-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OJcNvifjHJvf7VCDy1+YG0BXMteGkcesfHYG7ucDKYsDh7UlakCH2zWLMIEiz3jX 2gkMQhHb8VrNK1c25HphfA== /in/edgar/work/0000052971-00-000023/0000052971-00-000023.txt : 20001023 0000052971-00-000023.hdr.sgml : 20001023 ACCESSION NUMBER: 0000052971-00-000023 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000630 ITEM INFORMATION: FILED AS OF DATE: 20001020 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACO ELECTRONICS INC CENTRAL INDEX KEY: 0000052971 STANDARD INDUSTRIAL CLASSIFICATION: [5065 ] IRS NUMBER: 111978958 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-05896 FILM NUMBER: 743499 BUSINESS ADDRESS: STREET 1: 145 OSER AVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5162735500 MAIL ADDRESS: STREET 1: 145 OSER AVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 8-K/A 1 0001.txt JACO ELECTRONICS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 F O R M 8 - K/A A M E N D M E N T 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 6, 2000 -------------- Jaco Electronics, Inc. - -------------------------------------------------------------------------------- (Exact name of Registrant as Specified in Charter) New York 000-05896 11-1978958 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission) (IRS Employer of Incorporation) File Number) Identification No.) 145 Oser Avenue, Hauppauge, New York 11788 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (631) 273-5500 ----------------- N/A ---------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets. This Form 8-K/A, Amendment No. 2 is filed to amend and restate the Current Report on Form 8-K, which was filed on June 12, 2000 and to provide the financial information required under items 7(a) and 7(b), including revised audited financial statements of Interface Electronics Corp. as of and for the year ended December 31, 1999, unaudited financial statements of Interface Electronics, Corp. for the nine months ended March 31, 2000 and related proforma information. On June 6, 2000, Jaco Electronics, Inc. ("Jaco" or the "Company") acquired all of the issued and outstanding shares of Common Stock, no par value (the "Shares"), of Interface Electronics Corp., a Massachusetts corporation ("Interface")(the "Transaction"), from Joseph F. Oliveri and Brendan J. Perry (the "Sellers"), pursuant to the terms of the Stock Purchase Agreement, by and among Jaco and the Sellers, dated as of May 4, 2000, as amended on June 6, 2000 (the "Stock Purchase Agreement"). In consideration of the acquisition of the Shares, the Company paid $15,400,000 in cash at the closing (subject to a post closing net worth adjustment), assumed approximately $3,300,000 in bank debt, plus a deferred payment of up to $3,960,000 (subject to adjustment), approximately one (1) year from the anniversary of the closing (June 6, 2000) (or earlier under certain circumstances), and a deferred payment of up to $2,640,000 (subject to adjustment), approximately two (2) years from the anniversary of the closing (or earlier under certain circumstances). A portion of the purchase price is held in escrow pending the satisfaction of certain conditions and a portion was paid as directed by Sellers to satisfy certain Sellers' obligations. The Stock Purchase Agreement contains certain representations, warranties, covenants (including noncompetition and nonsolicitation provisions agreed to by the Sellers), conditions and indemnification provisions which survive the closing. In connection with the Transaction, Mr. Oliveri entered into an employment agreement with Jaco for a three (3) year term, pursuant to which he will serve as Vice Chairman of the Board of Directors and Executive Vice President of Jaco Electronics, Inc. The employment agreement provides Mr. Oliveri with a base salary of $300,000 per annum, certain employee benefits and an incentive bonus based upon the gross profits realized by Interface from certain sales during each twelve (12) month period during the term of his employment. To finance the consideration for the Transaction, the Company increased its credit facility with its commercial banks from $30,000,000 to $50,000,000, based principally on eligible accounts receivable and inventories of the Company. Borrowings under the credit facility are collateralized by substantially all of the assets of the Company. The foregoing is merely a summary of the Transaction. A copy of the Stock Purchase Agreement is attached as an Exhibit to the Current Report on Form 8-K, which was filed on May 15, 2000 and Amendment No. 1 to the Stock Purchase Agreement is attached as an Exhibit to the Current Report on Form 8-K, which was filed on June 12, 2000. 2 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a). Financial Statements of Interface Electronics Corp. PAGE Report of Independent Certified Public Accountants 5 Balance Sheet at December 31, 1999. 6 Statement of Operations and Accumulated Deficit for the year ended December 31, 1999. 8 Statement of Cash Flows for the year ended December 31, 1999. 9 Notes to Financial Statements for the year ended December 31, 1999. 10 Independent Auditors Report. 15 Consolidated Balance Sheets at December 31, 1998 and 1997. 16 Consolidated Statements of Operations for the years ended December 31, 1998 and 1997. 18 Statements of Retained Earnings for the years ended December 31, 1998 and 1997. 18 Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1997. 19 Consolidated Supplementary Information for the years ended December 31, 1998 and 1997. 20 Notes to Financial Statements for the years ended December 31, 1998. 21 Condensed Balance Sheets at March 31, 2000 and December 31, 1999. 24 Condensed Income Statements for the three months ended March 31, 2000 and 1999. 25 Condensed Statements of Cash Flows for the three months ended March 31, 2000 and 1999. 26 Notes to Condensed Financial Statements for the three months ended March 31, 2000. 27 (b) Pro Forma Financial Information. Introduction. 28 ProForma Condensed Consolidated Balance Sheet at March 31, 2000. 29 Notes to Pro Forma Condensed Consolidated Balance Sheet at March 31, 2000. 31 ProForma Condensed Consolidated Statement of Operations for the nine months ended March 31, 2000. 32 ProForma Condensed Consolidated Statement of Operations for the year ended June 30, 1999. 34 Notes to Pro Forma Condensed Consolidated Statements of Operations for the nine months ended March 31, 2000 and the year ended June 30, 1999. 36
3 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (continued) (c) Exhibits Exhibit Number Description 2.1 Stock Purchase Agreement by and among Jaco Electronics, Inc. and All of the Shareholders of Interface Electronics Corp. as of May 4, 2000. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on May 15, 2000. 2.2 Amendment No. 1 to the Stock Purchase Agreement by and among Jaco Electronics, Inc. and All of the Shareholders of Interface Electronics Corp. as of May 4, 2000, dated June 6, 2000. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on June 12, 2000. 10.16 Employment Agreement dated June 6, 2000, between the Registrant and Joseph Oliveri. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on June 12, 2000. 99.9 Press Release dated May 9, 2000. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on May 15, 2000. 99.10 Press Release dated June 8, 2000. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on June 12, 2000. 4 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Interface Electronics Corp. We have audited the accompanying balance sheet of Interface Electronics Corp. as of December 31, 1999, and the related statements of operations and accumulated deficit, 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 standards generally accepted in the United States of America. 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 Interface Electronics Corp. as of December 31, 1999 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Grant Thornton LLP Melville, New York October 3, 2000 5 Interface Electronics Corp. BALANCE SHEET December 31, 1999 ASSETS CURRENT ASSETS Cash and cash equivalents $ 307,518 Accounts receivable, net of allowance for doubtful accounts of $60,000 5,503,123 Inventories 2,610,046 Prepaid expenses and other current assets 112,371 ---------- Total current assets 8,533,058 PROPERTY AND EQUIPMENT Equipment 682,272 Furniture and fixtures 345,440 Software 163,010 Motor vehicles 69,324 Leasehold improvements 67,799 ----------- 1,327,845 Less accumulated depreciation and amortization 781,826 ----------- 546,019 OTHER ASSETS Loans receivable from officers 772,111 Due from related party 371,694 Deposits and other assets 108,701 Cash surrender value of officers' life insurance 96,923 ----------- 1,349,429 ---------- $10,428,506 ============ The accompanying notes are an integral part of this statement.
6 Interface Electronics Corp. BALANCE SHEET (continued) December 31, 1999 LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Note payable - line of credit $ 3,305,547 Accounts payable - trade 6,912,839 Accrued litigation settlement 1,000,000 Accrued expenses 313,204 Due to related parties 42,104 Total current liabilities 11,573,694 ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIT Common stock, no par value; 15,000 shares authorized; 10,000 shares issued and outstanding 85,000 Additional paid-in capital 312,843 Accumulated deficit (1,543,031) ------------ Total stockholders' deficit (1,145,188) ------------ $ 10,428,506 ============= The accompanying notes are an integral part of this statement.
7 Interface Electronics Corp. STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT Year ended December 31, 1999 Sales $ 36,439,110 Cost of sales 30,597,798 ------------ Gross profit 5,841,312 Selling, general and administrative expenses 7,022,585 ------------ Operating loss (1,181,273) Other income (expense) Litigation settlement (1,000,000) Interest expense (162,780) Other income 37,968 Interest income 26,165 ------------ (1,098,647) ------------- NET LOSS (2,279,920) Retained earnings at January 1, 1999 807,889 Distributions to stockholders (71,000) ------------ Accumulated deficit at December 31, 1999 $ (1,543,031) ============ The accompanying notes are an integral part of this statement.
8 Interface Electronics Corp. STATEMENT OF CASH FLOWS Year ended December 31, 1999 Cash flows from operating activities Net loss $(2,279,920) Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities Depreciation and amortization 180,209 Provision for bad debts 39,814 Changes in operating assets and liabilities Increase in accounts receivable (1,199,809) Increase in inventories (753,081) Decrease in prepaid expenses and other current assets 206,389 Increase in deposits and other assets (56,197) Increase in accrued litigation settlement 1,000,000 Increase in accounts payable 1,257,724 Increase in accrued expenses and other 81,055 --------- Net cash and cash equivalents used in operating activities (1,523,816) ---------- Cash flows from investing activities Capital expenditures (366,865) Increase in cash surrender value of officers' life insurance (13,001) Increase in due from related parties, net (331,231) Increase in loans receivable from officers (471,151) ----------- Net cash and cash equivalents used in investing activities (1,182,248) ---------- Cash flows from financing activities Distributions to stockholders (71,000) Net proceeds from notes payable - line of credit 2,523,497 ---------- Net cash and cash equivalents provided by financing activities 2,452,497 ---------- Net decrease in cash and cash equivalents (253,567) Cash and cash equivalents at beginning of year 561,085 ----------- Cash and cash equivalents at end of year $ 307,518 =========== Supplemental disclosures of cash flow information: Cash paid during the year for Interest $ 162,780 Income taxes 373,392 The accompanying notes are an integral part of this statement.
9 Interface Electronics Corp. NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Interface Electronics Corp. ("the Company") was organized under the laws of the Commonwealth of Massachusetts in January 1983, to conduct business principally as a distributor of electronic parts, components and equipment. The Company currently has operations in Massachusetts, New York, New Jersey, Alabama, Connecticut, and North Carolina. On June 6, 2000, Jaco Electronics, Inc. ("Jaco") purchased all of the outstanding common stock of the Company and, as a result, the Company became a wholly-owned subsidiary of Jaco. A summary of significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: 1. Revenue Recognition The Company recognizes revenue as products are shipped and title passes to customers. 2. Inventories Inventories, consisting of merchandise held for resale, are stated at the lower of cost or market; cost is determined using the first-in, first-out method. 3. Property and Equipment Property and equipment are stated at cost. Depreciation is provided for using the straight-line method over the estimated useful lives of the assets as follows: Assets Years --------- ------- Equipment 5 - 7 Furniture and fixtures 5 - 7 Software 3 - 5 Motor vehicles 5 - 7 Leasehold improvements 10 - 29 10 Interface Electronics Corp. NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1999 NOTE A (continued) 4. Use of Estimates and Fair Value of Financial Instruments In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Management of the Company believes that the fair value of financial instruments, consisting of cash and cash equivalents, accounts receivable and debt, approximates carrying value due to the immediate or short-term maturity associated with its cash and cash equivalents and accounts receivable and the interest rates associated with its debt. 5. Statement of Cash Flows For purposes of the statement of cash flows, the Company considers highly liquid cash investments with an original maturity of three months or less to be cash equivalents. 6. Advertising Advertising costs are expensed as incurred and aggregated $55,986 during the year ended December 31, 1999. 7. Income Taxes Income taxes on net earnings of the Company are obligations of the shareholders pursuant to a Federal Subchapter S election as provided in SEC 1362(a) of the Internal Revenue Code. Accordingly, no Federal income taxes have been provided for in the accompanying financial statements. 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 (4.5%) corporate level tax in addition to the income being included on the stockholders' individual income tax return. 11 Interface Electronics Corp. NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1999 NOTE A (continued) 8. Concentrations of Credit Risk In 1999, the Company had sales to three customers aggregating approximately 53% of the Company's net sales and accounts receivable to two customers aggregating 61% of total accounts receivable at December 31, 1999. During 1999, the Company purchased approximately 54% of its products from two suppliers. NOTE B - NOTES PAYABLE - LINE OF CREDIT The Company has an agreement with a financial institution, expiring May 31, 2001, which provides the Company with a line-of-credit facility of up to $10,000,000, limited to 80% of eligible accounts receivable and 50% of eligible inventory, as defined. Borrowings under the line of credit bear interest at either the bank's specified prime rate (8.5% at December 31, 1999) or LIBOR (8.22% at December 31, 1999). The outstanding balance against this line of credit was $3,305,547 at December 31, 1999. The line of credit contains certain financial covenants, as defined in the agreement. Borrowings under this line are secured by substantially all of the Company's assets. NOTE C - COMMITMENTS AND CONTINGENCIES 1. Leases The Company leases equipment and office facilities under operating leases expiring through May 2005. Rent expense for the year ended December 31, 1999 for all operating leases aggregated approximately $388,000. 12 Interface Electronics Corp. NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1999 NOTE C (continued) The minimum lease payments for the years ending after December 31, 1999 are as follows: Year ending December 31, 2000 $ 410,000 2001 389,000 2002 336,000 2003 297,000 2004 296,000 Thereafter 85,000 ----------- $1,813,000 =========== 2. Litigation Settlement The Company is a defendant in litigation related to a dispute about the purchase and subsequent return of nonconforming goods. Subsequent to year-end, a judgment was entered against the Company for $1,247,000, including interest. Pursuant to the judgment, the Plaintiff is required to return to the Company certain components. As a result of the above, the Company has recognized a provision for this loss amounting to $1,000,000 in the accompanying financial statements. NOTE D - RETIREMENT PLAN The Company maintains a 401(k) Plan ("the Plan") that is available to employees meeting certain requirements, as defined in the Plan. Employer contributions to the Plan are discretionary. No employer contributions were made to the Plan for the year ended December 31, 1999. NOTE E - SALE OF SUBSIDIARY During the year ended December 31, 1999, the Company sold the stock of a dormant subsidiary, Microelectronics Corp., to a group comprised of the officers of the Company for a nominal amount. 13 Interface Electronics Corp. NOTES TO FINANCIAL STATEMENTS (continued) December 31, 1999 NOTE F - RELATED PARTY TRANSACTIONS Loans receivable from officers principally bear interest at a rate of 4.94%. Included in interest income is $24,481 of interest earned from officers during the year ended December 31, 1999. In addition, the Company made advances to a related party aggregating $371,694 at December 31, 1999. Contemporaneously with the sale of the Company's common stock, all amounts due from these related parties were repaid. At December 31, 1999, the Company has an accrued liability of $42,104 related to amounts owed to an affiliate for office space that the Company had, in prior years, rented from a related party. 14 INDEPENDENT AUDITORS' REPORT To the Board of Directors Interface Electronics Corp. Franklin, MA We have audited the accompanying balance sheets of Interface Electronics Corp. and subsidiary as of December 31, 1998 and 1997 and the related statements of income and retained earnings, cash flows and supplementary information for the years 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 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 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 statements presentation. We believe that our audits provide 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 Interface Electronics Corp., as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. WALD & INGLE, P. C. Boston, Massachusetts March 9, 1999 15 INTERFACE ELECTRONICS CORP. Consolidated Balance Sheets December 31, 1998 and 1997 Assets 1998 1997 Current Assets: Cash $ 561,085 $ 704,674 Accounts Receivable - trade, net of allowance for doubtful accounts of $ 24,209 in 1998 and 1997 4,343,128 2,051,100 Merchandise inventory (Note 4) 1,856,965 3,145,632 Loans, advances and prepaid items 318,760 182,931 Due from related party (1,641) (1,641) Loans receivable - officers 300,960 5,674 ------------------------ ------------------------ Total current assets 7,379,257 6,088,370 ----------------------- ------------------------ Property and equipment, at cost: (Note 4) Furniture, fixtures and equipment 904,570 612,042 Leasehold improvements 56,410 108,687 ------------------------ ------------------------ 960,980 720,729 Less: accumulated depreciation 601,617 549,622 ------------------------ ------------------------ Net property and equipment 359,363 171,107 ------------------------ ------------------------ Other assets: Deposits 52,504 17,051 Cash surrender value life insurance 83,922 77,317 ------------------------ ------------------------ Total other assets 136,426 94,368 ------------------------ ------------------------ Total assets $ 7,875,046 $ 6,353,845 ======================== ======================== See accompanying notes to financial statements and independent auditors' report
16 INTERFACE ELECTRONICS CORP. Consolidated Balance Sheets December 31, 1998 and 1997 Liabilities and Stockholders' Equity 1998 1997 Current liabilities: Notes payable to bank (Note 4) ................ $ 782,050 $ 490,000 Accounts payable and accrued expenses ......... 5,655,115 4,993,791 Income taxes payable .......................... 232,149 110,795 ---------- ---------- Total current liabilities .................. 6,669,314 5,594,586 ---------- ---------- General comments, commitments and contingencies (Notes 5, 6, and 7) Stockholders' equity: Common Stock, no par value, 15,000 shares authorized, 10,000 shares issued and outstanding ..................... 85,000 85,000 Paid in capital ............................... 312,843 312,843 Retained earnings ............................. 807,889 361,416 ---------- ---------- Total stockholders' equity ................. 1,205,732 759,259 ---------- ---------- Total liabilities and stockholders' equity ................. $7,875,046 $6,353,845 ========== ==========
See accompanying notes to financial statements and independent auditors' report. 17 INTERFACE ELECTRONICS CORP. Consolidated Statements of Operations Years ended December 31, 1998 and 1997 1998 1997 Sales ........................... $33,923,518 $27,648,134 ----------- ----------- Cost of goods sold: Inventory, beginning of period 3,145,632 1,852,974 Merchandise purchased ........ 26,151,702 23,959,806 ----------- ----------- 29,297,334 25,812,780 Inventory, end of period ..... 1,856,965 3,145,632 ----------- ----------- Cost of goods sold ........ 27,440,369 22,667,148 ----------- ----------- Gross profit .................... 6,483,149 4,980,986 ----------- ----------- Operating expenses .............. 5,670,622 4,656,439 ----------- ----------- Income (loss) from operations ... 812,527 324,547 Income taxes .................... 366,054 140,895 ----------- ----------- Net income ...................... $ 446,473 $ 183,652 =========== =========== Statements of Retained Earnings December 31, 1998 and 1997 Retained earnings, begininning of year ........... $361,416 $177,764 Net income ....................................... 446,473 183,652 -------- -------- Retained earnings, end of year ................... $807,889 $361,416 ======== ======== See accompanying notes to financial statements and independent auditors' report
18 INTERFACE ELECTRONICS CORP. Consolidated Statements of Cash Flows Years ended December 31, 1998 and 1997 1998 1997 Cash flows from operating activities: Net income (loss) ............................. $ 446,473 $ 183,652 Adjustments to reconcile net income to net cash provided by (used by) operating activities: Amortization ............................ 3,524 4,935 Depreciation ............................ 89,676 64,182 Loss on abandonment of leasehold improvements ......................... 71,006 0 Changes in: Accounts receivable .................. (2,292,028) 1,623,942 Loans, advances and prepaid items .... (135,829) (10,605) Due from related party ............... 0 220,723 Refundable income taxes .............. 0 361,852 Loans receivable officers ............ (295,286) 349,907 Merchandise inventory ................ 1,288,667 (1,292,658) Other assets ......................... (45,583) (5,288) Accounts payable and accrued expenses .......................... 661,324 (1,334,868) Income taxes payable ................. 121,354 108,169 ----------- ----------- Net cash provided by (used by) operating activities ........... (86,702) 273,943 ----------- ----------- Cash flows from investing activities: Purchase of property and equipment, net ....... (348,937) (46,882) ----------- ----------- Cash flows from financing activities: Proceeds from bank loans net of repayments ................................. 292,050 231,643 ----------- ----------- Net increase (decrease) in cash ... (143,589) 458,704 Cash at beginning of year ........................ 704,674 245,970 ----------- ----------- Cash at end of year .............................. $ 561,085 $ 704,674 =========== =========== Interest ......................................... $ 71,305 $ 43,153 =========== =========== Income taxes paid ................................ $ 244,811 $ 30,556 =========== =========== See accompanying notes to financial statements and independent auditors' report 19 INTERFACE ELECTRONICS CORP. Consolidated Supplementary Information Years ended December 31, 1998 and 1997 1998 1997 Operating expenses: Advertising .................................. $ 75,450 $ 74,470 Amortization ................................. 3,524 4,935 Automobile expense ........................... 53,655 30,081 Depreciation ................................. 89,676 64,182 Dues and subscriptions ....................... 21,135 9,386 Employee group insurance ..................... 129,469 124,125 Equipment rental ............................. 10,427 13,762 Insurance .................................... 83,272 129,324 Interest, net ................................ 67,296 39,268 Leasehold improvements abandoned ............. 71,006 0 Life insurance ............................... 2,783 11,463 Loss on worthless accounts ................... 143,658 16,087 Maintenance and repairs ...................... 3,811 13,693 Miscellaneous expenses ....................... 55,297 18,701 Office supplies and expense .................. 75,236 37,788 Outside services ............................. 108,101 132,673 Postage ...................................... 3,975 3,384 Professional services ........................ 69,474 125,148 Profit sharing contribution .................. 0 14,874 Rent ......................................... 317,087 268,959 Salaries and commissions ..................... 3,570,012 2,933,120 Selling and travel expense ................... 290,198 232,206 Taxes - payroll .............................. 200,338 173,241 Taxes - other ................................ 6,001 1,204 Telephone .................................... 199,794 139,246 Utilities .................................... 8,169 0 Warehouse expense ............................ 11,778 45,119 ---------- ---------- Total operating expenses .................. $5,670,622 $4,656,439 ========== ========== See accompanying notes to financial statements and independent auditors' report 20 INTERFACE ELECTRONICS CORP. Notes To Financial Statements Years ended December 31, 1998 Note 1 - Nature of Business Interface Electronics Corp. was organized under the laws of the Commonwealth of Massachusetts in January, 1983 to conduct business principally as a distributor of electronic parts, components and equipment. Note 2 - Use of Estimates The presentation of financial statements in conformity with generally accepted auditing principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Note 3 - Summary of Accounting Principles Principles of Consolidation The consolidated financial statements include the accounts of Interface Electronics Corp. and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly-liquid, short term investments with an original maturity of three months or less to be cash equivalents. The Company deposits the majority of its cash in one commercial bank. From time to time, cash balances in this account exceed federally-insured limits. To date, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on its cash and cash equivalents. Merchandise Inventory Inventories are stated at the lower of cost or market, with cost being determined generally on the first-in, first-out method. Market value is determined by replacement cost or estimated net realizable value. 21 INTERFACE ELECTRONICS CORP. Notes To Financial Statements Years ended December 31, 1998 Note 3 - continued... Property, Equipment and Depreciation Property and equipment are carried at cost less accumulated depreciation and amortization. Major replacements of and improvements to property and equipment are capitalized. Minor renewals are charged against current operations. Depreciation is calculated primarily by the accelerated cost recovery methods at various rates based on the estimated useful lives of assets, substantially as follows: Depreciation Lives Furniture 5 - 7 years Lease improvements 10 - 39 years On disposition of property and equipment, the cost and related accumulated depreciation or amortization are eliminated from the accounts and the gain or loss thereon is reflected in net income. Note 4 - Notes Payable - Milford National Bank and Trust Company At December 31, 1998, the Company is indebted to the Milford National Bank and Trust Company as follows: On a revolving line of credit in the principal amount of $700,000 which matured May, 1998. Interest is at a floating rate equal to 1% above the base lending rate of the bank. The loan is secured by all of the Company's assets. On June 12, 1998, the Company was indebted to the bank for $297,050 on a note calling for monthly payments of interest at 7.75% per annum. At December 31, 1998, the balance of this note was $82,050. Note 5 - Related Party Transactions The Company leased its offices and warehouse in Massachusetts from a partnership, the partners of which are the stockholders of the Company, during the early part of 1998. The Company relocated its operations during 1998, leasing from unrelated parties. 22 INTERFACE ELECTRONICS CORP. Notes To Financial Statements Years ended December 31, 1998 Note 6 - Major Customers During the year ended December 31, 1998 sales to three unaffiliated customer amount to approximately 29%, 19% and 14% respectively of the Company's revenue. Note 7 - General Comments, Commitments and Contingencies (a) At December 31, 1998, commitments for minimum annual rentals through December 31, 2003 under non-cancelable leases were as follows: Real Estate Motor Vehicles 1999 315,266 22,425 2000 314,636 12,980 2001 319,032 520 2002 305,546 2003 294,881 (b) The Company is a defendant in a lawsuit filed by a vendor under a theory of goods sold and delivered. The ultimate out come of the litigation cannot presently be determined and no provision for any liability has been made in the accompanying consolidated financial statements. Counsel estimates that the loss, if any to be in the range of $100,000 to $125,000. (c) Final determination of income taxes is subject to audit by the respective federal and state governmental authorities for a period not closed by statute. 23 INTERFACE ELECTRONICS CORP. CONDENSED BALANCE SHEET (UNAUDITED) MARCH 31, DECEMBER 31, 2000 1999 ASSETS CURRENT ASSETS: Cash ........................................... $ 625,629 $ 307,518 Accounts receivable - net ...................... 6,391,535 5,503,123 Inventories .................................... 3,296,387 2,610,046 Prepaid expenses and other current assets ...... 37,271 112,371 ------------ ------------ Total current assets ........................... 10,350,822 8,533,058 Property and equipment - net ................... 528,733 546,019 Other assets: Loans receivable, officers ..................... 787,772 772,111 Due from related party ......................... 459,214 371,694 Deposits and other assets ................ 108,701 108,701 Cash surrender value of officers' life insurance 96,923 96,923 ------------ ------------ TOTAL ASSETS ................................... $ 12,332,165 $ 10,428,506 ============ ============ LIABILITIES AND SHAREHOLDERS' DEFICIT CURRENT LIABILITIES: Note payable, line of credit ................... $ 3,305,547 $ 3,305,547 Accounts payable, trade ........................ 8,491,410 6,912,839 Due to related party ........................... 42,104 42,104 Accrued liabilities: Payroll and payroll taxes ...................... 33,859 182,144 Litigation costs ............................... 1,050,000 1,000,000 Other .......................................... 78,543 131,060 ------------ ------------ Total current liabilities ...................... 13,001,463 11,573,694 SHAREHOLDERS' DEFICIT: Common stock ................................... 85,000 85,000 Additional paid-in capital ..................... 312,843 312,843 Accumulated deficit ............................ (1,067,141) (1,543,031) ------------ ------------ Total shareholders' deficit .................... (669,298) (1,145,188) ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT .... $ 12,332,165 $ 10,428,506 ============ ============ See accompanying notes to condensed financial statements.
24 INTERFACE ELECTRONICS CORP. CONDENSED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) 2000 1999 NET SALES .................................. $ 15,489,190 $ 8,821,822 COST AND EXPENSES: Cost of goods sold ......................... 13,024,968 7,336,785 ------------ ------------ Gross profit ............................ 2,464,222 1,485,037 Selling, general and administrative expenses 1,848,247 1,275,841 ------------ ------------ Operating profit ........................ 615,975 209,196 Other (expense) income: Interest expense - net .................. (78,358) (15,308) Litigation costs ........................ (50,000) Other income ............................ 11,273 1,698 ------------ ------------ Earnings before income taxes ............ 498,890 195,586 Income tax provision ....................... 23,000 9,000 ------------ ------------ NET EARNINGS ............................ $ 475,890 $ 186,586 ============ ============ See accompanying notes to condensed financial statements. 25 INTERFACE ELECTRONICS CORP. CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) 2000 1999 Cash flows from operating activities: Net earnings ............................................. $ 475,890 $ 186,586 Adjustments to reconcile net earrings to net cash provided by (used in) operating activities Depreciation and amortization ..................... 30,000 30,000 Changes in operating assets and liabilities Increase in operating assets - net ............. (1,499,653) (1,083,620) Increase in operating liabilities - net ........ 1,427,769 793,125 ----------- ----------- Net cash provided by (used in) operating activities 434,006 (73,909) ----------- ----------- Cash flows from investing activities Capital expenditures ..................................... (12,714) (84,831) Purchase of long-term investment ......................... (747) Increase in loans receivable, officers ................... (15,661) (62,306) ----------- ----------- Net cash used in investing activities .................... (28,375) (147,884) ----------- ----------- Cash flows from financing activities Increase in due from related parties ..................... (87,520) Principal payment under note payable ..................... (82,050) ----------- ----------- Net cash used in financing activities .................... (87,520) (82,050) ----------- ----------- Net increase (decrease) in cash ............................. 318,111 (303,843) Cash at beginning of period ................................. 307,518 561,085 ----------- ----------- Cash at end of period ....................................... $ 625,629 $ 257,242 =========== =========== See accompanying notes to condensed financial statements.
26 INTERFACE ELECTRONICS CORP. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) NOTE A - BASIS OF PRESENTATION 1) The accompanying condensed financial statements reflect all adjustments, consisting of normal recurring accrual adjustments, which are in the opinion of management, necessary for a fair presentation of the financial position and the results of operations at and for the periods presented. Such financial statements do not include all the information or footnotes necessary for a complete presentation. Therefore, they should be read in conjunction with Interface Electronics Corp.'s audited statements for the year ended December 31, 1999, which appear in Item 7 (a). 2) Interface Electronics Corp., through its shareholders, has elected to be taxed as a Subchapter S Corporation as provided in Section 1362(a) of the Internal Revenue Code. As such, the corporate income is passed through to the shareholders and combined with their personal income and deductions to determine taxable income on their individual federal tax returns. Accordingly, no provision for federal income taxes has been made in the financial statements. Interface Electronics Corp. 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 (4.5%) corporate level tax in addition to the income being included on the stockholders' individual tax returns. 3) Interface Electronics Corp. has a line of credit with a bank, in which advances are limited to $10,000,000. Interest is payable monthly at the bank's prime rate for the prime margin portion of the line and the stated LIBOR rate for the LIBOR portion of the line of credit. The line of credit expires on May 31, 2001 and is secured by a first security interest in substantially all of the Company's assets. The total balance of the line of credit was $3,305,546 at March 31, 2000. The line of credit is subject to certain other terms and covenants. Interface Electronics Corp. was not in compliance with the loan covenants as of March 31, 2000. Interface Electronics Corp. has been notified that the line of credit has been frozen. 27 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. INTRODUCTION (UNAUDITED) The unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the effect of the Stock Purchase Agreement dated May 4, 2000, as amended on June 6, 2000, between Jaco Electronics, Inc. and the shareholders of Interface Electronics Corporation. The unaudited pro forma condensed consolidated balance sheet at March 31, 2000 is based on the historical consolidated balance sheet of Jaco Electronics, Inc. ("Jaco") as of March 31, 2000 and the historical balance sheet of Interface Electronics Corporation ("Interface") as of March 31, 2000 and assumes that the Stock Purchase Agreement occurred on March 31, 2000. The purchase price consisted of a payment of $15,400,000 at closing (subject to a post closing net worth adjustment), plus the assumption of bank debt, plus a deferred payment of up to $3,960,000 (subject to adjustment), approximately one (1) year from the anniversary of the closing (June 6, 2000) (or earlier under certain circumstances), and a deferred payment of up to $2,640,000 (subject to adjustment), approximately two (2) years from the anniversary of the closing (or earlier under certain circumstances). The deferred payments are based upon Interface's Contract Manufacturing Division obtaining minimum sales and gross profit levels. At March 31, 2000, no amount has been provided for since the deferred payments, if any, are not presently determinable. To finance the Transaction, the Company increased its credit facility from $30,000,000 to $50,000,000. The unaudited pro forma condensed consolidated statements of operations for the nine months ended March 31, 2000 and the year ended June 30, 1999 are based on the historical consolidated statements of operations of Jaco Electronics, Inc. and the historical statements of operations of Interface Electronics Corporation for the nine months ended March 31, 2000 and the twelve months ended June 30, 1999 and combines their results as if the acquisition had occurred on July 1, 1999 and July 1, 1998, respectively. The pro forma adjustments are based on preliminary assumptions of the allocation of the purchase price and are subject to revision upon final settlement of all purchase price adjustments and the completion of evaluations made on the fair value of the assets acquired and liabilities assumed. As a result, the final allocation of the fair value of assets and liabilities assumed in connection with the acquisition may differ from that presented herein. The pro forma adjustments do not include any potential benefits that might result form the elimination of duplicate costs. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the actual results that would have been reported if the acquisition occurred on the dates indicated nor do they purport to be indicative of the results which may be obtained in the future. In the opinion of management all adjustments necessary to present fairly such pro forma condensed consolidated financial statements have been made. The pro forma condensed consolidated financial statements should be read in conjunction with Jaco Electronics, Inc.'s Form 10-K for the fiscal year ended June 30, 1999. 28 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 2000 (UNAUDITED) Historical -------------------------------------- Jaco Interface ASSETS CURRENT ASSETS: Cash $ 427,287 $ 625,629 Marketable securities 903,868 Accounts receivable - net 29,799,762 6,391,535 Inventories 43,210,928 3,296,387 Prepaid expenses and other 653,926 37,271 Deferred income taxes 1,008,000 ----------------- ----------------- Total current assets 76,003,771 10,350,822 Property, plant and equipment - net 6,426,398 528,733 Deferred income taxes 394,000 Excess of cost over net assets acquired - net 3,655,418 Loans receivable, officers 787,772 Due from related party 459,214 Other assets 1,722,155 205,624 ----------------- ----------------- TOTAL ASSETS $ 88,201,742 $ 12,332,165 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable and accrued expenses $ 25,159,115 $ 8,603,812 Current maturities of long-term debt and capitalized lease obligations 859,324 Note payable, line of credit 3,305,547 Due to related party 42,104 Litigation costs 1,050,000 Income taxes payable 1,130,136 ----------------- ----------------- Total current liabilities 27,148,575 13,001,463 Long-term debt and capitalized lease obligations 22,373,398 Deferred compensation 787,500 SHAREHOLDERS' EQUITY (DEFICIT): Common stock 408,072 85,000 Additional paid-in capital - net 22,721,645 312,843 Retained earnings (Accumulated deficit) 16,784,584 (1,067,141) Accumulated other comprehensive income 182,483 Treasury stock (2,204,515) ----------------- ----------------- Total shareholders' equity (deficit) 37,892,269 (669,298) ----------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 88,201,742 $ 12,332,165 ================= ================= See accompanying notes to condensed financial statements.
29 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 2000 (UNAUDITED) Pro Forma --------------------------------------------- Adjustments Consolidated ASSETS CURRENT ASSETS: Cash $ 1,052,916 Marketable securities 903,868 Accounts receivable - net 36,191,297 Inventories $ (213,054) (E) 46,294,261 Prepaid expenses and other 691,197 Deferred income taxes 1,008,000 ----------------- -------------------- Total current assets (213,054) 86,141,539 Property, plant and equipment - net (128,892) (E) 6,826,239 Deferred income taxes 394,000 Excess of cost over net assets acquired - net 12,939,298 (B) 16,594,716 Loans receivable, officers 1,050,000 (A) (1,837,772) (D) Due from related party (409,214) (D) 50,000 Other assets 1,235,000 (B) 3,112,779 (50,000) (D) ----------------- -------------------- TOTAL ASSETS $ 12,585,366 $113,119,273 ================= ==================== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable and accrued expenses $ 205,000 (B) $ 33,967,927 Current maturities of long-term debt and capitalized lease obligations 859,324 Note payable, line of credit (3,305,547) (C) Due to related party 42,104 Litigation costs (1,050,000) (B) Income taxes payable 1,130,136 ----------------- -------------------- Total current liabilities (4,150,547) 35,999,491 Long-term debt and capitalized lease obligations 15,400,000 (B) 38,440,013 3,305,547 (C) (2,296,986) (D) (341,946) (E) Deferred compensation 787,500 SHAREHOLDERS' EQUITY (DEFICIT): Common stock (85,000) (B) 408,072 Additional paid-in capital - net 1,050,000 (A) 22,721,645 (1,362,843) (B) Retained earnings (Accumulated deficit) 1,067,141 (B) 16,784,584 Accumulated other comprehensive income 182,483 Treasury stock (2,204,515) ----------------- -------------------- Total shareholders' equity (deficit) 669,298 37,892,269 ----------------- -------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 12,585,366 $113,119,273 ================= ==================== See accompanying notes to condensed financial statements.
30 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 2000 (UNAUDITED) A - To record an additional investment into Interface Electronics Corp. by the Sellers for liabilites not assumed by the Company. B - The purchase price, exclusive of related fees and expenses, of $15.4 million is based on the terms and conditions of the Stock Purchase Agreement. To finance the consideration for the Transaction, the Company increased its credit facility with its commercial banks from $30,000,000 to $50,000,000, based on eligible accounts receivable and inventories of the Company. Borrowings under the credit facility are collateralized by substantially all of the assets of the Company. The purchase price has initially been allocated as follows: Purchase price paid by cash $ 15,400,000 Less: Operating assets acquired (13,382,165) Identifiable intangibles: Franchise agreement (550,000) Employment agreement (685,000) Plus: Liabilities assumed 11,951,463 Estimated transaction costs 205,000 ------------------- Goodwill $ 12,939,298 =================== C - In connection with the acquisition of Interface, the Company assumed Interface's outstanding bank debt. Immediately after the closing of the transaction, the Company paid off the assumed outstanding bank debt using the Company's credit facility. D - Immediately after the closing of the transaction, pursuant to the stock purchase agreement, the Sellers paid to the Company the following items: Officers' loans due to Interface $ 1,837,772 Related party loan due to Interface 409,214 Miscellaneous receivable due to Interface 50,000 ------------------- $ 2,296,986 =================== Proceeds received were used to repay outstanding bank debt. E - Immediately after the closing of the transaction, pursuant to the stock purchase agreement, the Sellers purchased the following items which pertained to the Systems Division of Interface Electronics Corporation: Inventory $ 213,054 Fixed assets 128,892 ------------------- $ 341,946 =================== Proceeds received were used to repay outstanding bank debt.
31 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) Historical ------------------------------------------- Jaco Interface NET SALES $ 138,811,321 $ 36,364,438 COST AND EXPENSES: Cost of goods sold 108,994,750 30,710,220 ------------------- ------------------- Gross profit 29,816,571 5,654,218 Selling, general and administrative expenses 23,918,836 5,658,616 ------------------- ------------------- Operating profit (loss) 5,897,735 (4,398) Other expense (income): Interest expense - net 1,002,958 186,217 Litigation costs 1,050,000 Other income (47,445) ------------------- ------------------- Earnings (Loss) before income taxes 4,894,777 (1,193,170) Income tax provision (benefit) 2,031,000 ------------------- ------------------- Net earnings (loss) $ 2,863,777 $ (1,193,170) =================== =================== Net earnings per common share: Basic $ 0.52 =================== Diluted $ 0.51 =================== Weighted average common shares outstanding: Basic 5,482,328 =================== Diluted 5,652,593 ===================
32 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) Pro Forma --------------------------------------------- Adjustments Consolidated NET SALES $ (3,269,458)(A) $ 171,906,301 COST AND EXPENSES: Cost of goods sold (2,244,298)(A) 137,460,672 ------------------ ------------------- Gross profit (1,025,160) 34,445,629 Selling, general and administrative expenses (406,360)(A) 29,787,092 485,000 (C) 28,000 (D) 103,000 (E) ------------------ ------------------- Operating profit (loss) (1,234,800) 4,658,537 Other expense (income): Interest expense - net 717,783 (B) 1,906,958 Litigation costs 1,050,000 Other income 902 (A) (46,543) ------------------ ------------------- Earnings (Loss) before income taxes (1,953,485) 1,748,122 Income tax provision (benefit) (1,080,000)(F) 951,000 ------------------ ------------------- Net earnings (loss) $ (873,485) $ 797,122 ================== =================== Net earnings per common share: Basic $ 0.15 =================== Diluted $ 0.14 =================== Weighted average common shares outstanding: Basic 5,482,328 =================== Diluted 5,652,593 =================== See accompanying notes to condensed financial statements.
33 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 (UNAUDITED) Historical ------------------------------------------- Jaco Interface NET SALES $ 140,710,825 $ 33,713,694 COST AND EXPENSES: Cost of goods sold 113,334,627 27,650,192 ------------------- ------------------- Gross profit 27,376,198 6,063,502 Selling, general and administrative expenses 27,642,724 6,587,979 ------------------- ------------------- Operating loss (266,526) (524,477) Other expense (income): Interest expense - net 1,308,624 67,204 Other income (1,796) ------------------- ------------------- Loss before income taxes (1,575,150) (589,885) Income tax benefit 418,000 ------------------- ------------------- Net loss $ (1,157,150) $ (589,885) =================== =================== Net loss per common share: Basic and diluted $ (0.21) =================== Weighted average common shares outstanding: Basic and diluted 5,547,405 =================== See accompanying notes to condensed financial statements.
34 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999 (UNAUDITED) Pro Forma --------------------------------------------- Adjustments Consolidated NET SALES $ (2,293,328)(A) $ 172,131,191 COST AND EXPENSES: Cost of goods sold (1,523,711)(A) 139,461,108 ------------------ ------------------- Gross profit (769,617) 32,670,083 Selling, general and administrative expenses (256,501)(A) 34,795,202 647,000 (C) 37,000 (D) 137,000 (E) ------------------ ------------------- Operating loss (1,334,116) (2,125,119) Other expense (income): Interest expense - net 1,057,796 (B) 2,433,624 Other income (1,796) ------------------ ------------------- Loss before income taxes (2,391,912) (4,556,947) Income tax benefit 609,000 (F) 1,027,000 ------------------ ------------------- Net loss $ (1,782,912) $ (3,529,947) ================== =================== Net loss per common share: Basic and diluted $ (0.64) =================== Weighted average common shares outstanding: Basic and diluted 5,547,405 =================== See accompanying notes to condensed financial statements.
35 JACO ELECTRONICS, INC. AND SUBSIDIARIES AND INTERFACE ELECTRONICS CORP. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND THE YEAR ENDED JUNE 30, 1999 (UNAUDITED) Jaco does expect to achieve operating efficiencies from the acquisition. It is anticipated that cost savings will result principally from such areas as warehousing, administration and operations. Such anticipated cost savings have not been reflected in the accompanying unaudited pro forma condensed consolidated statements of operations. A - Jaco did not acquire the Systems Division of Interface. This adjustment is eliminating the sales and direct costs. B - Adjustment to reflect the net increase in interest expense: Nine Months Ended Year Ended March 31, 2000 June 30, 1999 ---------------------- ----------------------- Interest on additional borrowings of $18,705,547 less cash received at closing of $2,638,932 and assuming an interest rate of 7.5% and 7.0%, respectively $ 904,000 $ 1,125,000 Elimination of interest expense on Interface debt and interest income on officers' loans which are assumed repaid and the elimination of other miscellaneous interest (186,217) (67,204) ---------------------- ----------------------- Net increase in interest expense $ 717,783 $ 1,057,796 ====================== ======================= C - Adjustment to reflect the amortization of estimated goodwill determined on a straight-line basis over 20 years. D - Adjustment to reflect the amortization of the franchise agreement determined on a straight-line basis over 15 years. E - Adjustment to reflect the amortization of the employment agreement and covenant not to compete determined on a straight-line basis over 5 years. F - Adjustment to reflect the income tax benefit, assuming an effective tax rate of 41% and 26.5% for the nine months ended March 31, 2000 and the year ended June 30, 1999, respectively, applied to the deductible (the amortization of goodwill and the franchise agreement in Note C & D is not tax benefited) pro forma adjustments to the condensed consolidated statements of operations stated above and the Historical Loss of Interface
36 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. JACO ELECTRONICS, INC. By: /s/ Jeffrey Gash Jeffrey Gash, Vice President-Finance Date: October 19, 2000 EXHIBIT INDEX Exhibit Number Description 2.1 Stock Purchase Agreement by and among Jaco Electronics, Inc. and All of the Shareholders of Interface Electronics Corp. as of May 4, 2000. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on May 15, 2000. 2.2 Amendment No. 1 to the Stock Purchase Agreement by and among Jaco Electronics, Inc. and All of the Shareholders of Interface Electronics Corp. as of May 4, 2000, dated June 6, 2000. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on June 12, 2000. 10.16 Employment Agreement dated June 6, 2000, between the Registrant and Joseph Oliveri. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on June 12, 2000. 99.9 Press Release dated May 9, 2000. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on May 15, 2000. 99.10 Press Release dated June 8, 2000. Incorporated by reference from the Current Report on Form 8-K, SEC File No. 000-05896, filed by Jaco Electronics, Inc. on June 12, 2000. -----END PRIVACY-ENHANCED MESSAGE-----