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