<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): December 6, 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 other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
</TABLE>
2800 28th Street, Suite 100, Santa Monica, CA 90405
- --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 581-4030
--------------
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired (Pages 3-11)
(b) Pro Forma Financial Information (Pages 12-13)
SIGNATURE (Page 14)
2
<PAGE> 3
CRAY COMMUNICATIONS, INC.
FINANCIAL STATEMENTS
JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Accountants' Report 4
Balance Sheet as of June 30, 1996 5
Statements of Operations and Accumulated Deficit
Years Ended June 30, 1995 and 1996 6
Statements of Cash Flows Years Ended June 30, 1995 and 1996 7
Notes to Financial Statements 8-11
</TABLE>
3
<PAGE> 4
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Osicom Technologies, Inc.
We audited the accompanying balance sheet of Cray Communications, Inc. (Cray), a
division of Cray Electronics Holdings PLC (CEH), as of June 30, 1996 and the
related statements of operations and accumulated deficit and cash flows for
the years ended June 30, 1995 and 1996. These financial statements are the
responsibility of Cray'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, 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, Cray's financial position as of June 30, 1996 and the
results of its operations and cash flows for the years ended June 30, 1995 and
1996 in conformity with generally accepted accounting principles.
/s/Weinbaum & Yalamanchi
Los Angeles, California
September 27, 1996; except as
to Note 11 for which the
date is October 2, 1996.
4
<PAGE> 5
CRAY COMMUNICATIONS, INC.
BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Cash (Note 7) $ 227,795
Accounts receivable (Note 8) 5,415,210
Other receivables 3,465
Inventories (Note 3) 3,357,202
Prepaid expenses (Note 9) 93,821
------------
Total Current Assets 9,097,493
------------
Property, plant & equipment (Note 4) 13,842,433
Accumulated depreciation (12,652,660)
------------
Net Property, Plant & Equipment 1,189,773
------------
Other Assets:
Spare Parts (Net) (Note 6) 828,231
Intercompany Receivable 538,492
------------
TOTAL ASSETS $ 11,653,989
============
LIABILITIES & SHAREHOLDER'S EQUITY:
Accounts payable $ 2,482,427
Accrued liabilities (Note 10) 2,521,140
------------
Total Current Liabilities 5,003,567
------------
Loans (Note 11) 4,650,000
Capital leases 29,220
Commitments and contingencies (Notes 12 and 13)
Common stock 15,200
Paid in capital 37,437,285
Accumulated deficit (35,481,283)
------------
Total Shareholder's Equity 1,971,202
------------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $ 11,653,989
============
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
CRAY COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
YEARS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Product $ 26,034,136 $ 21,948,393
Intercompany 207,481 100,892
Service 4,652,855 4,125,133
------------ ------------
TOTAL SALES (Note 17) 30,894,472 26,174,418
------------ ------------
Material 11,345,637 9,234,241
Scrap 69,307 168,780
Direct Labor 1,688,751 1,366,069
Mfg Overhead 2,599,109 2,085,157
Variance (267,443) 238,453
Obsolescence (1,040,000) (1,569,396)
------------ ------------
PRODUCT COST 16,475,361 14,662,096
Service 3,759,697 3,378,325
------------ ------------
DIRECT COST OF SALES 19,195,058 16,471,025
------------ ------------
MARGIN, PRODUCT 9,766,256 7,387,189
MARGIN, SERVICE 893,158 746,808
------------ ------------
TOTAL MARGIN 10,659,414 8,133,997
------------ ------------
Engineering (Note 14) 2,765,083 2,863,677
Selling 5,997,832 4,577,272
Commissions 1,850,754 1,284,600
Marketing 1,937,186 835,534
Administration 1,514,014 1,330,034
------------ ------------
INDIRECT COSTS 14,064,869 10,891,117
------------ ------------
OPERATING (LOSS) (3,405,455) (2,757,120)
Interest Expense-External (196,347) (278,454)
Interest Expense-Internal (7,500) (137,224)
Severance (529,325) (333,489)
------------ ------------
PRE-TAX (LOSS) (4,138,627) (3,506,287)
TAX PROVISION 17,017 8,835
------------ ------------
NET (LOSS) (4,155,644) (3,515,122)
Cray's Accumulated Deficit (beginning) 27,810,517 31,966,161
------------ ------------
Cray's Accumulated Deficit (ending) $ 31,966,161 $ 35,481,283
============ ============
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
CRAY ELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Operating cash flows:
Net loss $(4,155,644) $(3,515,122)
Adjustments to reconcile net loss to cash
provided by (used) by operations:
Depreciation - fixed assets 437,284 379,854
Amortization - spare parts 276,304 570,311
Obsolescence reserve 1,040,000 1,569,396
Changes in operating assets
Accounts receivable 1,438,895 (390,177)
Other receivables (6,123) 388,672
Inventories (1,684,832) 1,206,644
Prepaid expenses 53,493 67,610
Accounts payable (1,200,659) 26,597
Accrued liabilities 81,147 341,247
----------- -----------
Cash provided (used) by operations (3,720,135) 645,032
----------- -----------
Investing cash flows:
Purchases of property, plant & equipment (435,073) (26,561)
Purchases of spare parts (199,410) (199,411)
----------- -----------
Cash used by investing activities (634,483) (225,972)
----------- -----------
Financing cash flows:
Proceeds (repayments) on loan 4,296,536 (357,500)
Increase (decrease) in capital leases 29,556 (96,256)
----------- -----------
Cash provided (used) by financing activities 4,326,092 (453,756)
----------- -----------
Decrease in cash (28,526) (34,696)
Cash at beginning of year 291,017 262,491
----------- -----------
Cash at end of year $ 262,491 $ 227,795
=========== ===========
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 8
CRAY COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
NOTE 1. ACCOUNTING POLICIES AND OPERATIONS:
Basis of Presentation - The financial statements include the assets and
liabilities of Cray Communications, Inc. (Cray), a division of Cray Electronics
Holdings PLC (CEH), a U.K. based company. The financial statements do not
include any assets or liabilities of other CEH divisions.
Business Description - Cray designs, manufactures, markets, and supports an
extensive range of communications products and systems for local area networks
and wide area networks.
Revenue Recognition - Revenue is recognized when products are shipped.
Maintenance Contracts - Revenue is recognized when earned, the unearned portion
is classified as a deferred liability.
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 - Cray's accounts receivable , accounts
payable, and accrued expenses carrying value approximates fair value because of
the short-term maturity of those instruments.
NOTE 2 - SALE OF CRAY:
On June 30, 1996, Osicom Technologies, Inc. (Osicom) acquired 100% of CEH
Holdings, Inc., and its wholly owned subsidiaries including Cray Communications,
Inc. for a total of $14 million. Under the acquisition agreement, the total
purchase consists of approximately $11 million in cash and $3 million in Osicom
preferred stock.
NOTE 3. INVENTORIES:
Inventories, at June 30 1996, comprised of raw materials, work in process and
finished goods are stated at the lower of cost (first-in, first-out method) or
market consisted of the following:
<TABLE>
<S> <C>
Raw materials $ 4,229,406
Work in process 470,699
Finished Goods 1,960,903
-----------
Subtotal 6,661,008
Reserve for Obsolescence (3,303,806)
===========
Net Inventories $ 3,357,202
===========
</TABLE>
8
<PAGE> 9
CRAY COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995 AND 1996
NOTE 4. PROPERTY AND EQUIPMENT:
Property and equipment is stated at cost and is depreciated using the
straight-line method over the estimated useful lives of the assets (generally 3
to 7 years). Leasehold improvements are amortized over the shorter of their
estimated useful lives or the term of the lease. Property and equipment at June
30, 1996 consists of:
<TABLE>
<S> <C>
Leasehold Improvements $ 191,907
Equipment 11,890,618
Capitalized leases 842,735
Furniture and Fixtures 917,173
------------
Total 13,842,433
Less :accumulated depreciation (11,836,913)
:accumulated amortization (815,747)
============
Net Book value $ 1,189,773
============
</TABLE>
NOTE 5. STOCK OPTIONS:
Concurrent with the sale of Cray to Osicom, Osicom gave certain Cray employees
stock options, contingent upon their continued employment by Osicom.
NOTE 6. AMORTIZATION - SPARE PARTS:
Spare parts are amortized over six years at the time of acquisition.
NOTE 7. CASH:
The Company maintains banking relationships with NationsBank in the U.S. and
with the Canadian Imperial bank in Canada. Any overdrafts will be covered by the
credit facility if the operating account does not have sufficient funds to cover
checks. Cash at June 30, 1996 consists of:
<TABLE>
<S> <C>
NationsBank-Operating $ 208,561
NationsBank-Overdraft (337,892)
Canadian Imperial Bank 356,626
Petty cash 500
---------
Total $ 227,795
=========
</TABLE>
NOTE 8. ACCOUNTS RECEIVABLE:
Allowance for doubtful accounts includes a reserve for bad debts based on an
evaluation of customers' credit risk and a reserve for sales returns. At June
30, 1996, Cray's largest two receivables were $1,568,000 and $640,000. Cray does
not require collateral for its receivables. Receivables at June 30, 1996 consist
of:
<TABLE>
<S> <C>
Gross Accounts Receivable $ 5,819,286
Bad Debt Reserve (144,344)
Sales Returns/Credits (259,732)
-----------
Net Accounts Receivable $ 5,415,210
===========
</TABLE>
9
<PAGE> 10
CRAY COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995 AND 1996
NOTE 9. PREPAID EXPENSES:
Prepaid expenses at June 30, 1996 were:
<TABLE>
<S> <C>
Security Deposits/Prepaid Rent $71,662
Workers' Compensation Insurance 12,475
Other Prepaid expenses 9,684
-------
Total $93,821
=======
</TABLE>
NOTE 10. ACCRUED LIABILITIES:
Accrued liabilities at June 30, 1996 were:
<TABLE>
<S> <C>
Security Deposits/Prepaid Rent $71,662
Workers' Compensation Insurance 12,475
Other Prepaid expenses 9,684
-------
Total $93,821
=======
</TABLE>
NOTE 11. LOANS
At June 30, 1996, Cray had outstanding borrowings of $3,250,000 under its $4
million line of credit with a lender. The line of credit was secured by a $3.5
million irrevocable letter of credit and a $500,000 guarantee issued by CEH.
This line of credit provided for interest at 1.5% over the Eurodollar rate or
6.98% at June 30, 1996, for the first $3 million of borrowings, and prime less
.25% or 8.0% at June 30, 1996 for the remaining $1 million of borrowings.
At June 30, 1996, Cray had outstanding indebtedness under its loan agreement
with Cray Electronics PLC of $1,400,000. The agreement provides for interest at
1% above prime or 9.25% at June 30, 1996. On October 2, 1996, a new lender
replaced the line of credit with a $5 million credit facility guaranteed by
Osicom. This credit facility provides for interest at prime plus 2.5% or 10.75%
at October 2, 1996.
NOTE 12. OPERATING LEASES:
Rent expense was $846,000 and $800,000 for 1995 and 1996. Cray has operating
lease commitments at June 30, 1996 as follows by years:
<TABLE>
<S> <C>
1997 $ 673,502
1998 556,859
1999 535,331
----------
$1,765,692
==========
</TABLE>
NOTE 13. PURCHASE COMMITMENTS:
Cray had purchase commitments with suppliers of $1,248,000 as of June 30, 1996.
10
<PAGE> 11
CRAY COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995 AND 1996
Note 14. Research and Development:
Research and development costs are expensed as incurred.
NOTE 15. PENSION:
Cray maintains the Case Communications Defined Benefit Plan (Plan) which was
amended whereby no participants would accrue a benefit under the Plan after
1988. Under the Purchase agreement, CEH is responsible for ensuring the Plan is
sufficiently funded. The Plan may be terminated at any time during the period
commencing on the Closing date and ending on the fifth anniversary of the
Closing date. Cray PLC will assume all liabilities under this plan.
The FAS 87 calculations for the deferred benefit plan, determined as of December
31, 1995, are as follows:
<TABLE>
<S> <C>
Assumptions
Discount Rate 7.25%
Expected Long-Term Rate of Return on Plan Assets 8.50%
Average Remaining Future Service Years 7.190
Summary of Assets and Liabilities as of December 31, 1995
Projected Benefit Obligation $(4,333,224)
Plan Assets at Fair Value 3,655,923
Funded Status (677,301)
-----------
Accrued Pension Expense $ (677,301)
===========
Market Related Value of Assets as of December 31, 1995 was $3,655,923
Components of 1996 Expense
Interest Cost Component $ 306,142
Expected Return on Assets (303,446)
-----------
Net Periodic Pension Expense $ 2,696
===========
</TABLE>
NOTE 16. INCOME TAXES:
Cray records no provision or benefit for income taxes. Had Cray been a separate
entity, it would have had net operating loss carryforwards which have no
assurance of realization.
Cray's federal income tax returns for the years ending April 30, 1993 and 1994
are under examination by the Internal Revenue Service. Under the purchase
agreement, $2,500,000 of Osicom preferred stock was placed into escrow in order
to secure performance of resolving this matter. As of June 30, 1995, Cray had
$2,270,000 of net operating loss carryforwards.
NOTE 17. SALES:
Cray had export sales and intercompany sales as follows:
<TABLE>
1995 1996
-------- --------
<S> <C> <C>
Export Sales $612,000 $279,000
Intercompany to CEH companies $207,000 $101,000
</TABLE>
11
<PAGE> 12
ITEM 7 (B) PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information presents the effects of the
acquisitions of Cray Communications, Inc. ("Cray"), Rockwell Network Systems
("RNSD"), and Dynair Electronics, Inc. ("Dynair") by the registrant as if the
acquisitions had been completed as of January 31, 1994. The pro forma
financial information reflects the registrant's 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., reported on Form
10-KSB for the year ended January 31, 1996.
The pro forma financial information is presented on the following page.
12
<PAGE> 13
OSICOM TECHNOLOGIES, INC.
Pro forma Condensed Consolidated Income Statements (In Thousands)
<TABLE>
<CAPTION>
Osicom Pro forma Pro forma
For the Year ended January 31, 1995 Consolidated Cray RNSD Dynair Ref Adjustments Consolidated
------- -------- -------- ------- --- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 5,892 $ 32,286 $ 8,471 $ 3,438 $ 50,087
Cost of sales 4,051 18,932 4,788 1,968 29,739
------- -------- -------- ------- --- ------- --------
Gross profit 1,841 13,354 3,683 1,470 20,348
Selling, general and
administrative expenses 2,058 13,553 10,941 2,225 28,777
Amortization of negative goodwill 951 951
Interest expense 85 53 148 (a) $ (27) 313
(b) (1,021) 1,021
(c) (1,100) 1,100
(d) (7,114) 7,114
------- -------- -------- ------- --- ------- --------
Earnings (loss) from continuing 649 (252) (7,258) (903) (9,262) (17,026)
operations
Loss on discontinued operations (276) (276)
------- -------- -------- ------- ------- --------
NET EARNINGS (LOSS) $ 373 $ (252) $ (7,258) $ (903) $(9,262) $(17,302)
======= ======== ======== ======= ======= ========
</TABLE>
<TABLE>
<S> <C> <C>
Weighted average shares used in computation primary and fully diluted 2,111,636
of per share information:
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Net earnings per share-primary & $ 0.11 $ (0.12) $ (3.44) $ (0.43) (4.39) $ (8.27)
fully diluted(e)
</TABLE>
--------------------------------------------------------
<TABLE>
<CAPTION>
4 months
ended
Osicom 5/31/95 Pro forma Pro forma
For the Year ended January 31, 1996 Consolidated Cray RNSD Dynair Ref Adjustments Consolidated
------------ -------- -------- ------- --- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $7,733 $ 26,123 $ 13,805 $ 2,065 -- $ 49,726
Cost of sales 4,621 17,735 7,953 1,115 -- 31,424
------ -------- -------- ------- ------- --------
Gross profit 3,112 8,388 5,852 950 -- 18,302
Selling, general and
administrative expenses 3,202 12,861 13,637 1,088 -- 30,788
Amortization of negative goodwill 951 -- -- -- -- 951
Interest expense 158 418 -- 64 (a) $ 64 576
-- -- -- - (b) (1,021) (1,021)
-- -- -- - (c) (1,100) (1,100)
------ -------- -------- ------- ------- --------
NET EARNINGS (LOSS) $ 703 $ (4,891) $ (7,785) $ (202) $(2,057) $(14,232)
====== ======== ======== ======= ======= ========
</TABLE>
<TABLE>
<S> <C> <C>
Weighted average shares used in computation Primary 2,649,006
of per share information:
Fully Diluted 2,798,378
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Net earnings per share(e)
-Primary $ 0.21 $ (1.85) $ (2.94) $ (0.08) $ (0.78) $ (5.44)
-Fully Diluted $ 0.20 $ (1.75) $ (2.78) $ (0.07) $ (0.74) $ (5.14)
</TABLE>
(a) To recognize interest expense for the year on acquisition debt, related to
Dynair acquisition.
(b) To recognize interest expense for the year on acquisition debt, of $9.5
million related to RNS acquisition.
(c) To recognize interest expense for the year on acquisition debt, of $11.0
million related to Cray acquisition, assuming a 10% interest rate.
(d) To write off purchased research and development costs
(e) Consolidated earnings per share reflect $150,000 of accrued annual
dividends.
13
<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.
Osicom Technologies, Inc.
(Registrant)
Dated: December 6, 1996 By: /s/ Christopher E. Sue
----------------------------
Christopher E. Sue
Chief Financial Officer
14
