<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 2, 1995
Commission File Number 0-10886
REXON INCORPORATED
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-4317481
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Progress Plaza
Suite 2110
St. Petersburg, Florida 33701
----------------------- -----
(Address of principal executive offices) Zip Code
</TABLE>
(813) 896-9609
Registrant's telephone number including area code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At May 1, 1995, Registrant had 10,358,872 shares of Common Stock outstanding.
(This document contains a total of 28 pages.)
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
April 2, October 2,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,119 $ 2,045
Trade accounts receivable, less
allowance of $1,900 (1995)
and $1,343 (1994) 39,916 36,885
Inventories 28,924 26,538
Prepaid expenses and other current
assets 2,632 2,016
----- -----
TOTAL CURRENT ASSETS 72,591 67,484
GOODWILL, LESS ACCUMULATED
AMORTIZATION 11,362 12,444
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS 39,443 36,871
Less: Accumulated depreciation and
amortization (26,921) (24,687)
-------- --------
12,522 12,184
CAPITALIZED SOFTWARE, NET OF
ACCUMULATED AMORTIZATION 7,451 5,777
OTHER ASSETS 3,179 2,495
----- -----
$107,105 $100,384
======== ========
</TABLE>
See Notes to consolidated financial statements.
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
April 2, October 2,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 29,508 $ 28,148
Accrued other expenses 6,953 9,005
Accrued income taxes 3,472 3,124
Current portion of long-term obligations 542 387
------- -------
TOTAL CURRENT LIABILITIES 40,475 40,664
LONG-TERM OBLIGATIONS 23,772 18,631
OTHER 2,204 2,643
REDEEMABLE convertible preferred stock, $.01 par value;
authorized 1,000,000 shares; issued and outstanding
480,000 shares at April 2, 1995 and at October 2, 1994 4,800 4,800
STOCKHOLDER'S EQUITY
Common Stock, $.01 par value;
authorized 15,000,000 shares;
issued and outstanding 10,343,000 shares
at April 2, 1995 and 10,054,000 shares
at October 2, 1994 103 101
Additional paid-in capital -- common stock 51,401 50,129
Accumulated deficit (15,650) (16,584)
-------- --------
35,854 33,646
-------- --------
$107,105 $100,384
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
FOR THE FISCAL PERIODS ENDED APRIL 2, 1995
AND APRIL 3, 1994
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------- -----------------
April 2, April 3, April 2, April 3,
1995 1994 1995 1994
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Net Sales $48,708 $51,855 $101,375 $99,737
Cost of Goods Sold 36,384 38,940 75,948 74,920
------- ------- -------- -------
12,324 12,915 25,427 24,817
------- ------- -------- -------
Selling, general and administrative 8,374 9,027 17,879 18,095
Research and development 2,491 3,602 4,967 6,240
Other, net 706 251 1,467 444
------- ------- -------- -------
11,571 12,880 24,313 24,779
------- ------- -------- -------
Net income before income taxes 753 35 1,114 38
Income taxes 30 -0- 60 -0-
------- ------- -------- -------
Net Income $ 723 $ 35 $ 1,054 $ 38
======= ======= ======== =======
Net income per share attributable to
Common stock:
Primary $ .06 $ NIL $ .09 $ NIL
======= ======= ======== =======
Fully Diluted $ .06 $ NIL $ .09 $ NIL
======= ======= ======== =======
Weighted average shares outstanding
Primary 10,522 9,816 10,408 9,673
Fully Diluted 10,522 9,816 10,408 9,673
</TABLE>
See Notes to consolidated financial statements.
4
<PAGE> 5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 2, 1995
AND APRIL 3, 1994
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------
(Unaudited)
April 2, April 3,
1995 1994
---- -----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income: $ 1,054 $ 38
Depreciation and amortization 4,083 4,315
Provision for doubtful accounts 632 565
Changes in operating assets and liabilities:
Accounts receivable (3,663) (4,440)
Inventories and prepaid expenses, net (3,002) 4,397
Accounts payable and accrued expenses (1,131) (4,470)
Accrued and deferred income taxes 348 -0-
------- -------
Net cash used in operating activities (1,679) 405
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment (1,784) (3,053)
Increase in capitalized software, licenses and other assets (3,125) (2,365)
Cash acquired in acquisition of Cal-Emeritus 0 185
------- -------
Net cash used in investing activities (4,909) (5,233)
------- -------
FINANCING ACTIVITIES:
Net proceeds from line of credit and long term obligations 4,508 3,077
Proceeds from issuance of common stock 1,274 707
Preferred dividends paid (120) (85)
------- -------
Net cash provided by financing activities 5,662 3,699
------- -------
Decrease in cash and cash equivalents (926) (1,129)
Cash and cash equivalents at beginning of period 2,045 3,273
------- -------
Cash and cash equivalents at end of period $ 1,119 $ 2,144
======= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
April 2, April 3,
1995 1994
---- ----
<S> <C> <C>
Cash Paid For:
Interest $874 $448
Income Taxes $-0- $-0-
</TABLE>
6
<PAGE> 7
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the period ended April 2, 1995 are not
necessarily indicative of the results that may be expected for the year. For
further information, refer to the consolidated financial statements and notes
thereto for the year ended October 2, 1994, included in the 1994 Annual Report
to Stockholders.
Certain reclassifications have been made to prior year amounts to conform with
current year classifications.
NOTE B -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
April 2, October 2,
1995 1994
------- -------
(in thousands)
<S> <C> <C>
Raw materials $16,408 $14,255
Work-in-process 6,803 7,870
Finished products 5,713 4,413
------- -------
$28,924 $26,538
======= =======
</TABLE>
7
<PAGE> 8
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOTE C -- INCOME PER SHARE
Per share data is based on the weighted average number of shares outstanding
and common stock equivalents, excluding those common stock equivalents that
would have the effect of being antidilutive.
Income per share computations limit the assumption of the repurchase of
treasury shares to a maximum of twenty percent of the outstanding shares of the
Company, with the remaining pro forma proceeds, where applicable, being applied
to reduce interest-bearing liabilities. Accordingly, interest expense based on
the Company's average cost of funds is reduced, and net income is increased.
For purposes of the income per share computations, the net income attributable
to common stock was computed by deducting preferred stock dividends from the
Company's reported net income for the period.
8
<PAGE> 9
PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentages which
certain items of expense or income bear to the Company's net sales.
<TABLE>
<CAPTION>
Percentage of Net Sales
Quarter Ended Six Months Ended
------------- ----------------
4/2/95 4/3/94 4/2/95 4/3/94
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Cost of goods sold 75% 75% 75% 75%
Selling, general and administrative 17% 18% 18% 18%
Research & development 5% 7% 5% 7%
Other, net 1% NIL 1% NIL
Net income before income taxes 2% NIL 1% NIL
Net income 1% NIL 1% NIL
</TABLE>
Net sales decreased by $3.1 million or 6% in the second quarter of fiscal 1995
compared with the same quarter in fiscal 1994 and increased by $1.6 million or
2% for the first six months of fiscal 1995 over the same period of fiscal 1994.
The second quarter drop in revenue was due to a $1.4 million decrease in sales
of the Company's software products, and a $2.3 million decrease in sales of the
Company's hardware products, partially offset by an increase of $.6 million of
the Company's multimedia products. Software sales were negatively affected by
the change in the marketing focus from OEM to distribution. The Company
believes that the decline in hardware sales may have resulted from market
uncertainties arising out of 3M's announcement of its new Travan tape format.
The increase for the first six months was comprised of an increase of $1.0
million of the Company's hardware products, an increase of $1.4 million of the
Company's multimedia products and a decrease of $.8 million of the Company's
software products.
Cost of goods sold as a percentage of net sales remained constant at 75% for
the second fiscal quarter of fiscal 1995 as compared to the same period of
fiscal 1994 and was also constant for the first six months of both fiscal 1995
and fiscal 1994. The Company is continuing its efforts to reduce manufacturing
costs and to increase its sales of newer, more highly margined products.
Selling, general and administrative expenses decreased as a percentage of net
sales in the second quarter of fiscal 1995 to 17% from 18% in the second
quarter of fiscal 1994. Selling, general and administrative expenses remained
constant at 18% for the first six months of fiscal 1995 as compared to the
first six months of fiscal 1994. The second quarter results reflect the
reversal of $.6 million in various accruals expensed in the first fiscal
quarter of 1995 that were deemed no longer required, the majority being bonus
accruals which were not awarded. Additional selling, general and
administrative expenses are expected to be incurred and expensed during the
last two quarters of fiscal 1995 relating to relocation costs resulting from
the Company's fiscal 1994 restructuring. Management does not anticipate any
material changes in connection with its previous restructuring plans.
9
<PAGE> 10
Research and development expenditures decreased to 5% of net sales in the
second quarter and first six months of fiscal 1995, compared with 7% in the
same periods of fiscal 1994. The Company continues to work on the development
of new hardware, software and multi-media products and new methods to reduce
manufacturing costs of the Company's existing products, while completing the
combination and consolidation of resources among various subsidiaries, which is
expected to be completed in fiscal 1995.
Other expenses increased to 1% of sales for both the second fiscal quarter and
first six months of fiscal 1995. This increase is primarily comprised of $.2
million from exchange rate fluctuations relating to the Company's Singapore
operations and $.5 million in additional interest expenses as a result of
higher interest rates and an increase of $5 million in the outstanding balance
of long term debt.
Income before income taxes as a percent of net sales increased to 2% in the
second quarter of fiscal 1995 from break even in fiscal 1994 and in the first
six months of fiscal 1995 compared to the first six months of fiscal 1994
increased to 1% from breakeven.
As of April 2, 1995, the Company's balance of cash and cash equivalents was
$1.1 million compared to $2.0 million at October 2, 1994. For the first six
months of fiscal 1995, net cash used by operating activities amounted to $1.7
million after taking into account an increase of $3.7 million in accounts
receivable, a $3.0 million increase in inventories and prepaid expenses and a
$1.1 million decrease in accounts payable and accrued expenses. Major cash
expenditures for investing activities for the period included the purchase of
$1.8 million of capital equipment; in addition, $3.1 million of software
license and other costs were capitalized. Cash generated from financing
activities include $4.5 million provided from the Company's line of credit and
$1.3 million from issuance of common stock which offset the negative cash flows
in operating and investing activities.
The Company entered in to a secured revolving credit agreement with Sanwa
Business Credit Corporation in October 1994 (amended from time to time through
April 1995) (the "Credit Agreement"), which provides for a total line of credit
of up to $25 million, consisting of advances against eligible domestic and
foreign accounts receivable. The advances under the credit agreement are
limited to eighty percent (80%) of eligible domestic accounts and seventy-five
percent (75%) of eligible foreign accounts up to a maximum advance on eligible
foreign accounts of $10 million. The credit agreement has financial covenants
that require the Company to meet quarterly profit levels, specified leverage
ratios, and certain levels of tangible net worth. At April 2, 1995 the Company
was out of compliance with the Ratio of Indebtedness to Consolidated Tangible
Net Worth. The covenant requires the ratio to be less than or equal to 2.5 to
1 at fiscal quarter end and the actual ratio was 2.72 to 1. The Company has
received a waiver from Sanwa Business Credit Corporation for the current
quarter.
The Company believes that its current level of cash, together with cash flow
from operations and its line of credit, should be adequate to meet its current
operating and capital requirements, assuming level to higher revenues. Revenues
declined 6% in the second fiscal quarter, and any further significant decline
in product shipments could materially and adversely affect the Company's
ability to access funds under its credit line; in such event, the Company would
likely be required to seek additional financing, and such may not be available.
Regardless of whether or not credit is available under its existing credit
line, the Company is actively exploring subordinated debt and/or equity
financing which would be used for additional working capital.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 3 - Not Applicable
ITEM 4 - Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held March 16, 1995.
At such meeting, the following persons were duly elected as the Class I
directors of the Company: Stanley D. Czerwinski and Irvin R. Reuling. Such
persons, together with Robert C. Genesi, Charles E. Moran, Henry E. Oberle,
Edmund H. Shea, Jr. and Kanwal S. Rekhi comprised the members of the Board of
Directors following such meeting. Mr. Czerwinski subsequently resigned as a
director on May 4, 1995, due to demands placed on his time by other business
and personal matters.
ITEM 5 - Not Applicable
ITEM 6 - Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
10.1 Third Amendment to Loan and Security Agreement,
dated March 24, 1995.
10.2 Fourth Amendment to Loan and Security Agreement,
dated April 15, 1995.
11.1 Statement of Computation of Per Share Earnings.
(b) No reports on Form 8-K were filed during the fiscal quarter covered by
this Report on Form 10-Q.
11
<PAGE> 12
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.
REXON INCORPORATED
(Registrant)
Dated: May 15, 1995
/S/Irvin R. Reuling
------------------------------------
Irvin R. Reuling
Chief Financial Officer & Secretary
(Principal Financial and
Accounting Officer)
12
<PAGE> 1
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Third Amendment to Loan and Security Agreement ("Third
Amendment") is made as of March 24, 1995 by and between SANWA BUSINESS CREDIT
CORPORATION ("Lender") and Rexon Incorporated, a Delaware corporation
("Rexon"), Rexon Software, Inc., a California corporation ("Rexon Software"),
Rexon/Tecmar, Inc., a California corporation, Scientific Solutions, Inc., an
Ohio corporation, Sytron Corporation, a Delaware corporation ("Sytron"),
WangDAT, Inc., a California corporation, and Wangtek, Inc., a California
corporation (each a "Borrower", collectively, the "Borrowers").
WHEREAS, Lender and Borrowers entered into a Loan and Security
Agreement dated as of October 5, 1994, as amended by the First Amendment to
Loan and Security Agreement dated as of October 17, 1994 and the Second
Amendment to Loan and Security Agreement dated as of December 27, 1994
(collectively, the "Loan Agreement") pursuant to which Lender is making certain
loans or other credit facilities available to Borrowers upon the terms and
conditions set forth in the Loan Agreement and the related Ancillary
Agreements; and
WHEREAS, the obligations of Borrower to Lender have been
guaranteed by, among others, Rexon Singapore Pte Ltd. ("RSP") pursuant to a
Guarantee dated as of October 5, 1994 made by RSP in favor of Lender and
secured by a first priority lien in all assets of RSP pursuant to a Debenture
dated as of October 24, 1994 made by RSP in favor of Lender; and
WHEREAS, Borrowers have requested that Lender (a) consent to
the merger of Rexon Software into Sytron, (b) increase the letter of credit
subline facility, (c) modify the formula for Collateral Availability to
increase the advance rate for Eligible Foreign Accounts and (d) consent to the
subordination of Lender's lien on certain third-party accounts receivable of
RSP to permit RSP to obtain a US$2,000,000 line of credit from The Hong Kong
and Shanghai Banking Corporation, Limited ("HKSBC"), Lender has agreed, subject
to the terms and conditions herein, to certain modifications and amendments to
the Loan Agreement as set forth in this Third Amendment.
NOW, THEREFORE, in consideration of the terms and conditions
herein, and of any loans or other credit facilities heretofore, now or
hereafter made to or for the benefit of Borrowers by Lender, the parties hereto
agree to the following amendments and modifications to the Loan Agreement:
1. Merger. Subject to the performance of the terms and
conditions contained in this Third Amendment, Lender consents to the merger of
Rexon Software into Sytron and hereby waives any Default arising under Section
10.2(a) of the Loan Agreement arising as a result of such merger.
13
<PAGE> 2
2. Amendments to Loan Agreement.
(a) Borrowers. As of the effective date of the Rexon
Software - Sytron merger, the definition of and each reference contained in the
Loan Agreement and each of the Ancillary Agreements to "Borrowers" shall be
amended to delete Rexon Software.
(b) Collateral Availability. The second sentence of the
second paragraph of Section 2.1 of the Loan Agreement is hereby amended and
restated in its entirety as follows:
". . . As used in this Agreement, "Collateral
Availability shall mean, and at any particular time and from time to
time, be equal to, the sum of up to eighty percent (80%) of the net
amount (after deduction of such reserves as Lender deems proper and
necessary) of Eligible Accounts plus up to SEVENTY-FIVE PERCENT (75%)
of the aggregate value of Eligible Foreign Accounts (after deduction
of such reserves as Lender deems proper and necessary), provided that
Collateral Availability as to Eligible Foreign Accounts shall not at
any time exceed TEN MILLION DOLLARS ($10,000,000.00)."
(c) Letter of Credit Subline. The first sentence of the
third paragraph of Section 2.1 of the Loan Agreement is hereby amended and
restated in its entirety as follows:
"The Revolving Loan shall include a subline letter of
credit facility to provide financial accommodations to guaranty the
reimbursement obligations of Borrowers in connection with letters of
credit issued at the request of Borrowers or to provide indemnities of
other assurances with respect thereto in an aggregate amount which
shall not at any time exceed FOUR MILLION DOLLARS ($4,000,000.00).
(d) Section 10.1(a) of the Loan Agreement is hereby
amended by adding subsection (iv) thereto as follows:
"(iv) as to Borrowers only (excluding all Guarantors) quarterly Net Profit
Before Taxes as of the end of the fiscal quarters set forth below not less
than the amount set forth opposite such period:
<TABLE>
<S> <C>
2nd qtr 1995 562,500
3rd qtr 1995 562,500
4th qtr 1995 750,000
1st qtr 1996 937,500
2nd qtr 1996 937,500
3rd qtr 1996 1,125,500
4th qtr 1996 1,125,500."
</TABLE>
3. Encumbrance of RSP Accounts Receivable. Notwithstanding
anything to the contrary set forth in the Loan Agreement or the Ancillary
Agreements and subject to the satisfaction of the Conditions Subsequent set
forth below, Lender hereby consents to the grant by RSP to HKSBC of a first
priority security interest in RSP's Accounts, up to the amount of
14
<PAGE> 3
US$2,000,000, to secure the payment and performance of a line of credit from
HKSBC to RSP in an amount not to exceed US$2,000,000.
(a) Definitions. For the purposes of this section, "Accounts"
shall mean and include all of RSP's presently existing and hereafter arising or
acquired accounts, receivables and rights of RSP to payment for goods sold or
leased or for services rendered, including, without limitation, those which are
not evidenced by instruments or chattel paper, and whether or not they have
been earned by performance; proceeds of any letters of credit on which RSP is
named as beneficiary, contract rights, chattel paper, instruments, documents,
insurance proceeds and all such obligations whatsoever owing to RSP, together
with all instruments and all documents of title representing any of the
foregoing, all rights in any merchandise of goods which any of the same may
represent, and all right, title, security and guaranties with respect to each
of the foregoing, including without limitation, any right of stoppage in
transit. "US$" shall mean the lawful currency of the United States of America.
(b) Conditions Subsequent. Lender's consent to the HKSBC loan
and its agreement to subordinate its lien in RSP's Accounts as set forth above
is conditioned upon the satisfaction of each of the following conditions or
their waiver in writing by Lender:
(i) The form and substance of the loan documents by and between RSP
and HKSBC shall be satisfactory to Lender, in the exercise of its
sole discretion, and to Lender's counsel.
(ii) Lender, HKSBC and RSP shall execute an intercreditor
agreement, in form and substance satisfactory to Lender, in the
exercise of its sole discretion, which sets forth the priorities of
Lender and HKSBC in the assets of RSP, and which contains
provisions as to the rights of Lender and HKSBC in the event of a
default under their respective credit documents or any distribution
of the assets of RSP or upon any dissolution, winding up,
liquidation, reorganization or bankruptcy of RSP.
(iii) The foregoing HKSBC loan documentation and intercreditor
agreement shall have been executed and delivered on or before
May 31, 1995.
4. Representations and Warranties. Borrowers
represent and warrant as follows:
(a) Each of the representations and warranties contained in the
Loan Agreement is hereby reaffirmed as of the date hereof, each as if set forth
herein;
(b) The execution, delivery and performance of this Third
Amendment are within Borrowers' powers, have been duly authorized by all
necessary action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restrictions binding on Borrowers;
15
<PAGE> 4
(c) This Third Amendment is a legal, valid and binding
obligation of Borrowers, enforceable against Borrowers in accordance with its
terms; and
(d) No event has occurred and is continuing or would result
from this Third Amendment which constitutes a Default under the Loan Agreement,
as amended and modified hereby.
5. Conditions. The effectiveness of this Third Amendment is
conditioned upon the full satisfaction by Borrowers of each of the following
conditions or their waiver in writing by Lender (Borrowers agree that failure
to satisfy all conditions by the dates specified shall cause Lender to rescind
any credit accomodations made hereunder in reliance on Borrowers' anticipated
satisfactory performance of said conditions):
(a) this Third Amendment and the Guarantor's Consent shall have
been executed by duly authorized signatories of the Borrowers and Guarantors
and delivered to Lender;
(b) an Agreement of Merger (Rexon Software into Sytron) shall
have been executed and delivered by Rexon Software and Sytron and a Certificate
of Merger shall have been executed by Sytron and sent for filing to the
Secretary of State of Delaware, each in form and substance acceptable to
Lender, on or before March 31, 1995;
(c) an Assignment of Copyrights and Trademarks by Rexon
Software to Sytron and an Amended and Restated Patent, Trademark & Copyright
Security Agreement by Sytron shall have been executed by the signatories
thereon and delivered to Lender on or before March 31, 1995;
(d) Rexon International Service Corp., a company doing business
in England, shall have executed and delivered a continuing guaranty and a
security agreement to collateralize its guaranty and any other document
required by Lender to effectuate the guaranty and security agreement, all in
form and substance acceptable to Lender, on or before March 31 1995;
(e) Borrowers shall pay to Lender an amendment fee in the
amount of $15,000, which fee is fully earned, due and payable as of the date of
this Third Amendment.
6. Miscellaneous. This Third Amendment shall be part of the
Loan Agreement, the terms of which are incorporated herein, and the breach of
any representation, warranty or covenant contained herein or the failure to
observe or comply with any term or agreement contained herein, shall constitute
a Default under the Loan Agreement and Lender shall be entitled to exercise all
rights and remedies it may have under the Loan Agreement and applicable law.
Borrowers agree to pay all costs, expenses and attorneys' fees incurred by
Lender in connection with the negotiation and preparation of this Third
Amendment and any other documents in connection herewith and in carrying out or
enforcing the terms of this Third Amendment. Lender is not waiving any rights
under the Loan Agreement and,
16
<PAGE> 5
except as expressly provided herein or as previously modified in a writing
signed by Lender, all of the terms, covenants, and conditions of the Loan
Agreement remain unmodified and in full force and effect. Capitalized terms
used herein and not otherwise defined shall have the same meaning as set forth
in the Loan Agreement. This Third Amendment may be executed in counterparts,
which counterparts, when so executed and delivered, shall together constitute
but one original.
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment to be effective as of the first date above written.
BORROWERS:
- ---------
REXON INCORPORATED, SYTRON CORPORATION,
a Delaware corporation a Delaware Corporation
By______________________________ By______________________________
Title___________________________ Title___________________________
REXON/TECMAR, INC., WANGTEK, INC.,
a California corporation a California corporation
By______________________________ By______________________________
Title___________________________ Title___________________________
SCIENTIFIC SOLUTIONS, INC. WANGDAT, INC.,
an Ohio corporation a California corporation
By______________________________ By______________________________
Title___________________________ Title___________________________
LENDER:
- ------
SANWA BUSINESS CREDIT CORPORATION
By_______________________________
Title____________________________
17
<PAGE> 6
GUARANTORS' CONSENT
The undersigned Guarantors hereby acknowledge and consent to the foregoing
Third Amendment and reaffirm their respective guarantys, security agreements
and other documents executed by the undersigned in connection with the Loan
Agreement and agree that all such guarantys, security agreements and documents
are in full force and of effect.
"GUARANTORS"
REXON EUROPE, INC., a
Delaware corporation
By______________________________
Title___________________________
REXON INTERNATIONAL SALES CORPORATION,
a California corporation
By______________________________
Title___________________________
REXON INTERNATIONAL SERVICE CO.,
a Delaware corporation
By______________________________
Title___________________________
18
<PAGE> 7
REXON SINGAPORE PTE LTD.,
a Singapore corporation
By______________________________
Title___________________________
REXON U.K., INC.,
a Delaware corporation
By______________________________
Title___________________________
SYTRON U.K., INC.,
a corporation
By______________________________
Title___________________________
TECMAR PUERTO RICO, INC.,
a Delaware corporation
By______________________________
Title___________________________
WANGTEK PUERTO RICO, INC.,
a Delaware corporation
By______________________________
Title___________________________
19
<PAGE> 1
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Fourth Amendment to Loan and Security Agreement ("Third
Amendment") is made as of April __, 1995 by and between SANWA BUSINESS CREDIT
CORPORATION ("Lender") and Rexon Incorporated, a Delaware corporation
("Rexon"), Rexon Software, Inc., a California corporation ("Rexon Software"),
Rexon/Tecmar, Inc., a California corporation, Scientific Solutions, Inc., an
Ohio corporation, Sytron Corporation, a Delaware corporation ("Sytron"),
WangDAT, Inc., a California corporation, and Wangtek, Inc., a California
corporation (each a "Borrower", collectively, the "Borrowers").
WHEREAS, Lender and Borrowers entered into a Loan and Security
Agreement dated as of October 5, 1994, as amended by the First Amendment to
Loan and Security Agreement dated as of October 17, 1994, the Second Amendment
to Loan and Security Agreement dated as of December 27, 1994 and the Third
Amendment to Loan and Security Agreement dated as of March 24, 1995
(collectively, the "Loan Agreement") pursuant to which Lender is making certain
loans or other credit facilities available to Borrowers upon the terms and
conditions set forth in the Loan Agreement and the related Ancillary
Agreements; and
WHEREAS, Borrowers obligations to Lender are to be guaranteed by
each of Borrowers' Affiliates; and
WHEREAS, the Loan Agreement makes reference to both Rexon
International Service Co. and Rexon International Service Corporation as a
Guarantor, however only Rexon International Service Co., a Delaware
corporation, is an existing corporation which is an Affiliate of the Borrowers;
and
WHEREAS, the parties wish to modify the Loan Agreement to eliminate
any references to Rexon International Service Corporation.
NOW, THEREFORE, in consideration of the terms and conditions
herein, and of any loans or other credit facilities heretofore, now or
hereafter made to or for the benefit of Borrowers by Lender, the parties hereto
agree to the following amendments and modifications to the Loan Agreement:
1. Amendments to Loan Agreement. All references to Rexon
International Service Corporation or Rexon International Service Corp.
contained in the Loan Agreement are hereby changed to Rexon International
Service Co.
2. Representations and Warranties. Borrowers represent and
warrant as follows:
(a) Rexon International Service Co. is a corporation duly
organized and validly existing under the laws of the State of Delaware and is a
Guarantor of Borrowers' Liabilities; Borrowers have not had and do not have an
Affiliate named Rexon International Service Corporation or Rexon International
Service Corp.
20
<PAGE> 2
(b) Each of the representations and warranties contained in the
Loan Agreement is hereby reaffirmed as of the date hereof, each as if set forth
herein;
(c) The execution, delivery and performance of this Fourth
Amendment are within Borrowers' powers, have been duly authorized by all
necessary action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restrictions binding on Borrowers;
(d) This Fourth Amendment is a legal, valid and binding
obligation of Borrowers, enforceable against Borrowers in accordance with its
terms; and
(e) No event has occurred and is continuing or would result
from this Fourth Amendment which constitutes a Default under the Loan
Agreement, as amended and modified hereby.
3. Conditions. The effectiveness of this Fourth Amendment is
conditioned upon the full satisfaction by Borrowers of each of the following
conditions on or before April 15, 1995 or their waiver in writing by Lender:
(a) this Fourth Amendment and the Guarantor's Consent shall
have been executed by duly authorized signatories of the Borrowers and
Guarantors and delivered to Lender; and
(b) Borrowers shall have delivered revised Exhibits "B" and "F"
to the Loan Agreement.
4. Miscellaneous. This Fourth Amendment shall be part of the
Loan Agreement, the terms of which are incorporated herein, and the breach of
any representation, warranty or covenant contained herein or the failure to
observe or comply with any term or agreement contained herein, shall constitute
a Default under the Loan Agreement and Lender shall be entitled to exercise all
rights and remedies it may have under the Loan Agreement and applicable law.
Borrowers agree to pay all costs, expenses and attorneys' fees incurred by
Lender in connection with the negotiation and preparation of this Fourth
Amendment and any other documents in connection herewith and in carrying out or
enforcing the terms of this Fourth Amendment. Lender is not waiving any rights
under the Loan Agreement and, except as expressly provided herein or as
previously modified in a writing signed by Lender, all of the terms, covenants,
and conditions of the Loan Agreement remain unmodified and in full force and
effect. Capitalized terms used herein and not otherwise defined shall have the
same meaning as set forth in the Loan Agreement. This Fourth Amendment may be
executed in counterparts, which counterparts, when so executed and delivered,
shall together constitute but one original.
21
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Fourth
Amendment to be effective as of the first date above written.
BORROWERS:
REXON INCORPORATED, SCIENTIFIC SOLUTIONS, INC.
a Delaware corporation an Ohio corporation
By______________________________ By______________________________
Title___________________________ Title___________________________
REXON/TECMAR, INC., SYTRON CORPORATION,
a California corporation a Delaware Corporation
By______________________________ By______________________________
Title___________________________ Title___________________________
WANGTEK, INC., WANGDAT, INC.,
a California corporation a California corporation
By______________________________ By______________________________
Title___________________________ Title___________________________
LENDER:
SANWA BUSINESS CREDIT CORPORATION
By_______________________________
Title____________________________
22
<PAGE> 4
GUARANTORS' CONSENT
The undersigned Guarantors hereby acknowledge and consent to the foregoing
Fourth Amendment and reaffirm their respective guarantys, security agreements
and other documents executed by the undersigned in connection with the Loan
Agreement and agree that all such guarantys, security agreements and documents
are in full force and of effect.
"GUARANTORS"
REXON EUROPE, INC., a
Delaware corporation
By______________________________
Title___________________________
REXON INTERNATIONAL SALES CORPORATION,
a California corporation
By______________________________
Title___________________________
REXON INTERNATIONAL SERVICE CO.,
a Delaware corporation
By______________________________
Title___________________________
REXON SINGAPORE PTE LTD.,
a Singapore corporation
By______________________________
Title___________________________
23
<PAGE> 5
REXON U.K., INC.,
a Delaware corporation
By______________________________
Title___________________________
SYTRON U.K., INC.,
a corporation
By______________________________
Title___________________________
TECMAR PUERTO RICO, INC.,
a Delaware corporation
By______________________________
Title___________________________
WANGTEK PUERTO RICO, INC.,
a Delaware corporation
By______________________________
Title___________________________
24
<PAGE> 6
EXHIBIT "B"
BORROWER'S AND ACTIVE GUARANTOR'S LOCATIONS
AS OF 3/31/95
<TABLE>
<CAPTION>
Inventory Equipment Status
Company Locations Locations Notes
- ------- --------- --------- -----
<S> <C> <C> <C>
Rexon Incorporated None California
Florida
Wangtek, Inc. Puerto Rico Minnesota
Ohio Florida
Texas
Massachusetts
Colorado
Ohio
WangDAT, Inc. Ohio Colorado
Ohio
Rexon International None None DISC Corporation
Sales Corporation
Wangtek Puerto Puerto Rico Puerto Rico
Rico, Inc.
Rexon Singapore Singapore Singapore
Pte. Ltd.
Rexon Europe, Inc. None U.K.
Rexon International U.K. U.K.
Service Co.
Rexon Software California California Merged into
Sytron Corporation
3/31/95
Scientific Solution Ohio Ohio
Inc.
Rexon/Tecmar, Inc. Ohio Ohio
California
Texas
Illinois
Florida
New Jersey
Sytron Corporation Massachusetts Massachusetts
California
</TABLE>
25
<PAGE> 7
EXHIBIT "F"
BORROWER'S AFFILIATES
As of 3/31/95
<TABLE>
<CAPTION>
State of Incorporation Transacting Business In
---------------------- -----------------------
<S> <C> <C>
Wangtek Puerto Rico, Inc. Delaware Puerto Rico
Rexon International Delaware U.K.
Service Co.
Rexon Europe, Inc. Delaware U.K.
Rexon Software, Inc. California (Merged into Sytron
Corporation 3/31/95)
WangDAT, Inc. California California
Rexon Incorporated Delaware California
Wangtek Inc. California Ohio
Rexon/Tecmar, Inc. California Ohio
Sytron Corporation Delaware Massachusetts and
California
Rexon Singapore Pte Ltd. Singapore Singapore
Rexon Business Machines Califonria (Name changed to Rexon
Culver City Corp.)
Rexon International California (Merged into Rexon
Corporation Incorporated 11/29/94)
Scientific Solutions, Inc. Ohio Ohio
Tecmar International Inc. Delaware (Declared Void 3/1/91)
Tecmar Puerto Rico Inc. Delaware (Declared Void 3/1/94)
Sytron U.K. Inc. N/A Inactive
Rexon U.K., Inc. Delaware Inactive
Rexon Culver City Corp. California (Merged into Rexon
Incorporated 11/29/94)
Rexon International Sales California DISC Corporation
Corporation
</TABLE>
26
<PAGE> 8
<TABLE>
<CAPTION>
Freight Forwarders:
- ------------------
<S> <C> <C>
Rexon Amsterdam Amsterdam None
c/o LEP International BV
Distribution Dept.
2123 Mr. Hoofdorf,
Zandsten 28
The Netherlands
011-31-20-653-1647 phone
011-31-20-653-1794 fax
</TABLE>
27
<PAGE> 1
EXHIBIT 11.1
REXON INCORPORATED AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Fiscal Periods Ended April 2, 1995 and April 3, 1994
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
-------------------- ---------------------
April 2, April 3, April 2, April 3,
1995 1994 1995 1994
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Net income $ 723 $ 35 $ 1,054 $ 38
Less Preferred Stock dividends 60 59 120 85
----- ------ ------- ------
Net income (loss) attributable to Common Stock
used to compute primary earnings per share 663 (24) 934 (47)
===== ====== ======= ======
Add interest on convertible subordinated notes payable
(net of taxes at the Company's effective
tax rate of 20%) 0 0 0 0
Net income (loss) attributable to Common Stock used
to compute fully diluted earnings per share. $ 663 $ (24) $ 934 $ (47)
Primary earnings per share:
Average number of shares of:
Common Stock and Common Stock
Equivalents outstanding: 10,522 9,816 10,408 9,673
Primary earnings per share $ .06 $ .00 $ .09 $ .00
======= ======= ======= ======
Fully diluted earnings per share:
Weighted average number of Common
shares outstanding: 10,522 9,816 10,408 9,673
Dilutive effect of stock options
after application of treasury stock method -0- -0- -0- -0-
Dilutive effect of convertible subordinated
notes payable and convertible preferred stock - 0- -0- -0- -0-
Number of shares used to compute fully
diluted earnings per share 10,522 9,816 10,408 9,673
Fully diluted earnings per share $ .06 $ .00 $ .09 $ .00
======= ====== ======= ======
</TABLE>
28
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-START> OCT-03-1994
<PERIOD-END> APR-02-1995
<CASH> 1,119
<SECURITIES> 0
<RECEIVABLES> 39,916
<ALLOWANCES> 1,900
<INVENTORY> 28,924
<CURRENT-ASSETS> 72,591
<PP&E> 39,443
<DEPRECIATION> 26,921
<TOTAL-ASSETS> 107,105
<CURRENT-LIABILITIES> 40,475
<BONDS> 0
<COMMON> 103
0
4,800
<OTHER-SE> 51,401
<TOTAL-LIABILITY-AND-EQUITY> 107,105
<SALES> 101,375
<TOTAL-REVENUES> 101,375
<CGS> 75,948
<TOTAL-COSTS> 75,948
<OTHER-EXPENSES> 24,313
<LOSS-PROVISION> 632
<INTEREST-EXPENSE> 1,032
<INCOME-PRETAX> 1,114
<INCOME-TAX> 60
<INCOME-CONTINUING> 1,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,054
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
