<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 7, 1996
------------
ZYCON CORPORATION
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 33-95284 94-2348052
----------------------------------------------------------------
(State of (Commission File (IRS Employer Identification
Incorporation) Number) Number)
445 El Camino Real, Santa Clara, CA 95050
------------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code (408) 241-9900
--------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 7, 1996, the registrant entered into an asset purchase agreement
(the "Agreement") with Alternate Circuit Technology, Inc. ("ACT") and the
shareholders of Alternate Circuit Technology, Inc. (the "ACT Shareholders").
Pursuant to the Agreement, the registrant purchased all of ACT's assets,
properties (tangible and intangible) and rights used in or related to the
business conducted by ACT (the "Assets") except certain excluded assets, such
excluded assets having an approximate total value of approximately
$1,500,000.00.
ACT is in the business of owning, operating and managing a quick turnaround
printed circuit board manufacturing facility in Massachusetts. The Assets
include ACT's cash, accounts receivable, inventory, equipment and leasehold
improvements, tools and supplies, all general intangibles used in the business,
ISO certificates, goodwill, contract rights, intellectual properties, and rights
under the MIFA lease financing. The registrant intends to continue to use the
Assets as ACT did, in the operation and management of a printed circuit board
manufacturing facility in Massachusetts.
The purchase price for the Assets consisted of assumed liabilities having
an approximate value of $5,000,000.00, approximately $8,700,000.00 in cash, and
50,000 shares of the registrant's $0.001 par value common stock (valued at
$12.00 per share). The principles followed in determining the amount of such
consideration included an evaluation of ACT's book value and revenues. The
consideration for the Assets is approximately two times the book value. The
source of the funds used to acquire the Assets was the registrant's working
capital.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
The financial statements of ACT, the acquired business, are filed as part
of this Form 8-K/A Amendment No. 2 at page 6.
(b) Pro Forma financial information.
The pro forma financial information relative to ACT, the acquired business,
are filed as part of this Form 8-K/A Amendment No. 2 at page 30.
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 hereunto duly authorized.
ZYCON CORPORATION
-----------------
(Registrant)
DATED: August 23, 1996 By:/s/ Kenneth R. Shilling
---------------------------
KENNETH R. SHILLING,
Vice President, Finance
and Chief Financial Officer
4
<PAGE>
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit Number Exhibit Page
- -------------- ------- ----
<S> <C> <C>
2* Plan of Acquisition - Asset Purchase
Agreement
4.1* Specimen Stock Certificate
4.2* Restated Certificate of Incorporation
4.3* Bylaws of Registrant
</TABLE>
*Exhibits 4.1, 4.2, and 4.3 are incorporated by reference to Exhibits 4.1,
3.3, and 3.4 respectively, to the Registrant's Registration Statement on Form S-
1, No. 33-95284. Exhibit 2 is incorporated by reference to Exhibit 2 of the
Registrant's Form 8-K filed on June 24, 1996.
5
<PAGE>
Alternate Circuit
Technology, Inc.
================================================================================
Financial Statements
Year Ended November 24, 1995
<PAGE>
Alternate Circuit
Technology, Inc.
Contents
================================================================================
<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 3
FINANCIAL STATEMENTS:
Balance sheet 4-5
Statement of operations 6
Statement of stockholders' equity 7
Statement of cash flows 8
Notes to financial statements 9-18
</TABLE>
2
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors of
Alternate Circuit Technology, Inc.
Ward Hill, Massachusetts
We have audited the accompanying balance sheet of Alternate Circuit Technology,
Inc. as of November 24, 1995 and the related statements of operations,
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 Alternate Circuit Technology,
Inc. at November 24, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
December 22, 1995, except for
Notes 6 and 8 which are as
of December 28, 1995
3
<PAGE>
Alternate Circuit
Technology, Inc.
Balance Sheet
================================================================================
<TABLE>
<CAPTION>
November 24, 1995
================================================================================
<S> <C>
ASSETS (Notes 6 and 8)
CURRENT:
Cash and cash equivalents (Note 1) $ 723,167
Accounts receivables, less allowance for
doubtful accounts of $10,000 1,969,784
Due from affiliates (Note 10) 365,193
Due from stockholders (Note 10) 509,897
Inventories (Notes 1 and 2) 549,736
Prepaid expenses and other current assets 121,164
- --------------------------------------------------------------------------------
Total current assets 4,238,941
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET (Notes 1 and 3) 4,254,073
- --------------------------------------------------------------------------------
PROPERTY HELD UNDER CAPITAL LEASES, NET (Notes 1 and 4) 345,402
- --------------------------------------------------------------------------------
OTHER ASSETS:
Investment in leveraged lease (Note 5) 332,117
Deferred financing costs, net of accumulated
amortization of $69,223 37,662
Cash surrender value of life insurance 64,444
- --------------------------------------------------------------------------------
Total other assets 434,223
- --------------------------------------------------------------------------------
Total assets $9,272,639
================================================================================
</TABLE>
4
<PAGE>
Alternate Circuit
Technology, Inc.
Balance Sheet
(Concluded)
================================================================================
<TABLE>
<CAPTION>
November 24, 1995
================================================================================
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings - line of credit (Note 6) $ 963,875
Accounts payable 1,418,739
Accrued expenses (Note 7) 368,246
Current portion of long-term debt (Note 8) 191,745
Current portion of obligations under capital leases (Note 9) 145,835
- --------------------------------------------------------------------------------
Total current liabilities 3,088,440
LONG-TERM DEBT, LESS CURRENT PORTION (Note 8) 1,116,055
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES,
LESS CURRENT PORTION (Note 9) 20,784
NOTES PAYABLE TO STOCKHOLDERS (Note 10) 250,000
- --------------------------------------------------------------------------------
Total liabilities 4,475,279
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 5, 9, 10, 11 and 12)
STOCKHOLDERS' EQUITY (Notes 8 and 11):
Common stock, no par value; 15,000 shares authorized;
150 shares issued and outstanding 300
Additional paid-in capital 252,614
Retained earnings 4,544,446
- --------------------------------------------------------------------------------
Total stockholders' equity 4,797,360
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $9,272,639
================================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Alternate Circuit
Technology, Inc.
Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Year ended November 24, 1995
================================================================================
<S> <C>
NET SALES (Note 14) $15,359,709
COST OF SALES 12,152,700
- --------------------------------------------------------------------------------
Gross profit 3,207,009
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,645,264
- --------------------------------------------------------------------------------
Operating income 561,745
OTHER EXPENSE, NET (Note 15) 379,373
- --------------------------------------------------------------------------------
Income before state income taxes 182,372
STATE INCOME TAXES (Notes 1 and 13) 9,000
- --------------------------------------------------------------------------------
Net income $ 173,372
================================================================================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
Alternate Circuit
Technology, Inc.
Statement of Stockholders' Equity
================================================================================
<TABLE>
<CAPTION>
Common Stock
-------------- Additional Retained
Shares Amount Paid-In Capital Earnings Total
==========================================================================================
<S> <C> <C> <C> <C> <C>
BALANCE, November 25, 1994 150 $300 $252 614 $4,452,074 $4,704,988
Net income - - - 173,372 173,372
Distributions to stockholders - - - (81,000) (81,000)
- ------------------------------------------------------------------------------------------
BALANCE, November 24, 1995 150 $300 $252,614 $4,544,446 $4,797,360
==========================================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Alternate Circuit
Technology, Inc.
Statement of Cash Flows
(Note 16)
================================================================================
<TABLE>
<CAPTION>
Year ended November 24, 1995
================================================================================
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 173,372
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 824,901
Gain on sale of property and equipment (25,300)
Increase in cash surrender value of life insurance (8,523)
Changes in operating assets and liabilities:
Accounts receivable 101,809
Due from affiliates 79,697
Inventories 198,288
Prepaid expenses and other current assets (2,501)
Accounts payable 252,114
Accrued expenses (136,989)
- --------------------------------------------------------------------------------
Net cash provided by operating activities 1,456,868
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Due from stockholders (72,664)
Purchase of property and equipment (704,818)
Proceeds on sale of property and equipment 30,000
Decrease in investment in leveraged lease 30,166
- --------------------------------------------------------------------------------
Net cash used by investing activities (717,316)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings - line of credit 55,000
Repayments of long-term debt (207,130)
Repayments of obligations under capital leases (149,526)
Distributions to stockholders (81,000)
- --------------------------------------------------------------------------------
Net cash used by financing activities (382,656)
- --------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 356,896
CASH AND CASH EQUIVALENTS, beginning of year 366,271
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 723,167
================================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
1. SUMMARY OF
ACCOUNTING
POLICIES
Business Operations Alternate Circuit Technology, Inc. (the "Company")
manufacturers and designs high-tech, multi-layer
printed circuit boards for original equipment and
contract manufacturers in the electronic interconnect
industry.
Fiscal Year The Company's fiscal year ends on the last Friday of
November. The year ended November 24, 1995 ("fiscal
1995") includes 52 weeks.
Cash Equivalents All highly liquid investments with a maturity of three
months or less when purchased are considered to be cash
equivalents.
Inventories Inventories are stated at the lower of cost or market.
Cost is determined using the first-in, first-out
method.
Property and Property and equipment is carried at cost. Depreciation
Equipment is computed using the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
Category Years
=====================================================
<S> <C>
Machinery and equipment 5-10
Furniture and fixtures 5-10
Vehicles 3-5
</TABLE>
Leasehold improvements and property held under capital
leases are amortized over the lesser of the lease term
or the useful life of the property.
9
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
1. SUMMARY OF
ACCOUNTING
POLICIES
(Concluded)
Deferred Financing Deferred financing costs are being amortized over 60
Costs months using the straight-line method.
Income Taxes The absence of a Federal provision for income taxes is
due to the election by the Company and consent by its
stockholders to include their respective shares of
taxable income of the Company in their individual tax
returns. As a result, no Federal income tax is imposed
on the corporation.
The Company is defined as a Qualified S Corporation for
Massachusetts income tax purposes. Qualified S
Corporations with annual gross receipts of $9,000,000
or more are subject to a four and one-half percent
corporate level tax in addition to the income being
included in the stockholders' individual tax returns.
At November 24, 1995, the Company recorded a provision
for state taxes for $9,000.
2. INVENTORIES Inventories consist of the following:
<TABLE>
<CAPTION>
Year ended November 24, 1995
=====================================================
<S> <C>
Raw materials $371,243
Work-in-progress 147,262
Finished goods 31,231
-----------------------------------------------------
Total inventories $549,736
=====================================================
</TABLE>
10
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
3. PROPERTY AND
EQUIPMENT Property and equipment consist of the following:
<TABLE>
<CAPTION>
Year ended November 24, 1995
=====================================================
<S> <C>
Machinery and equipment $ 8,225,338
Leasehold improvements 1,476,955
Furniture and fixtures 570,943
Vehicles 168,909
-----------------------------------------------------
10,442,145
Less accumulated depreciation
and amortization 6,188,072
-----------------------------------------------------
Net property and equipment $ 4,254,073
=====================================================
</TABLE>
4. PROPERTY HELD Property held under capital leases consist of the
UNDER CAPITAL following:
LEASES
<TABLE>
<CAPTION>
Year ended November 24, 1995
=====================================================
<S> <C>
Machinery and equipment $520,366
Less accumulated amortization 174,964
-----------------------------------------------------
Net property held under capital leases $345,402
=====================================================
</TABLE>
11
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
5. INVESTMENT IN The Company is the lessor in a leveraged lease
LEVERAGED LEASE agreement entered into on November 26, 1985 under which
radar equipment was leased for a term of fourteen
years. The Company's equity investment represented
30.5% of the purchase price; the remaining 69.5% was
furnished by third party financing in the form of long-
term debt that provides for no recourse against the
Company and is collateralized by a lien on the
equipment. At the end of the lease term, the equipment
is to be turned back to the Company. The residual value
at that time is estimated to be 23% of cost. For
federal income tax purposes, the Company received the
investment tax credit and has the benefit of tax
deductions for depreciation on the entire leased asset
and for interest on the long-term debt. During the
early years of the lease, those deductions exceed the
lease rental income, and substantial excess deductions
are available to be applied against the Company's other
income. The later years of the lease, rental income
will exceed the deductions and income will be
generated.
The Company's net investment in leveraged lease
consists of the following:
<TABLE>
<CAPTION>
Year ended November 24, 1995
=====================================================
<S> <C>
Rentals receivable (net of
principal and interest
on nonrecourse debt) $194,639
Estimated residual value of leased assets 196,603
Less unearned and deferred income 59,125
-----------------------------------------------------
Net investment in leveraged lease $332,117
=====================================================
</TABLE>
12
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
6. SHORT-TERM The Company had a $1,200,000 line of credit with a
BORROWINGS - financial institution at November 24, 1995 which was
LINE OF CREDIT refinanced on December 28, 1995, as a $1,500,000 demand
promissory note. Borrowings under the promissory note
bear interest at the bank's prime rate (8.75 percent at
December 28, 1995) and are limited to 80 percent of all
eligible receivables. The promissory note is
collateralized by substantially all the Company's
assets, guaranteed by Rogers Road Realty Trust
("Rogers") (see Note 10) and has a security interest
senior to the secured subordinated notes (see Note 8).
7. ACCRUED EXPENSES Accrued expenses consist of the following:
<TABLE>
<CAPTION>
Year ended November 24, 1995
=====================================================
<S> <C>
Compensation $208,661
Other 159,585
-----------------------------------------------------
Total accrued expenses $368,246
=====================================================
</TABLE>
8. LONG-TERM DEBT Long-term debt consists of the following:
<TABLE>
<CAPTION>
Year ended November 24, 1995
=====================================================
<S> <C>
Industrial Development Revenue Bonds $ 800,000
Secured subordinated notes, due
September 30, 2001 496,144
Other 11,656
-----------------------------------------------------
1,307,800
Less current portion 191,745
-----------------------------------------------------
Long-term debt $1,116,055
=====================================================
</TABLE>
13
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
8. LONG-TERM DEBT The Company had an Industrial Development Revenue
(Continued) Bond with the Massachusetts Industrial Finance Agency
("MIFA") ("Senior Debt") at November 24, 1995 which was
refinanced on December 28, 1995. The Company refinanced
the Senior Debt by executing a master sublease-purchase
agreement (the "Sublease Agreement") between the
Company and MIFA for $1,300,000, whereby the $800,000
of Senior Debt was paid in full and the Company
received the remaining $500,000 of proceeds. The
Sublease Agreement was made in conjunction with a
master lease purchase agreement (the "Lease Agreement")
between MIFA and a lender, also in the principal amount
of $1,300,000. Principal and interest payments of the
Sublease Agreement are payable in varying monthly
installments beginning February 1, 1996 and continuing
through January 1, 2000. Interest is calculated at an
annual rate of 6.05 percent. The borrowings under the
Sublease Agreement is collateralized by substantially
all the Company's assets, guaranteed by Rogers and have
a security interest senior to the secured subordinated
notes. Maturities of the Senior Debt at November 24,
1995 have been reflected in accordance with the
provisions of the Sublease Agreement.
The secured subordinated notes are due in quarterly
installments of $25,000 plus interest beginning
December 31, 1996. Interest is payable at 11 percent
per annum. The notes are subordinate to the refinanced
Senior Debt and the demand promissory note (see Note 6)
and are collateralized by substantially all the
Company's assets and guaranteed by Rogers. In
conjunction with the execution of the notes, stock
warrants, valued at $5,000, were granted to the lender
to purchase 789 shares of the Company's common stock at
any time prior to the due date at a purchase price per
share of $1.00, as adjusted pursuant to the agreement.
The unamortized discount on the notes was $3,856 at
November 24, 1995.
14
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
8. LONG-TERM DEBT
(Continued) Annual maturities of long-term debt as of November 24,
1995 are as follows:
<TABLE>
<CAPTION>
Fiscal Amount
=====================================================
<S> <C>
1996 $ 191,745
1997 349,358
1998 345,493
1999 208,741
2000 113,014
Thereafter 99,449
-----------------------------------------------------
Total $1,307,800
=====================================================
</TABLE>
9. LEASES The Company leases certain machinery and equipment
under capital leases expiring through July 1997. In
addition, the Company leases its operating facilities
and certain machinery and equipment under operating
leases, some of which are leased from related parties,
with various expiration dates through December 1999.
Total rent expense for fiscal 1995 was approximately
$865,000, which includes $295,000 paid to an affiliate
(see Note 10). Included in the schedule of minimum
lease payments below are commitments to the affiliate
of $300,000 for fiscal 1996, 1997, 1998 and 1999 and
$25,000 for fiscal 2000 as of November 24, 1995. Future
minimum lease payments under capital leases and
noncancellable operating leases with initial or
remaining terms of one year or more consist of the
following:
15
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
9. LEASES
(Continued)
<TABLE>
<CAPTION>
Capital Operating
Fiscal Leases Leases
==========================================================
<S> <C> <C>
1996 $145,835 $ 775,905
1997 50,643 729,625
1998 - 448,738
1999 - 300,000
2000 - 25,000
----------------------------------------------------------
Total minimum lease payments 196,478 $2,279,268
==========
Less amounts representing interest 29,859
---------------------------------------------
Present value of future minimum
lease payments 166,619
Less current portion 20,784
---------------------------------------------
Long-term portion $145,835
=============================================
</TABLE>
10. RELATED PARTY
TRANSACTIONS
Due from Affiliates Due from affiliates represents noninterest bearing
receivables from Rogers and Kenmart Realty Trust
("Kenmart"). The stockholders of the Company are the
beneficiaries of Rogers and Kenmart.
Due from Due from stockholders represents interest-bearing
Stockholders advances to two stockholders of the Company. Interest
is payable annually at 7 percent and amounted to
$33,098 for fiscal 1995.
Notes Payable to Notes payable to stockholders represent interest-
Stockholders bearing notes from the stockholders of the Company that
are due in September 2001. Interest is payable annually
at 11 percent and amounted to $27,500 for fiscal 1995.
These notes are subordinated to the Senior Debt (see
Note 8).
16
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
10. RELATED PARTY
TRANSACTIONS
(Continued)
Operating Lease The Company leases an operating facility from Rogers
that expires in December 1999, and has a 5 year renewal
option. See Note 9 for the future minimum lease
payments related to this lease.
Guarantee The Company is contingently liable under a guarantee of
a loan of Rogers in the principal amount of $893,333 at
November 24, 1995. On December 28, 1995, Rogers
refinanced the loan in conjunction with the Company's
refinancing of its line of credit (see Note 6). The
principal amount of Rogers' new loan is $925,000
11. STOCK RESTRICTION Pursuant to an agreement between the stockholders and
the Company, if any stockholder elects to sell all or
part of their shares of common stock in the Company,
they are restricted to offering the shares first to the
Company and then to the other holders of the Company's
common stock prior to offering the shares to a third
party. The Company's Board of Directors must elect to
purchase all or none of the shares pursuant to the
agreement.
12. PROFIT SHARING The Company has a profit sharing plan covering
PLAN substantially all full-time employees. Contributions to
the plan are at the discretion of the Company and are
determined as a percentage of each participant's
salary. There were no contributions to the plan by the
Company during fiscal 1995.
13. INCOME TAXES The Company has unused state net operating loss
carryforwards of approximately $1,000,000 which may be
used to offset future state taxable revenue through the
year 1997.
17
<PAGE>
Alternate Circuit
Technology, Inc.
Notes to Financial Statements
================================================================================
14. MAJOR CUSTOMERS During fiscal 1995, sales to two customers accounted
for 15 percent and 15 percent, respectively, of net
sales.
15. OTHER EXPENSES, NET Other expenses, net consists of the following:
<TABLE>
<CAPTION>
Year ended November 24, 1995
=====================================================
<S> <C>
Interest expense $374,914
Interest income (33,897)
Gain on sale of property and equipment (25,300)
Loss from leveraged lease 30,167
Liquidated damages 50,000
Other, net (16,511)
-----------------------------------------------------
Net other expenses $379,373
=====================================================
</TABLE>
During Fiscal 1995, a total of $154,000 was paid to a
shareholder pursuant to an agreement with the Company
and the other shareholders for amounts representing
interest and liquidated damages of $104,000 and
$50,000, respectively.
16. SUPPLEMENTAL Payments for interest and income taxes amounted to
CASH FLOW $268,498 and $7,140, respectively, for fiscal 1995.
INFORMATION
18
<PAGE>
ALTERNATE CIRCUIT TECHNOLOGY, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
May 31, November 24,
1996 1995
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
Cash & restricted cash $523,706 $723,167
Accounts Receivable, net 1,980,613 1,969,784
Due from Affiliates 279,679 365,193
Due from stockholders 580,844 509,897
Inventories 782,961 549,736
Prepaids & other current assets 342,223 121,164
----------- ----------
TOTAL CURRENT 4,490,026 4,238,941
Property and equipment, net 5,047,027 4,254,073
Property held under capital leases, net 307,717 345,402
Other Assets:
Investment in leveraged lease 293,935 332,117
Deferred financing costs, net 76,631 37,662
Cash surrender value of life insurance 64,444 64,444
----------- ----------
TOTAL OTHER ASSETS 435,010 434,223
TOTAL ASSETS $10,279,780 $9,272,639
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Short-term borrowings-line of credit $946,833 $963,875
Accounts Payable 1,844,412 1,418,739
Accrued Expenses 517,135 368,246
Current portion LTD 300,000 191,745
Current portion of obligations on Leases 85,984 145,835
----------- ----------
TOTAL CURRENT LIABILITIES 3,694,364 3,088,440
Long-term debt, less current portion 1,370,572 1,116,055
Long-term obligations on leases, less
current portion 0 20,784
Note payable to stockholders 250,000 250,000
----------- ----------
TOTAL LIABILITIES 5,314,936 4,475,279
Common Stock 300 300
Additional Paid-in Capital 252,614 252,614
Retained Earnings 4,711,930 4,544,446
----------- ----------
TOTAL EQUITY 4,964,844 4,797,360
----------- ----------
TOTAL LIABILITIES AND EQUITY $10,279,780 $9,272,639
=========== ==========
</TABLE>
<PAGE>
Alternate Circuit Technology, Inc.
Income Statement
(unaudited)
<TABLE>
<CAPTION>
Six months ended
---------------------------
May 31, May 31,
1996 1995
---------- ----------
<S> <C> <C>
Net sales $7,498,712 $7,779,299
Cost of sales
Total Labor 2,113,532 2,100,217
Total outside labor & services 235,035 190,831
Total direct materials 1,404,256 2,161,480
Total other costs 2,053,132 1,955,196
---------- ----------
Total cost of sales 5,805,955 6,407,724
---------- ----------
GROSS PROFIT 1,692,757 1,371,575
Selling, general & administrative expenses 1,570,000 1,376,116
---------- ----------
OPERATING INCOME (LOSS) 122,757 (4,541)
Other income, net 44,727 30,645
---------- ----------
NET INCOME $167,484 $26,104
========== ==========
Net Income per common share $1,116.56 $174.03
========== ==========
Number of shares outstanding 150 150
========== ==========
</TABLE>
<PAGE>
ALTERNATE CIRCUIT TECHNOLOGY, INC.
CASH FLOW STATEMENT
(unaudited)
<TABLE>
<CAPTION>
Six months ended
------------------------------
May 31, 1996 May 31, 1995
------------ ------------
<S> <C> <C>
Cash flow from operating activities:
Net income $167,484 $26,104
Adjustments to reconcile net income to net cash provided:
Depreciation & amortization 424,937 393,941
Gain on sale of equipment (35,000) (8,000)
Changes in assets and liabilities:
Accounts Receivable (10,829) (31,153)
Due from Affiliates 85,514 36,409
Inventories (233,225) 65,005
Prepaids & other current assets (221,059) (10,246)
Accounts Payable 425,673 (98,290)
Accrued Expenses 148,889 (352,211)
---------- --------
Net cash provided by operating activities 752,384 21,559
---------- --------
Cash flows from investing:
Due from stockholders (70,947) (81,685)
Additions to property and equipment (1,181,269) (222,064)
Proceeds on sale of fixed assets 60,000 8,000
Investment in leveraged lease 38,182 -
---------- --------
Net cash used in investing activities (1,154,034) (295,749)
---------- --------
Cash flows from financing activities:
Short-term borrowings (payments)-line of credit (17,042) 55,000
Deferred financing costs (62,906) -
Long-term debt borrowings (payments) 362,772 (3,895)
Repayments of obligations under capital leases (80,635) (61,034)
Distributions to stockholders - (81,000)
---------- --------
Net cash provided (used in) from financing activities 202,189 (90,929)
---------- --------
Net decrease in cash (199,461) (365,119)
Cash, beginning of six month period 723,167 366,271
---------- --------
Cash, end of six month period $523,706 $1,152
========== ========
Supplemental cash flow disclosure:
Income taxes paid, net of refunds $5,612 ($12,185)
========== ========
Interest paid $133,104 $151,824
========== ========
</TABLE>
<PAGE>
Alternate Circuit Technology, Inc.
Notes to Condensed Financial Statements
(unaudited)
1. INTERIM FINANCIAL DATA
The interim financial statements for the six months ended May 31, 1996 and
May 31, 1995 have been prepared on the same basis as the year end financial
statements and, in the opinion of Alternate Circuit Technology, Inc. (ACT)
management, include all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial information set forth
therein, in accordance with generally accepted accounting principles.
2. ACQUISITION BY ZYCON CORPORATION
On June 18, 1996, substantially all the assets of ACT were acquired by Zycon
Corporation in exchange for approximately $8.7 million in cash, $600,000 worth
of the Company's stock (50,000 shares valued at $12.00 per share), and the
assumption of approximately $5.0 million of liabilities.
The following assets and liabilities were not part of the ACT acquisition;
Due from affiliates, Due from stockholders, Investment in leveraged lease,
Deferred financing costs, Cash surrender value of life insurance, Long term
debt, and Notes payable to stockholders.
<PAGE>
ALTERNATE CIRCUIT TECHNOLOGY, INC.
STATEMENT REGARDING COMPUTATION
OF NET INCOME PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
May 31,
--------------------
1996 1995
--------- --------
<S> <C> <C>
Net income $ 167,484 $ 26,104
========= ========
Total shares outstanding for purposes of
calculating primary and fully diluted
income per share 150 150
========= ========
Net Income per share $1,116.56 $ 174.03
========= ========
</TABLE>
<PAGE>
ALTERNATE CIRCUIT TECHNOLOGY, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Additions Charged
Beginning to Costs and Balance at
of Year Expenses End of Year
---------- ----------------- -----------
<S> <C> <C> <C>
Allowance for Doubtful Accounts:
Year ended November 24, 1995 .......... $10,000 -0- $10,000
</TABLE>
<PAGE>
Zycon Corporation and Alternate Circuit Technology, Inc
Pro Forma Combined Condensed Income Statement
(unaudited, in thousands)
<TABLE>
<CAPTION>
Zycon Alternate Circuit Pro Forma
Corporation Technology --------------------------
Six months ended Six months ended Adjustments Combined
June 30, 1996 May 31, 1996
--------------- ------------ ------------ ---------
(See Note 2)
<S> <C> <C> <C> <C>
Net Sales $103,468 $7,499 ($502) (a) $110,465
Cost of Sales 86,402 5,806 (479) (a) 91,729
-------- ------ ----- --------
Gross Profit 17,066 1,693 (23) 18,736
Selling, General and Administrative (92) (a)
Expenses 7,437 1,404 272 (b) 9,021
-------- ------ ----- --------
Operating Income 9,629 289 (203) 9,715
Interest Expense, net 273 122 564 (c) 959
-------- ------ ----- --------
Income Before Taxes 9,356 167 (767) 8,756
Provision for Income Taxes 3,857 0 67 (d) 3,617
(307) (e)
-------- ------ ----- --------
Net Income $5,499 $167 ($527) $5,139
-------- ------ ----- --------
Net Income Per Share $0.50 $0.46
======== ========
Shares Used in Computing
Net Income Per Share 11,090 11,133 (g)
======== ========
</TABLE>
<PAGE>
Zycon Corporation and Alternate Circuit Technology, Inc
Pro Forma Combined Condensed Income Statement
(unaudited, in thousands)
<TABLE>
<CAPTION>
Zycon Alternate Circuit Pro Forma
Corporation Technology --------------------------
Year Ended Year Ended Adjustments Combined
December 31 November 24
1995 1995
------------ ----------------- ------------ ---------
(See Note 2)
<S> <C> <C> <C> <C>
Net Sales $180,944 $15,360 $196,304
Cost of Sales 153,109 12,153 165,262
-------- ------- --------- --------
Gross Profit 27,835 3,207 31,042
Selling, General and Administrative
Expenses 11,233 2,684 543 (b) 14,460
-------- ------- --------- --------
Operating Income 16,602 523 (543) 16,582
Interest Expense, net 1,716 341 1,196 (c) 3,253
-------- ------- --------- --------
Income Before Taxes 14,886 182 (1,739) 13,329
Provision for Income Taxes 7,409 9 64 (d) 5,302
(696) (e)
(1,484) (f)
-------- ------- --------- --------
Net Income $7,477 $173 $377 $8,027
-------- ------- --------- --------
Net Income Per Share $0.86
========
Shares Used in Computing
Net Income Per Share 9,297 (g)
========
Pro Forma Net Income Data:
- -------------------------
Income Before Taxes, as Reported $14,886
Pro Forma Income Taxes 5,925
========
Pro Forma Net Income $8,961
========
Pro Forma Net Income Per Share $0.97
========
Shares Used in Computing Pro Forma
Net Income Per Share 9,247
========
</TABLE>
<PAGE>
Zycon Corporation and Alternate Circuit Technology, Inc.
Notes to Pro Forma Consolidated Combined Condensed Financial Statements
(unaudited)
On June 18, 1996, Zycon Corporation (the Company) purchased substantially all
of the assets of Alternate Circuit Technology, Inc (ACT), a quick-turn,
prototype and design printed circuit board manufacturer. The initial
consideration for the acquisition was approximately $8.7 million in cash,
$600,000 worth of the Company's common stock (50,000 shares valued at $12.00 per
share), and the assumption of approximately $5.0 million of liabilities. The
acquisition agreement also calls for payment of $200,000 after a three year
period if non-compete covenants are met.
(1) The acquisition of ACT will be accounted for using the purchase method of
accounting. The pro forma consolidated combined condensed statements of
income present the combined operations of the Company and ACT for the six
months ended June 30,1996 and May 31, 1996, respectively, and for the year
ended December 31, 1995 and November 24, 1995, respectively, as if the
acquisition had been completed as of the beginning of each of the periods
presented. The pro forma consolidated balance sheet is not presented herein
as the Company has already filed its Form 10-Q for the quarter ended June
30, 1996, consolidating the acquisition of ACT.
(2) The following adjustments were applied to the historical statements of
income of the Company and ACT to arrive at the pro forma consolidated
combined condensed statements of income:
(a) Adjustment to reverse the ACT income statement for the period of June
18 through June 30, 1996 contained in the Company's consolidated
condensed income statement for the period ended June 30, 1996.
(b) Goodwill amortization of $272,000 for the six months ended June 30,
1996 and $543,000 for the year ended December 31,1995, representing
amortization of the approximately $5.4 million of goodwill over a
period of ten years.
(c) Interest expense of $564,000 for the six months ended June 30, 1996
and $1,196,000 for the year ended December 31, 1995, representing the
opportunity cost of using approximately $8.7 million in cash and
assuming approximately $5.0 million of liabilities to fund the
acquisition.
(d) Additional income tax expense of $67,000 for the six months ended May
31, 1996 and $64,000 for the year ended November 24, 1996, to adjust
the ACT provision for income taxes as if ACT was a C corporation for
the entire period.
<PAGE>
Zycon Corporation and Alternate Circuit Technology, Inc.
Notes to Pro Forma Consolidated Combined Condensed Financial Statements
(unaudited)
(e) Tax effect of pro forma adjustments using the Company's effective tax
rate of 40%.
(f) This adjustment reflects an income tax provision as if the Company had
been a C corporation for the entire period.
(g) Additional weighted average common shares outstanding of approximately
43,000 shares at June 30, 1996 and 50,000 shares at December 31, 1995,
representing the shares used as part of the purchase price in the ACT
acquisition.
