-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DNjRfMnmK+MBe0ZWYJXffNThDSwWytoigEyT0dDv7QPaQSje+m/ZoNwR+LNt6SB3 bpcbkXrRy3i07cgln7PJMw== 0000912057-95-002313.txt : 19950414 0000912057-95-002313.hdr.sgml : 19950414 ACCESSION NUMBER: 0000912057-95-002313 CONFORMED SUBMISSION TYPE: 8-K/A CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950125 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950410 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERTEX COMMUNICATIONS CORP /TX/ CENTRAL INDEX KEY: 0000780416 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 751982974 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-15277 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 2600 N LONGVIEW ST STREET 2: PO BOX 1277 CITY: KILGORE STATE: TX ZIP: 75662 BUSINESS PHONE: 9039840555 8-K/A 1 FORM 8-K/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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): JANUARY 25, 1995 VERTEX COMMUNICATIONS CORPORATION (Exact name of Registrant as specified in its charter) TEXAS 0-15277 75-1982974 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 2600 NORTH LONGVIEW STREET, KILGORE, TEXAS 75662 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (903) 984-0555 NOT APPLICABLE (former name or former address, if changed since last report) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- VERTEX COMMUNICATIONS CORPORATION FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 - ------------------------------------------------------------------------------- ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. Financial Statements of Maxtech, Inc. ("Maxtech") for the Year ended December 31, 1994, prepared in accordance with the specifications exacted by Regulation S-X, are attached hereto at pages 2 through 12 and include: - Independent Auditor's Report - Balance Sheet as of December 31, 1994 - Statement of Income for the Year ended December 31, 1994 - Statement of Stockholders' Equity for the Year ended December 31, 1994 - Statement of Cash Flows for the Year ended December 31, 1994 - Notes to Financial Statements (b) PRO FORMA FINANCIAL INFORMATION. Pro Forma Condensed Combined Financial Statements, in compliance with the applicable Rules of Regulation S-X, relative to the Registrant and Maxtech are attached hereto at pages 13 through 17 and include: - Introduction to Pro Forma Condensed Combined Financial Statements (unaudited) - Pro Forma Condensed Combined Balance Sheet as of December 30, 1994 (unaudited) - Pro Forma Condensed Combined Statement of Income for the Year ended September 30, 1994 (unaudited) - Pro Forma Condensed Combined Statement of Income for the Three Months ended December 30, 1994 (unaudited) - Notes to Pro Forma Condensed Combined Financial Statements (unaudited) -1- MAXTECH INCORPORATED FINANCIAL STATEMENTS DECEMBER 31, 1994 -2- INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of MAXTECH Incorporated State College, Pennsylvania We have audited the accompanying balance sheet of MAXTECH Incorporated as of December 31, 1994, and the related statements of income, stockholders' equity and cash flows for the year 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 audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit 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 audit provides 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 MAXTECH, Incorporated as of December 31, 1994, and the results of operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ Seligman Friedman & Co. P.C. January 13, 1995 State College, PA -3- MAXTECH INCORPORATED BALANCE SHEET As of December 31, 1994 (See accompanying notes to financial statements.)
ASSETS CURRENT ASSETS Cash $ 180,910 Accounts receivable 670,316 Inventories 1,980,830 Prepaid expenses 12,887 ----------- Total current assets 2,844,943 ----------- PROPERTY AND EQUIPMENT Production equipment 798,130 Factory support 190,511 Office and leaseholds 99,727 ----------- 1,088,368 LESS: Allowance for depreciation (484,022) ----------- 604,346 ----------- DEFERRED CHARGES (Net of amortization) 1,381 ----------- $ 3,450,670 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Line of credit $ 1,231,835 Current portion of notes payable 146,139 Accounts payable - trade 829,506 Accrued expenses 279,620 Dividend payable 153,301 ----------- Total current liabilities 2,640,401 ----------- LONG-TERM LIABILITIES Notes payable 204,840 Stockholders' loans 75,000 ----------- Total long-term liabilities 279,840 ----------- STOCKHOLDERS' EQUITY Common stock 75,000 Retained earnings 455,429 ----------- Total stockholders' equity 530,429 ----------- $ 3,450,670 ----------- -----------
-4- MAXTECH INCORPORATED STATEMENT OF INCOME For the year ended December 31, 1994 (See accompanying notes to financial statements.)
SALES Sales $ 6,780,763 ----------- COST OF SALES Direct materials and supplies 2,794,167 Direct labor 609,758 Factory overhead 939,106 ----------- Total 4,343,031 ----------- GROSS PROFIT 2,437,732 ----------- EXPENSES Administrative and general 603,713 Sales and marketing 885,053 Research and development 474,412 ----------- Total 1,963,178 ----------- INCOME BEFORE OTHER EXPENSE 474,554 OTHER EXPENSE (see Note 9) 124,670 ----------- NET INCOME $ 349,884 ----------- -----------
-5- MAXTECH INCORPORATED STATEMENT OF STOCKHOLDERS' EQUITY For the year ended December 31, 1994 (See accompanying notes to financial statements.)
Common Stock 750,000 shares issued, Retained 1,000,000 auth. no par earnings Total ---------------------- --------- --------- BALANCE, DECEMBER 31, 1993 $ 75,000 $ 258,846 $ 333,846 Net income - 1994 -- 349,884 349,884 Dividend declared -- (153,301) (153,301) -------- --------- --------- BALANCE, DECEMBER 31, 1994 $ 75,000 $ 455,429 $ 530,429 -------- --------- --------- -------- --------- ---------
-6- MAXTECH INCORPORATED STATEMENT OF CASH FLOWS For the year ended December 31, 1994 (See accompanying notes to financial statements.)
CASH FLOWS FROM OPERATIONS Net income $ 349,884 Adjustments for items not requiring cash: Depreciation and amortization 147,322 Changes in assets and liabilities affecting net income: Accounts receivable 2,766 Inventories (746,574) Accounts payable and accruals 259,904 Other 7,719 ----------- Net cash provided by operating activities 21,021 ----------- CASH FLOWS USED IN INVESTING ACTIVITIES Purchase of property & equipment (133,280) Acquisition of other assets (4,812) ----------- Net cash used in investing activities (138,092) ----------- CASH FLOWS FROM FINANCING ACTIVITIES Line of credit - advances 1,280,000 - repayments (1,158,332) Term loans - new loans 205,025 - repayments (136,728) ----------- Net cash provided by financing activities 189,965 ----------- NET CASH FLOWS 72,894 BEGINNING CASH BALANCE 108,016 ----------- ENDING CASH BALANCE $ 180,910 ----------- ----------- - -------------------------------------------------------------------------------- DISCLOSURE OF OTHER CASH FLOW DATA Interest paid $ 158,043 ----------- -----------
-7- MAXTECH INCORPORATED NOTES TO FINANCIAL STATEMENTS December 31, 1994 NOTE 1 - DESCRIPTION OF OPERATIONS The Company manufactures high quality, low noise, power and line driver, amplifiers and subsystems for the telecommunications industry worldwide. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES Inventories are stated at cost using first-in, first-out costing methods. Work in process and finished goods include factory overheads as well as direct materials and labor. Property and equipment are depreciated over their estimated useful lives using straight-line methods. Estimated lives are eight years for production equipment, five years for factory overhead and computer equipment, and eight to ten years for office equipment. Normal repairs and maintenance of equipment is expensed as incurred. Depreciation expense for 1994 was $141,209. Deferred charges consist of debt acquisition costs that are amortized over the term of the debt using the straight-line method. Income taxes are not provided for as the Company's shareholders have elected to be treated as an S-Corporation for income tax purposes. As a result, the shareholders are responsible for the income taxes connected with operations. Allowance for doubtful accounts has been determined to be zero as of December 31, 1994. The Company has incurred $23,124 in bad debt in its six-year history. NOTE 3 - CONCENTRATIONS CREDIT RISK AND SALES The Company extends trade credit to foreign and domestic manufacturers of telecommunications equipment. The Company has insurance to manage the risk from foreign manufacturers through the Foreign Trade Insurance Corporation. The Company also manages these risks by requiring irrevocable letters of credit, cash in advance, and cash against documents. As of December 31, 1994, one customer's account balance amounted to 27% of accounts receivable. Sales to one customer for 1994 were 19% of total sales. Foreign sales accounted for 20% of 1994 sales. -8- MAXTECH INCORPORATED NOTES TO FINANCIAL STATEMENTS December 31, 1994 NOTE 4 - DEBT The Company's debt consist of the following: Bank line of credit, prime plus 1%, currently 9.5%, maximum line of $1,500,000, collateralized by various assets, guaranteed by certain stockholders $ 1,231,835 ----------- ----------- Bank term loans, three to five year original maturities, variable and fixed rates at 8.75%-9.50% collateralized by various assets, guaranteed by certain stockholders 325,375 SEDA-COG Pennsylvania Capital Loan Fund, original maturity of five years, 5.0% interest, collateralized by a second lien on various company assets, guaranteed by certain stockholders 25,604 ----------- Total 350,979 Due within one year (146,139) ----------- Long-term portion $ 204,840 ----------- -----------
Five year maturities are: 1995 $ 146,139 1996 121,208 1997 72,632 1998 11,000 1999 -- --------- $ 350,979 --------- ---------
-9- MAXTECH INCORPORATED NOTES TO FINANCIAL STATEMENTS December 31, 1994 NOTE 4 - DEBT (continued) In January, 1994, the Company converted $100,000 of the line of credit to a short-term note maturing April 15, 1994 when it replaced that note and other bank term loans with permanent 3-year financing. The Company has arranged with a local bank a $250,000 credit facility allowing the Company to purchase equipment. Loans under this arrangement total $92,972 and are included in bank term loans and will be repaid over a five-year term with interest at one (1) percent above local bank prime. The Bank term and line of credit facilities call for restrictive covenants including maintaining a current ratio of 1.0 to 1, debt to tangible net worth ratio of less than 5.5 to 1, and total tangible net worth of not less than $500,000. Certain of the Company's equipment costing approximately $25,000 is subject to a security interest in connection with a 1993 Vocational Rehabilitation Grant. NOTE 5 - LEASES The Company leases production facilities and certain equipment under operating leases. Total operating rental expenses for 1994, 1993 and 1992 were $122,855, $101,961, and $100,256. Future minimum lease payments are as follows:
Operating --------- 1995 $ 114,563 1996 114,563 1997 114,563 1998 28,641 --------- Total $ 372,330 --------- ---------
The facility lease provides for a five-year rental period ending in 1998 with annual increases indexed to changes in a consumer price index. NOTE 6 - RELATED PARTY TRANSACTIONS AND LOANS FROM STOCKHOLDERS The stockholders have loaned the Company $75,000 in 1989 bearing interest at 9%. In 1994, the stockholders received interest payments of $38,765 of which $6,750 represents 1994 expense. -10- MAXTECH INCORPORATED NOTES TO FINANCIAL STATEMENTS December 31, 1994 NOTE 7 - NON-RECURRING GRANT INCOME AND COMMITMENTS The Company has entered into research and development grant agreements with the Ben Franklin Technology Center of Central and Northern Pennsylvania. The Company has received grant funds over a three year period ending in 1992 to develop telecommunication and microwave amplifier products. The agreements call for the Company to pay a two percent royalty on the product sales. Research and development costs associated with these grants are expensed as incurred. NOTE 8 - STOCK OPTIONS The Company maintains an incentive stock option plan under which a maximum of 75,000 common shares may be issued. As of December 31, 1994, the Company has issued options to employees totaling 67,250 shares at option prices ranging from $.25 to $2.00 per share. No options have been exercised. NOTE 9 - DETAIL OF SELECTED ACCOUNTS Other expenses - Interest expense $ 126,785 Interest income (2,115) ----------- TOTAL $ 124,670 ----------- ----------- Inventories - Raw materials $ 1,115,359 Work in process 677,579 Finished goods 187,892 ----------- TOTAL $ 1,980,830 ----------- ----------- Accrued expenses - Warranty $ 145,271 Selling costs 64,154 Payroll and other 70,195 ----------- TOTAL $ 279,620 ----------- -----------
-11- MAXTECH INCORPORATED NOTES TO FINANCIAL STATEMENTS December 31, 1994 NOTE 10 - MERGER PLANS On December 13, 1994, the Company's officers and principal shareholders signed a Letter of Intent to enter into an agreement to sell all of the Company's outstanding common stock to Vertex Communications Corporation. Should the agreement be completed, it would be effective January 1, 1995. -12- VERTEX COMMUNICATIONS CORPORATION AND MAXTECH, INC. INTRODUCTION TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited) Vertex Communications Corporation (Vertex) acquired all of the outstanding common stock of Maxtech, Inc. (Maxtech) on January 25, 1995 (Effective January 1, 1995) for cash, four-year unsecured installment promissory notes and contingent consideration based upon Maxtech's earnings for the cumulative period ending September 30, 1998. This acquisition is being accounted for under the purchase method. The following unaudited pro forma condensed combined balance sheet has been prepared as if Vertex purchased Maxtech as of December 30, 1994. The accompanying unaudited pro forma condensed combined statements of income for the year ended September 30, 1994 and the quarter ended December 30, 1994 have been prepared as if the purchase of Maxtech by Vertex occurred on October 1, 1993. The pro forma condensed combined financial statements and related notes have been prepared by Vertex based upon assumptions deemed appropriate. Certain of these assumptions are set forth in the accompanying Notes to Pro Forma Condensed Combined Financial Statements. The pro forma financial information presented herein should be read in conjunction with Vertex's Annual Report on Form 10-K and Quarterly Report on Form 10-Q as well as Maxtech's Financial Statements and relative notes incorporated in this report. -13- VERTEX COMMUNICATIONS CORPORATION AND MAXTECH, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET DECEMBER 30, 1994 (In Thousands) (Unaudited)
Historical ----------------- Pro Forma Pro Forma Vertex Maxtech Adjustments Combined ------ ------- ----------- --------- ASSETS Current Assets: Cash and cash equivalents $20,181 $ 181 $(5,699) (A) $14,663 Accounts receivable 15,377 670 (66) (B) 15,981 Inventories 9,076 1,981 11,057 Prepaid income taxes 182 -- 182 ------- ------ ------- ------- 44,816 2,832 (5,765) 41,883 Property and equipment, at cost 18,793 1,088 (484) (A) 19,397 Less: accumulated depreciation (7,370) (484) 484 (A) (7,370) ------- ------ ------- ------- 11,423 604 -0- 12,027 Goodwill -- -- 5,461 (A) 5,461 Other assets 902 14 916 ------- ------ ------- ------- TOTAL ASSETS $57,141 $3,450 $ (304) $60,287 ------- ------ ------- ------- ------- ------ ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 3,828 $ 829 $ (66) (B) $ 4,591 Accrued Liabilities 3,628 433 200 (A) 4,261 Customers' Advances 2,250 -- 2,250 Deferred Income Taxes 412 -- 412 Line of credit and notes payable -- 1,378 (1,378) (A) -- ------- ------ ------- ------- 10,118 2,640 (1,244) 11,514 Deferred income taxes 801 -- 801 Notes payable -- 205 (205) (A) -- Stockholders' loans -- 75 (75) (A) -- Other Liabilities -- -- 1,750 (A) 1,750 Shareholders' Equity: Common stock 466 75 (75) (A) 466 Capital in excess 24,973 455 (455) (A) 24,973 Retained Earnings 22,788 -- -- 22,788 Treasury Stock (2,058) -- -- (2,058) Translation adjustment 53 -- 53 ------- ------ ------- ------- 46,222 530 (530) 46,222 ------- ------ ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $57,141 $3,450 $ (304) $60,287 ------- ------ ------- ------- ------- ------ ------- -------
See Accompanying Notes to Pro Forma Financial Statements -14- VERTEX COMMUNICATIONS CORPORATION AND MAXTECH, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED SEPTEMBER 30, 1994 (In Thousands, Except Per Share Amounts) (Unaudited)
Historical ----------------- Pro Forma Pro Forma Vertex Maxtech Adjustments Combined ------ ------- ----------- --------- NET SALES $56,549 $ 6,781 $ (314) (F) $63,016 COSTS AND EXPENSES Cost of sales 42,185 4,343 (314) (F) 46,214 Research and development 2,637 474 3,111 Marketing 2,808 885 3,693 General and administrative 3,250 604 364 (C) 4,218 ------- ------ ------- ------- 50,880 6,306 50 57,236 ------- ------ ------- ------- Operating income 5,669 475 (364) 5,780 OTHER INCOME (EXPENSES): Income from investments 625 2 (171) (D) 456 Interest expense -- (127) (127) (E) -- ------- ------ ------- ------- Income before income taxes 6,294 350 (408) 6,236 PROVISION FOR INCOME TAXES 1,734 -- 38 (G) 1,772 ------- ------ ------- ------- NET INCOME $ 4,560 $ 350 $ (446) $ 4,464 ------- ------ ------- ------- ------- ------ ------- ------- EARNINGS PER SHARE $ .97 $ .94 ------- ------- ------- ------- AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 4,729 4,729 ------- ------- ------- -------
See Accompanying Notes to Pro Forma Financial Statements -15- VERTEX COMMUNICATIONS CORPORATION AND MAXTECH, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 30, 1994 (In Thousands, Except Per Share Amounts) (Unaudited)
Historical ----------------- Pro Forma Pro Forma Vertex Maxtech Adjustments Combined ------ ------- ----------- --------- NET SALES $14,707 $ 1,482 $ (117) (F) $16,072 COSTS AND EXPENSES Cost of sales 11,028 984 (117) (F) 11,895 Research and development 407 167 574 Marketing 714 171 885 General and administrative 979 192 91 (C) 1,262 ------- ------ ------- ------- 13,128 1,514 (26) 14,616 ------- ------ ------- ------- Operating income 1,579 (32) (91) 1,456 OTHER INCOME (EXPENSE): Income from investments 146 1 (43) (D) 104 Interest expense (36) (36) (E) -- ------- ------ ------- ------- Income before taxes 1,725 (67) (98) 1,560 PROVISION FOR INCOME TAXES 500 -- (41) (G) 459 ------- ------ ------- ------- NET INCOME $ 1,225 $ (67) $ (57) $ 1,101 ------- ------ ------- ------- ------- ------ ------- ------- EARNINGS PER SHARE $ .26 $ .24 ------- ------- ------- ------- AVERAGE SHARES AND EQUIVALENT SHARES OUTSTANDING 4,647 4,647 ------- ------- ------- -------
See Accompanying Notes to Pro Forma Financial Statements -16- VERTEX COMMUNICATIONS CORPORATION AND MAXTECH, INC. NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited) Balance Sheet Adjustments. A) To record the purchase of 100% of the common stock of Maxtech, Inc. The purchase price includes cash paid at closing of $4,049,000, four-year unsecured promissory notes in the aggregate principal sum of $1,750,000 and direct acquisition costs incurred of $200,000. An additional sum of $1,650,000 was paid at closing to pay-off certain promissory notes of Maxtech. The Maxtech acquisition was accounted for under the purchase method and, accordingly, the assets acquired and liabilities assumed were recorded at their fair values on the acquisition date. The excess of the purchase price over the net assets acquired of $5,461,000 will be amortized over fifteen years using the straight line method. In connection with the purchase of Maxtech, contingent consideration is due for the amount equal to 50% of the net pre-tax income above $1,750,000 that Maxtech earns for the cumulative period of three years and nine months ending September 30, 1998 not to exceed $2,250,000. This contingent consideration, if any, will be recorded as additional goodwill and amortized over the remaining life of the intangible asset as discussed above. B) To eliminate intercompany payables and receivables. Statement of Income Adjustments. C) To record amortization of goodwill ($5,461,000) related to the purchase of Maxtech over fifteen years on the straight line basis which amounts to $364,000 of expense annually. D) To reduce investment income relative to the promissory notes that were paid. E) To reduce interest expense related to the promissory notes that were paid. F) To eliminate intercompany sales from Maxtech to Vertex. G) To adjust provision for income taxes due to Maxtech's income before taxes and the adjustments described in C, D, and E above. The historical results of operations of Maxtech, Inc. included in the Pro Forma Income Statement for the year ended September 30, 1994 are for the year ended December 31, 1994 which was Maxtech's fiscal year end. -17- 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 hereunto duly authorized. VERTEX COMMUNICATIONS CORPORATION (Registrant) By: /S/ JAMES D. CARTER ----------------------------------------- James D. Carter, VICE PRESIDENT (FINANCE) & TREASURER Date: March 20, 1995 (DULY AUTHORIZED AND PRINCIPAL FINANCIAL OFFICER) -18- -----END PRIVACY-ENHANCED MESSAGE-----