-----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, AsMErrDOCVK/F4HVffBgO4+W6Nh2QtRFyykUBiBZ/xyDxoxNwUyEQT2mtJxJMVWv POtc/t0S4wIV0rAkQKojhw== 0000891092-98-000294.txt : 19980814 0000891092-98-000294.hdr.sgml : 19980814 ACCESSION NUMBER: 0000891092-98-000294 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PORTA SYSTEMS CORP CENTRAL INDEX KEY: 0000079564 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 112203988 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08191 FILM NUMBER: 98685427 BUSINESS ADDRESS: STREET 1: 575 UNDERHILL BLVD CITY: SYOSSET STATE: NY ZIP: 11791 BUSINESS PHONE: 5163649300 MAIL ADDRESS: STREET 1: 575 UNDERHILL BLVD CITY: SYOSSET STATE: NY ZIP: 11791 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.................to................... Commission file number 1-8191 PORTA SYSTEMS CORP. (Exact name of registrant as specified in its charter) Delaware 11-2203988 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 575 Underhill Boulevard, Syosset, New York (Address of principal executive offices) 11791 (Zip Code) 516-364-9300 (Company's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of 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 the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: Common Stock (par value $0.01) 9,298,713 shares as of August 3, 1998 Page 1 of 14 pages PART I.- FINANCIAL INFORMATION Item 1- Financial Statements PORTA SYSTEMS CORP. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands) June 30, December 31, 1998 1997 ---------- ------------ (Unaudited) Assets Current assets: ash and cash equivalents $ 4,877 $ 5,091 ccounts receivable, net 15,831 14,891 nventories 8,103 8,159 repaid expenses 1,703 1,266 -------- -------- Total current assets 30,514 29,407 -------- -------- Property, plant and equipment, net 4,420 4,667 Deferred computer software, net 313 543 Goodwill, net 11,828 12,059 Other assets 4,089 4,324 -------- -------- Total assets $ 51,164 $ 51,000 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Convertible subordinated debentures $ 360 $ 1,758 Current portion of senior debt 1,518 1,900 Accounts payable 4,825 5,796 Accrued expenses 7,085 8,656 Accrued interest payable 574 398 Accrued commissions 2,010 2,444 Income taxes payable 995 853 Accrued deferred compensation 1,152 1,228 Short-term loans 63 120 -------- -------- Total current liabilities 18,582 23,153 -------- -------- Senior debt 9,483 12,978 12% subordinated debentures 5,475 -- Zero coupon senior subordinated convertible notes -- 2,796 Notes payable net of current maturities 3,084 3,084 Income taxes payable 640 649 Other long-term liabilities 513 487 Minority interest 1,115 1,040 -------- -------- Total long-term liabilities 20,310 21,034 -------- -------- Total Liabilities 38,892 44,187 -------- -------- Stockholders' equity: Preferred stock, no par value; authorized 1,000,000 shares, none issued -- -- Common stock, par value $.01; authorized 20,000,000 shares, issued 9,298,713 and 8,644,304 shares at June 30, 1998 and December 31,1997, respectively 93 86 Additional paid-in capital 74,970 70,926 Accumulated other comprehensive loss: Foreign currency translation adjustment (3,900) (4,027) Accumulated deficit (56,518) (57,799) -------- -------- 14,645 9,186 Treasury stock, at cost (2,066) (2,066) Receivable for employee stock purchases (307) (307) -------- -------- Total stockholders' equity 12,272 6,813 -------- -------- Total liabilities and stockholders' equity 51,164 $ 51,000 ======== ======== See accompanying notes to consolidated financial statements. Page 2 of 14 pages PORTA SYSTEMS CORP. AND SUBSIDIARIES Unaudited Consolidated Statements of Operations (In thousands, except per share data) Six Months Ended June 30, June 30, 1998 1997 -------- --------- Sales $ 30,943 $ 28,874 Cost of sales 17,622 18,095 -------- -------- Gross profit 13,321 10,779 Selling, general and administrative expenses 6,967 5,892 Research and development expenses 3,013 2,488 -------- -------- Total expenses 9,980 8,380 -------- -------- Operating income 3,341 2,399 Interest expense (1,782) (1,840) Interest income 157 92 Other income 712 202 Debt conversion expense (945) -- -------- -------- Income before income taxes, minority interest and extraordinary item 1,483 853 Income tax expense (200) (23) Minority interest (76) 15 -------- -------- Income before extraordinary item 1,207 845 Extraordinary item 76 11 -------- -------- Net income $ 1,283 $ 856 ======== ======== Per share data: Basic per share amounts: Income before extraordinary item $ 0.13 $ 0.36 -------- -------- Extraordinary item 0.01 0.00 -------- -------- Net income per share of common stock $ 0.14 $ 0.36 ======== ======== Weighted average shares outstanding 9,220 2,348 ======== ======== Diluted per share amounts: Income before extraordinary item $ 0.12 $ 0.13 Extraordinary item 0.01 0.00 -------- -------- Net income per share of common stock $ 0.13 $ 0.13 ======== ======== Weighted average shares outstanding 10,075 6,398 ======== ======== See accompanying notes to unaudited consolidated financial statements. Page 3 of 14 pages PORTA SYSTEMS CORP. AND SUBSIDIARIES Unaudited Consolidated Statements of Operations (In thousands, except per share data) Three Months Ended June 30, June 30, 1998 1997 -------- --------- Sales $ 14,651 $ 16,394 Cost of sales 8,017 9,629 -------- -------- Gross profit 6,634 6,765 Selling, general and administrative expenses 3,500 3,305 Research and development expenses 1,683 1,337 -------- -------- Total expenses 5,183 4,642 -------- -------- Operating income 1,451 2,123 Interest expense (925) (924) Interest income 79 50 Other income 203 67 -------- -------- Income before income taxes, minority interest and extraordinary item 808 1,316 Income tax expense (184) (9) Minority interest (121) (60) -------- -------- Income before extraordinary item 503 1,247 Extraordinary item -- 3 -------- -------- Net income $ 503 $ 1,250 ======== ======== Per share data: Basic per share amounts: Income before extraordinary item $ 0.05 $ 0.56 Extraordinary item 0.00 0.00 -------- -------- Net income per share of common stock $ 0.05 $ 0.56 ======== ======== Weighted average shares outstanding 9,299 2.214 ======== ======== Diluted per share amounts: Income before extraordinary item $ 0.05 $ 0.20 Extraordinary item 0.00 0.00 -------- -------- Net income per share of common stock $ 0.05 $ 0.20 ======== ======== Weighted average shares outstanding 10,345 6,288 ======== ======== See accompanying notes to unaudited consolidated financial statements. Page 4 of 14 pages PORTA SYSTEMS CORP. AND SUBSIDIARIES Unaudited Consolidated Statements of Comprehensive Income Six Months Ended June 30, June 30, 1998 1997 -------- -------- Net income $1,283 $ 856 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 127 (202) ------ ------ Comprehensive income $1,410 $ 654 ====== ====== Three Months Ended June 30, June 30, 1998 1997 -------- -------- Net income $ 503 $1,250 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (15) 140 ------ ------ Comprehensive income $ 488 $1,390 ====== ====== See accompanying notes to unaudited consolidated financial statements. Page 5 of 14 pages PORTA SYSTEMS CORP. AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows (In thousands) Six Months Ended June 30, June 30, 1998 1997 -------- -------- Cash flows from operating activities: Net income $ 1,283 $ 856 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary gain (76) (11) Non-cash debt conversion expense 945 -- Non-cash financing expenses 228 184 Non-cash operating expenses -- 13 Write off of interest expense 304 -- Depreciation and amortization 1,080 1,582 Amortization of debt discounts 108 20 Minority interest 76 14 Changes in assets and liabilities: Accounts receivable (940) 182 Inventories 56 (1,137) Prepaid expenses (437) 119 Other receivables -- 31 Deferred computer software -- (13) Other assets (68) 865 Accounts payable, accrued expenses and other liabilities (1,873) (285) ------- ------- Net cash provided by operating activities 686 2,420 ------- ------- Cash flows from investing activities: Proceeds from disposal of assets held for sale, net -- 500 Capital expenditures (297) (216) ------- ------- Net cash provided by (used in) investing activities (297) 284 ------- ------- Cash flows from financing activities: Proceeds from senior debt 6 299 Repayments of senior debt (3,883) (1,122) Proceeds from 12% subordinated debentures and warrants 6,000 -- Repayment of Zero coupon senior subordinated convertible notes (2,796) -- (Repayments of) proceeds from short term loans (57) 39 ------- ------- Net cash used in financing activities (730) (784) ------- ------- Effect of exchange rate changes on cash 127 (227) ------- ------- Increase (decrease) in cash and cash equivalents (214) 1,693 Cash and equivalents - beginning of the year 5,091 2,584 ------- ------- Cash and equivalents - end of the period $ 4,877 $ 4,277 ======= ======= Supplemental cash flow disclosures: Cash paid for interest expense $ 1,219 $ 1,399 ======= ======= Cash paid for income taxes $ 82 $ 45 ======= ======= See accompanying notes to unaudited consolidated financial statements. Page 6 of 14 pages NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1: Management's Responsibility For Interim Financial Statements Including All Adjustments Necessary For Fair Presentation Management acknowledges its responsibility for the preparation of the accompanying interim consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the results of its operations for the interim periods presented. These consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to consolidated financial statements included in the Company's annual report to stockholders for the year ended December 31, 1997. Results for the first six months of 1998 are not necessarily indicative of results for the year. Note 2: Inventories Inventories are valued at lower of cost or market. Inventory costs at June 30, 1998 have been computed using a standard cost system. The composition of inventories at the end of the respective periods is as follows: June 30, 1998 December 31,1997 ------------- ---------------- (in thousands) Parts and components $ 4,762 $ 5,349 Work-in-process 1,413 1,079 Finished goods 1,928 1,731 ------- ------- $ 8,103 $ 8,159 ======= ======= Note 3: 6% Convertible Subordinated Debentures and Zero Coupon Senior Subordinated Convertible Notes As of June 30, 1998, the Company had outstanding $360,000 of its 6% Convertible Subordinated Debentures due July 1, 2002 ("the Debentures"), net of original issue discount amortized to principal over the term of the debt using the effective interest rate method, of $25,000. The face amount of the outstanding Debentures was $385,000 at June 30, 1998. Interest on the Debentures is payable on July 1 of each year. The interest accrued as of June 30, 1998 amounted to $92,400. As of June 30, 1998, the Company was in default under the provisions of the Debentures. Subsequent to June 30, 1998, the Company remedied the default by paying the interest due through July 1, 1998 to the paying agent. Page 7 of 14 pages Note 4: Senior Debt On June 30, 1998, the Company's debt to its senior lender was $14,085,000. During the six and three months ended June 30, 1998, the Company repaid principal of $3,877,000 and $934,000, respectively. Based on anticipated principal payments, $1,518,000 has been classified as a current liability at June 30, 1998. Financial debt covenants include an interest coverage ratio measured quarterly, limitations on the incurrence of indebtedness, limitations on capital expenditures, and prohibitions on declarations of any cash or stock dividends or the repurchase of the Company's stock. As of June 30,1998, the Company was in compliance with the above covenants. Note 5: 12% Subordinated Notes In January 1998, the Company raised $6,000,000 from the private placement of 60 units at $100,000 per unit. Each unit consisted of (a) the Company's 12 % Subordinated Note due January 3, 2000 (a "12% Note"), in the principal amount of $100,000, and (b) a Series B Common Stock Purchase Warrant (a "Series B Warrant") to purchase 10,000 shares of Common Stock at $3.00 per share through December 31, 2002. In the event that any 12% Note is outstanding one year from the date on which such 12% Note is issued (the "Anniversary Date of the Note"), the Company shall issue to the holder of such 12% Note on the Anniversary Date of the Note a Series C Warrant to purchase 25 shares of Common Stock for each $1,000 principal amount of 12% Notes outstanding on the Anniversary Date of the Note. The Series C Warrant will have an exercise price equal to the average closing prices of the Common Stock on each of the five trading days preceding the Anniversary Date of the Note with respect to which the Series C Warrant is being issued and will expire on December 31, 2003. The proceeds from the sale of the Units was used principally to pay the remaining principal amount of Zero Coupon Notes which had not been converted of $2,796,000 (note 3) and to reduce the Company's senior debt by approximately $2,950,000 (note 4). The balance of such proceeds was added to working capital. The Series B and Series C Warrants were valued at $630,000 and were recorded as part of additional paid in capital. Accordingly, the Company recorded the net 12% Note at a value of $5,370,000. In connection with the private placement of these units, the Company issued to its investment banking firm 120,000 shares of common stock. Note 6: Receivable for Employee Stock Purchases During the quarter ended June 30, 1998, the Board of Directors approved the exchange of certain notes receivable issued by current and former employees of the Company for the common stock of the Company which is held as collateral for these notes. The notes were issued as payment for the shares pursuant to the 1984 compensation plan. It is anticipated that this transaction will close during the quarter ended September 30, 1998. The exchange of the shares of the Company's common stock as full payment of the employee notes will have only an effect on the Company's balance sheet as a reclassification of equity. Page 8 of 14 pages Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company's consolidated statements of operations for the periods indicated below, shown as a percentage of sales, are as follows: Six Months Ended Three Months Ended June 30, June 30, 1998 1997 1998 1997 ------ ------ ------ ------ Sales 100% 100% 100% 100% Cost of Sales 57% 63% 55% 59% Gross Profit 43% 37% 45% 41% Selling, general and administrative expenses 22% 20% 24% 20% Research and development expenses 10% 9% 11% 8% Operating income 11% 8% 10% 13% Interest expense - net (5%) (6%) (6%) (5%) Other income 2% 1% 1% 0% Debt conversion expense (3%) 0% 0% 0% Minority interest 0% 0% (1%) 0% Income taxes (1%) 0% (1%) 0% Extraordinary item 0% 0% 0% 0% Net income 4% 3% 3% 8% The Company's sales by product line for the periods ended June 30, 1998 and 1997 are as follows: Six Months Ended June 30, 1998 1997 ---- ---- (Dollars in thousands) Line connection/protection equipment ("Line connection") $10,600 34% $13,347 46% Operations Support Systems ("OSS") 15,743 51% 11,302 39% Signal Processing 4,520 15% 3,942 14% Other 80 0% 283 1% ----------- ----------- $30,943 100% $28,874 100% =========== =========== Three Months Ended June 30, 1998 1997 ---- ---- (Dollars in thousands) Line connection $ 5,830 40% $ 6,552 40% OSS 6,570 45% 7,310 45% Signal Processing 2,195 15% 2,339 14% Other 53 0% 193 1% ----------- ----------- $14,651 100% $16,394 100% =========== =========== Page 9 of 14 pages Results of Operations The Company's sales for the six months ended June 30, 1998 compared to the six months ended June 30, 1997 increased $2,069,000 (7%) from $28,874,000 in 1997 to $30,943,000 in 1998. Sales for the quarter ended June 30, 1998 of $14,651,000 decreased by $1,743,000 (11%) compared to $16,394,000 for the quarter ended June 30, 1997. The increased sales for the six month period is due to higher revenue from the OSS and Signal Processing divisions for that period. The decrease for the three month period is due to a decline sales from all divisions for that period. The line connection equipment sales for the six months ended June 30 decreased from $13,347,000 to $10,600,000, or $2,747,000 (21%) from 1997 to 1998. Sales for the three months ended June 30 decreased by $722,000 (11%) from $6,552,000 in 1997 to $5,830,000 in 1998. The decrease for both the six and three months ended June 30, 1998 reflects changes in the product mix and reduced unit purchases from the Company's largest customer, British Telecommunications plc ("BT"). During 1997, the Company amended an agreement to supply certain line connection/protection equipment to BT, which included certain new products. The amended agreement resulted in a lower selling price for existing products and prices that resulted in a reduced gross margin for new products. Sales to BT during the six and three months of 1997 were made pursuant to the old agreement, while the amended agreement applied to sales in the 1998 periods. In addition, the number of units purchased by BT declined in the three and six months ended June 30, 1998 from the comparable periods of 1997. Orders for line connection/protection equipment from BT remain at the reduced rate. The decline in sales to BT was somewhat offset by increased sales of Line connection equipment in the United States and Mexico. OSS revenue for the six months ended June 30, 1998 was $15,743,000 compared to the six months ended June 30, 1997 of $11,302,000 an increase of $4,441,000 (39%). OSS revenue for the three months ended June 30, 1998 was $6,570,000 compared to the three months ended June 30, 1997 of $7,310,000, a decrease of $740,000 (10%) due to a delay in securing an anticipated OSS contract. The increased sales during the six months ended June 30, 1998 resulted from the attainment of certain milestones on OSS contracts which are accounted for using a percentage of completion method. Furthermore, OSS sales during the first quarter of 1997 were at a reduced level since certain contract milestones were attained later in the year, resulting in recognition of revenue at such later time. Signal Processing sales for the six months ended June 30, 1998 were $4,520,000 compared to the six months ended June 30, 1997 of $3,942,000, an increase of $578,000 (15%). Sales for the three months ended June 30, 1998 were $2,195,000 compared to the three months ended June 30, 1997 of $2,339,000, a decrease of $144,000 (6%). The increased revenue for the six month period reflects shipments on multiple year sales orders to certain military customers which were secured during the latter part of 1997. The decrease in sales for the three month period reflects delays by customers in placing sales orders. Cost of sales for the six months and the quarter ended June 30, 1998, as a percentage of sales compared to the same periods of 1997, decreased from 63% to 57% and from 59% to 55%, respectively. The improvement in gross margin is attributed to the Company's continuing effort to increase manufacturing productivity, the sales product mix and the associated higher gross margin, and the absorption of certain fixed expenses associated with the OSS contracts. Page 10 of 14 pages Results of Operations (continued) Selling, general and administration expenses increased by $1,075,000 (18%) from $5,892,000 to $6,967,000 for the six months ended June 30, 1998 compared to 1997. The increase from 1997 to 1998 for the six months reflects higher sales commissions, primarily on OSS contracts, based upon the increased revenues for the first six months of 1998. For the quarter ended June 30, 1998 and 1997 selling, general and administration expenses increased by $195,000 (6%). This increase relates primarily to the Company's efforts to increase its sales and marketing effectiveness in order to secure future business. Research and development expenses increased by $525,000 (21%) and by $346,000 (26%) for the six and three months ended June 30, 1998 from the comparable periods in 1997, respectively. The increased expenses results from the Company's efforts to develop new products, primarily related to the OSS business. As a result of the above, for the six months ended June 30, 1998 compared to 1997, the Company had operating income of $3,341,000 in 1998 versus $2,399,000 in 1997. The Company had an operating income of $1,451,000 for the quarter ended June 30, 1998 as compared to $2,123,000 for the quarter ended June 30, 1997. Other income for the six months ended June 30, 1998 includes $400,000 from the settlement of litigation and $167,000 of additional funds received from the settlement of the sale of the Israeli business. During the six months ended June 30 ,1998, the Company recorded debt conversion expense of $945,000 as a result of the conversion of Zero Coupon Notes and 6% Convertible Subordinated Debentures to common stock. Income tax expense increased for the six months ended June 30, 1998 compared to 1997 by $177,000 from $23,000 to $200,000 and for the three months ended June 30, 1998 compared to 1997 by $175,000 from $9,000 to $184,000 due to the limitation of the Company's NOL carryforwards. As the result of the foregoing the Company generated net income after extraordinary items of $1,283,000, $0.13 per share (basic) and $0.12 per share (diluted) for the six months ended June 30, 1998 compared with net income after extraordinary items of $856,000, $0.36 per share (basic) and $0.13 per share (diluted), for the six months ended June 30, 1997. Net income for the three months ended June 30, 1998 was $503,000, $0.05 per share (basic and diluted), compared with net income for the three months ended June 30, 1997 of $1,250,000, $0.56 per share (basic) and $0.20 per share (diluted). Page 11 of 14 pages Liquidity and Capital Resources At June 30, 1998 the Company had cash and cash equivalents of $4,877,000 compared with $5,091,000 at December 31, 1997. The Company's working capital at June 30, 1998 was $11,932,000, compared to working capital of $6,254,000 at December 31, 1997. The improved working capital reflects (i) increased accounts receivable (ii) reduced balance of the 6% Debentures and (iii) lower balances of accounts payable, accrued expenses and accrued commissions. As of June 30, 1998, the Company's loan and security agreement with its senior secured lender, which expires August 1999, provided the Company, under its revolving line of credit and its letter of credit facility, with combined availability totaling $9,000,000. In addition, the Company has $11,001,000 outstanding as of June 30, 1998 under a term loan agreement. Prior to the expiration of its agreement with its senior lender, the Company will require either an extension of such agreement or secure a comparable agreement with another lender. No assurance can be give as to the ability of the Company to obtain such an extension or alternative financing. Year 2000 Issue Many existing computer programs use only two digits to identify a year in a date field. These programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the year 2000. This is referred to the as the "Year 2000 Issue." Management has initiated a Company wide program to prepare the Company's computer systems and applications for year 2000 compliance including potential obligations to update its customer's systems to the extent required under their contracts. The Company expects to incur internal staff costs as well as other expenses necessary to prepare its systems for the year 2000. The Company expects to both replace some systems and upgrade others. Maintenance or modification costs will be expensed as incurred. The total cost of this effort is still being evaluated, but is not expected to be material to the Company. Forward Looking Statements Statements contained in this Form 10-Q include forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors, including those identified in this Form 10-Q, the Company's Annual Report on From 10-K for the year ended December 31, 1997 and in other documents filed by the Company with the Securities and Exchange Commission. Page 12 of 14 pages PART II- OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The Company's 1998 Annual Meeting of Stockholders was held on June 23, 1998. At the annual meeting, the stockholders (i) reelected its present board, consisting of Messrs. William V. Carney, Seymour Joffe, Michael A. Tancredi, Howard D. Brous, Warren H. Esanu, Herbert H. Feldman, Stanley Kreitman, Lloyd I. Miller, III and Robert Schreiber and (ii) ratified the appointment of BDO Seidman, LLP as independent auditors for the year ended December 31, 1998. Each director received at least 7,648,532 votes for his election. Set forth below is the vote on the other matters approved at the meeting. Matter Votes for Votes Against Abstentions Appointment of Auditors 7,645,145 19,591 7,321 Page 13 of 14 pages SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PORTA SYSTEMS CORP. Dated August 11, 1998 By /s/ William V. Carney ------------------------------ William V. Carney Chairman of the Board Dated August 11, 1998 By /s/ Edward B. Kornfeld ------------------------------ Edward B. Kornfeld Senior Vice President and Chief Financial Officer Page 14 of 14 pages EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 4,877 0 15,831 0 8,103 30,514 4,420 0 51,164 18,582 0 0 0 93 12,179 51,164 30,943 30,943 17,622 9,980 0 0 1,782 1,483 200 1,207 0 76 0 1,283 0.14 0.13
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