-----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, VjEdXJwWbwp23j3qnypZZO5N1bHbiSkRb7QPRkByNq23a4cV02VZTT8V7qp7mLxL D2dW0rRTVF6BUEL6auCtiA== 0001019056-97-000168.txt : 19970815 0001019056-97-000168.hdr.sgml : 19970815 ACCESSION NUMBER: 0001019056-97-000168 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-02364 FILM NUMBER: 97661081 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 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE NINE MONTHS ENDED JUNE 30, 1997 BOONTON ELECTRONICS CORPORATION ------------------------------- State: New Jersey Identification No. 22-1543137 File No. 0-2364 Address: 25 Eastmans Road, P. O. Box 465, Parsippany, New Jersey 07054-0465 Telephone: 973-386-9696 "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 [ ] Shares Outstanding: June 30, 1997 1,636,585 June 30, 1996 1,556,585 (Unaudited) BOONTON ELECTRONICS CORPORATION ------------------------------- CONSOLIDATED BALANCE SHEETS ---------------------------
Assets June 30, 1997 September 30, 1996 ------ ------------- ------------------ Current assets: Cash and cash equivalents $ 144,232 $ 113,041 Trade receivables 1,040,493 971,342 Inventories 1,286,301 1,210,940 Deferred tax benefits 81,058 81,058 Other current assets 281,085 230,340 ----------- ----------- Total current assets 2,833,169 2,606,721 ----------- ----------- Property and equipment-net 474,296 163,858 ----------- ----------- Other assets: Deferred tax benefit 988,651 988,651 Security deposits 74,044 67,768 ----------- ----------- Total other assets 1,062,695 1,056,419 ----------- ----------- Total assets $ 4,370,160 $ 3,826,998 =========== =========== Liabilities and Stockholders' Equity - ------------------------------------ Current liabilities: Note payable $ 51,648 $ 10,503 Related party loans 43,530 43,530 Accounts payable - trade 582,974 469,882 Other current liabilities 487,209 538,328 Unsecured claims payable (Chapter 11 settlement) current 48,491 48,491 ----------- ----------- Total current liabilities 1,213,852 1,110,734 Note payable - noncurrent 324,615 77,837 Related party loans - noncurrent 218,970 218,970 Unsecured claims payable (Chapter 11 settlement) - noncurrent 153,372 201,505 ----------- ----------- Total liabilities 1,910,809 1,609,046 ----------- ----------- Commitments and contingencies Stockholders' equity: Common stock 163,659 155,659 Capital in excess of par 4,613,638 4,421,637 Deficit (2,317,946) (2,359,344) ----------- ----------- Total stockholders' equity 2,459,351 2,217,952 ----------- ----------- Total liabilities and stockholders' equity $ 4,370,160 $ 3,826,998 =========== ===========
The accompanying footnotes are an integral part of these statements. 2 (Unaudited) BOONTON ELECTRONICS CORPORATION ------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS -------------------------------------
For the Nine Months Ended June 30, 1997 June 30, 1996 ------------- ------------- Net sales $ 5,403,070 $ 4,601,618 Cost of goods sold 3,046,285 2,387,528 ----------- ----------- Gross income 2,356,785 2,214,090 ----------- ----------- Operating expenses: Commissions 526,436 490,134 Research and development 538,137 667,592 Other operating expenses 1,189,298 1,117,670 ----------- ----------- Total operating expenses 2,253,871 2,275,396 ----------- ----------- Income/(loss) from operations 102,914 (61,306) ----------- ----------- Interest expense 34,329 18,660 Other expense 27,186 58,547 ----------- ----------- Total other expenses 61,515 77,207 ----------- ----------- Income/(loss) before provision for income taxes 41,399 (138,513) Provision for income taxes -- -- ----------- ----------- Income/(loss) before extraordinary item 41,399 (138,513) Extraordinary item -- 151,344 ----------- ----------- Net income/(loss) 41,399 (289,857) Stockholders' equity - beginning 2,217,952 2,667,537 Stock options exercised -- 36,656 Common stock sold 200,000 563,438 ----------- ----------- Stockholders' equity - ending $ 2,459,351 $ 2,977,774 =========== =========== Weighted average number of shares outstanding 1,616,365 1,428,545 =========== =========== Earnings/(loss) per share: Before extraordinary item $ 0.03 $ (0.10) Extraordinary item -- (0.11) ----------- ----------- Net $ 0.03 $ (0.21) =========== ===========
The accompanying footnotes are an integral part of these statements. 3 (Unaudited) BOONTON ELECTRONICS CORPORATION ------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS -------------------------------------
For The Three Months Ended June 30, 1997 June 30, 1996 ----------- ----------- Net sales $ 1,798,348 $ 1,410,126 Costs of goods sold 1,054,173 765,589 ----------- ----------- Gross income 744,175 644,537 ----------- ----------- Operating expenses: Commissions 146,225 150,612 Research and development 176,190 238,300 Other operating expenses 413,670 384,026 ----------- ----------- Total operating expenses 736,085 772,938 ----------- ----------- Income/(loss) from operations 8,090 (128,401) ----------- ----------- Interest expense 14,683 8,941 Other expense 8,589 6,198 ----------- ----------- Total other expenses 23,272 15,139 ----------- ----------- Income/(loss) before provision for income taxes (15,182) (143,540) Provisions for income taxes -- -- ----------- ----------- Income/(loss) before extraordinary item (15,182) (143,540) Extraordinary item -- 151,344 ----------- ----------- Net income/(loss) (15,182) (294,884) Stockholders' equity - beginning 2,474,533 3,251,408 Stock options exercised -- 21,250 ----------- ----------- Stockholders' equity - ending $ 2,459,351 $ 2,977,774 =========== =========== Weighted average number of common shares outstanding 1,636,585 1,537,244 =========== =========== Earnings/(loss) per share Before extraordinary item $ (0.01) $ (0.09) -- (0.10) ----------- ----------- Extraordinary item Net $ (0.01) $ (0.19) =========== ===========
The accompanying footnotes are an integral part of these statements. 4 (Unaudited) BOONTON ELECTRONICS CORPORATION ------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOW ------------------------------------
For the Nine Months Ended June 30, 1997 June 30, 1996 ------------- -------------- Cash provided/(used) by operations: Net income/(loss) $ 41,399 $(289,857) Adjustments to reconcile net income: Depreciation & amortization 32,013 13,824 Other -- -- Decrease/(increase) in current assets: Accounts receivable (69,151) 114,947 Inventories (75,361) (134,342) Other current assets (50,745) 98,241 Increase/(decrease) in current liabilities: Accounts payable 113,092 38,647 Chapter 11 settlement - current (48,133) (97,253) Accrued liabilities (51,119) (7,270) -------- -------- Net cash provided/(used) by operations (108,005) (263,063) -------- -------- Cash flows from investing activities: Purchase of equipment (342,451) (85,903) Other (6,276) -- -------- -------- Net cash (used) by investing activities (348,727) (85,903) -------- -------- Cash flows from financing activities: Increase notes payable 317,038 -- Payments on loans (29,115) (97,765) Proceeds from sale of stock 200,000 563,438 Proceeds from options exercised -- 36,656 -------- -------- Net cash provided/(used) by financing activities 487,923 502,329 -------- -------- Increase/(decrease) in cash and cash equivalents 31,191 153,363 Cash and cash equivalents at beginning of period 113,041 146,568 -------- -------- Cash and cash equivalents at end of period $ 144,232 $ 299,931 ========= =========
The accompanying footnotes are an integral part of these statements. 5 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES AND DISCRIPTION 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. B. 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. C. 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. D. 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. E. 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. F. Inventories - stated at the lower of cost or market determined by the first-in, first-out (FIFO) method. G. Property 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 improvements 39 Machinery and equipment 5-10 Office furniture and fixtures 5-10 Transportation equipment 3 6 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 The accelerated cost recovery system and modified accelerated cost recovery system are 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. H. Financial risk - The Company regularly maintains bank account balances in excess of FDIC insurable limit. I. 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. J. 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, an order confirming the Company's 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)). 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 7 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 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 to date 751,307 ------------ Balance of Chapter 11 settlement - June 30, 1997 $ 201,863 ============ NOTE 3 - INVENTORIES: June 30, September 30, 1997 1996 ----------- ------------ Raw material $ 661,715 $ 468,619 Work in process 579,262 688,273 Finished Goods 45,324 54,048 ----------- ------------ Total $ 1,286,301 $ 1,210,940 =========== ============ NOTE 4 - PROPERTY, PLANT AND EQUIPMENT: June 30, September 30, 1997 1996 ----------- ------------ Leasehold improvements $ 61,054 $ 61,054 Machinery and equipment 1,802,275 1,512,488 Office furniture and fixtures 497,623 444,959 Transportation equipment 13,188 13,188 ----------- ------------ Total 2,374,140 2,031,689 Less: Accumulated depreciation and amortization 1,899,844 1,867,831 ----------- ------------ Net depreciated cost $ 474,296 $ 163,858 =========== ============
8 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 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. The 1997 nine month revenues were approximately $5.4 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 $895,842 to the nine month 1997 revenues. The Company's backlog as of June 30, 1997 was $1,192,300 and included $138,915 for the military contracts. NOTE 6 - NOTES PAYABLE: June 30, September 30, 1997 1996 ----------- ----------- A. 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 43,530 ----------- ----------- Noncurrent portion $ 218,970 $ 218,970 =========== =========== June 30, September 30, 1997 1996 ----------- ----------- B. New Jersey Economic Development Authority: Note, dated July 31, 1996, payable in monthly installments of $6,317 including interest at 6.75% per annum through June 30, 2003: $ 376,263 $ 88,340 Less current portion 51,648 10,503 ----------- ----------- Noncurrent portion $ 324,615 $ 77,837 =========== =========== [/TABLE] 9 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 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 Plan: 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 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 10 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997
Price per share Number of shares --------------- ---------------- Exercised $1.0625 (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. 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 11 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 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 NJDEP. Costs associated with this site are charged directly to income as incurred. The lessor of this site has 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. Cost 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 STOCK:
June 30, September 30, 1997 1996 -------- ------------- Common Stock: $.10 par value, authorized 5,000,000 shares, issued and outstanding 1,636,585 shares and issued 1,556,585 shares. $163,659 $155,659 ======== ========
On December 9, 1996, G.E.M. USA, Inc. (GEM) purchased 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 GEM on October 21, 1996. The Agreement provided an option to GEM to purchase an additional 443,700 shares for $1,437,588 at three dollars and twenty-four cents ($3.24) a share U.S. The option expired on June 9, 1997. Refer to "Management Discussion and Analysis" for further information on GEM's continued interest in investing in the Company. GEM's total investment to date equals $763,437.50 for 260,300 shares of the common stock. 12 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 NOTE 10 - INCOME TAXES: The components of the deferred tax asset are: June 30, September 30, 1997 1996 ---------- ---------- Net operating loss carryforwards $3,799,877 $3,799,877 Less: Valuation allowance (2,730,168) (2,730,168) ---------- ---------- Net deferred tax asset $1,069,709 $1,069,709 ========== ========== 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). The following is a reconciliation of income taxes at the federal statutory rate: June 30, --------------------------- 1997 1996 ---------- ---------- Computed income taxes at statutory rate $ 14,076 $ 1,709 Recognition of net operating loss (14,076) (1,709) ---------- ---------- Expense (Benefit) $ -- $ -- ========== ========== 13 (Unaudited) BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 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 not begin to expire until the year 2006 and 1998, respectively. These loss carryforwards can be utilized to reduce future taxable income dollar for dollar. 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: Nine months ended % of June 30, Amount Total Sales -------- ------ ----------- 1997 $1,599,665 30% 1996 $2,003,375 44% B. Customers sales to domestic government agencies were as as follows: Nine months ended % of June 30, Amount Total Sales -------- ------ ----------- 1997 $1,285,374 24% 1996 $ 298,342 7% 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF INCOME STATEMENTS NINE MONTHS ENDED JUNE 30, 1997 Sales for the nine months ended June 30, 1997 were $801,452 above the prior year. The increase was due to an increase in sales to U.S. government agencies of $987,032 and an increase in other domestic sales of $218,130, coupled with a decrease in export sales of $403,710. Gross income increased by $142,695 over the prior year, but decreased to 44% of sales from 48% of sales in the prior year. The decrease in gross income as a percentage of sales was attributable to the increased government revenues which carry a lower gross margin. Commission expense increased by $36,302 over the prior year due to the increased sales volume, but decreased to 9.7% of sales versus a prior year's 10.7% of sales. The other categories of operating expense decreased in total by $57,827 below the prior year. Income from operations of $102,914 was an increase of $164,220 over the prior year's loss from operations. Net income increased by $331,256 over the prior year. The increase in net income was attributable to not having an extraordinary charge of $151,344 in the current period coupled with improved operating results associated with the increase in sales volume. Management continues to address the need to further improve the company's operating results and during the third fiscal quarter reduced the work force to 49 employees from a total of 58. These staff reductions occurred in manufacturing direct and overhead departments, and in the sales department. Additionally, the company has agreed to sublet a portion of its facility to another company owned by G.E.M. USA, Inc. to reduce the company's overhead costs. A shared facilities agreement has been signed that will result in the company receiving approximately $250,000 to $295,000 per year during the life of the agreement which commences October 1, 1997. The June 30, 1997 inventory balance was $1,286,301 which was an increase of $75,361 over the balance at September 30, 1996. The increase was for raw materials purchased to complete orders on hand. Both work-in-process and finished goods decreased. Trade receivables were $1,040,943 at June 30, 1997 versus $971,342 at September 30, 1996. The current ratio at June 30, 1997 was essentially the same as it was at September 30, 1996; 2.33 versus 2.34. On June 30, 1997, the company agreed to enter into a new option agreement with G.E.M. USA, Inc. (GEM). As reported on Form 8-K, filed July 7, 1997, the new Subscription and Option Agreement shall be for two years and will give GEM an option to purchase 435, 984 shares of the company's common stock at an option price of $3.24 per share. GEM shall pay the company $25,000 for this option and shall simultaneously purchase 7,716 shares of the Company's common stock for an additional $25,000, or $3.24 a share. REPORTS ON FORM 8-K: - -------------------- During the nine months ended June 30, 1997, reports on Form 8-K were filed, on January 7, 1997 and July 7, 1997, which reported information for "Item 5. Other Events". 15 SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOONTON ELECTRONICS CORPORATION By /s/ Yves Guyomar ------------------------------------ Yves Guyomar, President and Chief Executive Officer Date: August 14, 1997 By /s/ John E. Titterton ------------------------------------ John E. Titterton, Vice President Finance, Secretary/Treasurer Date: August 14, 1997 August 14, 1997 16 INDEX TO EXHIBIT FILED IN THE QUARTERLY REPORT ON FORM 10-QSB FOR THE NINE MONTHS ENDED JUNE 30, 1997 Exhibit No. Page - ----------- ---- 27 Financial Data Sheet 18 17 EX-27 2 FDS FOR 10QSB
5 (Page 18) 0000013191 Boonton Electronics 1 9-MOS SEP-30-1997 JUN-30-1997 144,232 0 1,040,493 0 1,286,301 2,833,169 2,374,140 1,899,844 4,370,160 1,213,852 0 0 0 163,659 2,295,692 4,370,160 5,403,070 5,403,070 3,046,285 2,253,871 27,186 0 34,329 41,399 0 41,399 0 0 0 41,399 .03 .03
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