UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE NINE MONTH PERIOD ENDED JUNE 30, 2000 Commission File number 0-2364 BOONTON ELECTRONICS CORPORATION State: New Jersey I.R.S. Identification No. 22-1543137 25 Eastmans Road, P.O. Box 465, Parsippany, New Jersey 07054-0465 973-386-9696 "Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days." YES [X] NO [ ] Shares of Common Stock Outstanding: June 30, 2000 2,387,332 June 30, 1999 2,387,332 (Unaudited) BOONTON ELECTRONICS CORPORATION BALANCE SHEETS June 30, 2000 September 30, 1999 ASSETS ------------- ------------------ Current assets: Cash and cash equivalents $ 157,619 $ 69,484 Trade receivables 1,456,989 866,475 Inventories 1,850,559 1,441,561 Deferred tax benefit 86,000 86,000 Prepaid expenses and other receivables 38,060 271,945 ----------- ----------- Total current assets 3,589,227 2,735,465 ----------- ----------- Plant and equipment - net 311,556 375,287 ----------- ----------- Other assets: Deferred tax benefit 322,435 322,435 Deposits 70,121 70,121 ----------- ----------- Total other assets 392,556 392,556 ----------- ----------- Total assets $ 4,293,339 $ 3,503,308 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 325,979 $ 84,303 Related party loans 43,530 43,530 Accounts payable 1,201,434 1,082,132 Other current liabilities 680,499 298,717 ----------- ----------- Total current liabilities 2,251,442 1,508,682 Notes payable - noncurrent 184,257 234,849 Related party loans - noncurrent 218,970 218,970 ----------- ----------- Total liabilities 2,654,669 1,962,501 ----------- ----------- Commitments and contingencies Stockholders' equity: Common stock 238,733 238,733 Capital in excess of par 5,005,563 5,005,563 Deficit (3,605,626) (3,703,489) ----------- ----------- Total stockholders' equity 1,638,670 1,540,807 ----------- ----------- Total liabilities and stockholders' equity $ 4,293,339 $ 3,503,308 =========== =========== The accompanying notes are an integral part of these statements. 2 (Unaudited) BOONTON ELECTRONICS CORPORATION STATEMENTS OF OPERATIONS For the Nine Months Ended June 30, 2000 June 30, 1999 ------------- ------------- Net sales $ 6,543,848 $ 5,234,573 Cost of sales 3,511,680 2,716,778 ----------- ----------- Gross profit 3,032,168 2,517,795 ----------- ----------- Operating expenses: Commissions 721,004 650,643 Sales and marketing 583,873 669,570 Research and development 574,324 604,774 Administrative expense 736,904 514,972 ----------- ----------- Total operating expenses 2,616,105 2,439,959 ----------- ----------- Income from operations 416,063 77,836 ----------- ----------- Interest expense 33,667 50,478 Other expense 284,533 65,703 ----------- ----------- Total other expense 318,200 116,181 ----------- ----------- Income (loss) before taxes 97,863 (38,345) Income taxes -- 1,438 ----------- ----------- Net income (loss) $ 97,863 $ (39,783) =========== =========== Weighted average shares outstanding 2,387,332 2,338,954 =========== =========== Earnings (loss) per share $ 0.04 $ (0.02) =========== =========== The accompanying notes are an integral part of these statements. 3 (Unaudited) BOONTON ELECTRONICS CORPORATION STATEMENTS OF OPERATIONS For the Three Months Ended June 30, 2000 June 30, 1999 ------------- ------------- Net sales $ 2,426,564 $ 1,820,394 Cost of sales 1,246,150 923,170 ----------- ----------- Gross profit 1,180,414 897,224 ----------- ----------- Operating expenses: Commissions 242,271 213,266 Sales and marketing 218,333 230,857 Research and development 210,547 170,777 Administrative expense 291,623 166,303 ----------- ----------- Total operating expenses 962,774 781,203 ----------- ----------- Income from operations 217,640 116,021 ----------- ----------- Interest expense 13,088 19,933 Other expense 310,787 27,105 ----------- ----------- Total other expense 323,875 47,038 ----------- ----------- Income (loss) before taxes (106,235) 68,983 Income taxes -- 1,438 ----------- ----------- Net (loss) income $ (106,235) $ 67,545 =========== =========== Weighted average shares outstanding 2,387,332 2,387,332 =========== =========== Earnings (loss) per share $ (0.05) $ 0.03 =========== =========== The accompanying notes are an integral part of these statements. 4 (Unaudited) BOONTON ELECTRONICS CORPORATION STATEMENTS OF CASH FLOWS For the Nine Months Ended June 30, 2000 June 30, 1999 ------------- ------------- Cash flows from operating activities: Net income (loss) $ 97,863 $ (39,783) Adjustments to reconcile net income (loss): Depreciation 63,731 66,087 Gain on sale of assets -- (150) Decrease (increase) in current assets: Accounts receivable (590,514) 228,812 Inventories (408,998) (411,185) Prepaid expenses and other current assets 233,885 (86,558) Increase (decrease) in current liabilities: Accounts payable 119,302 243,255 Accrued liabilities 381,782 (235,855) Chapter 11 settlement - current -- (144,993) --------- --------- Net cash (used) by operations (102,949) (380,370) --------- --------- Cash flows from investing activities: Purchase of equipment -- (6,157) Proceeds from sale of assets -- 150 --------- --------- Net cash provided (used) by investing activities -- (6,007) --------- --------- Cash flows from financing activities: Payments on loans (58,916) (55,983) Proceeds from borrowings 250,000 -- Proceeds from sale of common stock -- 442,000 --------- --------- Net cash provided by financing activities 191,084 386,017 --------- --------- Increase (decrease) in cash and cash equivalents 88,135 (306) Cash and cash equivalents at beginning of period 69,484 113,812 --------- --------- Cash and cash equivalents at end of period $ 157,619 $ 113,452 ========= ========= The accompanying notes are an integral part of these statements. 5 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS: A. The Company is a New Jersey Corporation organized in 1947. The Company designs and produces electronic testing and measuring instruments including power meters, voltmeters and modulation meters. Recent models are microprocessor controlled and are often used in computerized automatic testing systems. The Company's equipment is marketed throughout the world to commercial and government customers in the electronics industry. The Company markets and distributes its products throughout the United States and abroad via domestic sales representatives and foreign distributors. Representatives sell on a commission basis, while distributors buy products for resale at discounted ex-factory prices. Its representatives and distributors also handle the products of other manufacturers, although these are not generally competitive with the Company's products. 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 reporting period. Actual results could differ from those estimates. C. The Company accounts for uncollectible trade accounts under the direct write-off method whereas generally accepted accounting principles require provision for such expenses under the allowance method. The effect of using this method approximates the allowance method as all amounts are deemed to be fully collectible. D. Inventories - stated at the lower of cost or market are valued by the first-in, first-out (FIFO) method. E. Plant and equipment - Depreciation and amortization are calculated by the straight-line method for financial reporting purposes at rates based on the following estimated useful lives: Building and improvement 39 Machinery and equipment 5-10 Office furniture and fixtures 5-10 6 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 The accelerated cost recovery and modified accelerated cost recovery systems are used for income tax purposes. Cost of major renewals and improvements that extend the life of the plant and equipment are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. F. Financial risk - The Company regularly maintains bank account balances in excess of FDIC insurable limits. G. Income taxes - The Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" that requires a company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in a company's financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on differences between the financial statement amounts and tax basis of assets and liabilities using expected tax rates in effect in the years in which the differences are expected to reverse. The Company recognized the benefit of net operating loss carry forward applying the valuation allowance that requires that the tax benefit be limited based on the weight of available evidence and the probability that some portion of the deferred tax asset shall not be realized. H. Financial instruments - The Company's financial instruments include cash, cash equivalents, trade receivables and payables, long-term debt and loans from related parties for which the carrying amounts approximate fair value. It is not practicable to estimate the fair value of related party loans and long-term debt. I. Stock-based compensation - The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB25) and related interpretations in accounting for its employee stock options. Under APB25, because the exercise price of employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recorded. Effective October 1, 1997, the Company has adopted the disclosure only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (Statement 123). 7 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 NOTE 2 - INVENTORIES: June 30, 2000 September 30, 1999 ------------- ------------------ Raw material $ 914,742 $ 846,594 Work in process 493,491 326,332 Finished goods 442,326 268,635 ---------- ---------- Total inventories $1,850,559 $1,441,561 ========== ========== NOTE 3 - PLANT AND EQUIPMENT: June 30, 2000 September 30, 1999 ------------- ------------------ Building and improvements $ 62,329 $ 62,329 Machinery and equipment 1,675,512 1,675,512 Office furniture and fixtures 583,232 583,232 ---------- ---------- Total - at cost 2,321,073 2,321,073 Accumulated depreciation (2,009,517) (1,945,786) ---------- ---------- Plant and equipment - net $ 311,556 $ 375,287 ========== ========== NOTE 4 - RELATED PARTY LOANS AND NOTES PAYABLE: June 30, 2000 September 30, 1999 ------------- ------------------ A. Related Party Loans Board of Directors: Notes, subordinated to NJEDA loan, dated February 6, 1995, payable in monthly installments of $5,449 including interest at 9% per annum through September 30, 2001 $ 262,500 $ 262,500 Less current portion 43,530 43,530 --------- --------- Non current portion $ 218,970 $ 218,970 ========= ========= Interest expense for the fiscal years ended September 30, 1999 and 1998 amounted to $23,953 and $24,035, respectively. No principal payments were made during the year ended September 30, 1999 since these notes are subordinated to the NJEDA loan. 8 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 June 30, 2000 September 30, 1999 ------------- ------------------ B. Notes Payable New Jersey Economic Development Authority (NJEDA): Note, dated July 31, 1996, payable in monthly installments of $7,620 including interest at 6.75% per annum through June 30, 2003: $ 260,236 $ 319,152 Wireless Telecom Group (see Note 11): Note, dated March 2, 2000, payable in full including interest at 9.75% per annum: 250,000 -- --------- --------- Total notes payable 510,236 319,152 Less current portion 325,979 84,303 --------- --------- Non current portion $ 184,257 $ 234,849 ========= ========= NJEDA interest expense for the fiscal years ended September 30, 1999 and 1998 amounted to $24,855 and $28,061, respectively. Future principal payments under the terms of the NJEDA note agreement are as follows: Fiscal Year Amount Amount ------------------ -------- 2000 $ 84,303 2001 77,778 2002 83,271 2003 73,800 -------- Total $319,152 ======== NOTE 5 - CONCENTRATION OF CREDIT RISK: The Company maintains cash and cash equivalents at two financial institutions that are insured by the Federal Deposit Insurance Corporation (FDIC). The Company at times during the period had amounts in these institutions that exceeded the FDIC insurable limit of $100,000. In the normal course of business the Company extends unsecured credit to customers in the United States and abroad. 9 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 NOTE 6 - COMMITMENTS AND CONTINGENCIES: Commitments: A. Retirement Plans: Effective July 1, 1989, the Company adopted a defined contribution plan for all eligible employees. In accordance with Internal Revenue Code Section 401(k), the plan provides for elective deferral of up to 15% of total compensation. The plan further provided for a Company matching contribution of 25% of the elective deferral amount of each participant that did not exceed 6% of total compensation. Effective October 1, 1995, the Company increased the matching contribution to 50% of the elective deferral amount of each participant that does not exceed 6% of total compensation. The amounts charged to operations for the fiscal years ended September 30, 1999 and 1998 were $32,854 and $33,792, respectively. B. Employee Stock Option Plans: On February 26, 1987, the Stockholders approved the 1987 Incentive Stock Option Plan, the 1987 Employee Stock Purchase Plan and the 1987 Stock Option Plan for Non-Employee Directors. Subject to the provisions of these plans, an aggregate of 150,000 shares of the Company's stock was made available for option purchases; namely 75,000 shares, 37,500 shares and 37,500 shares, respectively. The plans ended effective December 1996 and no further grants may be made for options. Price Per Share Number of Shares --------------- ---------------- Shares under option at September 30, 1998 $ 1.0625 26,500 Expired $ 1.0625 (14,000) ------ Shares under option at September 30, 1999 $ 1.0625 12,500 Expired $ 1.0625 (12,500) ------ Shares under option at June 30, 2000 $ 1.0625 -- ====== C. Lease commitments: Effective September 28, 1994, the Company entered into a seven-year lease (with a five-year renewal option) for its present office and manufacturing facility in Hanover Township, New Jersey. Rent that was charged to operations for the fiscal year ended September 30, 1999 totaled $332,000. Future minimum lease payments required under the lease for fiscal years 2000 and 2001 are $332,000 and $332,000, respectively. 10 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 The Company leases certain equipment under operating lease arrangements that are generally 60-month terms. These operating leases expire in various years through 2005. One of these leases may be renewed at the end of three years. Future minimum payments consisted of the following at September 30, 1999: Fiscal Year Amount ----------- ------ 2000 $52,186 2001 54,624 2002 51,511 2003 49,287 2004 44,536 2005 2,438 Contingencies: A. Environmental Contingencies: Following an investigation by the New Jersey Department of Environmental Protection (NJDEP) of the Company's waste disposal practices at a certain site that it formerly leased, the Company put a groundwater management plan into effect as approved by the NJDEP. Costs associated with the plan are charged directly to income as incurred. The owner of the site has notified the Company that if the NJDEP investigation proves to interfere with a sale of the property, the owner may seek to hold the Company liable for any loss it suffers as a result. However, corporate counsel has informed management that, in their opinion, the lessor would not prevail in any lawsuit filed due to the imposition by law of the statute of limitations. Costs charged to operations in connection with the groundwater management plan for the fiscal years ended September 30, 1999 and 1998 amounted to $79,855 and $57,205, respectively. The Company estimates the expenditures in this regard for the fiscal year ending September 30, 2000 shall amount to approximately $80,000. B. Income Tax Contingencies: The Company's income tax returns for the fiscal years ended September 30, 1999, 1998, 1997 and 1996 are subject to review. C. A former employee has charged the Company with wrongful dismissal. The Company contends there was no such discrimination and intends to contest the suit. 11 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 NOTE 7 - COMMON STOCK: June 30, 2000 September 30, 1999 ------------- ------------------ Common Stock: $.10 par value authorized 5,000,000 shares, Issued and outstanding 2,387,332 shares $ 238,733 $ 238,733 ========== ========== NOTE 8 - INCOME TAXES: The components of the deferred tax asset are: June 30, 2000 September 30, 1999 ------------- ------------------ Deferred tax asset $3,029,700 $3,029,700 Valuation allowance (2,621,265) (2,621,265) ---------- ---------- Net deferred tax asset $ 408,435 $ 408,435 ========== ========== Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes", requires that the Company record a valuation allowance when it is "more likely than not that some portion or all of the deferred tax assets will not be realized". The ultimate realization of this deferred tax asset depends on the ability to generate sufficient taxable income in the future. The Company has undergone substantial restructuring changes and has made strategic realignments of its operations that management believes will result in future profitability. The losses in recent years and a desire to be conservative make it appropriate to record a valuation allowance. Accordingly, the Company has provided a valuation allowance for the portion of the total deferred tax asset that will not be realized as related to the operating loss carry forward. Income tax laws allow for the utilization of loss carry forwards over periods not to exceed 15 and 7 years for Federal and State purposes, respectively. In the event the Company reports sufficient profitability in the future to use all or a portion of the deferred tax asset the valuation allowance shall be reduced or eliminated through a credit to expense (increasing stockholders' equity). The Company has net loss carry forwards for Federal and State purposes approximating $6,706,500 and $8,327,500 that expire in various years through 2014 and 2006, respectively. These loss carry forwards can be utilized to reduce future taxable income dollar for dollar. 12 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 The following is a reconciliation of income taxes at the federal statutory rate with income taxes recorded by the Company: June 30, 2000 June 30, 1999 ------------- ------------- Computed income taxes at statutory rate $ 135,273 $ -- Recognition of net operating loss (135,273) -- --------- --------- Expense (benefit) $ -- $ -- ========= ========= NOTE 9 - SEGMENT INFORMATION: The Company is engaged in the manufacture and sale of electronic test and measurement equipment and management considers its business as a single segment for reporting purposes. The Companies export sales were as follows: Nine Months Ended June 30, Amount % of Total Sales -------------------------- ------ ---------------- 2000 $2,562,876 39% 1999 2,504,815 48% The Companies sales to domestic government agencies were as follows: Nine Months Ended June 30, Amount % of Total Sales -------------------------- ------ ---------------- 2000 $ 651,660 10% 1999 291,097 6% NOTE 10 - EARNINGS PER SHARE: Earnings per share have been computed by dividing net income by the weighted-average number of shares outstanding of 2,387,332 for 2000 and 2,338,954 for 1999. Options to purchase a total of 428,268 shares of common stock at $3.24 per share in 1999 were not included because the exercise price exceeded the average market price and would have resulted in anti-dilution. Also in 1999, incentive stock option shares were not included because they were deemed to be insignificant. 13 (Unaudited) BOONTON ELECTRONICS CORPORATION NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 NOTE 11 - SUBSEQUENT EVENT - CHANGE IN CONTROL OF COMPANY: Boonton entered into an Agreement and Plan of Reorganization (the "Merger Agreement") on March 2, 2000 with Wireless Telecom Group ("Wireless") and WTT Acquisition Corp., a wholly owned subsidiary of Wireless whereby Boonton shall be acquired by and become a wholly owned subsidiary of Wireless. Under the terms of the Merger Agreement, each outstanding share of the Boonton's common stock shall be converted into .79 shares of Wireless common stock on the closing date. The Merger Agreement was approved by Boonton's stockholders at a Special Meeting of Stockholders held on July 6, 2000 and the acquisition was completed on July 7, 2000. Also, on March 2, 2000, Wireless and Boonton executed a Promissory Note whereby Boonton promised to pay Wireless the sum of Two Hundred and Fifty Thousand Dollars ($250,000) together with interest. Since the closing of the Merger Agreement occurred before July 14, 2000 the principal due and any accrued but unpaid interest thereon shall be cancelled and forgiven and Wireless shall release, acquit and discharge Boonton from any liability under the Promissory Note. 14 BOONTON ELECTRONICS CORPORATION MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2000 RESULTS OF OPERATIONS: Net sales for the nine months ended June 30, 2000 of $6,543,848 were $1,309,275 higher than net sales of $5,234,573 reported for the nine months ended June 30, 1999. Domestic revenues increased by $1,251,214 due to significant sales of the new Peak Power/CW Power and RF Volt Meter products. Gross profit as a percentage of net sales decreased to 46% in the current period versus 48% for the equivalent period a year ago. This was primarily due to increased cost of goods caused mostly by overtime costs required to produce the increased number of units needed to generate the increased revenues. Commission expense increased by $70,361 over the prior year's comparable period due to increased revenues. However, it declined as a percentage of sales due to the increase in domestic revenues that carry a lower commission rate. Research and development expense decreased by $30,450 due to completion of the new product design at the end of fiscal year 1999. Income from operations of $416,063 was reported for the nine months ended June 30, 2000 as compared to income from operations of $77,836 for the previous year's equivalent period. Net income of $97,863 represented a $137,646 increase over the prior year's comparable period net loss of $39,783 primarily due to increased revenues. Earnings per share for the current period were $0.04 versus a loss per share of $.02 for the prior year's comparable period. LIQUIDITY AND CAPITAL RESOURCES: Boonton obtained a short-term loan for $250,000 from Wireless Telecom Group, Inc. the company that acquired Boonton on July 7, 2000. The proceeds from the note were used to pay past due trade payables. There have been no other significant changes in the Company's financial condition since the fiscal year ended September 30, 1999 and the information included in the Company's report on Form 10-KSB should be read in conjunction with this report on Form 10-QSB. Trade receivables at June 30, 2000 were higher than September 30, 1999 as a result of increased sales. Inventory also increased to $1,850,559 and continues to include a write down of approximately $212,000. The current ratio at June 30, 2000 decreased to 1.75 as compared to 1.81 at September 30, 1999 and working capital increased to $1,637,785 at June 30, 2000 versus $1,226,783 at September 30, 1999. The Company's backlog at June 30, 2000 was $3,398,928 reflecting an increase of $2,341,182 over the September 30, 1999 backlog. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOONTON ELECTRONICS CORPORATION By /s/ EDWARD GARCIA --------------------------- Edward Garcia, President August 10, 2000 16 BOONTON ELECTRONICS CORPORATION INDEX TO EXHIBITS AND REPORTS ON FORM 8-K FILED IN THE QUARTERLY REPORT ON FORM 10-QSB FOR THE NINE MONTHS ENDED JUNE 30, 2000 EXHIBIT NO. PAGE - ----------- ---- 27 Financial Data Schedule 18 REPORTS ON FORM 8-K: - ------------------- (a) A report on Form 8-K was filed with the Commission on March 3, 2000 with regard to Item 5. - Other Items. (b) A report on Form 8-K was filed with the Commission on March 14, 2000 with regard to Item 1. - Changes in Control of Registrant. (c) A report on Form 8-K was filed with the Commission on May 10, 2000 with regard to Item 1. - Changes in Control of Registrant. 17