SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
AMENDMENT TO
FORM 8-K
(Initial Report Date March 04, 1998)
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Amended Report:
May 12, 1998
PACER TECHNOLOGY
- - ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California
- - --------------------------------------------------------------------------
(State or other jurisdiction of Incorporation or Organization)
0-8864 77-0080305
- - ----------------------- -------------------------
Commission File No. IRS Employer
Identification No.
9420 Santa Anita Avenue, Rancho Cucamonga, California 91730
- - --------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
909-987-0550
- - --------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
The following items supersede previously submitted information to
the extent such is inconsistent therewith.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Independent Auditors' Report
Audited Balance Sheet as of February 28, 1998
Audited Statement of Operations and Accumulated Deficit for
the eleven months ended February 28, 1998
Audited Statement of Cash Flows for the eleven months ended
February 28, 1998
Notes to Financial Statements for the eleven months ended
February 28, 1998
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Balance Financial Information
Unaudited Pro Forma Combined Balance Sheet of Pacer Technology
and Subsidiaries at December 31, 1997
Unaudited Pro Forma Combined Statement of Income of Pacer
Technology and Subsidiaries for the six months ended December
31, 1997
Unaudited Pro Forma Combined Statement of Income of Pacer
Technology and Subsidiaries for the year ended June 30, 1997
Notes to Unaudited Pro Forma Combined Financial Data as of
December 31, 1997 and June 30, 1997
(c) Exhibits:
None
<PAGE>
COOK BATES
(A Division of London International Group, Inc.)
Financial Statements
February 28, 1998
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cook Bates:
We have audited the accompanying balance sheet of Cook Bates (a
division of London International Group, Inc.) as of February 28,
1998 and the related statements of operations and accumulated
deficit and cash flows for the eleven-month period then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cook
Bates as of February 28, 1998, and the results of its operations
and its cash flows for the eleven-month period then ended in
conformity with generally accepted accounting principles.
Los Angeles, California
April 17, 1998
<PAGE>
COOK BATES
(A Division of London International Group, Inc.)
Balance Sheet
February 28, 1998
Assets
Current Assets:
Cash $ 700
Accounts receivable,net of allowance
for doubtful accounts of $33,377 2,464,395
Inventories (note 2) 5,628,753
Prepaid Expenses 78,910
-----------
Total Current Assets $ 8,172,758
Property and equipment at cost, net (note 3) 189,017
-----------
Total Assets $ 8,361,775
==========
Liabilities and Divisional Deficit
Current liabilities:
Accounts Payable $ 650,985
Accrued Payroll 13,689
Accrued Liabilities 1,399,019
Due to parent (note 4) 8,633,538
-----------
Total current liabilities $10,697,231
Divisional deficit -
accumulated deficit $(2,335,456)
Commitments and contingencies (note 5)
Subsequent event (note 7)
------------
$ 8,361,775
==========
See accompanying notes to financial statements.
<PAGE>
COOK BATES
(A Division of London International Group, Inc.)
Statement of Operations and Accumulated Deficit
Eleven months ended February 28, 1998
Net sales $19,262,778
Cost of sales 13,890,625
-----------
Gross profit 5,372,153
Selling, general and administrative expenses 5,701,055
----------
Loss from operations (328,902)
Other income (expense):
Interest expense (665,440)
Gain on exchange rate 58,215
Other income (expense),net (958)
---------
608,183
---------
Loss before income taxes (937,085)
Provision for income taxes (note 6) -
----------
Net loss (937,085)
Accumulated deficit at beginning of period (1,398,371)
-------------
Accumulated deficit at end of period $(2,335,456)
==========
See accompanying notes to financial statements.
<PAGE>
COOK BATES
(A Division of London International Group, Inc.)
Statement of Cash Flows
Eleven months ended February 28, 1998
Cash flows from operating activities:
Net loss $ (937,085)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 108,674
Loss on disposal of fixed assets 11,406
Provision for doubtful accounts 3,119
Changes in assets and liabilities:
Accounts receivable (554,089)
Inventories 1,835,220
Prepaid expenses 2,048
Accounts payable (219,961)
Accrued payroll 9,751
Accrued liabilities 552,418
-----------
Net cash provided by operating activities 811,501
----------
Net cash used in investing activities -
acquisitions of property and equipment ( 32,359)
Net cash used in financing activities - net
repayments of debt to parent (793,587)
-----------
Net decrease in cash (14,445)
Cash at beginning of period 15,145
----------
Cash at end of period $ 700
=======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ -
Income taxes -
==========
See accompanying notes to financial statements.
<PAGE>
COOK BATES
(A Division of London International Group, Inc.)
Notes to Financial Statements
February 28, 1998
(1) Description of Business and Summary of Significant Accounting
-------------------------------------------------------------
Policies
--------
Description of Business
------------------------
Cook Bates is a division of London International Group, Inc.
("LIG"), a developer of latex and thin film barrier
technologies. Cook Bates, is a Florida-based manufacturer and
marketer of nail clippers, emery boards, and other related
manicure implements. The Cook Bates production facility is
located in Spartanburg, South Carolina, and its distribution
center is located in Anderson, South Carolina.
Inventories
-----------
Inventories are stated at the lower of cost or market using
the first-in, first-out method.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets, generally five to ten years.
Leasehold improvements are amortized on the straight-line
method over the estimated useful lives or the term of the
lease, whichever is shorter.
Revenue Recognition
-------------------
Net sales are generally recognized when products are shipped.
The Division has established programs which, under specified
conditions, enable customers to return product. The Division
establishes liabilities for estimated returns and allowances
at the time of shipment
Concentration of Credit Risk
-----------------------------
For the eleven months ended February 28, 1998, three customers
accounted for 45% of net sales. At February 28, 1998, the
Company had two customers who represented approximately 53% of
total accounts receivable.
<PAGE>
Income Taxes
------------
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and tax
credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
Impairment of Long-Lived Assets and Long-Lived Assets to Be
-----------------------------------------------------------
Disposed Of
-----------
Cook Bates has adopted the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of,". This Statement
requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value
less costs to sell. Adoption of this Statement did not have
a material impact on the Division's financial position,
results of operations or liquidity.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of cash, accounts receivables, accounts
payable and other liabilities are measured at cost which
approximates their fair value.
Use of Estimates
----------------
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect 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.
<PAGE>
(2) Inventories
------------
Inventories consist of the following:
Raw materials $ 3,217,580
Work in process 472,983
Finished goods 1,938,190
$ 5,628,753
=========
(3) Property and Equipment
----------------------
Property and equipment, at cost, are summarized as follows:
Machinery and equipment $ 747,855
Computer equipment 257,814
Tool and dyes 193,602
Office furniture and fixtures 115,696
Leasehold improvements 4,000
1,318,967
Less accumulated depreciation and
amortization (1,129,950)
$ 189,017
===========
(4) Due to Parent
--------------
Due to parent consists of intercompany loans made and expenses
incurred by LIG on behalf of Cook Bates. Cook Bates incures
interest at 6% per annum on all outstanding intercompany
balances. The liability is eliminated during consolidation
with LIG and no specific payment terms exist.
(5) Commitments and Contigencies
----------------------------
Operating leases:
----------------
Cook Bates leases office space, warehouse space and equipment
under noncancelable operating leases expiring in various years
through 2003. The lease expense for operating leases amounted
to $312,389 for the eleven months ended February 28, 1998.
<PAGE>
Future minimum lease payments as of February 28, 1998 are as
follows:
Operating
leases
------------
1999 $ 260,529
2000 95,953
2001 95,953
2002 76,693
Thereafter 5,674
------------
Total minimum lease payments $ 534,802
=============
Litigation:
----------
Cook Bates is involved in certain legal matters which have
arisen in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not
have a material adverse effect on Cook Bates' financial
position, results of operations or liquidity.
(6) Income Taxes
------------
Deferred taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. A valuation allowance has been
provided to fully offset the net deferred tax asset at
February 28, 1998, because there can be no assurance that Cook
Bates will generate any specific level of continuing
earnings in future years. The principal items that give rise
to deferred tax assets are inventory obsolescence and net
operating loss carryforwards.
(7) Subsequent Event (Unaudited)
---------------------------
On March 04, 1998, Pacer Technology acquired a majority of the
assets of Cook Bates. The assets purchased primarily
consisted of inventories and property and equipment. The
total cash purchase price was approximately $4,800,000.
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
- - --------------------------------------------------
The following unaudited pro forma combined financial
information presents the unaudited pro forma combined Balance
Sheet as of December 31, 1997 giving effect to the acquisition
of certain assets of Cook Bates as if the transaction had been
consummated on that date. Also presented is the unaudited pro
forma combined statements of operations for fiscal year ended
June 30, 1997 and the six months ended December 31, 1997,
giving effect to the acquisition of Cook Bates as if it had
been consummated as of the beginning of the earliest period
presented. Pacer Technology's fiscal year ends on June 30 and
Cook Bates' fiscal year ends on March 31. The pro forma
combined balance sheet combines Pacer Technology's balance
sheet as of December 31, 1997 with Cook Bates' balance sheet
as of February 28, 1998. The pro forma combined statement of
operations for the year ended June 30, 1997 combines the
results of Pacer Technology for such year with the results of
Cook Bates for the twelve-month period ended June 30, 1997.
The pro forma combined statement of operations for the six
months ended December 31, 1997 combines the results of Pacer
Technology for such six-month period with the results of Cook
Bates for the six-month period ended February 28, 1998.
The pro forma data is based on the historical combined
statements of Pacer Technology and Cook Bates, giving effect
to such acquisition under the purchase method of accounting
and the assumptions and adjustments (which the Company
believes to be reasonable) described in the accompanying notes
to unaudited pro forma combined financial data.
The pro forma data is provided for illustrative purposes only.
It does not purport to be indicative of the results that
actually would have occurred if the acquisition of Cook Bates
had been consummated on the date indicated or that may be
obtained in the future. The unaudited pro forma combined
financial information should be read in conjunction with the
notes thereto.
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Unaudited Pro Forma Combined Balance Sheet
December 31, 1997
Historical Pro Forma
------------------------ -------------------------------
Pacer Cook Adjust.
Technology Bates Inc.(Dec.) Notes Combined
------------- --------- ---------- -------- --------
ASSETS
Current Assets:
Cash $ 385,673 700 (700) a(i) $ 385,673
Trade Receivables 5,307,145 2,464,395 (2,464,395) a(i) 5,307,145
Other Receivables 167,387 - - 167,387
Notes Receivables 221,144 - - 221,144
Inventories 4,627,436 5,628,753 (747,955) a(ii) 9,508,234
Prepaid Expenses 798,569 78,910 ( 29,952) a(ii) 847,527
Deferred Income
Taxes 621,804 - - 621,804
---------- ---------- ---------- ----------
Total Current Assets 12,129,157 8,172,758 (3,243,002) 17,058,913
Equipment and
Leasehold Improve-
ments, Net: 1,539,690 189,017 185,983 a(ii) 1,914,690
Deferred Income Taxes 60,222 - - 60,222
Cost in Excess of Net
Assets Acquired 3,830,625 - - 3,830,625
Other Assets 7,078 - 25,000 a(ii) 32,078
----------- ---------- ----------- ----------
Total Assets $ 17,566,772 $ 8,361,775 $(3,032,019) $ 22,896,528
=========== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable 1,779,309 650,985 (650,985) a(i) 1,779,309
Accrued Payroll 459,748 13,689 (13,689) a(i) 459,748
Accrued Liabilities 1,464,893 1,399,019 (887,330) a(i&iv) 1,976,582
Due to LIG and
affiliates - 8,633,538 (8,633,538) a(i) -
--------- ---------- ------------ ----------
Total Current
Liabilities 3,703,950 10,697,231 (10,185,542) 4,215,639
Long-Term Liabilities:
Long-Term Debt 4,103,000 - 4,818,067 a(iii) 8,921,067
---------- --------- ---------- ----------
Total Liabilities 7,806,950 10,697,231 (5,367,475) 13,136,706
Stockholders' Equity:
Notes Receivable
from Directores (300,074) - - (300,074)
Common Stock 8,260,973 - - 8,260,973
Retained Earnings 1,798,923 (2,335,456) 2,335,456 a(v) 1,798,923
---------- ---------- ---------- ---------
Total Stockholders'
Equity 9,759,822 (2,335,456) 2,335,456 9,759,822
Total Liabilities and Stock-
holders' Equity $ 17,566,772 $ 8,361,775 $ (3,032,019) $ 22,896,528
=========== ========== ========== ===========
<PAGE>
PACER TECHNOLOGY & SUBSIDIARIES
Unaudited Pro Forma Combined Statement of Income
Six Months ended December 31, 1997
Historical Pro Forma
----------------------------- -----------------------------------
Pacer Cook Adjust.
Technology Bates Inc. (Dec.) Notes Combined
--------------- ----------- ------------ --------- ---------
Net Sales $ 13,648,651 11,233,876 - $ 24,882,527
Cost of Sales 8,662,349 7,685,360 30,000 b(i) 16,377,709
----------- ----------- ---------- -----------
Gross Profit 4,986,302 3,548,516 (30,000) 8,504,818
Selling, General
and Administrative
Expenses 3,504,746 2,934,252 8,393 b(i) 6,447,391
---------- ---------- --------- ----------
Operating
Income 1,481,556 614,264 (38,393) 2,057,427
Interest Expense
& Other 183,339 499,826 (42,193) b(ii&iii) 640,972
---------- --------- ---------- ---------
Income(loss) Before
Taxes 1,298,217 114,438 3,800 1,416,455
Income Taxes 571,698 - 41,383 b(iv) 613,081
---------- -------- --------- ---------
Net Income $ 726,519 114,438 (37,583) $ 803,374
========== ======== ======== ==========
<PAGE>
PACER TECHNOLOGY & SUBSIDIARIES
Unaudited Pro Forma Combined Statement of Income
For Year Ended June 30, 1997
Historical Pro Forma
----------------------------- ------------------------------------
Pacer Cook Adjust.
Technology Bates Inc. (Dec.) Notes Combined
--------------- ----------- ----------- --------- ----------
Net Sales $ 25,677,840 23,658,457 - $ 49,336,297
Cost of Sales 16,520,294 16,978,440 60,000 c(i) 33,558,734
---------- ---------- --------- -----------
Gross Profit 9,157,546 6,680,017 (60,000) 15,777,563
Selling, General
and Administrative
Expenses 6,595,513 6,419,169 16,786 c(i) 13,031,468
---------- ---------- --------- ----------
Operating
Income 2,562,033 260,848 (76,786) 2,746,095
Interest Expense
& Other 75,752 1,051,233 (84,386) c(ii&iii) 1,042,599
---------- ---------- --------- ---------
Income(loss) Before
Taxes 2,486,281 (790,385) 7,600 1,703,496
Income Taxes 1,268,879 - (273,975) c(iv) 994,904
------------ ---------- ----------- ------------
Net Income $ 1,217,402 (790,385) 281,575 $ 708,592
========== ======== ======== ==========
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Notes to Unaudited Pro Forma Combined Financial Data
December 31, 1997
a. The unaudited pro forma combined balance sheet has been
prepared to reflect the acquisition of certain assets of Cook
Bates under the purchase method of accounting. The cash purchase
price was approximately $4,818,067.
The purchase price has been allocated to the net assets purchased
based upon the fair values on the date of acquisition, as
follows:
Inventory $ 4,880,798
Property and equipment 375,000
Other assets 25,000
Prepaids 48,958
Other liabilities (511,689)
------------
Cash purchase price $ 4,818,067
===========
The pro forma combined balance sheet has been adjusted to
reflect the above as follows:
(i) To eliminate assets and liabilities not acquired or
assumed.
(ii) To adjust inventories, prepaid expenses, equipment and
leasehold improvements, and other asset balances to
reflect the actual amounts paid.
(iii) To record the indebtedness related to bank borrowings,
with effective interest rate of 9%, utilized
to finance the acquisition and to pay certain related
costs.
(iv) To record the recognition of liabilities related to plant
closings, relocation costs, and transaction costs.
(v) To eliminate the deficit of Cook Bates.
b. The unaudited pro forma combined statement of operations for
the six months ended December 31, 1997 combines the results of
Pacer Technology for such six-month period and the results of
Cook Bates for their six months ended February 28, 1998.
The unaudited pro forma combined statements of operations give
effect to the following adjustments:
<PAGE>
(i) To record six months of incremental depreciation and amortization
expense for allocated value of fixed assets and other assets
acquired.
(ii) To record six months of interest expense related to the
indebtedness of $4,818,067 utilized to finance the
acquisition.
(iii) To adjust (reduce) interest expense Cook Bates incurred on parent
company's debt of approximately $8.6 million at the rate
of 6%. Pacer Technology did not assume this debt.
(iv) To adjust the provision for income taxes to reflect the
combined result of operations assuming a statutory tax
rate of 35% on Cook Bates and pro forma adjustment.
<PAGE>
PACER TECHNOLOGY AND SUBSIDIARIES
Notes to Unaudited Pro Forma Combined Financial Data
June 30, 1997
c. The unaudited pro forma combined statement of operations for
the fiscal year ended June 30, 1997 combines the results of
Pacer Technology for such fiscal year and the results of Cook
Bates for the twelve-month period ended June 30, 1997.
The unaudited pro forma combined statements of operations give
effect to the following adjustments:
(i) To record the annual incremental depreciation and amortization
expense for allocated value of fixed assets and other assets
acquired.
(ii) To record the annual interest expense related to the
indebtedness of $4,818,067 utilized to finance the
acquisition.
(iii) To adjust (reduce) interest expense Cook Bates incurred on parent
company's debt of approximately $8.6 million at the rate
of 6%. Pacer Technology did not assume this debt.
(iv) To adjust the provision for income taxes to reflect the combined
result of operations assuming a statutory tax rate of 35% on Cook
Bates and pro forma adjustment.
<PAGE>
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 hereunto duly authorized.
PACER TECHNOLOGY
/s/Roberto J. Cavazos, Jr.
---------------------------
Roberto J. Cavazos, Jr.
Chief Financial Officer
Date: May 12, 1998
<PAGE>
