-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FBw9x43Vvez4xKXqNOlKDQN38sqv9uA7fPqM58cm7yj+7NRCX9Jck/dFIScXuevt u8vjOTVS+c93kFZfwb+zsA== 0000026987-98-000026.txt : 19980716 0000026987-98-000026.hdr.sgml : 19980716 ACCESSION NUMBER: 0000026987-98-000026 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980715 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: DDL ELECTRONICS INC CENTRAL INDEX KEY: 0000026987 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 330213512 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08101 FILM NUMBER: 98666485 BUSINESS ADDRESS: STREET 1: 2151 ANCHOR COURT CITY: NEWBURY PARK STATE: CA ZIP: 91320 BUSINESS PHONE: 805-376-94 MAIL ADDRESS: STREET 1: 2151 ANCHOR COURT CITY: NEWBURY PARK STATE: CA ZIP: 91320 FORMER COMPANY: FORMER CONFORMED NAME: DATA DESIGN LABORATORIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DATA DESIGN LABORATORIES DATE OF NAME CHANGE: 19880817 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 30, 1998 _____________________ Exact Name of Registrant as Specified in Its Charter: DDL ELECTRONICS, INC. ______________________________ DELAWARE 1-8101 33-0213512 _____________________________ ____________ _________________ State or Other Jurisdiction of Commission I.R.S. Employer Incorporation or Organization File Number Identification No. Address of Principal Executive Offices: 2151 Anchor Court Newbury Park, CA 91320 _________________________ Registrant's Telephone Number, Including Area Code: (805) 376-9415 _________________________ Former Name or Former Address, if Changed Since Last Report: Not applicable _________________________ Item 2. Acquisition or Disposition of Assets. On June 30, 1998, DDL Electronics, Inc. ("DDL") consummated its previously reported acquisition of Jolt Technology, Inc. ("Jolt"), pursuant to an Agreement and Plan of Merger dated May 28, 1998 (the "Agreement") among DDL, Jolt, Jolt Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of DDL ("Sub"), and the shareholders of Jolt, who (immediately prior to the closing) included Messrs. Thomas M. Wheeler and Mitchell Morhaim and Ms. Charlene A. Gondek. Under the terms of the Agreement, Jolt merged with and into Sub and 100% of the issued and outstanding common stock of Jolt was exchanged for nine million shares of DDL's common stock. The transaction will be accounted for under the pooling-of-interests method. One year ago, on June 30, 1997, the Company borrowed $2,000,000 from Mr. Wheeler under a secured, full recourse, non-negotiable promissory note bearing 8% interest (the "Wheeler Note"). As conditions to obtaining the Wheeler Note, DDL agreed to acquire Jolt and give Mr. Wheeler two seats on its Board, which seats were filled by Mr. Wheeler and Ms. Gondek. Upon consummation of the acquisition of Jolt, the maturity date of the Wheeler Note was extended from February 1, 1999 to October 31, 1999. The amount of consideration paid by DDL to acquire Jolt was negotiated concurrently with the terms of the Wheeler Note on June 30, 1997. During the negotiations, Mr. Wheeler initially proposed that the consideration for all outstanding shares of Jolt common stock be 15,000,000 shares of DDL's common stock. Mr. Wheeler based his proposal on his assessment of the relative value of Jolt and DDL based upon, among other things, their respective net tangible assets. Mr. Wheeler noted that, upon the conversion to equity of his shareholder loan to Jolt, Jolt would have net tangible assets of approximately $1.5 million, which was comparable to that of DDL. He also considered Jolt's profitability and financial strength in contrast to DDL's recent history of volatile operating results and sustained losses. In response to Mr. Wheeler's proposal, DDL assessed Jolt's value on the basis of its ability to strengthen DDL's financial position. In particular, DDL considered the benefits of increasing DDL's net tangible assets by $1.5 million, as well as Jolt's positive cash flow and liquid resources ($600,000 cash balance). In addition, DDL weighed Jolt's relatively small sales volume against such factors as Jolt's relatively high proportion of value added services in relation to its overall revenues and relatively high gross profit percentage. Although an assessment of such factors could have supported a higher valuation, DDL insisted that the acquisition be accretive to DDL on an earnings per share basis. Therefore, DDL made a counteroffer to Mr. Wheeler of 9,000,000 shares of DDL's common stock. DDL and Mr. Wheeler then agreed, subject to the approval of DDL's stockholders, obtaining a fairness opinion, and other terms and conditions, that DDL would acquire all of the issued and outstanding shares of Jolt for 9,000,000 shares of DDL's common stock. Needham & Company, Inc. acted as DDL's financial advisor in connection with the acquisition and delivered its written opinion dated November 25, 1997 to DDL's Board of Directors to the effect that, as of such date and based upon and subject to certain assumptions and other matters described in its written opinion, the consideration paid by DDL is fair to DDL from a financial point of view. As a condition of the Agreement, the Jolt shareholders agreed that Jolt would have on the closing date total tangible shareholders' equity of at least $1,500,000 and cash of at least $600,000. These conditions were met at the time of closing. Jolt will continue its present business as an operating subsidiary of DDL. Jolt is a provider of customized integrated electronic manufacturing services, including turnkey electronic assembly and manufacturing management services, to original equipment manufacturers in the electronics industry. Jolt's electronic manufacturing services consist primarily of the manufacture of complex printed circuit board assemblies using surface mount technology and pin through-hole interconnection technologies. Mr. Morhaim has agreed to continue in his capacity as President of Jolt pursuant to a five-year employment and noncompete agreement. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements: The audited financial statements of Jolt for the years ended December 31, 1997 and 1996, including the report thereon of Brunt & Company, P.A., independent public accountants, are attached hereto as pages F-1 through F-9. The unaudited balance sheet of Jolt as of March 31, 1998 and the unaudited statements of operations and cash flows of Jolt for the three months ended March 31, 1998 and 1997, and notes thereto, are attached hereto as pages F-10 through F-13. (b) Pro Forma Financial Information: The unaudited pro forma consolidated balance sheet of DDL and Jolt as of March 31, 1998, and the unaudited pro forma consolidated statements of operations of DDL and Jolt for the nine months ended March 31, 1998 and 1997 and the years ended June 30, 1997, 1996 and 1995, and the notes thereto, are attached hereto as pages F-14 through F-22. (c) Exhibit Description _______ ____________ 2.1 Agreement and Plan of Merger dated May 28, 1998 among DDL, Jolt, Jolt Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of DDL, and Messrs. Thomas M. Wheeler and Mitchell Morhaim and Ms. Charlene A. Gondek (incorporated by reference to Appendix A of DDL's Definitive Schedule 14A dated June 12, 1998) 99.1 Fairness Opinion of Needham & Company, Inc. dated November 25, 1997 (incorporated by reference to Appendix B of DDL's Definitive Schedule 14A dated June 12, 1998) 99.2 Press release dated June 30, 1998 SIGNATURE 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. DDL ELECTRONICS, INC. July 15, 1998 /s/ Richard K. Vitelle _________________________________ ___________________________________ Date Richard K. Vitelle Vice President - Finance (Principal Financial Officer) [LETTERHEAD OF BRUNT & COMPANY, P.A.] INDEPENDENT AUDITORS' REPORT To the Board of Directors Jolt Technology, Inc. We have audited the accompanying balance sheets of Jolt Technology, Inc. (a Florida corporation) as of December 31, 1997 and 1996 and the related statements of income, changes in stockholders' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Jolt Technology, Inc. as of December 31, 1997 and 1996 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Brunt & Company, P.A. Hollywood, Florida BRUNT & COMPANY, P.A. Certified Public Accountants March 19, 1998 F-1 JOLT TECHNOLOGY, INC. BALANCE SHEETS DECEMBER 31, 1997 AND 1996
1997 1996 ----------- ---------- ASSETS CURRENT ASSETS Cash and cash equivalents........................... $ 679,272 $ 613,618 Trade accounts receivable, net of allowance for doubtful accounts of $5,000 in 1997 and 1996....... 446,046 269,181 Other receivables................................... 2,813 11,787 Inventories......................................... 115,700 55,249 Deferred merger costs............................... 70,452 -- Prepaid expenses.................................... 8,354 -- ----------- ---------- TOTAL CURRENT ASSETS.............................. 1,322,637 949,835 PROPERTY AND EQUIPMENT, net........................... 457,773 454,540 OTHER ASSETS Rental deposit...................................... 7,773 6,573 ----------- ---------- TOTAL OTHER ASSETS................................ 7,773 6,573 ----------- ---------- $ 1,788,183 $1,410,948 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accrued interest--stockholder....................... $ 368,200 $ 250,856 Accrued merger costs................................ 70,452 -- Other accrued expenses.............................. 41,669 28,323 Lease obligation payable............................ -- 31,992 Trade accounts payable.............................. 8,709 10,853 ----------- ---------- TOTAL CURRENT LIABILITIES......................... 489,030 322,024 STOCKHOLDER NOTE AND LOAN PAYABLE..................... 1,625,148 1,625,148 STOCKHOLDERS' EQUITY (DEFICIT) Common stock, $1.00 par value, 10,000 shares authorized, issued and outstanding................. 10,000 10,000 Additional paid-in-capital.......................... 24,000 24,000 Accumulated deficit................................. (359,995) (570,224) ----------- ---------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT).............. (325,995) (536,224) ----------- ---------- $ 1,788,183 $1,410,948 =========== ==========
Read accompanying notes and auditors' report. F-2 JOLT TECHNOLOGY, INC. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996 ---------- ---------- NET SALES.............................................. $2,721,510 $2,354,386 COST OF GOODS SOLD..................................... 1,419,373 1,412,482 ---------- ---------- GROSS PROFIT......................................... 1,302,137 941,904 ---------- ---------- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........... 384,280 326,815 ---------- ---------- INCOME FROM OPERATIONS............................... 917,857 615,089 INTEREST EXPENSE--STOCKHOLDER LOANS.................... (117,345) (114,900) OTHER INCOME (EXPENSES)................................ 9,717 (9,032) ---------- ---------- TOTAL NON-OPERATING EXPENSES......................... (107,628) (123,932) ---------- ---------- NET INCOME........................................... $ 810,229 $ 491,157 ========== ========== BASIC AND DILUTED EARNINGS PER SHARE................. $ 81.02 $ 53.54 ========== ========== SHARES USED IN COMPUTING BASIC AND DILUTED EARNINGS PER SHARE........................................... 10,000 9,173 ========== ==========
Read accompanying notes and auditors' report. F-3 JOLT TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income............................................. $ 810,229 $ 491,157 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization......................... 158,355 232,435 Allowance for bad debts............................... -- 5,000 Changes in assets and liabilities: Trade accounts receivable............................ (176,865) 119,792 Inventories.......................................... (60,451) 2,286 Other receivables.................................... 8,974 7,647 Prepaid expenses..................................... (8,354) -- Customer deposits.................................... -- (44,600) Trade accounts payable............................... (2,144) (18,996) Accrued expenses (net of deferred merger costs)...... 130,690 106,224 --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 860,434 900,945 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment.................... (161,588) (225,942) Rental deposit......................................... (1,200) 1,185 --------- --------- NET CASH USED BY INVESTING ACTIVITIES................. (162,788) (224,757) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Reduction in capitalized lease obligations............. (31,992) (171,467) Sale of treasury stock................................. -- 2,000 Shareholder dividends.................................. (600,000) (325,000) --------- --------- NET CASH USED IN FINANCING ACTIVITIES................. (631,992) (494,467) --------- --------- NET INCREASE IN CASH.................................. 65,654 181,721 CASH AT BEGINNING OF YEAR................................ 613,618 431,897 --------- --------- CASH AT END OF YEAR...................................... $ 679,272 $ 613,618 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid.......................................... $ 4,411 $ 18,627 ========= =========
Read accompanying notes and auditors' report. F-4 JOLT TECHNOLOGY, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
ADDITIONAL COMMON TREASURY PAID-IN ACCUMULATED TOTAL STOCK STOCK CAPITAL DEFICIT --------- ------- -------- ---------- ----------- BALANCES, December 31, 1995. $(704,381) $10,000 $(2,000) $24,000 $(736,381) Sale of Treasury Stock...... 2,000 2,000 -- Net income.................. 491,157 491,157 Dividends paid.............. (325,000) (325,000) --------- ------- ------- ------- --------- BALANCES, December 31, 1996. (536,224) 10,000 -- 24,000 (570,224) Net income.................. 810,229 810,229 Dividends paid.............. (600,000) (600,000) --------- ------- ------- ------- --------- BALANCES, December 31, 1997. $(325,995) $10,000 $ -- $24,000 $(359,995) ========= ======= ======= ======= =========
Read accompanying notes and auditors' report. F-5 JOLT TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 NOTE 1--BUSINESS ACTIVITY The Company was incorporated in the State of Florida on June 21, 1989. It is engaged in the manufacture and sale of custom made printed circuit boards for use primarily in the computer, communications and instrumentation industries. The Company is located in Florida with customers throughout the United States but primarily in the South Florida region. NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and cash equivalents: Cash equivalents include short-term, highly- liquid debt instruments purchased with original maturities of three months or less. Revenue Recognition: Revenue is recognized when products are shipped and title has passed to the customer. Inventories: Inventories are stated at the lower of cost (determined on the first-in, first-out basis) or market. Labor and overhead costs are capitalized at the time of production. Property and Equipment: Property and equipment are stated at cost. Depreciation is provided using straight-line methods at rates based on the following estimated useful lives: YEARS ----- Machinery and equipment..................... 5-10 Furniture and fixtures...................... 5-10 Vehicles.................................... 5 Expenditures for major renewals and betterments that extend the useful lives of the property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Building and equipment repairs amounted to $21,863 and $25,030 for the years ended December 31, 1997 and 1996 respectively. Reclassification of Financial Statement Presentation: Certain reclassifications have been made to the 1996 financial statements to conform with the 1997 financial statement presentation. F-6 Income Taxes: The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S corporation. In lieu of corporation income taxes, the stockholders of an S corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Earnings per Share: All earnings per share amounts have been presented to conform to the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share". The shares used in computing basic and diluted earnings per share represent the weighted average number of common shares outstanding for the period. NOTE 3--INVENTORIES Inventories consisted of the following as of December 31: 1997 1996 -------- ------- Raw materials........................................... $ 74,677 $44,464 Work in process......................................... 41,023 10,785 -------- ------- $115,700 $55,249 ======== ======= NOTE 4--PROPERTY AND EQUIPMENT Property and equipment consisted of the following on December 31: 1997 1996 ---------- ---------- Leasehold Improvements............................... $ 63,880 $ 63,880 Machinery and Equipment.............................. 1,353,460 1,203,636 Motor Vehicles....................................... 36,499 24,735 Office Furniture and Equipment....................... 30,855 30,855 ---------- ---------- Total.............................................. 1,484,694 1,323,106 Less: Accumulated depreciation..................... (1,026,921) (868,566) ---------- ---------- Net Property Plant and Equipment..................... $ 457,773 $ 454,540 ========== ========== F-7 NOTE 5--CAPITALIZED LEASE OBLIGATION The Company acquired equipment under the provisions of a long-term lease in August of 1994. For financial reporting purposes, minimum lease payments relating to the equipment have been capitalized. The lease payments were $4,550 per month and expired August 1997. The original cost of the leased equipment was $216,682. The present value of the lease payments as of December 31, 1996 was $31,992. There are no future minimum lease payments as of December 31, 1997. NOTE 6--STOCKHOLDER NOTE AND LOAN PAYABLE 1997 1996 ---------- ---------- Stockholder note payable, unsecured, bearing interest at the rate of 8.25%................................ $ 100,000 $ 100,000 Stockholder loan payable, unsecured, bearing interest at the effective simple interest rate of 7.1 % and 7.75% as of December 31, 1997 and 1996 respectively........................................ 1,525,148 1,525,148 ---------- ---------- Total Stockholder note and loan payable.............. $1,625,148 $1,625,148 ========== ========== The stockholders have signed a definitive merger agreement with another company and under the terms of the agreement, the above note and loan will be converted to equity as explained further in Note 10 of these financial statements. As of December 31, 1997 there were no repayment terms set forth for the above note and loan payable. The stockholder has agreed not to demand payment prior to February 1999. Accrued interest of $368,200 at December 31, 1997, plus interest accruing on the note and loan payable from January 1, 1998 until the date of the consummation of the business combination referred to in Note 10, will be converted to equity as discussed further in Note 10. NOTE 7--COMMITMENTS-OPERATING LEASES As of December 31, 1997, the Company operated its facilities on a one year noncancellable lease which will expire on October 31, 1998. The lease is for $80,373 per year ($6,698 per month) plus applicable sales tax. Rental Expense for the years ended December 31, 1997 and 1996 was $81,171 and $72,706 respectively. In September 1997 the Company entered into an operating lease agreement for an automobile. The lease term expires February 2000. Total payments are $32,640 ($1,090 per month) plus applicable sales tax. F-8 NOTE 8--CONCENTRATION OF RISKS CASH The Company maintains its cash accounts in one commercial bank. Accounts in the bank are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At various times throughout the year the Company had cash balances in this bank that exceeded the FDIC limit. The cash balances exceeded the FDIC limit on December 31, 1997 and 1996. ACCOUNTS RECEIVABLE Credit sales are made to the Company's customers in the ordinary course of business. Generally, these sales are unsecured. Four customers accounted for approximately 67% of the trade accounts receivable balances as of December 31, 1997 and three customers accounted for 68% of the trade receivable balances as of December 31, 1996. SALES The Company had three customers that accounted for approximately 30% of its revenue in 1997 and one customer that accounted for approximately 20% of its revenue in 1996. NOTE 9--EMPLOYEE BENEFIT PLAN On January 1, 1991 the Company established a Salary Allowance Reduction Simplified Employee Pension Plan (SARSEP). Under the plan, employees may elect to defer up to fifteen percent of their salary, subject to Internal Revenue Service limits. The Company, at their discretion can make matching contributions. In addition, the plan allows for the Company to make additional discretionary contributions. The Company made no contributions to the plan in 1997 or 1996. NOTE 10--BUSINESS COMBINATION On December 31, 1997 the company's stockholders entered into a definitive agreement to combine the company with DDL Electronics, Inc. ("DDL"), a publicly owned company, in exchange for DDL stock. Prior to the combination and pursuant to the agreement, the Stockholder note and loan will be converted to common stock. The stockholder creditor will receive 10,660 shares of company stock in return for contributing the loan, the note and the accrued interest. The conversion of the loans and accrued interest will occur prior to the combination with DDL. It is anticipated that the transaction will be accounted for as a pooling of interests in which 9,000,000 shares of DDL will be exchanged for 20,660 shares of Jolt Technology, Inc. subject to the approval of DDL stockholders. F-9 JOLT TECHNOLOGY, INC. BALANCE SHEET MARCH 31, 1998 (UNAUDITED) ASSETS CURRENT ASSETS Cash and cash equivalents........................................ $ 928,881 Trade accounts receivable, net of allowance for doubtful accounts of $5,000....................................................... 461,843 Inventories...................................................... 146,260 Deferred merger costs............................................ 70,452 Prepaid expenses................................................. 8,354 ---------- TOTAL CURRENT ASSETS........................................... 1,615,790 PROPERTY AND EQUIPMENT, net........................................ 414,614 OTHER ASSETS....................................................... Rental deposit................................................... 7,773 ---------- TOTAL OTHER ASSETS............................................. 7,773 ---------- $2,038,177 ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accrued interest--stockholder.................................... $ 397,333 Accrued merger costs............................................. 70,452 Other accrued expenses........................................... 50,038 Trade accounts payable........................................... 19,239 ---------- TOTAL CURRENT LIABILITIES...................................... 537,062 STOCKHOLDER NOTE AND LOAN PAYABLE.................................. 1,625,148 STOCKHOLDERS' EQUITY (DEFICIT) Common stock, $1.00 par value, 10,000 shares authorized, issued and outstanding................................................. 10,000 Additional paid-in-capital....................................... 24,000 Accumulated deficit.............................................. (158,033) ---------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT)........................... (124,033) ---------- $2,038,177 ========== Read accompanying notes and auditors' report. F-10 JOLT TECHNOLOGY, INC. STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) 1998 1997 -------- -------- NET SALES................................................... $745,859 $517,837 COST OF GOODS SOLD.......................................... 346,558 294,938 -------- -------- GROSS PROFIT.............................................. 399,301 222,899 -------- -------- SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 71,564 61,815 -------- -------- INCOME FROM OPERATIONS.................................... 327,737 161,084 INTEREST EXPENSE--STOCKHOLDER LOANS......................... (29,133) (31,537) OTHER INCOME (EXPENSES)..................................... 3,358 944 -------- -------- TOTAL NON-OPERATING EXPENSES.............................. (25,775) (30,593) -------- -------- NET INCOME................................................ $301,962 $130,491 ======== ======== BASIC AND DILUTED EARNINGS PER SHARE................................................ $ 30.20 $ 13.05 ======== ======== SHARES USED IN COMPUTING BASIC AND DILUTED EARNINGS PER SHARE........................... 10,000 10,000 ======== ======== Read accompanying notes and auditors' report. F-11 JOLT TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) 1998 1997 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income.............................................. $ 301,962 $130,491 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization......................... 44,370 30,667 Changes in assets and liabilities: Trade accounts receivable........................... (12,984) (36,781) Inventories......................................... (30,560) (24,672) Trade accounts payable.............................. 10,530 (10,853) Accrued expenses.................................... 37,502 32,921 --------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES............. 350,820 121,773 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment..................... (1,211) (29,251) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Reduction in capitalized lease obligations.............. -- (11,667) Shareholder dividends................................... (100,000) -- --------- -------- NET CASH USED IN FINANCING ACTIVITIES................. (100,000) (11,667) --------- -------- NET INCREASE IN CASH.................................. 249,609 80,855 CASH AT BEGINNING OF YEAR................................. 679,272 613,618 --------- -------- CASH AT END OF YEAR....................................... $ 928,881 $694,473 ========= ======== Read accompanying notes and auditors' report. F-12 JOLT TECHNOLOGY, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 NOTE 1--BUSINESS ACTIVITY The Company was incorporated in the State of Florida on June 21, 1989. It is engaged in the manufacture and sale of custom made printed circuit boards for use primarily in the computer, communications and instrumentation industries. The Company is located in Florida with customers throughout the United States but primarily in the South Florida region. NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and cash equivalents: Cash equivalents include short-term, highly- liquid debt instruments purchased with original maturities of three months or less. Revenue Recognition: Revenue is recognized when products are shipped and title has passed to the customer. Inventories: Inventories are stated at the lower of cost (determined on the first-in, first-out basis) or market. Labor and overhead costs are capitalized at the time of production. Property and Equipment: Property and equipment are stated at cost. Depreciation is provided using straight-line methods at rates based on the following estimated useful lives: YEARS ------ Machinery and equipment............................................. 5 - 10 Furniture and fixtures.............................................. 5 - 10 Vehicles............................................................ 5 Income Taxes: The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S corporation. In lieu of corporation income taxes, the stockholders of an S corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Earnings per Share: All earnings per share amounts have been presented to conform to the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share". The shares used in computing basic and diluted earnings per share represent the weighted average number of common shares outstanding for the period. F-13 DDL ELECTRONICS, INC. AND JOLT TECHNOLOGY, INC. UNAUDITED PRO FORMA FINANCIAL STATEMENTS The following unaudited pro forma consolidated financial data present the Unaudited Pro Forma Consolidated Balance Sheet of the Company at March 31, 1998, giving effect to the merger between the Company and Jolt as if it had been consummated on that date. Also presented are the Unaudited Pro Forma Consolidated Statements of Operations of the Company for the nine months ended March 31, 1998 and 1997 and the fiscal years ended June 30, 1997, 1996 and 1995, after giving effect to the Merger as if it had been consummated as of the beginning of the respective periods presented. The Company's fiscal year ends on June 30. Jolt's fiscal year ends on December 31. Pro forma consolidated statement of operations information for the years ended June 30, 1997, 1996 and 1995 combines the results of the Company for the years then ended with the results of Jolt for the 12 months ended June 30, 1997 and the years ended December 31, 1996 and 1995, respectively. The pro forma data are based on the historical consolidated statements of the Company and Jolt giving effect to the merger under the pooling of interests method of accounting and the assumptions and adjustments outlined in the accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements. The pro forma adjustments set forth in the following unaudited pro forma consolidated financial data are estimates and may differ from the actual adjustments when they become known. The unaudited pro forma consolidated statement of operations for the fiscal year ended June 30, 1995 includes certain non-recurring charges and gains recorded by the Company. During that fiscal year, the Company closed the operations of its A.J. Electronics, Inc. ("A.J.") subsidiary and recorded restructuring charges of $1,533,000 for the costs associated with the shut down and disposal of A.J.'s assets. Also in fiscal 1995, the Company sold essentially all of the assets of its Aeroscientific Oregon subsidiary, which resulted in a gain of $3,317,000. The pro forma data give effect to the non-recurring items described above and assume that each share of Jolt common stock, both outstanding and issuable upon the conversion of shareholder debt, is converted into the right to receive 435.6244 shares of the Company's Common Stock. The following unaudited pro forma consolidated financial data do not give effect to anticipated expenses related to the acquisition and do not reflect certain cost savings that management of the Company believes may be realized following the acquisition. These savings are expected to be realized primarily through integration of operations. The pro forma data are provided for comparative purposes only. They do not purport to be indicative of the results that actually would have occurred if the merger had been consummated on the dates indicated or that may be obtained in the future. The unaudited pro forma consolidated financial data should be read in conjunction with the Notes thereto, the audited Consolidated Financial Statements of the Company and the Notes thereto and the audited Financial Statements of Jolt and the Notes thereto, all included in this Proxy Statement. F-14 DDL ELECTRONICS, INC. AND JOLT TECHNOLOGY, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (IN THOUSANDS) MARCH 31, 1998 HISTORICAL PRO FORMA --------------- ----------------------------- DDL JOLT ADJUSTMENTS REFS. TOTAL ------- ------ ----------- -------- -------- ASSETS Current assets: Cash and cash equivalents.... $ 2,019 $ 929 $ 2,948 Accounts receivable, net..... 8,751 462 9,213 Costs and estimated earnings in excess of billings on uncompleted contracts, net of progress billings........ 4,413 4,413 Inventories.................. 2,515 146 2,661 Prepaid expenses and other current assets.............. 441 78 519 ------- ------ -------- Total current assets....... 18,139 1,615 19,754 Property and equipment, net.... 6,217 415 6,632 Goodwill....................... 3,488 3,488 Deposits and other assets...... 234 8 242 ------- ------ -------- -------- $28,078 $2,038 $ -- $ 30,116 ======= ====== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank line of credit payable.... $ 3,272 $ 3,272 Current portion of long-term debt.......................... 2,993 2,993 Accounts payable............... 6,837 $ 19 6,856 Accrued interest on notes payable to shareholder........ 397 $ (397) 1(b) -- Other current liabilities...... 3,408 121 106 1(c) 3,635 ------- ------ -------- -------- Total current liabilities...... 16,510 537 (291) 16,756 ------- ------ -------- -------- Notes payable to shareholder... 1,625 (1,625) 1(b) -- Other long-term debt........... 5,251 5,251 ------- ------ -------- -------- Total long-term debt........... 5,251 1,625 (1,625) 5,251 ------- ------ -------- -------- Stockholders' equity: Common stock................... 246 10 80 1(d) 336 Additional paid-in capital..... 6,884 24 24,926 1(a,b,d) 31,834 Retained earnings (deficit).... (204) (158) (23,090) 1(a,c,d) (23,452) Foreign currency translation... (609) (609) ------- ------ -------- -------- Total stockholders' equity (deficit)..................... 6,317 (124) 1,916 8,109 ------- ------ -------- -------- $28,078 $2,038 $ -- $ 30,116 ======= ====== ======== ======== F-15 DDL ELECTRONICS, INC. AND JOLT TECHNOLOGY, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS NINE MONTHS ENDED MARCH 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL PRO FORMA --------------- ----------------------------- DDL JOLT ADJUSTMENTS REFS. TOTAL ------- ------ ----------- ----- ------- Sales.......................... $37,576 $2,258 $39,834 ------- ------ ------- Costs and expenses: Cost of goods sold........... 31,615 1,110 32,725 Administrative and selling... 4,048 304 4,352 Goodwill amortization........ 951 951 ------- ------ ------- 36,614 1,414 38,028 ------- ------ ------- Operating income............... 962 844 1,806 ------- ------ ------- Non-operating income (expense): Interest expense on shareholder notes........... (87) $ 87 2(b) -- Interest expense--other...... (724) (2) (726) Other income (expense), net.. (12) 11 (1) ------- ------ ------ ------- (736) (78) 87 (727) ------- ------ ------ ------- Income before income tax....... 226 766 87 1,079 Provision for income taxes..... (430) -- 383 2(a,c) (47) ------- ------ ------ ------- Net income..................... $ (204) $ 766 $ 470 $ 1,032 ======= ====== ====== ======= Per share information: Basic and diluted earnings per share................... $ (0.01) $76.60 $ 0.03 ======= ====== ======= Shares used in computing earnings per share (thousands): Basic: 24,598 10 8,990 3(a) 33,598 ======= ====== ====== ======= Diluted: 25,017 10 8,990 34,017 ======= ====== ====== ======= F-16 DDL ELECTRONICS, INC. AND JOLT TECHNOLOGY, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS NINE MONTHS ENDED MARCH 31, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL PRO FORMA --------------- ------------------------- DDL JOLT ADJUSTMENTS REFS. TOTAL ------- ------ ----------- ----- ------- Sales............................. $34,660 $1,478 $36,138 ------- ------ ------- Costs and expenses: Cost of goods sold.............. 30,161 968 31,129 Administrative and selling...... 3,653 256 3,909 Goodwill amortization........... 951 951 ------- ------ ------- 34,765 1,224 35,989 ------- ------ ------- Operating income (loss)........... (105) 254 149 ------- ------ ------- Non-operating income (expense): Interest expense on shareholder notes.......................... (80) (80) Interest expense--other......... (844) (9) (853) Debt issue cost amortization.... (372) (372) Other income, net............... 199 5 204 ------- ------ ------- (1,017) (84) (1,101) ------- ------ ------- Income (loss) before income taxes. (1,122) 170 (952) Provision for income taxes........ -- -- -- ------- ------ ------- Net income (loss)................. $(1,122) $ 170 $ (952) ======= ====== ======= Per share information: Basic and diluted earnings (loss) per share............... $ (0.05) $17.00 $ (0.03) ======= ====== ======= Shares used in computing earnings (loss) per share (thousands): Basic and diluted............... 23,047 10 8,990 3(a) 32,047 ======= ====== ===== ======= F-17 DDL ELECTRONICS, INC. AND JOLT TECHNOLOGY, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1997 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL PRO FORMA --------------- ------------------------- DDL JOLT ADJUSTMENTS REFS. TOTAL ------- ------ ----------- ----- ------- Sales............................. $48,919 $2,170 $51,089 ------- ------ ------- Costs and expenses: Cost of goods sold.............. 42,475 1,329 43,804 Administrative and selling...... 5,058 346 5,404 Goodwill amortization........... 1,268 1,268 ------- ------ ------- 48,801 1,675 50,476 ------- ------ ------- Operating income.................. 118 495 613 ------- ------ ------- Non-operating income (expense): Interest expense on shareholder notes.......................... (107) $ 107 2(b) 0 Interest expense--other......... (1,105) (10) (1,115) Debt issue cost amortization.... (937) (937) Other income (expense), net..... 246 8 254 ------- ------ ------ ------- (1,796) (109) 107 (1,798) ------- ------ ------ ------- Income (loss) before income taxes. (1,678) 386 107 (1,185) Provision for income taxes........ -- -- (27) 2(c) (27) ------- ------ ------ ------- Net income (loss)................. $(1,678) $ 386 $ 80 $(1,212) ======= ====== ====== ======= Per share information: Basic and diluted earnings (loss) per share...................... $ (0.07) $38.60 $ (0.04) ======= ====== ======= Shares used in computing earnings (loss) per share (thousands): Basic and diluted............... 23,150 10 8,990 3(a) 32,150 ======= ====== ====== ======= F-18 DDL ELECTRONICS, INC. AND JOLT TECHNOLOGY, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1996 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL PRO FORMA --------------- ------------------------- DDL JOLT ADJUSTMENTS REFS. TOTAL ------- ------ ----------- ----- ------- Sales............................. $33,136 $2,354 $35,490 ------- ------ ------- Costs and expenses: Cost of goods sold.............. 29,494 1,412 30,906 Administrative and selling...... 4,175 327 4,502 Goodwill amortization............. 634 634 ------- ------ ------- 34,303 1,739 36,042 ------- ------ ------- Operating income (loss)........... (1,167) 615 (552) ------- ------ ------- Non-operating income (expense): Interest expense on shareholder notes.......................... (115) (115) Interest expense--other......... (911) (19) (930) Debt issue cost amortization.... (281) (281) Other income (expense), net..... 491 10 501 ------- ------ ------- (701) (124) (825) ------- ------ ------- Income (loss) before income taxes. (1,868) 491 (1,377) Income tax benefit (provision).... 1,110 -- 1,110 ------- ------ ------- Income (loss) before extraordinary item............................. $ (758) $ 491 $ (267) ======= ====== ======= Per share information: Basic and diluted income (loss) before extraordinary item...... $ (0.04) $53.54 $ (0.01) ======= ====== ======= Shares used in computing income (loss) per share (thousands): Basic and diluted............... 18,180 9 8,991 3(a) 27,180 ======= ====== ===== ======= F-19 DDL ELECTRONICS, INC. AND JOLT TECHNOLOGY, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1995 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) HISTORICAL PRO FORMA --------------- ------------------------- DDL JOLT ADJUSTMENTS REFS. TOTAL ------- ------ ----------- ----- ------- Sales............................. $29,576 $1,817 $31,393 ------- ------ ------- Costs and expenses: Cost of goods sold.............. 26,516 1,082 27,598 Administrative and selling...... 6,497 357 6,854 Restructuring charges........... 1,533 1,533 ------- ------ ------- 34,546 1,439 35,985 ------- ------ ------- Operating income (loss)........... (4,970) 378 (4,592) ------- ------ ------- Non-operating income (expense): Interest expense on shareholder notes.......................... (130) (130) Interest expense--other......... (883) (35) (918) Gain on sale of assets.......... 3,317 3,317 Other income (expense), net..... 170 8 178 ------- ------ ------- 2,604 (157) 2,447 ------- ------ ------- Income (loss) before income taxes. (2,366) 221 (2,145) Provision for income taxes........ -- -- -- ------- ------ ------- Income (loss) before extraordinary item............................. $(2,366) $ 221 $(2,145) ======= ====== ======= Per share information: Basic and diluted income (loss) before extraordinary item...... $ (0.15) $27.65 $ (0.09) ======= ====== ======= Shares used in computing income (loss) per share (thousands): Basic and diluted............... 15,150 8 8,992 3(a) 24,150 ======= ====== ===== ======= F-20 DDL ELECTRONICS, INC. AND JOLT TECHNOLOGY, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The unaudited pro forma consolidated balance sheet has been prepared to reflect the merger of all outstanding capital stock of Jolt in exchange for 9,000,000 shares of the Company's Common Stock, or 435.6244 shares of the Company's Common Stock for each outstanding share, and each outstanding right to acquire a share, of Jolt common stock. The transaction will be accounted for under the pooling-of-interests method. As required pursuant to the pooling method of accounting, the quasi-reorganization effected by the Company on June 27, 1997 will be reversed upon consummation of the merger. Additionally, the unaudited pro forma combined consolidated balance sheet reflects the conversion of Jolt's indebtedness to one of its shareholders to additional paid-in capital. 1. The unaudited pro forma consolidated balance sheet reflects the financial position of the Company and Jolt at March 31, 1998 and has been adjusted to reflect the events described above as follows: (a) To record the equity adjustments required to reverse the quasi- reorganization. Such equity adjustments include the reinstatement of the Company's accumulated deficit of $23,678,000 at June 27, 1997, which had been offset against additional paid-in capital, and the reversal of the income tax provision which was recorded pursuant to quasi-reorganization accounting; (b) To record the conversion to equity of notes payable to a Jolt shareholder in the aggregate amount of $1,625,000 and accrued interest thereon of $397,000; (c) To accrue estimated dividends distributable to Jolt shareholders; and (d) To record the equity adjustments required to reflect the acquisition of Jolt on a pooling-of-interests basis. 2. Jolt's fiscal year-end is December 31. In reflecting the pooling of interests combination on a pro forma basis, Jolt's statement of operations for the 12 months ended June 30, 1997 was combined with the Company's statement of operations for the same period, and Jolt's statements of operations for the years ended December 31, 1996 and 1995 were combined with the Company's statements of operations for the years ended June 30, 1996 and 1995, respectively. Jolt's unaudited results of operations for the six months ended December 31, 1996 included sales of $960,000 and net income of $40,000. Assuming the merger had been consummated on June 30, 1997, an adjustment would have been made to stockholders' equity to eliminate the effect of including Jolt's results of operations for the six months ended December 31, 1996 in both the years ended June 30, 1997 and June 30, 1996. The historical results F-21 of operations for the fiscal year ended June 30, 1997 and the nine months ended March 31, 1998 have been adjusted as follows in preparing the unaudited pro forma combined consolidated statement of operations: (a) To reverse the income tax provision, recorded pursuant to quasi- reorganization accounting; (b) To adjust interest expense to reflect the elimination of interest on Jolt's notes payable to its shareholder that will be converted to equity prior to the combination; and (c) To adjust the provision for income taxes to reflect the combined results of operations. 3. (a) The number of common shares used in computing earnings per share in the unaudited pro forma combined consolidated statements of operations for the years ended June 30, 1997, 1996 and 1995 and for the nine months ended March 31, 1998 and 1997 have been adjusted to record issuance of 9,000,000 shares of the Company's Common Stock in exchange for all outstanding shares of Jolt common stock. The amount shown in the adjustments column represents the net of the 9,000,000 shares and the outstanding Jolt shares shown in the Historical column. F-22 EX-99 2 EXHIBIT 99.2 ------------ FOR IMMEDIATE RELEASE From: DDL Electronics, Inc. Contact: Rick Vitelle 2151 Anchor Court Chief Financial Officer Newbury Park, California 91320 (805) 376-9415, ext. 142 DDL COMPLETES ACQUISITION OF JOLT TECHNOLOGY -------------------------------------------- Stockholders Approve Jolt Transaction at Annual Meeting ------------------------------------------------------- NEWBURY PARK, CA, June 30, 1998 -- DDL Electronics, Inc. (NYSE:DDL) announced that the acquisition of Jolt Technology, Inc. was completed today, following approval of the transaction by DDL's stockholders at yesterday's Annual Stockholders Meeting. DDL's stockholders also approved an increase in authorized common stock from 50 million to 75 million shares, and re-elected Gregory L. Horton and Charlene A. Gondek to the Board of Directors. Jolt Technology, an electronic manufacturing services (EMS) provider in Fort Lauderdale, Florida, was acquired for nine million shares of DDL's common stock. The pooling-of-interests accounting method will be used for the Jolt acquisition, which will result in Jolt's historical financial statements being retroactively combined with those of DDL. "Because the Jolt acquisition was completed prior to DDL's July 3, 1998 year-end, DDL's fiscal 1998 results will include Jolt's operations, which have been very profitable during the past year," noted Gregory L. Horton, President and Chief Executive Officer of DDL. "The inclusion of Jolt on a pooling basis will result in DDL showing net income of approximately $1 million, or $.03 per share, for the nine months ended March 31, 1998." Mr. Horton continued, "DDL has continued to experience strong bookings and bidding activity, with a current backlog in excess of $30 million. With the Jolt acquisition completed, DDL can now focus on making additional acquisitions of medium to small EMS providers that are accretive to earnings per share. DDL is well positioned to take advantage of strong market demand in the high complexity, high mix segment of the EMS industry." DDL Electronics, Inc., headquartered in Newbury Park, California, provides integrated design and electronic manufacturing services to OEMs in the instrumentation, communications, computer, medical and aerospace industries. The Company's EMS operations are located in California, Florida and Northern Ireland. The Company also fabricates multilayer printed circuit boards at its subsidiary Irlandus Circuits Ltd. located in Northern Ireland. Certain statements made above are forward-looking in nature and reflect DDL's current expectations and anticipated future plans. Such statements involve various risks and uncertainties that could cause actual results to differ materially from those forecast in the statements. Factors that might cause such differences would include, without limitation, the factors described as "Risk Factors" in the Company's Definitive Schedule 14A as filed with the Securities and Exchange Commission on June 12, 1998. -----END PRIVACY-ENHANCED MESSAGE-----