-----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, LSyTsTPkiX7jP+iMpFPRnhvF1iAryfNI3dvCqp47S0P8rEwe7XA5qNijTFJx5dmA 7RQw6adRlacSlAX3LVIvpQ== 0000730255-02-000015.txt : 20020620 0000730255-02-000015.hdr.sgml : 20020620 20020619165304 ACCESSION NUMBER: 0000730255-02-000015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020405 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 20020619 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA AMPLIFIER INC CENTRAL INDEX KEY: 0000730255 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 953647070 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12182 FILM NUMBER: 02682492 BUSINESS ADDRESS: STREET 1: 460 CALLE SAN PABLO CITY: CAMARILLO STATE: CA ZIP: 93012 BUSINESS PHONE: 8059879000 MAIL ADDRESS: STREET 1: 460 CALLE SAN PABLO CITY: CAMARILLO STATE: CA ZIP: 93012 8-K 1 form8ka-kti_proforma.txt FORM 8-K AMENDMENT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): April 5, 2002 ____________________ Exact Name of Registrant as Specified in Its Charter: CALIFORNIA AMPLIFIER, INC. ___________________________________ DELAWARE 0-12182 95-3647070 _____________________________ ____________ _____________ State or Other Jurisdiction of Commission I.R.S. Employer Incorporation or Organization File Number Identification No. Address of Principal Executive Offices: 460 Calle San Pablo Camarillo, CA 93012 _________________________ Registrant's Telephone Number, Including Area Code: (805) 987-9000 _________________________ Former Name or Former Address, if Changed Since Last Report: Not applicable _________________________ On April 5, 2002, California Amplifier, Inc. ("California Amplifier" or the "Company") acquired in an asset purchase transaction the satellite antenna design and manufacturing business of Kaul-Tronics, Inc., a Wisconsin corporation, and two affiliated companies under common ownership and control with Kaul-Tronics, Inc. (collectively, "Kaul-Tronics Group"). This report is an amendment to the Company's report on Form 8-K dated April 5, 2002 that was filed with the Securities and Exchange Commission on April 22, 2002 (the "Initial Form 8-K Report"). This amending report contains the required audited financial statements and unaudited pro forma financial information referenced previously in the Initial Form 8-K Report. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements: The audited combined financial statements of Kaul-Tronics Group for the years ended December 31, 2001 and 2000, including the report thereon of Virchow, Krause & Company, LLP, independent public accountants, are attached hereto. The audited combined financial statements of Kaul-Tronics Group for the years ended December 31, 2000 and 1999, including the report thereon of Virchow, Krause & Company, LLP, independent public accountants, are attached hereto. (b) Pro Forma Financial Information: The unaudited pro forma condensed consolidated balance sheet of California Amplifier and Kaul-Tronics as of February 28, 2002, and the unaudited pro forma condensed consolidated income statement of California Amplifier and Kaul-Tronics Group for the year ended February 28, 2002 are attached hereto. 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. CALIFORNIA AMPLIFIER, INC. June 19, 2002 /s/ Richard K. Vitelle _________________________________ _________________________________ Date Richard K. Vitelle Vice President -Finance (Principal Financial Officer) INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. Richland Center, Wisconsin COMBINED FINANCIAL STATEMENTS Including Independent Auditors' Report December 31, 2001 and 2000 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. TABLE OF CONTENTS Independent Auditors' Report 1 Financial Statements Combined Balance Sheets 2 Combined Statements of Income and Retained Earnings 3 Combined Statements of Cash Flows 4 Notes to the Combined Financial Statements 5 - 10 Supplemental Information Combining Balance Sheets 11 - 14 Combining Statements of Income and Retained Earnings 15 - 16 INDEPENDENT AUDITORS' REPORT To the Stockholders Interactive Technologies International, LLC Kaul-Tronics, Inc. NGP, Inc. Richland Center, Wisconsin We have audited the accompanying combined balance sheets of Interactive Technologies International, LLC, Kaul-Tronics, Inc. and NGP, Inc. as of December 31, 2001 and 2000 and the related combined statements of income and retained earnings and cash flows for the years then ended. These combined financial statements are the responsibility of the companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined 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 combined financial statements referred to above present fairly, in all material respects, the combined financial position of Interactive Technologies International, LLC, Kaul-Tronics, Inc. and NGP, Inc. as of December 31, 2001 and 2000 and the results of their combined operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the combined financial statements taken as a whole. The combining information in the supplemental information is presented for purposes of additional analysis of the combined financial statements rather than to present the financial position, results of operations, and cash flows of the individual companies. Such information has been subjected to the auditing procedures applied in the audit of the combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the combined financial statements taken as a whole. /s/ Virchow, Krause & Company, LLP Madison, Wisconsin February 18, 2002 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINED BALANCE SHEETS December 31, 2001 and 2000 ASSETS 2001 2000 CURRENT ASSETS Cash and cash equivalents $ 2,286,861 $ 127,593 Accounts receivable 6,549,319 2,844,896 Inventories 1,548,284 2,370,812 Investment securities trading - 65,863 Prepaid expenses 5,246 49,489 ---------- ---------- Total Current Assets 10,389,710 5,458,653 PROPERTY AND EQUIPMENT 3,647,725 4,499,103 NET INTANGIBLES 459,205 659,872 ----------- ----------- TOTAL ASSETS $14,496,640 $10,617,628 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Checks issued in excess of bank balance $ - $ 81,881 Line of credit 1,000,000 1,094,000 Accounts payable 4,228,498 1,558,406 Customer deposits 717,258 117,014 Accrued expenses 223,525 244,098 Current portion of long-term debt 154,427 430,027 Current portion of related party debt 303,545 285,945 Total Current Liabilities 6,627,253 3,811,371 LONG-TERM LIABILITIES Long-term debt 1,048,638 2,560,741 Related party debt 601,748 862,837 Total Long-Term Liabilities 1,650,386 3,423,578 Total Liabilities 8,277,639 7,234,949 STOCKHOLDERS' EQUITY Common stock 202,000 202,000 Retained earnings 6,127,101 3,290,779 6,329,101 3,492,779 Less: Treasury stock, 7,000 shares at cost (110,100) (110,100) Total Stockholders' Equity 6,219,001 3,382,679 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,496,640 $ 10,617,628 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS Years Ended December 31, 2001 and 2000 2001 2000 NET SALES $ 37,391,409 $ 32,596,715 COST OF GOODS SOLD 29,927,551 26,558,156 Gross Profit 7,463,858 6,038,559 OPERATING EXPENSES 1,989,876 2,554,983 IMPAIRMENT CHARGES 422,419 - Operating Income 5,051,563 3,483,576 OTHER INCOME (EXPENSE) Interest expense (283,915) (400,243) Interest income 16,154 73,637 Other income 27,888 79,174 Net Other Expense (239,873) (247,432) NET INCOME 4,811,690 3,236,144 RETAINED EARNINGS - Beginning of Year 3,290,779 6,973,046 Distributions (1,975,368) (6,918,411) RETAINED EARNINGS - END OF YEAR $ 6,127,101 $ 3,290,779 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINED STATEMENTS OF CASH FLOWS Years Ended December 31, 2001 and 2000 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 34,337,607 $ 35,096,625 Cash paid to suppliers and employees (27,678,542) (28,421,878) Proceeds from sale of trading securities 68,005 50,000 Interest and dividends received 16,154 73,634 Interest paid (283,915) (400,243) Net Cash Flows From Operating Activities 6,459,309 6,398,138 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (122,600) (1,089,987) Proceeds from sale of assets 5,000 111,500 Net Cash Flows From Investing Activities (117,600) (978,487) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds (payments) on line of credit (94,000) 1,094,000 Cash used to retire debt (1,787,703) (396,175) Cash used to retire related party debt (243,489) (266,663) Distribution to stockholders (1,975,368) (6,918,411) Cash used to purchase treasury stock - (110,100) Change in checks issued in excess of bank balance (81,881) 81,881 Net Cash Flows From Financing Activities (4,182,441) (6,515,468) Net Change in Cash and Cash Equivalents 2,159,268 (1,095,817) CASH AND CASH EQUIVALENTS - Beginning of Year 127,593 1,223,410 CASH AND CASH EQUIVALENTS - END OF YEAR $ 2,286,861 $ 127,593 RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES Net income $ 4,811,690 $ 3,236,144 Adjustments to reconcile net income to net cash from operating activities Noncash items included in Income Depreciation 521,924 549,919 Amortization 200,667 201,334 Nonoperational items included in Income Loss (gain) on sale of property and equipment 24,635 (24,147) Loss (gain) on sales of trading securities (2,142) 9,357 Impairment charges 422,419 - Change in trading securities 68,005 50,000 Changes in noncash components of working capital Accounts receivable (3,704,423) 2,440,936 Inventories 822,528 528,201 Prepaid expenses 44,243 11,241 Accounts payable 2,670,092 (485,912) Accrued expenses (20,573) (113,523) Customer deposits 600,244 (5,412) NET CASH FLOWS FROM OPERATING ACTIVITIES $ 6,459,309 $ 6,398,138 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2001 and 2000 NOTE 1 - Summary of Significant Accounting Policies Nature of Operations Interactive Technologies International, LLC (ITI) is located in Spring Green, Wisconsin, and is primarily engaged in the development, production, marketing and selling of stamped offset antennas. ITI is owned entirely by KTI and NGP. Kaul-Tronics, Inc. (KTI) is located in Richland Center, Wisconsin, and primarily provides subcontract manufacturing and management services for ITI. KTI also manufactures C-band antennas. KTI is owned entirely by the John Kaul family. NGP, Inc. (NGP), is located in Spring Green, Wisconsin, and primarily provides subcontract manufacturing and management services for ITI. NGP also manufactures C-band antennas and outdoor barbecue accessories. The John Kaul family has a majority ownership interest in NGP. The companies currently sell their products to customers worldwide. Basis of Combination The accompanying combined financial statements include the accounts of ITI, KTI and NGP. Significant intercompany accounts and transactions have been eliminated. The combined companies will be referred to as "the companies" for the purposes of these statements. Cash and Cash Equivalents The companies define cash and cash equivalents as highly liquid, short-term investments with a maturity at the date of acquisition of three months or less. Investment Securities Trading Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period included in earnings. Accounts Receivable Accounts receivable are shown net of an allowance for doubtful accounts of $34,000 at December 31, 2001 and 2000. Inventories Inventories consist of raw materials, work in progress and finished goods, all of which are priced at the lower of cost or market based on the first- in, first-out (FIFO) method. Property and Equipment Property and equipment are stated at cost. Major expenditures for property and equipment are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, resulting gains or losses are included in income. Property and equipment are depreciated using the straight-line method over their estimated useful lives as follows: Years Transportation equipment 5 Plant and office equipment 7-10 Buildings and improvements 39 Impairment Charges When events or changes in circumstances indicate that assets may be impaired, an evaluation is performed comparing the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount to determine if a write-down to market value or discounted cash flow value is required. During the year ended December 31, 2001, the company suffered impairment on fixed assets that were no longer in service and were not resellable. The fixed assets were written down to their approximate net fair value. The resulting charge of $422,419 has been recorded as Impairment Charges in the accompanying statement of income. Intangibles NGP has a non-compete agreement in the amount of $1,000,000. The non-compete agreement is being amortized over 5 years using the straight-line method. Income Taxes The companies are S corporations and a limited liability company. The stockholders / members are taxed on their proportionate share of their respective company's taxable income. Therefore, no provision or liability for income taxes has been included in these financial statements. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising Advertising costs are charged to operations when incurred and are included in operating expenses. The amount charged to operations was $19,828 and $11,276 for the years ended December 31, 2001 and 2000, respectively. Research and Development Research and development costs are charged to operations when incurred and are included in operating expenses. The amount charged to operations was $203,033 and $146,232 for the years ended December 31, 2001 and 2000, respectively. Shipping and Handling Costs Shipping and handling costs charged to customers have been included in net sales. Shipping and handling costs incurred by the companies have been included in cost of goods sold. Revenue Recognition The companies recognize revenue at the point of passage of title, which is based on shipping terms. Warranty The companies sell their products with a one year limited warranty against defects in material and workmanship. Warranty costs are expensed at the time incurred. NOTE 2 - Inventories Inventories consist of the following at December 31: 2001 2000 Raw materials $ 461,556 $ 626,162 Work in process 203,666 488,443 Finished goods 883,062 1,256,207 Total Inventories $ 1,548,284 $ 2,370,812 NOTE 3 - Property and Equipment The major categories of property and equipment at December 31 are summarized as follows: 2001 2000 Land and improvements $ 198,521 $ 198,521 Buildings and improvements 2,831,303 2,836,213 Plant and office equipment 3,848,650 4,371,305 Transportation equipment 158,624 277,778 Property not in service - 61,342 Total Property and Equipment 7,037,098 7,745,159 Less: Accumulated depreciation (3,389,373) (3,246,056) Net Property and Equipment $ 3,647,725 $ 4,499,103 NOTE 4 - Line of Credit NGP has a line of credit in the amount of $400,000. The line is renewable annually and bears interest at LIBOR plus 2.25% (4.13% at December 31, 2001). The line is secured by a general business security agreement and limited corporate and stockholder guarantees. The outstanding balance on the line of credit at December 31, 2001 and 2000 was $- and $294,000, respectively. KTI has a line of credit in the amount of $600,000. The line is renewable annually and bears interest at LIBOR plus 2.25% (4.13% at December 31, 2001). The line is secured by a general business security agreement, real estate, an assignment of life insurance and a limited guarantee by the company's majority stockholder. There was no outstanding balance on the line of credit at December 31, 2001 and 2000. ITI has a line of credit in the amount of $2,500,000. The line is renewable annually and bears interest at LIBOR plus 2.25% (4.13% at December 31, 2001). The line is secured by a general business security agreement, and guarantees of its two members. The outstanding balance on the line of credit at December 31, 2001 and 2000 was $1,000,000 and $800,000, respectively. NOTE 5 - Long-Term Debt Long-term debt consists of the following at December 31: 2001 2000 NGP note payable in monthly installments of $8,207, including interest at 8.50%. Note is due April 2004 and is secured by limited personal guarantees of NGP stockholders. This note is subordinate to NGP's bank debt. The note was paid off during 2001. - 284,987 NGP notes payable in monthly installments totaling $18,052, including interest at 7.125%. Notes are due April 2004 and are secured by a general business security agreement, real estate and limited personal guarantees of NGP stockholders. $ 1,203,065 $2,705,781 Totals 1,203,065 2,990,768 Less: Current portion (154,427) (430,027) Long-Term Portion $ 1,048,638 $2,560,741 Principal requirements for years ending after December 31, 2001 are as follows: 2002 $ 154,427 2003 97,583 2004 951,055 Total $ 1,203,065 NOTE 6 - Related Party Debt Related party debt consists of the following at December 31: 2001 2000 KTI unsecured notes payable to its stockholders, payable in monthly installments totaling $29,775, including interest at 7.0%. Notes are due in April 2004. $ 905,293 $1,148,782 Totals 905,293 $1,148,782 Less: Current portion (303,545) (285,945) Long-Term Portion $ 601,748 $ 862,837 Principal requirements on debt for years ending after December 31, 2001 are as follows: 2002 $ 303,545 2003 325,489 2004 276,259 Total $ 905,293 NOTE 7 - Retirement Plan The companies have a 401(k) retirement plan that covers all eligible employees. Employees are eligible after one year of service. The companies may choose to match contributions up to 6% of employee salaries. Contributions were $50,457 and $63,218 for the years ended December 31, 2001 and 2000, respectively. NOTE 8 - Commitments and Contingencies Pending Lawsuits The companies have pending lawsuits against them as of December 31, 2001. Management feels that the risk of loss associated with this lawsuit is low. No liability has been recorded. NOTE 9 - Concentrations of Risk Cash Balance At various times throughout the years, the companies had deposits in excess of FDIC coverage. Major Customers The companies sold approximately 74% and 57% of all its products to four and two customers during the years ended December 31, 2001 and 2000, respectively. At December 31, 2001 and 2000 the amount due from those customers included in accounts receivable was $5,258,576 and $1,106,961, respectively. Major Suppliers The companies purchased approximately 53% and 17% of their material from three and one suppliers during the years ended December 31, 2001 and 2000, respectively. At December 31, 2001 and 2000 the amount due to those suppliers included in accounts payable was $1,934,504 and $468,000, respectively. SUPPLEMENTAL INFORMATION INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING BALANCE SHEET December 31, 2001 ASSETS Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- CURRENT ASSETS Cash and cash equivalents $1,798,825 $ 304,917 $183,119 $ - $2,286,861 Accounts receivable 6,414,054 103,402 31,863 6,549,319 Inventories 1,330,324 53,544 164,416 1,548,284 Related party receivable 1,000,000 572,451 56,133 (1,628,584) - Prepaid expenses - 5,246 - - 5,246 Total Current Assets 10,543,203 1,039,560 435,531 (1,628,584) 10,389,710 PROPERTY AND EQUIPMENT 1,133,323 927,719 1,586,683 - 3,647,725 INVESTMENT IN ITI - 2,742,857 2,742,857 (5,485,714) - NET INTANGIBLES 1,206 - 457,999 - 459,205 TOTAL ASSETS $11,677,732 $4,710,136 $5,223,070 $(7,114,298) $14,496,640 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING BALANCE SHEET (cont.) December 31, 2001 LIABILITIES AND STOCKHOLDERS' EQUITY Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- CURRENT LIABILITIES Line of credit $ 1,000,000 $ - $ - $ - $1,000,000 Accounts payable 3,885,109 264,071 79,318 - 4,228,498 Customer deposits 708,380 4,103 4,775 - 717,258 Related party payable 580,238 35,462 1,012,884 (1,628,584) - Accrued expenses 18,291 128,919 76,315 - 223,525 Current portion long-term debt - - 154,427 - 154,427 Current portion related party debt - 303,545 - - 303,545 Total Current Liabilities 6,192,018 736,100 1,327,719 (1,628,584) 6,627,253 LONG-TERM LIABILITIES Long-term debt - - 1,048,638 - 1,048,638 Related party debt - 601,748 - - 601,748 Total Long-Term Liabilities - 601,748 1,048,638 - 1,650,386 Total Liabilities 6,192,018 1,337,848 2,376,357 (1,628,584) 8,277,639 STOCKHOLDERS' EQUITY Common stock - 2,000 200,000 - 202,000 Members' equity 5,485,714 - - (5,485,714) Retained earnings - 3,370,288 2,756,813 - 6,127,101 Subtotal 5,485,714 3,372,288 2,956,813 (5,485,714) 6,329,101 Less: Treasury stock - - (110,100) - (110,100) Total Stockholders' Equity 5,485,714 3,372,288 2,846,713 (5,485,714) 6,219,001 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,677,732 $4,710,136 $5,223,070 $(7,114,298) $14,496,640 See accompanying notes to combined financial statements INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING BALANCE SHEET December 31, 2000 ASSETS Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- CURRENT ASSETS Cash and cash equivalents $ 101,808 $ 25,785 $ - $ - $ 127,593 Accounts receivable 2,532,323 190,349 122,224 - 2,844,896 Inventories 1,978,838 87,096 304,878 - 2,370,812 Related party receivable - 728,716 42,931 (771,647) - Investment securities trading - 65,863 - - 65,863 Prepaid expenses - 49,489 - - 49,489 Total Current Assets 4,612,969 1,147,298 470,033 (771,647) 5,458,653 PROPERTY AND EQUIPMENT 1,729,833 1,111,133 1,658,137 - 4,499,103 INVESTMENT IN ITI - 1,686,269 1,686,269 (3,372,538) - NET INTANGIBLES 1,206 - 658,666 - 659,872 TOTAL ASSETS $6,344,008 $3,944,700 $4,473,105 $(4,144,185) $10,617,628 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING BALANCE SHEET (cont.) December 31, 2000 LIABILITIES AND STOCKHOLDERS' EQUITY Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- CURRENT LIABILITIES Checks issued in excess of bank balance $ - $ 81,881 $ - $ 81,881 Line of credit 800,000 294,000 - 1,094,000 Accounts payable 1,287,974 167,580 102,852 - 1,558,406 Customer deposits 91,469 13,939 11,606 - 117,014 Related party payable 771,647 - - (771,647) - Accrued expenses 20,380 113,723 109,995 - 244,098 Current portion of long-term debt - - 430,027 - 430,027 Current portion of related party debt - 285,945 - - 285,945 Total Current Liabilities 2,971,470 581,187 1,030,361 (771,647) 3,811,371 LONG-TERM LIABILITIES Long-term debt - - 2,560,741 - 2,560,741 Related party debt - 862,837 - - 862,837 Total Long-Term Liabilities - 862,837 2,560,741 - 3,423,578 Total Liabilities 2,971,470 1,444,024 3,591,102 (771,647) 7,234,949 STOCKHOLDERS' EQUITY Common stock - 2,000 200,000 - 202,000 Members' equity 3,372,538 (3,372,538) Retained earnings - 2,498,676 792,103 - 3,290,779 Subtotal 3,372,538 2,500,676 992,103 (3,372,538) 3,492,779 Less: Treasury stock - - (110,100) - (110,100) Total Stockholders' Equity 3,372,538 2,500,676 882,003 (3,372,538) 3,382,679 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,344,008 $3,944,700 $4,473,105 $(4,144,185) $10,617,628 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS Year Ended December 31, 2001 Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- NET SALES $35,201,413 $4,162,882 $2,191,324 $(4,164,210) $37,391,409 COST OF GOODS SOLD 29,390,824 3,306,392 1,394,545 (4,164,210) 29,927,551 Gross Profit 5,810,589 856,490 796,779 - 7,463,858 OPERATING EXPENSES 345,046 1,148,407 496,423 - 1,989,876 IMPAIRMENT CHARGES 422,419 - - - 422,419 Operating Income (Loss) 5,043,124 (291,917) 300,356 - 5,051,563 OTHER INCOME (EXPENSE) Interest expense (24,922) (62,718) (196,275) - (283,915) Interest income 14,974 1,004 176 - 16,154 Other income - 31,155 (3,267) - 27,888 Investment income in subsidiary - 2,516,588 2,516,588 (5,033,176) - Net Other Income (Expense) (9,948) 2,486,029 2,317,222 (5,033,176) (239,873) NET INCOME 5,033,176 2,194,112 2,617,578 (5,033,176) 4,811,690 RETAINED EARNINGS - Beginning of Year 3,372,538 2,498,676 792,103 (3,372,538) 3,290,779 Distributions (2,920,000) (1,322,500) (652,868) 2,920,000 (1,975,368) RETAINED EARNINGS - END OF YEAR $5,485,714 $3,370,288 $2,756,813 $(5,485,714) $6,127,101 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS Year Ended December 31, 2000 Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- NET SALES $28,958,967 $5,130,601 $3,220,402 $(4,713,255) $32,596,715 COST OF GOODS SOLD 23,481,828 4,809,807 2,979,776 (4,713,255) 26,558,156 Gross Profit 5,477,139 320,794 240,626 - 6,038,559 OPERATING EXPENSES 601,118 1,452,907 500,958 - 2,554,983 Operating Income (Loss) 4,876,021 (1,132,113) (260,332) - 3,483,576 OTHER INCOME (EXPENSE) Interest expense (34,497) (116,094) (249,652) - (400,243) Interest income 25,588 41,865 6,184 - 73,637 Other income - 60,398 18,776 - 79,174 Investment income in subsidiary - 2,433,556 2,433,556 (4,867,112) - Net Other Income (Expense) (8,909) 2,419,725 2,208,864 (4,867,112) (247,432) NET INCOME 4,867,112 1,287,612 1,948,532 (4,867,112) 3,236,144 RETAINED EARNINGS - Beginning of Year 6,423,220 4,396,019 2,577,027 (6,423,220) 6,973,046 Distributions (7,917,794) 3,184,955) (3,733,456) 7,917,794 (6,918,411) RETAINED EARNINGS - END OF YEAR $3,372,538 $2,498,676 $792,103 $(3,372,538) $3,290,779 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. Richland Center, Wisconsin COMBINED FINANCIAL STATEMENTS Including Independent Auditors' Report December 31, 2000 and 1999 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. TABLE OF CONTENTS Independent Auditors' Report 1 Financial Statements Combined Balance Sheets 2 Combined Statements of Income and Retained Earnings 3 Combined Statements of Cash Flows 4 - 5 Notes to the Combined Financial Statements 6 - 11 Supplemental Information Combining Balance Sheets 12 - 15 Combining Statements of Income and Retained Earnings 16 - 17 INDEPENDENT AUDITORS' REPORT To the Stockholders Interactive Technologies International, LLC Kaul-Tronics, Inc. NGP, Inc. Richland Center, Wisconsin We have audited the accompanying combined balance sheets of Interactive Technologies International, LLC, Kaul-Tronics, Inc. and NGP, Inc. as of December 31, 2000 and 1999 and the related combined statements of income and retained earnings and cash flows for the years then ended. These combined financial statements are the responsibility of the companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined 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 combined financial statements referred to above present fairly, in all material respects, the combined financial position of Interactive Technologies International, LLC, Kaul-Tronics, Inc. and NGP, Inc. as of December 31, 2000 and 1999 and the results of their combined operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the combined financial statements taken as a whole. The combining information in the supplemental information is presented for purposes of additional analysis of the combined financial statements rather than to present the financial position, results of operations, and cash flows of the individual companies. Such information has been subjected to the auditing procedures applied in the audit of the combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the combined financial statements taken as a whole. /s/ Virchow, Krause & Company, LLP Madison, Wisconsin March 11, 2002 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINED BALANCE SHEETS December 31, 2000 and 1999 ASSETS 2000 1999 CURRENT ASSETS Cash and cash equivalents $ 127,593 $1,223,410 Accounts receivable 2,844,896 5,285,832 Inventories 2,370,812 2,899,014 Investment securities trading 65,863 125,220 Prepaid expenses 49,489 60,730 Total Current Assets 5,458,653 9,594,206 PROPERTY AND EQUIPMENT 4,499,103 4,046,391 NET INTANGIBLES 659,872 861,206 TOTAL ASSETS $10,617,628 $14,501,803 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Checks issued in excess of bank balance $ 81,881 $ - Line of credit 1,094,000 - Accounts payable 1,558,406 2,044,318 Customer deposits 117,014 122,426 Accrued expenses 244,098 357,625 Current portion of long-term debt 430,027 400,652 Current portion of related party debt 285,945 243,722 Total Current Liabilities 3,811,371 3,168,743 LONG-TERM LIABILITIES Long-term debt 2,560,741 2,986,291 Related party debt 862,837 1,171,723 Total Long-Term Liabilities 3,423,578 4,158,014 Total Liabilities 7,234,949 7,326,757 STOCKHOLDERS' EQUITY Common stock 202,000 202,000 Retained earnings 3,290,779 6,973,046 3,492,779 7,175,046 Less: Treasury stock, 7,000 shares at cost (110,100) - Total Stockholders' Equity 3,382,679 7,175,046 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,617,628 $14,501,803 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS Years Ended December 31, 2000 and 1999 2000 1999 NET SALES $ 32,596,715 $ 41,058,499 COST OF GOODS SOLD 26,558,156 32,219,273 Gross Profit 6,038,559 8,839,226 OPERATING EXPENSES 2,554,983 2,029,109 Operating Income 3,483,576 6,810,117 OTHER INCOME (EXPENSE) Interest expense (400,243) (369,746) Interest income 73,637 32,089 Other income 79,174 77,864 Share of income to non-combined entity - (393,134) Net Other Expense (247,432) (652,927) NET INCOME 3,236,144 6,157,190 RETAINED EARNINGS - Beginning of Year 6,973,046 1,979,896 Distributions (6,918,411) (1,164,040) RETAINED EARNINGS - END OF YEAR $ 3,290,779 $ 6,973,046 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINED STATEMENTS OF CASH FLOWS Years Ended December 31, 2000 and 1999 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 35,096,625 $39,893,484 Cash paid to suppliers and employees (28,421,878) (34,749,805) Proceeds from sale of trading securities 50,000 - Interest and dividends received 73,634 32,089 Interest paid (400,243) (369,746) Net Cash Flows From Operating Activities 6,398,138 4,806,022 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (1,089,987) (675,384) Proceeds from sale of assets 111,500 11,500 Cash used to acquire assets of Greenbriar Products, Inc. - (191,166) Net Cash Flows From Investing Activities (978,487) (855,050) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds (payments) on line of credit 1,094,000 (806,846) Cash used to retire debt (396,175) (825,057) Cash used to retire related party debt (266,663) (817,253) Distribution to stockholders (6,918,411) (1,164,040) Proceeds from issuance of common stock - 200,000 Cash used to purchase treasury stock (110,100) - Distributions to non-combined entity - (249,583) Change in checks issued in excess of bank balance 81,881 - Net Cash Flows From Financing Activities (6,515,468) (3,662,779) Net Change in Cash and Cash Equivalents (1,095,817) 288,193 CASH AND CASH EQUIVALENTS - Beginning of Year 1,223,410 935,217 CASH AND CASH EQUIVALENTS - END OF YEAR $ 127,593 $1,223,410 2000 1999 RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES Net income $3,236,144 $6,157,190 Adjustments to reconcile net income to net cash from operating activities Noncash items included in Income Depreciation 549,919 490,625 Amortization 201,334 150,000 Nonoperational items included in Income Loss (gain) on sale of property and equipment (24,147) (8,226) Unrealized loss (gain) on trading securities 9,357 (43,528) Share of income to non-combined entity - 393,134 Change in trading securities 50,000 - Changes in noncash components of working capital Accounts receivable 2,440,936 (1,309,559) Inventories 528,201 (53,969) Prepaid expenses 11,241 (27,042) Accounts payable (485,912) (734,090) Accrued expenses (113,523) (326,947) Customer deposits (5,412) 118,434 NET CASH FLOWS FROM OPERATING ACTIVITIES $ 6,398,138 $ 4,806,022 NONCASH INVESTING AND FINANCING ACTIVITIES On April 17, 1999, NGP was incorporated and acquired the assets of Greenbriar Products, Inc. The acquisition consisted of the following non- cash transaction: Working capital other than cash $ 370,746 Equipment 369,606 Building and land 1,500,913 Investment 1,561,901 Noncompete 1,000,000 Total Assets 4,803,166 Less: Portion financed by bank and seller (4,612,000) CASH PAID FOR ASSETS 191,166 See accompanying notes to combined financial statements. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 2000 and 1999 NOTE 1 - Summary of Significant Accounting Policies Nature of Operations Interactive Technologies International, LLC (ITI) is located in Spring Green, Wisconsin, and is primarily engaged in the development, production, marketing and selling of stamped offset antennas. ITI is owned entirely by KTI and NGP. Kaul-Tronics, Inc. (KTI) is located in Richland Center, Wisconsin, and primarily provides subcontract manufacturing and management services for ITI. KTI also manufactures C-band antennas. KTI is owned entirely by the John Kaul family. NGP, Inc. (NGP), incorporated on April 17, 1999, is located in Spring Green, Wisconsin, and primarily provides subcontract manufacturing and management services for ITI. NGP also manufactures C-band antennas and outdoor barbecue accessories. The John Kaul family has a majority ownership interest in NGP. The companies currently sell their products to customers worldwide. Basis of Combination The accompanying combined financial statements include the accounts of ITI, KTI and NGP. Significant intercompany accounts and transactions have been eliminated. The combined companies will be referred to as "the companies" for the purposes of these statements. Cash and Cash Equivalents The companies define cash and cash equivalents as highly liquid, short-term investments with a maturity at the date of acquisition of three months or less. Investment Securities Trading Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period included in earnings. Accounts Receivable Accounts receivable are shown net of an allowance for doubtful accounts of $34,000 at December 31, 2000 and 1999. Inventories Inventories consist of raw materials, work in progress and finished goods, all of which are priced at the lower of cost or market based on the first- in, first-out (FIFO) method. Property and Equipment Property and equipment are stated at cost. Major expenditures for property and equipment are capitalized. Maintenance, repairs, and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, resulting gains or losses are included in income. Property and equipment are depreciated using the straight-line method over their estimated useful lives as follows: Years Transportation equipment 5 Office equipment 7-10 Plant equipment 7-10 Buildings and improvements 39 Intangibles NGP has a non-compete agreement in the amount of $1,000,000. The non-compete agreement is being amortized over 5 years using the straight-line method. Income Taxes The companies are S corporations and a limited liability company. The stockholders / members are taxed on their proportionate share of their respective company's taxable income. Therefore, no provision or liability for income taxes has been included in these financial statements. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising Advertising costs are charged to operations when incurred. Research and Development Research and development costs are charged to operations when incurred and are included in operating expenses. The amount charged to operations was $146,232 and $326,913 for the years ended December 31, 2000 and 1999, respectively. Warranty The companies sell their products with a one year limited warranty against defects in material and workmanship. Warranty costs are expensed at the time incurred. Revenue Recognition Shipping and handling costs charged to customers have been included in sales. Shipping and handling costs incurred by the company have been included in cost of sales. NOTE 2 - Inventories Inventories consist of the following at December 31: 2000 1999 Raw materials $ 626,162 $1,201,000 Work in process 488,443 571,124 Finished goods 1,256,207 1,126,890 Total Inventories $ 2,370,812 $2,899,014 NOTE 3 - Property and Equipment The major categories of property and equipment at December 31 are summarized as follows: 2000 1999 Land and improvements $ 198,521 $ 198,521 Buildings and improvements 2,836,213 2,836,213 Plant equipment 4,250,714 3,178,938 Office equipment 120,591 108,877 Transportation equipment 277,778 255,249 Property not in service 61,342 186,000 Total Property and Equipment 7,745,159 6,763,798 Less: Accumulated depreciation (3,246,056) (2,717,407) Net Property and Equipment $ 4,499,103 $4,046,391 NOTE 4 - Line of Credit NGP has a line of credit in the amount of $400,000. The line is renewable annually and bears interest at LIBOR plus 2.25% (8.82% at December 31, 2000). The line is secured by a general business security agreement and limited stockholder guarantees. The outstanding balance on the line of credit at December 31, 2000 and 1999 was $294,000 and $0, respectively. KTI has a line of credit in the amount of $600,000. The line is renewable annually and bears interest at .25% below prime (9.25% at December 31, 2000). The line is secured by a general business security agreement, real estate, an assignment of life insurance and a limited guarantee by the company's majority stockholder. There was no outstanding balance on the line of credit at December 31, 2000 and 1999. ITI has a line of credit in the amount of $1,500,000. The line is renewable annually and bears interest at LIBOR plus 2.25% (8.82% at December 31, 2000). The line is secured by a general business security agreement, and corporate guarantees of its two members. The outstanding balance on the line of credit at December 31, 2000 and 1999 was $800,000 and $0, respectively. NOTE 5 - Long-Term Debt Long-term debt consists of the following at December 31: 2000 1999 NGP note payable in monthly installments of $8,207, including interest at 8.50%. Note is due April 2004 and is secured by limited personal guarantees of NGP stockholders. This note is subordinate to NGP's bank debt. $ 284,987 $ 355,933 NGP notes payable in monthly installments totaling $44,492, including interest at 7.125%. Notes are due April 2004 and are secured by a general business security agreement, real estate and limited personal guarantees of NGP stockholders. 2,705,781 3,031,010 Totals 2,990,768 3,386,943 Less: Current portion (430,027) (400,652) Long-Term Portion $ 2,560,741 $2,986,291 Principal requirements for years ending after December 31, 2000 are as follows: 2001 $ 430,027 2002 462,827 2003 498,144 2004 1,599,770 Total $ 2,990,768 NOTE 6 - Related Party Debt Related party debt consists of the following at December 31: 2000 1999 KTI unsecured notes payable to its stockholders, payable in monthly installments totaling $29,775, including interest at 7.0%. Notes are due in April 2004. $1,148,782 $1,415,445 Totals 1,148,782 1,415,445 Less: Current portion (285,945) (243,722) Long-Term Portion $862,837 $1,171,723 Principal requirements on debt for years ending after December 31, 2000 are as follows: 2001 285,945 2002 306,613 2003 328,779 2004 227,445 Total $1,148,782 NOTE 7 - Retirement Plan The companies have a 401(k) retirement plan that covers all eligible employees. Employees are eligible after one year of service. The companies may choose to match contributions up to 6% of employee salaries. Contributions were $63,218 and $49,199 for the years ended December 31, 2000 and 1999, respectively. NOTE 8 - Commitments and Contingencies Purchase Commitment During 2000, ITI contracted with a supplier to acquire equipment costing $122,684. At December 31, 2000, the outstanding commitment is $61,342. Pending Lawsuit The companies have a pending lawsuit against them as of December 31, 2000. Management feels that the risk of loss associated with this lawsuit is low. No liability has been recorded. NOTE 9 - Concentrations of Risk Cash Balance At various times throughout the year, the companies had deposits in excess of FDIC coverage. Major Customers The companies sold approximately 57% and 56% of all its products to two and three customers during the years ended December 31, 2000 and 1999, respectively. At December 31, 2000 and 1999 the amount due from those customers included in accounts receivable was $1,106,961 and $3,675,378, respectively. Major Suppliers The companies purchased approximately 17% and 46% of their material from one and three suppliers during the years ended December 31, 2000 and 1999, respectively. At December 31, 2000 and 1999 the amount due to those suppliers included in accounts payable was $468,000 and $560,225, respectively. INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING BALANCE SHEET December 31, 2000 ASSETS Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- CURRENT ASSETS Cash and cash equivalents $ 101,808 $ 25,785 $ - $ - $ 127,593 Accounts receivable 2,532,323 190,349 122,224 2,844,896 Inventories 1,978,838 87,096 304,878 2,370,812 Related party receivable - 728,716 42,931 (771,647) - Investment securities trading - 65,863 - 65,863 Prepaid expenses - 49,489 - - 49,489 Total Current Assets 4,612,969 1,147,298 470,033 (771,647) 5,458,653 PROPERTY AND EQUIPMENT 1,729,833 1,111,133 1,658,137 - 4,499,103 INVESTMENT IN ITI - 1,686,269 1,686,269 (3,372,538) - NET INTANGIBLES 1,206 - 658,666 - 659,872 TOTAL ASSETS $6,344,008 $3,944,700 $4,473,105 $(4,144,185) $10,617,628 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING BALANCE SHEET (cont.) December 31, 2000 LIABILITIES AND STOCKHOLDERS' EQUITY ASSETS Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- CURRENT LIABILITIES Checks issued in excess of bank balance $ - $ - $ 81,881 $ - $ 81,881 Line of credit 800,000 - 294,000 - 1,094,000 Accounts payable 1,287,974 167,580 102,852 - 1,558,406 Customer deposits 91,469 13,939 11,606 - 117,014 Due to related parties 771,647 - - (771,647) - Accrued expenses 20,380 113,723 109,995 - 244,098 Current portion long-term debt - - 430,027 - 430,027 Current portion related party debt - 285,945 - - 285,945 Total Current Liabilities 2,971,470 581,187 1,030,361 (771,647) 3,811,371 LONG-TERM LIABILITIES Long-term debt - - 2,560,741 - 2,560,741 Related party debt - 862,837 - - 862,837 Total Long-Term Liabilities - 862,837 2,560,741 - 3,423,578 Total Liabilities 2,971,470 1,444,024 3,591,102 (771,647) 7,234,949 STOCKHOLDERS' EQUITY Common stock - 2,000 200,000 - 202,000 Members' equity 3,372,538 (3,372,538) Retained earnings - 2,498,676 792,103 - 3,290,779 Subtotal 3,372,538 2,500,676 992,103 (3,372,538) 3,492,779 Less: Treasury stock - - (110,100 - (110,100) Total Stockholders' Equity 3,372,538 2,500,676 882,003 (3,372,538) 3,382,679 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,344,008 $3,944,700 $4,473,105 $(4,144,185) $10,617,628 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING BALANCE SHEET December 31, 1999 ASSETS Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- Cash and cash equivalents $1,798,825 $ 304,917 $183,119 $ - $2,286,861 CURRENT ASSETS Cash and cash Equivalents $ 221,357 $ 966,386 $ 35,667 $ - $1,223,410 Accounts receivable 4,735,140 473,804 76,888 - 5,285,832 Inventories 2,184,369 300,425 414,220 - 2,899,014 Related party receivable 48,358 47,410 57,465 (153,233) - Investment securities trading - 125,220 - - 125,220 Prepaid expenses - 60,730 - - 60,730 Total Current Assets 7,189,224 1,973,975 584,240 (153,233) 9,594,206 PROPERTY AND EQUIPMENT 1,032,700 1,192,866 1,820,825 - 4,046,391 INVESTMENT IN ITI - 3,211,610 3,211,610 (6,423,220) - NET INTANGIBLES 1,206 - 860,000 - 861,206 TOTAL ASSETS $8,223,130 $6,378,451 $6,476,675 $(6,576,453) $14,501,803 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING BALANCE SHEET (cont.) December 31, 1999 LIABILITIES AND STOCKHOLDERS' EQUITY ASSETS Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- CURRENT LIABILITIES Accounts payable $1,639,941 $ 233,417 $170,960 $ - $2,044,318 Customer deposits 83,862 17,981 20,583 - 122,426 Related party debt 66,445 79,218 7,570 (153,233) - Accrued expenses 9,662 234,371 113,592 - 357,625 Current portion of long-term debt - - 400,652 - 400,652 Current portion of related party debt - 243,722 - - 243,722 Total Current Liabilities 1,799,910 808,709 713,357 (153,233) 3,168,743 LONG-TERM LIABILITIES Long-term debt - - 2,986,291 - 2,986,291 Due to related parties - 1,171,723 - - 1,171,723 Total Long-Term Liabilities - 1,171,723 2,986,291 - 4,158,014 Total Liabilities 1,799,910 1,980,432 3,699,648 (153,233) 7,326,757 STOCKHOLDERS' EQUITY Common stock - 2,000 200,000 - 202,000 Members' equity 6,423,220 (6,423,220) Retained earnings - 4,396,019 2,577,027 - 6,973,046 Total Stockholders' Equity 6,423,220 4,398,019 2,777,027 (6,423,220) 7,175,046 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,223,130 $6,378,451 $6,476,675 $(6,576,453) $14,501,803 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS Year Ended December 31, 2000 Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- NET SALES $28,958,967 $5,130,601 $3,220,402 $(4,713,255) $32,596,715 COST OF GOODS SOLD 23,481,828 4,809,807 2,979,776 (4,713,255) 26,558,156 Gross Profit 5,477,139 320,794 240,626 - 6,038,559 OPERATING EXPENSES 601,118 1,452,907 500,958 - 2,554,983 Operating Income (Loss) 4,876,021 1,132,113) (260,332) - 3,483,576 OTHER INCOME (EXPENSE) Interest expense (34,497) (116,094) (249,652) - (400,243) Interest income 25,588 41,865 6,184 - 73,637 Other income - 60,398 18,776 - 79,174 Investment income in subsidiary - 2,433,556 2,433,556 (4,867,112) - Net Other Income (Expense) (8,909) 2,419,725 2,208,864 (4,867,112) (247,432) NET INCOME 4,867,112 1,287,612 1,948,532 (4,867,112) 3,236,144 RETAINED EARNINGS - Beginning of Year 6,423,220 4,396,019 2,577,027 (6,423,220) 6,973,046 Distributions (7,917,794)(3,184,955)(3,733,456) 7,917,794 (6,918,411) RETAINED EARNINGS - END OF YEAR $3,372,538 $2,498,676 $ 792,103 $(3,372,538) $3,290,779 INTERACTIVE TECHNOLOGIES INTERNATIONAL, LLC KAUL-TRONICS, INC. NGP, INC. COMBINING STATEMENT OF INCOME AND RETAINED EARNINGS Year Ended December 31, 1999 Interactive Technologies Kaul- International, Tronics, NGP, Combined LLC Inc. Inc. Eliminations Totals -------- -------- ------ --------- -------- NET SALES $33,755,337 $10,099,127 $3,109,294 $(5,905,259) $41,058,499 COST OF GOODS SOLD 25,862,145 9,447,238 2,815,149 (5,905,259) 32,219,273 Gross Profit 7,893,192 651,889 294,145 - 8,839,226 OPERATING EXPENSES 818,868 901,164 309,077 - 2,029,109 Operating Income (Loss) 7,074,324 (249,275) (14,932) - 6,810,117 OTHER INCOME (EXPENSE) Interest expense (9,244) (159,329) (201,173) - (369,746) Interest income 16,260 14,496 1,333 - 32,089 Other income - 60,698 17,166 - 77,864 Investment income in subsidiary - 3,540,670 3,147,536 (6,688,206) - Share of income to non-combined entity - - - (393,134) (393,134) Net Other Income(Loss) 7,016 3,456,535 2,964,862 (7,081,340) (652,927) NET INCOME 7,081,340 3,207,260 2,949,930 (7,081,340) 6,157,190 RETAINED EARNINGS - Beginning of Year 2,836,702 1,979,896 - (2,836,702) 1,979,896 Distributions (3,494,822) (791,137) (372,903) 3,494,822 (1,164,040) RETAINED EARNINGS - END OF YEAR $6,423,220 $4,396,019 $2,577,027 $(6,423,220) $ 6,973,046 DESCRIPTION OF UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS REFLECTING THE ACQUISITION OF THE BUSINESS OF KAUL-TRONICS, INC. AND AFFILIATED COMPANIES BY CALIFORNIA AMPLIFIER, INC. On April 5, 2002, California Amplifier, Inc. ("California Amplifier" or the "Company") acquired in an asset purchase transaction the satellite antenna design and manufacturing business of Kaul-Tronics, Inc., a Wisconsin corporation, and two affiliated companies under common ownership and control with Kaul-Tronics, Inc. (collectively, "Kaul-Tronics Group"). The following unaudited pro forma condensed consolidated financial statements have been prepared giving effect to the acquisition of the business of Kaul-Tronics Group by California Amplifier as if the transaction had taken place at February 28, 2002 for the pro forma condensed consolidated balance sheet and, in the case of the pro forma condensed consolidated income statement, as of March 1, 2001. The fiscal year of Kaul-Tronics Group ends on December 31 and California Amplifier's fiscal year ends on the Saturday closest to February 28 (referred to herein as February 28 for clarity of presentation). The Pro Forma Condensed Consolidated Income Statement for the year ended February 28, 2002 combines the results of California Amplifier for such year with the results of Kaul-Tronics Group for the 12 months ended December 31, 2001. The acquisition has been accounted for using the purchase method. The purchase price has been allocated to the assets acquired and liabilities assumed at their estimated fair values as of the April 5, 2002 acquisition date. The pro forma adjustments set forth in the following unaudited pro forma condensed financial information are estimated and may differ from the actual adjustments when they become known. Based on current information, California Amplifier's management does not expect the final allocation of the purchase price to be materially different from that used in the following pro forma balance sheet and pro forma income statement. The acquisition of Kaul-Tronics Group by California Amplifier gave rise to goodwill of approximately $17.6 million. In accordance with Financial Accounting Standards No. 142, which the Company adopted effective in March 2002, goodwill on this acquisition will not be amortized, but instead will be periodically evaluated for impairment. Accordingly, although the Kaul- Tronics Group acquisition is assumed to occur at the beginning of the year covered by the accompanying pro forma condensed consolidated income statement, no goodwill amortization expense is reflected in this pro forma income statement. The unaudited pro forma financial information does not reflect certain cost savings that California Amplifier management believes may be realized following the acquisition, and is not necessarily indicative of the results of operations or the financial position which would have been attained had the acquisition been consummated at any of the foregoing assumed dates, or which may be attained in the future. The pro forma financial information should be read in conjunction with the historical financial statements of California Amplifier and Kaul-Tronics Group. CALIFORNIA AMPLIFIER, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET FEBRUARY 28, 2002 (Unaudited) (In thousands) /-- Historical ---/ Kaul- Pro California Tronics Pro Forma Forma Amplifier Group Adjustments Total -------- ------- ----------- ------ ASSETS Current assets: Cash and cash equivalents $23,156 $ 2,287 $(4,703)(A) $ 18,453 (2,287)(B) Accounts receivable, net 8,219 6,550 (6,550)(B) 8,219 Inventories 9,472 1,548 (518)(C) 10,502 Deferred income tax asset 3,580 - 3,580 Prepaid expenses 1,312 5 (1)(B) 1,316 ------- ------ ------- -------- Total current assets 45,739 10,390 (14,059) 42,070 Property and equipment, net 7,375 3,648 430 (C) 11,453 Goodwill 3,287 - 17,625 (D) 20,912 Other assets 287 459 (459)(B) 802 115 (E) 400 (F) ------- ------ ------- -------- $56,688 $14,497 $ 4,052 $ 75,237 ======= ====== ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank line of credit payable $ - $ 1,000 $(1,000)(B) $ - Current portion of long-term debt 917 - 917 Accounts payable 5,713 4,229 (4,229)(B) 5,713 Other current liabilities 8,850 1,399 (1,399)(B) 9,345 495 (G) -------- ------ ------- -------- Total current liabilities 15,480 6,628 (6,133) 15,975 -------- ------ ------- -------- Long-term debt 3,628 1,650 (1,650)(B) 15,628 12,000 (H) -------- ------ ------- -------- Stockholders' equity: Common stock and additional paid-in capital 27,705 202 (202)(E) 33,759 6,054 (I) Retained earnings 10,676 6,127 (6,127)(B) 10,676 Treasury stock - (110) 110 (B) 0 Accumulated other comprehensive loss (801) - (801) -------- ------ ------- -------- Total stockholders' equity 37,580 6,219 (165) 43,634 -------- ------ ------- -------- $ 56,688 $14,497 $ 4,052 $ 75,237 ======== ====== ======= ======== CALIFORNIA AMPLFIER, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (In thousands except share and per share amounts) (A) To reflect the proceeds of new bank term loan, cash paid for direct costs of acquisition and debt issuance costs, and eliminate Kaul-Tronics' cash balance, as follows: Proceeds of bank term loan $12,000 Cash paid to Kaul-Tronics sellers (16,063) Cash paid for other direct costs of Kaul-Tronics acquisition (525) Cash paid for debt issuance costs (115) ------- $(4,703) ======= (B) To eliminate those assets, liabilities and equity balances of Kaul-Tronics which were not acquired by California Amplifier, as follows: Cash $(2,287) Accounts receivable, net (6,550) Other assets (459) Bank line of credit payable (1,000) Accounts payable (4,229) Other current liabilities (1,399) Long-term debt (1,650) Common stock and additional paid-in capital (202) Retained earnings (6,127) Treasury stock 110 (C) To adjust the carrying value of assets acquired to fair market value, as follows: Inventories $ (518) Prepaid expenses (1) Property and equipment, net 430 ------- $ (89) ======= (D) To reflect as goodwill the excess of cost over the fair value of assets acquired and liabilities assumed (see computation at (J) below) $17,625 ======= (E) To reflect debt issue costs on new bank term loan $ 115 ======= (F) To reflect value ascribed to non-compete agreements entered into with Kaul-Tronics sellers $ 400 ======= (G) To reflect accrued liabilities of Kaul-Tronics which were assumed by California Amplifier, as follows: Accrued vacation liability $ 207 Customer deposits liability 288 ------- $ 495 ======= (H) To reflect the issuance of a bank term loan payable to partially finance the cash portion of the purchase price. $12,000 ======= (I) To reflect California Amplifier common stock issued as partial consideration for the purchase, as follows: Number of common stock shares issued 929,086 Multiplied by the fair market value per share at time of issuance x $6.57 ------- $ 6,104 Less stock registration costs (50) ------- Fair value of common stock issued $ 6,054 ======= (J) Following is a computation of the excess of cost over the value of net assets acquired (goodwill): Cash paid to sellers $16,063 Value of common stock issued to sellers 6,054 Direct costs of acquisition including legal, accounting and financial advisory fees 525 ------- Total cost of Kaul-Tronics acquisition 22,642 Fair value of net assets acquired: Inventory 1,030 Prepaid expenses 4 Property and equipment 4,078 Non-compete agreements 400 Accrued liabilities assumed (495) ------- Total fair value of net assets acquired 5,017 ------- Goodwill $17,625 ======= CALIFORNIA AMPLFIER, INC. PRO FORMA CONDENSED STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1998 (Unaudited) (In thousands except per share amounts) /-- Historical ---/ Kaul- Pro California Tronics Pro Forma Forma Amplifier Group(A) Adjustments Total -------- ------- ----------- ------ Sales $100,715 $37,391 $138,106 Cost of goods sold 77,834 29,927 107,761 -------- ------- -------- Gross profit 22,881 7,464 30,345 -------- ------- -------- Operating expenses: Research and development 7,583 203 7,786 Selling 2,299 135 2,434 General and administrative 7,740 1,652 9,392 Impairment charges - 422 422 -------- ------- -------- Total operating expenses 17,622 2,412 20,034 ------- ------ ------- Operating income 5,259 5,052 10,311 ------- ------ ------- Non-operating income (expense): Settlement of litigation (1,125) - (1,125) Other income (expense) 47 (240) (480)(B) (692) (19)(C) ------- ------ ------- ------- Total non-operating expense (1,078) (240) (499) (1,817) ------- ------ ------- ------- Income from continuing operations before income taxes 4,181 4,812 (499) 8,494 Provision for income taxes (1,307) - (1,829)(D) (2,980) 156 (E) ------- ------ ------- ------- Income from continuing operations $ 2,874 $4,812 $(2,172) $ 5,514 ======= ====== ======= ======= Income from continuing operations per share: Basic $ 0.21 $ 0.38 Diluted $ 0.21 $ 0.37 Shares used in computing per share income: Basic 13,727 929 14,656 Diluted 13,979 929 14,908 CALIFORNIA AMPLFIER, INC. NOTES TO PRO FORMA CONDENSED INCOME STATEMENT YEAR ENDED FEBRUARY 28, 2002 ($ in thousands) (A) The revenue, cost and expense amounts shown for Kaul-Tronics Group are the historical amounts for Kaul-Tronics Group's fiscal year ended December 31, 2001. Subsequent to December 31, 2001, sales volume with a significant customer of Kaul- Tronics Group declined substantially. This customer accounted for approximately 25% of the sales of Kaul-Tronics Group during 2001. California Amplifier management expects the sales volume with this customer to recover in the future, but there can be no assurances when such business will return, or whether it will return to the same levels as previously experienced. Primarily for this reason, the financial results of Kaul-Tronics Group for the year ended December 31, 2001 are not necessarily indicative of the operating results which Kaul-Tronics Group can be expected to achieve in the future. (B) To reflect interest expense on the $12 million bank term loan payable which partially financed the cash portion of the purchase price. The interest rate on the new debt is assumed to be 4.0%. A change of 1/4 percent in the interest rate would result in a change in interest expense and income from continuing operations of $30k and $21k, before and after taxes, respectively. $ 480 ====== (C) To reflect amortization of debt issue costs of $115k over the six year life of the $12 million bank term loan payable. $ 19 ====== (D) Kaul-Tronics Group is organized as an S-Corp for income tax purposes and therefore does not record income tax expense. This pro forma adjustment is to reflect imputed income tax expense on Kaul-Tronics' pretax income at an effective federal and state combined rate of 39%. $1,829 ====== (E) To reflect the income tax effect of increased interest expense and debt issue cost amortization expense using an effective tax rate of 31.3%. $ 156 ====== -----END PRIVACY-ENHANCED MESSAGE-----