Special equipment consists of equipment manufactured by the Company and
includes direct manufacturing costs and overhead. Such equipment which is
used in manufacturing or research activities of the Company is normally
offered for sale by the Company. Therefore, revenue from the sale of such
equipment is included in sales and the depreciated cost is in cost of sales.
During the nine month period ended April 30, 1994, the Company transferred to
work-in-process one such system with a cost of approximately $124,000.
Note F - Income Taxes
The Company's provision for income taxes for the periods ended April 30,
1995 and 1994 was determined using the Company's estimated annual effective
rate. The difference in fiscal 1994 between the Company's effective rate and
the statutory rate of 34% is primarily due to the tax benefit of a foreign
Note G - Revolving Credit
On April 30, 1995, the Company had a $3,000,000 line of credit with a
bank, bearing interest at one-half percent above the bank's prime rate. The
Company had an outstanding balance under this line of credit of approximately
$882,000 with an additional $79,420 of the line reserved to support an
existing standby letter of credit. The outstanding balance was $125,000 at
July 31, 1994.
On November 30, 1994, the Company and the bank amended the line of
credit agreement with availability on the $3,000,000 line subject to a
formula. The formula is $1,120,000 plus 75% of qualified accounts receivable
and 50% of qualified unbilled accounts receivable. As of April 30, 1995, the
total availability, pursuant to the formula, is approximately $1,332,000. The
line of credit includes certain covenants, some of which require the Company
to maintain certain tangible net worth amounts, which increase over the life
of the contract, and a certain liquid asset ratio. As of April 30, 1995, the
bank has waived the Company's noncompliance with the tangible net worth and
liquid asset to current liabilities covenants in the Company's line of credit
resulting from the loss in the third quarter of fiscal 1995. The Company's
next covenant measurement date is July 31, 1995.
Note H - Earnings Per Share
The computation of net earnings per share is based on the weighted
average number of shares of common stock outstanding during the nine and three
month periods ended April 30, 1995 and 1994. The weighted average number of
shares used in the computation was 512,739 and 505,602 for the nine months
ended as of April 30, 1995 and 1994, respectively, and 514,097 and 505,856 for
the three months ended as of April 30, 1995 and 1994, all of which were issued
and outstanding. No adjustments were made to either net loss or the number of
shares outstanding in calculating earnings per share as such adjustments would
have been antidilutive.
There was no material difference between primary and fully diluted
earnings per share for the periods ended April 30, 1995 and 1994.
ANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company manufactures products for, and performs development projects
in, the field broadly described as "remote sensing". The principal products
manufactured by the Company are airborne imaging systems which are installed