FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 28, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-21892
PINNACLE MICRO, INC.
Delaware 33-0238563
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
PINNACLE MICRO, INC.
19 TECHNOLOGY DRIVE
IRVINE, CALIFORNIA 92618
(714) 789-3000
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 requirements for the past 90 days. Yes X No .
--- ---
As of August 5, 1997 there were outstanding 14,500,089 shares of Registrant's
Common Stock.
Page 1 of 13 pages
PINNACLE MICRO, INC.
INDEX
PAGE
Part I. Financial Information
Item 1. Financial Statements 3
Condensed Balance Sheets at June 28, 1997
and December 28, 1996 3
Condensed Statements of Operations for the thirteen weeks
and twenty-six weeks ended June 28, 1997 and June 29, 1996 4
Condensed Statements of Cash Flows for the twenty-six
weeks ended June 28, 1997 and June 29, 1996 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 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE MICRO, INC.
CONDENSED BALANCE SHEETS
June 28, December 28,
1997 1996
---- ----
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,389,000 $ 5,455,000
Accounts receivable, net 9,533,000 11,726,000
Income taxes receivable 949,000 1,984,000
Inventories 17,965,000 17,714,000
Prepaid expenses and other
current assets 595,000 215,000
------------ ------------
Total current assets 31,431,000 37,094,000
Furniture and equipment, net 2,294,000 1,739,000
Deferred interest related to
convertible debentures - 786,000
Other assets 156,000 619,000
------------ ------------
Total assets $ 33,881,000 $ 40,238,000
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity
Note payable $ 6,346,000 $ 3,276,000
Accounts payable 17,523,000 15,540,000
Accrued expenses 1,647,000 2,922,000
Accrued restructuring 1,286,000 1,421,000
Payroll related liabilities 792,000 1,225,000
------------ ------------
Total current liabilities 27,594,000 24,384,000
Convertible debentures 50,000 6,422,000
Other liabilities 409,000 929,000
Commitments and contingencies
Stockholders' equity:
Common stock 14,000 10,000
Additional paid-in capital 34,926,000 28,551,000
Accumulated deficit (29,112,000) (20,058,000)
------------ ------------
Total stockholders' equity 5,828,000 8,503,000
------------ ------------
Total liabilities and
stockholders' equity $ 33,881,000 $ 40,238,000
------------ ------------
------------ ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
3
PINNACLE MICRO, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
June 28, 1997 June 29, 1996 June 28, 1997 June 29, 1996
-------------- -------------- -------------- --------------
Net sales $11,277,000 $12,333,000 $25,383,000 $29,767,000
Cost of sales 10,768,000 10,180,000 22,046,000 24,486,000
-------------- -------------- -------------- --------------
Gross profit 509,000 2,153,000 3,337,000 5,281,000
-------------- -------------- -------------- --------------
Operating expenses:
Selling, general and administrative 4,163,000 4,429,000 8,904,000 9,681,000
Research and development 1,083,000 1,436,000 2,248,000 3,028,000
Nonrecurring charges - 87,000 - 251,000
-------------- -------------- -------------- --------------
Total operating expenses 5,246,000 5,952,000 11,152,000 12,960,000
-------------- -------------- -------------- --------------
Operating loss (4,737,000) (3,799,000) (7,815,000) (7,679,000)
Interest expense (254,000) (114,000) (1,217,000) (146,000)
-------------- -------------- -------------- --------------
Income loss before income taxes (4,991,000) (3,913,000) (9,032,000) (7,825,000)
Income tax expense - - 22,000 3,000
-------------- -------------- -------------- --------------
Net loss $(4,991,000) $(3,913,000) $(9,054,000) $(7,828,000)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net loss per share $(0.39) $(0.49) $(0.77) $(0.99)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Weighted average common shares
outstanding 12,957,000 7,917,000 11,747,000 7,892,000
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
4
PINNACLE MICRO, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
26 Weeks Ended 26 Weeks Ended
June 28, 1997 June 29, 1996
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(9,054,000) $(7,828,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Loss from disposal of assets 40,000 -
Depreciation and amortization 661,000 674,000
Provision for doubtful accounts 140,000 252,000
Interest on debentures paid in common stock 151,000 -
Provision for product returns and price protection 81,000 498,000
Provision for inventory obsolescence 1,626,000 358,000
Non cash interest expense 786,000 -
Compensation related to stock options and warrants 72,000 -
Changes in operating assets and liabilities:
Accounts receivable 1,972,000 1,863,000
Income taxes receivable 1,035,000 78,000
Inventories (1,877,000) (3,282,000)
Prepaid expenses and other current assets (380,000) (368,000)
Other assets 110,000 (43,000)
Accounts payable and accrued expenses 619,000 2,497,000
Payroll related liabilities (433,000) 150,000
Other liabilities (520,000) -
-------------- --------------
Net cash used in operating activities (4,971,000) (5,151,000)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of furniture and equipment 30,000 -
Purchase of furniture and equipment (1,332,000) (665,000)
-------------- --------------
Net cash used in investing activities (1,302,000) (665,000)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable, net 3,070,000 5,000,000
Principal payments on long-term debt - (20,000)
Proceeds from exercise of stock options 16,000 -
Tax benefit from exercise of stock options 3,000 -
Proceeds from issuance of stock through
the employee stock purchase plan 118,000 -
-------------- --------------
Net cash provided by financing activities 3,207,000 4,980,000
-------------- --------------
Effect of exchange rate changes on cash - (50,000)
Decrease in cash and cash equivalents (3,066,000) (886,000)
Cash and cash equivalents at beginning of period 5,455,000 3,606,000
-------------- --------------
Cash and cash equivalents at end of period $2,389,000 $2,720,000
-------------- --------------
-------------- --------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest 540,000 150,000
Income Taxes - -
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED FINANCIAL
STATEMENTS.
5
PINNACLE MICRO, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 28, 1997
(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 28, 1996. 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 28,
1997 and June 29, 1996.
NEW ACCOUNTING STANDARD
In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, EARNINGS PER SHARE (SFAS 128). This pronouncement provides a
different method of calculating earnings per share than is currently used
in accordance with APB 15, EARNINGS PER SHARE. SFAS 128 provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution of securities that could share in the earnings of an
entity, similar to fully diluted earnings per share. This pronouncement is
effective for fiscal years and interim periods ending after December 15,
1997; early adoption is not permitted. The Company does not believe that
the adoption of this pronouncement will have a material impact on the net
loss per share presented in the accompanying condensed statements of
operations.
2. INVENTORIES
Inventories consist of the following:
June 28, December 28,
1997 1996
---- ----
Components and work-in-process $17,713,000 $13,991,000
Finished goods 252,000 3,723,000
----------- -----------
$17,965,000 $17,714,000
----------- -----------
----------- -----------
3. CONTINGENCIES
On March 15, 1996, a complaint was filed against the Company and certain of
its directors and then executive officers 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
6
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 may incur significant legal costs relating to this suit in 1997.
4. CONVERTIBLE DEBENTURES
In December 1996, the Company completed an offshore placement of
$5,000,000 principal amount of convertible subordinated 6% debentures due
December 2001. The debenture holders could convert the principal of the 6%
debentures as follows: 30%, 40% and 30%, at discounts from the then market
price of 15%, 17.5% and 20%, in intervals commencing 50, 80 and 110 days
after closing, respectively.
As of June 28, 1997, debentures from both the December placement and the
prior placement made in July 1996, aggregating $6,372,000 were converted
into 4,276,929 shares of common stock at conversion prices ranging from
$4.16 to $0.84 per share.
5. RESTRUCTURING
During 1996, the Company recorded restructuring charges of $3,028,000 for
costs associated with the Company's planned consolidation and transfer of
manufacturing operations to Colorado Springs, Colorado and the closing of
its branch office in Japan. These restructuring charges principally
reflect the cost associated with early termination of existing leases,
losses from the disposal of assets and severance costs resulting from work
force reductions.
During the second quarter of 1997, charges totaling $341,000 were incurred
in connection with this restructuring, including $112,000 for severance
related to the termination of 16 employees who worked in the European Sales
office and Irvine; $171,000 for facility and lease terminations; and
$58,000 for the write-off of leasehold improvements and assets in Europe.
The remaining balance of the restructuring liability as of June 28, 1997
was $1,695,000 of which $409,000 relates to longer term lease and severance
agreements which should be paid or settled in 1998.
7
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 AS WELL
AS IN THE COMPANY'S ANNUAL REPORT ON
FORM 10 - K.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NET SALES
Net sales were $12,333,000 and $11,277,000 for the thirteen weeks ended June 29,
1996 and June 28, 1997, respectively, representing a decrease of 8.6%. Net
sales were $29,767,000 and $25,383,000 for the twenty-six weeks ended June 29,
1996 and June 28, 1997, respectively, representing a decrease of 14.7%. These
decreases are primarily attributable to decreased unit sales and average sales
prices of the current recordable CD, Sierra and Tahoe products, and were
partially offset by sales of the APEX drives and APEX-based optical libraries.
While the recordable CD product is facing increased competition, the Sierra and
Tahoe products reached the end of their product lives.
Net sales were $14,106,000 and $11,277,000 for the thirteen weeks ended March
29, 1997 and June 28, 1997, respectively, representing a decrease of 20%. The
decrease is primarily attributable to decreased unit sales and average sales
prices of the current recordable CD product and lower sales to distributors of
the APEX product, partially offset by increased sales of the VERTEX product and
APEX media. A large backlog of APEX drives was shipped to distributors in the
first part of the first quarter, but the sales orders and sell through rate in
the second quarter was lower than expected.
A major contributing factor to lower sales in sequential quarters was the
Company's shortage of cash. Several key vendors will only ship to the Company
on a prepay basis which the Company has had difficulty complying with, and,
accordingly the Company's ability to purchase key components has been limited.
As a result, sales were adversely affected.
GROSS PROFIT
Gross profit decreased from $2,153,000 for the thirteen weeks ended June 29,
1996 to $509,000 for the thirteen weeks ended June 28, 1997, and decreased as a
percentage of sales from 17.5% to 4.5%. Gross profit decreased from $5,281,000
for the twenty-six weeks ended June 29, 1996 to $3,337,000 for the twenty-six
weeks ended June 28, 1997, and decreased as a percentage of sales from
approximately 17.7% to approximately 13.1%. The company experienced increased
competition in the recordable CD market for the current product which placed
additional pressures on selling prices and gross margins. The reduction in
gross profit is also attributable to a reserve of approximately $1,200,000 that
was taken for certain excess inventory and end-of-life products, partially
offset by the margin on sales of the APEX drives, APEX-based optical libraries
and APEX media, which began shipping late in the fourth quarter 1996.
Gross profit decreased from $2,828,000 for the thirteen weeks ended March 29,
1997 to $509,000 for the thirteen weeks ended June 28, 1997, and decreased as a
percentage of sales from 20% to 4.5%. These decreases are related to the lower
volume sales of APEX drives to distributors, the increased competition in the
recordable CD market for the current product which has placed additional
pressures on selling prices and gross margins, and the reserve that was taken
for certain excess inventory and end-of-life products.
8
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $4,429,000 and $4,163,000 for
the thirteen weeks ended June 29, 1996 and June 28, 1997, respectively, and
represented approximately 35.9% and 36.9% of net sales. Selling, general and
administrative expenses were $9,681,000 and $8,904,000 for the twenty-six weeks
ended June 29, 1996 and June 28, 1997, respectively, and represented
approximately 32.5% and 35.1% of net sales. The decrease in expenditures
resulted primarily from reduced advertising and promotional expenditures and the
reduction of the Company's sales staff, with partial offsets from costs related
to the relocation of operations to Colorado Springs.
Selling, general and administrative expenses were $4,741,000 and $4,163,000 for
the thirteen weeks ended March 29, 1997 and June 28, 1997, respectively, and
represented approximately 33.6% and 36.9% of net sales. The decrease in
expenditures resulted primarily from reduced advertising and promotional
expenditures and the reduction of personnel, particularly Sales staff in the
company's European Sales office.
RESEARCH AND DEVELOPMENT
Research and development expenses were $1,436,000 and $1,083,000 for the
thirteen weeks ended June 29, 1996 and June 28, 1997, respectively, or
approximately 11.6% and 9.6% of net sales. Research and development expenses
were $3,028,000 and $2,248,000 for the twenty-six weeks ended June 29, 1996 and
June 28, 1997, respectively or 10.2% and 8.9% of net sales. Research and
development expenses were higher in both periods of 1996 due to incurred costs
related to VERTEX and APEX prototypes and for ASIC development fees paid to
third parties.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents of $2,389,000 at June 28, 1997 were $3,066,000 lower
than the balance at December 28, 1996. This was due mainly to payment of
certain expenses and capital costs related to the relocation to Colorado Springs
in the first quarter 1997 and the losses incurred in the first half of 1997,
partially off set by additional borrowings on the Company's line of credit. The
Company took a number of actions in the second quarter to reduce inventory from
the level reported in the first quarter, particularly with respect to APEX
components and subassemblies, including a $1,200,000 write-off of excess
inventory and end-of-life products.
The Company's liquidity position continues to be severely constrained. The
Company currently has a revolving line of credit agreement with a lender,
collateralized by substantially all assets of the Company, which expires on
September 30, 1998. Although the Company has a maximum availability of
$10,000,000 under the line of credit based on a percentage of eligible accounts
receivables and inventories, its ability to borrow against the revolving line of
credit is largely dependent upon its level of eligible accounts receivable.
Because of its lower than expected level of shipments, the Company's eligible
account receivables are also lower than expected and the Company frequently
utilizes the maximum available under the line of credit. Borrowings under the
line of credit totaled $3,276,000 at December 28, 1996, $6,346,000 at June 28,
1997 and $5,956,000 at July 25, 1997. At July 25, 1997, the Company had
borrowed substantially all of its available credit under the line.
The Company is focusing on efforts to increase sales, especially optical
library sales, in the third quarter. In July 1997, the Company reduced the
selling prices of its APEX and VERTEX drives by an average of 33% in order to
reach a wider market and increase sales of these drives. The Company will be
materially adversely impacted if it is unsuccessful in increasing its sales in
the third quarter of 1997. In addition, in an effort to address its working
capital needs, the Company has taken or intends to take a number of actions
to further reduce operating expenses. In the second quarter of 1997 the Company
continued to reduce its fixed costs and operating expenses. The European
Sales office was substantially reduced in size, as well as reorganized, and
headcount and advertising were reduced in the U.S.
9
As of June 28, 1997, the Company had an income tax receivable of $949,000. An
expected refund of $1,035,000 was received on June 27, 1997 and the balance of
$949,000 was received in early August 1997.
As a result of the Company's difficulty in paying its trade debt on a timely
basis, the Company sought the cooperation of its creditors in a restructuring of
its trade debt. As previously disclosed, on July 14, 1997, the Company held a
meeting with its trade creditors. Shortly after the meeting, a committee of
the creditors, representing in excess of 50% of the Company's trade debt, agreed
to an initial 60-day moratorium on the payment of the Company's outstanding
trade debt. No assurance can be given that the moratorium will be extended.
During the second quarter the Company retained the consulting firm Kibel, Green
Inc., a turnaround and management consulting firm, and the law firm of Lobel &
Opera to assist the Company in dealing with various creditors and related
matters. The Company also engaged the investment banking firm of Houlihan,
Lokey, Howard & Zukin to assist the Company in evaluating its alternatives,
including the possibility of locating a financial or industry partner or other
transaction. During July 1997, a Descriptive Memorandum was sent to a list of
potentially interested parties. No transaction is pending as of the date of
this filing and the outcome of these efforts cannot be determined at this time.
There can be no assurance that a financial or industry partner can be identified
or that any transaction with such a partner, or any other source of financial
assistance, can be consummated under terms which will allow the Company to
continue to operate as a going concern.
At the time of this filing there is no forbearance agreement in place with the
Company's secured lender. The Company and its secured lender currently have a
disagreement regarding the calculation of the Company's eligible borrowing base
under its line of credit. While the lender has cooperated so far with the
Company's efforts to meet its ongoing working capital requirements, there can be
no assurance that such cooperation will continue. In the event the Company is
declared in default under the line of credit by the lender and demand for
payment is made, the Company would be unable to make such payment.
In the event that the Company is unable to locate a financial partner or other
sources of funding to meet its current cash needs, it may be unable to continue
to operate as a going concern and may be required to seek protection under the
Federal Bankruptcy laws.
GENERAL AND RISK FACTORS
SALES AND MARKETING
The long-standing order backlog for APEX was substantially shipped as of March
29, 1997. The post-backlog shipment and order rate in the second quarter for
single-unit APEX drives was below the level necessary to support the Company's
strategy as a drive business. The Company has reduced the prices of APEX by 33%
in an effort to broaden its market base and increase sales in the third quarter
1997. The Company is also moving aggressively to focus on the optical library
market. The critical tasks facing the Company in the third quarter are managing
liquidity and building demand for APEX technology (and applications of that
technology such as optical libraries). Although management believes that the
demand for optical libraries indicates market acceptance of the APEX 4.6 GB
capacity point, if demand for APEX-based optical library solutions cannot be
developed to satisfactory levels and sustained at those levels, the Company
will have further significant liquidity constraints.
Marketing efforts are being directed at optical libraries and mid-range
($10,000-$100,000 systems) computer systems, medical imaging, near on-line
storage, video on demand and document imaging markets. Distribution
agreements were entered into in the first quarter with value added
resellers ("VARs") that specialize in optical technology markets. It is
premature to predict what effect, if any, these agreements may have on
single-unit APEX sales. The Company is seeking to have its products
certified as
10
compatible by additional leading software vendors in the belief that such
certification may generate additional sales of APEX.
CONVERSION OF CONVERTIBLE DEBENTURES
In December 1996, the Company sold an additional $5,000,000 principal amount of
6% convertible debentures pursuant to an offshore private placement. The
proceeds from this offering were used entirely for the Company's liquidity needs
at the end of the fourth quarter of 1996 and during the first quarter of 1997.
As of August 1, 1997, all of the debentures had been converted into 3,675,973
shares of common stock at conversion prices ranging from $0.53 to $4.16 per
share. Stockholders' equity was increased by the full amount of the debentures
converted less the unamortized debt issuance costs. In addition, 78,101 shares
of common stock were issued for $94,341 of interest payable on the converted
debentures.
BACKGROUND RISKS
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, 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. As is common in many high technology companies, the Company's
shipments tend to be disproportionately higher in the latter part of each
quarter. Past results are not necessarily indicative of future performance for
any particular period.
The computer industry in general, and the market for the Company's products in
particular, is characterized by rapidly changing technology, evolving industry
standards, frequent new product introductions and significant price competition,
resulting in short product life cycles and reductions in unit selling prices
over the life of a specific product. The Company faces competition from much
larger magnetic and optical storage device developers, including Fujitsu, Sony
and Philips. These competitors have larger R&D budgets and staffs, greater
engineering and manufacturing experience, and may be able to bring comparable or
superior products to market which could negatively impact the results of the
Company. The Company faces increasing competition in the "3R" or removable,
rewritable and random access storage market from companies such as Syquest and
Iomega.
There can be no assurance that there will be continued acceptance of the
Company's existing products or that the Company's future products will achieve
market acceptance at acceptable margins.
The market prices for shares of high technology companies, including the
securities of the Company, have been volatile. The Company's common stock
experienced substantial levels of short selling in the last 12 - 18 months which
has depressed the market price, and increased the volatility of the market
price, of the Company's common stock. Factors such as announcements of
technological innovations or new products by the Company or its competitors,
variations in the Company's quarterly operating results, continued high levels
of short selling of the Company's common stock and general economic and stock
market conditions may have material adverse effects on the market price of the
Company's common stock.
11
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of Stockholders on May 20, 1997. At the
meeting, the stockholders elected the following individuals as directors of
the Company: Daryl J. White (10,385,028 votes), Kenneth C. Campbell
(10,385,589 votes), Roger Hay (10,385,789 votes), John E. Koehler
(10,387,701 votes), Hans Imhof (10,386,815 votes) and William F. Blum
(10,320,096 votes). The stockholders also ratified the appointment BDO Seidman,
LLP as independent certified public accountants of the Company by a margin of
10,347,478 of the shares voted. Mr. White subsequently resigned as a director
and as Chairman of the Board, effective June 20, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number Description Page Number
-------------- ----------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K, dated June 20, 1997,
with the commission announcing Daryl White's resignation from
Chairman of the Board and certain second quarter events.
12
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.
Date: August 8, 1997 By: /s/ Kenneth C. Campbell
-----------------------------------
Kenneth C. Campbell
President
(Principal Executive Officer)
Date: August 8, 1997 By: /s/ Roger Hay
-----------------------------------
Roger Hay
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
13