<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of the earliest event reported): June 30, 1998
Commission File Number 0-14973
UNICO, INC.
--------------------------------------------------------------------
(Exact name of registrant as specified in charter)
New Mexico 85-0270072
--------------------------------------------------------------------
(State or other jurisdiction of IRS Employer
incorporation or organization) Identification No.
2925 Bayview Drive, Fremont, California 94538
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 510/770-3990
N/A
---------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The Registrant issued a majority of its stock to the old owners of Starlicon
International Corporation (Starlicon) on June 30, 1998. Since the Registrant
will account for this transaction by reverse acquisition accounting, it
believes it is a New Accounting Entity and has made an asset acquisition as
contemplated by Item 2 of Form 8-K.
The Registrant will account for its investment in Intermountain Refining Co.
by the cost method. Due to the terms of the Novation Agreement executed on
June 26, 1998 (exhibit 2.2 filed with Form 8-K on July 15, 1998), the New
Accounting Entity does not believe it has succeeded to the Registrant's former
business.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
In conformance to Item 7(a and b), the Registrant is filing audited financial
statements of the acquired business, Starlicon International Corporation
(Starlicon), as an amendment to the Form 8-K, originally filed on June 30,
1998.
As the acquired company, Starlicon was incorporated within two years of the
June 30, 1998 acquisition, and as Starlicon acquired significant assets of
Relialogic Technology Corporation (Relialogic), Starlicon may be considered a
successor company to Relialogic. In conformance to APB 16 and Regulation S-X,
Section 210.3-05, the audited financial statements of Relialogic are also
filed and included herewith. The disclosure of information on Relialogic or
its parent company Osicom Technologies does not signify any current
relationship nor affiliation with the Registrant.
While Item 7(b) of Form 8-K requires the presentation of pro-forma financial
information, New Accounting Entity has taken the position that pro-forma
consolidation of Starlicon financial statements with the Unico financial
statements for fiscal year ended February 28, 1998 may not result in a fair
presentation due to the terms of the Novation Agreement. Nonetheless Note 18
does provide such a pro-forma; however, it should be viewed in light of New
Accounting Entity's position.
The Registrant will provide further disclosure in a new Form 10-K which it
intends to file on or before October 15, 1998.
Exhibit 27.1 -- Audited financial statements of Starlicon Page 3
International Corporation (Starlicon)
Regulation S-K item 2.
Exhibit 27.1 -- Audited financial statements of Relialogic Page 19
Technology Corporation (Relialogic)
Regulation S-K item 2.
1
<PAGE>
Exhibit 99.1 -- Letter to Mr. Roger Schwall; Assistant Director; Page 29
Office 4; Division of Corporation Finance;
U.S. Securities and Exchange Commission.
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.
UNICO, INC.
Date: September 25, 1998 BY: /s/ Fynna Bernardez
NAME: FYNNA BERNARDEZ
TITLE: Secretary
2
<PAGE>
EXHIBIT 27.1 - STARLICON INTERNATIONAL CORPORATION
AUDITED FINANCIAL STATEMENTS AND PRO-FORMAS
STARLICON INTERNATIONAL CORPORATION
FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1998
Weinbaum & Yalamanchi, CPAs
4929 Wilshire Blvd, Suite 540
Los Angeles, CA 90010
Tel: 323-931-4827
Fax: 323-931-6247
3
<PAGE>
STARLICON INTERNATIONAL CORPORATION
FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1998
TABLE OF CONTENTS
Independent Accountants' Report 5
Balance Sheets 6-7
Statements of Operations and Retained Earnings
(Accumulated Deficit) 8
Statements of Cash Flows 9
Notes to Financial Statements 10-18
4
<PAGE>
Independent Accountants' Report
The Stockholders
Starlicon International Corporation
We audited the accompanying balance sheets of Starlicon International
Corporation (Starlicon) as of June 30, 1997 and 1998 and the related
statements of operations and retained earnings (accumulated deficit) and cash
flows for the nine months and year then ended. These financial statements are
the responsibility of Starlicon's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance that the financial statements are free of material
misstatement. An audit also 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 our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly in all material respects, Starlicon's financial position as of June 30,
1997 and 1998 and the results of its operations and cash flows for the nine
months and year then ended in conformity with generally accepted accounting
principles.
/s/ Weinbaum & Yalamanchi
Weinbaum & Yalamanchi
Los Angeles, California
September 3, 1998
5
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Balance Sheets
June 30, 1997 and 1998
ASSETS
(Dollars In Thousands)
1997 1998
Current Assets
Cash $ $ 30
Accounts receivable, less $30 and $84
allowances for doubtful accounts and
returns, allowances and discounts in 1998 721 1,034
Inventories (Note 12) 13 434
Prepaid expenses 9 4
------- -------
Total current assets 743 1,502
------- -------
Property and Equipment
Furniture and equipment 10 38
Leasehold improvements 9 25
------- -------
19 63
Accumulated depreciation 1 11
------- -------
18 52
------- -------
Trademark, less $24
accumulated amortization 106
Due from Luna 14
Due from Hwang 17
Hwang note (Note 6) 116
------- -------
253
------- -------
$ 761 $ 1,807
========= =========
The accompanying notes are an integral
part of these financial statements.
6
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Balance Sheets
June 30, 1997 and 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars In Thousands)
1997 1998
Current Liabilities
Bank overdrafts $ 48 $ 211
Accounts payable 109 433
Deferred revenues (Note 5) 210
Due RTC (Note 5) 32
Due Yin (Note 13) 100
Accrued payroll 25
--------- -------
Total current liabilities 157 1,011
--------- -------
Commitments and contingencies
(Notes 5, 8, 10 and 11)
Stockholders' Equity (Notes 6, 7 and 9)
Common stock, no par value, 1,000,000
shares authorized, 1,000 shares issued 600 600
Additional paid-in-capital 728
Retained earnings (Accumulated deficit) 4 (532)
--------- -------
Total stockholders' equity 604 796
--------- -------
$ 761 $ 1,807
========= =======
The accompanying notes are an integral
part of these financial statements.
7
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Statements of Operations and Retained Earnings
(Accumulated Deficit)
Nine Months Ended June 30, 1997 and Year Ended June 30, 1998
(Dollars In Thousands)
1997 1998
Net sales (Note 4) $ 15,058 $ 24,638
Cost of goods sold (Note 12) 14,844 24,229
--------- ---------
Gross profit 214 409
--------- ---------
Salaries and wages 128 498
Rent 17 50
Trademark amortization (Note 5) 24
Other expenses 67 381
--------- ---------
212 953
--------- ---------
Operating income (loss) 2 (544)
Interest income (Note 6) 2 8
--------- ---------
Net income (loss) (Note 16) 4 (536)
Retained earnings-beginning of period Nil 4
--------- ---------
Retained earnings (Accumulated deficit)
end of period $ 4 $ (532)
========= =========
The accompanying notes are an integral
part of these financial statements.
8
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Statements of Cash Flows
Nine Months Ended June 30, 1997 and Year Ended June 30, 1998
(Dollars In Thousands)
1997 1998
Operating cash flows (Notes 5 and 9)
Net income (loss) $ 4 $ (536)
Depreciation and amortization 1 30
Receivables change (721) (313)
Inventory change (13) (70)
Prepaid expenses change (9) 66
Accounts payable change 109 (28)
Deferred revenues change 65
Accrued payroll change 25
---------- ----------
Cash used by operations (629) (761)
---------- ----------
Investing cash flows (Notes 5 and 9)
Property acquisitions 19 1
Luna advance 14
Other assets 4
Paradise cash acquired (42)
---------- ----------
Cash used (provided) by investing activities 19 (23)
---------- ----------
Financing cash flows (Notes 5, 6, 7 and 9)
Common stock issued 600 0
RTC receivables collected 588
Yin advance 100
Shareholders' capital contribution 40
Reduction in due RTC (123)
Bank overdrafts 48 163
---------- ----------
Cash provided by financing activities 648 768
---------- ----------
Change in cash Nil 30
Cash - beginning of period Nil Nil
---------- ----------
Cash - end of period $ Nil $ 30
========== ==========
The accompanying notes are an integral
part of these financial statements.
9
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements
June 30, 1997 and 1998
NOTE 1. Accounting Policies and Operations
Basis of Presentation - The financial statements include the assets and
liabilities of Starlicon International Corporation (Starlicon), a California
Corporation. Starlicon was incorporated on October 3, 1996. These financial
statements also include Paradise's assets, liabilities and operations (Note 5)
from August 1, 1997. All dollar amounts are in thousands. The financial
statements were prepared to meet the Securities and Exchange Commission's Form
8-K rules.
Business Description - Starlicon markets computer memory chips, central
processing units and other basic computer components. The company also
markets a proprietary line of computer peripherals under the Paradise brand
name. Some of the products marketed include PC video conferencing products,
video adapter cards, multimedia products and modems. Starlicon's customer
base includes private label computer manufacturers and major technology
distributors, such as Tech Data, Ingram Micro, D&H, Almo, Comark and SED.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation and amortization are recorded by the straight-line method over
the related assets' estimated useful lives. Capitalized costs carrying value
is reviewed annually.
Accounts Receivable - Starlicon records an allowance for doubtful accounts to
reduce receivables to net realizable value. Starlicon does not require
collateral from its customers. Starlicon's customers include wholesalers and
value added retailers. Starlicon's four largest June 30, 1998 customer
receivables and July and August 1998 cash collections were:
Customer Balance Collections
July 1998 August 1998
A $395 $395 $0
B 239 163 76
C 173 142 22
D 105 29 1
Revenue Recognition - Revenue is recognized when products are shipped.
Starlicon records an allowance for returns, allowances and discounts when
sales are recorded.
Inventories - Inventories are valued at the lower of cost, first-in, first-out
method, or market.
Trademark - The trademark is amortized over five years by the straight-line
method. Its carrying value is reviewed annually.
Advertising - Starlicon expenses advertising as incurred.
10
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements (Continued)
June 30, 1997 and 1998
NOTE 1. Accounting Policies and Operations (continued)
Accounting Estimates - Preparing financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the financial statement
date and the reported amounts of revenue and expense during the reported
periods. Actual results could differ from those estimates.
Fair Value of Financial Instruments - Accounts receivable, cash, accounts
payable and accrued expenses carrying value approximates fair value because of
the short-term maturity of those instruments. The Hwang note (Note 6) is
believed to be at fair value.
Income Taxes - Starlicon will file a consolidated tax return for 1998 with
Starlicon Group, Inc. (SGI), Starlicon's holding company (Note 9). The 1998
tax disclosures were computed as if Starlicon filed a separate company tax
return.
Cash - Cash includes short-term instruments with original maturities of 90
days or less.
Service Contracts - Service contracts are amortized by the straight- line
method over the related contract term.
NOTE 2. Relialogic Technology Inc.(RTC) Advance
On June 9, 1997 RTC advanced Starlicon $50, which Starlicon repaid on June 18,
1997.
NOTE 3. Supplemental Cash Flow Disclosures
Interest paid and received and taxes paid were not material for the periods.
The statement of cash flows excludes the effects of Starlicon's acquisition of
Paradise (Note 5)
NOTE 4. Sales and Expenses
Sales and expenses included these amounts by period:
1997 1998
Sales to customer A $ 2,479 $ 7,313
Sales to customer B 1,262 2,402
Sales to customer C 1,258 1,688
Sales to customer D 1,196 2,167
Sales to Paradise 393
Purchases from Luna International, Inc. (Luna) 323
11
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements (Continued)
June 30, 1997 and 1998
NOTE 5. Paradise Acquisition
On July 31, 1997 Starlicon purchased the business and certain assets
comprising the Paradise Multimedia (Paradise) operations of RTC, a subsidiary
of Osicom Technologies, Inc.(Osicom). John Hwang (Hwang), a Starlicon
stockholder and officer resigned his position as an RTC officer on June 30,
1998. The assets acquired and related liabilities assumed were:
Cash $ 42
Inventory 351
Prepaid expenses 19
Hwang note (Note 6) 109
Other assets 58
Property and equipment 43
Trademark 130
-------
752
Less: Accounts payable (452)
Deferred revenues (145)
-------
$ 155
=======
The $155 sale price was paid to RTC as follows: $100 on February 23, 1998, and
$25 on April 3, 1998. The balance will be paid at $20 per month. Starlicon
believes RTC improperly computed its deferred revenues and that it owes RTC
$70 less than RTC currently believes it is owed. Following the acquisition,
Starlicon collected $588 of RTC's July 31, 1997 receivables (Note 9).
NOTE 6. Hwang Note and Shareholders' Capital Contribution
This amount is Hwang's $100 demand note to RTC dated February 29, 1996 plus
interest at 8%. Starlicon recorded $7 in interest income from this note in
1998. On March 30, 1998 Hwang and other shareholders contributed $40 to
Starlicon's capital.
NOTE 7. Stockholders' Equity
Starlicon issued 1,000 shares of stock for $600. In November 1997 Luna, a
company controlled by Hwang, contributed $100 of Starlicon's accounts payable
to Starlicon's equity. As this transaction neither provided nor used cash it
was excluded from the statement of cash flows.
12
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements (Continued)
June 30, 1997 and 1998
NOTE 8. Operating Leases
Starlicon leased its facilities on a month-to-month basis from Meret
Communications, Inc., an Osicom subsidiary. At June 30, 1998, Starlicon's
operating lease commitments were $10 through June 30, 1999, for a vehicle.
NOTE 9. Starlicon Group Inc. (SGI)
In November 1997, Starlicon's stockholders formed SGI as a holding company
for Starlicon's common stock. SGI assumed $588 of Starlicon's RTC debt as a
capital contribution to Starlicon. Since the transaction neither provided nor
used cash it was excluded from the statement of cash flows.
NOTE 10. Purchase of Starlicon
On June 30, 1998 Unico, Inc. (Unico) purchased Starlicon from SGI for
5,476,190 shares of Unico common stock and 5,476 shares of Unico convertible
preferred stock, convertible into 5,476,000 shares of Unico common stock.
Unico also issued warrants to two of its shareholders to purchase a total of
150,000 shares of Unico common at $1.40 per share expiring on December 1,
2006. Before the acquisition 1,125,609 shares of Unico common stock were
outstanding.
Since Starlicon's shareholders own the majority of Unico's shares, this
transaction will be accounted for as if Starlicon purchased Unico, or by
reverse acquisition accounting. Despite the transaction being a stock for
stock swap it will be recorded using purchase accounting since Paradise was
not an autonomous entity within two years before combination.
On June 30, 1998 Unico dismissed an action brought in May 1998 against SGI and
Starlicon. Starlicon's recorded cost for Unico's purchase was $3,163 which
consisted of $1,969 for 1,125,609 shares of Unico common issued to old Unico
shareholders valued at $1.75 per share, $958 for 547,169 shares issued to a
Starlicon shareholder, plus $236 which was the estimated value of the warrants
issued assuming a risk-free interest rate of 5.5%, 0% dividend, 100%
volatility and an 8 year, 5 month life.
13
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements (Continued)
June 30, 1997 and 1998
NOTE 11. Subsequent Event
On August 1, 1998 Unico leased premises which Starlicon moved into. The lease
expires July 31, 2003 and has escalation provisions for operating expenses.
Minimum payments due under the lease are as follows by year ending June 30:
1999 $ 131
2000 146
2001 150
2002 154
2003 159
2004 13
-------
$ 753
=======
NOTE 12. Inventory
On June 30, 1998 Starlicon recorded a $15 reserve for certain items it
acquired in the Paradise (Note 5) acquisition to reduce their carrying value
to current market value. It carries 75,000 integrated circuits acquired in
the Paradise acquisition at $179 which it believes it will use in the normal
course of business. On June 30, 1998 Starlicon recorded a $16 inventory
valuation reserve for other items.
NOTE 13. Chan Pui Yin (Yin) Advance
On June 30, 1998 Yin advanced Starlicon $100 intending to buy Starlicon stock.
Starlicon repaid the $100 on July 9, 1998 after deciding not to consummate the
transaction.
NOTE 14. Name Change
On August 5, 1998 Starlicon changed its name to Paradise Innovations, Inc.
NOTE 15. Segment Information
During fiscal 1997 Starlicon engaged in one business segment, distributing
computer hardware. Effective August 1, 1997 with the Paradise acquisition
(Note 5), Starlicon began distributing proprietary products and operating in
two segments. Starlicon is organized by product. At June 30, 1998 $207 of
Starlicon's inventory was located in Asia.
14
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements (Continued)
June 30, 1997 and 1998
NOTE 15. Segment Information (continued)
Segment assets were as follows:
Distribution Proprietary Eliminations Total
Products
$1,030 $893 $104 $1,819
Segment operating results were as follows:
Distri- Proprietary Elimi- Total
bution Products nations
------- ----------- ------ --------
Revenues $23,310 $ 1,356 $ 28 $24,638
Interest income 1 7 8
Depreciation 2 4 6
Amortization 0 24 24
Operating loss (94) (450) (544)
NOTE 16. Income Taxes
A reconciliation of Starlicon's 1998 tax provision to that which would have
been recorded at the applicable federal rate is:
Loss as recorded $ 536
Applicable rate 35 %
---------
Computed tax benefit 188
Tax benefit not recorded (188)
---------
Tax provision $ Nil
=========
At June 30, 1998 Starlicon had a net operating loss carryover (NOL) of $501
expiring 2013, the $190 benefits of which were not recorded in the financial
statements due to uncertainty as to their realizability. The only material
item giving rise to differences between the book and tax basis of Starlicon's
assets is the inventory valuation reserve.
NOTE 17. Pro Forma Financial Information (Unaudited)
The following pro forma financial information presents the effects of the
Paradise acquisition as if it occurred on June 30, 1997. The pro forma
financial information is not necessarily indicative of the results of
15
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements (Continued)
June 30, 1997 and 1998
NOTE 17. Pro Forma Financial Information (Unaudited, continued)
operations and financial position which will be attained in the future. The
pro forma information should be read in conjunction with the historical
financial statements of Starlicon as reported on Form 8-K for nine months and
the year ended June 30, 1997 and 1998.
Starlicon International Corporation.
Pro Forma Condensed Balance Sheet
June 30, 1997
Starlicon
before
Assets acquisition Paradise Pro forma
----------- --------- ---------
Cash $ 42 $ 42
Accounts receivable $ 721 721
Inventories 13 351 364
Property and equipment
-net 18 43 61
Trademark 130 130
Hwang note 109 109
Other assets 9 77 86
---------------------------------------------
$ 761 $ 752 $ 1,513
=============================================
Liabilities and
Stockholders' equity
Bank overdraft $ 48 $ $ 48
Accounts payable 109 452 561
Acquisition liability 155 155
Deferred revenues 145 145
---------------------------------------------
Total liabilities 157 752 909
---------------------------------------------
Common stock 600 600
Retained earnings 4 4
---------------------------------------------
Total stockholders'
equity 604 604
---------------------------------------------
$ 761 $ 752 $ 1,513
=============================================
16
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements (Continued)
June 30, 1997 and 1998
NOTE 17. Pro Forma Financial Information (Unaudited, continued)
These pro forma statements of operations presents the effects of the Paradise
acquisition as if it occurred on October 3, 1996.
Starlicon
Before Pro forma
Acquisition Paradise adjustments Consolidated
----------- ---------- ----------- ------------
Revenues $ 15,058 $ 2,841 $ $ 17,899
Cost of sales 14,844 2,368 17,212
----------- ---------- ----------- ------------
Gross profit 214 473 687
Operating expenses 212 742 (267)(a) 687
----------- ---------- ----------- ------------
Operating income
(loss) 2 (269) 267 0
Other income
(charges) 2 (19)(b) (17)
----------- ---------- ----------- -------------
Net income (loss) $ 4 $ (269) $ 248 $ (17)
=========== ========== =========== =============
(a) To reverse goodwill amortization and writeoff.
(b) To record interest on acquisition indebtedness at 11%.
NOTE 18. Unico Pro-Forma (Unaudited)
This balance sheet pro-forma presents the effects of Unico's acquisition of
Starlicon described in Note 10. The historical statement of operations in
Starlicon's financial statements (page 8) is the same as its pro-forma
statement of operations as Starlicon will account for its investment in Unico
using the cost method. The cost method was selected since Starlicon's old
stockholders cannot use 'old' Unico's assets and have no control over its
operations. Under this method, the historical and the pro-forma statements of
operations are identical. This footnote is provided in response to Item 2 of
Form 8-K
17
<PAGE>
STARLICON INTERNATIONAL CORPORATION
Notes To Financial Statements (Continued)
June 30, 1997 and 1998
NOTE 18. Unico Pro-Forma (Unaudited, continued)
Unico, Inc.
Pro-Forma Condensed Balance Sheet
June 30, 1998
Starlicon
before Old New
Assets acquisition Unico Unico
----------- ------ -------
Cash $ 30 $ 30
Receivables 1,034 1,034
Inventories 434 434
Property & equipment 52 52
Other assets 257 257
Investment $ 3,163 3,163
---------- -------- --------
$ 1,807 $ 3,163 $ 4,970
========== ======== ========
Liabilities and
Stockholders'
Equity
Bank overdraft $ 211 $ 211
Accounts Payable 433 433
Deferred Revenue 210 210
Due RTC 32 32
Due Yin 100 100
Accrued payroll 25 25
---------- -------- --------
Total Liabilities 1,011 1,011
---------- -------- --------
Stockholders' Equity 796 $ 3,163 3,959
---------- -------- --------
$ 1,807 $ 3,163 $ 4,970
========== ======== ========
18
<PAGE>
EXHIBIT 27.1 - RELIALOGIC TECHNOLOGY CORPORATION
AUDITED FINANCIAL STATEMENTS AND PRO-FORMAS
RELIALOGIC TECHNOLOGY CORPORATION
FINANCIAL STATEMENTS
JULY 31, 1997
Weinbaum & Yalamanchi, CPAs
4929 Wilshire Blvd, Suite 540
Los Angeles, CA 90010
Tel: 323-931-4827
Fax: 323-931-6247
19
<PAGE>
RELIALOGIC TECHNOLOGY CORPORATION
FINANCIAL STATEMENTS
JULY 31, 1997
TABLE OF CONTENTS
Independent Accountants' Report 21
Balance Sheet 22-23
Statement of Operations and Accumulated Deficit 24
Statement of Cash Flows 25
Notes to Financial Statements 26-28
20
<PAGE>
Independent Accountants' Report
Starlicon International Corporation
We audited the accompanying balance sheet of Relialogic Technology
Corporation (RTC) as of July 31, 1997 and the related statements of operations
and accumulated deficit and cash flows for the ten months then ended. These
financial statements are the responsibility of RTC's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance that the financial statements are free of material
misstatement. An audit also 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 our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly in all material respects, RTC's financial position as of July 31, 1997
and the results of its operations and cash flows for the ten months then ended
in conformity with generally accepted accounting principles.
/s/ Weinbaum & Yalamanchi
Weinbaum & Yalamanchi
Los Angeles, California
September 3, 1998
21
<PAGE>
RELIALOGIC TECHNOLOGY CORPORATION
Balance Sheet
July 31, 1997
ASSETS
Current Assets
Cash $ 41,689
Accounts receivable less $30,000 allowance for
doubtful accounts 588,494
Inventory 351,390
Due from officers 17,163
Prepaid expenses 18,872
-----------
Total current assets 1,017,608
-----------
Property and Equipment
Equipment 49,138
Leasehold improvements 20,092
-----------
69,230
Accumulated depreciation and amortization 25,986
-----------
43,244
-----------
Other receivables 32,502
Hwang note (Note 8) 109,444
Trademark net of $20,000 in accumulated
amortization (Note 11) 130,000
-----------
271,946
-----------
$1,332,798
===========
The accompanying notes are an integral
part of these financial statements.
22
<PAGE>
RELIALOGIC TECHNOLOGY CORPORATION
Balance Sheet
July 31, 1997
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 452,326
Due Osicom (Note 2 and 3) 125,245
Due others 8,775
Deferred revenue (Note 12) 145,000
-----------
Total current liabilities 731,346
-----------
Commitments and contingencies (Note 7)
Stockholder's Equity (Note 3)
Common stock, no par value
1,000,shares authorized, 1,000 issued 6,189
Additional paid-in-capital 944,044
Accumulated deficit (348,781)
-----------
Total stockholder's equity 601,452
-----------
$1,332,798
===========
The accompanying notes are an integral
part of these financial statements.
23
<PAGE>
RELIALOGIC TECHNOLOGY CORPORATION
Statement of Operations and Accumulated Deficit
Ten Months Ended July 31, 1997
Net sales $2,840,714
Cost of goods sold 2,230,347
-----------
Gross margin 610,367
-----------
Expenses
Professional fees 39,333
Salaries and wages 172,222
Travel and entertainment 110,340
Depreciation and amortization (Note 10) 298,662
Telephone 27,594
Other (Note 5) 93,815
-----------
741,966
-----------
Net loss 131,599
Accumulated deficit-beginning of period 217,182
-----------
Accumulated deficit-end of period $ 348,781
===========
The accompanying notes are an integral
part of these financial statements.
24
<PAGE>
RELIALOGIC TECHNOLOGY CORPORATION
Statement of Cash Flows
Ten Months Ended July 31, 1997
Operating cash flows
Net loss $(131,599)
Adjustments to reconcile net loss
to cash provided by operations
Depreciation and amortization 298,662
Changes in operating assets
Accounts receivable (72,157)
Accounts payable 67,523
Inventory (270,962)
Prepaid expenses (12,572)
Accrued expenses (8,108)
Deferred revenue 145,000
----------
Cash provided by operations 15,787
----------
Investing cash flows
Property acquisitions 30,887
Trademark purchase 150,000
Other assets (41,554)
----------
Cash used by investing activities 139,333
----------
Financing cash flows
Osicom advances (Note 2) 125,245
----------
Cash provided by financing activities (Note 3) 125,245
----------
Increase in cash 1,699
Cash - beginning of period 39,990
----------
Cash - end of period $ 41,689
==========
The accompanying notes are an integral
part of these financial statements.
25
<PAGE>
RELIALOGIC TECHNOLOGY CORPORATION
Notes To Financial Statements
July 31, 1997
NOTE 1. Accounting Policies and Operations
Basis of Presentation - The financial statements include the assets and
liabilities of Relialogic Technology Corporation (RTC), a California
Corporation. RTC is a wholly-owned subsidiary of Osicom Technologies,
Inc.(Osicom).
Business Description - RTC designs and manufactures add-on products for the
multimedia computer marketplace and distributes computer products made by
other manufacturers.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation and amortization are recorded by the straight-line method over
the related assets estimated useful lives.
Accounts Receivable - RTC provides an allowance for doubtful accounts to
reduce receivables to net realizable value. RTC does not require collateral
from its large customers.
Revenue Recognition - Revenue is recognized when products are shipped.
Accounting Estimates - Preparing financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the financial statement
date and the reported amounts of revenue and expense during the reported
periods. Actual results could differ from those estimates.
Fair Value of Financial Instruments - Accounts receivable, cash, accounts
payable and accrued expenses carrying value approximates fair value because of
the short-term maturity of those instruments. In regards to the $125,245 due
to Osicom, its fair value is less than its recorded values as it is
non-interest bearing.
Cash - Cash includes short-term instruments with original maturities of 90
days or less.
NOTE 2. Osicom Advances
Osicom advanced RTC funds during the period on a non-interest bearing basis.
NOTE 3. Supplemental Cash Flow Disclosures
Interest income and expense and taxes paid were not material.
26
<PAGE>
RELIALOGIC TECHNOLOGY CORPORATION
Notes To Financial Statements (continued)
July 31, 1997
NOTE 3. Supplemental Cash Flow Disclosures (continued)
On July 31, 1997 Osicom assumed $334,600 RTC owed BWA, Inc. This resulted in
a net amount due Osicom of 125,245. As this transaction neither provided nor
used cash, it was excluded from the statement of cash flows. The Hwang note
transfer (Note 8) was also excluded from the statement of cash flows.
NOTE 4. Sales and Expense Information
Sales and expenses included these amounts:
Sales to customer A $ 142,000
Purchases from Starlicon 393,000
Purchases from Uni Precision (Uni) 645,000
Purchases from Osicom 299,000
Uni is an Osicom subsidary.
NOTE 5. Operating Leases and Management Fee
Rent expense for RTC's Fremont, California office was $18,368. RTC leased
this facility on a month-to-month basis from an Osicom subsidiary. Osicom
charged RTC a $15,000 management fee during the period.
NOTE 6. Income Taxes
As RTC has had losses from inception, it did not record an asset for the
estimated value of net operating loss carryforwards as there is no assurance
of their realization.
NOTE 7. Sale of Paradise
On August 1, 1997 RTC sold certain assets comprising its Paradise Multimedia
(Paradise) operations, to Starlicon International Corporation (Starlicon). For
accounting purposes, RTC gave effect to this sale on August 1, 1997. The
effects of this transaction on RTC's balance sheet were:
As Reported Assets Sold As Adjusted
Cash $ 41,689 $ 41,689 Nil
Accounts receivable 588,494 $588,494
Inventory 351,390 351,390 Nil
Prepaid expenses 18,872 18,872 Nil
Property and equipment 43,244 43,244 Nil
Trademark 130,000 130,000 Nil
Hwang note 109,444 109,444 Nil
Starlicon note (155,423) 155,423
Other assets 49,665 58,110 (8,445)
----------- ---------- ----------
$1,332,798 $ 597,326 $ 735,472
=========== ========== ==========
27
<PAGE>
RELIALOGIC TECHNOLOGY CORPORATION
Notes To Financial Statements (continued)
July 31, 1997
NOTE 7. Sale of Paradise (continued)
As Reported Liability As Adjusted
Assumed
Accounts payable $ 452,326 $ 452,326 Nil
Due Osicom 125,245 $ 125,245
Due others 8,775 8,775
Deferred revenue 145,000 145,000 Nil
Stockholder's equity 601,452 601,452
----------- ---------- ----------
$1,332,798 $ 597,326 $ 735,472
=========== ========== ==========
Starlicon agreed to pay RTC $150,000 on October 31, 1997 and $75,423 on
December 31, 1998. To date, Starlicon has paid RTC $100,000 on February 23,
1998 and $25,000 on April 8, 1998. Starlicon believes it owes RTC $70,000
less than the agreed upon purchase price as RTC incorrectly computed its
deferred revenues.
NOTE 8. Hwang Note
On February 29, 1996 John Hwang (Hwang) an RTC officer borrowed $100,000 from
Osicom, bearing interest at 8%. On July 31, 1997 Osicom transferred this note
including accrued interest to RTC.
NOTE 9. Accounts Receivable
Subsequent to July 31, 1997 Starlicon collected RTC's July 31, 1997 accounts
receivable. In November 1997 Starlicon's shareholders formed a holding
company, Starlicon Group, Inc. (SGI). With Osicom's consent, Starlicon
transferred this $588,494 liability to SGI.
NOTE 10. Goodwill
In conjunction with Osicom's acquisition of RTC, RTC recorded $400,000 in
goodwill which was amortized over seven years. On July 31, 1997 RTC concluded
this goodwill was of no continuing value and wrote off the $219,047
unamortized balance.
NOTE 11. Trademark
On December 3, 1996 RTC purchased the Paradise Multimedia trademark from
Philips, NV for $150,000. This trademark is amortized over 60 months using
the straight-line method.
NOTE 12. Deferred Revenue
Deferred revenue arose from a service contract which Paradise agreed to
perform for RTC. It is amortized by the straight-line method over the contract
term.
28
<PAGE>
EXHIBIT 99.1
[Paradise Innovations, Inc. Stationery]
September 25, 1998
Mr. Roger Schwall
Assistant Director, Region 4
Division of Corporation Finance
U.S. Securities Exchange Commission
450 5th Street NW
Washington, DC 20549
Dear Mr. Schwall,
In accordance to our letter to you of September 15, 1998, we are filing the
audited financial statements and related pro-forma financial statements on SEC
Form 8-K/A for Starlicon International (Starlicon), which was acquired by
Unico, Inc. As explained, since Starlicon purchased assets from Relialogic
Technology Corporation (Relialogic) in less than two years prior to its
acquisition by Unico, it may be considered a successor company to Relialogic.
In accordance with APB 16, the audited financial statements and pro-formas
combining the assets and operations for Relialogic and Starlicon are also
included.
Please consider this filing as follow-up to our filing of Form 8-K/A on
September 15, 1998. We believe these audited financial statements and pro-
formas provide full disclosure of the transactions in accordance with the
Securities Exchange Commission Rule S-X.
Thank you very much for your consideration.
Sincerely,
/s/ Henry Tang
Henry Tang
Vice President
Finance and Operations
29
