-----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, FZtbrBZAD1/5rLpS3cG03CYyGW0LBe7xk163y1fDzoXdmVgJpE3rvZxw1O8nxz/B P5rFscQUAIZc5AZXl9omnQ== 0000741556-96-000031.txt : 19960702 0000741556-96-000031.hdr.sgml : 19960702 ACCESSION NUMBER: 0000741556-96-000031 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960701 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECHNOLOGY RESEARCH CORP CENTRAL INDEX KEY: 0000741556 STANDARD INDUSTRIAL CLASSIFICATION: SWITCHGEAR & SWITCHBOARD APPARATUS [3613] IRS NUMBER: 592095002 STATE OF INCORPORATION: FL FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-13763 FILM NUMBER: 96589682 BUSINESS ADDRESS: STREET 1: 5250 140TH AVE NORTH CITY: CLEARWATER STATE: FL ZIP: 34620 BUSINESS PHONE: 8135350572 MAIL ADDRESS: STREET 1: 5250 140TH AVENUE NORTH CITY: CLEARWATER STATE: FL ZIP: 34620 10-K405 1 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, 1996 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 34620 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (813) 535-0572 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered None 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. [X] As of May 31, 1996, the number of shares outstanding of the registrant's common stock, $.51 par value was 5,318,902, and based on the closing sale price on such date, the aggregate market value of the voting stock held by nonaffiliates of the registrant was $26,075,243. Part III of this Form 10K is incorporated by reference from the registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on August 22, 1996. TABLE OF CONTENTS PART I Page Item 1. Business .................................................... 3 Item 2. Properties .................................................. 13 Item 3. Legal Proceedings ........................................... 13 Item 4. Submission of Matters to a Vote of Security Holders ..........13 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ................................. 14 Item 6. Selected Financial Data ..................................... 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ......................... 16 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 .......... 20 Item 11. Executive Compensation ...................................... 20 Item 12. Security Ownership of Certain Beneficial Owners and Management ....................................... 20 Item 13. Certain Relationships and Related Transactions .............. 20 PART IV Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K ..................................... 21 SIGNATURES ........................................................... 23 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 electric power and specializes in electrical safety products that protect against shock, electrocution and fires. Such products include ground fault protective devices, fire protective devices for fires caused by aging appliance and extension cords, controls for electrical power generating systems,products with energy management applications, transformers and magnetics. These products are used in providing safe and efficient utilization and controlled distribution of electricity and have residential, industrial 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 entry into consumer/commercial, non-military markets. Net sales contributed by commercial and military products are as follows: Year Ended March 31 Commercial % Military % Total -------- ---------- ----- -------- ----- ---------- 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 1994 14,022,113 71.2 5,681,341 28.8 19,703,454 1993 8,786,733 73.5 3,162,054 26.5 11,948,787 1992 5,730,643 74.4 1,970,063 25.6 7,700,706 Royalties from license agreements are as follows: Year Ended March 31 Royalties -------- --------- 1996 $ 797,920 1995 837,399 1994 785,723 1993 925,800 1992 493,012 The backlog of unshipped orders at March 31, 1996 was approximately $7,543,750. This backlog consists of approximately 35% commercial product orders and approximately 65% military product orders. Of the current backlog, approximately $3,843,750 or 51% of such backlog is expected to be shipped within the year ended March 31, 1997, and approximately $3,700,000 or 49% of such backlog, primarily consisting of orders for the Tactical Quiet Generator Systems contract, will be shipped in periods commencing thereafter. -3- Commercial Products and Markets Ground fault protective devices protect equipment and people against power line conductor to ground faults which can damage equipment and 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 machines 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 essentially a small amount of electric current "leaking" to 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 cold water pipe, gas pipe, drain or any attached metal device), he 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 the fuse to blow or the circuit breaker to trip. GFCIs constantly monitor electric current. As long as the amount of current returning from the appliance 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 instantaneously. An ELCI is a device intended to provide leakage current protection in appliances and utilization equipment whose function is to interrupt all ungrounded conductors of the supply circuit to electrical equipment in the event a current, in excess of the trip current, occurs between live parts and the grounded enclosure or other grounded parts. The basic standard used to investigate these products is the Standard for Ground Fault Circuit Interrupters, UL 943, excluding requirements concerning trip current and time. ELCIs are considered "equipment protection" devices. The Company recently announced its portable "Electra Shield" product that provides ELCI capability, 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. 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 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 infrequent and short-time use, and used only while attended; for example, with electric knives, can openers, hair dryers, and the like, which are connected to a power supply circuit by means of a flexible cord terminating in an attachment plug. -4- The National Electrical Code (the "Code") now requires GFCIs for the protection of receptacle outlets 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 on contractors. For example, commencing in January 1989, high pressure sprayer manufacturers that desire Underwriter Laboratories ("UL") approval are required to include a GFCI and/or double-insulation protection on each electrically driven sprayer. The Company is a supplier to that original equipment manufacturer ("OEM") market. Another market that has developed in response to a Code requirement consists of contractors that use temporary power at a construction site. Although OSHA has required such contractors for several years to utilize GFCIs at their construction sites, compliance with this requirement has been sporadic due to the high costs normally associated with GFCIs. In October 1988, the Company introduced an industrial quality GFCI extension cord at a safety show and has introduced a wide variety of new products over the ensuing years. A new line of high current GFCIs were introduced as the Company continues to pursue meeting requirements for electrical safety across a broad market. A Code requirement that became effective on January 1, 1991, requires that a protective device be incorporated into hair dryers, curling irons and crimpers to protect users from possible electrocution. In response to this Code change, the Company has developed a smaller GFCI plug that incorporates its patented GFCI/ALCI technology. Additionally, the Company has developed an Immersion Detection Circuit Interrupter ("IDCI") that can also be used to protect users of these products. The Company currently manufactures and markets various portable GFCI 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 four domestic and sixteen foreign patents on its portable GFCI which incorporate design features not available on any similar product known to the Company. The Company has entered into eight license agreements concerning the portable GFCI, ALCI and ELCI. These agreements are with entities located in England, France, Germany, Australia, Italy, Japan, 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. Effective as of August 2, 1988, the Company entered into a license agreement with Windmere Corporation (the "Windmere Agreement"), a large Miami, Florida based manufacturer and distributor of a wide variety, among other items, of portable personal care and household products utilizing electric current (e.g. haircurlers, irons, food mixers and numerous other items), most of which are sold both domestically and internationally. Under the Agreement, Windmere is granted an exclusive license (subject to the rights of certain other preexisting licensees) to sell and distribute certain GFCI/ALCI or IDCI based electrical safety products in the United States, and to manufacture GFCI/ALCI and IDCI units (a) in the Far East (a defined term within the Agreement referencing most Asiatic countries) for incorporation into finished electrical safety products to be sold throughout the world directly or by way of Far East OEMs; or (b) in the United States for sale or -5- distribution, at retail, in conjunction with personal care items and household appliances. The Company also agreed to purchase its requirements of Far East manufactured GFCI and IDCI units from Windmere and its affiliates as long as the Company can obtain the same in a reasonable period and at a competitive cost. Windmere began production and marketing of these products in late 1990. The Company also developed a manufacturing source through Windmere which lowered the existing cost structure for its GFCI product line. The Company receives a substantial portion of its royalty income from Windmere. 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 and extension cords, which have been identified as a leading cause of electrical fires. According to United States Consumer Product Safety Commission (CPSC), these types of fires caused 149,900 residential structural fires involving electrical equipment which resulted in 770 civilian deaths, more than 6,000 injuries and $1.2 billion in property losses. The CPSC estimates were based on 1990 fire service reports. The Company currently manufactures and markets to an emerging market for personnel protection devices for electric vehicle charging circuits. The new Article 625 of the 1996 Edition of the National Electrical Code requires electric vehicle charging systems to include a system that will protect people against serious electric shock in the event of a ground fault. The Company has pilot-production product at the majority of the major automobile manufacturers and is active with various standards and safety bodies, relating to the electric vehicle, on a worldwide basis. The Company designs and manufactures various transformers and magnetics. In 1985, the Company purchased the exclusive right to manufacture and sell the Weston transformer product line. This transformer is used for calibration of delicate instruments. These products do not provide significant revenues. Military Products and Markets The Company is currently a supplier of control equipment used in engine generator sets 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 including the transducers for the indicating instruments. 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 generally 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 items 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 change board assemblies. These products are primarily furnished for spare parts support for existent systems in the military inventory. -6- In late 1989, the Company completed the redesign of 22 of its control items 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 reported receiving a production contract in the approximate amount of $7,500,000 covering the time period August 1992 to October 1994 to provide these control devices for the new design Tactical Quiet Generator System from the U. S. Government's prime contractor. All deliveries have been completed under this contract, and an additional $4,300,000 contract for the Company's control devices was awarded to the Company by a prime contractor in March 1995. Recently, $600,000 has been added to the Contract bringing the total of the Contract to $4,900.000. Deliveries are expected to begin in the second half of calendar year 1996 with completion within two years of initial production shipments. The Company has also designed and qualified various types of electrical power monitors for military Naval Shipboard requirements. The monitors are used on all types of class Naval surface vessels, such as minesweepers, destroyers guided missile cruisers and the aircraft carriers in addition to other types of Naval vessels. The monitors are furnished for both existent vessels requiring spare support parts for retrofit upgrades and for new vessel production. From 1993 through 1996, the Company designed and qualified electrical control devices for control and monitoring of the A.C. power self contained diesel generating system, which is part of the new configuration C2v armored electronic command post system that is mounted on the Bradley tracked chassis of the Bradley Fighting Vehicle and the newly developed armored ambulance, which will utilize the same components for the electrical power system. The control devices are the A.C. power monitor assemblies (which provide system protection and status display on the on-board computer), generator voltage regulator, power transformer, A.C. overcurrent and short circuit protection monitor assembly for vehicle A.C. power distribution circuits and the current sensing transformers. All devices 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. A production release Contract is expected for the components in the near future. The Company has also completed the development and initial production contracts for the D.C. voltage regulator used on armored tracked recovery vehicles and intends to pursue additional production contracts for this military qualified product. The Company's contracts with the U.S. Government are on a fixed-price bid basis and are not subject to price renegotiation. As with all fixed-price contracts, should manufacturing costs exceed the selling price, the contract could result in a loss. 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. On occasion, contract disputes arise which could result in a suspension of the 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. 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 the 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 products to a government testing laboratory, such as that located at Ft. Belvoir, Virginia. If approved, the product is rarely subject to requalification; 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 testing and acceptance by government inspectors prior to shipment of the product. The Company is presently enhancing its quality processes with the objective to meet the ISO 9000 Series International Quality Standards. 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 has worked with foreign GFCI licensees to design a product for foreign markets. A significant number of the Company's military and commercial electronic products are specialized in that they combine both electronic and magnetic features in design and production. The business of an electronic 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. The remainder of the products which the Company manufactures are assembled from component parts produced by other manufacturers. The Company purchases some of its circuit board assemblies and certain completed products under the Windmere Agreement from the Far East. As previously described with regard to the Windmere Agreement, the Company has increased its use of this type of operation for its expanding commercial -8- product requirements. The Company has now located other sources of contract manufacturing in the Far East and in Central America which it will use in a limited capacity in the coming year. The Company believes that these offshore type operations reduce production costs, improve profits and increase volume through more competitive pricing. The balance of the Company's products are currently manufactured 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 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 17 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, Germany, 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. In 1988, the Company received a patent for a circuit utilized in the measurement of AC electric power. This circuit will be used in products such as watt transducers. In 1990, the Company received a patent that allows its GFCI to sense arcing faults in power cables. Arcing faults are known to be a major contributor to electrical fires. In 1996, the Company obtained an exclusive license to manufacture, market and sell all products inherent to U.S. patents No. 4,911,654 and 5,299,951. These patents add to the Company's existing product lines a device for preventing disconnection of or damage to electrical connectors. 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. The Company believes that it will continue to market existing and new products through this medium. 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. -9- The Company complements its marketing activity through the use of additional distributors and sales representative organizations. The Company has also expanded its marketing activity 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 stone and tile cutters. Although the Company's primary marketing efforts have focused upon OEMs, an internal distribution division has been established to handle small quantity sales. Any sales leads generated through trade shows and Company promotional mailers are handled through this outlet. The Company offers purchasers of its products no specific product liability protection. 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. The Company's products are marketed throughout the world with the Company also selling component pieces as well as finished products to its foreign licensees, which incorporate such parts, pieces and finished products in their final products sold in England, France, Germany, Australia and Italy. The Company's GFCI products have world-wide application and the Company believes that its direct and indirect foreign sales will increase. In Fiscal Year 1996, export sales comprised 43% of total sales. In Fiscal Year 1997, the Company will be implementing a direct sales activity through the use of independent distributors that specialize in selling productsdirectly to the household consumer. This approach is being implemented by companies today as an economical way to reach the end user. Management believes that consumer sales represent a major growth opportunity for the Company. Major Customers Individual customers and aggregate exports which accounted for 10% or more of sales were: Year ended March 31 ------------------- Customer 1996 1995 1994 -------- ---- ---- ---- Fleck Manufacturing (a Xerox Corporation supplier) $ 2,358,887 $ 3,090,322 $ 2,981,063 ========= ========= ========= Exports: Canada $ 2,367,890 $ 3,168,677 $ 3,084,235 Far East 1,967,494 725,368 343,854 Europe 1,750,257 5,748,882 3,789,053 Mexico 569,845 549,980 465,798 Australia 438,875 536,176 398,456 --------- --------- --------- Total exports (including Fleck Manufacturing, $ 7,094,361 10,729,083 8,081,396 Inc. ========= ========== ========= Libby Corporation - - 3,432,952 ========= ========== ========= -10- For the Company's current fiscal year, sales to Xerox Corporation and its suppliers (e.g., Fleck Manufacturing), of the Company's Equipment Leakage Current Interrupter ("ELCI") were down from the previous fiscal year due primarily to a reduction in selling price to Xerox and a licensee, "TEMIC", beginning production of product (formerly produced by the Company) for the European market requirements. However, in the second half of Fiscal Year 1997, the Company expects again to be the supplier of Xerox's European product requirements, which will increase sales to Xerox and decrease royalty income from Temic. Xerox and its suppliers accounted for approximately 30% of the Company's revenue for the current year, and because Xerox and its suppliers account for such a large percentage of the Company's revenues, the loss of Xerox as a substantial customer would have a material adverse effect on the Company's business. The Company's military product sales are primarily to OEM prime contractors and secondarily to military procurement depots for spare parts. Of the total military product sales for the 1996 fiscal year, approximately 52% were to OEM contractors and 48% to military depots. In Fiscal Year 1996, military sales were approximately 12% of total sales, compared to 14% in the prior year. Due to the completion of the TQ contract with Libby Corporation, the revenues from Libby were less than 10% of the Company's revenues for Fiscal 1995 and 1996. 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, price, delivery and technical support are major competitive factors in the military market. The Company believes that it has strength in all of these areas due to the involvement of senior management personnel of the Company in the government procurement process for up to 36 years in connection with products similar to those currently marketed by the Company. 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 -11- 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 17 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 military and commercial products and improving presently existing products to meet the needs of the Company's customers. 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 its expansion into the commercial marketplace, and accordingly, the Company has modified its GFCI designs to fit these markets and new applications. The Company has also developed a "user connected" GFCI plug which has received considerable interest from manufacturers that require GFCI protection for their products. The Company believes that its "user connected" GFCI plug can be sold in large quantities to the average homeowner as the awareness of electrical danger and availability of protection becomes generally understood. 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 $975,568 in Fiscal Year 1996, $1,013,825 in Fiscal Year 1995 and $1,062,314 in Fiscal Year 1994 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, 1996, the Company employed 135 persons on a full time basis. Of that total, 94 employees, both permanent and temporary, were engaged in manufacturing operations, 17 in engineering, 14 in marketing and 10 in management and administration. The Company has reduced its manufacturing employment significantly in the past year due to the moving of additional high-volume products off-shore. None of the Company's employees are represented by a collective bargaining unit. The Company considers its relations with employees to be stable. -12- ITEM 2. PROPERTIES The Company's executive offices and manufacturing facilities 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 from 1981. The current annual rental of the land on which the building is located is approximately $24,612, subject to certain escalation provisions every five years. This leased land is adequate to enable the Company to expand its offices and manufacturing facilities 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 January 1993, the Company obtained a loan of $600,000, securing the same by a first mortgage on its facility. The mortgage note is for a term of 8 years and bears interest at the lending institution's prime rate. ITEM 3. LEGAL PROCEEDINGS In March 1995, the Company, along with seven other defendants, was sued in Harris County, Texas. The suit claims, among other things, that the Company's GFCI product was defectively designed and manufactured and caused the death by electrocution of an individual. The suit seeks unspecified compensatory and exemplary damages in excess of $100,000. The Company has both product liability and umbrella liability insurance. The case is in the discovery stage. Management believes the ultimate disposition of this matter will not have a material adverse effect on the Company's financial position, results of operations or liquidity. A trial date has been scheduled for September 30, 1996. 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, 1996. -13- 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 year ended March 31, 1996 and a range of high and low bid and ask quotations for the fiscal years ended March 31, 1995 and 1994, as reported by the NASDAQ system. Market Price Cash Fiscal Year Ended High Low Dividends ---- ---- --------- March 31, 1996 (post-reverse split) First Quarter ................. 5 1/4 3 $ .06 Second Quarter ................. 6 3/16 4 5/16 .06 Third Quarter ................. 5 1/2 3 3/4 .06 Fourth Quarter ................. 5 11/16 3 7/8 .06 ----- $ .24 Bid Price Ask Price High Low High Low March 31, 1995 ---- ---- ---- ---- First Quarter ................. 6 3/8 4 1/8 6 21/32 4 13/32 Second Quarter ................. 6 4 19/32 6 3/8 4 23/32 Third Quarter ................. 4 7/8 3 15/32 5 1/4 3 3/4 Fourth Quarter ................. 4 5/16 3 9/32 4 1/2 3 15/32 March 31, 1994 First Quarter ................. 6 3/16 3 15/16 6 3/8 4 1/8 Second Quarter ................. 6 9/16 5 7/16 6 21/32 5 5/8 Third Quarter ................. 6 3/4 4 31/32 6 15/16 5 1/4 Fourth Quarter ................. 8 5/8 5 13/16 8 13/16 6 As of May 31, 1996, the approximate number of the Company's shareholders was 800. 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 3,000 shareholders. On August 23, 1995, at the Company's Annual Meeting, the shareholders approved a one share for three share reverse stock split, by a majority vote of 82.24%. The record date for the reverse stock split was September 15, 1995, and the Company's financial information now reflects the reverse split. The Company's authorized capital stock, as of May 31, 1996, consisted of 10,000,000 shares of authorized common stock, par value $.51, of which 5,318,902 shares were issued and outstanding. -14- The Company's fourth quarter dividend of $.06 per share was paid on April 15, 1996 to shareholders of record on March 31, 1996. The Company has paid dividends of $.24 per share during its Fiscal Year 1996. No dividends were paid in prior fiscal years. ITEM 6. SELECTED FINANCIAL DATA 1996 1995 1994 1993 1992 ---- ---- ---- ---- ----
Year ended March 31: Operating revenues $ 17,379,221 21,772,956 20,489,177 12,874,587 8,193,718 Net income $ 2,038,785 1,867,957 2,296,778 1,655,023 183,710 Net income per common share $ .38 .35 .45 .41 .05 Cash dividends paid $ .24 - - - - Weighted average number of common and equivalent shares outstanding 5,404,885 5,339,953 5,083,007 4,066,724 3,876,124 March 31: Working capital $ 10,931,740 10,089,672 9,102,131 4,616,296 1,898,132 Total assets $ 15,380,590 14,813,938 13,443,899 8,709,221 5,387,522 Current liabilities $ 1,867,678 2,119,000 2,216,719 2,594,303 2,253,522 Long-term debt $ 281,350 356,350 831,350 1,421,829 261,963 Total liabilities $ 2,149,028 2,475,350 3,123,069 4,076,132 2,515,485 Retained earnings (accumulated deficit) $ 3,108,371 2,340,267 470,310 (1,824,468) (3,479,491) Total stockholders' equity $ 13,231,562 12,338,588 10,320,830 4,633,089 2,872,037
-15- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating Results: Fiscal Years 1996 and 1995 Comparison Operating revenues (net sales and royalties) for the Company's fiscal year ended March 31, 1996 ("Fiscal Year 1996") were $17,379,221, a 20% decrease from the $21,772,956 reported with respect to the Company's fiscal year ended March 31, 1995 ("Fiscal Year 1995"). Net sales for the Company's Fiscal Year 1996 were $16,581,301, a 21% decrease from the $20,935,557 reported with respect to the Company's Fiscal Year 1995. Income before income taxes for the current year was $3,204,599, compared to $2,412,957 for Fiscal Year 1995, an increase of approximately 33%. The Company's net income for Fiscal Year 1996 was $2,038,785, or $.38 per share, compared to $1,867,957, or $.35 per share, for Fiscal Year 1995, an increase of approximately 9%. Common shares and common share equivalents outstanding were comparable from year to year. Net sales of the Company's family of ground fault circuit interrupters for personnel and equipment protection products were approximately 88% of net sales for Fiscal Year 1996, compared to 86% in Fiscal Year 1995. U.S. sales and multinational accounts for the current year decreased by $3,553,833 over the previous year. Military sales decreased by $800,424 from the previous year due primarily to the completion of the initial contract for the TQ Generator Set Program and subsequent delay in the awarding of the follow-on contract. The contract now has been awarded and TRC, as previously reported, has received a contract for approximately $4.9 million from the prime contractor with shipments to begin in the July/August 1996 time frame assuming the successful completion of First Article testing by the prime contractor. As expected, sales to Xerox and its suppliers were somewhat lower for the current year primarily due to Temic (Telefunken Microelectronics) GmbH, a TRC licensee, increasing its production for Xerox's European requirements. However, the Company expects sales to Xerox to slightly increase over the coming year, in spite of lower prices, due to TRC again supplying product for Xerox's European requirements rather than Temic. In addition, TRC will be supplying Xerox with new products, and TRC, rather than Fleck Manufacturing Inc., will be attaching cord to Xerox's units in Fiscal Year 1997. Xerox and its suppliers accounted for approximately 30% of the Company's revenue for the current year, and because Xerox and its suppliers account for a large percentage of the Company's sales, the loss of Xerox as a substantial customer would have a material adverse effect on the Company's business. Revenues from the high pressure sprayer/washer market were negatively impacted in Fiscal Year 1996 by a provision in the National Electric Code permitting the use of double-insulation for certain sprayer/washer products to be sold without a GFCI provided they are used with a GFCI. This provision has been eliminated in the National Electric Code, effective January 1996; however, the Company has no certainty that it will recover its previous revenue level in that market. Nevertheless, the Company will have the opportunity to recover revenues in this market as UL enforces the change in the National Electric Code on the manufacturers. UL has not commented on how long this process will take. -16- Although revenues were down $4,393,735 for the fiscal year, the Company's pre-tax income of $3,204,599 was a record for the Company, which is attributed to the Company's continued efforts to control costs and improve profit margins. Royalty income for Fiscal Year 1996 was $797,920, compared to $837,399 in the prior year, a decrease of $39,479, or approximately 5%. Royalties will continue to decline in Fiscal Year 1997 as Windmere Corporation, in an effort to reduce their product cost because of competitive pressures, has renegotiated a lower royalty agreement with the Company. Royalties from Temic will also decline in Fiscal Year 1997 as a result of Xerox transferring their European product requirements back to TRC during Fiscal Year 1997 as mentioned above. Although the Company is tooled for its major products in both the U.S. and in the Far East, any major disruption to the subcontractor's facility in the Far East would temporarily have a material adverse effect on the Company's business. The Company has located other sources of contract manufacturing in the Far East and in Central America which it will use in a limited capacity in the coming year. Cost of sales was approximately 64% of net sales for Fiscal Year 1996, compared to approximately 75% incurred with respect to Fiscal Year 1995. The improvement in cost of sales was primarily due to better gross margins resulting from the additional products now being manufactured in the Far East and the cost control measures implemented at TRC's Clearwater facility. Selling, general and administrative expenses for Fiscal Year 1996 were $2,734,096, compared to $2,782,058 for the prior year. Selling expenses were $1,747,194 in the Fiscal Year 1996, compared to $1,749,459 in Fiscal Year 1995, reflecting comparable costs year to year. General and administrative expenses were $986,902, compared to $1,032,599 in the respective periods, reflecting a decrease in professional fees and operating costs year to year. Research, development and engineering expenses for Fiscal Year 1996 were $975,567, compared to $1,013,825 for the prior year, reflecting a decrease primarily in salary expenses. The Company anticipates spending levels for general and administrative and research and development to remain approximately the same in the coming year, and the Company expects selling expenses to increase as the Company pursues reaching the consumer market with its products, marketing the Fire Shield products and developing the Electric Vehicle market in Fiscal Year 1997. Interest and sundry income, net of interest expense, for Fiscal Year 1996 was $220,656, compared to $125,336 for the prior year, reflecting the Company's increased short term investments and reduced borrowings. Income tax expense as a percentage of net income before income tax was approximately 36% for Fiscal Year 1996, compared to 23% in the prior year. The actual tax rate for Fiscal Year 1995 was less than the expected tax rate primarily due to the reduction of the valuation allowance for deferred tax assets from $592,000 in Fiscal Year 1994 to $187,000 in Fiscal Year 1995. The reduction in the valuation allowance was attributable to management's increased estimates of future taxable income. -17- Fiscal Years 1995 and 1994 Comparison Operating revenues (net sales and royalties) for the Company's fiscal year ended March 31, 1995 ("Fiscal Year 1995") were $21,772,956, a 6% increase from the $20,489,177 reported with respect to the Company's fiscal year ended March 31, 1994 ("Fiscal Year 1994"). Net sales for the Company's Fiscal Year 1995 were $20,935,557, a 6% increase from the $19,703,454 reported with respect to the Company's Fiscal Year 1994. Income before income taxes for Fiscal Year 1995 was $2,412,957, compared to $3,142,278, a decrease of approximately 23% over Fiscal Year 1994. The Company's net income for Fiscal Year 1995 was $1,867,957, or $.35 per share, compared to $2,296,778, or $.45 per share, for the Fiscal Year 1994, a decrease of approximately 19% over the comparative year. Common shares and common share equivalents outstanding increased approximately 5% during Fiscal Year 1995. Net sales of the Company's family of ground fault circuit interrupters for personnel and equipment protection products were approximately 86% of net sales for Fiscal Year 1995, compared to 71% in Fiscal Year 1994. U.S. sales and multinational accounts for the current year increased by $4,073,021 over the previous year. Military sales decreased by $2,840,918 from the previous year due primarily to the completion of the initial contract for the TQ Generator Set Program and subsequent delay in the awarding of the follow-on contract. As expected, sales to Xerox and its suppliers were somewhat lower for Fiscal Year 1995 primarily due to Temic, a TRC licensee, increasing its production for Xerox's European requirements. Under the agreement with this licensee, TRC receives a royalty for each unit shipped. Xerox and its suppliers accounted for approximately 27% of the Company's revenue for Fiscal Year 1995. Royalty income for Fiscal Year 1995 was $837,399, compared to $785,723 in the prior year, an increase of $51,676, or approximately 7%. The increase can be attributed to the royalties now being received from Temic and higher royalties being received from Windmere Corporation in the current year. The Company continued the implementation of a business strategy involving manufacturing its high volume products off-shore while continuing to manufacture military products and lower volume commercial products at the Clearwater facility. TRC successfully transferred the manufacture of several of these products off-shore. As a result of this transition and the delays in the award of the follow-on Tactical Quiet Generator Systems Programs contract, TRC down-sized its Clearwater operation by 82 persons in the third quarter and 34 persons in the fourth quarter with the Company expensing $75,000 and $50,000, respectively, in severance cost related to these events. Cost of sales was approximately 75% of net sales for the Fiscal Year 1995, compared to approximately 72% incurred with respect to Fiscal Year 1994. Higher cost of sales can be attributed to additional labor and freight costs associated with the transfer of products from Clearwater to the Far East in the current year. Selling, general and administrative expenses for the Fiscal Year 1995 were $2,782,058, compared to $2,186,969 for the prior year. Selling expenses were $1,749,459 in the Fiscal Year 1995, compared to $1,182,430 in Fiscal Year 1994, reflecting higher salary, advertising and commission expenses. General and administrative expenses were $1,032,599, compared to $1,004,539 in the respective periods, reflecting comparable costs year to year. -18- Research, development and engineering expenses for the Fiscal Year 1995 were $1,013,825, compared to $1,062,314 for the prior year. The Company anticipates spending levels for selling, general and administrative and research and development to remain approximately the same in the coming year. Interest and sundry income, net of interest expense, for the Fiscal Year 1995 was $125,336, compared to interest expense, net of interest and sundry income, of $12,258 for the prior year, reflecting the Company's increased short term investments and reduced borrowings. Income tax expense as a percentage of net income before income tax was 23% for Fiscal Year 1995. The actual rate was less than the expected rate primarily due to the reduction of the valuation allowance for deferred tax assets from $592,000 in Fiscal Year 1994 to $187,000 in Fiscal Year 1995. The reduction in the valuation allowance was attributable to management's increased estimates of future taxable income. Liquidity and Capital Resources As of March 31, 1996, the Company's cash and cash equivalents decreased to $341,601 from the March 31, 1995 total of $1,707,930, and short term investments increased to $4,084,698 from the March 31, 1995 total of $2,742,128. Short term investments are comprised of U. S. Treasury Bills. On August 22, 1995, the Company's institutional lender renewed its commercial line of credit at $2,500,000 and extended the maturity date to August 15, 1997. The lender continues to give the Company 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 200 basis points. The lender also continues to make 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 did not use its line of credit in Fiscal Year 1996, and the mortgage payable to the Company's institutional lender as of March 31, 1996 was $356,350, compared to $431,350 in the prior year, reflecting the Company's payments on principal during its fiscal year. The Company's working capital increased by $842,068 to $10,931,740 at March 31, 1996, compared to $10,089,672 at March 31, 1995. The Company believes cash flows 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. -19- 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. 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 22, 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) 1. Financial Statements of Technology Research Corporation: Page Independent Auditors' Report .............................. F-1 Balance Sheets--March 31, 1996 and 1995 ................... F-2 Statements of Income--Years Ended March 31, 1996, 1995, and 1994 .......................... F-3 Statements of Stockholders' Equity--Years Ended March 31, 1996, 1995, and 1994 .......................... F-4 Statements of Cash Flows--Years Ended March 31, 1996, 1995, and 1994 .......................... F-5 Notes to Financial Statements ............................. F-6 2. The Following Financial Schedules for the years ended March 31, 1996, 1995, and 1994 are submitted herewith: Schedule II--Valuation and Qualifying Accounts ............ F-17 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. -20- 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.* (d) License Agreement between the Company and Windmere Corporation, dated August 2, 1988, granting to Windmere an exclusive (subject to previously existing marketing rights held by others under separate license agreements) license to sell and distribute the Company's patented GFCI and Immersion Detector Circuit Interrupter ("IDCI") products within the United States, and to manufacture the GFCI and IDCI products in certain Asiatic countries.* (e) Incentive Stock Option Plan, dated October 15, 1981.* (f) 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). (g) 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.* (h) 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). -21- (i) $600,000 Loan Agreement, dated January 8, 1993, between the Company and First Union National Bank of Florida.*** (j) License Agreement, dated November 23, 1992, between the Company and TEMIC Telefunken Microelectronic GmbH, a German corporation, granting Telefunken an exclusive right to manufacture the Company's ELCI product line in Europe for sale to Xerox Corporation, its European affiliates, or its authorized suppliers.*** (k) $2,500,000 Revolving Credit Agreement, dated November 12, 1993, between the Company and First Union National Bank of Florida.*** (l) $2,500,000 Revolving Credit Agreement renewal, dated August 22, 1995, between the Company and First Union National Bank of Florida.***** (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. -22- Independent Auditors' Report The Board of Directors and Stockholders Technology Research Corporation: We have audited the financial statements of Technology Research Corporation as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules 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 financial statements referred to above present fairly, in all material respects, the financial position of Technology Research Corporation as of March 31, 1996 and 1995, and the results of its operations and its cash flows for each of the years in the three-year period ended March 31, 1996 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG PEAT MARWICK LLP St. Petersburg, Florida April 26, 1996 F-1 TECHNOLOGY RESEARCH CORPORATION Balance Sheets March 31, 1996 and 1995
ASSETS 1996 1995 Current assets: Cash and cash equivalents $ 341,601 1,707,930 Short-term investments 4,084,698 2,742,128 Accounts receivable (notes 5 and 8): Trade, less allowance for doubtful accounts of $84,000 in 1996 and $107,000 in 1995 2,519,616 3,325,157 Other 87,536 10,569 Inventories (notes 2 and 5) 5,226,762 3,946,025 Prepaid expenses 94,205 36,863 Deferred income taxes (note 4) 445,000 440,000 ---------- ---------- Total current assets 12,799,418 12,208,672 ---------- ---------- Property, plant, and equipment (notes 3 and 5) 6,120,341 5,536,933 Less accumulated depreciation (3,698,692) (3,213,002) ---------- ---------- Net property, plant, and equipment 2,421,649 2,323,931 ---------- ---------- Deferred income taxes (note 4) 159,000 228,000 Other assets 523 53,335 ---------- ---------- 159,523 281,335 ---------- ---------- $ 15,380,590 14,813,938 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt (note 5) $ 75,000 75,000 Trade accounts payable 1,236,591 1,728,332 Accrued expenses: Compensation 164,070 101,041 Other 54,974 129,136 Dividends payable 336,052 - Income taxes payable 991 85,491 ---------- ---------- Total current liabilities 1,867,678 2,119,000 Long-term debt, excluding current installments (note 5) 281,350 356,350 ---------- ---------- Total liabilities 2,149,028 2,475,350 ---------- ---------- Stockholders' equity (note 6): Common stock, $.51 par value. Authorized 10,000,000 shares; issued and outstanding 5,318,902 in 1996 and 5,246,278 in 1995 2,712,437 2,675,398 Additional paid-in capital 7,410,754 7,322,923 Retained earnings 3,108,371 2,340,267 ---------- ---------- Total stockholders' equity 13,231,562 12,338,588 ---------- ---------- Commitments and contingencies (notes 7, 9 and 10) $ 15,380,590 14,813,938 ========== ========== See accompanying notes to financial statements. F-2
TECHNOLOGY RESEARCH CORPORATION Statements of Income Years ended March 31, 1996, 1995 and 1994
1996 1995 1994 Operating revenues: Net sales (note 8) $ 16,581,301 20,935,557 19,703,454 Royalties 797,920 837,399 785,723 ---------- ---------- ---------- 17,379,221 21,772,956 20,489,177 ---------- ---------- ---------- Operating expenses: Cost of sales 10,685,614 15,689,452 14,085,358 Selling, general, and administrative 2,734,096 2,782,058 2,186,969 Research, development, and engineering 975,568 1,013,825 1,062,314 ---------- ---------- ---------- 14,395,278 19,485,335 17,334,641 ---------- ---------- ---------- Operating income 2,983,943 2,287,621 3,154,536 ---------- ---------- ---------- Other income (deductions): Interest and sundry income 262,623 176,041 61,036 Interest expense (41,967) (50,705) (73,294) ---------- ---------- ---------- 220,656 125,336 (12,258) ---------- ---------- ---------- Income before income taxes 3,204,599 2,412,957 3,142,278 Income taxes (note 4) 1,165,814 545,000 845,500 ---------- ---------- ---------- Net income $ 2,038,785 1,867,957 2,296,778 ========== ========== ========== Earnings per share $ .38 .35 .45 ==== ==== ==== Weighted average number of common and equivalent shares outstanding 5,404,885 5,339,953 5,083,007 ========== ========== ========== See accompanying notes to financial statements. F-3
TECHNOLOGY RESEARCH CORPORATION Statements of Stockholders' Equity Years ended March 31, 1996, 1995 and 1994
Retained Additional earnings Total Common stock paid-in (accumulated stockholders' Shares Amount capital deficit) equity ------ ------ ------- -------- ------ Balances at March 31, 1993 3,940,914 $ 2,009,662 4,447,895 (1,824,468) 4,633,089 Exercise of stock options via exchange of 23,035 common shares and cash of $81,644 for 117,494 new common shares 94,459 48,174 33,470 - 81,644 Exercise of Class A warrants 907,433 462,791 2,395,624 - 2,858,415 Exercise of underwriters' warrants 76,133 38,828 181,167 - 219,995 Debenture conversion 112,650 57,452 280,498 - 337,950 Common stock issue costs - - (107,041) - (107,041) Net income - - - 2,296,778 2,296,778 --------- --------- --------- --------- ---------- Balances at March 31, 1994 5,131,589 2,616,907 7,231,613 472,310 10,320,830 Exercise of stock options via exchange of 6,874 common shares and cash of $149,801 for 121,563 new common shares 114,689 58,491 91,310 - 149,801 Net income - - - 1,867,957 1,867,957 --------- --------- --------- --------- ---------- Balances at March 31, 1995 5,246,278 2,675,398 7,322,923 2,340,267 12,338,588 Exercise of stock options via exchange of 113 common shares and cash of $124,870 for 72,737 new common shares 72,624 37,039 87,831 - 124,870 Dividends - - - (1,270,681) (1,270,681) Net income - - - 2,038,785 2,038,785 --------- --------- --------- --------- ---------- Balances at March 31, 1996 5,318,902 $ 2,712,437 7,410,754 3,108,371 13,231,562 ========= ========= ========= ========= ========== See accompanying notes to financial statements. F-4
TECHNOLOGY RESEARCH CORPORATION Statements of Cash Flows Years ended March 31, 1996, 1995 and 1994
1996 1995 1994 Cash flows from operating activities: Net income $ 2,038,785 1,867,957 2,296,778 Adjustments to reconcile net income to net cash provided by operating activities: Accretion of interest (216,814) (134,839) - Allowance for doubtful accounts (23,000) (21,000) - Depreciation 493,201 472,245 393,271 Loss on sale of equipment 107 - 2,475 Decrease (increase) in accounts receivable 751,574 928,898 (812,664) Increase in inventories (1,280,737) (251,079) (824,794) Increase in prepaid expenses (57,342) (4,391) (25,894) Decrease (increase) in deferred income taxes 64,000 (259,000) (344,000) Decrease (increase) in other assets 52,812 (33,983) 23,555 Increase (decrease) in accounts payable (491,741) 229,424 (274,293) Increase (decrease) in accrued expenses (11,133) (211,143) 98,168 Increase (decrease) in income taxes payable (84,500) (116,000) 136,491 --------- --------- --------- Net cash provided by operating activities 1,235,212 2,467,089 669,093 --------- --------- --------- Cash flows from investing activities: Maturities of short-term investments 4,832,000 2,357,000 - Purchases of short-term investments (5,957,756) (4,197,107) (767,182) Capital expenditures for property, plant, and equipment (599,028) (690,479) (1,045,728) Proceeds from sale of equipment 8,002 - - --------- --------- --------- Net cash used by investing activities (1,716,782) (2,530,586) (1,812,910) --------- --------- --------- Cash flows from financing activities: Net borrowings under line-of-credit agreement - (400,000) (509,229) Principal payments on long-term debt (75,000) (75,000) (81,250) Proceeds from exercise of stock options and warrants 124,870 149,801 3,160,054 Common stock issuance cost - - (107,041) Dividends paid (934,629) - - --------- --------- --------- Net cash provided (used) by financing activities (884,759) (325,199) 2,462,534 --------- --------- --------- Net increase (decrease) in cash and cash equivalents (1,366,329) (388,696) 1,318,717 Cash and cash equivalents at beginning of year 1,707,930 2,096,626 777,909 --------- --------- --------- Cash and cash equivalents at end of year $ 341,601 1,707,930 2,096,626 ========= ========= ========= Supplemental cash flow information: Cash paid for interest $ 41,967 50,705 96,803 ========= ========= ========= Cash paid for income taxes $ 1,186,314 920,000 1,053,009 ========= ========= ========= During the year ended March 31, 1994, convertible debentures in the amount of $337,950 were converted into common stock. See accompanying notes to financial statements. F-5
TECHNOLOGY RESEARCH CORPORATION Notes to Financial Statements March 31, 1996, 1995 and 1994 (1) Summary of Significant Accounting Policies (a) Description of Business Technology Research Corporation designs, develops, manufactures and markets electronic control and measurement devices related to the distribution of electric power. The Company's plant is located in Clearwater, Florida. The Company also has a contract manufacturer, Durable, in China that is headquartered in Hong Kong, which is a major supplier to the Company. 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 in North America, Europe, Asia and Australia. See note 8 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, Germany, Italy, Japan, the United Kingdom and the United States. (b) 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 reported period. Actual results may differ from estimates. (c) 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 payable and long-term debt) approximate their fair value due to their short-term nature or with respect to long-term debt, the interest rate appropriately reflects the credit risk. (d) 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, 1996. Cash equivalents of $1,003,892 at March 31, 1995 consisted of overnight repurchase agreements and U.S. Treasury Bills. F-6 (e) Short-Term Investments The Company adopted Statement of Financial Accounting Standard No. 115, Accounting for Certain Investments in Debt and Equity Securities effective April 1, 1995. The Company considers all of its short-term investments to be "held to maturity," and therefore, the effect of adoption of this statement was not material. (f) Inventories Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. (g) 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. (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) 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 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. (j) Earnings Per Share Earnings per share has been computed by dividing net income by the weighted average number of common and equivalent shares outstanding. Common share equivalents included in the computation represent shares issuable upon assumed exercise of stock options and convertible debt which would have a dilutive effect in years where there are earnings. F-7 (k) New Accounting Standards The Company will be required to adopt Statements of Financial Accounting Standard No. 121, Accounting for Long-Lived Assets and Long-Lived Assets to be Disposed Of (Statement 121), and No. 123, Accounting for Stock-Based Compensation (Statement 123) in 1997. Statement 121 requires that long-lived assets be reviewed for impairment whenever events or changes indicate that the carrying amount of the asset in question may not be recoverable. The Company does not expect the adoption of Statement 121 to have a material effect on the Company's financial position or results of operations. Statement 123 allows the Company to select either a fair value based method or its current intrinsic value based method of accounting for employee stock-based compensation. Companies that select the intrinsic value based method will be required to provide pro forma disclosures of net income and earnings per share as if the fair value method was selected. The Company plans to retain its current intrinsic value method of accounting, and therefore, adoption of this standard is not expected to have a material effect on the Company's financial statements. (2) Inventories Inventories at March 31, 1996 and 1995 consist of: 1996 1995 ---- ---- Raw materials $ 3,423,236 2,707,054 Work in process 945,795 654,520 Finished goods 857,731 584,451 --------- --------- $ 5,226,762 3,946,025 ========= ========= Approximately 23% of raw materials are located in China. (3) Property, Plant, and Equipment Property, plant, and equipment at March 31, 1996 and 1995 consists of: Estimated useful 1996 1995 lives ---- ---- ----- Building and improvements $ 1,457,251 1,444,089 20 years Machinery and equipment 4,663,090 4,092,844 5-15 years --------- --------- $ 6,120,341 5,536,933 ========= ========= F-8 (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, 1996 and 1995 are presented below: 1996 1995 ---- ---- Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 32,000 41,000 Inventories, principally due to valuation allowance for financial reporting purposes and additional costs inventoried for tax purposes 316,000 297,000 Accrued expenses, principally due to accrual for financial reporting purposes 32,000 38,000 Net operating loss carryforwards 313,000 377,000 Tax credit carryforwards 214,000 214,000 ------- ------- Total gross deferred tax assets 907,000 967,000 Less valuation allowance (187,000) (187,000) ------- ------- 720,000 780,000 ------- ------- Deferred tax liabilities: Property, plant, and equipment, principally due to differences in depreciation (104,000) (70,000) Other (12,000) (42,000) ------- ------- (116,000) (112,000) ------- ------- Net deferred tax assets $ 604,000 668,000 ======= ======= Net deferred tax assets are included in the accompanying balance sheets at March 31, 1996 and 1995 as: 1996 1995 ---- ---- Deferred income taxes, current asset $ 445,000 440,000 Deferred income taxes, noncurrent asset 159,000 228,000 ------- ------- $ 604,000 668,000 ======= ======= F-9 In evaluating deferred tax assets, management assesses the likelihood the deferred tax assets will be realized. The ultimate realization of deferred tax assets 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. Taxable income for the years ended March 31, 1996, 1995 and 1994 was approximately $2,800,000, $2,200,000 and $2,800,000, respectively. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it will realize the benefits of these deductible differences, net of the existing valuation allowance at March 31, 1996. The valuation allowance at March 31, 1996 and 1995 relates to tax credit carryforwards which management expects to expire unused. At March 31, 1996, the Company has net operating loss carryforwards for Federal income tax purposes of approximately $824,000, which are available to offset future taxable income through 2003. 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. As a result of an ownership change in 1989, the Internal Revenue Code limits the income tax benefit of net operating loss and tax credit carryforwards to approximately $65,000 each year. Income tax expense for the years ended March 31, 1996, 1995 and 1994 consists of: 1996 1995 1994 ---- ---- ---- Current: Federal $ 936,214 669,000 997,000 State 165,600 135,000 192,500 --------- --------- --------- 1,101,814 804,000 1,189,500 --------- --------- --------- Deferred: Federal 55,000 (222,000) (294,000) State 9,000 (37,000) (50,000) --------- --------- --------- 64,000 (259,000) (344,000) --------- --------- --------- $ 1,165,814 545,000 845,500 ========= ========= ========= F-10 The significant components of deferred income tax expense (benefit) for the years ended March 31, 1996, 1995 and 1994 are as follows: 1996 1995 1994 ---- ---- ---- Deferred tax expense (benefit) (exclusive of the effects of other components listed below) $ (1,000) 81,000 (21,000) Benefits of operating loss carryforwards 65,000 65,000 65,000 Investment tax credits - - (53,000) Decrease in beginning-of-the-year balance of the valuation allowance for deferred tax assets - (405,000) (335,000) ------- ------- ------- $ 64,000 (259,000) (344,000) ======= ======= ======= Income tax expense for the years ended March 31, 1996, 1995 and 1994 differs from the amounts computed by applying the Federal income tax rate of 34% to pretax income as a result of the following: 1996 1995 1994 ---- ---- ---- Computed expected tax expense $ 1,090,000 820,000 1,068,000 Increase (reduction) in income taxes resulting from: Change in valuation allowance for deferred tax assets - (405,000) (335,000) State income taxes, net of Federal income tax benefit 115,000 65,000 94,000 Other (39,186) 65,000 18,500 --------- --------- --------- $ 1,165,814 545,000 845,500 ========= ========= ========= F-11 (5) Long-Term Debt Long-term debt at March 31, 1996 and 1995 consists of the following: 1996 1995 ---- ---- $2,500,000 line of credit, interest at LIBOR plus 200 basis points (7.41% at March 31, 1996); payable monthly, due August 1997; secured by receivables, inventories and equipment (subject to provisions stated below) $ 100 100 First mortgage note payable; interest at prime (8.25% at March 31, 1996); due in monthly installments of $6,250, plus interest, matures December 2000; secured by operating facility 356,250 431,250 ------- ------- Total long-term debt 356,350 431,350 Less current installments 75,000 75,000 ------- ------- Long-term debt, excluding current installments $ 281,350 356,350 ======= ======= 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 equipment, and requires the Company to maintain certain financial ratios and a minimum tangible net worth amount. The aggregate maturities of long-term debt are: Year ending March 31, 1997 $ 75,000 1998 75,100 1999 75,000 2000 75,000 2001 56,250 ------- $ 356,350 ======= F-12 (6) Stock Options, Grants and Warrants Under the Company's qualified incentive stock option plan which expired in October 1991, 546,667 shares of common stock were reserved for issuance upon exercise of options granted to officers and key employees. Options granted are exercisable at any time after the date of grant. In August 1993, the shareholders approved a new incentive stock option plan which reserved 166,667 shares of common stock for issuance upon exercise of options granted to officers and employees. Options granted are exercisable equally over three years after the date of grant. The plans provide that the option price will be fixed by the Board of Directors but will not be less than 100% of the fair market value of the stock at the date of grant. Options granted expire ten years after the date of grant. Options may be exercised by payment of cash or with stock of the Company owned by the officer or employee. Option transactions and other information relating to the plans for the three years ended March 31, 1996 are as follows: Number of Option price shares per share --------- --------- Outstanding at March 31, 1993 283,681 $ .75 to $4.14 Granted 50,333 $5.52 Exercised (107,494) $ .75 to $4.14 ------- Outstanding at March 31, 1994 226,520 $ .75 to $5.52 Granted 116,167 $ 4.02 to $5.43 Exercised (121,564) $ .75 to $4.14 Canceled (667) $5.52 ------- Outstanding at March 31, 1995 220,456 $ .75 to $5.52 Granted 9,800 $5.44 Exercised (58,737) $ .75 to $4.03 Canceled (67,866) $ .75 to $5.52 ------- Outstanding at March 31, 1996 103,653 $ .75 to $5.52 ======= F-13 The Company adopted a nonqualified stock option plan in December 1989 and reserved a total of 266,667 shares of its common stock for future issuance to selected officers, directors, consultants and other key employees designated by the Company's Board of Directors. In August 1993 the shareholders approved an increase in the total number of reserved shares from 266,667 to 333,333. Previously granted nonqualified stock options were ratified and authorized as options under the nonqualified stock option plan. During the years ended March 31, 1996, 1995 and 1994, individuals purchased 14,000, 33,889 and 10,000 shares, respectively, of common stock through the exercise of nonqualified stock options. Information relating to remaining options, all of which are outstanding and exercisable, are as follows: Number of Option price Term of Option dates shares per share option ------------ --------- --------- ------- July 14, 1988 121,956 1.37 10 years September 28, 1990 23,810 1.31 10 years November 11, 1991 16,669 .75 10 years August 25, 1993 5,000 5.53 5 years August 23, 1995 29,468 5.44 10 years ------- 196,903 ======= Shares available for future grants totaled 38,540 at March 31, 1996. 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 at March 31, 1995. There were no reserved shares issued during the years ended March 31, 1996, 1995 or 1994. In connection with the January 1990 issuance of common stock through a public offering, the Company issued 913,600 Class A redeemable warrants. During 1994, 907,433 shares were issued upon exercise of Class A warrants. Additionally, the Company issued warrants to the underwriter of the January 1990 public offering of common stock, which entitle the underwriter to purchase up to 76,133 shares of the Company's common stock at a price of $2.88 per share. The warrants were all exercised during 1994. (7) 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 also leases certain office equipment under long-term operating lease agreements. F-14 Future minimum lease payments under noncancelable operating leases as of March 31, 1996 are: Year ending March 31, --------------------- 1997 $ 35,000 1998 23,000 1999 23,000 2000 23,000 2001 23,000 Thereafter 9,000 ------- Total minimum lease payments $ 136,000 ======= Rental expense for all operating leases was approximately $56,000 in 1996, $50,000 in 1995, and $59,000 in 1994. (8) 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. Individual customers and aggregate exports which accounted for 10% or more of sales were: Year ended March 31 ------------------- Customer 1996 1995 1994 -------- ---- ---- ---- Fleck Manufacturing, Inc. (a Xerox Corporation supplier) $ 2,358,887 3,090,322 2,981,063 ========= ========= ========= Exports: Canada $ 2,367,890 3,168,677 3,084,235 Far East 1,967,494 725,368 343,854 Europe 1,750,257 5,748,882 3,789,053 Mexico 569,845 549,980 465,798 Australia 438,875 536,176 398,456 --------- --------- --------- Total exports (including Fleck Manufacturing, Inc.) $ 7,094,361 10,729,083 8,081,396 ========= ========== ========= Libby Corporation $ - - 3,432,952 ========= ========== ========= At March 31, 1996, receivables from Fleck Manufacturing, Inc. were $80,845. F-15 (9) Benefit Plan The Company adopted a 401(k) plan effective January 1, 1994. The 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 $250. Total Company contributions were approximately $19,000 in 1996, $13,000 in 1995 and $16,000 in March 1994. (10) Litigation In March 1995, the Company, along with seven other defendants, was sued in Harris County, Texas. The suit claims, among other things, that the Company's GFCI product was defectively designed and manufactured and caused the death by electrocution of an individual. The suit seeks unspecified compensatory and exemplary damages in excess of $100,000. The Company has both product liability and umbrella liability insurance. The case is in the discovery stage. Management believes the ultimate disposition of this matter will not have a material adverse effect on the Company's financial position, results of operations or liquidity. (11) 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, 1996 and 1995 are: First Second Third Fourth quarter quarter quarter quarter ------- ------- ------- ------- Year ended March 31, 1996: Operating revenues $ 4,415,990 4,385,585 4,353,880 4,223,766 ========= ========= ========= ========= Operating income $ 951,001 645,076 673,542 714,324 ========= ========= ========= ========= Net income $ 629,856 455,131 464,733 489,065 ========= ========= ========= ========= Earnings per share $ .12 .08 .09 .09 ==== ==== ==== ==== Year ended March 31, 1995: Operating revenues $ 5,727,623 6,012,658 5,508,136 4,524,539 ========= ========= ========= ========= Operating income $ 996,262 776,567 250,953 263,839 ========= ========= ========= ========= Net income $ 645,956 630,833 177,771 413,397 ========= ========= ========= ========= Earnings per share $ .12 .12 .03 .08 ==== ==== ==== ==== The fourth quarter results for 1995 were positively impacted by a reduction in the valuation allowance for deferred tax assets of $405,000. F-16 TECHNOLOGY RESEARCH CORPORATION Schedule II Valuation and Qualifying Accounts Years ended March 31, 1996, 1995 and 1994
Additions ---------------------- Balances at Charged to Charged to Balances beginning costs and other at end Description of period expenses accounts Deductions of period ----------- --------- --------- --------- ---------- -------- Allowance for doubtful accounts: Year ended March 31, 1996 $ 107,000 - - 23,000 84,000 ======= ======= ======= ======= ======= Year ended March 31, 1995 $ 128,000 - - 21,000 107,000 ======= ======= ======= ======= ======= Year ended March 31, 1994 $ 128,000 40,000 - 40,000 128,000 ======= ======= ======= ======= =======
F-17 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: 7/1/96 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 Officer and Financial /s/ Robert S. wiggins Officer) 7/1/96 Robert S. Wiggins President and Director Raymond H. Legatti /s/ Edmund F. Murphy, Jr. Director 6/27/96 Edmund F. Murphy, Jr. /s/ Jerry T. Kendall Director 6/27/96 Jerry T. Kendall Senior Vice President Government Operations and Marketing and /s/ Raymond B. Wood Director 6/28/96 Raymond B. Wood -23- EX-3 2 EXHIBIT (3)(C) EXHIBIT (3)(c) CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF TECHNOLOGY RESEARCH CORPORATION *********************************************** TECHNOLOGY RESEARCH CORPORATION, a Florida corporation (the "Corporation"), hereby certifies as follows: 1. The Articles of Incorporation of the Corporation are hereby amended by deleting the present form of Article IV in its entirety and by substituting, in lieu thereof, the following: "The aggregate number of shares of stock authorized to be issued by this Corporation shall be 10,000,000 shares of common stock, each with a par value of $.51. Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to the common stock, as well as in the net assets of the Corporation upon liquidation or dissolution." 2. On May 10, 1995 the Board of Directors of the Corporation, and on August 23, 1995, the shareholders of the Corporation, approved a one for three reverse stock split or share combination, effective September 15, 1995. In addition to reducing the Corporation's authorized common stock to from 30,000,000 to 10,000,000 shares, the reverse stock split will effect a reduction in the issued and outstanding shares of common stock, from 15,844,507 to 5,281,502 (plus such additional shares as are created by rounding up each fractional share generated by the share combination to the next higher whole number). 3. The amendment recited above does not adversely affect the rights or preferences of the holders of outstanding shares of any class or series and does not result in the percentage of authorized shares that remain unissued after the division or combination exceeding the percentage of authorized shares that were unissued before the division or combination, except as a result of de minimis rounding up of each fractional share generated by the share combination to the next higher whole number, as approved by the Corporation's shareholders. 4. The amendment recited above (including the reverse stock split) has been duly adopted in accordance with the provisions of Sections 607.1003 and 607.10025(6), Florida Statutes, the Board of Directors of the Corporation having adopted a resolution setting forth such amendment, declaring its advisability and directing that such amendment be considered by the shareholders of the Corporation at its annual meeting thereof; notice of such meeting having been provided in accordance with the By-Laws of the Corporation; a quorum of such shareholders having been present at the meeting held in response to such notice on August 23, 1995; and a majority of the shareholders present at such meeting and entitled to vote on the proposed amendment having voted in favor thereof, a vote sufficient for approval of the amendment. 5. The foregoing amendment and reverse stock split shall become effective as of the close of business on September 15, 1995. IN WlTNESS WHEREOF, the Corporation has made this Certificate under the signature of its President and the attestation of its Secretary this 23 day of August, 1995. TECHNOLOGY RESEARCH CORPORATION /s/Raymond H. Legatti Attest: BY:______________________________ Raymond H. Legatti, President /s/Robert S. Wiggins By:_____________________________ Robert S. Wiggins, Secretary STATE OF FLORIDA COUNTY OF PINELLAS I HEREBY CERTIFY that on this 23 day of August, 1995, before me, the undersigned authority, personally appeared Raymond H. Legatti, President of TECHNOLOGY RESEARCH CORPORATION, to be well known and known to me to be the person who signed and executed the foregoing instrument, and who acknowledged before me that he executed the same on behalf of and as the act and deed of that corporation, freely and voluntarily, for the uses and purposes therein expressed, and that the facts stated therein are correct and complete to the best of his knowledge and belief. SWORN TO AND SUBSCRIBED before me the day and year aforesaid. /s/ Ida C. Larsen _______________________________ NOTARY PUBLIC, State of Florida at Large Print Name: Ida C. Larsen My Commission Expires: Sept. 6, 1996 EX-10 3 EXHIBIT (10)(L) REVOLVING CREDIT AGREEMENT RENEWAL First Union National Bank of Florida 410 Central Avenue St. Petersburg, Florida 33701 August 22, 1995 Mr. Robert S. Wiggins, CEO Technology Research Corporation 5250 140th Avenue North Clearwater, Florida 34620 Re: Loan Commitment and Agreement Reaffirmation Dear Mr. Wiggins: We are pleased to advise you that First Union National Bank of Florida ("First Union") has renewed the $2,500,000.00 Line of Credit to Technology Research Corporation under Loan Commitment and Agreement dated September 24, 1993 (the "Line of Credit"). First Union's obligation to advance under this Line of Credit will now expire on August 15, 1997. Except as expressly provided in this letter, all other terms and conditions of the Line of Credit will remain in full force and effect. At the Borrower's option, advances under the Line of Credit shall bear and accrue interest at a rate per annum which shall be either a) the 30 day London Interbank Offering Rate (LIBOR) plus 200 basis points; or b) the Bank's Prime Rate. Interest shall be due and payable monthly, calculated using year basis of 360 days, and charged for the actual number of days elapsed in an interest period. LIBOR base rate shall mean that rate per annum which, in the opinion of the Bank, United States dollars are being offered to major top credit quality banks at 11:00 a.m. London time, two (2) business days prior to +he commencement of the applicable interest period for settlement in immediately available funds by major top credit quality banks in the London Interbank market for a period equal to the interest period selected. Prime Rate is defined as that rate of interest announced from time to time by the Bank as its Prime Rate. The Line of Credit shall maintain a $750,000.00 sub-limit for Banker's Acceptances. The fee for this Line of Credit will continue to be one-quarter percent (0.25%) per annum and will be billed monthly in arrears on the unused portion of the Line of Credit. Page 2 of 2, Loan Commitment and Agreement Reaffirmation Thank you for allowing First Union the continuing opportunity to be of service. Sincerely, /s/Timothy J. Coop Timothy J. Coop Assistant Vice President Acknowledged and Accepted by: TECHNOLOGY RESEARCH CORPORATION /s/ Robert S. Wiggins By: ______________________ Robert S. Wiggins, CEO PROMISSORY NOTE $2,500,000.00 August 22, 1995 Technology Research Corporation 5250 140th Avenue North Clearwater, FL 34620 Individually and collectively "Borrower") First Union National Bank of Florida 214 North Hogan Street Jacksonville, FL 32202 (Hereinafter referred to as the "Bank") RENEWAL/MODIFICATION. This Promissory Note renews, extends and/or modifies that certain promissory note dated November 12, 1993 evidencing an original principal indebtedness of $2,500,000.00 of which $2,500,000.00 is currently outstanding. This Promissory Note is not a novation. Borrower promises to pay to the order of Bank, in lawful money of the United States of America, at its office indicated above or wherever else Bank may specify, the sum of Two Million, Five Hundred Thousand and No/100 dollars ($2,500,000.00) or such sum as may be advanced from time to time with interest on the unpaid principal balance at the rate and on the terms provided in this Promissory Note (including all renewals, extensions and/or modifications hereof, this "Note"). INTEREST RATE SELECTIONS. Prime Rate. The Bank's Prime Rate as that rate may change from time to time with changes to occur on the date Bank's Prime Rate changes ("Prime-Based Rate"). Bank's Prime Rate shall be that rate announced by Bank from time to time as its prime rate and is one of several interest rate bases used by Bank. Bank lends at rates both above and below Bank's Prime Rate, and Borrower acknowledges that Bank's Prime Rate is not represented or intended to be the lowest or most favorable rate of interest offered by Bank. LIBOR Rate. The 30-day LIBOR Rate plus 200 basis points ("LlBOR-Based Rate"). The LlBOR-Based Rate shall be determined in accordance with Bank's adjusted LIBOR Rate formula. INTEREST RATE SELECTION AND ADJUSTMENT. Interest Rate Options. Subject to the provisions hereof, at the election of Borrower, the unpaid principal balance of this Note shall bear interest from the date hereof at the Prime-Based Rate or the LIBOR-Based Rate (each, an "Interest Rate"). Borrower shall elect the Interest Rate, except the Prime- Based Rate, the period of time such Interest Rate will continuously apply (each, an "Interest Period"), if any, applicable thereto at the time of each borrowing and each rate conversion pursuant to the subparagraph entitled "Notice and Manner of Borrowing and Rate Conversion" below. There shall be no more than one Interest Rate in effect at any time. When the Prime-Based Rate is elected, it shall be adjusted daily as applicable to reflect Bank's Prime Rate and the Prime-Based Rate shall continue to apply until another Interest Rate option is elected pursuant to the subparagraph entitled "Notice and Manner of Borrowing and Rate Conversion." When the LlBOR- Based Rate is elected, such rate shall be fixed for the Interest Period and shall apply for successive Interest Periods at the then prevailing successive rate until another Interest Rate option is elected pursuant to the subparagraph entitled "Notice and Manner of Borrowing and Rate Conversion." When Borrower has not duly specified an Interest Rate as provided herein, the Note shall bear interest at the Prime-Based Rate. Interest Periods. In connection with each LlBOR-Based Rate Borrower, by giving notice at the times described in the subparagraph entitled "Notice and Manner of Borrowing and Rate Conversion" below, shall select an Interest Period to be applicable thereto, which Interest Period shall be a period of 1 month for 1-month LlBOR-Based Rate. No Interest Period selection is required for the Prime-Based Rate. Default Rate. In addition to all other rights contained in this Note, if a Default (defined herein) occurs, and as long as a Default continues, (a) Borrower shall no longer have the option to request the LlBOR-Based Rate and (b) all outstanding Obligations shall bear interest at the Prime-Based Rate plus three percent (3%) ("Default Rate") except if the Note is governed by North Carolina law and is under or equal to Three Hundred Thousand and No/100 Dollars ($300,000.00), the Default Rate shall be the Prime-Based Rate. The Default Rate shall apply from the occurrence of a Default (defined herein) until the Obligations or any judgment thereon is paid in full. Notice and Manner of Borrowing and Rate Conversion. Borrower shall give Bank irrevocable telephonic notice (confirmed in writing) of each proposed borrowing or rate conversion not later than 11:00 a.m. local time at the office of Bank first shown above (a) on the same business day as each proposed borrowing or rate conversion at a Prime-Based Rate and (b) at least two (2) business days before each proposed borrowing or rate conversion at a LlBOR-Based Rate. Each such notice shall specify (I) the date of such borrowing or rate conversion, which shall be a business day, (ii} the amount to be borrowed or converted, (iii) the Interest Rate or Interest Rates selected by Borrower, and (iv) except for the Primed-Based Rate, the duration of any Interest Period applicable thereto, which period must equal the Interest Rate option. Notices received after 11:00 a.m. local time at the office of Bank first shown above shall be deemed received on the next business day. INDEMNIFICATION AND ADDITIONAL COSTS Indemnification. Borrower indemnifies Bank against Bank's loss or expense in employing deposits as a consequence (a) of Borrower's failure to make any payment when due under this Note or (b) any payment, prepayment or conversion of any loan on a date other than the last day of the Interest Period ("Indemnified Loss or Expense " ) . Additional Costs. If, at any time, a new, or a revision in any existing law or interpretation or administration (including reversals) thereof by any government authority, central bank or comparable agency imposes, increases or modifies any reserve or similar requirement against assets, deposits or credit extended by Bank, or subjects Bank to any tax, duty or other charge (except tax on Bank's net income), and any of the foregoing increase the cost to Bank of maintaining its commitment or reduce the amount of any sum received or receivables by Bank under this Note, within 15 days after demand by Bank, Borrower agrees to pay Bank such additional amounts as will compensate Bank for such increased costs or reduction ("Additional Costs"). Match Funding. The amount of such (a) Indemnified Loss or Expense or (b) Additional Costs outlined above shall be determined, in Bank's sole discretion, based upon the assumption that Bank funded 100% of the loan in the applicable London interbank or domestic certificate of deposit market. Unavailability of Interest Rate. If, at any time, (a) Bank shall determine that, by reasons of circumstances affecting foreign exchange and interbank markets generally, LIBOR or CD deposits in the applicable amounts are not being offered to Bank; or (b) a new, or a revision in any existing law or interpretation or administration (including reversals) thereof by any government authority, central bank or comparable agency shall make it unlawful or impossible for Bank to honor its obligations under this Note, (I) Bank's obligation to make, maintain or convert into a LlBOR-Based Rate shall be suspended; and (ii) the applicable LIBOR-Based Rate shall immediately be converted to the Prime-Based Rate for the remainder of the Interest Period. INTEREST COMPUTATION. Actual/360 Computation. Interest shall be computed on the basis of a 360-day year for the actual number of days in the interest period ("Actual/360 Computation"). The Actual/360 Computation determines the annual effective interest yield by taking the stated (nominal) interest rate for a year's period and then dividing said rate by 360 to determine the daily periodic rate to be applied for each day in the interest period. Application of the Actual/360 Computation produces an annualized effective interest rate exceeding that of the nominal rate. PAYMENT. This Note shall be due and payable in consecutive periodic payments of accrued interest only commencing September 15, 1995, and on the fifteenth day of each month thereafter until fully paid. In any event, all principal and accrued interest shall be due and payable August 15, 1997. APPLICATION OF PAYMENTS. Monies received by Bank from any source for application toward payment of the Obligations (defined herein) shall be applied to accrued interest and then to principal. If a Default (defined herein) occurs, monies may be applied to the Obligations in any manner or order deemed appropriate by Bank. If any payment received by Bank under this Note or other Loan Documents (defined herein) is rescinded, avoided or for any reason returned by Bank because of any adverse claim or threatened action, the returned payment shall remain payable as an obligation of all persons liable under this Note or other Loan Documents as though such payment had not been made. LOAN DOCUMENTS AND OBLIGATIONS. The term "Loan Documents" used in this Note and other Loan Documents refers to all documents executed in connection with the loan evidenced by this Note and may include, without limitation, a commitment letter that survives closing, a loan agreement, this Note, guaranty agreements, security agreements, security instruments, financing statements, mortgage instruments, letters of credit and any modifications, but however, does not include swap agreements as defined in 11 U.S.C. Section 101 whenever executed. The term "Obligations" used in this Note refers to any and all indebtedness and other obligations under this Note, all other obligations as defined in the respective Loan Documents, and all obligations under any swap agreements as defined in 11 U.S.C. Section 101 between Borrower and Bank whenever executed. LATE CHARGE. If any payments are not timely made, Borrower shall also pay to Bank a late charge equal to five percent (5%) of each payment past due for ten (10) or more days. Acceptance by bank of any late payment without an accompanying late charge shall not be deemed a waiver of Bank's right to receive such late charge or to receive a late charge for any subsequent late payment received. If this Note is secured by owner-occupied residential real property located outside the state in which the office of Bank first shown above is located, the late charge laws of the state where the real property is located shall apply to this Note. ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's reasonable expenses incurred to enforce or collect any of the Obligations, including, without limitation, reasonable arbitration, paralegals', attorneys' and experts' fees and expenses, whether incurred without the commencement of a suit, in any triad arbitration, or administrative proceeding, or in any appellate or bankruptcy proceeding. USURY. Regardless of any other provision of this Note or other Loan Documents, if for any reason the effective interest should exceed the maximum lawful interest, the effective interest shall be deemed reduced to and shall be such maximum lawful interest, and (I) the amount which would be excessive interest shall be deemed applied to the reduction of the principal balance of this Note and not to the payment of interest, and (ii) if the loan evidenced by this Note has been or is thereby paid in full, the excess shall be returned to the party paying same, such application to the principal balance of this Note or the refunding of excess to be a complete settlement and acquittance thereof. DEFAULT. If any of the following occurs, a default ("Default") under this Note shall exist: (a) Nonpayment; Nonperformance. The failure of timely payment or performance of the Obligations or Default under this Note or any other Loan Documents; (b) False Warranty. A warranty or representation made in the Loan Documents or furnished Bank in connection with the loan evidenced by this Note proves materially false, or if of a continuing nature, becomes materially false; (c) Cross Default. At Bank's option, any default in payment or performance of any obligation under any other loans, contracts or agreements of Borrower, any Subsidiary or Affiliate of Borrower ("Affiliate" shall have the meaning as defined in 11 U.S.C. Section 101, except that the term "debtor" therein shall be substituted by the term "Borrower" herein; "Subsidiary" shall mean any corporation of which more than 50% of the issued and outstanding voting stock is owned directly or indirectly by Borrower), any general partner of or the holder(s) of the majority ownership interests of Borrower with Bank or its affiliates; (d) Cessation; Bankruptcy. The death of, appointment of guardian for, dissolution of, termination of existence of, loss of good standing status by, appointment of a receiver for, assignment for the benefit of creditors of, or commencement of any bankruptcy or insolvency proceeding by or against the Borrower, its Subsidiaries or Affiliates, if any, or any general partner of or the holder(s) of the majority ownership interests of Borrower, or any party to the Loan Documents; or (e) Material Capital Structure or Business Alteration. A material alteration in the type or kind of Borrower's business or that of its Subsidiaries or Affiliates, if any; or the acquisition of substantially all of Borrower's, any Subsidiary's, any Affiliate's, or guarantor's business or assets, or a material portion (10% or more) of such business or assets if such a sale is outside Borrower's, any Subsidiary's, any Affiliate's or any guarantor's, ordinary course of business, or more than 50% of its outstanding stock or voting power in a single transaction or a series of transactions, or the acquisition of substantially all of the business or assets or more than 50% of the outstanding stock or voting power of any other entity, or should any Borrower, Subsidiary, Affiliate, or guarantor enter into any merger or consolidation without prior written consent of Bank. REMEDIES UPON DEFAULT. (a) Bank Lien and Set-off. Except as prohibited by law, Borrower grants Bank a security interest in all of Borrower's accounts with Bank and any of its affiliates. If a Default (defined herein) occurs, Bank is authorized to exercise its right of set-off or to foreclose its lien against any agreement or account of any nature or maturity of Borrower without notice. (b) Acceleration Upon Default. If a Default occurs, Bank may, at Bank's discretion, accelerate the maturity of this Note and all other Obligations, and all of the Obligations shall be immediately due and payable. (c) Cumulative. All remedies available to Bank with respect to this Note and other Loan Documents and remedies available at law or in equity shall be cumulative and may be pursued concurrently or successively. SECURITY. Borrower has granted Bank a security interest in the collateral described in the Loan Documents, including, but not limited to, a Loan Commitment and Agreement dated September 24, 1993, a Loan Commitment and Agreement Reaffirmation dated August 15, 1994 and a Loan Commitment and Agreement Reaffirmation dated August 22, 1995. LINE OF CREDIT ADVANCES. Borrower may borrow, repay and reborrow, and Bank may advance and readvance under this Note respectively from time to time, so long as the total indebtedness outstanding at any one time does not exceed the principal amount stated on the face of this Note. Bank's obligation to advance or readvance under this Note shall terminate if Borrower is in Default under this Note. WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and other Loan Documents shall be valid unless in writing and signed by an officer of Bank. No waiver by Bank of any Default shall operate as a waiver of any other Default or the same Default on a future occasion. Neither the failure nor any delay on the part of Bank in exercising any right, power, or privilege granted pursuant to this Note and other Loan Documents shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise or the exercise of any other right, power or privilege. Each Borrower or any other person who may be liable under the Loan Documents waives presentment, protest, notice of dishonor, demand for payment, notice of intention to accelerate maturity, notice of acceleration of maturity, notice of sale and all other notices of any kind. Further, each agrees that Bank may extend, modify or renew this Note or make a novation of the loan evidenced by this Note for any period; whether or not longer than the original period of the Note, and grant any releases, compromises or indulgences with respect to any collateral securing this Note, or with respect to any Borrower or any person who may be liable under this Note or other Loan Documents, all without notice to or consent of any Borrower or any person who may be liable under this Note or other Loan Documents and without affecting the liability of Borrower or any person who may be liable under this Note or other Loan Documents. MISCELLANEOUS PROVISIONS. (a) Assignment. This Note and other Loan Documents shall inure to the benefit of and be binding upon the parties and their respective heirs, legal representatives, successors and assigns. Bank's interests in and rights under this Note and other Loan Documents are freely assignable, in whole or in part, by Bank. Borrower shall not assign its rights and interest hereunder without the prior written consent of Bank, and any attempt by Borrower to assign without Bank's prior written consent is null and void. Any assignment shall not release Borrower from the Obligations. (b) Applicable Law; Conflict Between Documents. This Note and other Loan Documents shall be governed by and construed under the laws of the state where Bank first shown above is located without regard to that state's conflict of laws principles. If the terms of this Note should conflict with the terms of the loan agreement or any commitment letter that survives closing, the terms of this Note shall control. (c) Jurisdiction. Borrower irrevocably agrees to non- exclusive personal jurisdiction in the state in which the office of Bank first shown above is located. (d) Severability. If any provision of this Note or of the other Loan Documents shall be prohibited or invalid under applicable law, such provision shall be ineffective but only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note or other such document. (e) Notices. Any notices to Borrower shall be sufficiently given, if in writing and mailed or delivered to the Borrower's address shown above or such other address as provided hereunder, and to Bank, if in writing and mailed or delivered to Bank's office address shown above or such other address as Bank may specify in writing from time to time. In the event that Borrower changes Borrower's address at any time prior to the date the Obligations are paid in full, Borrower agrees to promptly give written notice of said change of address by registered or certified mail, return receipt requested, all charges prepaid. (f) Plural; Captions. All references in the Loan Documents to Borrower, guarantor, person, document or other nouns of reference mean both the singular and plural form, as the case may be, and the term "person" shall mean any individual, person or entity. The captions contained in the Loan Documents are inserted for convenience only and shall not affect the meaning or interpretation of the Loan Documents. (g) Binding Contract. Borrower by execution of and Bank by acceptance of this Note agree that each party is bound to ail terms and provisions of this Note. (h) Advances. Bank in its sole discretion may make other advances and readvances under this Note pursuant hereto. (i) Posting of Payments. All payments received during normal banking hours after 2:00 p.m. local time at the office of Bank first shown above shall be deemed received at the opening of the next banking day. (j) Joint and Several Obligations. Each person who signs this Note is a Borrower and is jointly and severally obligated. (k) Fees and Taxes. Borrower shall promptly pay all documentary, intangible recordation and/or similar taxes on this transaction whether assessed at closing or arising from time to time. ARBITRATION AND PRESERVATION OF REMEDIES. (a) Upon demand of any party hereto, whether made before or after institution of any judicial action, any dispute, claim or controversy arising out of or connected with this Note and other Loan Documents ("Disputes") shall be resolved by binding arbitration as provided herein. Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future. Arbitration shall be conducted under the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association and Title 9 of the U.S. Code. All arbitration hearings shall be conducted in the city where the Bank first shown above is located or any place agreed to in writing by the parties. The expedited procedures set forth in Rule 51 et. Seq. Of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitation shall apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted. (b) Notwithstanding the preceding binding arbitration provision, Bank and Borrower preserve certain remedies that any party hereto may exercise freely, either alone or during a Dispute. Any party hereto shall have the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following remedies, as applicable: (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Loan Documents or under applicable law, (ii) all rights of self help including peaceful occupation of real property and collection of rents, set-off, and peaceful possession of personal property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, and appointment of receiver, and (iv) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute. (c) Borrower and Bank agree that they shall not have a remedy of punitive or exemplary damages against the other in any Dispute and hereby waive any right or claim to punitive or exemplary damages they have now or which may arise in the future in connection with any Dispute whether the Dispute is resolved by arbitration or judicially. (d) Notwithstanding the foregoing, this arbitration provision does not apply to disputes under or related to swap agreements. IN WITNESS WHEREOF, Borrower, on the day and year first above written, has caused this Note to be executed under seat. TECHNOLOGY RESEARCH CORPORATION By: /s/ Robert S. Wiggins --------------------- Robert S. Wiggins, Chief Executive Officer Taxpayer Identification No.: 59-2095002 EX-23 4 EXHIBIT (23)(A) Consent of Independent Certified Public Accountants ___________________________________________________ The Board of Directors Technology Research Corporation: We consent to incorporation by reference in the registration statements (No. 33-62379 and No. 33-62397) on Form S-8 of Technology Research Corporation of our report dated April 26, 1996, relating to the balance sheets of Technology Research Corporation as of March 31, 1996, and 1995, and the related statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended March 31, 1996, and related schedule, which report appears in the March 31, 1996, annual report on Form 10-K of Technology Research Corporation. KPMG Peat Marwick LLP St. Petersburg, Florida July 1, 1996 EX-27 5 ARTICLE 5 FDS FOR FISCAL YEAR 1996 10-K
5 1 12-MOS Mar-31-1996 Mar-31-1996 341601 4084698 2607152 0 5226762 12799418 6120341 3698692 15380590 2201885 0 2712437 0 0 10519125 15380590 16581301 17379221 10685614 10685614 975568 0 41967 3204599 1165814 2038785 0 0 0 2038785 .38 0
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