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 earliest event reported): OCTOBER 31, 1996
Glasgal Communications, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-20688 94-2914253
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
151 Veterans Drive, Northvale, New Jersey 07647
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 768-8082
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) The Registrant hereby amends Item 7 of this Form 8-K by including
the required Financial Statements of Datatec Industries Inc., a New Jersey
corporation ("Datatec").
(b) The Registrant hereby amends Item 7 of this Form 8-K by including
the requisite pro forma financial information of the Datatec acquisition.
(c) Exhibits:
2 Stock Purchase Agreement dated as of October 31, 1996
by and among Glasgal Communications, Inc., Datatec
Industries Inc. and Those Stockholders Listed on
Schedule 1.1 Thereto (previously filed on this Report
on Form 8-K).
20 News Release of Glasgal Communications, Inc. dated
October 31, 1996 (previously filed on this Report on
Form 8-K).
23.1 Consent of Arthur Andersen LLP.
99.1 Financial Statements of Datatec Industries Inc.
99.2 Pro forma financial information.
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLASGAL COMMUNICATIONS, INC.
By:/s/ James Caci
--------------
James Caci
Chief Financial Officer
DATE: December 13, 1996
-3-
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glasgal Communications, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K of our report dated November 1, 1996 and to all
references to our firm included in this Form 8-K.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Roseland, New Jersey
December 13, 1996
Datatec Industries Inc. And Subsidiaries
Consolidated Financial Statements As Of
April 28, 1996 And April 30, 1995
Together With
Report Of Independent Public Accountants
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Datatec Industries Inc.:
We have audited the accompanying consolidated balance sheets of Datatec
Industries Inc. (a New Jersey corporation) and subsidiaries as of April 28, 1996
and April 30, 1995 and the related consolidated statements of operations,
changes in stockholders' equity (deficit) and cash flows for the three years in
the period ended April 28, 1996. 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 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 about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Datatec Industries Inc. and
subsidiaries as of April 28, 1996 and April 30, 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
April 29, 1996 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has negative cash flows from operating activities and has a
working capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Roseland, New Jersey
November 1, 1996
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 28, April 30,
ASSETS 1996 1995
------ -------- --------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,455 $ 213
Accounts receivable, net of allowance for doubtful accounts
of $538,000 at April 28, 1996 and $424,000 at April 30, 1995 7,470 9,330
Inventory (Note 1) 3,238 2,860
Net (liabilities) assets of discontinued operations (Note 9) (142) 3,714
Prepaid expenses and other current assets 304 646
-------- --------
Total current assets 12,325 16,763
DUE FROM RELATED PARTIES (Note 2) 0 711
PROPERTY AND EQUIPMENT, net (Notes 1 and 3) 3,299 3,688
RESTRICTED FUNDS (Note 4) 205 694
OTHER ASSETS 651 823
-------- --------
$ 16,480 $ 22,679
======== ========
<CAPTION>
April 28, April 30
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY 1996 1995
---------------------------------------------- -------- --------
(in thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 4) $ 10,489 $ 6,354
Capitalized lease obligations (Note 5) 403 165
Deferred revenue (Note 1) 17 745
Accounts payable 7,701 7,498
Accrued liabilities (Note 8) 6,172 1,633
Due to related parties (Note 2) 0 330
-------- --------
Total current liabilities 24,782 16,725
-------- --------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities (Note 4) 766 2,918
Capitalized lease obligations, net of current portion (Note 5) 1,572 724
-------- --------
Total long-term liabilities 2,338 3,642
-------- --------
STOCKHOLDERS' (DEFICIT) EQUITY:
Common stock, no par value; 10,000,000 shares authorized, 6,850,000
shares issued 289 289
(Accumulated deficit) retained earnings (10,602) 2,015
Currency translation adjustment (127) 8
Common shares held in treasury, at cost (100,000 shares in 1996) (200) 0
-------- --------
Total stockholders' (deficit) equity (10,640) 2,312
-------- --------
$ 16,480 $ 22,679
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
---------------------------------------------
April 28, April 30, April 24,
1996 1995 1994
------------ ------------- ------------
(in thousands)
<S> <C> <C> <C>
REVENUE $ 54,114 $ 52,624 $ 47,399
COST OF SALES 31,952 30,626 26,215
-------- -------- --------
Gross profit 22,162 21,998 21,184
-------- -------- --------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 21,777 19,405 14,968
RESTRUCTURING CHARGES (Note 8) 6,756 0 0
-------- -------- --------
Total operating expenses 28,533 19,405 14,968
-------- -------- --------
Operating (loss) income (6,371) 2,593 6,216
INTEREST EXPENSE, NET 938 495 285
-------- -------- --------
(Loss) income from continuing operations
before taxes (7,309) 2,098 5,931
PROVISION FOR INCOME TAXES 139 176 484
-------- -------- --------
(Loss) income from continuing operations (7,448) 1,922 5,447
-------- -------- --------
DISCONTINUED OPERATIONS (Note 9):
Loss from current year operations, net of state tax benefit of
$179 and $109 in 1995 and 1994, respectively (2,218) (2,579) (1,228)
Provision for future losses, including loss on disposal (2,284) 0 0
-------- -------- --------
Loss from discontinued operations (4,502) (2,579) (1,228)
-------- -------- --------
Net (loss) income ($11,950) ($ 657) $ 4,219
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE YEARS ENDED APRIL 28, 1996, APRIL 30, 1995 AND APRIL 24, 1994
(dollar amounts in thousands)
<TABLE>
<CAPTION>
Retained
Common Stock Earnings Currency Treasury Stock, At Cost
------------------------ (Accumulated Translation -------------------------
Shares Amount Deficit) Adjustment Shares Amount
--------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, April 25, 1993 1,500,000 $ 1 $ 1,808 $ (48) 0 $ 0
Issuance of stock 5,250,000 106 0 0 0 0
Stockholder distributions 0 0 (1,565) 0 0 0
Currency translation
adjustment 0 0 0 (113) 0 0
Net income 0 0 4,219 0 0 0
--------- --------- --------- --------- --------- ---------
BALANCE, April 24, 1994 6,750,000 107 4,462 (161) 0 0
Issuance of stock 100,000 182 0 0 0 0
Stockholder distributions 0 0 (1,790) 0 0 0
Currency translation
adjustment 0 0 0 169 0 0
Net loss 0 0 (657) 0 0 0
--------- --------- --------- --------- --------- ---------
BALANCE, April 30, 1995 6,850,000 289 2,015 8 0 0
Stockholder distributions 0 0 (667) 0 0 0
Purchase of treasury
stock 0 0 0 0 (100,000) (200)
Currency translation
adjustment 0 0 0 (135) 0 0
Net loss 0 0 (11,950) 0 0 0
--------- --------- --------- --------- --------- ---------
BALANCE, April 28, 1996 6,850,000 $ 289 ($ 10,602) $ (127) (100,000) $ (200)
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
--------------------------------------------
April 28, April 30, April 24,
1996 1995 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($11,950) $ (657) $ 4,219
Adjustments to reconcile net (loss) income to net cash from
operating activities-
Depreciation and amortization 1,114 862 677
Changes in assets and liabilities, net of effects from
acquisitions and dispositions of businesses-
Decrease (increase) in accounts receivable 1,860 (1,641) (1,107)
Decrease (increase) in due from related parties 381 (271) 107
Increase in inventory (378) (39) (1,212)
Decrease (increase) in other current and noncurrent
assets 457 (536) (370)
Decrease (increase) in net assets of discontinued
operations 2,461 (2,101) (115)
(Decrease) increase in deferred revenue (729) 745 0
Increase in accounts payable and accrued liabilities 4,742 1,773 1,427
-------- -------- --------
Net cash from operating activities (2,042) (1,865) 3,626
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (668) (2,885) (1,162)
Proceeds from sale of division 1,395 0 0
-------- -------- --------
Net cash from investing activities 727 (2,885) (1,162)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in capitalized lease obligations 1,086 820 (110)
Increase in debt 1,984 5,291 (1,022)
Distributions to stockholders (667) (1,790) (1,565)
Decrease in restricted funds 489 125 278
Purchase of treasury stock (200) 0 0
Issuance of common stock 0 182 106
-------- -------- --------
Net cash from financing activities 2,692 4,628 (2,313)
-------- -------- --------
EFFECT OF CURRENCY TRANSLATION ON CASH (135) 169 (113)
-------- -------- --------
Net increase in cash 1,242 47 38
CASH, beginning of year 213 166 128
-------- -------- --------
CASH, end of year $ 1,455 $ 213 $ 166
======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Years Ended
--------------------------------------------
April 28, April 30, April 24,
1996 1995 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 1,020 $ 624 $ 324
======== ======== ========
State income taxes paid $ 14 $ 600 $ 103
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
Business-
Datatec Industries Inc. (the "Company"), specializes in the implementation
of enterprise-wide information communications networks. The Company works
with large commercial accounts to implement technology throughout the
organizations. The Company's services include network design and
engineering consulting, project management, site preparation, systems
staging, equipment and structured cabling system installation, training and
help desk support. The Company also provides inhouse product development
and manufacturing capabilities that allow for the development of network
support products.
On October 31, 1996 all outstanding shares of Datatec Industries Inc. were
acquired by Glasgal Communications, Inc. (Glasgal) which is a publicly
traded company. The shareholders of Datatec Industries, Inc. received
4,000,000 shares of common stock of Glasgal in exchange for all of the
outstanding shares of Datatec Industries, Inc. Glasgal intends to account
for the acquisition of the Company as a "pooling of interests." Accordingly
the financial position and results of operations of the Company for these
and future periods will be included with those of Glasgal as if the
Companies were together for all periods presented.
Basis of Presentation-
The Company maintains its accounts on a fiscal year ending the last Sunday
of April.
The consolidated financial statements include the accounts of Datatec
Industries Inc. and its majority owned subsidiaries, Datatec Industries UK
Ltd., Datatec Industries Canada Ltd. and Ultimate France. All significant
intercompany accounts and transactions have been eliminated in
consolidation and there was no material minority interest in these
subsidiaries as of April 28, 1996.
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform to the current year presentation.
The Company has suffered recurring losses from operations, has negative
cash flows from operating activities and has a working capital deficiency.
In connection with the acquisition of the outstanding common stock of the
Company, Glasgal has agreed to make capital contributions of $6,500,000
from October 31, 1996 through February 29, 1997. In addition, management
has initiated restructuring initiatives as of the end of fiscal 1996, which
it believes will reduce the Company's cost structure in the future (Note
8). Management expects that the above efforts, along with its anticipated
profitability for the fiscal year ending 1997 will provide the Company with
adequate working capital. The accompanying consolidated financial
statements do not include any adjustments that might result, should the
Company be unable to continue as a going concern.
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition-
Revenues from sales of products and services are recognized when
merchandise is shipped or services are rendered. Payments from customers
received prior to the completion of services are recorded as deferred
revenue.
Property and Equipment-
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed on straight-line and accelerated methods over the
expected useful lives or lease terms of the related assets, whichever is
shorter.
Long-Lived Assets-
During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets" ("SFAS 121"). SFAS 121 requires, among other things, that an entity
review its long-lived assets and certain related intangibles for impairment
whenever changes in circumstances indicate that the carrying amount of an
asset may not be fully recoverable based upon the future undiscounted cash
flows before interest and taxes from that asset. As a result of its review
and provisions made as described in Note 8, the Company does not believe
that any impairment exists related to its long-lived assets as of April 28,
1996.
Inventory-
In those instances where the Company believes it will realize less than the
cost of the inventory items, an obsolescence reserve is established for an
amount equal to the difference between the cost of the inventory and its
estimated market value.
Income Taxes-
The Company and its stockholders have elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code for United States
Federal and certain state income tax purposes. Accordingly, the Company's
income or losses are reported in the individual tax returns of the
stockholders for Federal and certain state income tax purposes. The
provision for income taxes includes taxes applicable to states that do not
recognize Subchapter S filing status and taxes attributable to the
Company's interest in foreign subsidiaries' earnings.
-2-
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective April 25, 1994, the Company adopted Statement of Financial
Accounting Standard 109, "Accounting for Income Taxes" ("SFAS 109"). In
accordance with SFAS 109, the Company uses the liability method of
computing deferred income taxes. Deferred income taxes are recognized for
tax consequences of "temporary differences" by applying enacted statutory
rates to differences between the financial reporting and the tax basis of
assets and liabilities. As of April 28, 1996 and April 30, 1995, there were
no significant temporary differences requiring deferred tax provisions or
credits.
Foreign Currency Translation-
For the Company's international operations, assets and liabilities are
translated at year-end exchange rates and items included in the statement
of operations are translated at average exchange rates prevailing during
the year. Translation adjustments are recorded as a separate component of
stockholders' equity.
Stock Based Compensation-
The Financial Accounting Standards Board issued a new standard, "Accounting
for Stock-Based Compensation" ("SFAS 123"). SFAS 123 requires that an
entity account for employee stock compensation under a fair value based
method. However, SFAS 123 also allows an entity to continue to measure
compensation cost for employee stock-based compensation arrangements using
the intrinsic value based method of accounting prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees" ("Opinion 25"). Entities
electing to remain with the accounting under Opinion 25 are required to
make pro forma disclosures of net income and earnings per share as if the
fair value based method of accounting under SFAS 123 had been applied. The
accounting and disclosure requirements of this standard are effective for
the Company's 1997 fiscal year. The Company expects to continue to account
for employee stock-based compensation under Opinion 25.
Use of Estimates-
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
-3-
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) TRANSACTIONS WITH RELATED PARTIES:
As of April 30, 1995, the Company had advanced $100,000 to an officer and
stockholder of the Company. The advance was noninterest bearing and was due
on demand. As of April 28, 1996 the advance was fully satisfied through the
forgiveness of $80,000 and a deemed distribution of $20,000.
In connection with the purchase of Ultimate France, the Company's principal
stockholder was indebted to the Company for $611,000 as of April 30, 1995
which represented the financing of 21% of the purchase price plus
acquisition costs. The indebtedness was noninterest bearing and was
satisfied by the sale to the Company of the principal stockholder's
minority ownership in the Company's subsidiaries.
As of April 30, 1995, the Company had outstanding advances from the
principal stockholder in the amount of $330,000. The advances were
noninterest bearing and were due on demand. As of April 28, 1996 the
advances were fully satisfied.
The Company had various leases with the principal stockholder or with
companies in which he is a principal stockholder. Rent expense charged on
these premises was $1,258,000 and $691,000, respectively for the years
ended April 28, 1996 and April 30, 1995, which approximated fair market
value.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following-
April 28, April 30,
1996 1995
------- -------
(in thousands)
Furniture, fixtures and leasehold improvements $ 2,548 $ 2,882
Computers and computer software 2,893 2,464
Equipment 1,078 899
------- -------
6,519 6,245
Accumulated depreciation (3,220) (2,557)
------- -------
Total $ 3,299 $ 3,688
======= =======
-4-
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) DEBT:
Debt consisted of the following-
April 28, April 30,
1996 1995
-------- --------
(in thousands)
Credit facility $ 8,337 $ 5,457
Term loan 2,023 2,127
New Jersey Economic Development Authority Note 895 1,015
Other 0 673
-------- --------
Total debt 11,255 9,272
Less- Current maturities (10,489) (6,354)
-------- --------
Long-term debt, net of current maturities $ 766 $ 2,918
======== ========
The Company had a credit facility with a bank that provided for borrowings
of the lesser of $17,250,000 or a sum based on a formula of qualified
assets. The formula included 85% of qualified accounts receivable plus 40%
of qualified inventory. The formula also provided for an additional
$1,500,000 working capital advance (the "Overadvance") to the Company. The
effective interest rate was prime plus 0.75% or LIBOR plus 2.75%. As of
April 28, 1996 the interest rate was 9.0%. As of April 30, 1996, the
Company had approximately $1,059,000 in available borrowings under this
credit facility. The Company also had a $250,000 credit facility for its
Canadian operations. Interest on Canadian borrowings was payable at prime
plus 0.75% or LIBOR plus 2.75%. As of April 28, 1996 the Company had no
borrowings against this facility. The credit facilities are secured by
accounts receivable, inventory and specific other assets, and the personal
guaranty of the Company's principal stockholder. The credit facility
agreements contained various financial covenants including minimum working
capital and tangible net worth in addition to limitations on the ratio of
liabilities to net worth, dividend payments, capital expenditures, advances
and borrowings by the Company. As of April 28, 1996, the Company was not in
compliance with substantially all of its financial covenants.
In connection with the acquisition of the Company by Glasgal (Note 1), the
Company amended its revolving credit and term loan agreements effective
October 31, 1996. The amended agreements provide for reductions in maximum
borrowings under the credit facility from $17,250,000 in June 1996 to
$10,500,000 in January 1997, and the elimination of the Canadian facility
and the $1,500,000 Overadvance on October 30, 1996. The interest on the
credit facility under the amended agreement is equal to the prime rate plus
0.75% or LIBOR plus 2.75% through September 1996 and adjusts to prime plus
2.50% in January 1997.
-5-
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the purchase of Ultimate France (Note 9), the Company
had entered into a $2,800,000 term loan which provided for equal monthly
installments of $78,000 commencing July 1995 through June 1998. The
effective interest rate was prime plus 1% or LIBOR plus 3% through December
31, 1995 and prime plus 2% or LIBOR plus 4% thereafter. As of April 28,
1996 the interest rate was 10 1/4%. As of April 30, 1995 loan proceeds of
$2,127,000 were received by the Company. An additional $673,000 was loaned
to the Company through January 1996 at which time the entire $2,800,000
term loan was funded. The term loan was secured by accounts receivable,
inventory and specific other assets, and the personal guarantee of the
Company's principal stockholder. On October 31, 1996, the term loan
agreement was amended to provide for an acceleration of payments through
March of 1997. Based on the amended agreement, the entire term loan balance
has been classified as current as of April 28, 1996.
In June 1992, the Company entered into a $1,320,000 loan agreement with the
New Jersey Economic Development Authority ("NJEDA"). The note provides for
monthly payments of principal and interest through June 1, 2002. Monthly
principal payments range from $9,000 to $14,000. Interest is based on a
floating rate equal to the variable rate borne by the NJEDA Economic Growth
Bonds (4.0% as of April 28, 1996). The use of the proceeds is restricted to
the acquisition of certain manufacturing equipment and the expansion of the
Company's New Jersey manufacturing area. At April 28, 1996 and April 30,
1995, restricted funds, representing unexpended proceeds, totaled $205,000
and $694,000, respectively. The note is secured by the assets acquired with
the loan proceeds.
Maturities of long-term debt in each of the next five years are:
$10,489,000, $135,000, $140,000, $149,000 and $159,000.
(5) CAPITALIZED LEASE OBLIGATIONS:
Capitalized lease obligations consisted of the following-
April 28, April 30,
1996 1995
------- -------
(in thousands)
Total future obligations $ 2,427 $ 1,133
Less- Interest included in future obligations (452) (244)
------- -------
Net capitalized lease obligations 1,975 889
Less- Current portion (403) (165)
------- -------
Capitalized lease obligations, net of current portion $ 1,572 $ 724
======= =======
-6-
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Annual principal payments are due as follows (in thousands)-
Twelve-Month Period Ending
April
----------------------------
1997 $403
1998 494
1999 494
2000 445
2001 139
(6) COMMITMENTS AND CONTINGENCIES:
Commitments-
The Company leases office and warehouse facilities from related and
unrelated parties. The minimum annual rentals for future years are as follows-
Twelve-Month Period Related
Ending April Party Other Total
- --------------------------- --------- ----- -------
(in thousands)
1997 $1,271 $467 $1,738
1998 1,000 367 1,367
1999 730 328 1,058
2000 730 256 986
2001 235 141 376
Thereafter 2,600 0 2,600
Rent expense was $1,785,000, $1,194,000 and $942,000 for the twelve-month
periods ended April 28, 1996, April 30, 1995 and April 24, 1994,
respectively.
The Company had one-year lease commitments for its fleet of vehicles. Lease
expense related to these vehicles was $1,155,000, $943,000 and $824,000 for
the twelve-month periods ended April 28, 1996, April 30, 1995 and April 24,
1994, respectively. The leases expire throughout the year, most with an
option for renewal. Future commitments are not reflected in the amounts
above but are expected to be consistent with the 1996 expense.
-7-
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contingencies-
The Company from time to time is involved in various legal proceedings
incurred in the normal course of business. In the opinion of management, if
adversely decided, none of these proceedings would have a material effect
on the Company's consolidated financial statements.
(7) EMPLOYEE SAVINGS AND STOCK OPTION PLANS:
Savings Plan-
The Company has a savings plan, which qualifies under section 401(k) of the
Internal Revenue Code. Under the plan, participating U. S. employees may
defer up to 15% of their pretax salary, but no more than the statutory
limits. The Company does not provide for matching contributions to the
plan.
Stock Option Plans-
The Company has a stock option plan (the "Plan") for directors, officers
and key employees, which provides for nonqualified stock options. Options
have been granted at exercise prices at or below fair market value at the
date of grant and expire over periods of up to ten years. The amount of
compensation associated with options granted below fair market value was
not significant for the periods presented.
The following table summarizes the activity in the Plan-
Exercise
Shares Price
------------ ------------
Shares under option April 24, 1994 30,000 $.50
Granted 90,000 1.82
Exercised 0 0
----------- ----------
Shares under option April 30, 1995 120,000 .50-1.82
Granted 408,000 .83-1.82
Exercised 0 0
Canceled (15,000) 1.82
----------- ----------
Shares under option April 28, 1996 513,000 $.50-1.82
=========== ==========
The Company also has an Equity Participation Plan (the "Equity Plan") for
its employees which allows for the granting of options to employees to
purchase up to 600,000 shares of the Company's stock in the event that the
Company completes an Initial Public Offering prior to December 31, 2005.
Pursuant to the Equity Plan, employees were entitled to received options
-8-
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
based on their length of service and bonus level. As of April 28, 1996, a
total of 328,107 shares were set aside under the Equity Plan at an exercise
price of $1.73 which approximated the fair market value at the date of
grant.
In connection with the acquisition of the Company by Glasgal (Note 1), all
stock options were converted into options in Glasgal stock at terms
equivalent to the exchange rate for outstanding shares. In addition, no
future grants will be made under the Company's stock option plans.
(8) RESTRUCTURING OF OPERATIONS:
In April 1996, the Company recorded restructuring charges of $6,756,000
aimed at reducing costs and improving the Company's efficiency and focus on
its core businesses. These charges included $2,049,000 in noncash
write-downs of certain of the Company's long-lived assets based upon the
criteria described in Note 1 as well as the establishment of $4,707,000 of
accrued liabilities, which included $1,984,000 of projected cash outflows
for personnel severance and facilities consolidation plans. It is expected
that the majority of these liabilities will be settled by the end of fiscal
1997. Accordingly, they have been included in accrued liabilities.
(9) DISCONTINUED OPERATIONS:
Effective April 28, 1996, the Company adopted a plan to dispose of its
international operations located in France ("Ultimate France"). In fiscal
1995, the Company adopted a plan to dispose of its Shoppertrak division
located in the United States and Great Britain.
The net assets associated with the discontinued divisions have been
reclassified on the consolidated balance sheets for all years presented.
The operating results of the discontinued divisions have been reported
separately as a component of discontinued operations and include the
write-down of assets sold to their net realizable value as well as
anticipated losses through the date of disposition and disposition costs.
Fiscal 1996 results include a charge of $643,000 related to operating
losses incurred by the Shoppertrak division prior to its actual disposal in
excess of amounts provided in fiscal 1995.
-9-
<PAGE>
DATATEC INDUSTRIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The summarized results of the discontinued operations were as follows-
April 28, April 30, April 24,
1996 1995 1994
-------- -------- --------
(in thousands)
Revenue $ 14,686 $ 14,309 $ 3,353
Cost of sales 10,276 10,688 1,620
-------- -------- --------
Gross profit 4,410 3,621 1,733
Selling, general and administrative expenses 6,628 6,200 3,070
-------- -------- --------
Operating loss ($ 2,218) ($ 2,579) ($ 1,337)
======== ======== ========
Provision for future losses, including loss
on disposal ($ 2,284) $ 0 $ 0
======== ======== ========
-10-
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the
acquisition of Datatec Industries, Inc., being accounted for using the pooling
of interests method of accounting. To acquire Datatec Industries, Inc., Glasgal
issued 4,000,000 shares of its common stock. Immediately following the
acquisition Glasgal Communications, Inc. has 20,552,768 shares of common stock
issued and outstanding.
The following pro forma financial statements are included:
Balance sheet at July 31, 1996
Balance sheet at April 30, 1996
Balance sheet at April 30, 1995
Statement of operations for the three months ended July 31, 1996
Statement of operations for the year ended April 30, 1996
Statement of operations for the year ended April 30, 1995
Statement of operations for the four month period ended April 30, 1994
Statement of operations for the year ended December 31, 1993.
The fiscal year end of Glasgal Communications, Inc. was December 31, until May
2, 1994, at which time the year end was changed to April 30. The fiscal year end
of Datatec Industries Inc. is the last Sunday in April. In the accompanying pro
forma statements no adjustments have been made to conform the last Sunday in
April to April 30.
<PAGE>
<TABLE>
<CAPTION>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
JULY 31, 1996
GLASGAL DATATEC PRO FORMA (1)
COMMUNICATIONS, INC. INDUSTRIES INC. ADJUSTMENTS CONSOLIDATED
-------------------- ---------------- ------------- ------------
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 29,457 $ 256,890 $ -- $ 286,347
ACCOUNTS RECEIVABLE, NET 9,140,790 11,339,704 -- 20,480,494
INVENTORY 2,667,528 3,251,954 -- 5,919,482
PREPAID EXPENSES AND OTHER CURRENT ASSETS 914,813 646,798 -- 1,561,611
---------------- ---------------- ------------- -----------
TOTAL CURRENT ASSETS 12,752,588 15,495,346 -- 28,247,934
PROPERTY AND EQUIPMENT, NET 3,683,232 3,405,653 -- 7,088,885
OTHER ASSETS 2,053,051 845,809 -- 2,898,860
---------------- ---------------- ------------- -----------
TOTAL ASSETS $ 18,488,871 $ 19,746,808 $ -- $ 38,235,679
============ ============ ========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY(DEFICIT)
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS $ 2,696,663 $ 9,989,270 $ -- $ 12,685,933
CURRENT PORTION OF LONG-TERM OBLIGATIONS 166,576 2,361,295 -- 2,527,871
ACCOUNTS PAYABLE 5,406,769 8,441,985 -- 13,848,754
ACCRUED LIABILITIES 1,575,001 5,671,532 -- 7,246,533
DEFERRED INCOME 495,775 291,046 -- 786,821
---------------- ---------------- ------------- -----------
TOTAL CURRENT LIABILITIES 10,340,784 26,755,128 -- 37,095,912
---------------- ---------------- ------------- -----------
LONG-TERM OBLIGATIONS 988,835 2,336,337 -- 3,325,172
SHAREHOLDERS' EQUITY (DEFICIT):
COMMON STOCK 17,624 289,420 -- 307,044
ADDITIONAL PAID-IN CAPITAL 11,970,987 -- (9,263,932) 2,707,055
ACCUMULATED DEFICIT (4,701,159) (9,263,932) 9,263,932 (4,701,159)
CUMULATIVE TRANSLATION ADJUSTMENT (128,201) (170,145) -- (298,346)
TREASURY STOCK -- (200,000) -- (200,000)
---------------- ---------------- ------------- -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) 7,159,251 (9,344,657) -- (2,185,406)
---------------- ---------------- ------------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 18,488,871 $ 19,746,808 $ -- $ 38,235,679
============ ============ ========== ============
(1) REPRESENTS THE RECLASSIFICATION OF CUMULATIVE SHAREHOLDERS' EQUITY OR
DEFICIT AS A CONTRIBUTION OF CAPITAL UPON DATATEC INDUSTRIES INC.'S
CONVERSION TO C CORPORATION STATUS ASSUMING SUCH CONVERSION OCCURRED AT THE
END OF THE PERIOD PRESENTED.
</TABLE>
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 30, 1996
<TABLE>
<CAPTION>
GLASGAL DATATEC PRO FORMA (1)
COMMUNICATIONS, INC. INDUSTRIES INC. ADJUSTMENTS CONSOLIDATED
-------------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 764,474 $ 1,455,090 $ -- $ 2,219,564
ACCOUNTS RECEIVABLE, NET 8,101,741 7,469,934 -- 15,571,675
INVENTORY 2,802,164 3,237,699 -- 6,039,863
PREPAID EXPENSES AND OTHER CURRENT ASSETS 930,875 161,876 -- 1,092,751
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS 12,599,254 12,324,599 -- 24,923,853
PROPERTY AND EQUIPMENT, NET 3,708,506 3,298,356 -- 7,006,862
OTHER ASSETS 2,146,777 856,490 -- 3,003,267
------------ ------------ ------------ ------------
TOTAL ASSETS $ 18,454,537 $ 16,479,445 $ -- $ 34,933,982
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY(DEFICIT)
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS $ 2,084,264 $ 8,337,842 $ -- $ 10,422,106
CURRENT PORTION OF LONG-TERM OBLIGATIONS 131,253 2,554,075 -- 2,685,328
ACCOUNTS PAYABLE 5,681,474 7,701,443 -- 13,382,917
ACCRUED LIABILITIES 800,397 6,170,804 -- 6,971,201
DEFERRED INCOME 702,120 16,667 -- 718,787
------------ ------------ ------------ ------------
TOTAL CURRENT LIABILITIES 9,399,508 24,780,831 -- 34,180,339
------------ ------------ ------------ ------------
LONG-TERM OBLIGATIONS 2,067,191 2,338,080 -- 4,405,271
SHAREHOLDERS' EQUITY (DEFICIT):
COMMON STOCK 15,891 289,420 -- 305,311
ADDITIONAL PAID-IN CAPITAL 11,693,354 -- (10,601,549) 1,091,805
ACCUMULATED DEFICIT (4,601,277) (10,601,549) 10,601,549 (4,601,277)
CUMULATIVE TRANSLATION ADJUSTMENT (120,130) (127,337) -- (247,467)
TREASURY STOCK -- (200,000) -- (200,000)
------------ ------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) 6,987,838 (10,639,466) -- (3,651,628)
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 18,454,537 $ 16,479,445 $ -- $ 34,933,982
============ ============ ============ ============
</TABLE>
(1) REPRESENTS THE RECLASSIFICATION OF CUMULATIVE SHAREHOLDERS' EQUITY OR
DEFICIT AS A CONTRIBUTION OF CAPITAL UPON DATATEC INDUSTRIES INC.'S
CONVERSION TO C CORPORATION STATUS ASSUMING SUCH CONVERSION OCCURRED AT THE
END OF THE PERIOD PRESENTED.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 30, 1995
<TABLE>
<CAPTION>
GLASGAL DATATEC PRO FORMA (1)
COMMUNICATIONS, INC. INDUSTRIES INC. ADJUSTMENTS CONSOLIDATED
-------------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 52,443 $ 213,097 $ -- $ 265,540
ACCOUNTS RECEIVABLE, NET 6,862,804 9,330,273 -- 16,193,077
INVENTORY 2,589,750 2,859,744 -- 5,449,494
PREPAID EXPENSES AND OTHER CURRENT ASSETS 824,689 4,359,618 -- 5,184,307
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS 10,329,686 16,762,732 -- 27,092,418
DUE FROM RELATED PARTIES -- 711,281 -- 711,281
PROPERTY AND EQUIPMENT, NET 3,199,351 3,687,510 -- 6,886,861
OTHER ASSETS 278,456 1,517,244 -- 1,795,700
------------ ------------ ------------ ------------
TOTAL ASSETS $ 13,807,493 $ 22,678,767 $ -- $ 36,486,260
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY(DEFICIT)
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS $ 4,893,875 $ 5,456,804 $ -- $ 10,350,679
CURRENT PORTION OF LONG-TERM OBLIGATIONS 166,735 1,062,119 -- 1,228,854
ACCOUNTS PAYABLE 5,343,190 7,498,191 -- 12,841,381
ACCRUED LIABILITIES 1,356,375 1,632,916 -- 2,989,291
DEFERRED INCOME 1,075,124 745,182 -- 1,820,306
OTHER CURRENT LIABILITIES 120,557 330,000 -- 450,557
------------ ------------ ------------ ------------
TOTAL CURRENT LIABILITIES 12,955,856 16,725,212 -- 29,681,068
------------ ------------ ------------ ------------
LONG-TERM OBLIGATIONS 1,105,529 3,641,139 -- 4,746,668
SHAREHOLDERS' EQUITY (DEFICIT):
COMMON STOCK 1,050 289,420 -- 290,470
ADDITIONAL PAID-IN CAPITAL 2,999,141 -- 2,015,045 5,014,186
ACCUMULATED DEFICIT (2,832,415) 2,015,045 (2,015,045) (2,832,415)
CUMULATIVE TRANSLATION ADJUSTMENT (105,901) 7,951 -- (97,950)
TREASURY STOCK (315,767) -- -- (315,767)
------------ ------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (253,892) 2,312,416 -- 2,058,524
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 13,807,493 $ 22,678,767 $ -- $ 36,486,260
============ ============ ============ ============
</TABLE>
(1) REPRESENTS THE RECLASSIFICATION OF CUMULATIVE SHAREHOLDERS' EQUITY OR
DEFICIT AS A CONTRIBUTION OF CAPITAL UPON DATATEC INDUSTRIES INC.'S
CONVERSION TO C CORPORATION STATUS ASSUMING SUCH CONVERSION OCCURRED AT THE
END OF THE PERIOD PRESENTED.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1996
<TABLE>
<CAPTION>
GLASGAL DATATEC
COMMUNICATIONS, INC. INDUSTRIES INC. CONSOLIDATED
-------------------- -------------- ------------
<S> <C> <C> <C>
REVENUE $13,110,144 $14,266,079 $27,376,223
COST OF SALES 8,980,187 8,572,827 17,553,014
SELLING, GENERAL AND ADMINISTRATIVE 3,741,762 4,031,826 7,773,588
----------- ----------- -----------
TOTAL COSTS AND EXPENSES 12,721,949 12,604,653 25,326,602
----------- ----------- -----------
OPERATING INCOME 388,195 1,661,426 2,049,621
INTEREST EXPENSE 129,799 280,118 409,917
----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 258,396 1,381,308 1,639,704
INCOME TAX PROVISION 201,778 43,691 245,469
----------- ----------- -----------
NET INCOME $ 56,618 $ 1,337,617 $ 1,394,235
=========== =========== ===========
EARNINGS PER SHARE $ 0.00 $ 0.06
=========== ===========
WEIGHTED AVERAGE COMMON AND
COMMON STOCK EQUIVALENT SHARES 19,365,113 23,609,286
=========== ===========
</TABLE>
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1996
<TABLE>
<CAPTION>
GLASGAL DATATEC PRO FORMA (1)
COMMUNICATIONS, INC. INDUSTRIES INC. ADJUSTMENTS CONSOLIDATED
-------------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUE $ 48,088,597 $ 54,114,362 $ 14,685,903 $ 116,888,862
COST OF SALES 35,080,258 31,952,072 10,275,605 77,307,935
SELLING, GENERAL AND ADMINISTRATIVE 13,511,172 21,777,394 8,974,007 44,262,573
RESTRUCTURING & NONRECURRING CHARGES -- 6,755,584 -- 6,755,584
------------- ------------- ------------- -------------
TOTAL COSTS AND EXPENSES 48,591,430 60,485,050 19,249,612 128,326,092
------------- ------------- ------------- -------------
OPERATING LOSS (502,833) (6,370,688) (4,563,709) (11,437,230)
INTEREST EXPENSE 830,599 938,624 -- 1,769,223
MINORITY INTEREST -- -- (705,062) (705,062)
------------- ------------- ------------- -------------
LOSS FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES (1,333,432) (7,309,312) (3,858,647) (12,501,391)
INCOME TAX PROVISION (87,754) 138,766 -- 51,012
------------- ------------- ------------- -------------
LOSS FROM CONTINUING OPERATIONS (1,245,678) (7,448,078) (3,858,647) (12,552,403)
DISCONTINUED OPERATIONS:
LOSS FROM CURRENT YEAR OPERATIONS -- (2,217,867) 2,217,867 --
PROVISION FOR FUTURE LOSSES -- (2,283,780) 1,640,780 (643,000)
------------- ------------- ------------- -------------
LOSS FROM DISCONTINUED OPERATIONS -- (4,501,647) 3,858,647 (643,000)
------------- ------------- ------------- -------------
LOSS BEFORE EXTRAORDINARY ITEM (1,245,678) (11,949,725) -- (13,195,403)
EXTRAORDINARY ITEM (223,066) -- -- (223,066)
------------- ------------- ------------- -------------
NET LOSS $ (1,468,744) $ (11,949,725) $ -- $ (13,418,469)
============= ============= ============= =============
LOSS PER SHARE :
LOSS FROM CONTINUING OPERATIONS $ (0.09) $ (0.68)
DISCONTINUED OPERATIONS $ 0.00 $ (0.03)
EXTRAORDINARY ITEM $ (0.02) $ (0.01)
------------- -------------
NET LOSS $ (0.11) $ (0.72)
============== ==============
WEIGHTED AVERAGE COMMON AND
COMMON STOCK EQUIVALENT SHARES 14,353,747 18,597,920
============== ==============
</TABLE>
(1) REPRESENTS THE OPERATIONS OF ULTIMATE FRANCE, A SUBSIDIARY OF DATATEC
INDUSTRIES INC. WHICH WAS CONSIDERED TO BE A DISCONTINUED OPERATION OF
DATATEC INDUSTRIES INC. HOWEVER, IN THE CONSOLIDATED GROUP SUCH OPERATIONS
DO NOT MEET THE CRITERIA FOR DISCONTINUED OPERATIONS.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
GLASGAL DATATEC PRO FORMA (1)
COMMUNICATIONS, INC. INDUSTRIES INC. ADJUSTMENTS CONSOLIDATED
-------------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUE $ 38,256,614 $ 52,624,055 $ 12,224,845 $ 103,105,514
COST OF SALES 26,379,305 30,625,813 9,477,654 66,482,772
SELLING, GENERAL AND ADMINISTRATIVE 13,099,692 19,404,777 2,852,862 35,357,331
------------- ------------- ------------- -------------
TOTAL COSTS AND EXPENSES 39,478,997 50,030,590 12,330,516 101,840,103
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) (1,222,383) 2,593,465 (105,671) 1,265,411
INTEREST EXPENSE 502,022 494,843 76,783 1,073,648
------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (1,724,405) 2,098,622 (182,454) 191,763
INCOME TAX PROVISION 10,903 176,143 (7,160) 179,886
------------- ------------- ------------- -------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS (1,735,308) 1,922,479 (175,294) 11,877
DISCONTINUED OPERATIONS:
LOSS FROM OPERATIONS -- (2,579,146) 175,294 (2,403,852)
------------- ------------- ------------- -------------
NET LOSS $ (1,735,308) $ (656,667) $ -- $ (2,391,975)
============= ============= ============= =============
EARNINGS (LOSS) PER SHARE :
EARNINGS (LOSS) FROM CONTINUING OPERATIONS $ (0.14) $ 0.00
DISCONTINUED OPERATIONS $ 0.00 $ (0.15)
------------- -------------
NET LOSS $ (0.14 $ (0.15)
============== ==============
WEIGHTED AVERAGE COMMON AND
COMMON STOCK EQUIVALENT SHARES 12,181,237 16,425,410
============== ==============
</TABLE>
(1) REPRESENTS THE OPERATIONS OF ULTIMATE FRANCE, A SUBSIDIARY OF DATATEC
INDUSTRIES INC. WHICH WAS CONSIDERED TO BE A DISCONTINUED OPERATION OF
DATATEC INDUSTRIES INC. HOWEVER, IN THE CONSOLIDATED GROUP SUCH OPERATIONS
DO NOT MEET THE CRITERIA FOR DISCONTINUED OPERATIONS.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
GLASGAL DATATEC
COMMUNICATIONS, INC INDUSTRIES INC. CONSOLIDATED
------------------- --------------- ------------
<S> <C> <C> <C>
REVENUE $ 11,674,114 $ 14,080,866 $ 25,754,980
COST OF SALES 8,550,773 8,352,621 16,903,394
SELLING, GENERAL AND ADMINISTRATIVE 4,967,281 6,557,269 11,524,550
------------ ------------ ------------
TOTAL COSTS AND EXPENSES 13,518,054 14,909,890 28,427,944
------------ ------------ ------------
OPERATING LOSS (1,843,940) (829,024) (2,672,964)
INTEREST EXPENSE 145,432 47,847 193,279
------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME TAXES (1,989,372) (876,871) (2,866,243)
INCOME TAX PROVISION -- (115,420) (115,420)
------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (1,989,372) (761,451) (2,750,823)
------------ ------------ ------------
DISCONTINUED OPERATIONS:
LOSS FROM DISCONTINUED OPERATIONS -- (876,899) (876,899)
------------ ------------ ------------
NET LOSS $ (1,989,372) $ (1,638,350) $ (3,627,722)
============ ============ ============
</TABLE>
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
GLASGAL DATATEC
COMMUNICATIONS, INC. INDUSTRIES INC. CONSOLIDATED
<S> <C> <C> <C>
REVENUE $ 37,288,469 $ 46,372,821 $ 83,661,290
COST OF SALES 25,419,030 25,303,874 50,722,904
SELLING, GENERAL AND ADMINISTRATIVE 11,229,521 12,755,671 23,985,192
------------ ------------ ------------
TOTAL COSTS AND EXPENSES 36,648,551 38,059,545 74,708,096
------------ ------------ ------------
OPERATING INCOME 639,918 8,313,276 8,953,194
INTEREST EXPENSE 521,616 360,622 882,238
------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 118,302 7,952,654 8,070,956
INCOME TAX PROVISION 221,772 582,554 804,326
------------ ------------ ------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS (103,470) 7,370,100 7,266,630
------------ ------------ ------------
DISCONTINUED OPERATIONS:
LOSS FROM DISCONTINUED OPERATIONS -- (920,109) (920,109)
------------ ------------ ------------
NET INCOME (LOSS) $ (103,470) $ 6,449,991 $ 6,346,521
============ ============ ============
</TABLE>
<PAGE>
DATATEC INDUSTRIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED JULY 28, 1996
(UNAUDITED)
REVENUE $14,266,079
COST OF SALES 8,572,827
SELLING, GENERAL AND ADMINISTRATIVE 4,031,826
-----------
TOTAL COSTS AND EXPENSES 12,604,653
-----------
OPERATING INCOME 1,661,426
INTEREST EXPENSE 280,118
-----------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,381,308
INCOME TAX PROVISION 43,691
-----------
NET INCOME $ 1,337,617
===========
<PAGE>
DATATEC INDUSTRIES INC
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JULY 28, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,337,617
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 250,202
Changes in assets and liabilities, net of effects
from dispositions of businesses:
(Inc) dec in accounts receivable, net (3,869,770)
(Inc) dec in inventory (14,255)
(Inc) dec in other current and noncurrent assets 1,471
(Inc) dec in due from related parties (191,974)
Inc (dec) in accounts payable 740,542
Inc (dec) in deferred revenue 274,379
Inc (dec) in accrued liabilities (499,272)
-----------
Net cash provided by (used in) operating activities (1,971,060)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (347,402)
Net assets of discontinued operations (293,835)
-----------
Net cash provided by (used in) investing activities (641,237)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Dec) inc in capitalized lease obligations 70,478
(Dec) inc in debt 1,386,427
-----------
Net cash provided by (used in) financing activities 1,456,905
-----------
Effect of translation adjustment on cash (42,808)
-----------
NET CHANGE IN CASH (1,198,200)
CASH, BEGINNING OF PERIOD 1,455,090
-----------
CASH, END OF PERIOD $ 256,890
===========
</TABLE>
<PAGE>
DATATEC INDUSTRIES INC.
CONSOLIDATED BALANCE SHEET
JULY 28, 1996
(UNAUDITED)
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 256,890
ACCOUNTS RECEIVABLE, NET 11,339,704
INVENTORY 3,251,954
PREPAID EXPENSES AND OTHER CURRENT ASSETS 646,798
------------
TOTAL CURRENT ASSETS 15,495,346
PROPERTY AND EQUIPMENT, NET 3,405,653
OTHER ASSETS 845,809
------------
TOTAL ASSETS $ 19,746,808
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS $ 9,989,270
CURRENT PORTION OF LONG-TERM OBLIGATIONS 2,361,295
ACCOUNTS PAYABLE 8,441,985
ACCRUED LIABILITIES 5,671,532
DEFERRED INCOME 291,046
------------
TOTAL CURRENT LIABILITIES 26,755,128
------------
LONG-TERM OBLIGATIONS 2,336,337
SHAREHOLDERS' DEFICIT:
COMMON STOCK 289,420
ADDITIONAL PAID-IN CAPITAL
ACCUMULATED DEFICIT (9,263,932)
CUMULATIVE TRANSLATION ADJUSTMENT (170,145)
TREASURY STOCK (200,000)
------------
TOTAL SHAREHOLDERS' DEFICIT (9,344,657)
------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 19,746,808
============
