UNITED STATES
SECURITIES AND EXCHANGE COMMISION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
----------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
For the transition period from _____________ to _____________
Commission file number 1-14072
PEN INTERCONNECT, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0430260
(State or other jurisdiction I.R.S. Employer Identification No)
of incorporation or organization) (
1601 Alton Parkway, Irvine CA 92606
(Address of Principal Executive Offices) (Zip Code)
(949) 798-5800
(Issuer's telephone number)
2351 South 2300 West, Salt Lake City, UT 84119
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
As of February 10, 1999, the issuer had 6,069,160 shares of its common
stock, par value $0.01 per share, issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
FORM 10-QSB
PEN INTERCONNECT, INC.
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
--------------------
Financial Information 3
Balance Sheets as of December 31, 1998
(unaudited) and September 30, 1998 4-5
Statements of Operations for the three months ended
December 31, 1998 (unaudited) and 1997 (unaudited) 6
Statements of Cash Flows for the three months ended
December 31, 1998 (unaudited) and 1997 (unaudited) 7-8
Notes to Condensed Financial Statements (unaudited) 9-11
Item 2 Management's Discussion and Analysis or Plan of Operation 12-14
---------------------------------------------------------
PART II - OTHER INFORMATION
Item I Legal Proceedings 15
Item 2 Changes in the Securities and Use of Proceeds 15
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security Holders 15
Item 5 Other Information 15
Item 6(a) Exhibits
Item 6(b) Reports on Form 8-K 15
Signatures 16
2
<PAGE>
PEN INTERCONNECT, INC.
PART I
FINANCIAL INFORMATION
ITEM 1. INTERIM CONDENSED FINANCIAL STATEMENTS
Pen Interconnect, Inc. (the "Company"), has included the unaudited condensed
balance sheet of the Company as of December 31, 1998 and audited balance sheet
as of September 30, 1998 (the Company's most recent fiscal year), unaudited
condensed statements of operations for the three months ended December 31, 1998
and 1997, and unaudited condensed statements of cash flows for the three months
ended December 31, 1998 and 1997, together with unaudited condensed notes
thereto. In the opinion of management of the Company, the financial statements
reflect all adjustments, all of which are normal recurring adjustments,
considered necessary to fairly present the financial condition, results of
operations and cash flows of the Company for the interim periods presented. The
financial statements included in this report on Form 10-QSB should be read in
conjunction with the audited financial statements of the Company and the notes
thereto included in the annual report of the Company on Form 10-KSB for the year
ended September 30, 1998. The results of operations for the three months ended
December 31, 1998 may not be indicative of the results that may be expected for
the year ending September 30, 1999.
3
<PAGE>
Pen Interconnect, Inc.
BALANCE SHEETS
ASSETS
December 31, September 30,
1998 1998
(unaudited)
--------------- -----------
CURRENT ASSETS
Cash and cash equivalents ...................... $ 316,292 $ 657,777
Receivables
Trade accounts, less allowance for doubtful
accounts of $117,002 and $108,575 at
December 31, and September 30, 1998,
respectively ............................. 3,505,613 3,350,970
Current maturities of notes receivable ...... 35,675 35,675
Investments in common stock .................... 242,739 242,739
Inventories (Note B) ........................... 3,220,077 3,680,169
Prepaid expenses and other current assets ...... 168,859 261,375
Deferred tax asset ............................. 41,324 41,324
----------- -----------
Total current assets .................... 7,530,579 8,270,029
----------- -----------
PROPERTY AND EQUIPMENT, AT COST
Production equipment ........................... 2,973,903 2,624,513
Furniture and fixtures ......................... 772,258 837,594
Transportation equipment ....................... 83,522 83,522
Leasehold improvements ......................... 323,566 613,248
----------- -----------
4,153,249 4,158,877
Less accumulated depreciation .................. 1,737,374 1,680,266
----------- -----------
2,415,875 2,478,611
OTHER ASSETS
Notes receivable, less current maturities ...... 2,067 3,989
Investments in common stock .................... 482,220 482,220
Deferred income taxes .......................... 725,667 725,667
Goodwill and other intangibles (net) ........... 2,020,945 2,031,685
Other .......................................... 98,455 98,455
----------- -----------
3,329,354 3,342,016
----------- -----------
$13,275,808 $14,090,656
=========== ===========
The accompanying notes are an integral part of these statements.
4
<PAGE>
Pen Interconnect, Inc.
BALANCE SHEETS - Continued
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1998 1998
------------ -------------
(unaudited)
CURRENT LIABILITIES
Subordinated debentures .................... $ 909,465 $ 1,401,429
Line of credit ............................. 3,749,860 4,064,361
Current maturities of long-term obligations 1,062,550 1,132,538
Bridge loans (Note C) ...................... 896,000 --
Current maturities of capital leases ....... 69,621 69,621
Accounts payable ........................... 2,662,960 2,926,797
Accrued liabilities ........................ 443,172 389,889
------------ ------------
Total current liabilities ........... 9,793,628 9,984,635
LONG-TERM OBLIGATIONS, less current
maturities .................................. 51,965 51,965
CAPITAL LEASE OBLIGATIONS,
less current maturities ..................... 810 22,333
DEFERRED INCOME TAXES .......................... 165,755 165,755
------------ ------------
Total liabilities ................... 10,012,158 10,224,688
STOCKHOLDERS' EQUITY (Note D)
Preferred stock, $0.01 par value,
authorized 5,000,000 shares, none issued .. -- --
Common stock,$0.01 par value,
authorized 50,000,000 shares; issued
and outstanding 6,069,160 shares at
December 31, 1998 and 5,018,437 shares
at September 30, 1998 ..................... 60,692 50,184
Additional paid-in capital ................. 11,582,590 10,890,022
Accumulated deficit ........................ (8,379,632) (7,074,238)
------------ ------------
Total stockholders' equity .......... 3,263,650 3,865,968
============ ============
$ 13,275,808 $ 14,090,656
============ ============
The accompanying notes are an integral part of these statements.
5
<PAGE>
Pen Interconnect, Inc.
STATEMENTS OF OPERATIONS
Three months ended December 31,
(unaudited)
--------------------------
1998 1997
------------- ------------
Net sales .......................................... $ 4,757,839 $ 3,904,717
Cost of sales ...................................... 4,567,468 3,055,373
----------- -----------
----------- -----------
Gross profit ............................ 190,371 849,344
Operating expenses
Sales and marketing ............................ 81,719 218,381
Research and development ....................... 312,028 88,387
General and administrative ..................... 722,631 435,463
Depreciation and amortization .................. 112,297 114,275
-----------
-----------
Total operating expenses ................ 1,228,675 856,506
----------- -----------
Operating loss .......................... (1,038,304) (7,162)
Other income (expense)
Interest expense ............................... (192,872) (79,037)
Other income (expense), net ................... (74,218) 30,233
----------- -----------
Total other income (expense) ............ (267,090) (48,804)
----------- -----------
Loss before income taxes ................ (1,305,394) (55,966)
Provision (benefit) for income taxes ............... -- (21,800)
----------- -----------
NET LOSS ................................ $(1,305,394) $ (34,166)
=========== ===========
Loss per common share - basic ...................... $ (0.24) $ (0.01)
- diluted .................... (0.24) (0.01)
Weighted-average common shares outstanding - basic . 5,551,257 4,122,863
- diluted 5,551,257 4,122,863
The accompanying notes are an integral part of these statements.
6
<PAGE>
Pen Interconnect, Inc.
STATEMENTS OF CASH FLOWS
Three months ended December 31,
(unaudited)
------------------------------
1998 1997
-------------- --------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net loss .................................... $(1,305,394) $ (34,166)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization ........... 112,297 114,275
Bad debts ............................... 8,427 14,036
Contingent stock San Jose agreement ..... -- (40,000)
Loss on disposal of equipment ........... -- 16,537
Changes in assets and liabilities
Trade accounts receivable ........... (163,070) (857,006)
Inventories ......................... 460,092 (198,665)
Prepaid expenses and other
current assets .................... 92,516 (161,412)
Accounts payable .................... (263,837) (133,502)
Accrued liabilities ................. 53,283 (149,424)
Income taxes ........................ -- (19,843)
----------- -----------
Total adjustments ................ 299,708 (1,415,004)
----------- -----------
----------- -----------
Net cash used in
operating activities ........... (1,005,686) (1,449,170)
----------- -----------
----------- -----------
Cash flows from investing activities
Purchase of property and equipment .......... (38,821) (81,605)
Issuance of notes receivable ................ -- (39,742)
Collection on notes receivable .............. 1,922 --
----------- -----------
Net cash used in
investing activities ........... (36,899) (121,347)
----------- -----------
(Continued)
7
<PAGE>
Pen Interconnect, Inc.
STATEMENTS OF CASH FLOWS - CONTINUED
Three months ended December 31,
(unaudited)
----------------------------
1998 1997
-------------- -----------
Cash flows from financing activities
Principal payments on notes payable ............. (69,988) (524,412)
Net change in line of credit .................... (314,501) 402,653
Principal payments on bridge loans .............. -- (100,000)
Principal payments on long-term obligations ..... (21,523) (79,697)
Proceeds from issuance of term loans ............ -- 500,000
Proceeds from issuance of bridge loans .......... 896,000 --
Proceeds from issuance of subordinated debentures -- 1,000,000
Proceeds from sale of common stock .............. 211,112 150,000
----------- -----------
Net cash provided by
financing activities ............ 701,100 1,348,544
----------- -----------
----------- -----------
Net decrease in cash
and cash equivalents ............ (341,485) (221,973)
Cash and cash equivalents at beginning of period .... 657,777 272,148
=========== ===========
Cash and cash equivalents at end of period .......... $ 316,292 $ 50,175
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest ..................................... $ 192,872 $ 63,188
Income taxes ................................. -- 100
Noncash investing and financing activities
During the first quarter of fiscal year 1998, subordinated debentures totaling
$491,064 were converted into 854,473 shares of common stock.
8
<PAGE>
Pen Interconnect, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE A - ACQUISITIONS/DISPOSITIONS
Laminating Technologies, Inc.
On December 23, 1998, the Company signed a definitive agreement to merge
with Laminating Technologies, Inc. (LTI) which is expected to close in
the second or third quarter of fiscal year 1999. Under the Agreement, LTI
would merge into Pen Laminating, Inc., a newly created, wholly-owned
subsidiary of the Company in exchange for the issuance of shares of the
Company's common stock to the shareholders of LTI. Each share of LTI
common stock will be converted into a number of the Company's common
stock based upon a calculation which is equal to $0.50 divided by the
closing price of the Company's common stock on the fifth day following
the effective date of the registration statement covering the merger
transaction.
Cables To Go Inc.
Effective January 29, 1999, the Company sold substantially all of the
assets and liabilities of its custom cable and harness interconnections
business to Pen Cabling Technologies, LLC, a wholly-owned subsidiary of
CTG, Inc. of Dayton, Ohio. The sales price was $1,075,000 and the
assumption of certain related lease obligations. Additional payments may
be made by the purchaser based upon a post-closing valuation of certain
assets transferred in the transaction. In addition, the Company will
receive royalties equal to two percent on future sales of the Cable
Divisions products up to an amount of $600,000. Assets and liabilities
sold were as follows:
Receivables, net .................. $ 310,467
Inventories ....................... 361,880
Property and equipment, net ....... 1,386,267
Prepaid expenses .................. 19,757
Other assets ...................... 32,390
Capital leases .................... (64,886)
-----------
Net assets sold ........ 2,045,875
Cash received ..................... 1,075,000
===========
Loss on sale of Division $ (970,875)
===========
Mobile Technology Inc.
On February 1, 1999, the Company entered into a letter of intent with the
Company's former CEO for the sale of the MotoSat division. The Company
anticipates the sale will be completed during the second or third quarter
of fiscal year 1999. The proposed sale provides for the acquisition of
substantially all of the assets, assumption of all liabilities and the
operations of the division. The proposed sale will not generate cash
proceeds to the Company.
9
<PAGE>
Pen Interconnect. Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE A - ACQUISITIONS/DISPOSITIONS - CONTINUED
Transdigital Communications Inc.
In December 1998, the Company signed a nonbinding Letter of Intent (LOI)
to reverse merge with Transdigital Communications Inc. (TCC). TCC is a
privately held developer of entertainment and database systems for the
transportation markets which includes narrow bodied commercial aircraft
and cruise ships. The Company believes that its manufacturing capability
will provide vertical integration to TCC as it begins production of these
database systems for their customers while giving the Company the
opportunity to diversify its product base.
NOTE B - INVENTORIES
Inventories consist of the following:
December 31, September 30,
1998 1998
--------------- -------------
Raw material (net of allowance) $2,276,309 $2,253,933
Work-in-process 903,433 1,391,664
Finished goods 40,335 35,572
========== ==========
$3,220,077 $3,680,169
========== ==========
NOTE C - BRIDGE LOANS
During the first quarter of FY 1999, the Company secured two bridge loans
both of which were to be repaid with funds to be received from the merger
with LTI. The term of each loan was 90 days and carried an interest rate
of eight percent. If the merger with LTI is not consummated, the loans
will be repaid by the issue of warrants. One bridge loan was secured in
November for $500,000 and the other in December for $396,000.
10
<PAGE>
Pen Interconnect. Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
NOTE D - WARRANTS TO PURCHASE COMMON STOCK
During the first quarter of FY 1999, the Company issued warrants to
purchase 490,000 shares of the Company's common stock. The following
table outlines the features of these warrants:
Number of warrants Exercise Price Expiration Date
------------------------------- ------------------ ------------------
150,000 $1.00 October 2002
125,000 $0.875 October 2002
215,000 $0.875 November 2001
Also during the quarter ended December 31, 1999 the Company issued
196,250 shares of common stock in association with the conversion of
warrants in existence at the beginning of the quarter and 854,473 shares
in association with the conversion of subordinated debentures.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
section 27A of the Securities Act of 1933 as amended, and section 21E of the
Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties. In addition, the Company may from time to time make oral
forward-looking statements. Actual results are uncertain and may be impacted by
the following factors. In particular, certain risks and uncertainties that may
impact the accuracy of the forward-looking statements with respect to revenues,
expenses and operating results include without limitation, cycles of customer
orders, general economic and competitive conditions and changing consumer
trends, technological advances and the number and timing of new product
introductions, shipments of products and components from foreign suppliers, and
the timing of operating and changes in the mix of products ordered by customers.
As a result, the actual results may differ materially from those projected in
the forward-looking statements.
Because of these and other factors that may affect the Company's operating
results, past financial performance should not be considered an indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.
The following discussion and analysis provides certain information which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition for the three months
ended December 31, 1998 and 1997. This discussion should be read in conjunction
with the audited financial statements of the Company and notes thereto included
in the Annual Report of the Company on Form 10-KSB for the year ended September
30, 1998.
General
Pen Interconnect, Inc. (the "Company" or "Pen") is a total interconnection
solution provider offering internal and external custom cable and harness
interconnections, mobile satellite equipment, EMSI (Electronic Manufacturing
Service Industry) manufacturing (circuit board assembly) and custom design and
manufacturing of battery chargers, power supplies and Uninterruptible Power
Supply (UPS) systems for original equipment manufactures ("OEMs") in the
computer, peripheral, telecommunications, instrumentation, medical and testing
equipment industries. The Company was incorporated under the laws of the State
of Utah on September 30, 1985. The Company maintains divisions located in Salt
Lake City and Orem, Utah and Irvine, California.
Results of Operations
Net sales. Net sales for the Company increased $855,122 or approximately 22
percent for the three month period ended December 31, 1998 as compared to the
same period in the prior year. This increase resulted primarily from an increase
in sales to one significant customer at the InCirt Division. Sales for this
division increased 41 percent during the first three months of FY 99 from
$3,391,569 to $2,406,744 during the first three months in FY 98.
Cost of sales. Cost of sales as a percentage of net sales have increased to
approximately 96 percent for the three months ended December 31, 1998, as
compared to 78 percent for the same period in the prior year. This increase is
primarily due to declining sales in the Cable Division with delays in the
reduction of manufacturing overhead costs, and a decrease in the margins on a
contract with a major customer at the InCirt Division. This decrease in price
raised the level of sales required for this division to cover its manufacturing
and overhead costs before generating profits; a level of sales that the division
was not able to meet during the period.
12
<PAGE>
Operating expenses. Operating expenses increased during the first quarter of
fiscal 1999 by approximately $372,168. This increase resulted from the following
areas: (1) Research and development costs of $223,641 associated with new
product development at the PowerStream Division; (2) General and Administrative
costs increased by $287,167 primarily due to legal and audit fees to support the
merger and divestiture discussions and increased overhead expenses at the InCirt
division to support the increased level of sales associated with the contract
expansion with a major customer; (3) sales and marketing expenses declined by
$136,662 due to cash flow constraints and an inability to fund sales and
marketing programs.
Other income and expenses. Other income and expenses increased $218,286 for the
three months ended December 31, 1998 as compared to the same period in the prior
year. This increase is primarily the result of increased interest expense of
$113,835 due to an increase in the average line of credit outstanding during the
quarter over the previous year, from borrowed funds needed to finance a contract
expansion with a major customer at the InCirt division and the related increase
in receivables and inventories associated with that increase; $40,000 of
non-operating income from the TMCI settlement recorded in FY 1998 but not
repeated in FY 1999 and $74,294 in expenses associated with interest expense on
the subordinated debentures.
Net loss and loss per share. Net loss for the first fiscal quarter ended
December 31, 1999 totaled $1,305,394 or $0.24 per share, compared with losses of
$ 34,166 or $0.01 per share for the first fiscal quarter of 1998. This increase
in the loss per share consists primarily of ($0.16) due to decreased margins on
sales, ($0.05) from an increase in research and development costs, ($0.03) from
an increase in interest expense and ($0.02) from an increase in the number of
weighted average shares of 1,428,394 for the first three months of fiscal year
1999 over the same period in fiscal year 1998.
Liquidity and Capital Resources
During the first three months of FY 99 the Company sustained losses of
$1,305,394 which continued the trend of FY 98. Management has taken steps to
correct this trend by signing a purchase agreement with Cables To Go as of the
date of this filing to sell the Cable division and by signing a letter of intent
to sell the MotoSat division. With the selling of the these two divisions, the
Company expects to save approximately $170,000 per month in operating costs and
interest. The Company has also signed a definitive agreement with Laminating
Technologies Inc. (LTI) to merge with Pen being the surviving company. This
merger will bring additional funds of approximately $1.8 million to the Company.
As a result of these losses, the Company has had to raise cash through two
bridge loans and the exercise of warrants from a re-strike of the purchase price
of the stock. The bridge loans raised a total of $896,000 while the exercise of
warrants yielded an additional $211,112.
As of the date of this report, it appears that the Company's net tangible assets
will fall below the amount of $4 million required for continued listing on
NASDAQ. The Company is currently engaged in acquisition and financing activities
previously mentioned which the Company's management believes will restore the
required level of net tangible assets. However, not all of these activities have
been completed as of the date hereof and there can be no assurance that the
Company will acquire sufficient net tangible assets to maintain its NASDAQ
National Market listing. In such event, the Company's stock might be listed for
trading on the NASDAQ Small Cap Market.
13
<PAGE>
The Company anticipates increases in sales and new contracts with more
profitable margins generating a return to profitability beginning in the third
quarter of FY 99. Until such time, it is estimated that between $1 million and
$2 million will have to be raised to sustain operations. These funds are
expected to be raised from the sale of convertible Preferred Stock for
approximately $1 million and additional cash from the LTI merger. The
dispositions of the two divisions, the anticipated increases in sales from the
remaining divisions and the anticipated return to profitability should generate
sufficient cash to fund operations of the Company for the rest of calendar year
1999. Management cannot assure however that these efforts to raise funds nor the
anticipated increases in sales will materialize.
Inflation and Seasonality
The Company does not believe that it is significantly impacted by inflation.
Historically, the computer industry sales tend to decline in December, January,
July and August when activity in the personal computer industry as a whole is
reduced. However, the Company has recently diversified into the medical and
telecommunications products in an effort to offset the seasonality in the
computer industry.
Year 2000 Readiness
In general, the Year 2000 issue relates to computers and other systems being
unable to distinguish between the years 1900 and 2000 because they use two
digits, rather than four, to define the applicable year. Systems that fail to
properly recognize such information will likely generate erroneous data or cause
a system to fail possibly resulting in a disruption of operations. The Company's
products do not incorporate such date coding so the Company's efforts to address
the Year 2000 issue fall in the following three areas: (1) the Company's
information technology (IT) systems; (2) the Company's non-IT systems (i.e.,
machinery, equipment and devices which utilize technology which is "built-in"
such as embedded mirocontrollers); and (3) third-party suppliers. Management has
initiated a program to prepare for compliance in these three areas and expects
such programs to be implemented and completed by July 1999. Costs will be
expensed as incurred and currently are not expected to be material.
The Company believes its current IT systems, with a few exceptions which are
being addressed, are year 2000 compliant. The Company is currently conducting an
inventory of non IT systems which may have inadequate date coding and will
commence efforts to remedy any non-compliant systems by the end of June 30,
1999. Third party suppliers and customers present a different problem in that
the Company cannot control the efforts of such third parties. The Company
anticipates requesting confirmations from third party suppliers that they are
year 2000 compliant to avoid disruptions of services and supplies. However, any
failure on the part of such companies with whom the Company transacts business
to be year 2000 compliant on a timely basis may adversely affect the operations
of the Company.
14
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in the Securities and Use of Proceeds.
Warrants to purchase 490,000 shares of Common Stock were issued during
the quarter ended December 31, 1998. The terms of these warrants and
the exercise price are described in Note D of the Notes to the
Financial Statements which are included in this report.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None during the
quarter.
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit SEC Reference
Number Number Title of Document
------------------ ---------------------- ---------------------------
1 (11) Calculation of loss per share
2 (27) Financial Data Schedule
B. Reports on Form 8-K. None
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PEN INTERCONNECT, INC.
Dated: February 22, 1999 By: /s/ Stephen J. Fryer
---------------------
Stephen J. Fryer,
CEO
By: /s/ Robert J. Albrecht
--------------------------
Robert J. Albrecht
CFO, Principal Accounting Officer
and Vice President
16
<PAGE>
Exhibit 11
PEN INTERCONNECT, INC.
CALCULATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1997
1998 1997
------------ -----------
Loss to common shareholders $(1,305,394) $ (34,166)
=========== ===========
Basic EPS
---------
Shares
Common shares outstanding entire period 5,018,437 4,072,863
Weighted-average common shares issued
during period 532,820 50,000
----------- -----------
Weighted-average common shares outstanding
during period - basic 5,551,257 4,122,863
=========== ===========
Loss per common share $ (0.24) $ (0.01)
=========== ===========
Diluted EPS
-----------
Shares
Weighted-average common shares outstanding
during period - basic 5,551,257 4,122,863
Diluted effect of stock options and warrants -- --
----------- -----------
Weighted-average common shares outstanding
during period - diluted 5,551,257 4,122,863
=========== ===========
Loss per common share - assuming dilution $ (0.24) $ (0.01)
=========== ===========
For the three months ended December 31, 1998 and 1997, all of the options and
warrants that were outstanding, were not included in the computation of diluted
EPS because to do so would have been anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summar financial information extracted from Pen
Interconnect, Inc. Dec. 311, 1998 financial statments and is qualified in ites
enterirety to such financial statements.
</LEGEND>
<CIK> 0001000266
<NAME> Pen Interconnect, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> SEP-30-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.0
<CASH> 316,292
<SECURITIES> 3,263,650
<RECEIVABLES> 3,505,613
<ALLOWANCES> 0
<INVENTORY> 3,220,077
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
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<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
