-----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, ND5c/pV6s1HK0gxc4rXvAQk0WfUeCGtkHMGKkQbpkpX6fvaoJrrtE88QnWxPi03+ JbCaFe/oi4Pa9Bdp1F0OoQ== 0000950148-96-002866.txt : 19961210 0000950148-96-002866.hdr.sgml : 19961210 ACCESSION NUMBER: 0000950148-96-002866 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961010 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961209 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRV COMMUNICATIONS INC CENTRAL INDEX KEY: 0000887969 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 061340090 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11174 FILM NUMBER: 96677463 BUSINESS ADDRESS: STREET 1: 8917 FULLBRIGHT AVE CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8187739044 MAIL ADDRESS: STREET 1: 8943 FULLBRIGHT AVE CITY: CHATSWORTH STATE: CA ZIP: 91311 8-K/A 1 FORM 8-K/A 1 FORM 8-K/A WASHINGTON, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 MRV COMMUNICATIONS, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation) 0-23452 06-1340090 (Commission File Number) (I.R.S. Employer Identification No.) 8917 Fullbright Ave. Chatsworth, CA 91311 (Address of Principal executive offices) (Zip Code) 818 773-9044 (Registrant's telephone number, including area code) N/A (Form name or former address, if changed since last report) 2 This Form 8-K/A Supplements and completes registrant's Form 8-K filed October 10, 1996. Item 7 Financial Statements and Exhibits (a) Financial Statements of Business Acquired The following financial statements of Fibronics Ltd Group are included herewith:
PAGE ---- INDEPENDENT AUDITORS' REPORT 3 COMBINED FINANCIAL STATEMENTS Balance Sheets as of December 31, 1995, 1994 and 1993 4 Statements of Operations for the years ended December 31, 1995, 1994 and 1993 6 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 7 Notes to the Combined Financial Statements 8 Unaudited Combined Balance Sheet at September 25, 1996 21 Unaudited Statement of Operations Nine Months ended September 30, 1996 22 Unaudited Statement of Cash Flows Nine Months ended September 30, 1996 23 Notes to Unaudited Combined Financial Statements 24
(b) Pro Forma Financial Information The following pro forma financial information is included herewith:
PAGE ---- Unaudited Pro Forma Combined Statements of Operations for the year ended December 31, 1995 25 Unaudited Pro Forma Combined Statements of Operations for the Nine Months ended September 30, 1996 26
2 3 LUBOSHITZ, KASIERER & CO. ARTHUR ANDERSEN INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF FIBRONICS LTD. We have audited the combined balance sheets of the Fibronics Ltd. Group (the "Group") as of December 31, 1995 and 1994, and the related combined statements of operations and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Israel and in the United States, including those prescribed by the Auditor's (Mode of Performance) Regulations (Israel), 1973. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Group as of December 31, 1995 and 1994, and the combined results of their operations and their combined cash flows for each of the three years in the period ended December 31, 1995 in conformity with accounting principles generally accepted in Israel and in the United States (as applicable to the financial statements of the Group, such principles are practically identical). CERTIFIED PUBLIC ACCOUNTANTS (ISR.) Haifa, February 29, 1996 (except with respect to the subsequent events discussed in Note 20 as to which the date is October 30, 1996). 3 4 FIBRONICS LTD. GROUP COMBINED BALANCE SHEETS In thousands of U.S. dollars
DECEMBER 31 ---------------------- NOTE 1995 1994 ---- ------- ------- CURRENT ASSETS Cash and cash equivalents 1,145 759 Receivables, net (3) 10,938 8,529 Inventories (4) 7,380 6,671 Prepaid and other current assets 301 567 ------ ------- Total current assets 19,764 16,526 ------ ------- FIXED ASSETS (5) Cost 12,994 14,021 Less - accumulated depreciation (9,893) (10,222) ------ ------- 3,101 3,799 ------ ------- OTHER ASSETS 299 349 ------ ------- 23,164 20,674 ====== =======
4 5
DECEMBER 31 ---------------------- NOTE 1995 1994 ---- ------- ------- CURRENT LIABILITIES Banks (6) 9,169 7,824 Trade payables 3,200 4,980 Accrued payroll and other expenses 3,371 6,215 Current maturities 5,176 4,610 ------ ------ Total current liabilities 20,916 23,629 ------ ------ LOAN FROM ELBIT LTD. (7) 6,781 -- ------ ------ LONG-TERM LIABILITIES Bank and others (8) 2,328 3,886 Accrued severance pay, net (9) 116 215 ------ ------ 2,444 4,101 ------ ------ CONTINGENT LIABILITIES AND COMMITMENTS (11) SHAREHOLDERS' DEFICIENCY (12) (6,977) (7,056) ------ ------ 23,164 20,674 ====== ======
. . . . . . . . . . . . . . . . . . . . . . . YIGAL BARUCHI PESAH DAVID Chief Executive Officer Controller and member of Board of Directors THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE COMBINED FINANCIAL STATEMENTS. 5 6 FIBRONICS LTD. GROUP COMBINED STATEMENTS OF OPERATIONS In thousands of U.S. dollars
DECEMBER 31 ------------------------------------- NOTE 1995 1994 1993 ---- ------ ------- ------ Net sales 35,003 33,355 47,590 Cost of sales (13) 19,127 20,725 25,034 ------ ------- ------ Gross profit 15,876 12,630 22,556 ------ ------- ------ Selling expenses 15,129 16,712 19,259 Research and development costs, net (14) 545 76 4,966 Administrative and general expenses 1,485 3,751 3,202 ------ ------- ------ Total operating expenses 17,159 20,539 27,427 ------ ------- ------ Operating loss (1,283) (7,909) (4,871) Financing expenses, net (15) 1,753 1,577 1,104 Restructuring costs (16) -- 1,953 -- Other income (expenses), net 815 (118) (256) ------ ------- ------ (2,221) (11,557) (6,231) Forgiveness of debt by Elbit 2,300 -- -- ------ ------- ------ Net income (loss) 79 (11,557) (6,231) ====== ======= ======
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE COMBINED FINANCIAL STATEMENTS. 6 7 FIBRONICS LTD. GROUP COMBINED STATEMENTS OF CASH FLOWS In thousands of U.S. dollars
DECEMBER 31 ------------------------------ 1995 1994 1993 ------ ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) 79 (11,557) (6,231) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Revenues and expenses not affecting operating cash flows: Forgiveness of debt by Elbit (2,300) -- -- Depreciation and amortization 1,459 2,455 2,990 Severance pay, net (99) (92) 34 Loss (gain) on disposal and write off of fixed assets (205) 410 (61) Linkage increments on long-term loans 10 56 (35) Changes in operating assets and liabilities: Receivables (2,409) 751 3,698 Inventories (709) 1,524 5587 Prepaid and other current assets 266 218 73 Payables and accrued expenses (4,624) 2,693 (3,873) ------ ------ ------ Net cash used in operating activities (8,532) (3,542) (2,848) ------ ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES Investment in fixed assets (786) (361) (943) Proceeds from disposal of fixed assets 280 156 129 ------ ------ ------ Net cash used in investing activities (506) (205) (814) ------ ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES Additional paid-in capital -- 4,183 2,022 Long-term loans from banks -- 192 227 Repayment of long-term loans from banks (1,002) (1,657) -- Loan from Elbit 9,081 -- -- Short-term borrowings from banks, net 1,345 1,165 1,507 ------ ------ ------ Net cash provided by financing activities 9,424 3,883 3,756 ------ ------ ------ INCREASE IN CASH AND CASH EQUIVALENTS 386 136 94 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 759 623 529 ------ ------ ------ CASH AND CASH EQUIVALENTS AT END OF YEAR 1,145 759 623 ====== ====== ====== Interest paid 1,650 1,761 1,195 ====== ====== ======
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE COMBINED FINANCIAL STATEMENTS. 7 8 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS In thousands of U.S. dollars NOTE 1 - GENERAL A. BASIS OF PRESENTATION The combined financial statements of the Fibronics Ltd. Group (the "Group") comprise the accounts of the following companies which commencing in 1994 are, directly and indirectly, wholly-owned subsidiaries of Elbit Ltd. ("Elbit"). - Fibronics Ltd. (the "Company") and its marketing subsidiaries (principally in the United Kingdom and in Germany). - Fibronics International Inc. (marketing company in the U.S.) Material intercompany balances and transaction among the companies in the Group have been eliminated in the combined financial statements. B. The Group is engaged in the development, manufacture and international marketing of high-speed information transfer and distribution systems. The term "affiliated company", as used in these financial statements, refers to affiliates of Elbit, and its principal shareholder, Elron Electronic Industries Ltd. ("Elron"). C. The Group incurred significant losses from operations in previous years resulting in a shareholders' deficiency of approximately $6,977 as of December 31, 1995. Elbit has made a commitment that it will assist the Group in meeting its working capital needs for 1996 in order to enable the Group to continue operations. D. The accompanying financial statements have been prepared in U.S. dollars, as the currency of the primary economic environment in which the operations of the Group are conducted is the U.S. dollar. The majority of the Group's sales are made outside Israel in non-Israeli currencies (mainly the U.S. dollar), as are the majority of purchases of materials and components. Thus, the functional currency of the Group is the U.S. dollar. Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are remeasured into U.S. dollars in accordance with principles identical to those prescribed in Statement No. 52 of the Financial Accounting Standards Board of the United States (FASB). Exchange gains and losses from the aforementioned remeasurement are reflected in the statement of operations. 8 9 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 1 - GENERAL (CONT.) E. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F. REORGANIZATION OF ELBIT In December 1995, Elbit announced that its Board of Directors approved in principle the exploration of a strategic split of Elbit's business segments into three separate publicly-traded companies in the defense, healthcare and commercial businesses. The proposal is subject to all necessary approvals, permits and licenses required by law, in both Israel and in other applicable countries. Upon final approval of this proposal by the Elbit Board of Directors, it will be submitted for approval by Elbit's shareholders. The accompanying financial statements do not reflect the impact of any adjustments that may result from this reorganization. NOTE 2 - ACCOUNTING POLICIES The financial statements have been prepared in conformity with accounting principles generally accepted in Israel and in the United States (as applicable to the financial statements of the Group such principles are practically identical). The significant accounting policies followed in the preparation of the financial statements, on a consistent basis, are: A. INVENTORIES Inventories are valued at the lower of cost or market, cost being determined as follows: Raw materials - "first-in, first-out" method. Finished products and work in process - materials as above; labor and overhead on an average basis 9 10 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 2 - ACCOUNTING POLICIES (CONT.) B. CASH EQUIVALENTS All highly liquid investments are considered as cash equivalents if the investments mature within three months from the date of acquisition. C. FIXED ASSETS Fixed assets are stated at cost, net of investment grants received. Repairs and maintenance expenses are charged to operations as incurred. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets (principally five to fifteen years). D. RESEARCH AND DEVELOPMENT COSTS Research and development costs, net of participations, are charged to operations as incurred. E. PRODUCT WARRANTY The provision for product warranty is recorded based on the Company's experience and engineering estimates. F. DOUBTFUL DEBTS Known bad debts are written off. Doubtful debts are provided for specifically. G. BALANCES IN FOREIGN CURRENCY AND LINKED BALANCES Balances in foreign currency are translated at the exchange rates in effect at balance sheet date. Balances linked to the Consumer Price Index in Israel (CPI) are stated at the latest index published prior to balance sheet date. 10 11 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 2 - ACCOUNTING POLICIES (CONT.) G. BALANCES IN FOREIGN CURRENCY AND LINKED BALANCES (Cont.) Data regarding the representative exchange rate of the U.S. dollar and the CPI are as follows:
EXCHANGE RATE OF CONSUMER END OF YEAR U.S. DOLLAR PRICE INDEX -------------------------- ---------------- ----------- 1995 3.135 313.3 1994 3.018 289.7 1993 2.986 253.2 CHANGE DURING THE YEAR % % -------------------------- ---------------- ----------- 1995 3.9 8.1 1994 1.1 14.5 1993 8.0 11.2
NOTE 3 - RECEIVABLES
DECEMBER 31 ----------- 1995 1994 ---- ---- Trade - Elbit 198 - Other (*) 9,999 7,673 Government departments 712 826 Sundry 29 30 ------ ----- 10,938 8,529 ====== ===== (*) Net of allowance for doubtful debts 264 509 ====== =====
NOTE 4 - INVENTORIES
DECEMBER 31 ----------- 1995 1994 ----- ---- Raw materials 2,636 2,576 Work in process 1,246 833 Finished products 3,498 3,262 ------ ----- 7,380 6,671 ====== =====
11 12 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 5 - FIXED ASSETS
DECEMBER 31 ----------- 1995 1994 ---- ---- Machinery, computers and vehicles 9,022 10,107 Office furniture and fixtures 3,801 3,706 Leasehold improvements 171 208 ------ ------ 12,994 14,021 Less - accumulated depreciation and amortization (9,893) (10,222) ------ ------ 3,101 3,799 ====== ======
Depreciation and amortization expense totaled approximately $1,409, $1,933 and $2.171 in 1995, 1994 and 1993, respectively. Investment grants deducted from cost of fixed assets amount to $680 (1994 - same). Liens - see Note 10. NOTE 6 - BANKS The loans are linked to the U.S. dollar and bear interest at annual rates of between 6.5% and 7.2%. Collateral - see Note 10. NOTE 7 - LOAN FROM ELBIT LTD. The loan is linked to the U.S. dollar and bears interest at an annual rate of 7.5%. Maturity dates have not yet been determined. 12 13 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 8 - LONG-TERM LIABILITIES A. COMPOSITION:
DECEMBER 31 ANNUAL -------------- INTEREST 1995 1994 RATE ------ ----- % (4) -------- Bank loans (1) 7.2 4,250 4,250 Bank loans (2) 8.5-10.5 3,154 3,758 Capital lease - 173 Other (3) 10.0-11.5 100 315 ------ ----- 7,504 8,496 Less - current maturities 5,176 4,610 ------ ----- 2,328 3,886 ====== =====
(1) These loans are subject to various financial covenants. (2) The loans are secured by guarantees from the Government of Israel in accordance with the Law for the Encouragement of Capital Investments, 1959. (3) Loans of $100 (1994 - $280) are linked to the CPI. (4) The loans bear interest mainly based on the LIBOR rate. The above mentioned rates are the rates as of December 31, 1995. B. MATURITIES
First year - current maturities 5,176 Second year 1,596 Third year 486 Fourth year 124 Fifth year 122 ----- 7,504 =====
C. COLLATERAL - see Note 10. 13 14 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 9 - ACCRUED SEVERANCE PAY, NET The Company is obligated to make severance payments to employees upon termination of their employment. For some of its employees, including senior employees, the Company discharges its obligation for severance pay by the payment of premiums to an insurance company under an approve plan. Other employees have joined a comprehensive pension plan. The deposits with the insurance company and the pension fund are not under the control of the Company and, therefore, are not presented in the balance sheet. The Company makes deposits with a severance pay fund to cover a portion of its liability for severance pay over and above its contributions to the pension plan as detailed below:
DECEMBER 31 ----------- 1995 1994 ---- ---- Accrued severance pay 324 410 Less - deposits (including accrued profits) 208 195 ---- ----- 116 215 ==== =====
NOTE 10 - LIENS As collateral for its liabilities to banks and to the State of Israel (in respect of investment grants), the Company has registered fixed and floating charges on its assets. NOTE 11 - CONTINGENT LIABILITIES AND COMMITMENTS A. LEASES Various companies in the Group lease facilities under operating leases, certain of which include escalation clauses, purchase options, renewal options and requirements to pay property taxes and utilities. The companies also lease certain furniture and equipment under non-cancellable operating lease agreements. 14 15 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars A. LEASES (Cont.) The future minimum lease commitments under operating leases as of December 31, 1995, are as follows: Year ending December 31: ------------------------ 1996 605 1997 450 1998 197 1999 91 2000 86 Thereafter 68 -------- 1,497 ========
Rentals charged to operations under these leases for the year ended December 31, 1995, 1994 and 1993 amounted to approximately $460, $600 and $1,636, respectively. B. ROYALTIES In connection with its research and development, the Company has received participation payments from the State of Israel. The participation commits the Company to pay royalties of 2%, mainly on the related product sales, and is subject to various time restrictions and maximum amounts. Royalties for the current year amounting to $300 (1994 - $386. 1993 - $386) are included in selling expenses. The Company received in prior years participations in selling expenses by the Government of Israel. The participations commit the Company to pay a royalty of 3% of the increase in sales over a base amount. C. According to a letter of understanding between the Company and a supplier (Kalpana), the Company will pay the supplier royalties of $25 per unit sold, after the first 12,000 units. 15 16 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 11 - CONTINGENT LIABILITIES AND COMMITMENTS (CONT.) D. According to an agreement between the Company and a supplier (QSP), the Company may be liable for payment of up to $200, if the agreement with the supplier is terminated E. According to terms of an agreement between the Company and Elbit, Elbit has undertaken to finance the Company's research and development expenses, contingent upon specific conditions, during the years 1995 and 1996. In consideration for the financing of its research and development programs, commencing on January 1, 1997, and for a period of five years, the Company is committed to pay Elbit royalties for each product developed through this financing at a rate of 3% of total sales (see Note 14). F. According to an agreement between the Company and a supplier (Plaintree), the Company has a commitment to purchase chips of the supplier in 1996 of up to $1,200. G. Short-term deposits amounting to $105 are pledged to secure bank credit received by a company in Germany. NOTE 12 - SHAREHOLDERS' DEFICIENCY
FOR THE YEAR ENDED DECEMBER 31 --------------------- 1995 1994 1993 ------- ------- ------- Balance, beginning of year (7,056) 318 4,418 Additional paid-in capital -- 4,183 109 Net income (loss) 79 (11,557) (6,231) ------- ------- ------- (6,977) (7,056) 318 ======= ======= =======
16 17 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 13 - COST OF SALES
FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- 1995 1994 1993 ------- ------- ------- Materials 16,951 15,115 17,506 Labor and overhead 2,417 4,161 5,529 Depreciation and amortization 408 937 1,069 ------- ------- ------- 19,776 20,213 24,104 Decrease (increase) in inventories of finished products and work in process (649) 512 930 ------- ------- ------- 19,127 20,725 25,034 ======= ======= =======
NOTE 14 - RESEARCH AND DEVELOPMENT COSTS, NET
FOR THE YEAR ENDED DECEMBER 31 -------------------------------- 1995 1994 1993 ------ ------ ------ Total expenditure for research and product development net 4,578 6,186 6,772 Less - participation by: The Government of Israel (2,233) (2,589) (1,806) Elbit Ltd. (1,800) (3,521) -- ------ ------ ------ 545 76 4,966 ====== ====== ======
NOTE 15 - FINANCING EXPENSES, NET
FOR THE YEAR ENDED DECEMBER 31 ---------------------------------- 1995 1994 1993 ------ ------ ------ Expenses: Long-term loans 694 658 564 Short-term loans and other 1,055 864 700 Loan from Elron 147 94 6 ----- ----- ----- 1,896 1,616 1,270 Less - financing income 143 39 166 ----- ----- ----- 1,753 1,577 1,104 ===== ===== =====
17 18 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 16 - RESTRUCTURING COSTS
FOR THE YEAR ENDED DECEMBER 31 1994 ----------- Writedown of discontinued fixed assets and facility closure costs 416 Severance payments in excess of regular provisions and involuntary employee termination costs 837 Lease buyout 325 Other 375 ----- 1,953 =====
NOTE 17 - TRANSACTIONS WITH RELATED PARTIES
FOR THE YEAR ENDED DECEMBER 31 --------------------------- 1995 1994 1993 ------ ----- ----- Income: Sales 9,399 9,729 -- Participation in research and development 1,800 3,521 -- Forgiveness of debt 2,300 -- -- Costs and expenses: Cost of sales, net 1,917 302 -- Selling expenses 150 673 -- Financing expenses 147 94 6 Sales of fixed assets 320 -- -- Exercise of warrants by Elron -- -- 1,550
18 19 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 18 - TAXES ON INCOME A. The Company's production facilities have been granted the status of "approved enterprise" entitling the Company to certain tax benefits. The period of such benefits is limited to a certain number of years. This period will terminate in 1996 and 1997 for certain plant expansions and in 2005 and 2007 in respect of other expansions. Income deriving from the "approved enterprise" is subject to tax at a reduced rate. The above benefits are conditional, inter alia, on the Company exporting specified percentages of its annual turnover. The Company has fulfilled this condition to date. B. The Group has tax loss carryforwards amounting to approximately $14,500 some of which expire in varying amounts through 2009. A valuation allowance has been provided for the full amount of the deferred tax benefit related to these carryforwards due to the uncertainty in respect of their realization. C. Final tax assessments for the Company have been received through 1993. NOTE 19 - CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Group to concentrations of credit risk consist principally of accounts receivable. These concentrations of credit risk within geographical markets may be affected by changes in economic or other conditions and may, accordingly, impact the Group's overall credit risk. The Group performs ongoing credit evaluations of its customers and maintains allowances for credit losses. Accounts receivable-trade, classified by geographical markets at December 31, 1995 and 1994 are:
DECEMBER 31 ------------------------ 1995 1994 ----- ----- Americas 1,207 1,966 Israel 1,097 468 Europe 7,039 4,600 Other 656 639 ----- ----- 9,999 7,673 ===== =====
19 20 FIBRONICS LTD. GROUP NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (CONT.) In thousands of U.S. dollars NOTE 20 - SUBSEQUENT EVENTS Pursuant to an agreement signed in September 1996, all the assets, of the Group except cash and cash equivalents, trade and other receivables, rights and obligations of the Group under certain lease agreements and other assets, were sold to MRV Communications, Inc. ("MRV"), a U.S. publicly traded company, in consideration of approximately $23,000 in cash and shares of MRV, which consideration exceeds the carrying value of the assets sold. According to the agreement Elbit and the Group may not produce or sell any proprietary software or hardware developed by the Group and transferred to MRV except for a specific technology which is shared by both sides, for a period of 18 months from the date of closing. # # # # # # 20 21 FIBRONICS LTD, GROUP COMBINED BALANCE SHEET (Unaudited) SEPTEMBER 25, 1996
CURRENT ASSETS Cash $ 1,648,000 Receivables, net 6,418,000 Inventories 8,433,000 Prepaid and other assets 1,391,000 ------------ Total current assets 17,890,000 ------------ FIXED ASSETS Cost 13,608,000 Less - accumulated depreciation (10,674,000) ------------ 2,934,000 ------------ OTHER ASSETS 299,000 ------------ TOTAL ASSETS $ 21,123,000 ============ CURRENT LIABILITIES Suppliers 2,654,000 Accrued payroll and other expenses 4,046,000 ------------ Total current liabilities 6,700,000 ------------ LOAN FROM ELBIT LTD 13,545,000 ------------ LONG-TERM LIABILITIES Banks and others 13,996,000 ------------ SHAREHOLDERS' DEFICIENCY Share capital 405,000 Additional paid-in capital 41,642,000 Accumulated deficit (55,165,000) ------------ (13,118,000) ------------ TOTAL LIABILITIES & SHAREHOLDERS' DEFICIENCY $ 21,123,000 ============
21 22 FIBRONICS LTD, GROUP STATEMENT OF OPERATIONS (Unaudited) NINE MONTHS ENDED SEPTEMBER 30, 1996 NET SALES $ 19,481,000 COST OF SALES 10,823,000 ------------ GROSS PROFIT 8,658,000 RESEARCH & DEVELOPMENT 1,879,000 SELLING, GENERAL & ADMINISTRATIVE EXPENSES 11,489,000 ------------ TOTAL OPERATING EXPENSES 13,368,000 ------------ OPERATING LOSS (4,710,000) FINANCING EXPENSES, NET 1,240,000 OTHER INCOME (193,000) ------------ NET LOSS $ (6,143,000) ============
22 23 FIBRONICS LTD. GROUP STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE PERIOD JANUARY 1, 1996 TO SEPTEMBER 25, 1996
CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(5,799,000) Adjustments to reconcile loss to net cash provided by operating activities: Revenues and expenses not affecting operating cash flows: Depreciation and amortization 920,000 Severance pay, net (116,000) Gain on disposal and write-off of fixed assets (58,000) Changes in operating assets and liabilities: Receivables 3,653,000 Inventories (1,420,000) Prepaid and other current assets (224,000) Payables and accrued expenses 156,000 ----------- Net cash used in operating activities (2,888,000) ----------- CASH FLOWS FROM INVESTING ACTIVITIES Investment in fixed assets (761,000) Proceeds from disposal of fixed assets 64,000 ----------- Net cash used in investing activities (697,000) ----------- CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term loans from banks (7,504,000) Loan from Elbit 6,765,000 Short-term borrowings from banks, net 4,088,000 ----------- Net cash provided by financing activities 3,094,000 ----------- INCREASE IN CASH AND CASH EQUIVALENTS 503,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,145,000 ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR 1,648,000 =========== Interest paid 1,300,000 ===========
23 24 FIBRONICS LTD. GROUP NOTES TO UNAUDITED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION - The accompanying unaudited condensed financial statements have been prepared in accordance with the requirements of Regulation S-X and, therefore, do not include all information and footnotes which would be presented if such financial statements were prepared in accordance with generally accepted accounting principles. These statements should be read in conjunction with the audited financial statements included elsewhere herein. In the opinion of management, these interim financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the financial position and results of operations for the period presented. The results of operations and cash flows for such period is not necessarily indicative of results to be expected for the full year. 24 25 UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS For the Year ended December 31, 1995 (in thousands except per share amounts)
For the Year For the Four Months ended ended December 31, 1995 April 30, 1995 MRV Communications, Inc. Galcom Networking, Ltd (a) (b) REVENUES $ 39,202 $ 2,076 COSTS AND EXPENSES Cost of goods sold 22,608 1,285 Research and development expenses 4,044 28 Selling, general and administrative expenses 6,799 964 Purchased technology in progress 6,211 -- Restructuring costs 1,465 -- -------- ------- 41,127 2,277 -------- ------- Operating income (loss) (1,925) (201) Financing expenses, net -- Other income (expense) 654 (222) Forgiveness of debt -- -- (Credit) Provision for income taxes 2 -- Net income (loss) (1,273) (423) Net income (loss) per share Weighted average common and common equivalent shares outstanding
For the period For the Year January 1, 1995 ended to June 29, 1995 December 31, 1995 Ace 400 Communications Ltd Fibronics Group Ltd. (b) (b) REVENUES $ 5,727 $ 35,003 COSTS AND EXPENSES Cost of goods sold 3,607 19,127 Research and development expenses 529 545 Selling, general and administrative expenses 1,894 16,614 Purchased technology in progress -- -- Restructuring costs -- -- -------- -------- 6,030 36,286 -------- -------- Operating income (loss) (303) (1,283) Financing expenses, net (1,753) Other income (expense) (517) 815 Forgiveness of debt -- 2,300 (Credit) Provision for income taxes -- -- Net income (loss) (820) 79 Net income (loss) per share Weighted average common and common equivalent shares outstanding
Pro Forma Adjustment Balances (c) (b) (d) REVENUES $ -- $82,008 COSTS AND EXPENSES Cost of goods sold -- 46,627 Research and development expenses -- 5,146 Selling, general and administrative expenses -- 26,271 Purchased technology in progress 6,211 -- Restructuring costs -- 1,465 -------- ------- 6,211 79,509 -------- ------- Operating income (loss) (6,211) 2,499 Financing expenses, net -- (1,753) Other income (expense) -- 730 Forgiveness of debt -- 2,300 (Credit) Provision for income taxes (2,236) 2,238 Net income (loss) (3,975) 1,538 Net income (loss) per share $ 0.08 Weighted average common and common equivalent shares outstanding 18,377
Note a Includes results of operations associated with assets acquired from Galcom Networking Ltd for the period May 2, 1995 to December 31, 1995 and also includes results of operations associated with assets acquired from ACE 400 Communications Ltd for the period June 30, 1995 to December 31, 1995. b The pro forma information above shows the combined statements of operations of MRV Communications, Inc. and operations associated with assets acquired from ACE 400 Communications, Ltd, Galcom Networking Ltd and Fibronics Group Ltd as if the purchase of those assets had taken place as of January 1, 1995. The results of Galcom Networking, Ltd. for the four months ended April 30, 1995 include only those related to the assets purchased by MRV. The assets acquired and liabilities assumed from ACE 400 Communications did not include those of a subsidiary named North Hills Europe on whose financial statements their auditor has issued a disclaimer of opinion. The Company is not liable for resolution of liablities related to North Hills Europe or its liquidation proceedings. North Hills Europe has no effect on an investment decision on the Company's securities. North Hills Europe ceased operations in 1995. Any amounts for the period January 1, 1995 to June 29, 1995, related to North Hills Europe, included in the results of ACE 400 Communications, Ltd. above are immaterial. c Adjustment to eliminate nonrecurring purchased technology in progress and tax effect thereon. d Adjustments to amortize goodwill recorded and fair value adjustments to property, plant and equipment are not material. 25 26 UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS For the Period January 1, 1996 to September 25, 1996 (in thousands except per share amounts)
For the Nine Months For the period ended January 1, 1996 to September 30, 1996 September 30, 1996 Pro Forma MRV Communications, Inc. Fibronics Group Ltd. Adjustment Balances (a) (b) (c) REVENUES $ 57,779 $ 19,481 $ -- $ 77,260 COSTS AND EXPENSES Cost of goods sold 33,682 10,823 -- 44,505 Research and development expenses 5,787 1,879 -- 7,666 Selling, general and administrative expenses 8,808 11,489 -- 20,297 Purchased technology in progress 17,795 -- 17,795 -- Restructuring costs 6,974 -- -- 6,974 -------- -------- ------- -------- 73,046 24,191 17,795 79,442 -------- -------- ------- -------- Operating income (loss) (15,267) (4,710) (17,795) (2,182) Financing expenses, net -- (1,240) -- (1,240) Other income (expense) 296 (193) -- 103 (Credit) Provision for income taxes (5,982) -- (6,406) 424 Minority interests 117 -- -- 117 -------- -------- ------- -------- Net income (loss) (9,106) (6,143) (11,389) (3,860) Net income (loss) per share $ (0.20) Weighted average common and common equivalent shares outstanding 19,312
Note a Includes results of operations associated with assets acquired from Fibronics Group Ltd for the period September 26, 1996 to September 30, 1996. b Adjustment to eliminate nonrecurring purchased technology in progress and tax effect thereon. c The pro forma information above shows the combined statements of operations of MRV Communications, Inc. and operations associated with assets acquired from Fibronics Group Ltd. as if the purchase of those assets had taken place as of January 1, 1996. Adjustments to amortize goodwill recorded and fair value adjustments to property, plant and equipment are not material. 26 27 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. MRV COMMUNICATIONS, INC. BY: /s/ EDMUND GLAZER ---------------------------- Edmund Glazer Chief Financial Officer 27 -----END PRIVACY-ENHANCED MESSAGE-----