<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
Commission file number 0-15810
OSICOM TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
New Jersey 22-2367234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
1800 Stewart St, Santa Monica, California 90404
(Address of principal executive offices)
(310) 828-7496
(Issuer's telephone number)
---------------------------------
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
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS
Number of shares outstanding of each of the issuer's classes of common equity
as of June 14, 1995
Title of Each Class Number of Shares Outstanding
Common Stock, $.20 par value per share 1,195,898
<PAGE> 2
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Unaudited Balance Sheet at April 30, 1995 3-4
Consolidated Unaudited Statements of Operations for the Three Months
Ended April 30, 1995 and 1994 5
Consolidated Unaudited Statements of Cash Flows for the Three Months Ended
April 30, 1995 and 1994 6
Notes to Consolidated Unaudited Financial Statements 7-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED BALANCE SHEET
APRIL 30, 1995
ASSETS
<TABLE>
<S> <C>
CASH $ 185,552
ACCOUNTS RECEIVABLE 536,199
ALLOWANCE FOR DOUBTFUL ACCOUNTS (65,551)
NOTES RECEIVABLE (Note C ) 799,502
NOTES RECEIVABLE -Affiliates (Note D) 490,625
INVENTORIES (Note B(4)) 2,795,817
PREPAID EXPENSES 149,436
-----------
TOTAL CURRENT ASSETS 4,891,580
NET PROPERTY AND EQUIPMENT (Note E) 45,680
OTHER ASSETS 75,747
-----------
TOTAL ASSETS $ 5,013,007
===========
</TABLE>
The accompanying notes to consolidated unaudited financial statements are an
integral part hereof.
3
<PAGE> 4
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED BALANCE SHEET (CONTINUED)
APRIL 30, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
<TABLE>
<S> <C>
LOAN PAYABLE - BANK (Note F) $610,209
ACCOUNTS PAYABLE AND
ACCRUED EXPENSES 956,341
----------
TOTAL CURRENT LIABILITIES 1,566,550
----------
NEGATIVE GOODWILL (Note B(2)) 1,037,817
----------
STOCKHOLDERS' EQUITY
PREFERRED STOCK
Series A, 2500 shares issued and outstanding 250,000
COMMON STOCK
Par value $.20 per share, authorized 20,000,000 shares,
1,195,898 shares issued and outstanding 239,180
ADDITIONAL PAID-IN-CAPITAL 793,683
RETAINED EARNINGS 1,125,777
----------
TOTAL STOCKHOLDERS' EQUITY 2,408,640
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,013,007
==========
</TABLE>
The accompanying notes to consolidated unaudited financial statements are an
integral part hereof.
4
<PAGE> 5
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 1995 AND 1994
<TABLE>
<CAPTION>
Three Months Ended
1995 1994
-----------------------------
<S> <C> <C>
NET SALES $ 1,174,507 $ 1,044,831
COST OF SALES 699,695 585,651
-----------------------------
GROSS MARGIN 474,812 459,180
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 553,551 538,159
EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE AMORTIZATION OF NEGATIVE GOODWILL (78,739) (78,979)
AMORTIZATION OF NEGATIVE GOODWILL 237,717 248,754
INTEREST EXPENSE 17,000 16,779
-----------------------------
EARNINGS FROM CONTINUING OPERATIONS 141,978 152,996
LOSS ON DISCONTINUED OPERATIONS (113,121)
-----------------------------
NET INCOME $ 141,978 $ 39,875
=============================
EARNINGS PER COMMON SHARE (NOTE M)
Earnings per share $ 0.09 $ 0.00
Weighted average shares used in computation 1,195,898 1,049,662
=============================
</TABLE>
The accompanying notes to consolidated unaudited financial statements are an
integral part hereof.
5
<PAGE> 6
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 1995 AND 1994
<TABLE>
<CAPTION>
Three Months Ended
1995 1994
---------------------------
<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATIONS ($204,622) ($637,212)
CASH FLOWS FROM DISCONTINUED OPERATIONS (90,640)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (3,397) (3,623)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on acquisition liability (74,974)
Payments on bank loan (50,000)
Proceeds from note receivable-net 357,053 541,767
Issuance of common stock 1,500
----------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 307,053 468,293
----------------------------
NET (DECREASE) INCREASE IN CASH 99,034 (263,182)
CASH AT BEGINNING OF PERIOD 86,518 543,693
----------------------------
CASH AT END OF PERIOD $ 185,552 $ 280,511
============================
</TABLE>
The accompanying notes to consolidated unaudited financial statements are an
integral part hereof.
6
<PAGE> 7
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(NOTE A) - The Company, Basis of Presentation and Acquisitions:
The accompanying consolidated unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB and, in the opinion
of management, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation. The results of operations for
the three months ended April 30, 1995 are not necessarily indicative of the
results that may be expected for the fiscal year ending January 31, 1996. These
statements should be read in conjunction with the consolidated unaudited
financial statements and notes thereto included in the Company's annual report
on Form 10KSB-for the year ended January 31, 1995.
(NOTE B) - Significant Accounting Policies:
(1) Principles of Consolidation:
The balance sheet reflects the accounts of Meret, Catel, and Osicom.
The consolidated unaudited statement of operations for the three months ended
April 30, 1995 includes the results of operations of Meret, Osicom and Catel.
The consolidated unaudited statement of operations for the three months ended
April 30, 1994 includes the results of operations of Meret, Osicom and Catel,
and the discontinued operations of Adtech.
(2) Amortization of Intangibles:
Excess of fair value over cost of net assets acquired (negative
goodwill) is amortized over 3 years on a straight-line basis.
(3) Depreciation and Amortization:
Depreciation of property and equipment is computed on the straight-line
method over the estimated useful lives of the assets (generally 3 to 5 years).
Leasehold improvements are amortized over the shorter of their estimated useful
life or the term of the lease.
(4) Inventories:
Inventories, comprised of raw materials, work in process and finished
goods, are stated at the lower of cost (first-in, first-out method) or market.
Inventories consist of:
<TABLE>
<CAPTION>
Raw Work in Finished Reserve for
materials process goods Subtotal obsolescence Net
--------- ------- -------- -------- ------------ ---
<S> <C> <C> <C> <C> <C>
$1,601,523 $1,823,671 $777,310 $4,202,504 $1,406,687 $2,795,817
</TABLE>
(5) Per Share Data:
Earnings (loss) per common share is computed based on weighted
average number of common and dilutive common equivalent shares outstanding
during each period presented. All references in the financial statements to
common shares and per share data give effect to the 2:1 reverse split effective
November 7, 1994.
7
<PAGE> 8
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
(6) Revenue Recognition
Revenues are recognized upon shipment of product.
(7) Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
(8) Allowance for Doubtful Accounts:
The Company provides an allowance for doubtful accounts based on its
continuing evaluation of its customers' credit risk. The Company does not
require collateral from its customers.
(NOTE C) - Notes Receivable:
The Company carried the following notes receivable totaling $799,502 at
April 30, 1995:
(1) Other notes receivable were $379,197. During the three months ended
April 30, 1995 the Company collected $357,053 against the notes receivable which
were outstanding at January 31, 1995. An additional $200,000 payment was
received subsequent to April 30, 1995.
(2) Agama, Inc., owed the Company $420,305. The amount is due on demand
and does not accrue interest. On April 26, 1995 Agama, Inc. agreed to repay the
entire balance by January 31, 1996 with interest from November 1, 1995 at 1%
over the prime rate.
(NOTE D) - Notes Receivable - affiliates:
(1) Rand owed the Company $229,589 which is due on demand and does not
accrue interest.
(2) In the fourth quarter of Fiscal 1995, the Company and Stratuslink
entered into an agreement whereby the Company sold the acquired stock of Adtech
to Stratuslink in exchange for repayment to the Company of the balance of its
investment in Adtech after absorption by the Company, of the operating losses
since January 31, 1994. The Company was indemnified by Stratuslink for any
further losses. Stratuslink issued the Company a $261,036 note which is
guaranteed. The Company granted Stratuslink a warrant, expiring on June 1, 1998,
to purchase 76,174 shares of Osicom common stock at an exercise price of $8.25
per share, in return for which Stratuslink surrendered 76,174 shares of Osicom
stock to the Company. Osicom has accounted for the return of its shares and
receipt of the note as a reduction in the purchase price of Adtech under the
provisions of FASB 38.
8
<PAGE> 9
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
(NOTE E) - Property and Equipment:
The Company did not record property and equipment which Meret and Catel
carried at $1,978,000 net of accumulated depreciation of $4,191,000 as a result
of the revaluation of Meret's assets at acquisition and the purchase of Catel.
The Company still uses these assets in its business. Property and equipment at
cost, less accumulated depreciation and amortization, consists of:
<TABLE>
<S> <C>
Plant Equipment $ 34,364
Office Furniture and Fixtures 6,386
Computer Equipment 25,649
--------
Total 66,399
Less accumulated depreciation (20,719)
--------
$ 45,680
========
</TABLE>
(NOTE F) - Loan Payable -Bank
At April 30, 1995, the Company had outstanding indebtedness under its
revolving demand loan agreement with Banca di Roma of $610,209. The agreement
provides for interest at 1% above the bank's base lending rate, which was 9.75%,
at April 30, 1995. The line of credit is collateralized by accounts receivable
and personally guaranteed by a director of the Company.
(NOTE G) - Income Taxes:
The Company recorded no income tax provision for the three months ended
April 30, 1995 and 1994. A significant portion of the net income reported by the
Company for those periods arose from the amortization of negative goodwill which
is not taxable. In addition, the Company has other temporary differences,
primarily depreciation, that can be utilized to offset any remaining taxable
income. Both the negative goodwill amortization and the depreciation differences
arose out of the Company's acquisitions of Meret and Catel. The Company also has
other tax attributes arising from the Meret and Catel acquisitions that could
give rise to the recording of deferred tax assets. Upon acquisition, management
determined that realization of such benefits was not assured thus, no deferred
asset was recorded. At April 30, 1995, management determined that realization of
any future benefits is still not assured thus, no deferred tax assets were
recorded. The Company believes that any remaining net operating losses incurred
by the Company, prior to the acquisitions, available to offset future taxable
income, may be severely limited by the provisions of Section 382 of the Internal
Revenue Code.
(Note H) - Commitments and Contingencies:
(1) The Company leases warehouse and office space in Santa Monica and
Fremont, California. These leases end on January 31, 1996 and July 31, 1997
respectively. Amoco has guaranteed Meret's Santa Monica facility lease. These
leases include escalations for real estate taxes and certain operating expenses.
Rent expense for the Company for the three months ended April 30, 1995 and 1994
was $54,000 and $30,000 respectively net of monthly sublease income of $8,000.
The sublease expires on January 31, 1996.
9
<PAGE> 10
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
Future minimum annual rentals for the Company and its subsidiaries are as
follows:
<TABLE>
<CAPTION>
Rental Sublease Income Net Rent
------ --------------- --------
<S> <C> <C> <C>
1995 $434,000 ($121,000) $313,000
1996 98,000 98,000
1997 49,000 49,000
-------- --------- --------
Total $581,000 ($121,000) $460,000
======== ========= ========
</TABLE>
(2) The Company is party to several lawsuits related to trade claims
made by and against the Company. The Company is in litigation or is attempting
to settle these lawsuits. The majority of such claims have been assigned to
Agama, Inc. in conjunction with the sale of the Company's computer business (See
- - - Note A), and as such Agama, Inc. has indemnified the Company against any
unfavorable outcomes. Management believes that the ultimate outcome of these
lawsuits will not have a material adverse effect on the Company's financial
position and future operations.
(NOTE I) - Stockholders' Equity:
(1) In January 1987, the Company adopted a qualified stock option plan
which granted options to key employees to purchase an aggregate of 7,500 shares
of the Company's common stock at a price equal to 100% of the fair market value
(110% of the fair market value if the optionee owns more than 10% of the
Company's stock) as of the date of the grant. The options expire at a date
determined by the Board of Directors ("BOD"), but in no event later than ten
years from the date of grant.
In April 1988, the Company adopted a stock option plan which provides
for the granting of incentive stock options (ISO) and non-qualified stock
options (NQSOs) to key employees to purchase an aggregate of 7,500 shares of the
Company's common stock. On May 8, 1992 and August 20, 1992, 4,175 and 2,427
options were issued under this plan. Also on May 8, 1992, 1,247 options were
reissued under this plan. 350 of the above options were canceled during Fiscal
1993. During Fiscal 1994 the BOD increased the aggregate number of shares
available to be issued under this plan to 60,000. During Fiscal 1994, the
Company granted options to purchase 37,450 shares. During Fiscal 1994, 20,960
options were exercised under this plan and 40 options were canceled.
In December 1994, the Company's BOD granted 120,000 NQSOs to employees
and consultants. These NQSOs will not be exercisable until the Company has filed
a Form S-8 registration statement with the Securities and Exchange Commission,
which is expected to be filed on or about June 15, 1995.
(2) During Fiscal 1993, in conjunction with the retirement of its
United Jersey Bank debt, the Company issued United Jersey Bank options to
purchase 50,000 shares of its common stock. This option expires on December 31,
2002. Under a redemption agreement, the Company can redeem the options for
$450,000 or $600,000 if redeemed by September 30, 1995 or 1996, respectively and
$1 million thereafter.
(3) On August 21, 1992, the Company issued 2,500 shares of Series A
Convertible Preferred stock in exchange for $2,500,000 of trade debt. The
preferred stock was ascribed a value of $250,000 based on the estimated market
value of the underlying common stock of the Company. The preferred stock accrues
cumulative dividends at 6% and is convertible into common stock (i) at the
option of the holder at the market price of the common stock provided the market
price is equal to or exceeds $135, and (ii) at the option of the
10
<PAGE> 11
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
Company after August 21, 1994 at 110% of the market price of the common stock.
In no event shall a conversion result in the holder having more than 49% of the
outstanding common stock of the Company. The shares of preferred stock are
redeemable at the option of the Company at $1,000 per share. At April 30, 1995
there was $400,000 of cumulative preferred stock dividends.
(NOTE J) - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of:
Accounts Payable $580,890
Accrued Vacations 117,091
Other 258,360
--------
Total $956,341
========
(NOTE K) - Subsequent Events
As of June 14, 1995, the stock options granted by Osicom's BOD in
December 1994 had not been registered.
On April 14, 1995, Coast Business Credit ("the lender") and Meret
entered into an agreement ("the agreement") for a $5 million revolving line of
credit collateralized by inventories, receivables and property, plant and
equipment. Osicom has guaranteed the debt to the extent of $600,000. The
agreement bears interest at 2 1/2% over the prime rate, but in no event less
than 8%. Meret is required to pay the lender a $50,000 origination fee and a
$2,500 quarterly Facility Fee and Osicom is required to issue the lender
warrants to purchase 5,000 shares of its common stock exercisable at any time up
to 3 years from the date of funding at a price equal to the per share price on
the funding date.
The agreement provides for advance of 80% of eligible accounts
receivable and 25% of eligible inventories not to exceed the lesser of
$1,000,000 or 75% of the then outstanding accounts receivable loan. The proceeds
must be used to provide working capital for expansion and for other business
purposes. The agreement remains in effect until May 31, 1998 and automatically
renews for successive additional terms of one year on a continuous basis unless
terminated by written notice of either party or by default As of June 14, 1995,
no borrowings were outstanding under the loan agreement.
On June 8, 1995, the Company acquired 100% of Dynair Electronics, Inc.
("Dynair"). Dynair is engaged in the business of designing, manufacturing,
marketing and supporting digital and analog switches and routers and related
products.
The purchase price paid by the Company for Dynair will be equal to the
audited shareholder's equity of Dynair as of May 31,1995, payable in cash. In
addition to the above-mentioned consideration, Seller is entitled to receive
additional cash consideration equal to a percentage of net revenues in excess of
$5,000,000 within a post-closing year derived from the sale of Dynair products,
for each of the five years subsequent to the acquisition date.
(NOTE L) - Supplemental Cash Flow Disclosures:
Interest expense approximated $17,000 and was accrued at April 30, 1995
for the three months then ended April 30, 1994. Interest expense which
approximated $17,000, was paid during the three months ended. April 30, 1994.
11
<PAGE> 12
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
There were no non-cash financing and investing activities during the
three months ended April 30, 1995 and 1994.
(NOTE M) - Earnings Per Share Calculation:
Earnings per share has been computed on a primary basis only as the
result of the fully diluted calculation is anti-dilutive. Earnings per share
were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended April 30, 1995 1994
---------------------------- ---- ----
<S> <C> <C>
Net earnings $ 141,978 $ 39,875
Accrued undeclared dividends 37,500 37,500
------------------------------
Earnings used for computation $ 104,478 $ 2,375
==============================
Weighted average number of shares outstanding 1,195,898 1,026,824
Shares issuable upon exercise of dilutive warrants and
options, net of shares assumed to have been purchased,
at the average market price for the period, with assumed
exercise proceeds. 22,838
------------------------------
1,195,898 1,049,662
Net earnings per share of common stock $ 0.09 $ 0.00
==============================
</TABLE>
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated unaudited
financial statements and related notes thereto.
Results of Operations for the Three Months Ended April 30, 1995 and 1994
Results of operations for the three months ended April 30, 1995 include
the operating results of Meret, Catel and the expenses of Osicom. Results of
operations for the three months ended April 30, 1994 include the results of
continuing operations of Meret, Catel and Osicom and the discontinued operations
of Adtech.
Consolidated unaudited net sales increased by 12% to $1,175,000 from
$1,045,000. Consolidated unaudited gross profit increased by 3% to $475,000 from
$459,000, due to the increased efficiency related to having consolidated the
manufacturing facilities of Meret and Catel.
Selling, general and administrative expenses increased to $554,000 from
$538,000, due to higher professional costs, while decreasing as a percentage of
sales from 52% to 47%. Amortization of negative goodwill was $238,000 as
compared to 249,000. Interest expense incurred in connection with the bank
credit line was approximately $17,000 for each period. During the three months
ended April 30, 1995, although the average balance outstanding on the bank
credit line was less than for the same period in 1994, the effect of higher
interest rates resulted in interest expense for the periods being approximately
equal.
Consolidated unaudited income from continuing operations decreased 7%
to $142,000 as compared to $153,000. As a percentage of sales, consolidated
unaudited income from continuing operations decreased from 15% to 12%.
Consolidated net income increased 255% to $142,000 from $40,000. As a percentage
of sales, consolidated unaudited net income increased from 4% to 12% due
primarily to the discontinuance of the operation of Adtech. Consolidated net
income included a loss from the discontinued operations of Adtech approximately
$113,000 for the three months ended April 30, 1994.
Due to the offsetting of non-current assets against negative goodwill
in the Meret and Catel acquisitions, as required by generally accepted
accounting principles, productive fixed assets with a net book value of
approximately $1,900,000 at date of acquisition, have not been recorded.
Accordingly, there is no depreciation charge to operations these assets which
are used in the operations of Meret and Catel.
As of June 14, 1995 the Company had a backlog of over $2,000,000.
Liquidity and Capital Resources
The continuing operations of the Company reduced cash balances by
approximately $205,000 as compared to $637,000 for the three months ended April
30, 1995 and 1994 respectively. The reduction in the use of cash is due to the
impact of cost reductions and the cessation of the operations of Adtech. Cash
flows from financing activities for the three months ended April 30, 1995 and
1994 approximated $307,000 and $468,000 respectively. During the three months
ended April 30, 1995, the Company paid $50,000 against the bank loan and
collected $357,000 from notes receivable. During the three months ended April
30, 1994, the Company paid $75,000 against the note issued for the acquisition
of Catel in 1993 and collected $542,000 from notes receivable. Expenditures for
capital equipment in both periods were negligible.
On April 14, 1995, Coast Business Credit ("the lender") and Meret
entered into an agreement ("the agreement") for a $5 million revolving line of
credit collateralized by inventories, receivables and property, plant and
equipment. Osicom has guaranteed the debt to the extent of $600,000. The
agreement bears interest
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
at 2 1/2% over the prime rate, but in no event less than 8%. The agreement
provides for advance of 80% of eligible accounts receivable and 25% of eligible
inventories not to exceed the lesser of $1,000,000 or 75% of the then
outstanding accounts receivable loan. The proceeds must be used to provide
working capital for expansion and for other business purposes. The agreement
remains in effect until May 31, 1998 and automatically renews for successive
additional terms of one year on a continuous basis unless terminated by written
notice of either party or by default As of June 14, 1995, no borrowings were
outstanding under the loan agreement.
On June 8, 1995 the Company acquired 100% of Dynair Electronics, Inc.
("Dynair"). Dynair is engaged in the business of designing, manufacturing,
marketing and supporting digital and analog switches and routers which are being
used by the telecommunications industry to build the next generation of networks
to provide video-on-demand and related services.
The purchase price paid by the Company for Dynair will be equal to the
audited shareholder's equity of Dynair as of May 31,1995, payable in cash. In
addition to the above-mentioned consideration, Seller is entitled to receive
additional cash consideration equal to a percentage of net revenues in excess of
$5,000,000 within a post-closing year derived from the sale of Dynair products,
for each of the five years subsequent to the acquisition date.
Management believes that the Company has sufficient working capital to
meet the needs of the current level of operations. Management is implementing
plans which it believes will enable the Company to internally generate funds for
its continuing operations. There can be no assurance that these mechanisms to
improve liquidity will be effective. The Company, however, is actively seeking
acquisitions and anticipates that it will require additional capital in order to
fund any acquisitions or substantial growth in its current business and no
assurances can be given that sufficient capital will be available when needed.
14
<PAGE> 15
OSICOM TECHNOLOGIES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to several lawsuits related to trade claims made
by and against the Company. The Company is in litigation or is attempting to
settle these lawsuits. The majority of such claims have been assigned to Agama,
Inc. in conjunction with the sale of the Company's computer business, and as
such Agama, Inc. has indemnified the Company against any unfavorable outcomes.
Management believes that the ultimate outcome of these lawsuits will not have a
material adverse effect on the Company's financial position and future
operations.
Item 6. - Exhibits and Reports on Form 8-K
June 12, 1995 - Acquisition of Dynair Electronics, Inc.
15
<PAGE> 16
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf the
undersigned thereunto duly authorized.
OSICOM TECHNOLOGIES, INC.
(Registrant)
Date: June 14, 1995
By: /s/ Sharon Gill Chadha
---------------------------
President,
Chief Financial Officer and
Chief Accounting Officer
16
<TABLE> <S> <C>
<ARTICLE> CT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> APR-30-1995
<TOTAL-ASSETS> 5,013,007
<COMMON> 1,195,898
0
2,500
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,013,007
<TOTAL-REVENUES> 1,174,507
<INCOME-TAX> 0
<INCOME-CONTINUING> 141,978
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,978
<EPS-PRIMARY> $.09
<EPS-DILUTED> 0
</TABLE>
