================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT TO APPLICATION OR REPORT Filed pursuant to Section 12, 13 or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-10355 COMMUNICATIONS SYSTEMS, INC. ................................................................................ (Exact name of registrant as specified in its charter) AMENDMENT NO. 1 ................................................................................ The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K (Date of Report: November 18, 1996) as set forth in the pages attached hereto: Item 7: Financial Statements and Pro Forma Financial Information. 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. COMMUNICATIONS SYSTEMS, INC. by /s/ Paul N. Hanson Paul N. Hanson Vice President and Chief Financial Officer November 19, 1996 Total Pages (6) ================================================================================ Item 7: Financial Statements and Pro Forma Financial Information. The information originally supplied under this item is supplemented by the following: Pro forma Financial Information (unaudited) Page Herein Pro forma Consolidated Balance Sheet as of September 30, 1996 3 Notes to Pro forma Consolidated Balance Sheet 4 Pro forma Consolidated Income Statement for the year ended December 31, 1995 and Notes to 1995 Pro forma Consolidated Income Statement 5 Pro forma Consolidated Income Statement for the nine months ended September 30, 1996 and Notes to 1996 Consolidated Pro forma Condensed Income Statement 6 PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following pro forma consolidated financial statements of income and explanatory notes show the pro forma effect on operating results of Communications Systems, Inc. (the Company) as if the sale of the assets of Zercom Corporation to Nortech Systems, Inc. occurred as of the beginning of the periods presented. The sale was completed on November 4, 1996. The pro forma balance sheet and explanatory notes show the effect on the Company's financial position as if the sale occurred January 1, 1996. The pro forma financial information and explanatory notes are unaudited and include adjustments which are based on management assumptions. The accompanying pro forma financial statements should be read in conjunction with the historical financial statements and notes thereto included in the Company's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996 and Annual Report on Form 10-K for the year ended December 31, 1995. Management believes these statements provide a reasonable basis for presenting the significant effects of the sale and the pro forma adjustments are properly applied in the pro forma statements. The pro forma financial statements are not necessarily indicative of the results of operations had the sale occurred at the beginning of the periods presented, nor are they necessarily indicative of the results of future operations. 2 PRO FORMA CONDENSED BALANCE SHEET (unaudited) The following unaudited pro forma condensed balance sheet as of September 30, 1996 sets forth the effects of the sale of Zercom Corporation which was completed on November 4, 1996, as if the sale had been completed September 30, 1996.
COMMUNICATIONS SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA BALANCE SHEET as of September 30, 1996 Historical Pro Forma Balance Pro Forma Balance Assets: Sheet Adjustments Sheet ____________ ____________ ____________ Current assets: Cash $14,892,182 $1,637,570 [a] [c] $16,529,752 Marketable securities 859,890 859,890 Receivables, net 11,121,364 1,975,075 [d] 13,096,439 Inventories 13,211,397 13,211,397 Prepaid expenses 618,163 618,163 Deferred income taxes 869,000 869,000 ____________ ____________ ____________ Total current assets 41,571,996 3,612,645 45,184,641 Property, plant and equipment 23,744,102 23,744,102 less accumulated depreciation (15,044,851) (15,044,851) ____________ ____________ ____________ Net property, plant and equipment 8,699,251 0 8,699,251 Net assets of and advances to discontinued Zercom operations 8,364,379 (8,364,379) [e] - Other assets: Investments in mortgage backed and other securities 4,643,194 4,643,194 Excess of cost over net assets acquired 3,173,596 3,173,596 Deferred income taxes 354,044 354,044 Other assets 293,744 293,744 Notes receivable 5,000,000 [b] 5,000,000 ____________ ____________ ____________ Total other assets 8,464,578 5,000,000 13,464,578 ____________ ____________ ____________ Total Assets $67,100,204 $248,266 $67,348,470 ____________ ____________ ____________ ____________ ____________ ____________ Liabilities and Stockholders' Equity: Current liabilities: Notes payable Accounts payable $3,157,698 $3,157,698 Accrued expenses 2,260,664 2,260,664 Dividends payable 740,278 740,278 Income taxes payable 2,615,638 2,615,638 Reserve for loss on discontinued operations 248,266 [f] 248,266 ____________ ____________ ____________ Total current liabilities 8,774,278 248,266 9,022,544 Stockholders' Equity 58,325,926 58,325,926 ____________ ____________ ____________ Total Liabilities and Stockholders' Equity $67,100,204 $248,266 $67,348,470 ____________ ____________ ____________ ____________ ____________ ____________
3 NOTES TO PRO FORMA CONDENSED BALANCE SHEET (unaudited) Pro forma adjustments reflect the Company's sale of the inventory, property, plant, equipment and intangible assets of Zercom Corporation. to Nortech Systems, Inc. The Company sold these assets in exchange for $1,500,000 of cash, and a $5,000,000 note receivable at 8.25% annual interest. The Company retained Zercom's cash and accounts receivable and remains obligated for Zercom's liabilities. The following is a summary of the adjustments required in accordance with generally accepted accounting principles: a. Record cash receipt from Nortech Systems, Inc. from sale of Zercom $1,500,000 b. Record note receivable from Nortech from sale of Zercom 5,000,000 c. Record net cash retained from Zercom following payment of outstanding liabilities 137,570 d. Record Zercom receivables retained by the Company 1,975,075 e. Eliminate net assets of and advances to Zercom Operations as result of the sale 8,364,379 f. Record reserve established for future adjustments to sales agreement 248,266 4 PRO FORMA CONDENSED INCOME STATEMENT (unaudited) The following unaudited pro forma consolidated condensed income statement for the twelve months ended December 31, 1995 sets forth the effects of the sale of Zercom Corporation as if it had occurred effective January 1, 1995. The pro forma condensed income statement should be read in conjunction with the historical consolidated financial statements and related notes thereto of Communications Systems, Inc.
COMMUNICATIONS SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA STATEMENT OF INCOME Twelve Months Ended December 31, 1995 Discontinued Historical Historical Operations Continuing Pro Forma Pro Forma Statements Adjustments Operations Adjustments Results ____________ ____________ ____________ ____________ ____________ Sales $85,614,365 ($19,610,049) $66,004,316 $66,004,316 Costs and expenses: Cost of sales 64,393,055 (17,095,977) 47,297,078 47,297,078 Selling, general and administrative expenses 10,777,137 (2,258,493) 8,518,644 8,518,644 ____________ ____________ ____________ ____________ ____________ Total costs and expenses 75,170,192 (19,354,470) 55,815,722 0 55,815,722 ____________ ____________ ____________ ____________ ____________ Operating income 10,444,173 (255,579) 10,188,594 0 10,188,594 Other income and (expenses): Investment income 975,263 (58,226) 917,037 $412,500 [a] 1,329,537 Interest expense (35,283) 17,477 (17,806) (17,806) ____________ ____________ ____________ ____________ ____________ Other income, net 939,980 (40,749) 899,231 412,500 1,311,731 Income before income taxes 11,384,153 (296,328) 11,087,825 412,500 11,500,325 Income taxes 2,300,000 (136,000) 2,164,000 165,000 [b] 2,329,000 ____________ ____________ ____________ ____________ ____________ Net income 9,084,153 (160,328) 8,923,825 $247,500 9,171,325 ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ Net income per share $.99 $ (.02) $.97 $.99 ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ Average common and common equivalent shares outstanding 9,217,000 9,217,000 9,217,000 9,217,000 ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________
NOTES TO PRO FORMA CONDENSED INCOME STATEMENT (unaudited) Twelve Months Ended December 31, 1995 The following is a summary of the adjustments required in accordance with generally accepted accounting principles: a. Interest income from note receivable from Nortech Systems, Inc. $412,500 b. Income tax expense (40% rate) 165,000 5
COMMUNICATIONS SYSTEMS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA STATEMENT OF INCOME Nine Months Ended September 30, 1996 Historical Pro Forma Pro Forma Statements Adjustments Results ____________ ____________ ____________ Sales from continuing operations $50,618,464 $50,618,464 Costs and expenses: Cost of sales 35,504,434 35,504,434 Selling, general and administrative expenses 7,884,875 7,884,875 ____________ ____________ ____________ Total costs and expenses 43,389,309 0 43,389,309 ____________ ____________ ____________ Operating income from continuing operations 7,229,155 0 7,229,155 Other income and (expenses): Investment income 490,719 $309,375 [a] 800,094 Interest expense (16,499) (16,499) ____________ ____________ ____________ Other income, net 474,220 309,375 783,595 Income before income taxes 7,703,375 309,375 8,012,750 Income taxes 1,600,000 123,750 [b] 1,723,750 ____________ ____________ ____________ Income from continuing operations 6,103,375 185,625 6,289,000 Discontinued operations: Loss from discontinued Zercom operations, net of income taxes (355,124) (355,124) Loss on disposal of Zercom operations, including provision of $30,000 for operating losses during disposal period (net of tax benefit of $133,000) (393,000) (393,000) ____________ ____________ ____________ Net income $5,355,251 $185,625 $5,540,876 ____________ ____________ ____________ ____________ ____________ ____________ Net income per share: Continuing operations $.65 $.67 Discontinued operations (.08) (.08) ____________ ____________ $.57 $.59 ____________ ____________ ____________ ____________ Average common and common equivalent shares outstanding 9,393,000 9,393,000 ____________ ____________ ____________ ____________
NOTES TO PRO FORMA CONDENSED INCOME STATEMENT (unaudited) Nine Months Ended September 30, 1996 The following is a summary of the adjustments required in accordance with generally accepted accounting principles: a. Interest income from note receivable from Nortech Systems, Inc. $309,375 b. Income tax expense (40% rate) 123,750 6