1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period ____________ to ___________
Commission File Number 0-21892
PINNACLE MICRO, INC.
(Exact name of the registrant as specified in its charter)
Delaware 33-0238363
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19 Technology Drive, Irvine, California 92618
(Address of principal executive offices)
(714) 789-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X .
--- ---
As of July 30, 1996, there were outstanding 7,924,850 shares of the Registrant's
Common Stock.
Page 1 of 13 Pages
Exhibit Index appears on page 12
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PINNACLE MICRO, INC.
INDEX
Part I. Financial Information
Item 1. Financial Statements 3
Condensed Balance Sheets at June 29, 1996
and December 30, 1995 3
Condensed Statements of Operations for the thirteen
weeks and twenty-six weeks ended June 29, 1996
and July 1, 1995 4
Condensed Statements of Cash Flows for the
twenty-six weeks ended June 29, 1996 and July 1, 1995 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 1. Legal Proceedings 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE MICRO, INC.
CONDENSED BALANCE SHEETS
June 29, December 30,
1996 1995
----------- -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,720,000 $ 3,606,000
Accounts receivable, net 8,741,000 11,354,000
Income taxes receivable 921,000 999,000
Inventories 14,337,000 11,413,000
Prepaid expenses and other current assets 1,329,000 961,000
Deferred income taxes 1,058,000 1,058,000
----------- -----------
Total current assets 29,106,000 29,391,000
Furniture and equipment, net 2,113,000 2,098,000
Deferred income taxes 213,000 213,000
Other assets 322,000 303,000
----------- -----------
Total assets $31,754,000 $32,005,000
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $13,929,000 $11,644,000
Accrued expenses 1,571,000 1,244,000
Payroll related liabilities 1,106,000 956,000
Note payable to bank and current
portion of long-term debt 5,000,000 6,000
----------- -----------
Total current liabilities 21,606,000 13,850,000
Long-term debt, less current portion -- 14,000
Accrued litigation settlement 980,000 1,400,000
Commitments and contingencies
Stockholders' equity:
Common stock 8,000 8,000
Additional paid-in capital 16,578,000 16,158,000
Retained earnings (7,053,000) 775,000
Foreign currency translation adjustment (365,000) (200,000)
----------- -----------
Total stockholders' equity 9,168,000 16,741,000
----------- -----------
Total liabilities and stockholders' equity $31,754,000 $32,005,000
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
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PINNACLE MICRO, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
June 29, 1996 July 1, 1995 June 29, 1996 July 1, 1995
- -------------------------------------------------------------------------------------------------------------------
Net sales $12,333,000 $20,600,000 $29,767,000 $40,785,000
Cost of sales 10,180,000 15,201,000 24,486,000 29,702,000
----------- ----------- ----------- -----------
Gross profit 2,153,000 5,399,000 5,281,000 11,083,000
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative 4,429,000 4,106,000 9,681,000 8,798,000
Research and development 1,436,000 891,000 3,028,000 1,680,000
Nonrecurring charges 87,000 183,000 251,000 408,000
----------- ----------- ----------- -----------
Total operating expenses 5,952,000 5,180,000 12,960,000 10,886,000
----------- ----------- ----------- -----------
Operating income (loss) (3,799,000) 219,000 (7,679,000) 197,000
Interest income (expense) (114,000) 45,000 (146,000) 86,000
----------- ----------- ----------- -----------
Income (loss) before income taxes (3,913,000) 264,000 (7,825,000) 283,000
Income tax expense -- 102,000 3,000 109,000
----------- ----------- ----------- -----------
Net income (loss) $(3,913,000) $ 162,000 $(7,828,000) $ 174,000
=========== =========== =========== ===========
Net income (loss) per share $ (0.49) $ 0.02 $ (0.99) $ 0.02
=========== =========== =========== ===========
Weighted average
common shares outstanding 7,917,000 7,929,000 7,892,000 7,928,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
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PINNACLE MICRO, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
26 Weeks Ended 26 Weeks Ended
June 29, 1996 July 1, 1995
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(7,828,000) $ 174,000
----------- -----------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 674,000 428,000
Provision for doubtful accounts 252,000 98,000
Provision for product returns and price protection 498,000 --
Provision for inventory obsolescence 358,000 (4,000)
Deferred compensation recognized -- 9,000
Changes in operating assets and liabilities:
Accounts receivable 1,863,000 (2,283,000)
Income taxes receivable 78,000 (268,000)
Inventories (3,282,000) (5,265,000)
Prepaid expenses and other current assets (368,000) (858,000)
Other assets (43,000) (271,000)
Accounts payable and accrued expenses 2,497,000 7,545,000
Payroll related liabilities 150,000 112,000
Income taxes payable -- (294,000)
----------- -----------
Net cash used in operating activities (5,151,000) (877,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of short-term investments -- 1,198,000
Purchase of furniture and equipment (665,000) (611,000)
----------- -----------
Net cash provided by (used in) investing activities (665,000) 587,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable to bank 5,000,000 --
Principal payments on note payable to bank -- (200,000)
Principal payments on long-term debt (20,000) (14,000)
Proceeds from exercise of stock options -- 2,000
Proceeds from issuance of stock through
the employee stock purchase plan -- 68,000
----------- -----------
Net cash provided by (used in) financing activities 4,980,000 (144,000)
----------- -----------
Effect of exchange rate changes on cash (50,000) 257,000
----------- -----------
Decrease in cash and cash equivalents (886,000) (177,000)
Cash and cash equivalents at beginning of period 3,606,000 4,866,000
----------- -----------
Cash and cash equivalents at end of period $ 2,720,000 $ 4,689,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 150,000 $ 19,000
=========== ===========
Income taxes $ -- $ 670,000
=========== ===========
The accompanying notes are an integral part of these condensed financial
statements.
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PINNACLE MICRO, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 29, 1996
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Period Accounting Policies
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles.
Certain information normally included in annual financial statements
prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission, and these financial statements
should be read in conjunction with the Company's Form 10-K for the year
ended December 30, 1995. In the opinion of management, the accompanying
condensed financial statements reflect all material adjustments which
are necessary for a fair presentation of the financial position and
results of operations and cash flows as of and for the twenty-six weeks
ended June 29, 1996 and July 1, 1995.
Revenue Recognition
The Company recognizes product sales revenue at the time of shipment
and records a reserve for estimated sales returns and price
adjustments. The Company has agreements with its resellers which, under
certain circumstances, provide for stock rotation for slow-moving items
and price protection for inventories held by the resellers at the time
of published price reductions.
Foreign Currency Transactions
Gains and losses from foreign currency transactions are included in
operating results, in selling, general and administrative expenses.
Transaction gains increased operating income in the thirteen weeks
ended June 29, 1996 by approximately $130,000 while transaction losses
decreased operating income for the thirteen weeks ended July 1, 1995 by
approximately $204,000. Transaction gains increased operating income in
the twenty-six weeks ended June 29, 1996 by approximately $178,000
while transaction losses decreased operating income for the twenty-six
weeks ended July 1, 1995 by approximately $789,000.
2. INVENTORIES
Inventories consist of the following:
June 29, December 30,
1996 1995
---- ----
Components and work-in-process $13,160,000 $ 9,522,000
Finished goods 1,177,000 1,891,000
----------- -----------
$14,337,000 $11,413,000
----------- -----------
3. INCOME TAXES
The Company estimated an effective tax rate of 38.5% for the thirteen
weeks and twenty-six weeks ended July 1, 1995. The Company did not
accrue a tax benefit for the operating losses incurred in the thirteen
week and twenty-six week periods ended June 29, 1996.
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4. CONTINGENCIES
On March 15, 1996, a complaint was filed against the Company and
certain of its officers and directors in a securities class action
lawsuit which alleges that Company management engaged in improper
accounting practices and made certain false and misleading statements.
The complaint was filed in the United States District Court for the
Central District of California under the case name Wills, Cohen, et al.
v. William Blum et al., Case No. SACV96-261GLT. The Company denies all
allegations and intends to vigorously contest the suit. The ultimate
outcome of this matter cannot presently be determined. Accordingly,
no provision for any liability that may result has been made in the
accompanying financial statements. However, any adverse determination
with respect to the pending lawsuit could have a material adverse
effect on the Company's financial statements. The Company expects to
incur significant legal costs relating to this suit in 1996.
5. SUBSEQUENT EVENT
Bank of America, the Company's lender, after defaults on certain
covenants (but not payments), granted extensions or forbearances of the
loan pending repayment.
After discussions with qualified investors in May and June, the
Company completed an offshore placement of $10 million principal amount
of convertible subordinated 8% notes in July, 1996 after the close of
the second quarter. Proceeds from this placement and cash on hand were
used to repay the Bank of America loan on July 17, 1996. The $10
million placement was completed on July 19 yielding aggregate net
proceeds of $9.4 million after commissions (fees) to First Bermuda
Securities Limited. First Bermuda also has the right to receive
compensation in the form of warrants exercisable for five years at a
strike price of 125% of the closing bid/price on the closing date.
First Bermuda received customary piggyback registration rights
beginning 90 days from the Closing Date and demand rights after two
years. The note holders may convert the principal of the 8% notes in
thirds, at discounts from the then market price of 15%, 17.5% and
20%, in intervals 60, 90 and 120 days after the closing.
First Bermuda has issued a term sheet for a second $5 million
placement of 6% debentures plus warrants. The Company has agreed to
give the purchasers of the 8% notes a right of first refusal.
In connection with this offering, the Company notified all
shareholders of the proposed offering and obtained confirmation from
the holders of a majority of the outstanding shares that they would, if
a formal vote had been taken, approve the offering.
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THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANINGS OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ACTUAL RESULTS AND EVENTS COULD DIFFER MATERIALLY FROM
THOSE PROJECTED AS A RESULT OF THE RISK FACTORS SET FORTH IN THIS REPORT.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Net sales were $20,600,000 and $12,333,000 for the thirteen weeks ended July 1,
1995 and June 29, 1996, respectively, representing a decrease of approximately
40%. Net sales were $40,785,000 and $29,767,000 for the twenty-six weeks ended
July 1, 1995 and June 29, 1996, respectively, representing a decrease of
approximately 27%. These decreases are primarily attributable to decreased unit
sales and average sales prices of the current recordable CD, Sierra and Tahoe
230 products, and were partially offset by sales of the Vertex product which
began shipping at the end of the second quarter. While the recordable CD product
is facing increased competition, the Sierra and Tahoe 230 products have reached
the end of their product lives.
Gross Profit
Gross profit decreased from $5,399,000 for the thirteen weeks ended July 1,
1995, to $2,153,000 for the thirteen weeks ended June 29, 1996, and decreased as
a percentage of sales from approximately 26.2% as compared to 17.5%. Gross
profit decreased from $11,083,000 for the twenty-six weeks ended July 1, 1995,
to $5,281,000 for the twenty-six weeks ended June 29, 1996, and decreased as a
percentage of sales from approximately 27.2% as compared to 17.7%. The Company
has observed increased competition in the recordable CD market for the current
product. This competition placed additional pressures on selling prices and
gross margins in the current period, and is expected to continue placing
pressure on gross margins in future periods for existing recordable CD products.
The reduction in gross profit is also attributable to the Sierra and Tahoe 230
products reaching the end of their product lives, but was partially offset by
the Company's ability to negotiate cost reductions from its recordable CD
suppliers.
The Company has manufacturing facilities in Colorado Springs, Colorado, devoted
to the production of the Company's Apex and Vertex products. Vertex is in
production in the third quarter and is meeting Company objectives. There were
some scrap and rework costs associated with the former Vertex design. These
costs, along with the overhead associated with this facility, significantly
reduced the Company's gross margins in the reported thirteen week and twenty-six
week periods. This facility and its operations will continue to negatively
impact the Company's gross margins unless and until production volumes increase
significantly for the Apex drives and Apex-based optical libraries or
"jukeboxes."
Selling, General and Administrative
Selling, general and administrative expenses were $4,106,000 and $4,429,000 in
the thirteen weeks ended July 1, 1995 and June 29, 1996, respectively, and
represented approximately 19.9% and 35.9% of net sales. Selling, general and
administrative expenses were $8,798,000 and $9,681,000 in the twenty-six weeks
ended July 1, 1995 and June 29, 1996, respectively, and represented
approximately 21.6% and 32.5% of net sales. The increase in expenditures
resulted primarily from increased advertising and promotional expenditures and
the expansion of the Company's sales and administrative staffs. In the thirteen
weeks ended July 1, 1995 and June 29, 1996, selling, general and administrative
expenses were increased by $204,000 and decreased by $130,000, respectively, as
resulted from Japanese Yen denominated transactions as the U.S. dollar
fluctuated in value in relationship to the Japanese Yen. Selling, general and
administrative expenses were increased by $789,000 and decreased by $178,000 for
the twenty-six weeks ended July 1, 1995 and June 29, 1996, respectively for the
same reason. The Company continues to evaluate a number of cost reduction
alternatives to be implemented in the second half of 1996, with results expected
to be seen in the fourth quarter of 1996 and first quarter of 1997.
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Research and Development
Research and development expenses were approximately $891,000 and $1,436,000 for
the thirteen weeks ended July 1, 1995 and June 29, 1996, respectively, or 4.3%
and 11.6% of net sales. Research and development expenses were approximately
$1,680,000 and $3,028,000 for the twenty-six weeks ended July 1, 1995 and June
29, 1996, respectively, or 4.1% and 10.2% of net sales. These increases resulted
from increased staffing at the Company's research and development facility,
along with expenses for Apex and Vertex prototypes and for ASIC development fees
paid to third parties. The Company expects to increase its research and
development expense during the next twelve months to complete the development of
the Apex product, and to fund new product development projects.
Nonrecurring charges
Nonrecurring charges were approximately $183,000 and $87,000 in the thirteen
weeks ended July 1, 1995 and June 29, 1996, respectively. Nonrecurring charges
were approximately $408,000 and $251,000 in the twenty-six weeks ended July 1,
1995 and June 29, 1996, respectively. Included in nonrecurring charges are
certain professional fees related to the restatements and related legal matters.
Management expects related legal fees to continue at noticeable levels through
1996. (Please see Note 4 of Notes to Condensed Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
As of June 29, 1996, the Company had cash and cash equivalents of $2,720,000 as
compared to $3,606,000 at December 30, 1995. During the twenty-six weeks ended
July 1, 1995, the Company's operations used $877,000 in cash, while they used
$5,151,000 in cash during the twenty-six weeks ended June 29, 1996. Inventories
increased from $11,413,000 at December 30, 1995 to $14,337,000 at June 29, 1996
as the Company's sales levels were lower than had been planned. Accounts payable
increased from $11,644,000 at December 30, 1995 to $13,929,000 at June 29, 1996
as certain of the Company's suppliers provided extended payment terms, and due
to higher inventory levels. Accounts receivable decreased from $11,354,000 at
December 30, 1995 to $8,741,000 at June 29, 1996 as the Company experienced
decreased sales in the current period.
Portions of the Company's accounts payable balance typically include items
denominated in Japanese Yen. As the Japanese Yen generally strengthened during
the twenty-six weeks ended July 1, 1995, the cost to repay these liabilities in
terms of U.S. dollars increased substantially. The Company has renegotiated most
of its principal contracts with Japanese suppliers for payment in U.S. Dollars.
In contrast, as the Japanese Yen generally weakened during the twenty-six weeks
ended June 29, 1996, the cost to repay these liabilities in terms of U.S.
dollars decreased. (See "Selling, General and Administrative" above for details
of these expenses.) These Japanese Yen liabilities were not hedged at June 29,
1996.
The Company's investing activities during this period included capital
expenditures of approximately $700,000 for test and manufacturing equipment
primarily associated with the Company's manufacturing facility in Colorado.
As previously disclosed, the Company was in default of certain covenants (but
not payments) in the loan agreement with its lender. The Company sought
additional capital to repay the loan and for working capital. The Company's
lender, Bank of America, while declining to make additional advances gave
forbearance letters pending repayment of the loan. The Company used funds from a
private placement (Approx. $9.4 million raised) under Regulation S to repay this
loan. (See Note 5 of Notes to Condensed Financial Statements.)
The Company is presently negotiating with a candidate for a successor lender.
The Company is also evaluating its working capital requirements and possible
sources of additional working capital in light of projected capital requirements
for Apex ramp-up and manufacturing.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and certain present and former members of its senior management have
been the subject of an investigation by the Securities and Exchange Commission
(the "SEC") relating principally to the restatement of the Company's
previously-reported financial results. The Company and its management have been
cooperating fully with the investigation. The resignation of the Company's prior
independent public accountants on February 20, 1996, led to additional inquiries
by the SEC, which additional inquiry is believed to be closed.
The Company reached agreement in principle on terms of settlement with the Staff
of the Enforcement Division of the SEC.
Under the terms of the Company's proposed settlement, which have not been
finally approved by the Commission, the Company would be subject to an
administrative cease and desist proceeding including the following findings,
which the Company would neither admit nor deny: violating Sections 13(a)
(periodic reporting) 13(B)(2)(A) (books and records) and 13(B)(2)(B) (internal
controls) of the Securities Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-13
and 13b2-1 thereunder. The allegations will be based primarily on the
post-period shipping at the fiscal year ended December 31, 1993 and, to a lesser
extent on the inconsistent accounting for certain component sales. One Rule
12b-20 finding would relate to the restatement of the Company's third quarter
1995 financial statements as to certain non-recurring engineering expenditures.
The proposed settlement does not provide for any civil penalties. The Company,
in light of issues raised by the Staff's investigation, has voluntarily
implemented certain measures to enhance its internal controls and improve its
corporate governance.
On March 15, 1996, a complaint was filed against the Company and certain of its
officers and directors in a securities class action lawsuit which alleges that
Company management engaged in improper accounting practices and made certain
false and misleading statements. The Company denies all allegations and intends
to vigorously contest the suit. The ultimate outcome of this matter cannot
presently be determined. The Company expects to incur significant legal costs
relating to this suit in 1996. (See Note 4 of Notes to Condensed Financial
Statements.)
The Company is also subject to other legal proceedings and claims which arise in
the normal course of business. While the outcome of these proceedings cannot be
predicted with certainty, the Company does not believe that the outcome of such
legal matters will have a material adverse effect on the Company's financial
statements.
ITEM 5. OTHER INFORMATION
Vertex and Apex
Vertex 2.6 GB optical drive was relaunched in June 1996. Media from the three
major vendors was tested and qualified. The product was re-engineered for
manufacturing which greatly improved manufacturing yields. The media which ships
with the drive is tested with the drive before shipment to the customer. Current
production is sufficient to satisfy the existing backlog of orders and meet
current demand.
Engineering verification testing on Apex has begun. All mechanical and optical
improvements in components of the drive have been completed and tested. The
Company expects to begin building subassemblies in the third quarter. The
Company plans both pre-production and pilot releases before volume production.
Apex is scheduled for production in the fourth quarter of 1996.
Cooperation From Suppliers
In the second quarter the Company worked out understandings and arrangements
with certain of its vendors pursuant to which the Company obtained temporary
extended terms.
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Reorganization at the R & D Center and in Manufacturing
During the second quarter the Company formed a business team consisting of
product management, R & D manufacturing and quality assurance. The Company is
now following a product release process that requires disciplined action and
follow up by every department. The launch of a product to the market and the
corresponding sales plan is being prepared in parallel with the development of
products. During the quarter, the Company recruited key manufacturing and
technical people. In addition, the Company reestablished good working
relationships with its key suppliers.
RISK FACTORS
Because of these and other factors affecting the Company's operating results,
including the uncertainties relating to the pending litigation, past financial
performance should not be considered a reliable indicator of future performance,
and investors should not use historical trends to anticipate results or trends
in future periods.
Risks in the Apex program could include the unplanned need for another revision
of the principal printed circuit board and an unexpected problem in media
quality. To date, these risks do not appear to extend or delay the schedule for
commencement of shipping in the fourth quarter.
The Company plans to raise an additional $5 million dollars through a private
placement of a 6% convertible debenture in October 1996. In addition, the
Company continues to evaluate alternative sources of additional working capital,
which the Company in all probability may need to obtain within the next six to
twelve months. If such additional working capital is not or cannot be obtained,
it could limit the Company's growth prospects.
The Company's quarterly operating results fluctuate significantly depending on
factors such as timing of product introductions by the Company and its
competitors, market acceptance of new products and enhanced versions of the
Company's existing products, changes in pricing policies by the Company and its
competitors, currency fluctuations and the timing of expenditures on
advertising, promotion and research and development.
In addition, the Company's component purchases, production and spending levels
are made based upon forecasted demand for the Company's products. Accordingly,
any inaccuracy in forecasting could adversely affect the Company's results of
operations. Demand for the Company's products could be adversely affected by a
slowdown in the overall demand for computer systems or data storage products.
Further, as is common in many high technology companies, the Company's shipments
tend to be disproportionately higher in the latter part of each quarter. The
Company has historically experienced an increase in the number of orders and
shipments in the latter part of each calendar quarter and the Company expects
this pattern to continue in the future. The Company's failure to receive
anticipated orders or to complete shipments in the latter part of a quarter
could have a material adverse effect on the Company's results of operations for
that quarter. Past results are not necessarily indicative of future performance
for any particular period.
The Company continues to face competition from other, much larger, magnetic and
optical storage device developers, including Fujitsu, Sony and Philips. These
competitors have much larger R&D budgets and staffs, much greater engineering
and manufacturing experience, and may be able to bring products to market that
force the Company to reduce prices in order to remain competitive. Such price
competition would reduce the Company's margins, thereby making it more difficult
for the Company to maintain or increase its revenues and consequently to achieve
a profit.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number Description Page Number
- -------------- ----------- -----------
10.32 Form of Offshore Subscription Agreement
10.33 Form of Convertible Note
10.34 Form of Registration Rights Agreement
27.1 Financial Data Schedule
(b) Reports on Form 8-K: None
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SIGNATURES
PINNACLE MICRO, INC.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
August 12, 1996 By: /s/ Lawrence Goelman
-----------------------------------------
Lawrence Goelman, President and
Chief Executive Officer
(Duly Authorized Officer)
August 12, 1996
By: /s/ Roger Hay
-----------------------------------------
Roger Hay
Principal Financial Officer and Principal
Accounting Officer
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