UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-8342
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PICO PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 15-0624701
- ------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12500 Foothill Blvd.
Lakeview Terrace, California 91342
- ---------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(818) 897-0028
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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 reports), and (2) has been subject to such filing
requirement for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of December 6, 1996.
Common Stock, $0.01 par value 4,065,246
- ----------------------------- ------------------
Class Number of Shares
1
PICO PRODUCTS, INC.
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
October 31, 1996 and July 31, 1996 3-4
Condensed Consolidated Statements
of Income - Three Months
Ended October 31, 1996 and 1995 5
Condensed Consolidated Statements
of Cash Flows - Three Months
Ended October 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial
Statements 7-10
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition 11-14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 6. Exhibits and Reports on Form 8-K 15-18
2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PICO PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
October 31, July 31,
1996 1996
----------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 185,355 $ 159,669
Accounts receivable (less allowance
for doubtful accounts: October 31,
1996, $225,000; July 31, 1996,
$200,000) 5,749,419 5,289,288
Inventories (Note 2) 12,662,868 10,933,244
Prepaid expenses and other current
assets 272,892 191,215
----------- -----------
TOTAL CURRENT ASSETS 18,870,534 16,573,416
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Buildings 217,255 217,255
Leasehold improvements 345,136 345,136
Machinery and equipment 2,785,474 2,637,609
----------- -----------
3,347,865 3,200,000
Less accumulated depreciation
and amortization 2,441,541 2,393,995
----------- -----------
906,324 806,005
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OTHER ASSETS:
Patents and licenses (less accumulated
amortization: October 31, 1996,
$63,674; July 31, 1996, $62,180) 157,536 159,030
Excess of cost over net assets of
businesses acquired (less accumulated
amortization: October 31, 1996,
$374,190; July 31, 1996, $366,930) 203,245 210,505
Deposits and other noncurrent assets 231,155 195,582
----------- -----------
591,936 565,117
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$20,368,794 $17,944,538
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----------- -----------
See notes to condensed consolidated financial statements.
3
PICO PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
(Unaudited)
October 31, July 31,
1996 1996
----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Notes 5 & 6) $ 9,213,364 $ 8,227,776
Current portion of long-term debt 316,889 311,086
Accounts payable 5,122,653 3,921,081
Accrued expenses:
Legal and accounting 162,574 170,497
Payroll and payroll taxes 602,226 506,742
Other accrued expenses 304,925 312,193
----------- -----------
TOTAL CURRENT LIABILITIES 15,722,631 13,449,375
----------- -----------
LONG-TERM DEBT (Note 6) 84,678 39,414
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 4) - -
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value;
authorized 500,000 shares;
no shares issued - -
Common shares, $.01 par value;
authorized 15,000,000 shares;
issued and outstanding 4,055,246
shares at October 31, 1996 and
4,052,246 shares at July 31, 1996 40,552 40,522
Additional paid-in capital 22,037,398 22,035,178
Stock subscriptions receivable (115,000) (115,000)
Accumulated deficit (17,309,071) (17,409,924)
Cumulative translation adjustment (92,394) (95,027)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 4,561,485 4,455,749
----------- -----------
$20,368,794 $17,944,538
----------- -----------
----------- -----------
See notes to condensed consolidated financial statements.
4
PICO PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
October 31,
-----------------------------
1996 1995
----------- ------------
SALES $ 9,698,188 $ 8,373,962
COSTS AND EXPENSES:
Cost of sales 7,330,072 6,245,265
Selling and administrative expenses 2,025,788 1,900,762
----------- -----------
TOTAL COSTS AND EXPENSES 9,355,860 8,146,027
----------- -----------
INCOME FROM OPERATIONS 342,328 227,935
INTEREST INCOME 3,834 1,809
INTEREST EXPENSE (241,075) (227,687)
----------- -----------
INCOME BEFORE INCOME TAXES 105,087 2,057
----------- -----------
INCOME TAX PROVISION (Note 3) 4,234 -
----------- -----------
NET INCOME $ 100,853 $ 2,057
----------- -----------
----------- -----------
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary $ 0.02 $ 0.00
----------- -----------
----------- -----------
Fully diluted $ 0.02 $ 0.00
----------- -----------
----------- -----------
WEIGHTED AVERAGE COMMON AND
EQUIVALENT SHARES OUTSTANDING:
Primary 4,249,724 4,136,917
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----------- -----------
Fully diluted 4,249,724 4,136,917
----------- -----------
----------- -----------
See notes to condensed consolidated financial statements.
5
PICO PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
October 31,
-----------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 100,853 $ 2,057
Adjustments to reconcile net income
to net cash used in
operating activities:
Depreciation and amortization 86,378 82,675
Changes in operating assets
and liabilities (1,022,057) (229,907)
----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES (834,826) (145,175)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (90,971) (132,313)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under a
line of credit agreement 985,588 43,693
Principal payments on long-term debt (35,905) (30,729)
Proceeds from exercise of stock options 1,800 14,125
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 951,483 27,089
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 25,686 (250,399)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 159,669 501,525
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 185,355 $ 251,126
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest $ 240,856 $ 229,428
Income taxes 634 22,050
During the fiscal quarters ended October 31, 1996 and 1995 the Company financed
the purchase of office and test lab equipment totaling approximately $87,000 and
$31,000, respectively.
See notes to condensed consolidated financial statements.
6
PICO PRODUCTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) GENERAL
Pico Products, Inc. and its subsidiaries (the "Company") design,
manufacture and distribute products and systems for the pay TV and cable TV
industry (CATV), broadband communications and other signal distribution markets.
These other distribution markets include "private" cable TV systems such as
those found in hotels, schools, hospitals and large apartment complexes.
Private cable systems are referred to in the industry as master antenna (MATV)
or satellite master antenna (SMATV) systems. These systems receive satellite
and "off-air" (or broadcast) signals at a single source known as the "headend".
The signals are processed and then distributed by coaxial or fiber optic cable
to the consumer. Also included in other signal distribution markets are
wireless cable or MMDS (multichannel multipoint distribution systems) and
business to business or direct-to-home (DTH) communications by satellite. The
Company also sells pay TV security products and home satellite market products.
Finally, the Company is pursuing development and introduction of broadband
communications products that will support high speed internet transmissions.
The accompanying unaudited condensed consolidated financial statements include
the accounts of Pico Products, Inc. and its wholly owned subsidiaries, and
include all adjustments which are, in the opinion of the Company's management,
necessary to present fairly the Company's financial position as of October 31,
1996, and the results of its operations and its cash flows for the three-month
periods ended October 31, 1996 and 1995. All such adjustments are of a normal
recurring nature. All significant intercompany accounts and transactions have
been eliminated in consolidation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
(GAAP) have been condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission (SEC). The preparation of interim
financial statements in conformity with GAAP, as modified by SEC rules and
regulations, requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures 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 these estimates. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
related
7
notes contained in the Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1996.
The results of operations for the interim periods shown in this Report are not
necessarily indicative of the results to be expected for the fiscal year.
(2) INVENTORIES
The composition of inventories was as follows:
October 31, July 31,
1996 1996
----------- -----------
Raw materials $ 2,796,622 $ 3,485,548
Work in process 796,147 636,072
Finished goods 9,070,099 6,811,624
----------- -----------
$12,662,868 $10,933,244
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----------- -----------
(3) INCOME TAXES
No provision for U.S. Federal and state regular income taxes or foreign income
taxes has been recorded for the three-month periods ended October 31, 1996 and
1995 due to the Company's U.S. Federal, state, and foreign net operating loss
carryforward positions and a tax holiday granted to one of the Company's foreign
subsidiaries. However, a provision for U.S. Federal and state alternative
minimum tax has been recorded for the three month period ended October 31, 1996.
(4) LITIGATION AND CONTINGENCIES
INFORMATION REQUEST
On March 6, 1995, a subsidiary of the Company received a Joint Request for
Information (the "Information Request") from the United States Environmental
Protection Agency, Region II (the "EPA"), under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), with
respect to the release and/or threatened release of hazardous substances,
hazardous wastes, pollutants or contaminants into the environment at the
Onondaga Lake Site, Syracuse, Onondaga County, New York. The Company has
learned that the EPA added the Onondaga Lake Site to the Superfund National
Priorities List on December 6, 1994, and has completed an onsite assessment of
the degree of hazard. The EPA has indicated that the Company is only one of 26
companies located in the vicinity of Onondaga Lake or its tributaries that have
received a similar Information Request.
8
The Information Request related to the activities of the Company's Printed
Circuit Board Division, which was sold to a third party in 1992, and which
conducted operations within the specified area. Under the Agreement of Sale
with the buyer, the Company retained liability for environmental obligations
which occurred prior to the sale.
The Company has provided all information requested by the EPA. The Information
Request does not designate the Company as a potentially responsible party, nor
has the EPA indicated the basis upon which it would designate the Company as a
potentially responsible party. The Company is therefore unable to state whether
there is any material likelihood for liability on its part, and, if there were
to be any such liability, the basis of any sharing of such liability with
others.
OTHER
The Company is involved, from time to time, in certain other legal actions
arising in the normal course of business. Management believes that the outcome
of other litigation will not have a material adverse affect on the Company's
consolidated financial statements.
(5) DEBT COVENANT VIOLATION
At October 31, 1996, the Company was in technical violation of several financial
covenants relating to Pico Macom's bank revolving line of credit. These
covenants restrict the maximum advances to affiliates by Pico Macom and limit
certain financial ratios. Pico Macom's bank has issued a waiver of these
violations effective October 31, 1996. All other covenants relating to this
line of credit were met as of October 31, 1996.
As described below, subsequent to October 31, 1996, the Company completed a
private placement financing. On a pro forma basis, after giving effect to the
private placement, Pico Macom's financial covenants were in compliance with the
line of credit agreement.
(6) SUBSEQUENT EVENT
On November 21, 1996 the Company completed a private placement financing
totaling $6 million with two institutional investors. The private placement
consisted of $5 million of seven-year 12 percent subordinated debentures and $1
million of seven-year 12 percent redeemable preferred stock. In connection with
the financing, the Company issued warrants to the investors and to the Company's
investment banker for 955,176 shares of its common stock.
9
Additionally, the Company issued warrants to the investors providing for the
purchase, in the aggregate, of up to 18% of the number of shares of the
Company's common stock resulting from the exercise from time to time by holders
of options and warrants previously granted by the Company. These warrants are
exercisable no later than 10 years from the date of issuance, at a price of
$1.81 per share.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The following discussion compares the operations of the Company for the
three-month period ended October 31, 1996 with the operations for the
three-month period ended October 31, 1995, as shown by the unaudited condensed
consolidated statements of income included in this quarterly report.
RESULTS OF OPERATIONS
Sales increased by approximately $1,324,000, or 16%, for the fiscal quarter
ended October 31, 1996 compared to the fiscal quarter ended October 31, 1995.
The Company's Pico Macom subsidiary recorded a sales increase of approximately
$958,000, or 15%, in the quarter primarily due to increased demand for Satellite
Master Antenna Television (SMATV) products in South America and the Middle East.
The Company's CATV division recorded a sales increase of approximately $219,000,
or 14%, in the quarter primarily due to continued strong domestic and
international demand for pay TV encoders and decoders. The Company's Hong Kong
subsidiary recorded a sales increase of approximately $184,000, or 103%, in the
quarter primarily due to increased sales and marketing efforts in China, Hong
Kong and Southeast Asia. Management believes that the Company's overall sales
growth will continue during the remainder of fiscal year 1997 due to increased
availability of existing products, the introduction of new products and
increased sales to customers in Asia and in South America.
Cost of sales increased by approximately $1,085,000, or 17%, for the fiscal
quarter ended October 31, 1996 compared with the fiscal quarter ended October
31, 1995. Cost of sales as a percentage of sales increased by 1% (from 75% to
76%) for the fiscal quarter ended October 31, 1996 versus the same fiscal
quarter in the previous year. The dollar increase in cost of sales was
primarily attributable to the increase in sales volume. The 1% increase in cost
of sales as a percentage of sales was primarily due to a shift in the sales mix
of products sold by the Company's Hong Kong subsidiary, and startup costs
related to initial manufacturing of some of the Company's new products.
Selling and administrative expenses increased by approximately $125,000, or 7%,
for the fiscal quarter ended October 31, 1996 compared to the fiscal quarter
ended October 31, 1995. The primary reason for the increase in selling and
administrative expenses was the continuing expenditures related to development
of new markets in Asia. Management anticipates that this current level of
selling and administrative expenses will continue throughout fiscal year 1997.
11
Interest expense increased by approximately $13,000, or 6%, for the fiscal
quarter ended October 31, 1996 compared with the fiscal quarter ended October
31, 1995. The increase was primarily due to higher borrowing levels on the
Company's bank line of credit to support the Company's working capital
requirements partially offset by a decrease in the prime rate for the
three-month period ended October 31, 1996.
No provision for U.S. Federal and state regular income taxes or foreign income
taxes has been recorded for the three-month periods ended October 31, 1996 and
1995 due to the Company's U.S. Federal, state, and foreign net operating loss
carryforward positions and a tax holiday granted to one of the Company's foreign
subsidiaries. However, a provision for U.S. Federal and state alternative
minimum tax has been recorded for the three-month period ended October 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1996, the Company had working capital of approximately
$3,148,000 and a ratio of current assets to current liabilities of approximately
1.20:1, compared with working capital of approximately $3,124,000 and a ratio of
1.23:1 as of July 31, 1996. During the fiscal quarter ended October 31, 1996,
the Company recorded negative cash flow from operating activities primarily as a
result of increased inventory purchases to support the current and anticipated
future sales levels.
Inventories at October 31, 1996, were at a higher level due, in part, to delays
in sales and shipments of finished goods in the first quarter of fiscal 1997.
These delays resulted in lower sales in the first quarter of fiscal 1997 than
would have otherwise been attained, and were caused by the limited availability
under the Company's line of credit (as discussed below). The limited
availability under the line of credit delayed the Company's ability to obtain
finished goods inventory shipped from foreign vendors, which goods were required
to complete customer orders.
During the fiscal quarters ended October 31, 1996 and 1995, cash used for
capital expenditures was approximately $91,000 and $132,000 respectively.
Capital expenditures for the remainder of fiscal year 1997 are expected to be
under $500,000.
Pico Macom has an $11,000,000 revolving bank line of credit which is secured by
substantially all of Pico Macom's assets, including all trade accounts
receivable and inventories. The line provides for interest at the prime rate
(8.25% at October 31, 1996) plus 1.25%. The revolving line of credit is used to
fund operating expenses, product purchases and letters of credit for import
purchases. The
12
line has a $1,500,000 sublimit for outstanding letters of credit. The amount
available to borrow at any one time is based upon various percentages of
eligible accounts receivable and eligible inventories as defined in the
agreement, which is subject to review and renewal on December 31, 1997. The
credit facility is subject to certain financial tests and covenants. At October
31, 1996, Pico Macom had approximately $9,213,000 in revolving loans outstanding
and approximately $43,000 in letters of credit outstanding, and the unused
portion of the borrowing base was approximately $585,000.
At October 31, 1996, the Company was in technical violation of certain financial
covenants relating to Pico Macom's bank line of credit. These covenants
restrict the maximum advances to affiliates by Pico Macom and establish certain
minimum and maximum financial ratios. Pico Macom's bank has issued a waiver of
these violations effective October 31, 1996. All other covenants relating to
this line of credit were met as of October 31, 1996.
As described below, subsequent to October 31, 1996, the Company completed a
private placement financing. On a pro forma basis, after giving effect to the
private placement, Pico Macom's financial covenants were in compliance with the
line of credit agreement.
During the second half of fiscal year 1996, Management determined that the
Company's credit arrangements, along with an inventory reduction program
implemented by the Company, would not provide sufficient cash to fund growth in
the Company's sales and planned operations for fiscal year 1997 and beyond.
Consequently, on November 21, 1996, the Company completed a private placement
financing totaling $6 million with two institutional investors to provide funds
for general working capital requirements and investment in new product
development, market development, and upgrade of facilities. The private
placement consisted of $5 million of seven-year 12 percent subordinated
debentures sold to Allied Capital Corporation of Washington, D.C. and certain of
its affiliates, and $1 million of seven-year 12 percent redeemable preferred
stock sold to The Sinkler Corporation of Wilmington, Delaware. In connection
with the financing, Allied Capital Corporation and affiliates received warrants
to purchase 779,313 shares of the Company's common stock, The Sinkler
Corporation received warrants to purchase 155,863 shares of the Company's common
stock, and Shipley Raidy Capital Partners, LP, the Company's investment banker,
received warrants to purchase 20,000 shares of the Company's common stock.
Additionally, Allied Capital Corporation and affiliates, and The Sinkler
Corporation, received warrants to purchase, in the aggregate, up to 18% of the
number of shares of the Company's common stock resulting from the exercise from
time to time by holders of options and warrants previously granted by the
Company. The warrants are exercisable at a price of
13
$1.81 per share, the average closing price of the Company's common stock for the
30 trading days prior to November 21, 1996.
Profitability of operations is subject to various uncertainties including
general economic conditions and the actions of actual or potential competitors
and customers. The Company's future depends on the growth of the cable TV
market in the United States and internationally. In the United States, a number
of factors could affect the future profitability of the Company, including
changes in the regulatory climate for cable TV, changes in the competitive
structure of the cable and telecommunications industries or changes in the
technology base of the industry. Internationally, the Company's profitability
depends on its ability to penetrate new markets in the face of competition from
other United States and foreign companies.
FORWARD LOOKING STATEMENTS
Statements which are not historical facts, including statements about our
confidence, strategies and expectations, technologies and opportunities,
industry and market segment growth, demand and acceptance of new and existing
products, and return on investments in products and markets, are forward looking
statements that involve risks and uncertainties, including without limitation,
the effect of general economic and market conditions, industry market conditions
caused by changes in the supply and demand for our products, the continuing
strength of the markets we serve, competitor pricing, maintenance of our current
momentum and other factors.
14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Incorporated by reference from financial statement footnote number 4 of Part I.
ITEM 2. CHANGES IN SECURITIES
As discussed in Management's Discussion and Analysis of Financial Condition and
Results of Operations, the Company and certain of its subsidiaries issued
subordinated debentures and preferred stock in the face amounts of $5 million
and $1 million, respectively, on November 21, 1996. The debentures and the
preferred stock were issued pursuant to the terms of agreements which contain
various financial and other covenants. These agreements prohibit the
distribution of cash, stock or other property to shareholders (whether
characterized as dividends or otherwise) or the redemption or repurchase of the
Company's capital stock or similar securities, subject to limited exceptions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
3(a) Complete copy of the Certificate of Incorporation of the Company,
as amended on November 19, 1996.
3(b)c By-Laws of the Company, as amended on December 17, 1987.
4(a)b 1981 Non-Qualified Stock Option Plan
4(b)a 1982 Incentive Stock Option Plan
4(c)d 1992 Incentive Stock Plan
4(d)e Warrant Certificates issued to Scimitar Development Capital Fund
and Scimitar Development Capital "B" Fund, dated February 10,
1993.
4(e)f Warrant Certificate issued to City National Bank, dated February
10, 1993.
4(f)g Amendment to 1992 Incentive Stock Plan.
Note: Key to Index of Exhibits Incorporated by Reference follows this
List of Exhibits.
15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED).
4(g)h Amendment to 1981 Non-Qualified Stock Option Plan.
4(h) Investment Agreement between the Company and certain of its
subsidiaries, and Allied Capital Corporation and certain of its
affiliated companies, dated November 21, 1996.
4(i) Subordinated Secured Debenture issued by the Company and certain
of its subsidiaries, payable to Allied Capital Corporation, dated
November 21, 1996. The Company has issued subordinated secured
debentures in substantially the same form as this debenture to
the following parties for the following amounts:
Holder Amount
-------------------------------- ----------
Allied Investment Corporation $2,300,000
Allied Investment Corporation II $1,450,000
Allied Capital Corporation II $ 550,000
4(j) Letter Agreement covering the issuance and sale by the Company of
Preferred Stock to The Sinkler Corporation, dated November 21,
1996.
4(k) Stock Purchase Warrant issued by the Company to Allied Capital
Corporation, dated November 21, 1996. The Company has issued
warrants in substantially the same form as this warrant to the
following parties for the following number of shares:
Holder Shares
-------------------------------- ----------
Allied Investment Corporation 358,484
Allied Investment Corporation II 226,001
Allied Capital Corporation II 85,724
The Sinkler Corporation 155,863
Shipley Raidy Capital Partners, LP 20,000
Note: Key to Index of Exhibits Incorporated by Reference follows this
List of Exhibits.
16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED).
4(l) Stock Purchase Warrant issued by the Company to Allied Capital
Corporation, dated November 21, 1996. The Company has issued
warrants in substantially the same form as this warrant to the
following parties for the following percentage of shares:
Percentage of
Holder Shares
-------------------------------- --------------
Allied Investment Corporation 6.9%
Allied Investment Corporation II 4.35%
Allied Capital Corporation II 1.65%
The Sinkler Corporation 3.0%
4(m) Registration Rights Agreement between the Company, Allied Capital
Corporation and certain of its affiliated companies, Scimitar
Development Capital Fund and Scimitar Development Capital "B"
Fund, Shipley Raidy Capital Partners, LP, and The Sinkler
Corporation, dated November 21,1996.
10(r) Amendment No. 4 to the Loan and Security Agreement between Pico
Macom, Inc. and HSBC Business Loans, Inc., as successor to Marine
Midland Business Loans, Inc. (original agreement dated May 25,
1994) - amendment dated November 25, 1996.
11.1 Computation of Per Share Earnings.
27 Financial Data Schedule (included only in the EDGAR filing).
See next page for Key to Index of Exhibits Incorporated by Reference.
(b) Reports on Form 8-K:
None.
17
KEY TO INDEX OF EXHIBITS INCORPORATED BY REFERENCE
a Previously filed by the Company as an exhibit to the Company's Registration
Statement on Form S-1, File No. 2-77439 and incorporated by reference.
b Previously filed by the Company as an exhibit to the Company's Registration
Statement on Form S-18, File No. 2-72318 and incorporated by reference.
c Previously filed by the Company as an exhibit to the Company's Form 10-K
for the fiscal year ended July 31, 1988 and incorporated by reference.
d Previously filed by the Company as an exhibit to the Company's Form 10-Q
for the fiscal quarter ended January 31, 1993 and incorporated by
reference.
e Previously filed as exhibits to Schedule 13D, dated February 16, 1993,
filed by Standard Chartered Equitor Trustee CI Limited, Scimitar
Development Capital Fund and Scimitar Development Capital "B" Fund, and
incorporated by reference.
f Previously filed by the Company as an exhibit to the Company's Form 10-K
for the fiscal year ended July 31, 1993 and incorporated by reference.
g Previously filed by the Company as an exhibit to the Company's Form 10-K
for the fiscal year ended July 31, 1994 and incorporated by reference.
h Previously filed by the Company as an exhibit to the Company's Form 10-Q
for the fiscal quarter ended January 31, 1996 and incorporated by
reference.
Copies of all exhibits incorporated by reference are available at no charge
by written request to Assistant Corporate Secretary, Pico Products, Inc.,
12500 Foothill Blvd., Lakeview Terrace, California 91342.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PICO PRODUCTS, INC.
REGISTRANT
DATE: December 9, 1996 /s/ Joseph T. Kingsley
-------------------------------------
Senior Vice President of Finance
Chief Financial Officer
19
FORM 10-Q
QUARTER ENDED OCTOBER 31, 1996
LIST OF NEW EXHIBITS
3(a) Complete copy of the Certificate of Incorporation of the Company,
as amended on November 19, 1996.
4(h) Investment Agreement between the Company and certain of its
subsidiaries, and Allied Capital Corporation and certain of its
affiliated companies, dated November 21, 1996.
4(i) Subordinated Secured Debenture issued by the Company and certain
of its subsidiaries, payable to Allied Capital Corporation, dated
November 21, 1996. The Company has issued subordinated secured
debentures in substantially the same form as this debenture to
the following parties for the following amounts:
Holder Amount
-------------------------------- ----------
Allied Investment Corporation $2,300,000
Allied Investment Corporation II $1,450,000
Allied Capital Corporation II $ 550,000
4(j) Letter Agreement covering the issuance and sale by the Company of
Preferred Stock to The Sinkler Corporation, dated November 21,
1996.
4(k) Stock Purchase Warrant issued by the Company to Allied Capital
Corporation, dated November 21, 1996. The Company has issued
warrants in substantially the same form as this warrant to the
following parties for the following number of shares:
Holder Shares
-------------------------------- ----------
Allied Investment Corporation 358,484
Allied Investment Corporation II 226,001
Allied Capital Corporation II 85,724
The Sinkler Corporation 155,863
Shipley Raidy Capital Partners, LP 20,000
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LIST OF NEW EXHIBITS (CONTINUED)
4(l) Stock Purchase Warrant issued by the Company to Allied Capital
Corporation, dated November 21, 1996. The Company has issued
warrants in substantially the same form as this warrant to the
following parties for the following percentage of shares:
Percentage of
Holder Shares
-------------------------------- --------------
Allied Investment Corporation 6.9%
Allied Investment Corporation II 4.35%
Allied Capital Corporation II 1.65%
The Sinkler Corporation 3.0%
4(m) Registration Rights Agreement between the Company, Allied Capital
Corporation and certain of its affiliated companies, Scimitar
Development Capital Fund and Scimitar Development Capital "B"
Fund, Shipley Raidy Capital Partners, LP, and The Sinkler
Corporation, dated November 21,1996.
10(r) Amendment No. 4 to the Loan and Security Agreement between Pico
Macom, Inc. and HSBC Business Loans, Inc., as successor to Marine
Midland Business Loans, Inc. (original agreement dated May 25,
1994) - amendment dated November 25, 1996.
11.1 Computation of Per Share Earnings.
27 Financial Data Schedule (included only in the EDGAR filing).
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