UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 8 - K/A
A M E N D M E N T NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 6, 2000
--------------
Jaco Electronics, Inc.
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(Exact name of Registrant as Specified in Charter)
New York 000-05896 11-1978958
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(State or Other Jurisdiction (Commission) (IRS Employer
of Incorporation) File Number) Identification No.)
145 Oser Avenue, Hauppauge, New York 11788
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (631) 273-5500
-----------------
N/A
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(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
This Form 8-K/A, Amendment No. 2 is filed to amend and restate the Current
Report on Form 8-K, which was filed on June 12, 2000 and to provide the
financial information required under items 7(a) and 7(b), including revised
audited financial statements of Interface Electronics Corp. as of and for the
year ended December 31, 1999, unaudited financial statements of Interface
Electronics, Corp. for the nine months ended March 31, 2000 and related proforma
information.
On June 6, 2000, Jaco Electronics, Inc. ("Jaco" or the "Company")
acquired all of the issued and outstanding shares of Common Stock, no par value
(the "Shares"), of Interface Electronics Corp., a Massachusetts corporation
("Interface")(the "Transaction"), from Joseph F. Oliveri and Brendan J. Perry
(the "Sellers"), pursuant to the terms of the Stock Purchase Agreement, by and
among Jaco and the Sellers, dated as of May 4, 2000, as amended on June 6, 2000
(the "Stock Purchase Agreement").
In consideration of the acquisition of the Shares, the Company paid
$15,400,000 in cash at the closing (subject to a post closing net worth
adjustment), assumed approximately $3,300,000 in bank debt, plus a deferred
payment of up to $3,960,000 (subject to adjustment), approximately one (1) year
from the anniversary of the closing (June 6, 2000) (or earlier under certain
circumstances), and a deferred payment of up to $2,640,000 (subject to
adjustment), approximately two (2) years from the anniversary of the closing (or
earlier under certain circumstances). A portion of the purchase price is held in
escrow pending the satisfaction of certain conditions and a portion was paid as
directed by Sellers to satisfy certain Sellers' obligations.
The Stock Purchase Agreement contains certain representations,
warranties, covenants (including noncompetition and nonsolicitation provisions
agreed to by the Sellers), conditions and indemnification provisions which
survive the closing.
In connection with the Transaction, Mr. Oliveri entered into an
employment agreement with Jaco for a three (3) year term, pursuant to which
he will serve as Vice Chairman of the Board of Directors and Executive Vice
President of Jaco Electronics, Inc. The employment agreement provides Mr.
Oliveri with a base salary of $300,000 per annum, certain employee benefits and
an incentive bonus based upon the gross profits realized by Interface from
certain sales during each twelve (12) month period during the term of his
employment.
To finance the consideration for the Transaction, the Company increased
its credit facility with its commercial banks from $30,000,000 to $50,000,000,
based principally on eligible accounts receivable and inventories of the
Company. Borrowings under the credit facility are collateralized by
substantially all of the assets of the Company.
The foregoing is merely a summary of the Transaction. A copy of the
Stock Purchase Agreement is attached as an Exhibit to the Current Report on Form
8-K, which was filed on May 15, 2000 and Amendment No. 1 to the Stock Purchase
Agreement is attached as an Exhibit to the Current Report on Form 8-K, which was
filed on June 12, 2000.
2
<PAGE>
<TABLE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a). Financial Statements of Interface Electronics Corp.
PAGE
<S> <C>
Report of Independent Certified Public Accountants 5
Balance Sheet at December 31, 1999. 6
Statement of Operations and Accumulated Deficit for the year ended
December 31, 1999. 8
Statement of Cash Flows for the year ended December 31, 1999. 9
Notes to Financial Statements for the year ended December 31, 1999. 10
Independent Auditors Report. 15
Consolidated Balance Sheets at December 31, 1998 and 1997. 16
Consolidated Statements of Operations for the years ended
December 31, 1998 and 1997. 18
Statements of Retained Earnings for the years ended December 31, 1998 and 1997. 18
Consolidated Statements of Cash Flows for the years ended December 31, 1998 and
1997. 19
Consolidated Supplementary Information for the years ended December 31, 1998 and
1997. 20
Notes to Financial Statements for the years ended December 31, 1998. 21
Condensed Balance Sheets at March 31, 2000 and December 31, 1999. 24
Condensed Income Statements for the three months ended March 31, 2000 and 1999. 25
Condensed Statements of Cash Flows for the three months ended March 31, 2000 and
1999. 26
Notes to Condensed Financial Statements for the three months ended March 31,
2000. 27
(b) Pro Forma Financial Information.
Introduction. 28
ProForma Condensed Consolidated Balance Sheet at March 31, 2000. 29
Notes to Pro Forma Condensed Consolidated Balance Sheet at March 31, 2000. 31
ProForma Condensed Consolidated Statement of Operations for the nine months
ended March 31, 2000. 32
ProForma Condensed Consolidated Statement of Operations for the year ended June
30, 1999. 34
Notes to Pro Forma Condensed Consolidated Statements of Operations for the nine
months ended March 31, 2000 and the year ended June 30, 1999. 36
</TABLE>
3
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(continued)
(c) Exhibits
Exhibit
Number Description
2.1 Stock Purchase Agreement by and among Jaco
Electronics, Inc. and All of the Shareholders of
Interface Electronics Corp. as of May 4, 2000.
Incorporated by reference from the Current Report on
Form 8-K, SEC File No. 000-05896, filed by Jaco
Electronics, Inc. on May 15, 2000.
2.2 Amendment No. 1 to the Stock Purchase Agreement
by and among Jaco Electronics, Inc. and All of the
Shareholders of Interface Electronics Corp. as of May
4, 2000, dated June 6, 2000. Incorporated by reference
from the Current Report on Form 8-K, SEC File No.
000-05896, filed by Jaco Electronics, Inc. on June 12,
2000.
10.16 Employment Agreement dated June 6, 2000, between
the Registrant and Joseph Oliveri. Incorporated by
reference from the Current Report on Form 8-K, SEC
File No. 000-05896, filed by Jaco Electronics, Inc. on
June 12, 2000.
99.9 Press Release dated May 9, 2000. Incorporated by
reference from the Current Report on Form 8-K, SEC
File No. 000-05896, filed by Jaco Electronics, Inc. on
May 15, 2000.
99.10 Press Release dated June 8, 2000. Incorporated by
reference from the Current Report on Form 8-K, SEC
File No. 000-05896, filed by Jaco Electronics, Inc. on
June 12, 2000.
4
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Interface Electronics Corp.
We have audited the accompanying balance sheet of Interface Electronics Corp. as
of December 31, 1999, and the related statements of operations and accumulated
deficit, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards generally accepted in the
United States of America. Those standards require that we plan and perform the
audit 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 audit provides 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 Interface Electronics Corp. as
of December 31, 1999 and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.
/s/ Grant Thornton LLP
Melville, New York
October 3, 2000
5
<PAGE>
<TABLE>
Interface Electronics Corp.
BALANCE SHEET
December 31, 1999
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $ 307,518
Accounts receivable, net of allowance for
doubtful accounts of $60,000 5,503,123
Inventories 2,610,046
Prepaid expenses and other current assets 112,371
----------
Total current assets 8,533,058
PROPERTY AND EQUIPMENT
Equipment 682,272
Furniture and fixtures 345,440
Software 163,010
Motor vehicles 69,324
Leasehold improvements 67,799
-----------
1,327,845
Less accumulated depreciation and amortization 781,826
-----------
546,019
OTHER ASSETS
Loans receivable from officers 772,111
Due from related party 371,694
Deposits and other assets 108,701
Cash surrender value of officers' life insurance 96,923
-----------
1,349,429
----------
$10,428,506
============
The accompanying notes are an integral part of this statement.
</TABLE>
6
<PAGE>
<TABLE>
Interface Electronics Corp.
BALANCE SHEET (continued)
December 31, 1999
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
<S> <C>
Note payable - line of credit $ 3,305,547
Accounts payable - trade 6,912,839
Accrued litigation settlement 1,000,000
Accrued expenses 313,204
Due to related parties 42,104
Total current liabilities 11,573,694
------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, no par value; 15,000 shares authorized;
10,000 shares issued and outstanding 85,000
Additional paid-in capital 312,843
Accumulated deficit (1,543,031)
------------
Total stockholders' deficit
(1,145,188)
------------
$ 10,428,506
=============
The accompanying notes are an integral part of this statement.
</TABLE>
7
<PAGE>
<TABLE>
Interface Electronics Corp.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
Year ended December 31, 1999
<S> <C>
Sales $ 36,439,110
Cost of sales 30,597,798
------------
Gross profit 5,841,312
Selling, general and administrative expenses 7,022,585
------------
Operating loss (1,181,273)
Other income (expense)
Litigation settlement (1,000,000)
Interest expense (162,780)
Other income 37,968
Interest income 26,165
------------
(1,098,647)
-------------
NET LOSS (2,279,920)
Retained earnings at January 1, 1999 807,889
Distributions to stockholders (71,000)
------------
Accumulated deficit at December 31, 1999 $ (1,543,031)
============
The accompanying notes are an integral part of this statement.
</TABLE>
8
<PAGE>
<TABLE>
Interface Electronics Corp.
STATEMENT OF CASH FLOWS
Year ended December 31, 1999
Cash flows from operating activities
<S> <C>
Net loss $(2,279,920)
Adjustments to reconcile net loss to net cash
and cash equivalents used in operating activities
Depreciation and amortization 180,209
Provision for bad debts 39,814
Changes in operating assets and liabilities
Increase in accounts receivable (1,199,809)
Increase in inventories (753,081)
Decrease in prepaid expenses and other current assets 206,389
Increase in deposits and other assets (56,197)
Increase in accrued litigation settlement 1,000,000
Increase in accounts payable 1,257,724
Increase in accrued expenses and other 81,055
---------
Net cash and cash equivalents used in operating activities (1,523,816)
----------
Cash flows from investing activities
Capital expenditures (366,865)
Increase in cash surrender value of officers' life insurance (13,001)
Increase in due from related parties, net (331,231)
Increase in loans receivable from officers (471,151)
-----------
Net cash and cash equivalents used in investing activities (1,182,248)
----------
Cash flows from financing activities
Distributions to stockholders (71,000)
Net proceeds from notes payable - line of credit 2,523,497
----------
Net cash and cash equivalents provided by financing activities 2,452,497
----------
Net decrease in cash and cash equivalents (253,567)
Cash and cash equivalents at beginning of year 561,085
-----------
Cash and cash equivalents at end of year $ 307,518
===========
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ 162,780
Income taxes 373,392
The accompanying notes are an integral part of this statement.
</TABLE>
9
<PAGE>
Interface Electronics Corp.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Interface Electronics Corp. ("the Company") was organized under the laws of
the Commonwealth of Massachusetts in January 1983, to conduct business
principally as a distributor of electronic parts, components and equipment.
The Company currently has operations in Massachusetts, New York, New
Jersey, Alabama, Connecticut, and North Carolina.
On June 6, 2000, Jaco Electronics, Inc. ("Jaco") purchased all of the
outstanding common stock of the Company and, as a result, the Company became
a wholly-owned subsidiary of Jaco.
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
1. Revenue Recognition
The Company recognizes revenue as products are shipped and title passes to
customers.
2. Inventories
Inventories, consisting of merchandise held for resale, are stated at the
lower of cost or market; cost is determined using the first-in, first-out
method.
3. Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for
using the straight-line method over the estimated useful lives of the
assets as follows:
Assets Years
--------- -------
Equipment 5 - 7
Furniture and fixtures 5 - 7
Software 3 - 5
Motor vehicles 5 - 7
Leasehold improvements 10 - 29
10
<PAGE>
Interface Electronics Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE A (continued)
4. Use of Estimates and Fair Value of Financial Instruments
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the 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.
Management of the Company believes that the fair value of financial
instruments, consisting of cash and cash equivalents, accounts receivable
and debt, approximates carrying value due to the immediate or short-term
maturity associated with its cash and cash equivalents and accounts
receivable and the interest rates associated with its debt.
5. Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers highly
liquid cash investments with an original maturity of three months or less
to be cash equivalents.
6. Advertising
Advertising costs are expensed as incurred and aggregated $55,986 during
the year ended December 31, 1999.
7. Income Taxes
Income taxes on net earnings of the Company are obligations of the
shareholders pursuant to a Federal Subchapter S election as provided in
SEC 1362(a) of the Internal Revenue Code. Accordingly, no Federal income
taxes have been provided for in the accompanying financial statements. The
Company is defined as a "Qualified S Corporation" for Massachusetts income
tax purposes. Qualified S Corporations with annual gross receipts of
$9,000,000 or more are subject to a four and one-half percent (4.5%)
corporate level tax in addition to the income being included on the
stockholders' individual income tax return.
11
<PAGE>
Interface Electronics Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE A (continued)
8. Concentrations of Credit Risk
In 1999, the Company had sales to three customers aggregating
approximately 53% of the Company's net sales and accounts receivable to
two customers aggregating 61% of total accounts receivable at December 31,
1999.
During 1999, the Company purchased approximately 54% of its products from
two suppliers.
NOTE B - NOTES PAYABLE - LINE OF CREDIT
The Company has an agreement with a financial institution, expiring May 31,
2001, which provides the Company with a line-of-credit facility of up to
$10,000,000, limited to 80% of eligible accounts receivable and 50% of
eligible inventory, as defined. Borrowings under the line of credit bear
interest at either the bank's specified prime rate (8.5% at December 31,
1999) or LIBOR (8.22% at December 31, 1999). The outstanding balance against
this line of credit was $3,305,547 at December 31, 1999.
The line of credit contains certain financial covenants, as defined in the
agreement. Borrowings under this line are secured by substantially all of the
Company's assets.
NOTE C - COMMITMENTS AND CONTINGENCIES
1. Leases
The Company leases equipment and office facilities under operating leases
expiring through May 2005. Rent expense for the year ended December 31,
1999 for all operating leases aggregated approximately $388,000.
12
<PAGE>
Interface Electronics Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE C (continued)
The minimum lease payments for the years ending after December 31, 1999
are as follows:
Year ending December 31,
2000 $ 410,000
2001 389,000
2002 336,000
2003 297,000
2004 296,000
Thereafter 85,000
-----------
$1,813,000
===========
2. Litigation Settlement
The Company is a defendant in litigation related to a dispute about the
purchase and subsequent return of nonconforming goods. Subsequent to
year-end, a judgment was entered against the Company for $1,247,000,
including interest. Pursuant to the judgment, the Plaintiff is required to
return to the Company certain components. As a result of the above, the
Company has recognized a provision for this loss amounting to $1,000,000
in the accompanying financial statements.
NOTE D - RETIREMENT PLAN
The Company maintains a 401(k) Plan ("the Plan") that is available to
employees meeting certain requirements, as defined in the Plan. Employer
contributions to the Plan are discretionary. No employer contributions were
made to the Plan for the year ended December 31, 1999.
NOTE E - SALE OF SUBSIDIARY
During the year ended December 31, 1999, the Company sold the stock of a
dormant subsidiary, Microelectronics Corp., to a group comprised of the
officers of the Company for a nominal amount.
13
<PAGE>
Interface Electronics Corp.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1999
NOTE F - RELATED PARTY TRANSACTIONS
Loans receivable from officers principally bear interest at a rate of 4.94%.
Included in interest income is $24,481 of interest earned from officers
during the year ended December 31, 1999. In addition, the Company made
advances to a related party aggregating $371,694 at December 31, 1999.
Contemporaneously with the sale of the Company's common stock, all amounts
due from these related parties were repaid.
At December 31, 1999, the Company has an accrued liability of $42,104 related
to amounts owed to an affiliate for office space that the Company had, in
prior years, rented from a related party.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Interface Electronics Corp.
Franklin, MA
We have audited the accompanying balance sheets of Interface Electronics Corp.
and subsidiary as of December 31, 1998 and 1997 and the related statements of
income and retained earnings, cash flows and supplementary information for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 statements 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 Interface Electronics Corp., as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
WALD & INGLE, P. C.
Boston, Massachusetts
March 9, 1999
15
<PAGE>
<TABLE>
INTERFACE ELECTRONICS CORP.
Consolidated Balance Sheets
December 31, 1998 and 1997
Assets
1998 1997
Current Assets:
<S> <C> <C>
Cash $ 561,085 $ 704,674
Accounts Receivable - trade, net of
allowance for doubtful accounts of
$ 24,209 in 1998 and 1997 4,343,128 2,051,100
Merchandise inventory (Note 4) 1,856,965 3,145,632
Loans, advances and prepaid items 318,760 182,931
Due from related party (1,641) (1,641)
Loans receivable - officers 300,960 5,674
------------------------ ------------------------
Total current assets 7,379,257 6,088,370
----------------------- ------------------------
Property and equipment, at cost: (Note 4)
Furniture, fixtures and equipment 904,570 612,042
Leasehold improvements 56,410 108,687
------------------------ ------------------------
960,980 720,729
Less: accumulated depreciation 601,617 549,622
------------------------ ------------------------
Net property and equipment 359,363 171,107
------------------------ ------------------------
Other assets:
Deposits 52,504 17,051
Cash surrender value life insurance 83,922 77,317
------------------------ ------------------------
Total other assets 136,426 94,368
------------------------ ------------------------
Total assets $ 7,875,046 $ 6,353,845
======================== ========================
See accompanying notes to financial statements
and independent auditors' report
</TABLE>
16
<PAGE>
<TABLE>
INTERFACE ELECTRONICS CORP.
Consolidated Balance Sheets
December 31, 1998 and 1997
Liabilities and Stockholders' Equity
1998 1997
Current liabilities:
<S> <C> <C> <C>
Notes payable to bank (Note 4) ................ $ 782,050 $ 490,000
Accounts payable and accrued expenses ......... 5,655,115 4,993,791
Income taxes payable .......................... 232,149 110,795
---------- ----------
Total current liabilities .................. 6,669,314 5,594,586
---------- ----------
General comments, commitments and
contingencies (Notes 5, 6, and 7)
Stockholders' equity:
Common Stock, no par value, 15,000
shares authorized, 10,000 shares
issued and outstanding ..................... 85,000 85,000
Paid in capital ............................... 312,843 312,843
Retained earnings ............................. 807,889 361,416
---------- ----------
Total stockholders' equity ................. 1,205,732 759,259
---------- ----------
Total liabilities and
stockholders' equity ................. $7,875,046 $6,353,845
========== ==========
</TABLE>
See accompanying notes to financial statements and independent auditors' report.
17
<PAGE>
<TABLE>
INTERFACE ELECTRONICS CORP.
Consolidated Statements of Operations
Years ended December 31, 1998 and 1997
1998 1997
<S> <C> <C>
Sales ........................... $33,923,518 $27,648,134
----------- -----------
Cost of goods sold:
Inventory, beginning of period 3,145,632 1,852,974
Merchandise purchased ........ 26,151,702 23,959,806
----------- -----------
29,297,334 25,812,780
Inventory, end of period ..... 1,856,965 3,145,632
----------- -----------
Cost of goods sold ........ 27,440,369 22,667,148
----------- -----------
Gross profit .................... 6,483,149 4,980,986
----------- -----------
Operating expenses .............. 5,670,622 4,656,439
----------- -----------
Income (loss) from operations ... 812,527 324,547
Income taxes .................... 366,054 140,895
----------- -----------
Net income ...................... $ 446,473 $ 183,652
=========== ===========
Statements of Retained Earnings
December 31, 1998 and 1997
Retained earnings, begininning of year ........... $361,416 $177,764
Net income ....................................... 446,473 183,652
-------- --------
Retained earnings, end of year ................... $807,889 $361,416
======== ========
See accompanying notes to financial statements
and independent auditors' report
</TABLE>
18
<PAGE>
INTERFACE ELECTRONICS CORP.
Consolidated Statements of Cash Flows
Years ended December 31, 1998 and 1997
1998 1997
Cash flows from operating activities:
Net income (loss) ............................. $ 446,473 $ 183,652
Adjustments to reconcile net income
to net cash provided by (used by)
operating activities:
Amortization ............................ 3,524 4,935
Depreciation ............................ 89,676 64,182
Loss on abandonment of leasehold
improvements ......................... 71,006 0
Changes in:
Accounts receivable .................. (2,292,028) 1,623,942
Loans, advances and prepaid items .... (135,829) (10,605)
Due from related party ............... 0 220,723
Refundable income taxes .............. 0 361,852
Loans receivable officers ............ (295,286) 349,907
Merchandise inventory ................ 1,288,667 (1,292,658)
Other assets ......................... (45,583) (5,288)
Accounts payable and accrued
expenses .......................... 661,324 (1,334,868)
Income taxes payable ................. 121,354 108,169
----------- -----------
Net cash provided by (used by)
operating activities ........... (86,702) 273,943
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment, net ....... (348,937) (46,882)
----------- -----------
Cash flows from financing activities:
Proceeds from bank loans net of
repayments ................................. 292,050 231,643
----------- -----------
Net increase (decrease) in cash ... (143,589) 458,704
Cash at beginning of year ........................ 704,674 245,970
----------- -----------
Cash at end of year .............................. $ 561,085 $ 704,674
=========== ===========
Interest ......................................... $ 71,305 $ 43,153
=========== ===========
Income taxes paid ................................ $ 244,811 $ 30,556
=========== ===========
See accompanying notes to financial statements
and independent auditors' report
19
<PAGE>
INTERFACE ELECTRONICS CORP.
Consolidated Supplementary Information
Years ended December 31, 1998 and 1997
1998 1997
Operating expenses:
Advertising .................................. $ 75,450 $ 74,470
Amortization ................................. 3,524 4,935
Automobile expense ........................... 53,655 30,081
Depreciation ................................. 89,676 64,182
Dues and subscriptions ....................... 21,135 9,386
Employee group insurance ..................... 129,469 124,125
Equipment rental ............................. 10,427 13,762
Insurance .................................... 83,272 129,324
Interest, net ................................ 67,296 39,268
Leasehold improvements abandoned ............. 71,006 0
Life insurance ............................... 2,783 11,463
Loss on worthless accounts ................... 143,658 16,087
Maintenance and repairs ...................... 3,811 13,693
Miscellaneous expenses ....................... 55,297 18,701
Office supplies and expense .................. 75,236 37,788
Outside services ............................. 108,101 132,673
Postage ...................................... 3,975 3,384
Professional services ........................ 69,474 125,148
Profit sharing contribution .................. 0 14,874
Rent ......................................... 317,087 268,959
Salaries and commissions ..................... 3,570,012 2,933,120
Selling and travel expense ................... 290,198 232,206
Taxes - payroll .............................. 200,338 173,241
Taxes - other ................................ 6,001 1,204
Telephone .................................... 199,794 139,246
Utilities .................................... 8,169 0
Warehouse expense ............................ 11,778 45,119
---------- ----------
Total operating expenses .................. $5,670,622 $4,656,439
========== ==========
See accompanying notes to financial statements
and independent auditors' report
20
<PAGE>
INTERFACE ELECTRONICS CORP.
Notes To Financial Statements
Years ended December 31, 1998
Note 1 - Nature of Business
Interface Electronics Corp. was organized under the laws of the Commonwealth of
Massachusetts in January, 1983 to conduct business principally as a distributor
of electronic parts, components and equipment.
Note 2 - Use of Estimates
The presentation of financial statements in conformity with generally accepted
auditing principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note 3 - Summary of Accounting Principles
Principles of Consolidation
The consolidated financial statements include the accounts of Interface
Electronics Corp. and its wholly owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly-liquid, short term investments with an original maturity of three months
or less to be cash equivalents.
The Company deposits the majority of its cash in one commercial bank. From time
to time, cash balances in this account exceed federally-insured limits. To date,
the Company has not experienced any losses in such accounts and believes it is
not exposed to any significant credit risk on its cash and cash equivalents.
Merchandise Inventory
Inventories are stated at the lower of cost or market, with cost being
determined generally on the first-in, first-out method. Market value is
determined by replacement cost or estimated net realizable value.
21
<PAGE>
INTERFACE ELECTRONICS CORP.
Notes To Financial Statements
Years ended December 31, 1998
Note 3 - continued...
Property, Equipment and Depreciation
Property and equipment are carried at cost less accumulated depreciation and
amortization.
Major replacements of and improvements to property and equipment are
capitalized. Minor renewals are charged against current operations.
Depreciation is calculated primarily by the accelerated cost recovery methods at
various rates based on the estimated useful lives of assets, substantially as
follows:
Depreciation Lives
Furniture 5 - 7 years
Lease improvements 10 - 39 years
On disposition of property and equipment, the cost and related accumulated
depreciation or amortization are eliminated from the accounts and the gain or
loss thereon is reflected in net income.
Note 4 - Notes Payable - Milford National Bank and Trust Company
At December 31, 1998, the Company is indebted to the Milford National Bank and
Trust Company as follows:
On a revolving line of credit in the principal amount of $700,000 which matured
May, 1998. Interest is at a floating rate equal to 1% above the base lending
rate of the bank. The loan is secured by all of the Company's assets.
On June 12, 1998, the Company was indebted to the bank for $297,050 on a note
calling for monthly payments of interest at 7.75% per annum. At December 31,
1998, the balance of this note was $82,050.
Note 5 - Related Party Transactions
The Company leased its offices and warehouse in Massachusetts from a
partnership, the partners of which are the stockholders of the Company, during
the early part of 1998. The Company relocated its operations during 1998,
leasing from unrelated parties.
22
<PAGE>
INTERFACE ELECTRONICS CORP.
Notes To Financial Statements
Years ended December 31, 1998
Note 6 - Major Customers
During the year ended December 31, 1998 sales to three unaffiliated customer
amount to approximately 29%, 19% and 14% respectively of the Company's revenue.
Note 7 - General Comments, Commitments and Contingencies
(a) At December 31, 1998, commitments for minimum annual rentals through
December 31, 2003 under non-cancelable leases were as follows:
Real Estate Motor Vehicles
1999 315,266 22,425
2000 314,636 12,980
2001 319,032 520
2002 305,546
2003 294,881
(b) The Company is a defendant in a lawsuit filed by a vendor under a
theory of goods sold and delivered. The ultimate out come of the
litigation cannot presently be determined and no provision for any
liability has been made in the accompanying consolidated financial
statements. Counsel estimates that the loss, if any to be in the range
of $100,000 to $125,000.
(c) Final determination of income taxes is subject to audit by the
respective federal and state governmental authorities for a period not
closed by statute.
23
<PAGE>
<TABLE>
INTERFACE ELECTRONICS CORP.
CONDENSED BALANCE SHEET
(UNAUDITED)
MARCH 31, DECEMBER 31,
2000 1999
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash ........................................... $ 625,629 $ 307,518
Accounts receivable - net ...................... 6,391,535 5,503,123
Inventories .................................... 3,296,387 2,610,046
Prepaid expenses and other current assets ...... 37,271 112,371
------------ ------------
Total current assets ........................... 10,350,822 8,533,058
Property and equipment - net ................... 528,733 546,019
Other assets:
Loans receivable, officers ..................... 787,772 772,111
Due from related party ......................... 459,214 371,694
Deposits and other assets ................ 108,701 108,701
Cash surrender value of officers' life insurance 96,923 96,923
------------ ------------
TOTAL ASSETS ................................... $ 12,332,165 $ 10,428,506
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Note payable, line of credit ................... $ 3,305,547 $ 3,305,547
Accounts payable, trade ........................ 8,491,410 6,912,839
Due to related party ........................... 42,104 42,104
Accrued liabilities:
Payroll and payroll taxes ...................... 33,859 182,144
Litigation costs ............................... 1,050,000 1,000,000
Other .......................................... 78,543 131,060
------------ ------------
Total current liabilities ...................... 13,001,463 11,573,694
SHAREHOLDERS' DEFICIT:
Common stock ................................... 85,000 85,000
Additional paid-in capital ..................... 312,843 312,843
Accumulated deficit ............................ (1,067,141) (1,543,031)
------------ ------------
Total shareholders' deficit .................... (669,298) (1,145,188)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT .... $ 12,332,165 $ 10,428,506
============ ============
See accompanying notes to condensed financial statements.
</TABLE>
24
<PAGE>
INTERFACE ELECTRONICS CORP.
CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2000 1999
NET SALES .................................. $ 15,489,190 $ 8,821,822
COST AND EXPENSES:
Cost of goods sold ......................... 13,024,968 7,336,785
------------ ------------
Gross profit ............................ 2,464,222 1,485,037
Selling, general and administrative expenses 1,848,247 1,275,841
------------ ------------
Operating profit ........................ 615,975 209,196
Other (expense) income:
Interest expense - net .................. (78,358) (15,308)
Litigation costs ........................ (50,000)
Other income ............................ 11,273 1,698
------------ ------------
Earnings before income taxes ............ 498,890 195,586
Income tax provision ....................... 23,000 9,000
------------ ------------
NET EARNINGS ............................ $ 475,890 $ 186,586
============ ============
See accompanying notes to condensed financial statements.
25
<PAGE>
<TABLE>
INTERFACE ELECTRONICS CORP.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net earnings ............................................. $ 475,890 $ 186,586
Adjustments to reconcile net earrings to net cash
provided by (used in) operating activities
Depreciation and amortization ..................... 30,000 30,000
Changes in operating assets and liabilities
Increase in operating assets - net ............. (1,499,653) (1,083,620)
Increase in operating liabilities - net ........ 1,427,769 793,125
----------- -----------
Net cash provided by (used in) operating activities 434,006 (73,909)
----------- -----------
Cash flows from investing activities
Capital expenditures ..................................... (12,714) (84,831)
Purchase of long-term investment ......................... (747)
Increase in loans receivable, officers ................... (15,661) (62,306)
----------- -----------
Net cash used in investing activities .................... (28,375) (147,884)
----------- -----------
Cash flows from financing activities
Increase in due from related parties ..................... (87,520)
Principal payment under note payable ..................... (82,050)
----------- -----------
Net cash used in financing activities .................... (87,520) (82,050)
----------- -----------
Net increase (decrease) in cash ............................. 318,111 (303,843)
Cash at beginning of period ................................. 307,518 561,085
----------- -----------
Cash at end of period ....................................... $ 625,629 $ 257,242
=========== ===========
See accompanying notes to condensed financial statements.
</TABLE>
26
<PAGE>
INTERFACE ELECTRONICS CORP.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
1) The accompanying condensed financial statements reflect all adjustments,
consisting of normal recurring accrual adjustments, which are in the
opinion of management, necessary for a fair presentation of the financial
position and the results of operations at and for the periods presented.
Such financial statements do not include all the information or footnotes
necessary for a complete presentation. Therefore, they should be read in
conjunction with Interface Electronics Corp.'s audited statements for the
year ended December 31, 1999, which appear in Item 7 (a).
2) Interface Electronics Corp., through its shareholders, has elected to be
taxed as a Subchapter S Corporation as provided in Section 1362(a) of the
Internal Revenue Code. As such, the corporate income is passed through to
the shareholders and combined with their personal income and deductions to
determine taxable income on their individual federal tax returns.
Accordingly, no provision for federal income taxes has been made in the
financial statements.
Interface Electronics Corp. is defined as a "Qualified S Corporation" for
Massachusetts income tax purposes. Qualified S Corporations with annual
gross receipts of $9,000,000 or more are subject to a four and one-half
percent (4.5%) corporate level tax in addition to the income being included
on the stockholders' individual tax returns.
3) Interface Electronics Corp. has a line of credit with a bank, in which
advances are limited to $10,000,000. Interest is payable monthly at the
bank's prime rate for the prime margin portion of the line and the stated
LIBOR rate for the LIBOR portion of the line of credit. The line of credit
expires on May 31, 2001 and is secured by a first security interest in
substantially all of the Company's assets. The total balance of the line of
credit was $3,305,546 at March 31, 2000.
The line of credit is subject to certain other terms and covenants.
Interface Electronics Corp. was not in compliance with the loan covenants
as of March 31, 2000. Interface Electronics Corp. has been notified that
the line of credit has been frozen.
27
<PAGE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
INTRODUCTION
(UNAUDITED)
The unaudited pro forma condensed consolidated financial statements have been
prepared to illustrate the effect of the Stock Purchase Agreement dated May 4,
2000, as amended on June 6, 2000, between Jaco Electronics, Inc. and the
shareholders of Interface Electronics Corporation.
The unaudited pro forma condensed consolidated balance sheet at March 31, 2000
is based on the historical consolidated balance sheet of Jaco Electronics, Inc.
("Jaco") as of March 31, 2000 and the historical balance sheet of Interface
Electronics Corporation ("Interface") as of March 31, 2000 and assumes that the
Stock Purchase Agreement occurred on March 31, 2000. The purchase price
consisted of a payment of $15,400,000 at closing (subject to a post closing net
worth adjustment), plus the assumption of bank debt, plus a deferred payment of
up to $3,960,000 (subject to adjustment), approximately one (1) year from the
anniversary of the closing (June 6, 2000) (or earlier under certain
circumstances), and a deferred payment of up to $2,640,000 (subject to
adjustment), approximately two (2) years from the anniversary of the closing (or
earlier under certain circumstances). The deferred payments are based upon
Interface's Contract Manufacturing Division obtaining minimum sales and gross
profit levels. At March 31, 2000, no amount has been provided for since the
deferred payments, if any, are not presently determinable. To finance the
Transaction, the Company increased its credit facility from $30,000,000 to
$50,000,000.
The unaudited pro forma condensed consolidated statements of operations for the
nine months ended March 31, 2000 and the year ended June 30, 1999 are based on
the historical consolidated statements of operations of Jaco Electronics, Inc.
and the historical statements of operations of Interface Electronics Corporation
for the nine months ended March 31, 2000 and the twelve months ended June 30,
1999 and combines their results as if the acquisition had occurred on July 1,
1999 and July 1, 1998, respectively.
The pro forma adjustments are based on preliminary assumptions of the allocation
of the purchase price and are subject to revision upon final settlement of all
purchase price adjustments and the completion of evaluations made on the fair
value of the assets acquired and liabilities assumed. As a result, the final
allocation of the fair value of assets and liabilities assumed in connection
with the acquisition may differ from that presented herein. The pro forma
adjustments do not include any potential benefits that might result form the
elimination of duplicate costs.
The unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of the actual results that would have been reported if
the acquisition occurred on the dates indicated nor do they purport to be
indicative of the results which may be obtained in the future. In the opinion of
management all adjustments necessary to present fairly such pro forma condensed
consolidated financial statements have been made.
The pro forma condensed consolidated financial statements should be read in
conjunction with Jaco Electronics, Inc.'s Form 10-K for the fiscal year ended
June 30, 1999.
28
<PAGE>
<TABLE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
Historical
--------------------------------------
Jaco Interface
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 427,287 $ 625,629
Marketable securities 903,868
Accounts receivable - net 29,799,762 6,391,535
Inventories 43,210,928 3,296,387
Prepaid expenses and other 653,926 37,271
Deferred income taxes 1,008,000
----------------- -----------------
Total current assets 76,003,771 10,350,822
Property, plant and equipment - net 6,426,398 528,733
Deferred income taxes 394,000
Excess of cost over net assets acquired - net 3,655,418
Loans receivable, officers 787,772
Due from related party 459,214
Other assets 1,722,155 205,624
----------------- -----------------
TOTAL ASSETS $ 88,201,742 $ 12,332,165
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 25,159,115 $ 8,603,812
Current maturities of long-term debt and capitalized
lease obligations 859,324
Note payable, line of credit 3,305,547
Due to related party 42,104
Litigation costs 1,050,000
Income taxes payable 1,130,136
----------------- -----------------
Total current liabilities 27,148,575 13,001,463
Long-term debt and capitalized lease obligations 22,373,398
Deferred compensation 787,500
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock 408,072 85,000
Additional paid-in capital - net 22,721,645 312,843
Retained earnings (Accumulated deficit) 16,784,584 (1,067,141)
Accumulated other comprehensive income 182,483
Treasury stock (2,204,515)
----------------- -----------------
Total shareholders' equity (deficit) 37,892,269 (669,298)
----------------- -----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT) $ 88,201,742 $ 12,332,165
================= =================
See accompanying notes to condensed financial statements.
</TABLE>
29
<PAGE>
<TABLE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
Pro Forma
---------------------------------------------
Adjustments Consolidated
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 1,052,916
Marketable securities 903,868
Accounts receivable - net 36,191,297
Inventories $ (213,054) (E) 46,294,261
Prepaid expenses and other 691,197
Deferred income taxes 1,008,000
----------------- --------------------
Total current assets (213,054) 86,141,539
Property, plant and equipment - net (128,892) (E) 6,826,239
Deferred income taxes 394,000
Excess of cost over net assets acquired - net 12,939,298 (B) 16,594,716
Loans receivable, officers 1,050,000 (A)
(1,837,772) (D)
Due from related party (409,214) (D) 50,000
Other assets 1,235,000 (B) 3,112,779
(50,000) (D)
----------------- --------------------
TOTAL ASSETS $ 12,585,366 $113,119,273
================= ====================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 205,000 (B) $ 33,967,927
Current maturities of long-term debt and capitalized
lease obligations 859,324
Note payable, line of credit (3,305,547) (C)
Due to related party 42,104
Litigation costs (1,050,000) (B)
Income taxes payable 1,130,136
----------------- --------------------
Total current liabilities (4,150,547) 35,999,491
Long-term debt and capitalized lease obligations 15,400,000 (B) 38,440,013
3,305,547 (C)
(2,296,986) (D)
(341,946) (E)
Deferred compensation 787,500
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock (85,000) (B) 408,072
Additional paid-in capital - net 1,050,000 (A) 22,721,645
(1,362,843) (B)
Retained earnings (Accumulated deficit) 1,067,141 (B) 16,784,584
Accumulated other comprehensive income 182,483
Treasury stock (2,204,515)
----------------- --------------------
Total shareholders' equity (deficit) 669,298 37,892,269
----------------- --------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT) $ 12,585,366 $113,119,273
================= ====================
See accompanying notes to condensed financial statements.
</TABLE>
30
<PAGE>
<TABLE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
A - To record an additional investment into Interface Electronics Corp. by
the Sellers for liabilites not assumed by the Company.
B - The purchase price, exclusive of related fees and expenses, of $15.4
million is based on the terms and conditions of the Stock Purchase
Agreement. To finance the consideration for the Transaction, the Company
increased its credit facility with its commercial banks from $30,000,000
to $50,000,000, based on eligible accounts receivable and inventories of
the Company. Borrowings under the credit facility are collateralized by
substantially all of the assets of the Company.
The purchase price has initially been allocated as follows:
<S> <C>
Purchase price paid by cash $ 15,400,000
Less: Operating assets acquired (13,382,165)
Identifiable intangibles:
Franchise agreement (550,000)
Employment agreement (685,000)
Plus: Liabilities assumed 11,951,463
Estimated transaction costs 205,000
-------------------
Goodwill $ 12,939,298
===================
C - In connection with the acquisition of Interface, the Company assumed
Interface's outstanding bank debt. Immediately after the closing of the
transaction, the Company paid off the assumed outstanding bank debt using
the Company's credit facility.
D - Immediately after the closing of the transaction, pursuant to the stock
purchase agreement, the Sellers paid to the Company the following items:
Officers' loans due to Interface $ 1,837,772
Related party loan due to Interface 409,214
Miscellaneous receivable due to Interface 50,000
-------------------
$ 2,296,986
===================
Proceeds received were used to repay outstanding bank debt.
E - Immediately after the closing of the transaction, pursuant to the stock
purchase agreement, the Sellers purchased the following items which
pertained to the Systems Division of Interface Electronics Corporation:
Inventory $ 213,054
Fixed assets 128,892
-------------------
$ 341,946
===================
Proceeds received were used to repay outstanding bank debt.
</TABLE>
31
<PAGE>
<TABLE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
Historical
-------------------------------------------
Jaco Interface
<S> <C> <C>
NET SALES $ 138,811,321 $ 36,364,438
COST AND EXPENSES:
Cost of goods sold 108,994,750 30,710,220
------------------- -------------------
Gross profit 29,816,571 5,654,218
Selling, general and administrative expenses 23,918,836 5,658,616
------------------- -------------------
Operating profit (loss) 5,897,735 (4,398)
Other expense (income):
Interest expense - net 1,002,958 186,217
Litigation costs 1,050,000
Other income (47,445)
------------------- -------------------
Earnings (Loss) before income taxes 4,894,777 (1,193,170)
Income tax provision (benefit) 2,031,000
------------------- -------------------
Net earnings (loss) $ 2,863,777 $ (1,193,170)
=================== ===================
Net earnings per common share:
Basic $ 0.52
===================
Diluted $ 0.51
===================
Weighted average common shares outstanding:
Basic 5,482,328
===================
Diluted 5,652,593
===================
</TABLE>
32
<PAGE>
<TABLE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
Pro Forma
---------------------------------------------
Adjustments Consolidated
<S> <C> <C>
NET SALES $ (3,269,458)(A) $ 171,906,301
COST AND EXPENSES:
Cost of goods sold (2,244,298)(A) 137,460,672
------------------ -------------------
Gross profit (1,025,160) 34,445,629
Selling, general and administrative expenses (406,360)(A) 29,787,092
485,000 (C)
28,000 (D)
103,000 (E)
------------------ -------------------
Operating profit (loss) (1,234,800) 4,658,537
Other expense (income):
Interest expense - net 717,783 (B) 1,906,958
Litigation costs 1,050,000
Other income 902 (A) (46,543)
------------------ -------------------
Earnings (Loss) before income taxes (1,953,485) 1,748,122
Income tax provision (benefit) (1,080,000)(F) 951,000
------------------ -------------------
Net earnings (loss) $ (873,485) $ 797,122
================== ===================
Net earnings per common share:
Basic $ 0.15
===================
Diluted $ 0.14
===================
Weighted average common shares outstanding:
Basic 5,482,328
===================
Diluted 5,652,593
===================
See accompanying notes to condensed financial statements.
</TABLE>
33
<PAGE>
<TABLE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
(UNAUDITED)
Historical
-------------------------------------------
Jaco Interface
<S> <C> <C>
NET SALES $ 140,710,825 $ 33,713,694
COST AND EXPENSES:
Cost of goods sold 113,334,627 27,650,192
------------------- -------------------
Gross profit 27,376,198 6,063,502
Selling, general and administrative expenses 27,642,724 6,587,979
------------------- -------------------
Operating loss (266,526) (524,477)
Other expense (income):
Interest expense - net 1,308,624 67,204
Other income (1,796)
------------------- -------------------
Loss before income taxes (1,575,150) (589,885)
Income tax benefit 418,000
------------------- -------------------
Net loss $ (1,157,150) $ (589,885)
=================== ===================
Net loss per common share:
Basic and diluted $ (0.21)
===================
Weighted average common shares outstanding:
Basic and diluted 5,547,405
===================
See accompanying notes to condensed financial statements.
</TABLE>
34
<PAGE>
<TABLE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1999
(UNAUDITED)
Pro Forma
---------------------------------------------
Adjustments Consolidated
<S> <C> <C>
NET SALES $ (2,293,328)(A) $ 172,131,191
COST AND EXPENSES:
Cost of goods sold (1,523,711)(A) 139,461,108
------------------ -------------------
Gross profit (769,617) 32,670,083
Selling, general and administrative expenses (256,501)(A) 34,795,202
647,000 (C)
37,000 (D)
137,000 (E)
------------------ -------------------
Operating loss (1,334,116) (2,125,119)
Other expense (income):
Interest expense - net 1,057,796 (B) 2,433,624
Other income (1,796)
------------------ -------------------
Loss before income taxes (2,391,912) (4,556,947)
Income tax benefit 609,000 (F) 1,027,000
------------------ -------------------
Net loss $ (1,782,912) $ (3,529,947)
================== ===================
Net loss per common share:
Basic and diluted $ (0.64)
===================
Weighted average common shares outstanding:
Basic and diluted 5,547,405
===================
See accompanying notes to condensed financial statements.
</TABLE>
35
<PAGE>
<TABLE>
JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND THE YEAR ENDED JUNE 30, 1999
(UNAUDITED)
Jaco does expect to achieve operating efficiencies from the acquisition. It is
anticipated that cost savings will result principally from such areas as
warehousing, administration and operations. Such anticipated cost savings have
not been reflected in the accompanying unaudited pro forma condensed
consolidated statements of operations.
A - Jaco did not acquire the Systems Division of Interface. This adjustment
is eliminating the sales and direct costs.
B - Adjustment to reflect the net increase in interest expense:
Nine Months Ended Year Ended
March 31, 2000 June 30, 1999
---------------------- -----------------------
Interest on additional borrowings of $18,705,547 less cash received at
closing of $2,638,932 and assuming an interest rate of 7.5% and
<S> <C> <C> <C>
7.0%, respectively $ 904,000 $ 1,125,000
Elimination of interest expense on Interface debt and interest income
on officers' loans which are assumed repaid and the elimination of
other
miscellaneous interest (186,217) (67,204)
---------------------- -----------------------
Net increase in interest expense $ 717,783 $ 1,057,796
====================== =======================
C - Adjustment to reflect the amortization of estimated goodwill determined on a straight-line basis over
20 years.
D - Adjustment to reflect the amortization of the franchise agreement
determined on a straight-line basis over 15 years.
E - Adjustment to reflect the amortization of the employment agreement and
covenant not to compete determined on a straight-line basis over 5 years.
F - Adjustment to reflect the income tax benefit, assuming an effective tax
rate of 41% and 26.5% for the nine months ended March 31, 2000 and the
year ended June 30, 1999, respectively, applied to the deductible (the
amortization of goodwill and the franchise agreement in Note C & D is not
tax benefited) pro forma adjustments to the condensed consolidated
statements of operations stated above and the Historical Loss of Interface
</TABLE>
36
<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 hereunto duly authorized.
JACO ELECTRONICS, INC.
By: /s/ Jeffrey Gash
Jeffrey Gash,
Vice President-Finance
Date: October 19, 2000
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2.1 Stock Purchase Agreement by and among Jaco
Electronics, Inc. and All of the Shareholders of
Interface Electronics Corp. as of May 4, 2000.
Incorporated by reference from the Current Report on
Form 8-K, SEC File No. 000-05896, filed by Jaco
Electronics, Inc. on May 15, 2000.
2.2 Amendment No. 1 to the Stock Purchase Agreement
by and among Jaco Electronics, Inc. and All of the
Shareholders of Interface Electronics Corp. as of May
4, 2000, dated June 6, 2000. Incorporated by reference
from the Current Report on Form 8-K, SEC File No.
000-05896, filed by Jaco Electronics, Inc. on June 12,
2000.
10.16 Employment Agreement dated June 6, 2000, between
the Registrant and Joseph Oliveri. Incorporated by
reference from the Current Report on Form 8-K, SEC
File No. 000-05896, filed by Jaco Electronics, Inc. on
June 12, 2000.
99.9 Press Release dated May 9, 2000. Incorporated by
reference from the Current Report on Form 8-K, SEC
File No. 000-05896, filed by Jaco Electronics, Inc. on
May 15, 2000.
99.10 Press Release dated June 8, 2000. Incorporated by
reference from the Current Report on Form 8-K, SEC
File No. 000-05896, filed by Jaco Electronics, Inc. on
June 12, 2000.
