SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
Pursuant to Section 13 or 15(d) of
The Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) May 1, 1996
PEN INTERCONNECT, INC.
(Exact name of registrant as specified in its charter)
Utah 1-14072 87-0430260
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
2351 South 2300 West, Salt Lake City, Utah 84119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (801) 973-6090
Total Pages: 17
<PAGE>
Item 7. Financial Statements and Exhibits
Pen Interconnect, Inc. (the "Registrant"), hereby amends and
supplements its report on form 8-K dated May 1, 1996, by filing
financial statements in connection with its acquisition of InCirT
Technology (InCirT)(A Division of the Cerplex Group, Inc.).
(a) Financial Statements of Business Acquired The following
financial statements of InCirT Technology are included as part of this
report:
Page
3 Report of Independent Certified Pubic Accountants
4 Balance Sheets as of December 31, 1995 and 1994
5 Statements of Operations and Division Equity for the years
ended December 31, 1995 and 1994
6 Statements of Cash Flows for the years ended December 31,
1995 and 1994
7-10 Notes to Financial Statements
Exhibit 27 - Financial Data Schedule
(b) Pro Forma Financial Information. The following pro forma
condensed consolidated financial information is included as part of
this report:
Page
11 Explanation of Pro Forma Statements
12 Pro Forma Balance Sheet as of March 31, 1996 (Unaudited)
13-14 Pro Forma Statements of Earnings for the six months ended
March 31, 1996 and for the year ended September 30, 1995 (Unaudited)
15-16 Notes to Pro Forma Financial Statements (Unaudited)
(c) Exhibits. The exhibits which pertain to the above-
described transaction shall be filed with the registrant's Form 10-QSB
for the period ending June 30, 1996.
2
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Pen Interconnect, Inc.
We have audited the accompanying balance sheets of InCirT Technology (a
Division of The Cerplex Group, Inc.) (the Division) as of December 31,
1995 and 1994, and the related statements of operations and division
equity and cash flows for the years then ended. These financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
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 InCirT
Technology (a Division of the Cerplex Group, Inc.) as of December 31,
1995 and 1994, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
Grant Thornton LLP
Salt Lake City, Utah
May 15, 1996
3
<PAGE>
InCirT Technology
(A Division of the Cerplex Group, Inc.)
BALANCE SHEETS
December 31,
ASSETS
1995 1994
CURRENT ASSETS
Cash $ - $ 15,533
Accounts receivable, less allowance
for doubtful accounts of $165,000
in 1995 and $117,000 in 1994 4,202,965 2,990,209
Inventory (Note B) 3,400,020 1,769,636
Prepaid expenses 9,762 29,914
Total current assets 7,612,747 4,805,292
PROPERTY AND EQUIPMENT, NET (Note C) 128,372 171,831
OTHER ASSETS 32,354 20,669
$7,773,473 $4,997,792
LIABILITIES AND DIVISION EQUITY
CURRENT LIABILITIES
Accounts payable $3,415,279 $ 958,280
Accrued liabilities 161,351 106,340
Due to parent (Note D) 2,150,463 2,512,761
Total current liabilities 5,727,093 3,577,381
COMMITMENTS AND CONTINGENCIES
(Notes E and H) - -
DIVISION EQUITY (Note G) 2,046,380 1,420,411
$7,773,473 $4,997,792
The accompanying notes are an integral part of these statements.
4
<PAGE>
InCirT Technology
(A Division of the Cerplex Group, Inc.)
STATEMENTS OF OPERATIONS AND DIVISION EQUITY
Year ended December 31,
1995 1994
Net sales $13,576,209 $9,578,093
Cost of sales 11,787,511 8,379,143
Gross profit 1,788,698 1,198,950
Operating expenses
Sales and marketing 20,166 21,175
General and administrative 560,842 772,858
Depreciation and amortization 162,742 331,032
Total operating expenses 743,750 1,125,065
Operating profit 1,044,948 73,885
Other income (expense)
Interest expense - (60,506)
Other income 1,821 52,001
Other expense (Note F) - (357,500)
1,821 (366,005)
Earnings (loss) before credit
(charge) in lieu of income taxes 1,046,769 (292,120)
Credit (charge) in lieu of income taxes
(Note A8) (420,800) 117,000
NET EARNINGS (LOSS) 625,969 (175,120)
Division equity at beginning of year 1,420,411 1,595,531
Division equity at end of year $2,046,380 $1,420,411
The accompanying notes are an integral part of these statements.
5
<PAGE>
InCirT Technology
(A Division of the Cerplex Group, Inc.)
STATEMENTS OF CASH FLOWS
Year ended December 31,
1995 1994
Increase (decrease) in cash
Cash flows from operating activities
Net earnings (loss) $ 625,969 $ (175,120)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities
Bad debts 48,000 80,907
Depreciation and amortization 162,742 331,032
Changes in assets and liabilities
Accounts receivable (1,260,756) (2,054,444)
Inventory (1,630,384) (955,594)
Prepaid expenses 20,152 (11,174)
Other assets (11,685) 218,951
Accounts payable 2,456,999 461,155
Accrued liabilities 55,011 (95,347)
Due to parent (362,298) 2,512,761
Total adjustments (522,219) 488,247
Net cash provided by operating
activities 103,750 313,127
Net cash flows from investing activities -
purchase of property and equipment (119,283) (33,709)
Net cash flows from financing activities -
principal payments on note payable - (343,296)
Net decrease in cash (15,533) (63,878)
Cash at beginning of year 15,533 79,411
Cash at end of year $ - $ 15,533
Supplemental disclosure of cash flow information
Cash paid during the year for
Interest $ - $ 60,526
Noncash investing and financing activities
During the year ended December 31, 1994, the Division transferred
$55,336 of equipment to the Parent. The equipment was fully
depreciated and the transfer was done at book value.
The accompanying notes are an integral part of these statements.
6
<PAGE>
InCirT Technology
(A Division of the Cerplex Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the
preparation of the accompanying financial statements follows.
1. Basis of presentation
The financial statements include the accounts of InCirT Technology
(the Division) which is under common control of The Cerplex Group,
Inc. (the Parent). InCirT Technology is a wholly-owned division of
the Parent. Certain operating expenses are paid by the Parent on
behalf of the Division based on various cost sharing arrangements.
At December 31, 1995, the Division had no separate legal status or
existence, and its resources were controlled by the Parent. In the
normal course of business, the Division had various transactions
with the Parent, including various expense allocations and
reimbursements.
The financial statements of the Division have been prepared from
separate records maintained by the Division as well as from the
combined records of the Parent and may not necessarily be
indicative of the conditions which would have existed if the
Division had operated as an independent entity.
On May 1, 1996, substantially all of the assets and certain of the
liabilities and the operations of the Division were acquired by Pen
Interconnect, Inc. (Note H).
2. Business activity
The Division is principally engaged in the manufacture of printed
circuit board assemblies.
3. Concentrations of credit risks
The Division sells its assemblies to customers throughout the
United States. Sales to three customers were 40%,12% and 10% of
total sales for the year ended December 31, 1995 (51%, 12% and 11%
in 1994). The Division performs ongoing credit evaluations on its
customers and generally does not require collateral. The Division
maintains reserves for potential credit losses.
4. Cash
At December 31, 1995 the Division maintains no separate cash
accounts. All sources of revenue associated with the Division are
collected by the Parent, and all costs and expenses associated with
the Division are paid on its behalf by the Parent.
5. Inventory
Inventory is stated at the lower of cost (first-in, first-out) or
market value.
7
<PAGE>
InCirT Technology
(A Division of the Cerplex Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
6. Use of estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required 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 revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
7. Property and equipment
Property and equipment are stated at cost. Depreciation and
amortization are calculated using the straight-line method over the
following estimated useful lives:
Years
Machinery and equipment 5
Transportation equipment 5
Office furniture and equipment 3
Leasehold improvements 3
Maintenance and repairs are charged to expense as incurred. At the
time of retirement or other disposition of property and equipment,
the cost and accumulated depreciation are removed from the accounts
and any gains or losses are reflected in operations.
8. Income taxes
The Division's operations have been included with the operations of
the Parent for purposes of filing federal and state income tax
returns. A charge or credit in lieu of income taxes has been
provided in the financial statements at combined federal and state
rates of 40%, which approximate statutory rates without giving
recognition to tax credits.
9.Statements of cash flows
For purposes of the statements of cash flows, the Division
considers all highly liquid debt instruments with original
maturities of three months or less when purchased to be cash
equivalents. At the balance sheet dates, there were no cash
equivalents.
No separate disclosure is made of cash paid for income taxes as
these amounts are included within net intracompany transactions
with the Parent.
8
<PAGE>
InCirT Technology
(A Division of the Cerplex Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE B - INVENTORY
Inventory consists of the following:
1995 1994
Raw materials $1,283,902 $1,184,288
Work-in-process 2,516,118 826,348
3,800,020 2,010,636
Less allowance for inventory obsolescence 400,000 241,000
$3,400,020 $1,769,636
NOTE C - PROPERTY AND EQUIPMENT, AT COST
Property and equipment consist of the following:
1995 1994
Machinery and equipment $748,966 $735,921
Transportation equipment 11,387 -
Office furniture and equipment 151,772 74,592
Leasehold improvements 51,449 33,779
963,574 844,292
Less accumulated depreciation and amortization 835,202 672,461
$128,372 $171,831
NOTE D - DUE TO PARENT
The Parent has allocated to the Division various expenses it has
incurred for corporate overhead and income taxes based on various
cost sharing arrangements.
The following is a summary of allocated costs:
1995 1994
General and administrative $363,000 $450,000
Income taxes 420,800 (117,000)
$783,800 $333,000
At December 31, 1995, the Division was indebted to the Parent in
the amount of $2,150,463 ($2,512,761 in 1994).
9
<PAGE>
InCirT Technology
(A Division of the Cerplex Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE E - LEASES
The Division has lease agreements with total monthly payments of
approximately $25,000 expiring through January 2000. The minimum
future rental commitments under the operating lease are as follows:
Year ending
December 31,
1996 $298,589
1997 299,796
1998 235,182
1999 157,561
2000 1,207
Thereafter -
$992,335
Rent expense for the year ended December 31, 1995 was $320,328
($275,233 in 1994).
NOTE F - OTHER EXPENSE
During 1994, other expense consisted of directors fees of $237,500
and purchase fees paid to the prior owner of $120,000.
NOTE G - DIVISION EQUITY
Division equity represents the cumulative earnings of the Division
net of allocations of costs and expenses incurred by the Division
and paid by the Parent and cash generated by the Division and
collected by the Parent. Also included in Division equity are all
liabilities of the Division which are not separate legal
obligations of the Division, such as income taxes payable which are
legal obligations of the Parent but which have been charged to the
Division.
NOTE H - SUBSEQUENT EVENT
Effective May 1, 1996, the Parent entered into an agreement to sell
substantially all assets and certain of the liabilities and the
operations of the Division to Pen Interconnect, Inc., an unrelated
buyer, for $5.3 million, which consisted of $3.5 million in cash
and 333,407 shares of common stock. In addition, the Parent will
receive .09261 shares of common stock for every dollar of past due
over 90 days accounts receivable of the Division collected by Pen
Interconnect, Inc. during the first 180 days after May 1, 1996 up
to a maximum of 55,568 shares of common stock. The transaction
will be effective April 1, 1996.
10
<PAGE>
PRO FORMA STATEMENTS
(Unaudited)
Effective May 1, 1996, Pen Interconnect, Inc. (Pen or the Company)
acquired substantially all assets and assumed certain of the
liabilities and the operations of InCirT Technology (InCirT) for
$3,500,000 in cash and 333,407 shares of Pen's common stock (the
Acquisition). In addition, Pen will deliver to The Cerplex Group, Inc.
(the former parent of InCirT) .09261 shares of its common stock for
every dollar of past due over 90 days accounts receivable of InCirT
collected by Pen during the first 180 days after the date of the
acquisition closing, up to a maximum of 55,568 shares of common stock
("Contingent Stock"). The Contingent Stock, if issued in its entirety,
has a value of $300,000. InCirT was formerly a division of The Cerplex
Group, Inc. a Delaware corporation. This transaction was accounted for
using the purchase method of accounting.
The objective of this unaudited pro forma financial information is to
show what the significant effects on the historical financial
information might have been had the Acquisition occurred at an earlier
date.
The following unaudited pro forma statements of earnings for the year
ended September 30, 1995, and for the six months ended March 31, 1996,
are presented as if the Acquisition had occurred on October 1, 1994.
The pro forma statements are derived from the respective historical
financial statements of Pen and InCirT. The pro forma statements of
earnings combine Pen's historical statements of earnings for the fiscal
year ended September 30, 1995, and the six month period ended March 31,
1996, with the corresponding InCirT historical statements of earnings
for the year ended December 31, 1995, and the six months ended March
31, 1996. The following information relates to the three months ended
December 31, 1995 and has been included in both periods:
In
thousands
Net sales $ 4,619
Operating income 94
Net earnings 56
The pro forma balance sheet combines Pen's historical statement as of
March 31, 1996 with the corresponding InCirT historical statement as of
March 31, 1996 as adjusted for the Acquisition.
The unaudited pro forma data is presented for informational purposes
only and may not be indicative of the future results of operations and
financial position of the Company or what the results of operations and
financial position of the Company would have been had the Acquisition
occurred immediately prior to the periods indicated.
11
<PAGE>
<TABLE>
PEN INTERCONNECT, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands)
March 31, 1996
Historical Pro forma
ASSETS Pen InCirT Adjustments Pro forma
CURRENT ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 1,579 $ 2 $ - $ 1,581
Receivables (net) 3,466 3,462 6,928
Current maturities of notes receivable
Related party 13 13
Other 15 15
Inventories (net) 4,816 3,292 20 (a) 8,128
Prepaid expenses and other assets 321 5 326
Deferred tax asset 33 33
Total current assets 10,243 6,761 20 17,024
PROPERTY AND EQUIPMENT (NET) 2,223 136 570 (b) 2,929
OTHER ASSETS
Notes receivable, less current
maturities
Related party 41 41
Other 36 36
Goodwill 1,515 (c) 1,515
Other 151 30 181
Total other assets 228 30 1,515 1,773
TOTAL ASSETS $ 12,694 $ 6,927 $ 2,105 $ 21,726
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 2,418 $ - $ 3,500 (f) $ 5,918
Current maturities of L-T obligations 213 213
Current maturities of capital leases 59 59
Accounts payable 2,050 3,563 5,613
Accrued liabilities 488 169 657
Due to parent 4,216 (4,216) (d) -
Income taxes payable 3 3
Total current liabilities 5,231 7,948 (716) 12,463
LONG-TERM OBLIGATIONS, less current
maturities 239 239
CAPITAL LEASE OBLIGATIONS, less current
maturities 174 174
DEFERRED INCOME TAXES 194 194
Total liabilities 5,838 7,948 (716) 13,070
STOCKHOLDERS' EQUITY
Common stock 27 3 (g) 30
Additional paid-in capital 5,761 1,797 (g) 7,558
Retained earnings 1,068 (1,021) 1,021 (e) 1,068
Total stockholders' equity 6,856 (1,021) 2,821 8,656
Total liabilities & stockholders'
equity $ 12,694 $ 6,927 $ 2,105 $ 21,726
The accompanying notes to pro forma statements are an integral part of these statements.
12
<PAGE>
PRO FORMA STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
Six months ended March 31, 1996
Historical Pro forma
Pen InCirT Adjustments Pro forma
<S> <C> <C> <C> <C>
Net sales $ 10,012 $ 7,810 $ - $ 17,822
Cost of sales 8,160 7,354 15,514
Gross profit 1,852 456 2,308
Operating expenses
Sales and marketing 591 9 600
Research and development 43 - 43
General and administrative 502 425 (227) (1) 700
Depreciation and amortization 86 45 50 (2) 181
Total operating expenses 1,222 479 (177) 1,524
Operating income 630 (23) 177 784
Other income (expense)
Interest expense (204) - (153) (3) (357)
Other, net (17) (94) 94 (4) (17)
Total other income (expense) (221) (94) (59) (374)
Earnings before income taxes 409 (117) 118 410
Income taxes (benefit) 157 (47) 47 (5) 157
NET EARNINGS (LOSS) $ 252 ($ 70) $ 71 $ 253
Pro forma earnings per common share
Primary $ 0.09
Fully dilutive $ 0.09
Weighted average common
shares outstanding - Primary 2,783,407 (6)
- Fully dilutive 2,838,975 (7)
The accompanying notes to pro forma statements are an integral part of these statements.
13
<PAGE>
PRO FORMA STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
(Unaudited)
Year ended September 30, 1995
Historical Pro forma
Pen InCirT Adjustments Pro forma
<S> <C> <C> <C> <C>
Net sales $ 15,022 $ 13,576 $ - $ 28,598
Cost of sales 11,843 11,787 23,630
Gross profit 3,179 1,789 - 4,968
Operating expenses
Sales and marketing 795 20 815
Research and development - - -
General and administrative 925 561 (263) (1) 1,223
Depreciation and amortization 148 163 101 (2) 412
Total operating expenses 1,868 744 (162) 2,450
Operating income 1,311 1,045 162 2,518
Other income (expense)
Interest expense (333) - (306) (3) (639)
Other, net 31 2 33
Total other income (expense) (302) 2 (306) (606)
Earnings before income taxes 1,009 1,047 (144) 1,912
Income taxes 391 421 (57) (5) 755
NET EARNINGS $ 618 $ 626 ($ 87) $ 1,157
Pro forma earnings per common share
Primary $ 0.57
Fully dilutive $ 0.55
Weighted average common
shares outstanding - Primary 2,033,407 (6)
- Fully dilutive 2,088,975 (7)
The accompanying notes to pro forma statements are an integral part of these statements.
14
<PAGE>
NOTES TO PRO FORMA STATEMENTS
(Amounts in thousands)
(Unaudited)
The Pro Forma Balance Sheet gives effect to the following adjustments:
At March
31, 1996
<S> <C>
(a) Represents the recording of additional Inventory
provided as part of the Acquisition. $ 20
(b) Represents a re-valuation of equipment at fair market
value in connection with the Acquisition. 570
(c) Amount represents Goodwill recorded with the Acquisition 1,515
(d) Represents payable to The Cerplex Group, Inc. (Prior Parent
Company) that was not assumed in the Acquisition (4,216)
(e) Represents division equity that was not assumed in the Acquisition 1,021
(f) Represents additional cash requirement to fund the Acquisition.
To be financed $1 million in cash reserves from original public
offering and $2.5 million in additional line of credit borrowing 3,500
(g) Amounts represent the issuance of additional stock associated
with the Acquisition. Common stock 3
Additional paid-in capital 1,797
(Does not include Contingent Stock)
15
<PAGE>
NOTES TO PRO FORMA STATEMENTS
(Amounts in thousands, except common shares data)
(Unaudited)
The Pro Forma Statements of Earnings give effect to the following adjustments:
Six months ended Year ended
March 31, September 30,
1996 1995
<S> <C> <C>
(1) Represents charges from the former parent company recorded
in the historical statements which have been reversed for MIS,
Finance and other support departments ($ 277) ($ 363)
Less: charges by new parent co. for MIS, Finance, etc. 50 100
(227) (263)
(2) Represents the increase in depreciation expense resulting from
valuation of equipment at fair market value and amortization of
Goodwill in connection with the Acquisition 50 101
(3) Represents the interest expense resulting from the financing
required for the Acquisition (153) (306)
(4) Represents charges from the former parent company recorded
in the historical statements which have been reversed for
a cost of capital allocation 94 -
(in lieu of interest expense)
(5) Represents the effect on income taxes resulting from the
adjustments described above 47 57
(at a 40% combined rate)
(6) Additional common shares issued for the Acquisition. 333,407 333,407
plus historical balance of 2,450,000 1,700,000
Pro forma weighted shares outstanding 2,783,407 2,033,407
(Does not include Contingent Stock)
(7) Includes above shares plus Contingent Stock
Above shares 2,783,407 2,033,407
Contingent Stock 55,568 55,568
2,838,975 2,088,975
</TABLE>
16
<PAGE>
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.
PEN INTERCONNECT, INC.
(registrant)
7/12/96 BY: /s/ James S. Pendleton
- -------- -----------------------
(Date) JAMES S. PENDLETON
PRESIDENT & CHIEF
EXECUTIVE OFFICER
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from InCirT
Technology (A Division of the Cerplex Group, Inc.) December 31, 1995 financial
statements and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4,367,965
<ALLOWANCES> 165,000
<INVENTORY> 3,400,020
<CURRENT-ASSETS> 7,612,747
<PP&E> 963,574
<DEPRECIATION> 835,202
<TOTAL-ASSETS> 7,773,473
<CURRENT-LIABILITIES> 5,727,093
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,046,380
<TOTAL-LIABILITY-AND-EQUITY> 7,773,473
<SALES> 13,576,209
<TOTAL-REVENUES> 13,576,209
<CGS> 11,787,511
<TOTAL-COSTS> 12,531,261
<OTHER-EXPENSES> (1,821)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,046,769
<INCOME-TAX> 420,800
<INCOME-CONTINUING> 625,969
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 625,969
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
