UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
(Amendment No. 2)
Pursuant to Section 13 or 15(d) of the Securities exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 1999
Commission file number: 0-27712
-------------------------------
INTEGRATED PACKAGING ASSEMBLY CORPORATION
-----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 77-0309372
------------------------------ ----------------------------------
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation)
2221 Old Oakland Road
San Jose, CA 95131-1402
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(408) 321-3600
---------------------------------------------------
(Registrant's telephone number, including area code)
Page 1
<PAGE>
The undersigned hereby amends Item 7 of its Current Report on Form 8-K filed
with the Commission on November 15, 1999 to read as follows:
Item 7. Financial Statements, Pro Forma Financial Statements, and Exhibits
------------------------------------------------------------------
(a) Financial Statements of Business Acquired
-----------------------------------------
OSE, Inc. Financial Statements for the 3 month periods ending
September 30, 1999.
Balance Sheet as of September 30, 1999
Statements of Income for the 3 month periods ending
September 30, 1999 and September 30, 1998
Statements of Cash Flows for the 3 month periods ending
September 30, 1999 and September 30, 1998
Notes to Financial Statements for the 3 month period ending
September 30, 1999
OSE, Inc. Financial Statements for the year ended June 30, 1999
with Auditor's Report
Independent Auditor's Report for the year ended June 30, 1999
Balance Sheet as of June 30, 1999
Statement of Income for the year ended June 30, 1999
Statement of Stockholders' Equity for the year ended
June 30, 1999
Statement of Cash Flows for the year ended June 30, 1998
Notes to Financial Statements for the year ended June 30, 1999
OSE, Inc. Financial Statements for the year ended June 30, 1998
with Auditor's Report
Independent Auditor's Report for the year ended June 30, 1998
Balance Sheet as of June 30, 1998
Statement of Income for the year ended June 30, 1998
Statement of Stockholders' Equity for the year ended
June 30, 1998
Statement of Cash Flows for the year ended June 30, 1998
Notes to Financial Statements for the year ended June 30, 1998
Page 2
<PAGE>
(b) Pro Forma Financial Information
-------------------------------
Introduction to Unaudited Pro Forma Financial Statements
Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet
as of October 3, 1999
Unaudited Pro Forma Condensed Combined Consolidated Statement of
Operations for the year ended December 31, 1998
Unaudited Pro Forma Condensed Combined Consolidated Statement of
Operations for the nine months ended October 3, 1999
Notes to Unaudited Pro Forma Condensed Combined Consolidated
Financial Information
(c) Exhibits
--------
Pursuant to Item 601 of Regulation S-K, the following exhibits are
filed herewith:
Exhibit
No. Description
------- -----------
a. Agreement for Purchase and Sale of Common Stock of OSE,
Inc. by and among the Registrant, OSE, Inc. and the
shareholders of OSE, Inc. dated as of October 29, 1999. *
b. Exclusive Sales Distributor Agreement between OSE, Inc.
and Orient Semiconductor Electronics Limited dated as of
October 29, 1999. *
* Exhibit previously filed.
Page 3
<PAGE>
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.
Integrated Packaging Assembly Corporation
Date: May 11, 2000 By: /s/ Patrick Verderico
--------------------------------------
Patrick Verderico
President, Chief Executive Officer and
Principal Financial Officer
Page 4
<PAGE>
OSE, Inc.
Financial Statements
For the 3 month period ended September 30, 1999
Page 5
<PAGE>
OSE, Inc.
Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30,
1999
-------------
<S> <C>
ASSETS
Current assets:
Cash $1,002,193
Accounts receivable, net 16,555,948
Refundable income taxes 0
Prepaid expenses 23,031
Deferred tax assets 31,900
-------------
Total current assets 17,613,072
Investments 4,206,719
Property and equipment, at cost 233,521
Less accumulated depreciation (129,979)
-------------
103,542
Other assets 9,933
-------------
$21,933,266
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $18,350,895
Salaries and wages 80,811
Pension contributions 142,076
Accrued income taxes 19,891
Current maturities of long term debt 4,920
-------------
Total current liabilities 18,598,593
-------------
Long term debt, net of current portion -
Deferred income taxes 179,900
Shareholders' equity:
Common stock, no par value; 1,000,000
shares authorized, 85,000 shares
issued and outstanding 164,377
Unrealized holding gain on investments 249,703
Retained earnings 2,740,693
-------------
3,154,773
-------------
$21,933,266
=============
</TABLE>
See notes to financial statements
Page 6
<PAGE>
OSE, Inc.
Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Revenues $1,269,322 $1,468,528
Cost of revenues 472,149 981,199
------------- -------------
Gross profit (loss) 797,173 487,329
------------- -------------
Operating expenses:
Selling, general and administrative 568,396 375,923
------------- -------------
Total operating expenses 568,396 375,923
------------- -------------
Income from operations 228,777 111,406
Other income
Net interest, dividends and other
income (expense) 11,419 (38,795)
------------- -------------
Total other income (expense) 11,419 (38,795)
------------- -------------
Income before income taxes 240,196 72,611
Income taxes 93,442 28,600
------------- -------------
Net income $146,754 $44,011
============= =============
</TABLE>
See notes to financial statements
Page 7
<PAGE>
OSE, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from Operating Activities:
Net income $146,754 $44,011
Adjustments to reconcile net income to net
Cash provided (used) by operating
activities:
Depreciation and amortization 7,906 7,548
Loss from partnership - 45,500
Deferred tax assets and liabilities 44,200 10,700
Changes in items effecting operations:
Accounts receivable, net (8,055,373) (982,393)
Inventories - 170,578
Prepaid expenses and other assets (14,565) 19,664
Refundable income taxes 12,227 17,900
Accounts payable 8,100,332 881,818
Other accrued expenses (43,491) 79,396
------------- -------------
Net cash provided in operating
activities 197,990 294,722
------------- -------------
Cash flows from investing activities:
Purchases of equipment (28,993) (6,156)
Additional investments (100,000) -
------------- -------------
Net cash used in investing activities (128,993) (6,156)
------------- -------------
Cash flows from financing activities:
Equipment lease payments (632) (541)
------------- -------------
Net cash provided by financing activities (632) (541)
------------- -------------
Net increase in cash 68,365 288,025
Cash at beginning of the period 933,828 334,044
------------- -------------
Cash at end of the period $1,002,193 $622,069
============= =============
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $211 $516
============= =============
Income taxes $4,500 $ -
============= =============
</TABLE>
See notes to financial statements
Page 8
<PAGE>
OSE, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
1. Organization and summary of significant accounting policies
-----------------------------------------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and Regulation S-X. Accordingly, they do not have the
information and footnotes required by generally accepted accounting
principals for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included.
The financial statements should be read in conjunction with the audited
financial statements for the year ended June 30, 1999 included in this
Form 8-K/A.
The results of operation for the three month period ended September 30,
1999 are not necessarily indicative of the results that may be expected for
any subsequent period.
Organization
------------
OSE, Inc. was incorporated in January, 1990. The Company is the North
American sales, marketing and technical support organization for Orient
Semiconductor Electronics, LTD, of Taiwan. Commissions are earned from the
direct sales efforts in the "direct channel" for the semiconductor assembly
and test service of Orient Semiconductor Electronics, LTD. of Taiwan. The
customers are mainly US manufacturers of high-tech products such as video
components, chip sets, graphics chips, logic components, etc.
Cash
----
Cash equivalents are included in cash. The Company considers interest
bearing investments due on demand as cash equivalents.
Concentration of credit risk
----------------------------
The Company at September 30, 1999 and periodically throughout the year
has maintained balances in various operating and money market accounts in
excess of federally insured limits.
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash and accounts
receivable. Risks associated with cash are mitigated by placing deposits in
credit worthy financial institutions. The Company's customer base is
primarily in the high-technology industry and is affected by changes in that
industry. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral.
Page 9
<PAGE>
Investments
-----------
Equity securities are classified as "available-for-sale" as defined by
SFAS 115. In accordance with that Statement, they are reported at aggregate
fair value with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity.
Revenue
-------
Revenue is recognized when product is shipped to the customer.
Management 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and amortization
-----------------------------
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the assets, which are from three to ten
years.
Income taxes
------------
Deferred income taxes are provided on the difference in earnings
determined for tax and financial reporting purposes.
2. Related party transactions
--------------------------
The Company is a sales and supporting entity for its shareholder, Orient
Semiconductor Electronics, LTD. of Taiwan (OSET). The major source of income
of the Company is the commission income it earns based on the respective
sales it makes for OSET.
While the Company is responsible for the collection of accounts
receivable, it has obtained certain guarantees from OSET for the risk of bad
debt. It normally makes payments to OSET for the accounts payable after the
collection of respective accounts receivable. Periodically, upon the
request, the Company also purchases certain materials and components for
OSET, and then sells these items to OSET at minimal profit.
3. Subsequent Event
----------------
On October 29, 1999, Integrated Packaging Assembly Corporation (IPAC), a
Delaware corporation, acquired all of the outstanding common stock of the
Company with purchase price to be paid in shares of Integrated Packaging
Assembly Corporation common stock. Immediately prior to the acquisition,
the Company distributed certain assets with fair market value aggregated to
approximately $4,209,000 to existing shareholders as a dividend
distribution.
Page 10
<PAGE>
OSE, Inc.
Financial Statements
For the year ended June 30, 1999
with
Auditor's Report
Page 11
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
OSE, INC.
Santa Clara, California
We have audited the accompanying balance sheet of OSE, INC. (a California
Corporation) as of June 30, 1999, 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.
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 financial statements referred to above present fairly,
in all material respects, the financial position of OSE, INC. as of June 30,
1999, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ ANNETTE A YU
- -----------------
ANNETTE A YU, CPA
San Jose, California
November 18, 1999
Page 12
<PAGE>
OSE, Inc.
Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $933,828
Accounts receivable, net of allowance for
doubtful accounts of $155,600 8,500,575
Refundable income taxes 12,227
Prepaid expenses 9,925
Deferred tax assets 77,000
--------------
Total current assets 9,533,555
Investments 4,100,000
Property and equipment, at cost 204,528
Less accumulated depreciation (122,073)
--------------
82,455
Other assets 8,474
--------------
$13,724,484
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $10,250,563
Salaries and wages 156,817
Pension contributions 109,624
Current maturities of long term debt 2,689
--------------
Total current liabilities 10,519,693
Long term debt, net of current portion 2,863
Deferred income taxes 178,100
Shareholders' equity:
Common stock, no par value; 1,000,000 shares
authorized, 85,000 shares issued and
outstanding 164,377
Unrealized holding gain on investments 245,684
Retained earnings 2,613,767
--------------
3,023,828
--------------
$13,724,484
==============
</TABLE>
See notes to financial statements
Page 13
<PAGE>
OSE, Inc.
Statement of Income
For the year ended June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Revenues $5,798,117
Cost of revenues 3,770,056
--------------
Gross profit (loss) 2,028,061
--------------
Operating expenses:
Selling, general and administrative 1,784,133
--------------
Total operating expenses 1,784,133
--------------
Income from operations 243,928
Other income (expense)
Interest and dividends income 33,178
Other income 13,611
--------------
Total other income (expense) 46,789
--------------
Income before income taxes and
extraordinary item 290,717
Income taxes 123,700
--------------
Income before extraordinary item 167,017
Extraordinary item 37,880
--------------
Net income $204,897
==============
</TABLE>
See notes to financial statements
OSE, Inc.
Statement of Stockholders' Equity
For the year ended June 30, 1999
<TABLE>
<CAPTION>
Unrealized
Common Stock Gain on
------------------ Retained Equity
Shares Amount Earnings Securities Total
-------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at
July 1, 1998 85,000 $164,377 $2,408,870 $87,074 $2,660,321
Net income 204,897 204,897
Change in unrealized
gain on equity
securities, net 158,610 158,610
-------- --------- ----------- ----------- -----------
Balance at
June 30, 1999 85,000 $164,377 $2,613,767 $245,684 $3,023,828
======== ========= =========== ----------- ===========
</TABLE>
See notes to financial statements
Page 14
<PAGE>
OSE, Inc.
Statement of Cash Flow
For the year ended June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Cash flows from Operating Activities:
Net income $204,897
Adjustments to reconcile net income to net
Cash provided (used) by operating activities:
Depreciation and amortization 30,191
Loss from partnership 60,702
Gain on sale of investments (62,880)
Deferred tax assets and liabilities (50,200)
Changes in items effecting operations:
Accounts receivable, net (1,445,865)
Inventories 170,578
Prepaid expenses and other assets 19,852
Refundable income taxes 195,754
Accounts payable 2,282,950
Other accrued expenses 180,119
-------------
Net cash provided in operating activities 1,586,098
-------------
Cash flows from investing activities:
Proceeds from sale of investments 134,477
Purchases of equipment (24,289)
Additional investments (1,094,202)
-------------
Net cash used in investing activities (984,014)
-------------
Cash flows from financing activities:
Equipment lease payments (2,300)
-------------
Net cash provided by financing activities (2,300)
-------------
Net increase in cash 599,784
Cash at beginning of year 334,044
-------------
Cash at end of year $933,828
=============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $2,000
=============
Income taxes $107,700
Non-cash investing and financial activities: =============
Unrealized non-cash gains on investments-net $158,610
=============
</TABLE>
See notes to financial statements
Page 15
<PAGE>
OSE, INC
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
1. Organization and summary of significant accounting policies
-----------------------------------------------------------
Organization
------------
OSE, Inc. was incorporated in January, 1990. The Company is the North
American sales, marketing and technical support organization for Orient
Semiconductor Electronics, LTD, of Taiwan. Commissions are earned from the
direct sales efforts in the "direct channel" for the semiconductor assembly
and test service of Orient Semiconductor Electronics, LTD. of Taiwan. The
customers are mainly US manufacturers of high-tech products such as video
components, chip sets, graphics chips, logic components, etc.
Cash
----
Cash equivalents are included in cash. The Company considers interest
bearing investments due on demand as cash equivalents.
Concentration of credit risk
----------------------------
The Company at June 30, 1999 and periodically throughout the year has
maintained balances in various operating and money market accounts in excess
of federally insured limits.
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash and accounts
receivable. Risks associated with cash are mitigated by placing deposits in
credit worthy financial institutions. The Company's customer base is
primarily in the high-technology industry and is affected by changes in that
industry. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral.
Inventories
-----------
Inventories are stated at the lower of cost (which approximates first-in,
first-out) or market.
Investments
-----------
Equity securities are classified as "available-for-sale" as defined by
SFAS 115. In accordance with that Statement, they are reported at aggregate
fair value with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity.
Revenue
-------
Revenue is recognized when equipment product is shipped to the customer.
Management Estimates
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
Page 16
<PAGE>
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and amortization
-----------------------------
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the assets, which are from three to ten
years.
Income taxes
------------
Deferred income taxes are provided on the difference in earnings
determined for tax and financial reporting purposes.
2. Long-term debt
--------------
Long-term debt at June 30, 1999, consists of the following:
Equipment lease payable, is due in monthly
installment of $281, including interest, final
payment due February, 2001, collateralized by a
a copier with a net book value of $6,517
3. Employee Benefit Plan
---------------------
The Company has established a Simplified Employee Pension plan which is
exempt from Federal income taxes. The Company, at the discretion of the
Board of Directors, may contribute any amount up to 15% of the annual
eligible compensation of participants in the plan from the current or
accumulated earnings of the Company. The Company's contributions to the plan
for the year ended June 30, 1999 were approximately $109,600. This
contribution has yet to be funded and is included in accrued liabilities at
June 30, 1999.
4. Commitments
-----------
The Company leases its facility under an extended thirty-six months
operating lease commencing January 17, 1990. Rent expenses for the current
year was approximately $108,500. The minimum rental commitment for the lease
is:
2000 $ 118,300
2001 124,100
2002 20,800
----------
$ 263,200
==========
5. Common Stock
------------
The Company was incorporated with an authorized capitalization of
1,000,000 shares of common stock. 45,000 outstanding shares are held
exclusively by officers of the Company.
Page 17
<PAGE>
Income taxes
------------
The provision for income taxes consists of the following as of June 30,
1999:
Current:
Federal $ 152,000
State 46,900
-----------
198,900
Deferred:
Federal (36,500)
State (13,700)
-----------
(50,200)
-----------
$ 148,700
===========
Deferred taxes are provided for differences relating to depreciation and
certain costs capitalized and reserves not deducted for federal and state
income tax purposes.
Reconciliation of the differences between income taxes computed at
Federal statutory tax rate and provisions for income taxes are as follows:
Income taxes computed at Federal
statuary tax rate $ 120,200
State tax provision, net of
Federal benefits 22,000
Permanent differences and other 6,500
----------
Provision for income taxes $ 148,700
==========
Deferred tax assets and liabilities recorded on the balance as of
June 30, 1999, are as follows:
Deferred tax assets
Reserve for bad debt $ 66,700
California Franchise Tax 10,300
----------
77,000
==========
Deferred income taxes
Depreciation $ 14,300
Unrealized gain on investments 163,800
----------
$ 178,100
==========
Page 18
<PAGE>
7. Related party transactions
--------------------------
The Company is a sales and supporting entity for its shareholder, Orient
Semiconductor Electronics, LTD. of Taiwan (OSET). The major source of income
of the Company is the commission income it earns based on the respective
sales it makes for OSET.
While the Company is responsible for the collection of accounts
receivable, it has obtained certain guarantees from OSET for the risk of bad
debt. It normally makes payments to OSET for the accounts payable after the
collection of respective accounts receivable. Periodically, upon the
request, the Company also purchases certain materials and components for
OSET, and then sells these items to OSET at minimal profit.
For year ended June 30, 1999 the Company earned approximately $1,925,000
commission from OSET based on its agent sales of approximately $43,012,000.
The aggregated sales to OSET were approximately $3,879,000. At June 30,
1999, commission and accounts receivable from OSET was approximately
$847,200. Amount due to OSET included in accounts payable was approximately
10,786,600.
The Company sold approximately 67% (32%, 14%, 11%, and 10%) of its
merchandise to four major customers. At June 30, 1999, accounts receivable
from these customers were approximately $5,647,000.
8. Subsequent event
----------------
On October 29, 1999, Integrated Packaging Assembly Corporation (IPAC), a
Delaware corporation, acquired all of the outstanding common stock of the
Company with purchase price to be paid in shares of Integrated Packaging
Assembly Corporation common stock. Immediately prior to the acquisition, the
Company distributed certain assets with fair market value aggregated to
approximately $ 4,209,000 to existing shareholders as dividend distribution.
Page 19
<PAGE>
OSE, Inc.
Financial Statements
For the year ended June 30, 1998
with
Auditor's Report
Page 20
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
OSE, INC.
Santa Clara, California
We have audited the accompanying balance sheet of OSE, INC. (a California
Corporation) as of June 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.
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 financial statements referred to above present fairly,
in all material respects, the financial position of OSE, INC. as of June 30,
1998, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ ANNETTE A YU
- -----------------
ANNETTE A YU, CPA
San Jose, California
November 18, 1999
Page 21
<PAGE>
OSE, Inc.
Balance Sheet
June 30, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $334,044
Accounts receivable 7,054,710
Inventories, at lower of cost or market 170,578
Refundable income taxes 207,981
Prepaid expenses 30,227
Deferred tax assets 30,700
-------------
Total current assets 7,828,240
-------------
Investments 2,873,687
Property and equipment, at cost 180,239
Less accumulated depreciation (91,882)
-------------
88,357
Other assets 8,023
-------------
$10,798,307
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,967,613
Pension contributions 86,322
Current maturities of long term debt 349
-------------
Total current liabilities 8,054,284
-------------
Long term debt, net of current portion 7,502
Deferred income taxes 76,200
Shareholders' equity:
Common stock, no par value; 1,000,000 shares
authorized, 85,000 shares issued and
outstanding 164,377
Unrealized holding gain on investments, net 87,074
Retained earnings 2,408,870
-------------
2,660,321
-------------
$10,798,307
=============
</TABLE>
See notes to financial statements
Page 22
<PAGE>
OSE, Inc.
Statement of Income
For the year ended June 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Revenues $7,712,698
Cost of revenues 4,946,056
------------
Gross profit (loss) 2,766,642
------------
Operating expenses:
Selling, general and administrative 1,740,927
------------
Total operating expenses 1,740,927
------------
Income from operations 1,025,715
Other income (expense)
Interest and dividends income 76,604
Loss from Aspen Venture (49,882)
------------
Total other income (expense) 26,722
------------
Income before income taxes 1,052,437
Income taxes 439,500
------------
Net income $612,937
============
</TABLE>
See notes to financial statements
OSE, Inc.
Statement of Stockholders' Equity
For the year ended June 30, 1998
<TABLE>
<CAPTION>
Unrealized
Common Stock Gain on
------------------ Retained Equity
Shares Amount Earnings Securities Total
-------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at
July 1, 1997 85,000 $164,377 $1,795,933 $64,938 $2,025,248
Net income 612,937 612,937
Change in unrealized
gain on equity
securities, net 22,136 22,136
-------- --------- ----------- ----------- -----------
Balance at
June 30, 1998 85,000 $164,377 $2,408,870 $87,074 $2,660,321
======== ========= =========== ----------- ===========
</TABLE>
See notes to financial statements
Page 23
<PAGE>
OSE, Inc.
Statement of Cash Flow
For the year ended June 30, 1998
<TABLE>
<CAPTION>
<S> <C>
Cash flows from Operating Activities:
Net income $612,937
Adjustments to reconcile net income to net
Cash provided (used) by operating activities:
Depreciation and amortization 26,396
Loss from partnership 49,882
Deferred tax assets and liabilities (1,700)
Changes in items effecting operations:
Accounts receivable, net 4,367,680
Inventories (134,151)
Prepaid expenses and other assets (16,222)
Accounts payable (4,506,329)
Other accrued expenses (50,612)
Accrued income taxes (186,174)
-------------
Net cash provided in operating activities 161,707
-------------
Cash flows from investing activities:
Purchases of equipment (55,843)
Additional investments (700,000)
-------------
Net cash used in investing activities (755,843)
-------------
Cash flows from financing activities:
Additional lease obligations 8,200
Payment of lease obligations (349)
-------------
Net cash provided by financing activities 7,851
-------------
Net decrease in cash (586,285)
Cash at beginning of year 920,329
-------------
Cash at end of year $334,044
=============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $200
=============
Income taxes $627,800
Non-cash investing and financial activities: =============
Unrealized non-cash gains on investments-net $22,136
=============
</TABLE>
See notes to financial statements
Page 24
<PAGE>
OSE, INC
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
1. Organization and summary of significant accounting policies
-----------------------------------------------------------
Organization
------------
OSE, Inc. was incorporated in January, 1990. The Company is the North
American sales, marketing and technical support organization for Orient
Semiconductor Electronics, LTD, of Taiwan. Commissions are earned from the
direct sales efforts in the "direct channel" for the semiconductor assembly
and test service of Orient Semiconductor Electronics, LTD. of Taiwan. The
customers are mainly US manufacturers of high-tech products such as video
components, chip sets, graphics chips, logic components, etc.
Cash
----
Cash equivalents are included in cash. The Company considers interest
bearing investments due on demand as cash equivalents.
Concentration of credit risk
----------------------------
The Company at June 30, 1998 and periodically throughout the year has
maintained balances in various operating and money market accounts in excess
of federally insured limits.
Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of cash and accounts
receivable. Risks associated with cash are mitigated by placing deposits in
credit worthy financial institutions. The Company's customer base is
primarily in the high-technology industry and is affected by changes in that
industry. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral.
Inventories
-----------
Inventories are stated at the lower of cost (which approximates first-in,
first-out) or market.
Investments
-----------
Equity securities are classified as "available-for-sale" as defined by
SFAS 115. In accordance with that Statement, they are reported at aggregate
fair value with unrealized gains and losses excluded from earnings and
reported as a separate component of stockholders' equity.
Revenue
-------
Revenue is recognized when product is shipped to the customer.
Management estimates
--------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
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<PAGE>
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and amortization
-----------------------------
Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the assets, which are from three to ten
years.
Income taxes
------------
Deferred income taxes are provided on the difference in earnings
determined for tax and financial reporting purposes.
2. Long-term debt
--------------
Long-term debt at June 30, 1998, consists of the following:
Equipment lease payable, is due in monthly
installment of $281, including interest, final
payment due February, 2001, collateralized by
a copier with a net book value of $8,217
3. Employee benefit plan
---------------------
The Company has established a Simplified Employee Pension plan which is
exempt from Federal income taxes. The Company, at the discretion of the
Board of Directors, may contribute any amount up to 15% of the annual
eligible compensation of participants in the plan from the current or
accumulated earnings of the Company. The Company's contributions to the plan
for the year ended June 30, 1998 were approximately $86,300. This
contribution has yet to be funded and is included in accrued liabilities at
June 30, 1998.
4. Commitments
-----------
The Company leases its facility under an extended thirty-six months
operating lease commencing January 17, 1990. Rent expenses for the current
year was approximately $ 42,000. The minimum rental commitment for the lease
is:
1999 $ 109,200
2000 118,300
2001 124,100
2002 20,800
---------
$ 372,400
=========
5. Common stock
------------
The Company was incorporated with an authorized capitalization of
1,000,000 shares of common stock. 45,000 outstanding shares are held
exclusively by officers of the Company.
Page 26
<PAGE>
Income taxes
------------
The provision for income taxes consists of the following as of June 30,
1998:
Current:
Federal $ 343,700
State 97,500
----------
441,200
Deferred:
Federal (2,000)
State 300
----------
(1,700)
----------
$ 439,500
==========
Deferred taxes are provided for differences relating to depreciation and
certain costs capitalized and reserves not deducted for federal and state
income tax purposes.
Reconciliation of the differences between income taxes computed at
Federal statutory tax rate and provisions for income taxes are as follows:
Income taxes computed at Federal
statutory tax rate $ 358,000
State tax provision, net of
Federal benefits 64,500
Permanent differences and other 17,000
---------
$ 439,500
=========
Deferred tax liabilities recorded on the balance sheet as of
June 30, 1998, are as follows:
Deferred income taxes
Depreciation $ 18,200
Unrealized gain on investments 58,000
---------
$ 76,200
=========
7. Related party transactions
--------------------------
The Company is a sales and supporting entity for its shareholder, Orient
Semiconductor Electronics, LTD. of Taiwan (OSET). The major source of income
of the Company is the commission income it earns based on the respective
sales it makes for OSET.
While the Company is responsible for the collection of accounts
receivable, it has obtained certain guarantees from OSET for the risk of bad
debt. It normally makes payments to OSET for the accounts payable after the
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<PAGE>
collection of respective accounts receivable. Periodically, upon the
request, the Company also purchases certain materials and components for
OSET, and then sells these items to OSET at minimal profit.
For year ended June 30, 1998 the Company earned approximately $2,613,000
commission from OSET based on its agent sales of approximately $58,290,000.
The aggregated sales to OSET were approximately $5,078,600. At June 30,
1998, commission and accounts receivable from OSET was approximately
$1,889,500. Amount due to OSET included in accounts payable was
approximately $8,169,700.
The Company sold approximately 47% of its merchandise to four major
customers. At June 30, 1998, accounts receivable from these customers were
approximately $4,082,000.
Page 28
<PAGE>
Item 7(b) PRO FORMA FINANCIAL INFORMATION
-------------------------------
On October 29, 1999, Integrated Packaging Assembly Corporation ("IPAC")
purchased all of the outstanding shares of OSE, Inc. ("OSEI") in a stock for
stock exchange. As a result of the transaction, each outstanding share of
OSEI Common Stock was exchanged for 304.8246 shares of IPAC's Common Stock
and an aggregate of 25,910,000 shares of Common Stock were issued by IPAC.
The unaudited pro forma condensed combined consolidated financial
information gives effect to the acquisition of OSEI by IPAC under the
purchase method of accounting. The unaudited pro forma condensed combined
consolidated balance sheet combines IPAC's unaudited consolidated balance
sheet at October 3, 1999 and OSEI's unaudited consolidated balance sheet at
September 30, 1999 as if the acquisition had occurred on October 3, 1999.
The unaudited pro forma condensed combined consolidated statements of
operations combine the historical results of operations of IPAC and OSEI for
the twelve months ended December 31, 1998 and the nine months ended October
3, 1999 giving effect to the acquisition as if it had occurred at January 1,
1998.
The pro forma financial information is presented for illustrative
purposes only and does not purport to be indicative of the operating results
of financial position that would have occurred had the acquisition been
effected for the periods indicated nor is it indicative of the future
operating results or financial position of the Company.
The pro forma adjustments are based upon information and assumptions
available at the time of the filing of this Form 8-K/A. The pro forma
information should be read in conjunction with the historical audited and
unaudited financial statements of IPAC, including the notes thereto, and the
audited historical financial statements of OSEI, including the notes
thereto.
Page 29
<PAGE>
IPAC and OSEI
Pro Forma Condensed Combined Consoloidated Balance Sheet
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
IPAC OSEI Adjustments Combined
(as of (as of
10/3/99) 9/30/99)
---------- ---------- ----------- -- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,652 $1,002 $2,654
Accounts receivable, net 2,716 16,556 19,272
Inventory 1,014 - 1,014
Prepaid expenses and other
other assets 742 23 765
Deferred tax assets - 32 (32)(a) -
---------- ---------- ----------- ---------
Total current assets 6,124 17,613 (32) 23,705
Property and equipment, net 10,950 103 0 11,053
Long term investments - 4,207 (4,207)(c) -
Intangibles - - 5,772 (a) 5,772
Other assets 142 10 152
---------- ---------- ----------- ---------
Total assets 17,216 21,933 1,533 40,682
========== ========== =========== =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities:
Bank debt 15,195 - 15,195
Accounts payable 1,737 18,351 20,088
Accrued expenses and
other liabilities 2,888 247 390 (a) 3,505
---------- ---------- ----------- --------
Total liabilities 19,820 18,598 390 38,788
Deferred income taxes - 180 180
Deferred gain on sale of
facilities 1,145 - 1,145
Series A mandatorily
redeemable convertible 5,100 - 5,100
preferred stock
Stockholders' equity:
Common stock 50,056 164 4,318 (d) 54,374
(164)(d)
Unrealized holding gain
on investments - 250 (250)(c) -
Accumulated retained
earnings (deficits) (58,905) 2,761 (3,977)(c) (58,905)
1,216 (d)
---------- ---------- ----------- --------
Total stockholders'
equity (8,8,49) 3,175 1,143 (4,531)
---------- ---------- ----------- --------
Total liabilities and
stockholders' equity $17,216 $21,933 $1,533 $40,682
========== ========== =========== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined
consolidated financial information.
Page 30
<PAGE>
IPAC and OSEI
Pro Forma Condensed Combined Consolidated Statement of Operations
(Unaudited)
(In thousands, except per share data)
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
IPAC OSEI Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $23,281 $8,093 ($6,022)(f) $25,352
Cost of revenues 29,114 5,860 (5,886)(f) 29,088
---------- ---------- ----------- ---------
Gross profit (loss) (5,833) 2,233 (136) (3,736)
Operating expenses:
Selling, general and
administrative 4,068 1,732 725 (b) 6,525
Research and development 1,101 - 1,101
Provision for impairment
of assets 18,200 - 18,200
---------- ---------- ----------- ---------
Total operating expenses 23,369 1,732 725 25,826
---------- ---------- ----------- ---------
Operating profit (loss) (29,202) 501 (861) (29,562)
Interest and other income 1,209 45 1,254
Interest and other expense (1,783) (50) (1,833)
Total interest and other
---------- ---------- ----------- ---------
income (expense) (574) (5) (579)
---------- ---------- ----------- ---------
Operating income (loss)
before taxes (29,776) 496 (861) (30,141)
Income taxes - 209 (209)(e) -
Extraordinary item - 38 38
---------- ---------- ----------- ---------
Net income (loss) ($29,776) $325 ($652) ($30,103)
========== ========== =========== =========
Per share data:
Basic and diluted ($2.12)
Number of shares used to
compute per share data
Basic and diluted 14,046
Pro forma per share data:
Basic and diluted ($0.75)
Pro forma number of shares
used to compute per share
data
Basic and diluted 39,956
</TABLE>
See accompanying notes to unaudited pro form condensed combined consolidated
financial information.
Page 31
<PAGE>
IPAC and OSEI
Pro Forma Condensed Combined Consolidated Statement of Operations
(Unaudited)
(In thousands, exept per share data)
Nine Months Ended October 3, 1999
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
IPAC OSEI Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $11,836 $3,729 ($2,006)(f) $13,559
Cost of revenues 17,039 1,935 (1,934)(f) 17,040
---------- ---------- ----------- ---------
Gross profit (loss) (5,203) 1,794 (72) (3,481)
Operating expenses:
Selling, general and
administrative 2,917 1,499 544 (b) 4,955
Research and development 528 - 528
---------- ---------- ----------- ---------
Total operating expenses 3,445 1,499 544 5,483
---------- ---------- ----------- ---------
Operating profit (loss) (8,648) 300 (616) (8,964)
Interest and other income 59 105 164
Interest and other expenses (1,207) (61) (1,268)
---------- ---------- ----------- ---------
Total interest and other
income (expense) (1,148) 44 (1,104)
---------- ---------- ----------- ---------
Operating income (loss)
before taxes (9,796) 344 (616) (10,068)
Income taxes - 137 (137)(e) -
---------- ---------- ----------- ---------
Operating income (loss) before
extraordinary gain and
preferred stock dividends (9,796) 207 (479) (10,068)
Extraordinary gain 2,047 - 2,047
---------- ---------- ----------- ---------
Income (loss) before
preferred stock dividends (7,749) 207 (479) (8,021)
Preferred stock dividend 227 - 227
Deemed dividend on preferred
stock 6,800 - - 6,800
---------- ---------- ----------- ---------
Net income (loss) applicable
to common stockholders ($14,776) $207 ($479) ($15,048)
========== ========== =========== =========
Per share data:
Basic and diluted ($0.84)
Number of shares used to
compute per share data
Basic and diluted 17,511
Pro forma per share data:
Basic and diluted ($0.35)
Pro forma number of shares
used to compute per share
data
Basic and diluted 43,421
</TABLE>
See accompanying notes to unaudited pro forma condensed combined
consolidated financial information.
Page 32
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
INFORMATION
NOTE 1. PRO FORMA ADJUSTMENTS
The following adjustments were applied to the historical condensed
financial statements to arrive at the pro forma condensed combined
consolidated financial statements.
(a) On October 29, 1999 IPAC completed its acquisition of OSEI. The
acquisition was accounted for using the purchase method. The
following represents the allocation of the estimated purchase
price over the historical net book values of the acquired assets
and liabilities of OSEI at September 30, 1999, and is for
illustrative purposes only. The actual purchase price allocation
will be based on fair values and will be based on the acquired
assets and liabilities as of the acquisition date.
Purchase price $ 4,318
Estimated acquisition costs 390
------------
$ 4,708
============
Current other assets $ 17,591
Property and equipment 103
Intangible assets 5,772
Liabilities assumed (18,758)
------------
$ 4,708
============
As part of purchase price allocation a valuation allowance of $32
was raised against the deferred tax asset.
(b) Adjustment reflects the amortization of the amount of the
purchase price allocated to identified intangible assets over a
period of 12 months for the year ended December 31, 1998 and
9 months for the period ended October 3, 1999. The intangibles
are being amortized as follows:
Intangible Asset Amount Economic
Useful Life
---------------- -------- -----------
Assembled Workforce $ 280 3 years
Distribution Agreement 3,557 10 years
Goodwill 1,935 7 years
--------
$ 5,772
========
The amortization of these intangible assets for year ended
December 31, 1998 and the nine months ended October 3, 1999
was $725 and $544.
Page 33
<PAGE>
(c) A condition of the closing of the acquisition was that OSEI had
to have declared and paid a dividend to its shareholders of its
investments. These were recorded at $4,207 on September 30, 1999.
OSEI had an unrealized holding gain on the investments of $250.
This adjustment reflects the dividend having occurred on September
30, 1999.
(d) Reflects the issuance of common shares of IPAC to the previous
shareholders of OSEI.
(e) Reflects the adjustment to remove tax balances due to the
utilization of IPAC's net operating losses.
(f) OSEI had an arrangement under which it supplied goods to Orient
Semiconductor Electronics, Limited ("OSE"), a public Taiwanese
company. As a result, it recorded revenues of $6,022 and $2,006
in the year ended December 31, 1998 and the nine months ended
September 30, 1999. Pro forma adjustments to exclude these
revenues and associated cost of revenues were made as the contract
had ceased when IPAC acquired OSEI.
Page 34
<PAGE>
