SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended September 30, 1998
Commission File No. 0-3425
PLATRONICS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1440857
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer or
incorporation or organization) Identification No.)
301 Commerce Road, Linden, New Jersey 07036
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area
code: (908) 862-3600
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
- --------------------------------------------------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 |_|
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure fill be
contained, to the best or registrant's knowledge, in definitive proxy or
information statements incorpored by reference in part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|
State issuer's revenues for its most recent fiscal year.
$3,761,631
As of January 8, 1999, the aggregate market value of the voting stock held
by non-affiliates of the registrant was approximately $ 958,850 as computed by
reference to the average bid and ask prices of the stock.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the most recent practicable date.
Date Number of Shares Outstanding
---- ----------------------------
October 21, 1998 910,031 Common Shares
<PAGE>
PART I
Item 1. Business
General Development of Business
Platronics, Inc. (the "Company") is a New Jersey corporation incorporated
on September 28, 1946.
As of September 30, 1998, there was no material change in the nature of
the business done by the Company during the prior year.
Bankruptcy
On November 24, 1993, the Company filed a voluntary petition for
reorganization pursuant to Chapter 11 of the United States Bankruptcy Court for
the District of New Jersey. A bankruptcy plan of reorganization was approved by
the Court on June 25, 1996.
Narrative Description of Business
Products and Services: The Company is primarily engaged in the business of
precision electroplating of electrical and electronic components and
semiconductor products used in computers, data processing and communication
equipment, and microwave transmission equipment. In general, electroplating is
the process of plating with an adherent continuous coating by electrodeposition,
or by the creation of deposits through chemical changes produced by passing an
electric current through a non-metallic electric conductor called an
electrolyte. (The term "electroplating" is hereinafter sometimes referred to as
a "plating"). The Company specializes in, among other things, plating with
precious metals. It employs unique plating and other
<PAGE>
techniques designed and developed by the Company. Such techniques are not,
however, patented. The Company's customers impose various requirements with
respect to plating done by the Company, ranging from requiring a coating of only
a small portion of each micro-miniature item to requiring a coating consisting
of precious and base metals to achieve properties which are not characteristic
of the base metal. The plating material includes previous metals such as gold,
silver, rhodium and palladium, and base metals such as copper, nickel and tin.
Components plated by the Company include semiconductor products such as
diodes, transistors, and rectifiers; telephone and telegraphic components; metal
parts and electronic parts for computers and data processing equipment,
components for microwave transmission and Defense Department related weaponry
components.
The Company services its customers not only by its barrel and rack plating
operations, but also by continuous automatic reel to reel plating procedures.
Sources and Availability of Raw Materials: The most important raw
materials used by the Company are gold and silver.
Although the Company presently purchases its particular metal requirements
from three principal suppliers, it need not rely on any one supplier because
there are many suppliers of such materials available. The Company does not
anticipate any problems with respect to the availability of any raw materials
required.
Seasonality: The Company customarily experiences a late summer slowdown
averaging 30%, primarily because many customers
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<PAGE>
have annual plant shutdowns at that time.
Working Capital Items: The Company sometimes must buy the precious metals
it uses for plating materials in significant quantities in order to have them
readily available and to receive a discount on the related purchase prices. Such
purchases require substantial periodic outlays of working capital.
Also related to working capital is the general practice in the
electroplating industry with respect to completed job orders that are rejected
by the customers. In most cases, if the grounds for rejection are reasonable (a)
if the job has been billed, the customer's account will be credited, (b) the job
will be redone, and (c) the customer will be rebilled. The Company's practices
with respect to such matters are consistent with the foregoing.
Another item affecting working capital is the Company's practice of
billing its customers for work performed on a "net 30 days" basis. The Company
believes that such practice is consistent with the practices employed in the
industry.
Customers: The Company had one (1) customer which accounted for 30% or
more of the Company's gross revenues during the fiscal year ended September 30,
1998 and two (2) other customers which each accounted for 10% or more of the
Company's gross revenues during such fiscal year.
Backlog Orders: There was no material backlog of unshipped orders believed
to be firm as of September 30, 1998 and September 30, 1997, respectively.
Employees: The Company has thirty-six (36) full time
-3-
<PAGE>
employees and no part time employees.
Competitive Conditions: The Company competes with a number of other
independent electroplating shops for business with customers located primarily
in the eastern part of the United States. Such customers may, from time to time,
include large industrial companies. Such companies may have in-house
electroplating shops, and the Company competes for overflow work from such
shops.
The Company believes that a significant competitive condition affecting
the domestic electroplating industry and thus the Company relates to reduced
levels of domestic electroplating business. Such reduced levels are based in
part on large U.S. industrial companies, which previously utilized domestic
manufacturing facilities to produce items which then would be electroplated
domestically, switching to foreign production and electroplating of such items,
based in large part on the lower cost of foreign labor. Such companies have
either acquired foreign facilities or have contracts with foreign firms. Reduced
levels of domestic business are also due to the failure of business
opportunities relating to plating jobs in connection with personal computers to
materialize at least on a domestic level. As a result of the foregoing,
independent electroplating shops are competing more intensely for fewer
customers and fewer job orders and are also competing with new foreign
electroplating competitors commencing operations in Korea, Japan, Taiwan, Mexico
and Europe, in response to new telephone and electronic equipment manufacturing
operations in those countries.
-4-
<PAGE>
As in prior years, price and service are the principal areas of
competition between the Company and its competitors. In particular, heightened
competition for customers has increased competition in the area of prices. As a
result, the Company has experienced a decrease in sales over the last two years.
Marketing: The Company advertises its electroplating services in trade
magazines, brochures, catalogues, and newsletters and by direct mail.
Research and Development and Year 2000 Issues: The Company does not expend
any material amounts for research and development, nor does it expend any
material amounts in connection with the year 2000.
Item 2. Properties
The Company leases its administrative offices and principal production
facilities which consist of a 42,000 square feet plant at 301 Commerce Road,
Linden, New Jersey. The lease expires on June 30, 2003. The net annual base rent
is currently $170,000 exclusive of supplemental rent for real estate taxes and
insurance to be paid by the Company under the terms of the lease.
The Company believes that its facility at 301 Commerce Road is adequate
for the operations of the Company.
Item 3. Pending Legal Proceedings
None.
-5-
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matter to a vote of the owners of the
Companies securities during the fourth quarter of the Company's fiscal year
ended September 30, 1998.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
(a) Trading of Common Stock
The principal market on which the Company's common stock is being
traded is the over-the-counter market. Due to the relatively small and declining
number of shareholders of the Company's stock, trading is infrequent and the
public market for the Company's stock is limited. The following is bid
information for the fiscal year ended September 30, 1998.
High Ask Low Bid
-------- -------
1st quarter 4 3/8 2
2nd quarter 3 2
3rd quarter 4 1 3/4
4th quarter 4 1/4 3
Source: Internet
The above quotations may reflect inter-dealer transactions, without retail
markup, mark-down or commission and may no represent actual transactions.
(b) As of September 30, 1998, there were approximately 527
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<PAGE>
shareholders of the Company's common stock.
(c) No cash dividends have been paid by the Company during the past two
years with respect to its common stock.
Item 6. Management's Discussion and Analysis or Plan of Operation
This Item 6 includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements other than statements of historical fact
included in this Item 6 are forward-looking statements. Although the Company
believes that the expectations and assumptions reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations and
assumptions will prove to have been correct.
Management is encouraged by numerous developments that have occurred and
are occurring in the Company's business activities.
Orders received have increased and the number of new quotations for new
product requirements for major established customers has also increased.
The Company is considering the adoption of a new marketing plan to further
attract additional customers as well. If adopted, it is management's expectation
that this new planned marketing program will generate increased sales in 1999.
The Company has manufactured a new automated reel-to-reel gold-plating machine
which will increase the output of its gold-plated telephony and computer
connection products by as much as forty (40%) percent. This new modern automatic
machine is expected to be on line prior to March 1, 1999.
-7-
<PAGE>
Management believes that its sales in 1998 were lower than 1997 and lower
than expected largely because of the pressure placed upon the electronics market
by competition from abroad, mainly Asia and due to the decrease in the cost of
gold. In addition, the lower pricing available to the Company's customers and
prospects, because of competition and the fluctuation in the value of the U.S.
dollar, have also contributed to lower than desired and expected sales.
In spite of previous favorable projections for new business, a decline in
the aerospace, computer and electronics field was felt in the industry because
of the so-called Asian problem. This instability has caused a temporary
curtailment of shipments to several major governmental and electronic industrial
contracts. This temporary condition has resulted in the Company's declining
sales figures from 1997 to 1998. The reduction was as follows:
Sales in 1997 $3,999,668
Sales in 1998 $3,761,631
However, it is noteworthy that despite the declining sales, as a result of
economies put in place by Management, the Company's net income increased. The
Company's net loss in 1997 was $196,784.
The company's profit in 1998 was $8,905.00. The most significant element
of uncertainty known to the Company is the fluctuation in market prices of
precious metals, particularly gold, which are employed as raw materials in the
Company's business operations. This factor especially affects the Company's
liquidity due to its need to keep sizable inventories of
-8-
<PAGE>
gold. To counteract its exposure to gold price fluctuations, the Company has
continued its policy of reducing its gold inventory to the lowest practical
level.
The Company's only significant internal source of liquidity is its
accounts receivable. The collectability period of receivables, which generally
averaged 45-60 days during the fiscal year ended September 30, 1998 and was
generally consistent with the past operating history of the Company.
Nevertheless, in 1998, the Company experienced collectability periods in some
cases of as long as 90 days.
In the fiscal year ended September 30, 1998 the Company made a capital
expenditure of $172,022 for an automatic reel to reel plating machine.
The Company does not anticipate any major expenditures in connection with
the year 2000.
The Company is in need of additional capital and hopes to obtain same from
a private offering of its securities. If it is successful in such an offering,
it intends to initiate an acquisition strategy to acquire small plating
companies. Management believes that other small plating companies can be
successfully added to the Company's operations and provide significant economies
of scale. While there is no assurance that such acquisitions will actually be
completed and if completed, that such acquisitions will contribute to the
Company's profits. Management believes that this fragmented acquisition or
roll-up strategy will allow the Company to increase its sales and profits
-9-
<PAGE>
and competitive position.
In summary, Management believes that the economic programs it has
put into place have returned and will continue to return the Company to
profitability. Management further believes that by a diligent and aggressive
strategic marketing program and a fragmented industry acquisition program, it
will obtain a greater share of the marketplace and enhance profitability. As a
small company, however, there is no assurance that the Company will be able to
achieve its goals and objectives.
Item 7. Financial Statements and Supplementary Data
See Financial Statements attached hereto. The Index of Financial
Statements is located at page 16 of this filing.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
The names of the directors, together with certain information regarding
them, are as follows:
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<PAGE>
Year
First
Name of Became Term Position
Directors (A) Age Director Expires With Company
- ------------- --- -------- ------- ------------
Ronald Knigge 54 1997 April, 1998(B) Chairman,
President
and Chief
Executive
Officer
John R. Palumbo, 53 1979 April, 1998(B) Vice
Jr. President
Ralph J. Pocaro 73 1997 April, 1998(B) Director
Alan VanNess 59 1997 April, 1998(B) Director
(A) There is not currently in force or effect any arrangement pursuant to the
terms of which any nominee has agreed to cause his votes to be cast for the
election of any other nominee or director.
(B) Since the Company did not conduct an Annual Meeting of Shareholders in 1998
to elect directors, all of the directors are serving in a holdover capacity
until the next Annual Meeting of Shareholders.
The Company's Chairman, President and Chief Executive Officer is Ronald
Knigge. Mr. Knigge is fifty-four (54) years of age, and first became an
executive at the Company in July, 1997, with over thirty (30) years experience
in the operation of electroplating business. Mr. Knigge is also the President of
Ideal Plating & Polishing Co., Inc., as well as the President of the
Independence Plating Corp., both successful metal finishing concerns.
Independence Plating Corp. is primarily involved in the defense
-11-
<PAGE>
industry and Ideal Plating & Polishing Co., Inc., is a volume barrel plating
facility supplying electronic-grade, tin, tin/lead, and related coatings for the
electronic industry.
Both Ideal Plating and Polishing Co., Inc. and Independence Plating Corp.
are unrelated to the Company and the Company and its shareholders have no
interest whatsoever therein.
Other key executives include:
Mr. John Palumbo, Jr., Vice President and Director. Mr. Palumbo has been
employed by the Company for over the past 25 years, including many years as its
President. He has primary responsibility for new production activities, and new
equipment management.
Mrs. MaryLou Palumbo, Secretary/Treasurer. Mrs. Palumbo has been an
employee for over 16 years, involved with the company's growth through financial
planning, increased business potential, and related responsibilities.
The other directors of the Company are:
Mr. Ralph Pocaro, Director. Mr. Pocaro has a degree in engineering and is
also an attorney at law of the State of New Jersey, where he has practiced law
for over 39 years. Mr. Pocaro has an appreciation for the technical and legal
aspects of the Company's business.
Mr. Alan Van Ness, Director, is the Secretary/Treasurer of the ALFA
Machine Co., Fairfield, NJ. Mr. Van Ness runs a machine shop catering to
electronics, medical and aerospace industries. Mr. Van Ness is expert in the
fabrication of metal parts for the some of
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<PAGE>
the same customers as the Company.
Item 10. Executive Compensation
Summary Compensation Table
Annual Compensation Long Term Comp.
------------------- ---------------
Other Rest. Opt/ LTIP Other
Name Salary Bonus Comp. StockAwds. SARS Pay. Comp.
- ---- ------ ----- ----- ---------- ---- ---- -----
Ronald
Knigge,
CEO 0 0 0 0 303,344 0 0
Mr. Ronald Knigge, the Chairman of the Board, President and Chief
Executive Officer, was not paid any direct compensation during the fiscal year
ended September 30, 1998. Mr. Knigge was granted stock options to purchase
303,344 shares of the Common Stock of the Company at five ($.05) cents per
share.
None of the other executive officers of the Company was paid remuneration
in excess of $100,000.
No compensation was paid to the members of the Company's Board of
Directors for serving as Board members.
Option/SAR Grants in Last Fiscal Year
Number of % of Total
Securities Options
Underlying Granted to Exercise Expiration
Name Options Employees Price Date
- ---- ------- --------- ----- ----
Ronald 303,344 100% $.05 July 1, 2007
Knigge
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<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The Company has one class of capital stock, Common Stock, $.10 Par Value,
of which, as of September 30, 1997, 910,031 shares were outstanding. Each
outstanding share of Common Stock is entitled to one vote.
(a) Security Ownership of Certain Beneficial Owners
The following chart sets forth, as of December 29, 1998, information
concerning the security ownership of those beneficial owners who are known by
the Company to own beneficially more than 5% of the Common Stock of the Company:
Name and Amount and
Address of Nature of Percent
Title of Beneficial Beneficial of
Class Owner Ownership Class
- -------- ---------- ---------- -------
Common Sheridan Printing Co., Inc. 615,000 shares 67.6%
702 Hamilton Mall
Allentown, Pa. 18101
(b) Security Ownership of Management
As of September 30, 1998, there was no security ownership by the
management of the Company.
Item 12. Certain Relationships and Related Transactions
As of September 30, 1998, the Company was indebted to Sheridan Printing
Co., Inc., its principal shareholder, in the amount of $295,472, indebtedness
bears interest at the rate of eight (8%)
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<PAGE>
percent per annum and is due on December 31, 1999.
During the year ended September 30, 1998, the Company purchased $50,856 of
machinery from Independence Plating Corp., a company owned by Ronald Knigge, the
Chairman of the Board, President and Chief Executive Officer of the Company and
there was $31,810 of sales between the Company, on one hand, and Independence
Plating Corp. and Ideal Plating & Polishing Co., Inc., both owned by Ronald
Knigge, on the other hand.
In addition, Independence Plating Corp. and Ideal Plating & Polishing Co.,
Inc. performed $114,829 of subcontract plating for the Company.
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements: Page
-------------------- ----
Report of Independent Certified
Public Accountants ........................... F-2
Balance Sheet ................................ F-3
Statement of Income .......................... F-4
Statement of Stockholders' Equity ............ F-6
Statement of Cash Flows ...................... F-7
Notes to Financial Statements ................ F-9
2. All other schedules are inapplicable or the required information is
included in the financial statements, the notes thereto, or in the schedules
included herein.
3. Exhibits
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<PAGE>
None.
(b) Reports on Form 8-K:
None
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.
PLATRONICS,INC.
Registrant
/s/ Ronald Knigge
--------------------------------
Date: January 8, 1999 Ronald Knigge, President
/s/ Mary Lou Palumbo
--------------------------------
Date: January 8, 1999 Mary Lou Palumbo,
Principal Accounting
Officer
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<PAGE>
PLATRONICS, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
<PAGE>
INDEX TO THE FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants F-2
Financial Statements:
Balance Sheet as of September 30, 1998 F-3
Statements of Income for the years ended September 30,
1997 and 1998 F-4
Statements of Stockholders' Equity for the year ended
September 30, 1997 and 1998 F-6
Statements of Cash Flow for the years ended September 30,
1997 and 1998 F-7
Notes to the Financial Statements F-9
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Platronics, Inc.
Linden, New Jersey
We have audited the accompanying balance sheet of Platronics, Inc. as of
September 30, 1998 and the related statements of income, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The financial
statements of Platronics, Inc. as of September 30, 1997 were audited by other
auditors whose report dated October 29, 1997 expressed an unqualified opinion on
those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1998 financial statements referred to above present fairly,
in all material respects, the financial position of Platronics, Inc. as of
September 30, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Ferdinand, Ganek & Company, CPA, PA
Union, New Jersey
November 23, 1998
F-2
<PAGE>
PLATRONICS, INC.
BALANCE SHEET
SEPTEMBER 30, 1998
ASSETS
Current Assets:
Cash $ 66,257
Trade receivables, less allowance for doubtful
accounts of $11,184 485,884
Inventory 485,223
Prepaid expenses 7,920
----------
Total Current Assets 1,045,284
Property and Equipment, net of accumulated depreciation 236,491
Other Assets:
Security deposit 34,165
----------
Total Assets $1,315,940
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 248,610
Accounts payable 263,750
Deferred rental obligations - current portion 10,000
----------
Total Current Liabilities 522,360
Long-Term Debt, less current maturities 46,862
Deferred Rental Obligations - Long Term 35,832
----------
Total Liabilities 605,054
----------
Stockholders' Equity
Common stock, $.10 par value
authorized - 2,000,000, shares issued - 910,031 91,003
Paid in additional capital 6,156
Retained Earnings 613,727
----------
Total Stockholders' Equity 710,886
----------
Total Liabilities and Stockholders' Equity $1,315,940
==========
See accompanying notes to the financial statements
F-3
<PAGE>
PLATRONICS, INC.
STATEMENTS OF INCOME
Years Ended September 30,
-----------------------------
1997 1998
----------- -----------
Net Sales $ 3,909,868 $ 3,761,631
Cost of Sales 3,540,568 3,291,591
----------- -----------
Gross Profit 369,300 470,040
Operating Expenses:
Selling, General and
Administrative Expenses 562,269 436,542
----------- -----------
Operating Income (Loss) (192,969) 33,498
----------- -----------
Other Income (Expense)
Interest Expense (6,365) (24,768)
Miscellaneous -- 350
----------- -----------
Total Other Income (Expense) (6,365) (24,418)
----------- -----------
Income (loss) before income taxes
and extraordinary item (199,334) 9,080
Extraordinary item - gain on
discharge of debt pursuant to
Chapter 11 bankruptcy
reorganization filing (net of
tax effect of $0) 2,550 --
----------- -----------
Income (Loss) before income taxes (196,784) 9,080
Provision for income taxes -- 175
----------- -----------
Net Income (Loss) $ (196,784) $ 8,905
=========== ===========
(continued)
See the accompanying notes to the financial statements
F-4
<PAGE>
PLATRONICS, INC.
STATEMENTS OF INCOME
(continued)
Years Ended September 30,
-----------------------------
1997 1998
----------- -----------
Earnings (Loss) per share:
Income (loss) from operation (0.22) 0.01
Extraordinary item -- --
---------- -----------
Earnings (Loss) per share (0.22) 0.01
========== ===========
Weighted Average Number of
Common Shares Outstanding 910,031 910,031
========== ===========
See the accompanying notes to the financial statements
F-5
<PAGE>
PLATRONICS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Paid in Shareholders'
Common Stock Additional Capital Retained Earnings Equity
------------ ------------------ ----------------- ------
<S> <C> <C> <C> <C>
Balance, September 30, 1996 91,003 $ 6,156 $ 801,606 $ 898,765
Net loss for the year -- -- (196,784) (196,784)
--------- --------- --------- ---------
Balance, September 30, 1997 91,003 6,156 604,822 701,981
Net income for the year -- -- 8,905 8,905
--------- --------- --------- ---------
Balance, September 30, 1998 91,003 $ 6,156 $ 613,727 $ 710,886
========= ========= ========= =========
</TABLE>
See accompanying notes to the financial statements
F-6
<PAGE>
PLATRONICS, INC.
STATEMENTS OF CASH FLOWS
Years Ended September 30,
-----------------------------
1997 1998
--------- ---------
Operating activities:
Net income (loss) $(196,784) $ 8,905
--------- ---------
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization 45,240 41,282
Provision for doubtful accounts -- (3,160)
(Increase)Decrease in:
Accounts receivable (199,870) 140,443
Inventories 66,630 (83,046)
Prepaid expenses 3,273 (3,661)
Increase(Decrease) in:
Accounts payable, accrued
expenses and taxes (26,161) 166,446
Deferred rental obligations 7,499 (10,000)
--------- ---------
Total adjustments (103,389) 248,304
--------- ---------
Net cash provided by (used in)
operating activities (300,173) 257,209
--------- ---------
Investing activities:
Capital expenditures (3,257) (181,721)
--------- ---------
Net cash used in investing
activities (3,257) (181,721)
--------- ---------
See accompanying notes to the financial statements
F-7
<PAGE>
PLATRONICS, INC.
STATEMENTS OF CASH FLOWS
(continued)
Years Ended September 30,
-----------------------------
1997 1998
--------- ---------
Financing activities:
Repayment of long-term debt $ (81,373) $ (54,528)
Proceeds from note payable 350,000 --
--------- ---------
Net cash provided by (used in)
financing activities 268,627 (54,528)
--------- ---------
Net Increase (Decrease) in Cash (34,803) 20,960
Cash - Beginning of Year 80,100 45,297
--------- ---------
Cash - End of Year $ 45,297 $ 66,257
========= =========
See accompanying notes to the financial statements
F-8
<PAGE>
PLATRONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
Platronics, Inc. (the "Company") was incorporated in New Jersey on
September 28, 1946. The Company is primarily engaged in the business of
precision electroplating of electrical and electronic components and
semiconductor products used in computers, data processing and
communications equipment, and microwave transmission equipment.
Basis of Accounting
The Company's policy is to prepare its financial statement on the accrual
method of accounting. On November 23, 1993 the Company filed for
bankruptcy under Chapter 11. The Company submitted a plan of
reorganization which was approved on June 25, 1996.
Inventory
Inventory, consisting primarily of plating materials, are valued at the
lower of cost or market. Cost is determined on a first-in, first-out
(FIFO) method
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are computed by the straight line method over the estimated useful lives
of the assets. Estimated useful lives of the assets are as follows:
Machinery and Equipment 7 Years
Automobile and Trucks 5 Years
Furniture and Fixtures 5-7 Years
Leasehold Improvements 10 Years
Maintenance and repairs are expensed as incurred. Cost of major
replacements and renewals are capitalized. Upon retirement or other
dispositions of property or equipment, the cost and accumulated
depreciation are removed from the accounts and any gain or loss on
disposition is recognized currently.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions and affect the reported amounts 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 reported period. Actual results could differ from these
estimates.
F-9
<PAGE>
PLATRONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Deferred taxes are provided for temporary differences in reporting certain
transactions for financial and tax purposes, principally relating to net
operating loss carryforwards.
Earnings (Loss) Per Share
Earnings (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares of common stock outstanding during
the period. The Company maintains a simple capital structure and has no
common stock equivalents.
2. CONCENTRATION OF BUSINESS AND CREDIT RISK
The majority of the Company's inventory is purchased from one supplier.
The Company is subject to risk to the extent a supplier cannot satisfy the
Company's purchase requirements. The Company sometimes must buy the
precious metals it uses for plating materials in significant quantities.
Such purchases require substantial periodic outlays of working capital.
The Company is at risk to the extent that available working capital cannot
meet the demand for inventory purchases.
The Company provides credit in the normal course of business to customers.
The company performs ongoing credit evaluations of its customers and
maintains allowances for doubtful accounts based on factors surrounding
the credit risk of specific customers, historical trends and other
information. Approximately sixty percent (60%) of the accounts receivable
are from three customers. Working capital needs are funded through the
collection of accounts receivable and consequently, the Company is at risk
to the extent that accounts receivable are collected according to the
terms provided.
The Company maintains its cash in bank deposit accounts, which, at times,
may exceed federally insured limits. The company has not experienced any
losses in such account. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Cash Flows Information
Supplemental disclosure of cash flows information:
Cash paid for:
Years Ended September 30,
-------------------------
1997 1998
------ -------
Interest $6,365 $24,768
Income Taxes -- 175
F-10
<PAGE>
PLATRONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
3 COMMITMENTS
The Company conducts its operation in a leased facility under a net, net,
net lease. The lease is noncancelable and expires on June 20, 2003. The
lease has been amended subsequent to the balance sheet date and the future
minimum commitments, as amended, are as follows:
September 30,
-------------
1999 $ 170,000
2000 170,000
2001 170,000
2002 170,000
2003 99,167
---------
$ 779,167
=========
The above rental commitments reflect the periods during which the actual
obligations arise (per lease agreement). Rental expense has been charged
to operations on a straight line basis which amounted to $160,000 for each
year ended September 30, 1997 and 1998. The associated liability is
presented in the balance sheet as a current and long-term deferred rental
obligation liability of $10,000 and $35,832 respectively.
4. PROPERTY AND EQUIPMENT
The components of property and equipment at September 30, 1998 are as
follows:
Machinery and equipment $ 1,624,790
Automobiles and trucks 6,389
Furniture and fixtures 94,365
Pollution control equipment 169,749
Leasehold improvement 608,928
-----------
Total property and equipment 2,504,221
Less: accumulated depreciation 2,267,730
-----------
Property and Equipment, Net $ 236,491
===========
5. INCOME TAXES
As of September 30, 1998, federal loss carryforwards of approximately
$1,159,448 expiring in years 2007 through 2012 and state loss
carryforwards of $1,383,466 expiring in years 1997 through 2005 are
available to offset future income.
F-11
<PAGE>
PLATRONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
5. INCOME TAXES (CONTINUED)
The Company's net deferred tax asset consists of:
Total deferred tax asset $ 476,390
Less valuation allowance 476,390
---------
Net deferred tax asset --
=========
6. EXTRAORDINARY ITEM
Pursuant to the Plan of Reorganization, under a Chapter 11 bankruptcy
filing dated June 25, 1996, the Company agreed to settle for 8% on the
unsecured claims. The total settlement of $80,000, which included both
secured and unsecured claims resulted in the company recognizing income in
the amount of $2,550 and $-0- for the years ended September 30, 1997 and
1998, respectively
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, trade receivables, accounts payable and accrued expense, and notes
payable:
The carrying amount approximates fair value because of the short maturity
of these instruments.
Limitations:
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
8. RECLASSIFICATIONS
In 1998, the Company changed its method of classifying certain expense
transactions. Where practical, certain 1997 amounts previously reported on
have been reclassified to conform to the 1998 classifications.
9. LONG-TERM DEBT - RELATED PARTY
Long-term debt at September 30, 1998 consisted of the following:
Note payable with interest at 8% due
December 31, 1999, unsecured from a
shareholder owning a majority of the
outstanding stock $ 295,472
Less current portion 248,610
---------
Long-term debt $ 46,862
=========
F-12
<PAGE>
PLATRONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
9. LONG-TERM DEBT - RELATED PARTY (CONTINUED)
Maturities of long-term debt as of September 30, 1998 are:
Year Ended
September 30,
-------------
1999 $ 46,862
2000 --
2001 --
2002 --
2003 --
--------
$ 46,862
========
10. STOCK OPTIONS
On July 1, 1997, the Company established a non-statutory stock option plan
for key management employees to provide an incentive for such employees to
expand and improve the profits and prosperity of the Company and to assist
the Company in attracting and retaining key personnel through the grant of
options to purchase shares of the Company's common stock. The maximum
number of shares of stock that may be optioned or sold under the plan is
303,344 shares. Such shares may be treasury, or authorized, but unissued,
shares of stock of the Company. Under the plan, the purchase price for
stock under each option shall be 100 percent of the fair market value of
the stock at the time the option is granted or the date the employee
commences employment if the option grant is part of the employment
agreement with a prospective employee. No option may be exercised after
the expiration of ten years from the date it is granted. On July 1, 1997,
an option to purchase a total of 303,344 shares of stock of the Company
was granted to a key management personnel, subject in all respects to the
terms and provisions of the non-statutory stock option plan. The option
price as determined by the Board of Directors of the Company is five
($.05) cents per share.
11. RELATED PARTY TRANSACTIONS
During the year ended September 30, 1998, the Company purchased $50,856 of
machinery from a company controlled by an officer of Platronics, Inc.
Subcontract labor of $114,829 was performed by companies controlled by an
officer of the Company and there was $31,810 of sales between Platronics,
Inc. and companies controlled by an officer of the Company. As of
September 30, 1998, accounts receivable and accounts payable from these
related parties amounted to $31,810 and $46,959, respectively.
F-13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 9/30/98 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 66,257
<SECURITIES> 0
<RECEIVABLES> 497,068
<ALLOWANCES> 11,184
<INVENTORY> 485,223
<CURRENT-ASSETS> 1,045,284
<PP&E> 2,504,221
<DEPRECIATION> 2,267,730
<TOTAL-ASSETS> 1,315,940
<CURRENT-LIABILITIES> 522,360
<BONDS> 0
0
0
<COMMON> 91,003
<OTHER-SE> 619,883
<TOTAL-LIABILITY-AND-EQUITY> 1,315,940
<SALES> 3,761,631
<TOTAL-REVENUES> 3,761,631
<CGS> 3,291,591
<TOTAL-COSTS> 3,728,133
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,768
<INCOME-PRETAX> 9,080
<INCOME-TAX> 175
<INCOME-CONTINUING> 8,905
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,905
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
