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Previous: NEW JERSEY STEEL CORP, 10-Q, 1996-04-15 |
Next: WATERHOUSE INVESTOR SERVICES INC, 10-Q, 1996-04-15 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8 - K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): April 12, 1996 (January 31,
1996)
OSICOM TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW JERSEY 0-15810 22-2367234
---------- ------- ---------------
(STATE OR JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
</TABLE>
<TABLE>
<S> <C>
2800 28th STREET, #100, SANTA MONICA, CALIFORNIA 90405
------------------------------------------------ -----
(Address of principal executive offices) (zip code)
</TABLE>
Registrant's telephone number, including area code: (310) 828-7496
<PAGE> 2
<TABLE>
<CAPTION>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<S> <C>
(a) Financial Statements of Business Acquired (Pages 3-11)
(b) Pro Forma Financial Information (Pages 12 - 13)
SIGNATURES (Page 14)
</TABLE>
<PAGE> 3
ROCKWELL NETWORK SYSTEMS DIVISION
FINANCIAL STATEMENTS
JANUARY 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
<S> <C>
Independent Accountants' Report 4
Balance Sheet as of January 31, 1996 5 - 6
Statements of Operations and Rockwell International Corporation
Investment Years Ended January 31, 1995 and 1996 7
Statements of Cash Flows Years Ended January 31, 1995 and 1996 8
Notes to Financial Statements 9 - 11
</TABLE>
<PAGE> 4
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Osicom Technologies, Inc.
We audited the accompanying balance sheet of Rockwell Network Systems
Division (RNSD), a division of Rockwell International Corporation (RIC) as of
January 31, 1996 and the related statements of operations and RIC Investment
and cash flows for the years ended January 31, 1995 and 1996. These financial
statements are the responsibility of RNSD's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, RNSD's financial position as of January 31,
1996 and the results of its operations and cash flows for the years ended
January 31, 1995 and 1996 in conformity with generally accepted accounting
principles.
Weinbaum & Yalamanchi
Canoga Park, California
April 11, 1996
<PAGE> 5
ROCKWELL NETWORK SYSTEMS DIVISION
BALANCE SHEET
JANUARY 31, 1996
ASSETS
<TABLE>
<S> <C>
Current Assets
- --------------
Cash $ 1,000
Accounts receivable (less $276,000 allowance for
doubtful accounts) 3,193,000
Inventories (Note 5) 5,150,000
Prepaid expenses 149,000
--------------
Total current assets 8,493,000
--------------
Property and Equipment
- ----------------------
Test equipment 1,760,000
Computers 2,586,000
Leasehold improvements 408,000
Office equipment and furniture 1,788,000
Other equipment 158,000
-----------------
6,700,000
Accumulated depreciation 5,481,000
-----------------
1,219,000
-----------------
Deposits 22,000
-----------------
$ 9,734,000
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
ROCKWELL NETWORK SYSTEMS DIVISION
BALANCE SHEET
JANUARY 31, 1996
LIABILITIES AND ROCKWELL INTERNATIONAL
CORPORATION INVESTMENT
<TABLE>
<S> <C>
Current Liabilities
- -------------------
Accounts payable $ 1,872,000
Accrued expenses (Note 6) 684,000
----------------
Total current liabilities 2,556,000
----------------
Commitments and contingencies (Note 3 and 8)
Rockwell International Corporation Investment 7,178,000
----------------
$ 9,734,000
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
ROCKWELL NETWORK SYSTEMS DIVISION
STATEMENTS OF OPERATIONS AND ROCKWELL INTERNATIONAL CORPORATION INVESTMENT
YEARS ENDED JANUARY 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Net sales (Note 7) $ 8,471,000 $ 13,805,000
-----------------------------------------
Cost of sales 4,652,000 7,848,000
Inventory writedowns 136,000 105,000
-----------------------------------------
4,788,000 7,953,000
-----------------------------------------
Gross margin 3,683,000 5,852,000
-----------------------------------------
Selling, general and administrative expenses
(Notes 7,8 & 9) 6,209,000 8,587,000
Research and development 4,691,000 5,190,000
-----------------------------------------
10,900,000 13,777,000
-----------------------------------------
Operating loss 7,217,000 7,925,000
-----------------------------------------
Other income 102,000 308,000
Other expense 143,000 168,000
-----------------------------------------
(41,000) 140,000
-----------------------------------------
Net loss 7,258,000 7,785,000
Rockwell International Corporation
investment - beginning of year 2,753,000 3,316,000
Rockwell International Corporation
capital contribution 7,821,000 11,647,000
-----------------------------------------
Rockwell International Corporation
investment - end of year $ 3,316,000 $ 7,178,000
=========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
<TABLE>
<CAPTION>
ROCKWELL NETWORK SYSTEMS DIVISION
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1995 AND 1996
1995 1996
---- ----
<S> <C> <C>
Operating cash flows:
Net loss $ (7,258,000) $ (7,785,000)
Adjustments to reconcile net loss to cash used
by operations
Depreciation and amortization 568,000 554,000
Changes in operating assets
Accounts receivable 193,000 (1,881,000)
Inventories (651,000) (3,370,000)
Prepaid expenses (257,000) 196,000
Accounts payable 352,000 1,119,000
Accrued expenses (357,000) 102,000
Deposits (12,000) (1,000)
---------------------------------------
Cash used by operations 7,422,000 11,066,000
----------------------------------------
Investing cash flows:
Property acquisitions 399,000 581,000
----------------------------------------
Cash used by investing activities 399,000 581,000
----------------------------------------
Financing cash flows:
Rockwell International Corporation contributions 7,821,000 11,647,000
----------------------------------------
Cash provided by financing activities 7,821,000 11,647,000
----------------------------------------
Change in cash (Note 4) 0 0
Cash - beginning of year 1,000 1,000
----------------------------------------
Cash - end of year $ 1,000 $ 1,000
========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 9
ROCKWELL NETWORK SYSTEMS DIVISION
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1996
NOTE 1. ACCOUNTING POLICIES AND OPERATIONS
Basis of Presentation - The financial statements include the assets and
liabilities of Rockwell Network Systems Division (RNSD), a division of Rockwell
International Corporation (RIC). The financial statements do not include any
assets or liabilities of other RIC divisions.
Business Description - RNSD manufactures and markets local area network and
remote access products. RNSD sells primarily to computer manufacturers,
network product distributors and internet service providers.
Inventories - Inventories are valued by the lower of cost or market,
first-in-first-out method.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is recorded by the straight-line method over the related assets
estimated useful lives. Leasehold improvements are amortized over the term of
the related lease. Fully depreciated assets still in use at January 31, 1996
were $ 3,225,000.
Accounts Receivable - RNSD provides an allowance for doubtful accounts to reduce
receivables to net realizable value. RNSD's largest two January 31, 1996
receivables were $1,397,000 and $668,000. RNSD does not require collateral for
its receivables.
Revenue Recognition - Revenue is recognized when products are
shipped.
Advertising Costs - Advertising costs are expensed in the period in which they
are incurred.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses
during the reported periods. Actual results could differ from those estimates.
Fair Value of Financial Instruments - RNSD's accounts receivable, accounts
payable and accrued expenses carrying value approximates fair value because of
the short-term maturity of those instruments.
Income Taxes - RNSD recorded no benefit for income taxes, RIC recording any
such benefit. Had RNSD been a separate entity, it would have had net operating
loss carryforwards which have no assurance of realization and would have
recorded a valuation allowance equal to their potential benefit.
NOTE 2. SALE OF RNSD
On January 31, 1996, RIC sold certain assets, subject to the assumption of
certain liabilities, commonly known as RNSD to Meret Optical Communications,
Inc. (Meret), a wholly-owned subsidiary of Osicom Technologies, Inc. (Osicom),
for $11,000,000. Concurrent with the sale, Osicom gave certain RNSD employees
options to purchase Osicom stock, and Osicom stock grants, contingent upon
their continued employment by Meret.
<PAGE> 10
ROCKWELL NETWORK SYSTEMS DIVISION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1995 AND 1996
NOTE 3. BANK LOAN
Simultaneously, with RNSD's sale, Note 2, Meret gave a bank a security interest
in RNSD's accounts receivable, inventories and property, plant and equipment
and borrowed $3,500,000.
NOTE 4. SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest income and expense approximated cash received and paid for interest
for the years and were not material. Taxes paid were not material. RNSD
maintained no bank accounts using RIC's cash management system; therefore, RNSD
will have no change in cash balances for a year.
NOTE 5. INVENTORIES
<TABLE>
<S> <C>
Inventories were:
Raw materials $ 2,907,000
Work in process 1,955,000
Finished goods 772,000
----------------
5,634,000
Obsolescence reserve 484,000
----------------
$ 5,150,000
================
</TABLE>
NOTE 6. ACCRUED EXPENSES
<TABLE>
<S> <C>
Accrued expenses include:
Vacations $ 175,000
Insurance 186,000
Warranty 43,000
Other 280,000
----------------
$ 684,000
================
</TABLE>
NOTE 7. SALES AND EXPENSE INFORMATION
Sales and expenses included these amounts by year:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Export sales $ 1,390,000 $ 1,300,000
Customer A 319,000 1,749,000
Customer B NIL 1,689,000
Customer C 1,035,000 621,000
Customer D 854,000 784,000
Sales to other RIC divisions 90,000 812,000
Repairs and maintenance expense 315,000 379,000
Advertising expense 908,000 1,464,000
</TABLE>
<PAGE> 11
ROCKWELL NETWORK SYSTEMS DIVISION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1995 AND 1996
NOTE 8. OPERATING LEASES
Rent expense was $538,000 and $655,000 for 1995 and 1996. RNSD had operating
lease commitments at January 31, 1996 as follows by years:
<TABLE>
<S> <C>
1997 $ 433,000
1998 370,000
1999 31,000
--------------
$ 834,000
==============
</TABLE>
NOTE 9. TRANSACTIONS WITH RIC
During 1995 and 1996, RNSD recorded credits of $262,000 and $644,000 for
Foreign Sales Corporation advertising which it recorded as RIC Capital
Contributions. RNSD also recorded various allocated expenses for data
processing, telecommunications, employee health care, savings and retirement
plans totaling $52,000 and $33,000 for 1995 and 1996.
<PAGE> 12
ITEM 7 (B) PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information presents the effects of
the acquisitions of Rockwell Network Systems Division, and Dynair Electronics,
Inc. by the registrant as if the acquisitions had been completed as of January
31 1994. The proforma financial information reflects the registrant's 2:1 stock
split effected February 12, 1996.
The pro forma financial information is not necessarily indicative of
the results of operations and financial position which will be attained in the
future. The pro forma information should be read in conjunction with the
historical consolidated financial statements of Osicom Technologies, Inc. to be
reported on Form 10-KSB for the year ended January 31, 1996.
OSICOM TECHNOLOGIES, INC.
Proforma Condensed Consolidated Income Statements
For the Year ended January 31, 1995
<TABLE>
<CAPTION>
Osicom Pro forma Pro forma
Consolidated RNSD Dynair adjustments consolidated
------------ ---------- ------- ------------- -------------
<S> <C> <C>
Net sales $5,892,356 $ 8,471,000 $ 3,438,000 $ 17,801,356
Cost of sales 4,051,409 4,788,000 1,968,000 10,807,409
---------- ----------- ----------- -------------
Gross profit 1,840,947 3,683,000 1,470,000 6,993,947
Selling, general and administrative expenses 2,058,095 10,941,000 2,225,000 15,224,095
Amortization of negative goodwill 950,868 950,868
Interest expense 84,431 148,000 (a) $27,000 1,280,431
(b) 1,021,000
---------- ----------- ----------- ----------- -------------
Earnings (loss) from continuing operations 649,289 (7,258,000) (903,000) (1,048,000) (8,559,711)
Loss on discontinued operations 276,269 276,269
---------- ----------- ----------- ----------- -------------
NET EARNINGS (LOSS) $373,020 ($7,258,000) ($903,000) ($1,048,000) ($8,835,980)
========== =========== =========== =========== =============
Weighted average shares used in computation of per share information (Note K):
Primary & Fully Diluted 2,111,636
Net Earning Per
- Both Primary & Fully Diluted $0.11 ($3.44) ($0.43) ($4.26)
</TABLE>
(a) To recognize interest expense for the year on
acquisition debt related to the Dynair acquisition.
(b) To recognize interest expense for the year on
acquisition debt of $9.5 million related to the
RNS acquisition based upon 10.75%.
<PAGE> 13
OSICOM TECHNOLOGIES, INC.
Proforma Condensed Consolidated Income Statements
For the Year ended January 31, 1996
<TABLE>
<CAPTION>
Dynair
Four Months
Osicom Ended Pro forma Pro forma
Consolidated RNSD May 31, 1996 Ref Adjustments consolidated
------------ ---- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 7,733,366 $13,805,000 $2,065,133 $ 23,603,499
Cost of Sales 4,621,315 7,953,000 1,115,381 13,689,696
----------- ----------- ---------- ------------
Gross profit 3,112,051 5,852,000 949,752 9,913,803
Selling, general and administrative expenses 3,201,627 13,637,000 1,087,320 17,925,947
Amortization of negative goodwill 950,868 950,868
----------- ----------- ---------- ------------
Interest expense - net 158,339 64,222 (a) ($64,222) 1,179,339
(b) 1,021,000
----------- ----------- ---------- --------- ------------
NET EARNINGS (LOSS) $702,953 ($7,785,000) ($201,790) ($956,778) ($8,240,615)
=========== =========== ========== ========= ============
Weighted average shares used in computation of per share information (Note K):
Primary 2,649,006
Fully diluted 2,798,378
Net Earning Per Share - Primary $0.21 ($2.94) ($0.08) ($3.17)
- Fully Diluted $0.20 ($2.78) ($0.07) ($3.00)
</TABLE>
(a) To remove interest expense on debt not assumed related to the Dynair
acquisition.
(b) To recognize interest expense for the year on acquisition debt related to
the RNS acquisition.
<PAGE> 14
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 by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C> <C>
Osicom Technologies, Inc.(Registrant)
------------------------------------------------------
Dated: April 12, 1996 By: /s/Sharon Gill Chadha
------------------------------------------------------
Sharon Gill Chadha
Chief Executive Officer
</TABLE>
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