<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 5, 1998
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WELLS-GARDNER ELECTRONICS CORPORATION
-------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Illinois 0-8250 36-1944630
- ---------------------------- ---------- --------------
(State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.
2701 North Kildare Avenue, Chicago, Illinois 60639
-------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (773) 252-8220
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<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The following Financial Statements of Coin Controls, Inc. are included
on pages F-1 through F-5 of this Form 8-K/A:
September 30, 1996, September 30, 1997 and March 31, 1998 (unaudited)
Independent Auditors' Report
Statements of Assets Acquired as of September 30, 1996,
September 30, 1997 and March 31, 1998 (unaudited)
Statements of Revenues and Certain Expenses for the years
ended September 30, 1996 and 1997 and the six months ended
March 31, 1998 (unaudited)
Notes to Financial Statements
(b) Pro Forma Financial Information.
The following Pro Forma Financial Information is included on pages P-1
through P-5 of this Form 8-K/A:
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1998
(unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1997 (unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the three
months ended March 31, 1998 (unaudited)
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
(c) Exhibits.
2.1* Asset Purchase Agreement by and among Wells-Gardner
Electronics Corporation, Coin Controls, Inc. and Coin Controls
Limited, dated as of June 5, 1998.
2.2* Loan Agreement by and between Wells-Gardner Electronics
Corporation and American National Bank and Trust Company of
Chicago, dated as of June 5, 1998.
2.3* London Interbank Offered Rate Agreement by and between
Wells-Gardner Electronics Corporation and American National
Bank and Trust Company of Chicago, dated as of June 5, 1998.
1
<PAGE> 3
2.4* Installment Note by and between Wells-Gardner Electronics
Corporation and American National Bank and Trust Company of
Chicago, dated as of June 5, 1998.
2.5* Revolving Note by and between Wells-Gardner Electronics
Corporation and American National Bank and Trust Company of
Chicago, dated as of June 5, 1998.
23.1 Consent of KPMG Peat Marwick LLP.
- ------------------------------
*Previously filed.
2
<PAGE> 4
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.
Wells-Gardner Electronics Corporation
Dated: August 5, 1998 By: /s/ George B. Toma
-----------------------------------
George B. Toma
Vice President of Finance, Chief
Financial Officer & Treasurer
3
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Wells-Gardner Electronics Corporation:
We have audited the accompanying statements of assets acquired of the
mechanical coin door business of Coin Controls, Inc. at September 30, 1996 and
1997 and the related statements of revenues and certain expenses for the years
then ended. These financial statements are the responsibility of management of
Coin Controls, Inc. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets acquired of the mechanical coin door
business of Coin Controls, Inc. at September 30, 1996 and 1997, and its revenues
and certain expenses (see note 2(a)) for the years then ended in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
April 30, 1998
F-1
<PAGE> 6
MECHANICAL COIN DOOR BUSINESS OF
COIN CONTROLS, INC.
Statements of Assets Acquired
September 30, 1996 and 1997 and March 31, 1998 (unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
=========================================================================================
September 30,
------------- March 31,
1996 1997 1998
- -----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Inventory, net $ 529 604 401
Equipment and tooling, net 44 102 98
- -----------------------------------------------------------------------------------------
$ 573 706 499
=========================================================================================
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 7
MECHANICAL COIN DOOR BUSINESS OF
COIN CONTROLS, INC.
Statements of Revenues and Certain Expenses
Years ended September 30, 1996 and 1997 and Six months ended March 31, 1998
(unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
====================================================================================================
Year ended
September 30, Six months
------------- ended
1996 1997 March 31, 1998
- ----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Net sales $ 4,218 5,195 2,204
Cost of sales 2,973 3,592 1,533
- ----------------------------------------------------------------------------------------------------
Gross margin 1,245 1,603 671
- ----------------------------------------------------------------------------------------------------
Other costs and expenses:
Commissions 120 145 46
Manufacturing 430 416 187
Engineering, selling, and administrative 595 495 243
- ----------------------------------------------------------------------------------------------------
Total other costs and expenses 1,145 1,056 476
- ----------------------------------------------------------------------------------------------------
Excess of revenues over certain expenses $ 100 547 195
====================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 8
MECHANICAL COIN DOOR BUSINESS OF
COIN CONTROLS, INC.
Notes to Financial Statements
September 30, 1996 and 1997
(Dollars in thousands)
(1) BUSINESS
On June 5, 1998, Wells-Gardner Electronics Corporation ("Wells-Gardner")
acquired the mechanical coin door business of Coin Controls, Inc. ("the
Business"). The Business consists of the US manufacturing service and
sales and marketing of mechanical coin doors. Coin doors are sold to the
coin-operated video games, pinball, and redemption markets. Under the
terms of the agreement, Wells-Gardner acquired inventory, machinery and
plant equipment, tooling, and certain contract rights (e.g. open
purchase and sales orders).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying statements of assets acquired at September 30, 1996 and
1997 and statements of revenues and certain expenses for the years then
ended were prepared from the books and records maintained by Coin
Controls, Inc. ("Coin Controls"), a subsidiary of Coin Controls, Ltd.
("the Parent"), of which the mechanical coin door business is a product
group. The statements of revenues and certain expenses do not include
charges for interest, taxes or corporate overhead.
In preparing the statements of revenues and certain expenses, some costs
and expenses of Coin Controls were allocated to the Business on various
bases, including relative sales of the Business to all sales of Coin
Controls, personnel, and estimated time spent on the Business. Such
allocations are based on the best estimate of management of Coin
Controls of actual expenses. In the opinion of management of Coin
Controls, such allocations are reasonable.
(b) INTERIM FINANCIAL INFORMATION
The financial information at March 31, 1998 and for the six months ended
March 31, 1998 is unaudited but includes all adjustments (consisting
only of normal recurring adjustments) which Coin Controls considers
necessary for a fair presentation of the financial position of the
Business at such date and its revenues and certain expenses. Results of
the six month period are not necessarily indicative of results expected
for the entire year.
(c) INVENTORIES
Inventories are stated at the lower of cost or market determined on a
first-in, first-out (FIFO) basis. The components of inventory are valued
at actual cost and include material, freight, labor and overhead.
(d) EQUIPMENT AND TOOLING
Equipment and tooling is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the related
assets (machinery and plant equipment-5 years; tooling-5 years).
(e) USE OF ESTIMATES
Management of Coin Controls has made estimates and assumptions relating
to the reporting of assets to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
F-4
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MECHANICAL COIN DOOR BUSINESS OF
COIN CONTROLS, INC.
Notes to Financial Statements
September 30, 1996 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
===============================================================================================
(3) INVENTORY
Inventory at September 30, 1996 and 1997 consists of the following:
===============================================================================================
1996 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 580 599
Finished goods 30 67
- -----------------------------------------------------------------------------------------------
$ 610 666
Less obsolescence reserve 81 62
- -----------------------------------------------------------------------------------------------
$ 529 604
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================
(4) EQUIPMENT AND TOOLING
Equipment and tooling at September 30, 1996 and 1997 consists of the
following:
===============================================================================================
1996 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Machinery and plant equipment $ 66 81
Tooling 498 569
- -----------------------------------------------------------------------------------------------
$ 564 650
Less accumulated depreciation 520 548
- -----------------------------------------------------------------------------------------------
$ 44 102
===============================================================================================
</TABLE>
Depreciation charges totaled $24 and $37 in 1996 and 1997, respectively.
(5) RELATED PARTY TRANSACTIONS
Coin Controls, purchases finished goods, raw materials and other
supplies from the Parent for a certain product line within the
mechanical coin door business. Such purchases from the Parent were $371
and $420 in fiscal years 1996 and 1997, respectively. Amounts included
in the ending inventory balances were $59 and $69 at September 30, 1996
and 1997, respectively.
Expenses charged by the Parent to the Business for administrative and
professional services were approximately $38 and $52 in fiscal years
1996 and 1997 respectively.
F-5
<PAGE> 10
WELLS-GARDNER ELECTRONICS CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1997 and the three months ended March
31, 1998 present the unaudited pro forma results of operations of the Company
assuming the acquisition of the mechanical coin door business ("Business") had
been consummated as of the beginning of each period.
These unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the Company's consolidated financial statements and
notes thereto previously filed on Form 10-K and the Business' financial
statements and notes thereto included in Item 7 (a) of this Form 8-K/A. The
unaudited pro forma condensed consolidated statements of operations do not
necessarily reflect actual results which may have occurred if the acquisition
had taken place as of the beginning of each period, nor are they necessarily
indicative of the results of future combined operations.
P-1
<PAGE> 11
WELLS-GARDNER ELECTRONICS CORPORATION
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 1998
<TABLE>
<CAPTION>
WELLS-GARDNER MECHANICAL
ELECTRONICS COIN DOOR PRO FORMA
CORPORATION BUSINESS ADJUSTMENTS (UNAUDITED)
--------------------- ---------------- ------------------- ---------------
ASSETS
Current assets:
<S> <C> <C> <C> <C>
Cash & cash equivalents 39,000 - - 39,000
Accounts receivable 5,894,000 - - 5,894,000
Note receivable 214,000 - - 214,000
Inventory 9,872,000 401,000 - 10,273,000
Prepaid expenses & other current assets 361,000 - - 361,000
----------------------------------------------------------------------------------
Total current assets 16,380,000 401,000 - 16,781,000
----------------------------------------------------------------------------------
Property, plant & equipment, net 2,208,000 98,000 - 2,306,000
Long-term notes receivable 432,000 - - 432,000
Intangible assets - - 250,000 (a) 250,000
Goodwill - - 2,801,000 (a) 2,801,000
----------------------------------------------------------------------------------
TOTAL ASSETS 19,020,000 499,000 3,051,000 22,570,000
==================================================================================
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 3,148,000 - - 3,148,000
Accrued expenses 575,000 - - 575,000
----------------------------------------------------------------------------------
Total current liabilities 3,723,000 - - 3,723,000
----------------------------------------------------------------------------------
Long-term note payable 3,675,000 - 3,550,000 (a) 7,225,000
----------------------------------------------------------------------------------
Total liabilities 7,398,000 - 3,550,000 10,948,000
----------------------------------------------------------------------------------
Shareholders' equity 11,622,000 - - 11,622,000
----------------------------------------------------------------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 19,020,000 - 3,550,000 22,570,000
==================================================================================
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
P-2
<PAGE> 12
WELLS-GARDNER ELECTRONICS CORPORATION
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1997
<TABLE>
<CAPTION>
WELLS-GARDNER MECHANICAL
ELECTRONICS COIN DOOR PRO FORMA
CORPORATION BUSINESS ADJUSTMENTS (UNAUDITED)
------------------ ------------------- ------------------ --------------
<S> <C> <C> <C> <C>
Net sales 42,989,000 5,213,000 - 48,202,000
Cost & expenses:
Cost of sales 36,188,000 4,039,000 - 40,227,000
Engineering, selling & administrative 5,677,000 759,000 142,000 (b) 6,628,000
50,000 (c)
Other expense, net 339,000 - 263,000 (d) 602,000
-------------------------------------------------------------------------------
Earnings before income taxes 785,000 415,000 (455,000) 745,000
Income tax 10,000 - - 10,000
-------------------------------------------------------------------------------
Net earnings 775,000 415,000 (455,000) 735,000
===============================================================================
Basic net earnings per share $ 0.19 $ 0.18
Diluted net earnings per share $ 0.18 $ 0.17
Basic average common shares outstanding 4,129,000 4,129,000
Diluted average common shares outstanding 4,316,000 4,316,000
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
P-3
<PAGE> 13
WELLS-GARDNER ELECTRONICS CORPORATION
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
WELLS-GARDNER MECHANICAL
ELECTRONICS COIN DOOR PRO FORMA
CORPORATION BUSINESS ADJUSTMENTS (UNAUDITED)
------------------ ----------------- ------------------- ------------------
<S> <C> <C> <C>
Net sales 8,983,000 1,118,000 - 10,101,000
Cost & expenses:
Cost of sales 7,588,000 863,000 - 8,451,000
Engineering, selling & administrative 1,171,000 145,000 36,000 (b) 1,365,000
13,000 (c)
Other expense, net 70,000 - 65,000 (d) 135,000
---------------------------------------------------------------------------------
Earnings before income taxes 154,000 110,000 (114,000) 150,000
Income tax - - - -
---------------------------------------------------------------------------------
Net earnings 154,000 110,000 (114,000) 150,000
=================================================================================
Basic net earnings per share $ 0.04 $ 0.04
Diluted net earnings per share $ 0.04 $ 0.04
Basic average common shares outstanding 4,222,000 4,222,000
Diluted average common shares outstanding 4,409,000 4,409,000
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
P-4
<PAGE> 14
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Effective June 5, 1998, Registrant purchased certain of the assets of Coin
Controls, Inc. ("Coin Controls"), an Illinois corporation, and Coin Controls
Limited ("Limited"), a company organized under the laws of the United Kingdom
and sole shareholder of Coin Controls, for an aggregate purchase price of
$3,350,000, payable in cash ("Mechanical Coin Door Business").
The purchase price of this transaction was paid out of proceeds from
Registrant's Installment Note ("Note") pursuant to the Loan Agreement by and
between Registrant and American National Bank and Trust Company of Chicago dated
June 5, 1998.
Certain of the assets acquired pursuant to this transaction constitute equipment
or other physical property used by Coin Controls and Limited in its business as
designers and manufacturers of coin doors and related mechanical mechanism
products. The Registrant will continue to use these assets for the same purpose.
The acquisition was accounted for under the purchase method of accounting. The
preliminary allocation of the purchase price represents an estimate of the fair
values of the assets acquired, including estimated professional fees and other
acquisition expenses expected to be incurred. The excess of the purchase price
over the estimated fair values of the assets acquired has been recorded as
goodwill. This preliminary allocation of purchase price is subject to further
adjustments; however, the Company does not expect the estimated values to change
materially upon finalization of the allocation of the purchase price.
The pro forma adjustments reflect the following:
(a) Represents the intangible assets acquired, the assumed borrowings to
consummate the purchase, and the resulting goodwill.
(b) Represents the amortization of goodwill on a straight-line basis over 20
years.
(c) Represents the amortization of intangible assets acquired on a straight-line
basis over the 5 year life.
(d) Represents interest expense on assumed borrowings to consummate the purchase
based on the terms of the Note.
P-5
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors and Shareholders
Wells-Gardner Electronics Corporation:
We consent to incorporation by reference in the Registration Statements on Form
S-8 (#2-72090, #2-09137, #33-63920, #33-61535, and #33-02981) of Wells-Gardner
Electronics Corporation of our report dated April 30, 1998, relating to
statements of assets acquired of the mechanical coin door business of Coin
Controls, Inc. at September 30, 1996 and 1997, and the related statements of
revenues and certain expenses for the years then ended, which reports are
included in this Current Report on Form 8-K/A of Wells-Gardner Electronics
Corporation.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
August 5, 1998
