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
======