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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended October 31, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from .......... to ..........
Commission File No. 0-14733
DELTA COMPUTEC INC.
(Exact name of registrant as specified in its charter)
New York 16-1146345
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
366 White Spruce Boulevard
Rochester, New York 14623
(Address of principal executive offices) (Zip Code)
201-440-8585
(Registrant's telephone number, including area code)
Securities registered pursuant of Section 12(b) of the Act:
Name of exchange
Title of each class on which registered
Common Stock $.01 par value ......
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant is $84,935. Market value is determined by reference to the
price (average between bid and ask) of Registrant's Common Stock as reported
through Bloomberg as of the close of business on January 17, 1996.
The number of common shares outstanding as of January 17, 1996 was
6,811,575.
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DOCUMENTS INCORPORATED BY REFERENCE
Part III Registrant's 1995 Proxy Statement, to be issued in connection
with the Annual Meeting of Shareholders.
Exhibit Index is located on Page 28.
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PART I
Item 1. Business
A. General
Delta Computec Inc. and its subsidiaries/divisions (the "Registrant" or
the "Company"), provide a wide array of Computer System, Data Communication and
Lan/Wan technical services and products to a customer base which encompasses
many industries and many geographic locations. Its customer base includes large
brokerage houses, banks, pharmaceutical companies, major hospitals and long
distance carriers, located principally in the Northeast but reaching as far as
Florida and the West Coast. Technical services offered include but are not
limited to design, product procurement, installation, service, maintenance and
on-site technical management and consulting.
While the Company maintains its corporate headquarters in Rochester,
New York, its main operation center is located in Teterboro, New Jersey. The
Northeast and Mid-Atlantic regions are both serviced from Teterboro while other
areas of the country are supported by branch locations in: Atlanta, Georgia;
Escandido, California; Altamonte Spring, Florida; Mt. Laurel, Maryland;
Philadelphia, Pennsylvania; Sunrise, Florida; Syracuse, New York; Waltham,
Massachusetts and Wilmington, Delaware. The Company, a New York Corporation, is
qualified to do business in California, Connecticut, Georgia, Illinois,
Louisiana, Maryland, Massachusetts, Ohio, Pennsylvania, Texas and New Jersey.
In November, 1992, the Company completed the acquisition of the assets
of Data Net, Inc. ("Data Net") and Dataspan Systems, Inc. ("Dataspan") from
Willcox & Gibbs through the Company's wholly-owned subsidiary, Delta Data Net,
Inc. (the "Data Net Subsidiary"). Data Net's historical focus had been the sale
of Data Communications hardware and test equipment. Dataspan had focused
exclusively on the sale and assembly of cables used in Data Communication
applications. Dataspan sells directly to end users and original equipment
manufacturers (OEM), custom manufactured and bulk cable products. In 1990, Data
Net established an engineering team to support the sale of their core products
in the form of integrated network systems. this effort included the design,
specifications, project management, installation and (to a lesser extent)
trouble shooting support of complete cable plants and data centers using digital
switching, hubbing, bridging, and routing hardware. The Company relocated its
Data Net Subsidiary to its main operations facility in Teterboro, New Jersey in
March, 1993 and combined its operations with its Computer Hardware maintenance
organization.
In November, 1994, the Company completed the acquisition of the assets
of Intronet, Inc. ("Intronet, Inc."), which assets formed the basis of the
Company's Intronet Division ("Intronet"). Intronet designs, installs and
supports advanced computer networks in such specialty markets as large campuses
and industrial facilities which require network hubbing integrated with fiber
and copper cabling. Following the acquisition, the Company assumed the lease on
the Waltham, Massachusetts office of Intronet.
In December, 1994, the Company acquired the balance of ownership in its
joint venture technical services company, SAI/Delta, Inc. ("SAI/Delta") and
operated from SAI/Delta's two Florida offices in Altamonte Spring and Sunrise.
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Significant events which occurred in the Fiscal year ending October 31,
1995, ("Fiscal 1995") included:
1. Changes in the Company's senior management.
On March 24, 1995, the Company filed Form 8-K concerning the
resignation of Mr. L. Rodger Loomis, President and Chief Executive
Officer and Mr. Peter D. Smith, Chief Financial Officer. Following
these resignations, Mr. John T. DeVito was named President and Chief
Operating Officer. The Board of Directors performed services as an
Executive Management Committee. The position of Chief Accounting
Officer was filled by Mr. Walter Struble who sadly and unexpectedly
died at the early age of 41 years in December of 1995. The position
has not yet been filled.
2. A return to the Company's core business.
In the beginning of April, 1995, management and the Board of Directors
determined to strategically shift the Company's direction back toward
its prior core business of providing technical integration services to
customers while de-emphasizing the product and system engineering
aspects of its Data Net Subsidiary. The decision was based on the large
overhead costs necessary to support the business of the Data Net
Subsidiary as well as anticipated changes to market conditions leading
to increased competition and lower gross margins.
Consistent with this shift in strategic direction, management
immediately instituted approximately $1,200,000 in payroll reduction
and approximately $300,000 to $400,000 of additional cost savings
through expense reduction. The impact of these cost reductions was
partially recognized in the third quarter of Fiscal 1995, with most of
the cost reductions being fully recognized in the fourth quarter of
Fiscal 1995.
Based on this strategic shift in direction, the Company signed a letter
of intent in June, 1995, to sell certain of its business units to a
private investment group. This specific transaction was not
successfully completed. However, management continues to negotiate with
other potential qualified acquirers for similar transactions.
3. Changes in financing.
On May 4, 1995, the Company filed a Form 8-K concerning an agreement
with its commercial lender and with Joseph M. Lobozzo, II, an officer,
Director and the Company's controlling shareholder ("Lobozzo") to
provide for an additional $700,000 Over Advance Lending Facility. The
Company also agreed to issue an option to Lobozzo exercisable through
May 20, 1999, to purchase an additional 11,440,475 of the Company's
common shares. This Over Advance Lending Facility was critical in
providing increased working capital to help bridge the Company through
its critical restructuring phase.
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4. Project overruns.
At the time of the Company's acquisition of the assets of Intronet,
Inc. in November, 1994, the Company entered into a major contract in
excess of $4,000,000 from a well known eastern college to provide
extensive on-campus computer access to all of the college's buildings.
The contract, to be performed by the Company's Intronet Division, was
essentially completed prior to the end of Fiscal 1995. Actual costs
incurred by the Company significantly exceeded contractual estimates.
Most of these cost overruns have been recognized in the Fiscal 1995
financial statements which accompany this Form 10-K. As described in
paragraph 6 below, Intronet has since been down-sized and is operating
under a new management team.
5. Relocation of Functions
Following the changes in senior management referred to above, the
Company closed its Syracuse, New York executive/administrative office
in July, 1995. The Company's principal executive offices were moved to
Rochester, New York and the remainder of the administrative functions
previously performed in the Syracuse office were either terminated or
moved to the Company's Teterboro, New Jersey facility. The remaining
employees associated with the Syracuse office were either terminated or
moved to Teterboro, New Jersey.
6. Downsizing of the Intronet division
In the fall of 1995, the Company reduced the size of its operating
staff of the Waltham, Massachusetts office of Intronet. The Company and
two of its employees who had also been principal executives of
Intronet, Inc. prior to the acquisition reached agreement terminating
employment agreements with those employees. One employee has since
become a consultant to the Company assisting in Intronet's Connecticut
operations.
The Board of Directors and management believe that the decision to
downsize the Company and to refocus its emphasis on its core business has
provided the Company with the means to return to profitability.
B. Services, Products and Markets
The Company operates in an extraordinarily large market. While the
Company's total sales and revenues are but a fractional percent of the dollars
spent each year for services and products related to Computer Systems Data
Communications and Lan/Wan Networks, nevertheless the Company does have long
standing relationships with major brokerage firms, banks and pharmaceutical
companies. By refocusing on its core business, the Company hopes to be able to
expand those relationships.
The Company's customers are not committed to fulfilling their Computer System
and Data Communication needs through a single manufacturer. Performance
differences as well as constant changes in technology make such a commitment
nearly
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impossible. As a result, service and integration needs have become far more
complex requiring knowledge of multiple manufacturers' products, how they
interact with each other and how they must be serviced/maintained. This
complexity has become significant enough that many customers are now considering
or already outsourcing complete management of their Computer System and Data
Communication needs. By doing so, they are no longer compelled to maintain
internal resources to perform the same or similar functions. The Company hopes
to be able to take advantage of these market opportunities.
Consequences of this trend are likely to include increased margin
pressure on third party maintenance providers that are not able to provide
higher level technical services and continued margin pressure on companies that
are exclusively product/distribution oriented.
1. Technical Services
The Company's core business is based in providing technical and
maintenance services in direct support of its customers' Computer
Systems, Data Communication Systems and Lan/Wan Networks. Broadly,
these services include:
* Network systems design
* Network analysis and performance testing
* Network management
* Project management
* Premise wiring
* Installation services
* Technical consulting services
* Maintenance Services
* Help desk support
* Complete outsourcing responsibility for all or most of
the above
Technical services are either charged at a predetermined
contractual price or on the basis of labor and materials used.
Maintenance services are generally performed at a customer's site on an
"on-call" basis, either pursuant to a contract of a specified term and
coverage ("Service Agreement") or, as in the case of technical
services, on a time and materials basis.
In Fiscal year 1995, approximately 66% of the Company's
service revenue was generated from contractual Service Agreements. This
compares to 72% in Fiscal year 1994 and 81% in Fiscal year 1993.
Technical services and maintenance are performed either at the
customer's site or at one of the Company's regional offices or the
Teterboro, New Jersey depot facility. Project related technical
services are most often initiated through an authorization to proceed
given by the customer following a competitive bid process. A Service
Agreement related repair service is initiated by the customer, usually
by telephoning the Company's National Response Center which then
dispatches a Field Engineer to diagnose the source of the problem and
repair or replace the malfunctioning component or equipment.
Frequently, the Company's service personnel are permanently located at
the customer's site in order to ensure optimum response time to the
customer's mission critical needs.
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In the broader context of technical services offered by the
Company, a number of customers, actual and potential, are currently
considering complete outsourcing of the ongoing management of their
Computer System/Data Communications systems. Where such a commitment is
made, the nature of the agreement between the Company and its customer
is similar to that of a Service Agreement including a defined period of
time (usually at least one year) as well as predetermined billing rates
for specific functions performed or technical positions filled.
Customer Service Agreements generally have an initial term of
one year and continue thereafter until terminated by either the
customer or the Company, usually upon 90 days prior written notice.
After the first year, the Company may increase or decrease the prices
related to this service, typically with 90 days advance written notice
to the customer. In some cases the Company provides service at customer
sites as part of a subcontracting agreement with another provider,
usually a manufacturer or reseller of equipment that has taken
responsibility as prime contractor for all maintenance services. In
these cases, the provider (prime contractor) is responsible for payment
of all services rendered by the Company to the end user. The Company
currently is engaged in this type of sub-contractor relationship with
several large organizations.
The Company maintains a significant inventory of spare parts
in order to ensure prompt servicing of its customers' requirements.
This inventory is replenished on a regular basis based on the number of
different systems being supported, past parts usage and anticipated
future requirements.
Marketing
The Company markets its technical services by direct
development of customers through its sales force and senior management
and by initiating and responding with technical and price proposals
when customer needs are specifically identified. Unique to the
Company's approach is its emphasis on custom crafted solutions which
focus on creating the resources to meet a customer's specific needs
instead of attempting to modify customer needs to fit specific
resources.
Competition
The Company competes both with third party service providers
that are either nationally based or have strong regional presence and
with manufacturers and/or large distributors which have their own
technical service organizations. It is management's belief that the
Company competes with third party providers on the basis of technical
competence, customer satisfaction, responsiveness and effectiveness of
services as well as the price at which such services are provided, and
with manufacturers on the basis of its breadth of product availability
as well as its ability to service these multiple product lines. The
Company also believes that its scope of services, its presence in the
industry and its specific expertise in computer systems and networks
gives it an advantage over traditional maintenance companies and
enables it to compete on a regional/national basis.
Backlog
As of October 31, 1995, the Company had service maintenance
contracts and technical service contracts in force with an annual
volume of approximately $5,772,000, subject to renewal on contract
anniversary dates, compared with approximately $6,558,000 at October
31, 1994.
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2. Products
In addition to the technical services provided, the Company
distributes a wide variety of Computer System, Data Communication and
Networking products from over 40 manufacturers. Included are modems,
multiplexers, channel banks, CSU/DSU's, workstations, terminal servers,
hubs, bridges, routers, gateways, cable assemblies, bulk cable and
cabinets. The Company also offers a line of high quality cables and
accessories manufactured by the Company through its Data Span division
to service the extensive premise wiring requirements of Data
Communications installations. This division, located at the Teterboro
facility, fabricates custom cable assemblies and molded cables for end
users as well as OEM manufacturers.
Marketing
The Company's marketing strategy is to offer a full line of
Data Communication and Computer System Networking products to its
customers, linked as often as possible to its broad range of technical
services. This strategy facilitates the development of long term
relationships with customers and provides market differentiation both
from manufacturers and distributors.
The products sold by the Company are marketed through direct
solicitation of customers by the Company's sales staff and its senior
management as well as by initiating and responding with technical and
price proposals to specific customer requirements.
Competition
The Company competes directly with manufacturers, distributors
and even retailers. Its principal disadvantage with these competitors
is its lack of volume driven buying power. This disadvantage is offset
somewhat by long term relationships with customers and integrated value
added services.
Backlog
As of October 31, 1995, the Company had a backlog for network
products of approximately $800,000 compared to a backlog of $2,900,000
on October 31, 1994. The prior year amount reflected the contract with
a well known eastern college.
3. Other aspects of the Company's business
It is not believed that the Company's business is seasonal;
however, several large service and maintenance contracts are usually
renewed near the calendar year end and at calendar mid-year. The
Company does not believe its business is dependent upon a single
customer or a few customers; the loss of any one or more of which would
have a material adverse effect on the Company's business. No customer
accounts for sales of more than ten percent (10%) of the Company's
consolidated revenues. No significant portion of the Company's business
is subject to renegotiation of profits or termination of contracts or
subcontracts at the election of the government. Research and
development activities are not considered to be material to the
Company's operations.
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4. Government Regulation
To the best of the Company's knowledge, it is presently in
compliance with environmental statues and regulations.
5. Executive Officers Who Are Not Directors
Mr. John DeVito, President and Chief Operating Officer
joined the Company as a result of the acquisition by the Company of
R&M Associates, Electronic Data Products Service, Inc. in June, 1990.
6. Employees
As of October 31, 1995, the Company had approximately 232 full
and part time employees. Except as noted below, the employees of the
Company are not covered by any collective bargaining agreement and the
Company has never experienced a strike or work-stoppage. The Company
does have an agreement with IBEW local 164 in New Jersey to provide
cable installers as needed. The number of employees subject to this
agreement fluctuates between 2 and 20 and includes career managers of
that division. The Company considers its relations with its employees
to be good. As a result of the November 1994 acquisition of the assets
of Intronet, Inc., the Company has agreements with Massachusetts IBEW
Local 1499 and currently employs 12 union employees in the Northeast.
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Item 2. Properties
Offices
The Company maintains offices in many cities. In addition to
the locations listed below, customers provide, at no cost to the
Company, facilities at their premises in:
Bedminster, New Jersey Pompton Plains, New Jersey
King of Prussia, Pennsylvania Toms River, New Jersey
Miami, Florida White Plains, New Jersey
Morristown, New Jersey Wilmington, Delaware
New York City, New York
The following summarizes the Company's current leased facilities:
<TABLE>
<CAPTION>
Base
Monthly Approx.
Location Rent Expires Sq.Ft.
<S> <C> <C> <C>
Atlanta, Georgia 1,500.00 Monthly 6,600
Escandido, California 400.00 Monthly 1,200
Laurel, Maryland 550.00 Monthly 510
Altamonte Springs, Fl. 642.00 11/30/96 800
Philadelphia, Pa. 1,378.00 Monthly 1,600
Sunrise, Florida 1,166.00 1/31/96 1,200
Syracuse, New York 3,885.00 7/31/97 6,600
Teterboro, New Jersey 19,180.00 7/30/01 37,000
Waltham, Massachusetts 3,700.00 5/31/97 2,185
Wilmington, Delaware 355.00 2/28/97 400
</TABLE>
Management considers its present leased space to be adequate
for current operations. The Company relocated its Data Net subsidiary
in March of 1993 to its facility in Teterboro, New Jersey and its
Syracuse offices/service center to the same location in May, 1995. The
Company has closed its Syracuse location but has not yet reached
agreement with the landlord of this facility regarding a termination of
the Lease.
Item 3. Legal Proceedings
No material litigation is pending or is known to be
contemplated against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
During the period reported ending October 31, 1995, the common
stock of the Registrant was traded on the over-the-counter NASDAQ
market under the symbol DCIS. As of November 10, 1995, the common stock
of the Registrant fell below the NASDAQ minimum bid price guidelines
and since then has traded only on local OTC markets. At the end of
Fiscal 1995, there were approximately 450 holders of record of the
Company's common stock. The high and low bid prices of the common stock
during each quarter of Fiscal 1995 and Fiscal 1994 were as follows:
1994 Bid Prices
High Low
1st Quarter 7/8 3/4
2nd Quarter 3/4 1/2
3rd Quarter 1/2 1/2
4th Quarter 5/8 1/2
1995 Bid Prices
1st Quarter 3/4 3/4
2nd Quarter 1/4 1/4
3rd Quarter 1/8 1/8
4th Quarter 1/16 1/16
The over-the-counter market quotations described above reflect
inter-dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.
No cash dividends have been declared on the common stock of
the Company for Fiscal 1995 or Fiscal 1994. The Company anticipates
that, for the foreseeable future, any earnings which may be generated
from its operations will be used to reduce debt and provide working
capital. Payment of dividends are prohibited under the terms of the
Company's long-term credit facility. In any event, the payment of
dividends in the future will depend upon the Company's financial
condition, capital requirements and earnings and such other factors as
the Board of Directors may deem relevant.
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Item 6. Selected Financial Data Delta Computec Inc.
The selected data presented below for and as of the end of the four years ended
October 31, 1994, 1993, 1992 and 1991 is derived from the financial statements
of the Company which have been audited by Deloitte & Touche, independent
certified public accountants. Data for and as of the end of the year ended
October 31, 1995 is per the Company's unaudited internal financial statements.
This data should be read in conjunction with the related financial statements
and notes included elsewhere in the Form 10-K.
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<CAPTION>
STATEMENT OF OPERATIONS DATA:
1995 (1) 1994 1993 (2) 1992 1991
<S> <C> <C> <C> <C> <C>
Total Revenue $30,801,156 $25,361,745 $30,901,744 $ 8,468,566 $ 8,720,908
Earnings (Loss) from Continuing Operations (1,550,842) (643,426) (569,010) 242,954 199,369
Extraordinary Items 156,000 (4) 110,000 (4)
Cumulative Effect of Accounting Change 775,000 (3)
Net Earnings (Loss) (1,550,842) (643,426) 205,990 398,954 309,369
Earnings (Loss)/Share:
Continuing Operations (.08)(5) (.09) (.08) .07 .06
Net Earnings (Loss) (.08)(5) (.09) .03 .12 .10
BALANCE SHEET DATA:
Total Assets $12,909,129 $13,521,285 $13,851,817 $ 6,174,750 $ 6,204,597
Short-Term Debt 3,782,956 3,624,339 708,663 500,193
Long-Term Debt 3,716,820 424,851 426,230 770,224
Subordinated Debentures 1,075,001 1,087,501 1,112,501 1,000,000 1,000,000
Stockholders' Investment 1,619,255 3,170,097 3,813,398 1,532,943 1,133,293
</TABLE>
(1) Operating results include the results of Intronet Inc. from the date of
acquisition of assets in November, 1994.
(2) Operating results include the results of Delta Data Net, Inc. a wholly
owned subsidiary which acquired the assets of Data Net, Inc. and Dataspan
Systems, Inc. in November, 1992.
(3) The Company adopted the Statement of Financial Accounting Standards No.
109 (FAS 109) "Accounting for Income Taxes" effective November 1, 1992.
This statement supersedes FAS No. 96 "Accounting for Income Taxes". The
cumulative effect of adopting FAS No. 109 on the Company's financial
statements was to increase income by $775,000 ($.11 per share) for the
year ended October 31, 1993.
(4) Utilization of Tax Loss Carryforwards.
(5) Includes full dilution for convertible debenture and for option issued to
Lobozzo in the year ended October 31, 1995 to acquire 11,440,475
common shares.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Results of Operations
Operating results for the year ended October 31, 1995 (Fiscal 1995)
reflected a net loss of $1,550,842 or $.08 per share compared with a
net loss of $643,426 or $.09 per share for the year ended October 31,
1994 (Fiscal 1994) and net earnings of $205,990 or $.03 per share
(after reflecting the cumulative effect of a change in accounting for
income taxes of $775,000 or $.11 per share) for the year ending
October 31, 1993 (Fiscal 1993). Operating results for Fiscal 1994 and
Fiscal 1993 were negatively impacted by unusual charges for obsolete
inventory, litigation and relocation expenses, as well as declining
revenues at its Data Net subsidiary. Operating results for Fiscal 1995
were negatively impacted by cost overruns on a major contract in the
Company's Intronet division and by a continued decline in revenues in
the Data Net subsidiary.
Revenues
Total revenues for Fiscal 1995, Fiscal 1994 and Fiscal 1993 were
$30,801,156, $25,361,745 and $30,901,744 respectively. Revenues
increased $5,439,411 or 21.5% in Fiscal 1995 compared to Fiscal 1994.
This increase was primarily due to the acquisition of the assets of
Intronet, Inc. in November 1994. Revenues decreased $5,539,999 or
17.9% in Fiscal 1994 compared to Fiscal 1993. This decrease was
primarily due to the integration of the Company's Data Net subsidiary
which was acquired in November, 1992.
Costs and Expenses
Service costs for Fiscal 1995, Fiscal 1994 and Fiscal 1993 were
$10,969,323, $7,654,062 and $7,341,708 respectively. Service costs
increased $3,315,261 or 43.3% in Fiscal 1995 compared to Fiscal 1994.
Service costs in Fiscal 1994 increased $312,354 or 4.3% compared to
Fiscal 1993. These increases were primarily due to the incremental
costs associated with the increase in service revenue from period to
period.
Service costs as a percentage of service revenue increased from 70.0%
in Fiscal 1993 to 72.4% in Fiscal 1994 and increased to 81.3% in
Fiscal 1995. The 1994 increase is reflective of a decline in service
contracts in the Company's branch offices and high start-up costs
associated with the Company's entry into high volume laser printer
maintenance. The 1995 increase was due to the front loaded
costs associated with the Company's entry into the "high end"
technical consulting business.
Cost of equipment sold for Fiscal 1995, Fiscal 1994 and Fiscal 1993
was $13,689,506, $11,645,855 and $15,937,346. Cost of equipment sold
increased $2,043,651 or 17.5% in Fiscal 1995 compared to Fiscal 1994.
This increase was primarily due to a proportionate increase in
equipment sales. Cost of equipment sold decreased $4,291,491 or 26.9%
in Fiscal 1994 compared with Fiscal 1993. This decrease was due to a
proportionate decrease in equipment sales. Cost of equipment sold as a
percentage of sales increased from 78.1% in Fiscal 1993 to 78.7% in
Fiscal 1994 to 78.5% in 1995. These increases reflect lower margins on
sales of Data Communication equipment sold due to price pressure in
the marketplace, offset partially by a few higher margin customers.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses for Fiscal 1995, Fiscal
1994 and Fiscal 1993 were $6,615,896, $5,682,678 and $7,283,166
respectively. Selling, general and administrative expenses increased
$933,207 or 16.4% in Fiscal 1995 compared with Fiscal 1994. This
increase was primarily due to the acquisition of Intronet. Selling,
general and administrative expenses decreased $1,600,488 or 22.0% in
Fiscal 1994 compared with Fiscal 1993. This decrease was primarily due
to the continued integration of its Data Net subsidiary.
Inventory and Product Obsolescence
During Fiscal 1995, the Company accounted for normal product
obsolescence through inventory reserves. During the quarter ended
October 31, 1994, management made a decision to eliminate its stocking
position of certain data communication equipment in its Data Net
subsidiary. As a result, the Company provided $846,527 as an unusual
charge to write down certain data communication equipment to net
realizable value. During the quarter and year ended October 31, 1993,
an unusual charge was made in the amount of $700,866 to write down
certain inventories of data communication equipment of the Data Net
subsidiary, which were assumed at the time of the acquisition of Data
Net in November, 1992. While Company personnel review obsolescence on
a regular basis by reference to historical movement and market
conditions, the Fiscal 1993 charges were recognized principally during
the Company's fourth quarter of Fiscal 1993.
Interest Expense
Interest expense for Fiscal 1995, Fiscal 1994 and Fiscal 1993 was
$462,485, $390,343 and $460,649 respectively. Interest expense
increased by $72,142 or 18.5% in Fiscal 1995 compared with Fiscal
1994. This increase was primarily due to increased borrowing
from the prior year. Interest expense decreased by $70,306 or
15.3% in Fiscal 1994 compared with Fiscal 1993. This decrease was
primarily due to reduced borrowing from the prior year.
Income Taxes
Income tax (benefit) expense for Fiscal 1995, Fiscal 1994 and Fiscal
1993 was $642,764, $(260,000) and $(249,000) respectively. Income
taxes are recognized for the amount of taxes payable or refundable for
the current tax year, and deferred tax liabilities and assets for the
future tax consequence of events that have been recognized in the
Company's consolidated financial statements or tax returns.
The Company adopted the Statement of Financial Accounting Standards
No. 109, (FAS 109) "Accounting for Income Taxes" effective November
1, 1992. This statement supersedes FAS No. 96 "Accounting for Income
Taxes": The cumulative effect of adopted FAS No. 109 on the
Company's financial statements was to increase income by $775,000
($.11 per share) for the year ended October 31, 1993.
At July 31, 1995 the Company had accumulated approximately $2,500,000
of operating loss carryforward for tax purposes which was primarily
the result of losses generated by its newly acquired business units
over the
14
<PAGE>
prior two years. The Company had recognized the tax benefit of these
losses, in the form of deferred tax assets on its balance sheet,
through April 30, 1995. Generally accepted accounting principles (FAS
109) establish guidelines to be used in valuing deferred tax assets.
The Company incorporated in the financial statements at July 31, 1995
reserves for the valuation of previously recorded deferred tax assets
in the amount of $400,000 and additional reserves in the amount of
$400,000 at October 31, 1995. It continues to be the Company's
intention to divest itself of certain non-strategic business units and
the Company will continue to assess, in future periods, the value of
these deferred tax assets which expire in varying amounts between the
years 2001 and 2009. This assessment will include, but not be limited
to, the Company's ability to divest of non-strategic business units
and the ability to project adequate profits to utilize the operating
loss carryforward.
Liquidity and Capital Resources
The Company has financed its working capital requirements, capital
expenditures and debt service from cash flow provided from the
operations and borrowing. Cash provided by operations in Fiscal 1995,
Fiscal 1994 and Fiscal 1993 totalled $1,028,570, $1,232,188 and
$1,803,185 respectively. Working capital at October 31, 1995 decreased
by approximately $4,922,905 from October 31, 1994 primarily due to
classifying the bank line of credit as a current obligation as of
October 31, 1995. Working capital at October 31, 1994 improved by
approximately $2,601,120 over October 31, 1993 primarily due to bank
debt refinancing. It is possible that in Fiscal 1996, the Company may
require supplemental sources of capital at least on a short term
basis, to support seasonal cash needs.
On May 4, 1995, the Company filed Form 8-K concerning an agreement
with its commercial lender and Lobozzo to provide for an additional
$700,000 overdraft lending facility, and to issue an option to Lobozzo
to purchase an additional 11,440,475 common shares. This modified
lending arrangement was critical to providing central working capital
to help bridge the Company through its critical restructuring phase.
On April 1, 1994, The Company executed a credit agreement to provide a
long-term credit facility. This facility will expire on April 30, 1997
and bears interest at 2.0% above the bank's prime lending rate.
Proceeds from this facility were utilized to refinance existing credit
facilities and provide on-going working capital requirements. This
facility was amended in November 1994, to complete the acquisition of
the assets of Intronet, Inc. Availability of funds under this facility
is limited to the lesser of $4,500,000 or a percentage of eligible
accounts receivable and inventory.
Capital expenditures for field spare parts and property and equipment
were $1,282,678 in Fiscal 1995 compared with $964,822 in Fiscal 1994
and $1,167,669 in Fiscal 1993. Capital expenditures are expected to be
approximately $1,000,000 in Fiscal 1996.
Depreciation and amortization expense in Fiscal 1995, Fiscal 1994 and
Fiscal 1993 was $1,366,484, $1,262,478 and $1,174,356 respectively.
Depreciation and amortization expense is expected to be approximately
$1,300,000 in Fiscal 1996.
15
<PAGE>
Item 8. Financial Statements and Supplementary Schedule
CONSOLIDATED FINANCIAL STATEMENTS
DELTA COMPUTER INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Form
10-K Ref.
Consolidated Financial Statements:
Consolidated Balance Sheets, October 31, 1995 and 1994 17
Consolidated Statements of Operations for the Years Ended
October 31, 1995, 1994 and 1993 19
Consolidated Statements of Cash Flows for the Years Ended
October 31, 1995, 1994 and 1993 20
Notes to Consolidated Financial Statements 21
All other schedules are not submitted because they are not applicable, are not
required or because the required information is included in the financial
statements or notes thereto.
16
<PAGE>
DELTA COMPUTEC INC.
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
1995 1994
CURRENT ASSETS:
<S> <C> <C>
Cash $ 30,147 $ 12,809
Accounts receivable, less allowance
for doubtful accounts of $386,049
and $193,238 in 1995 and 1994
respectively 5,618,217 5,462,556
Inventories 1,968,089 2,201,339
Prepaid expenses and other current 244,836 222,484
Deferred income taxes current 100,000 317,000
----------- -----------
Total current assets $ 7,961,289 $ 8,216,188
FIELD SPARE PARTS, less accumulated
amortization of $572,811 and
$911,493 in 1995 and 1994,
respectively $ 2,381,134 $ 2,378,698
PROPERTY AND EQUIPMENT:
Technical equipment $ 1,525,898 $ 1,311,900
Office furniture & equipment 1,422,293 1,296,557
Vehicles 154,661 150,461
Leasehold improvements 283,121 227,046
----------- -----------
$ 3,385,973 $ 2,985,964
Less: accumulated depreciation 2,408,696 1,970,132
----------- -----------
$ 977,277 $ 1,015,832
INVESTMENT IN AFFILIATED COMPANY $ - $ 10,000
DEFERRED INCOME TAXES NON-CURRENT $ 610,236 $ 1,035,000
OTHER ASSETS:
Goodwill, less accumulated
amortization of $171,216 in
1995 and 1994 respectively $ 774,591 $ 456,928
Customer lists, less accumulated
amortization of $87,833 in 1995
and 1994, respectively $ 142,401 $ 168,485
Other assets 62,201 240,154
----------- -----------
$ 979,193 $ 865,567
----------- -----------
$12,909,129 $13,521,285
=========== ===========
</TABLE>
See notes to consolidated financial statements.
17
<PAGE>
DELTA COMPUTEC INC.
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
(Unaudited)
1995 1994
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 3,613,502 $ 3,142,204
Deferred service revenue 1,573,966 1,783,238
Accrued expenses:
Payroll and payroll taxes 423,762 404,791
Interest 21,800 30,376
Other 196,248 186,258
Due to Shareholder 602,639 -
Bank line of credit 3,782,956 -
----------- -----------
Total current liabilities $10,214,873 $ 5,546,867
LONG-TERM DEBT $ - $ 3,716,820
SUBORDINATED DEBENTURE $ 1,075,001 $ 1,087,501
STOCKHOLDERS' INVESTMENT:
Common stock, $ .01 par value;
authorized 20,000,000 shares;
issued and outstanding 6,811,575
shares in 1995 and 1994. $ 68,116 $ 68,116
Additional paid-in capital 4,916,093 4,916,093
Accumulated deficit ( 3,364,954) ( 1,814,112)
----------- -----------
Total stockholders investment $ 1,619,255 $ 3,170,097
----------- -----------
$12,909,129 $13,521,285
=========== ===========
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
DELTA COMPUTEC INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
(Unaudited)
1995 1994 1993
<S> <C> <C> <C>
REVENUES:
Service revenues $13,494,558 $10,572,860 $10,485,117
Equipment sales 17,306,598 14,788,885 20,416,627
----------- ----------- -----------
$30,801,156 $25,361,745 $30,901,744
COSTS AND EXPENSES:
Service costs $10,969,323 $ 7,654,062 $ 7,341,708
Cost of equipment sold 13,689,506 11,645,855 15,937,346
Selling, general and
administrative 6,615,896 5,682,689 7,283,166
Unusual Charges - 846,527 700,866
----------- ----------- -----------
$31,274,725 $25,829,133 $31,263,086
OTHER INCOME (EXPENSE):
Interest expense $ (462,485) $ (390,343) $ (460,649)
Other, net (27,976) (45,695) 3,981
----------- ----------- -----------
$ (434,509) $ (436,038) $ (456,668)
----------- ----------- -----------
EARNINGS (LOSS) BEFORE INCOME
TAXES CUMULATIVE EFFECT OF AC- $ (908,078) (903,426) $ (818,010)
COUNTING CHANGE
INCOME TAXES $ 642,764 $ (260,000) $ (249,000)
----------- ----------- -----------
EARNINGS (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $(1,550,842) $ (643,426) $ (569,010)
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE $ - $ - $ 775,000
----------- ----------- -----------
NET EARNINGS $(1,550,842) $ (643,426) $ 205,990
=========== =========== ===========
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE NET EARNINGS (LOSS) (.23) (.09) .03
EARNINGS PER COMMON SHARE ASSUMING FULL
DILUTION NET EARNINGS (LOSS) (.08) (.09) .03
</TABLE>
19
<PAGE>
DELTA COMPUTEC INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
(Unaudited)
1995 1994 1993
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings (loss) $(1,550,842) $ (643,426) $ 205,990
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 1,412,047 1,262,478 1,174,356
Loss on retirement of fixed assets - - 47,756
Provision for deferred income taxes 641,764 (307,000) (270,000)
Decrease (increase) in accounts
receivable (155,661) (475,761) 975,497
Decrease (increase) in inventories 233,250 972,978 652,563
Increase (decrease) in accounts payable
and accrued expenses 849,963 516,642 (278,042)
Increase (decrease) in deferred
service revenue (209,272) 153,497 (74,366)
Other - net (192,679) (247,220) 144,431
Cumulative effect of accounting
change - - (775,000)
----------- ----------- -----------
Net cash flow from
operating activities $ 1,028 570 $ 1,232,188 $ 1,803,185
----------- ----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment $ (400 ,009) $ (162,802) $ (347,753)
Additions to field spare parts (882,678) (802,020) (819,916)
Acquisition of businesses (384,820) - (4,113,613)
----------- ----------- -----------
Net cash flow from
investing activities $(1,667,507) $ (964,822) $(5,281,282)
----------- ----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from Shareholder loan $ 602,639 - -
Proceeds from debenture issue $ - $ - $ 637,501
Sale of common stock 125 23,230
Net proceeds from bank borrowings 66,136 (203,350) 3,301,000
Principal repayments of debt ( 12,500) (154,020) (386,703)
----------- ----------- -----------
Net cash flow from
financing activities $ 656,275 $ (357,245) $ 3,575,028
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH $ 17,338 $ (89,879) $ 96,931
CASH - beginning of year $ 12,809 $ 102,688 $ 5,757
----------- ----------- -----------
CASH - end of year $ 30,147 $ 12,809 $ 102,688
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
DELTA COMPUTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 1995, 1994 AND 1993
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries R&M Associates Electronic
Data Products Service Inc., Computer Support, Inc., Delta Data Net
Inc., Intronet Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation. The unaudited
financial statements included herein reflect all normal and recurring
adjustments that are in the opinion of management, necessary for fair
presentation of the results for the period.
Basis of Presentation
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company
incurred an operating loss in Fiscal 1994 and 1995 and was in default
under certain loan agreements as of October 31, 1995 (Note 3). In
Fiscal 1994, the Company executed a credit agreement to provide a
long-term credit facility which will expire April 30, 1997. On
January 24, 1995, certain debt covenants were amended based on the
Company's business plan for Fiscal 1995. If certain measures that
management has recently implemented prove unsuccessful and defaults
occur under the amended credit agreement, then the Company may need
to seek additional financing from outside sources.
Property and Equipment
Property and equipment are stated at cost and are depreciated using
the straight-line method over the following estimated useful lives:
Estimated
Description Useful Lives
Technical equipment 5 - 7 years
Office furniture and equipment 5 - 7 years
Vehicles 2 - 3 years
Leasehold improvements 5 - 10 years
Maintenance and repairs are charged to expense as incurred. The cost
of renewals or betterments that increase the useful lives of the
assets is capitalized in the appropriate asset account. The gain or
loss on property retired or otherwise disposed of is credited or
charged to operations and the cost and accumulated depreciation are
removed from the accounts.
Inventories
Inventories represent computer equipment and peripherals held for
resale in the normal course of business and consumable field spare
parts. These inventories are recorded at the lower of cost (first-in,
first-out) or market.
21
<PAGE>
Field Spare Parts
Field spare parts are stated at cost and are amortized using the
straight-line method over an estimated useful life of 5 years,
beginning in the year after acquisition.
Goodwill
Goodwill, representing the excess of the cost of acquired businesses
over the fair value of net assets acquired, is being amortized on a
straight-line basis over periods ranging from ten to twenty years.
Customer Lists
Customer lists, representing the fair market value of customer lists
for businesses acquired, are being amortized on a straight-line basis
over a ten-year period.
Deferred Service Revenue
Service revenue is recognized ratably over the contract period.
Deferred service revenue represents billings in advance of the
service period.
Revenue Recognition
Service revenues: Contract service revenue is recognized ratably over
the contractual period or as services are provided. Revenue from
service rendered on a "time and materials" basis is recognized in the
period the work is performed.
Equipment sales: Revenue from equipment sales and the related cost of
sales are recognized when title to the equipment passes. Component
repair revenue and related costs are recognized upon completion of
the repair.
Income Taxes
Income taxes are recognized for the amount of taxes payable or
refundable for the current year, and deferred tax liabilities and
assets for the future tax consequence of events that have been
recognized in the Company's consolidated financial statements or tax
returns.
At July 31, 1995 the Company had accumulated approximately $2,500,000
of operating loss carryforward for tax purposes which was primarily
the result of losses generated by its newly acquired business units
over the prior two years. The Company had recognized the tax benefit
of these losses, in the form of deferred tax assets on its balance
sheet, through April 30, 1996. Generally accepted accounting
principals (FAS 109) establishes guidelines to be used in valuing
deferred tax assets. The Company had incorporated in the financial
statements at July 31, 1995 reserves for the valuation of previously
recorded deferred tax assets in the amount of $400,000. The financial
statements at October 31, 1995 incorporate valuation reserves of
$800,000. As discussed in Note 5, it is the Company's intention to
divest itself of certain non-strategic business units. The Company
will continue to assess, in future periods, the value of the deferred
tax assets. This assessment will include, but will not be limited to,
the Company's ability to divest of non-strategic business units and
the ability to project adequate profits to utilize the operating loss
carryforward including that portion that has been reserved during the
period being reported.
22
<PAGE>
Earnings Per Share
Earnings per common and common equivalent share are computed based
upon the weighted average of common shares outstanding during each
year adjusted for dilutive outstanding stock options using the
Treasury Stock Method. Earnings per common and common equivalent
share assuming full dilution are computed on the assumption that all
outstanding convertible debentures were exercised on the issue date.
(2) Acquisitions
On November 17, 1994, the Company acquired substantially all of the
operating assets of Intronet, Inc. Intronet designs, installs, and
supports advanced computer networks with emphasis on large campus and
industrial facilities requiring network hubbing integrated with fiber
and copper cabling. These assets were acquired in exchange for
$337,000 in cash and assumption of approximately $588,000 in
liabilities of the seller. The Company accounted for the acquisition
as a purchase and the operating results of the acquisition from
November 17, 1994 have been included in the consolidated financial
statements.
On December 1, 1994, the Company exercised an option to acquire the
remaining shares of SAI/Delta, Inc. The Company accounted for the
acquisition as a purchase and the operating results of the
acquisition from December 1, 1994 have been included in the
consolidated financial statements.
(3) Long-Term Debt
On April 1, 1994, the Company executed a credit agreement to provide
a long-term credit facility. This facility will expire on April 30,
1997 and bears interest at 2.0% above the bank's prime lending rate
(8.75% at October 31, 1995). Proceeds from this facility were
utilized to refinance existing credit facilities and provide ongoing
working capital. This facility was amended in November 1994 to
complete the acquisition of the assets of Intronet, Inc. (see note
2). Availability of funds under this facility is limited to the
lesser of $4,500,000 or a percentage of eligible accounts receivable
and inventory. The credit agreement contains restrictive covenants,
the more significant of which require maintenance of minimum net
working capital, minimum tangible net worth, maximum debt-to-tangible
net worth, pre-tax income and a restriction on capital expenditures
and prohibition of dividend payments. The Company was not in
compliance with certain of these restrictive covenants due to lower
than projected earnings for the period. The Company plans to request
a waiver of non-compliance from the bank and has classified this debt
as current until it receives the waiver.
On May 1, 1995, Delta Computec Inc. reached an agreement with its
commercial lender for an additional $700,000 lending facility. Mr.
Joseph M. Lobozzo II, Delta's controlling shareholder, Secretary and
a director, agreed with Delta to provide funding for $400,000 of the
$700,000 additional lending facility. In return, Delta agreed to
issue to Mr. Lobozzo an option to purchase 11,440,475 common shares,
the balance of its available authorized but unissued common shares
for a four year period between May 20, 1995 and May 20, 1999 for
nominal consideration. If Mr. Lobozzo exercises the option, Mr.
Lobozzo and affiliated parties will hold or control 78 percent of the
authorized common shares of Delta. The option is cancelable under
certain circumstances if Delta's computer service business is sold
within 1 year.
23
<PAGE>
(4) Subordinated Debentures
As of October 31, 1995, the Company had issued an 8% subordinated
debenture in the face amount of $475,000 due November 4, 1997 to the
seller of Data Net.
As of October 31, 1995, the Company had issued an 8% subordinated
debenture in the face amount of $600,001 due to Mr. Lobozzo, a
director of Delta Computec Inc. Principal payments are due in three
annual installments of $200,000 commencing January 31, 1996 subject
to meeting bank loan covenants.
(5) Other Matters
The Company is continuing discussions with certain parties in order
to divest itself of non-performing operations.
24
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company
The information required by this Item is (i) incorporated herein by
reference to the Company's proxy statement under "Election of
Directors", which proxy statement will be filed within 120 days after
the end of the Company's Fiscal year.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by
reference to the Company's proxy statement under "Executive
Compensation", which proxy statement will be filed 120 days after the
end of the Company's Fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated herein by
reference to the Company's proxy statement under "Principal
Stockholders", which proxy statement will be filed within 120 days after
the end of the Company's Fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated herein by
reference to the Company's proxy statement under "Certain Transactions",
which proxy statement will be filed within 120 days after the end of the
Company's Fiscal year.
25
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Items 14(a)(1), 14(a)(2) and 14(d): The following financial statements and
financial statement schedules will be filed pursuant to a Form 8 Amendment to
this report as part of Item 8 of this report upon receipt of the audited
financial statements for the fiscal year ended October 31, 1995:
Independent Auditors' Report
Consolidated Balance Sheets - October 31, 1995 and 1994
Consolidated Statements of Operations for the years ended October 31,
1995, 1994, and 1993
Consolidated Statements of Changes in Stockholders' Investment for the
years ended October 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows for the years ended October 1995,
1994, and 1993
Notes to Consolidated Financial Statements
Financial Statements Schedule - Schedule VIII - Valuation and Qualifying
Accounts for the years ended October 31, 1995, 1994 and 1993.
See Index to Exhibits for a list of exhibits to this Annual Report.
All other schedules are not submitted because they are not applicable or
not required under Regulation S-X or because the required information is
included in the financial statements or notes thereto.
Individual financial statements of the Company have been omitted because
the Company is primarily an operating company and no subsidiary included in the
consolidated financial statements has minority equity interests and/or
non-current indebtedness not guaranteed by the Company in excess of 5% of total
consolidated assets.
Item 14(a)(3) 14(b) and 14(c): Not Applicable, incorporated by
reference or referred to in Exhibits
10.48 through 10.51.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1933, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: February 13, 1996 DELTA COMPUTEC INC.
By: /s/ John DeVito
John DeVito
President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: February 13, 1996 By: /s/ Alfred Engelfried
Alfred Engelfried
Director
Dated: February 13, 1996 By: /s/ Michael Julian
Michael Julian
Director and Secretary
Dated: February 13, 1996 By: /s/ Joseph M. Lobozzo II
Joseph M. Lobozzo II
Director and Chairman of the
Board of Directors
Dated: February 13, 1996 By: /s/ Michael McCusker
Michael McCusker
Director
27
<PAGE>
INDEX TO EXHIBITS
The Exhibits denominated by (1) were previously filed as part of, and
are hereby incorporated herein by reference to, the Exhibits in the Registrant's
Registration Statement on Form S-18 (File No. 33-389NY) as amended by Amendment
No. 1. the number contained in parentheses set forth opposite the Exhibit
hereunder refers to the Exhibit number in the Registrant's Registration
Statement on Form S-18 and amendments thereto.
The Exhibits denominated by (2) were previously filed as part of, and
are hereby incorporated herein, by reference to the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1986. The
number contained in parentheses set forth opposite the Exhibit hereunder refers
to the Exhibit number in that Annual Report on Form 10-K.
The Exhibits denominated by (3) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1987. The
number contained in the parentheses set forth opposite the Exhibit hereunder
refers to the Exhibit number in that Annual Report on Form 10-K.
The Exhibits denominated by (4) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1988.
The Exhibits denominated by (5) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1989.
The Exhibits denominated by (6) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1990.
The Exhibits denominated by (7) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1991.
The Exhibits denominated by (8) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Form 8-K dated November 13, 1992.
The Exhibits denominated by (9) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1992.
The Exhibits denominated by (10) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1993.
The Exhibits denominated by (11) were previously filed as part of, and
are hereby incorporated by reference herein, the Exhibits in the Registrant's
Annual Report on Form 10-K for the Fiscal year ended October 31, 1994.
(3) Certificate of Incorporation and By-Laws
(3.1) Restated Certificate of Incorporation.
(3.2) Amended and Restated By-Laws of the Registrant.(3)
(3.3) Certificate of Change, changing Registrant's address.
(4.1) Specimen Stock Certificates representing shares of the
Registrant's $.01 par value Common Stock.(1)
28
<PAGE>
(4.2) Restated Incentive Stock Option Plan.(4)
(4.3) Non-Qualified Stock Option Plan.(1)
(10.15) Asset Purchase Agreement with JWP.(5)
(10.20) Stock purchase agreement R&M Associates.(6)
(10.21) Asset purchase agreement RTK Computer Services.(6)
(10.24) Building Lease Teterboro, New Jersey (7)
(10.26) Building Lease Syracuse, New York (7)
(10.27) Equipment Lease Bell Atlantic Systems (7)
(10.28) Purchase agreement CSI (7)
(10.29) Purchase agreement Market Line (7)
(10.31) Sale and Purchase Agreement dated as of September 29,
1992 (8)
(10.32) Amendment to Sale and Purchase Agreement dated as of
October 31, 1992 (8)
(10.33) 8% Subordinated Debenture due October 31, 1997 (8)
(10.34) 8% Subordinated Short-Term Note, $1,150,000 (Subject to
Adjustment) dated October 31, 1992 (8)
(10.35) Assignment and Assumption Agreement dated October 31,
1992 (8)
(10.36) Registration Rights Agreement dated as of October 31,
1992 (8)
(10.37) 8% Subordinated Debenture due October 28, 1995 (8)
(10.38) Option Agreement dated October 28, 1992 (8)
(10.39) Registration Rights Agreement dated October 28, 1992 (8)
(10.40) Letter from Richard J. Mackey, President and Chief
Financial Officer of Willcox & Gibbs, Inc., to Peter D.
Smith, Chief Financial Officer of Delta Computec Inc.,
dated October 13, 1992. (8)
(10.41) Loan Agreement, Fleet Bank of New York to Delta Data
Net, Inc. (9)
(10.42) Credit Agreement, Norstar Bank of Upstate NY to Delta
Computec Inc. and R&M Associates Electronic Data
Products Services, Inc. (9)
(10.43) Employment Agreement between Delta Computec Inc., and L.
Rodger Loomis dated September 1, 1992. (9)
29
<PAGE>
(10.44) Joint venture Agreement between SAI/Delta, Inc., and
Systems Automation, Inc., dated March 10, 1992. (9)
(10.45) Amendment Number 1 to Loan Agreement. (10)
(10.46) Amendment Number 1 to Credit Agreement. (10)
(10.47) Amendment Number 2 to Loan Agreement. (10)
(10.48) Credit Agreement, National Canada Finance
Corporation. (11)
(10.49) Credit Agreement, National Canada Finance Corporation,
Amendment No. 1. (11)
(10.50) Asset Purchase Agreement dated October 17, 1994. (11)
(10.51) Amendment No. 1 to Asset Purchase Agreement. (11)
(10.52) Credit Agreement, National Canada Finance Corporation,
Amendment No. 2. (11)
(10.53) Credit Agreement, National Canada Finance Corporation,
Amendment No. 3.
(10.54) Credit Agreement, National Canada Finance Corporation,
Amendment No. 4.
(10.55) Credit Agreement, National Canada Finance Corporation,
Amendment No. 5.
(10.56) Letter agreements dated, respectively, May 1, 1995, May
1, 1995, and May 4, 1995, with Joseph M. Lobozzo II, a
Director, Chairman of the Board of Directors and
controlling person of the Registrant, relative to
providing a commitment to advance up to $400,000 of the
Overadvance Facility provided by National Canada Finance
Corporation, and granting a stock option to Joseph M.
Lobozzo II.
(11) Statement re: computation of per share earnings. (This
document will be filed pursuant to a Form 8 Amendment to
this report along with the audited financial statements
for the fiscal year ended October 31, 1995.
(12) Statement re: computation of ratios.
Not Applicable
(13) Annual report to security holders, Form 10-Q or
quarterly report to security holders.
Not Applicable
(16) Letter re: change in certifying accountant.
Not Applicable
(18) Letter re: change in accounting principles.
Not Applicable
(19) Report furnished to security holders.
Not applicable
30
<PAGE>
(21) Subsidiaries of the Registrant.
(22) Published report regarding matters submitted to vote of
security holders.
Not applicable
(23) Consents of experts and counsel.
Not applicable
(24) Power of Attorney.
Not applicable
(28) Information from reports furnished to state insurance
regulatory authorities. Not applicable
(99) Additional Exhibits.
None
31
<PAGE>
Exhibit 3.3
CERTIFICATE OF CHANGE
OF
DELTA COMPUTEC INC.
---------------------
Under Section 805-A of the
Business Corporation Law
We, the undersigned, being, respectively, the President and Secretary of
DELTA COMPUTEC INC., do hereby certify as follows:
1. The name of the Corporation is DELTA COMPUTEC INC.
2. The Corporation was formed under the name Central Computer Services
Corp. The Certificate of Incorporation was filed by the Department
of State on April 8, 1992.
3. Paragraph 3. of the Certificate of Incorporation is deleted in its
entirety and replaced by the following:
3. The Office of the Corporation shall be located in
the County of Monroe, State of New York.
4. Paragraph 5. of the Certificate of Incorporation is deleted in its
entirety and replaced by the following:
5. The Secretary of State is designated as agent of the
Corporation upon whom process against it may be served. The post
office address to which the Secretary of State shall mail a copy of
any process against the Corporation served upon him is:
366 White Spruce Boulevard
Rochester, New York 14623
5. This change was authorized by written consent of all members of the
Board of Directors of the Corporation.
IN WITNESS WHEREOF, we have signed this Certificate this 30th day of
June, 1995 and affirm the truth of the statements made herein under
penalties of perjury.
/s/ John DeVito
John DeVito, President
/s/ Joseph M. Lobozzo II
Joseph M. Lobozzo II, Secretary
32
<PAGE>
Exhibit 21
21. Subsidiaries of the Company
Name Jurisdiction of Incorporation
R&M Associates Electronics New Jersey
Data Products Service Inc.
Computer Support Inc. Georgia
SAI/Delta, Inc. Florida
Delta Data Net, Inc. New York
33
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<CASH> 30,147
<SECURITIES> 0
<RECEIVABLES> 6,004,266
<ALLOWANCES> 386,049
<INVENTORY> 1,968,089
<CURRENT-ASSETS> 7,961,289
<PP&E> 3,385,973
<DEPRECIATION> 2,408,696
<TOTAL-ASSETS> 12,909,129
<CURRENT-LIABILITIES> 10,214,873
<BONDS> 1,075,001
0
0
<COMMON> 68,116
<OTHER-SE> (3,364,954)
<TOTAL-LIABILITY-AND-EQUITY> 12,909,129
<SALES> 30,801,156
<TOTAL-REVENUES> 30,801,156
<CGS> 24,658,829
<TOTAL-COSTS> 24,658,829
<OTHER-EXPENSES> 6,587,920
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 462,485
<INCOME-PRETAX> (908,078)
<INCOME-TAX> 642,764
<INCOME-CONTINUING> (1,550,842)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,550,842)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.08)
</TABLE>
