<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 4, 1995
__________________Electronic Associates, Inc.__________________
(Exact name of registrant as specified in its charter)
___________________________New Jersey___________________________
(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
1-4680 21-0606484
(Commission File Number) (IRS Employer Identification No.)
</TABLE>
_________185 Monmouth Parkway, West Long Branch, New Jersey 07764-9989_________
(Address of principal executive offices, including zip code)
_________(908) 229-1100_________
(Registrant's telephone number)
___________________________________________________________________________
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
The audited balance sheets of Tanon Manufacturing, Inc. as of December 31,
1993 and December 31, 1992 and related statements of operations, shareholders'
equity and cash flows for the years ended December 31, 1993, 1992 and 1991,
together with the unaudited balance sheet of Tanon Manufacturing, Inc. as of
October 1, 1994 and related statements of operations, shareholders' equity
and cash flows for the nine months ended October 1, 1994 and October 2, 1993,
were attached as an exhibit to the report on Form 8-K previously filed with
the Securities and Exchange Commission on January 19, 1995.
(b) Pro forma financial information.
The following Unaudited Pro Forma Combined Condensed Balance Sheet as of
September 30, 1994, and the Unaudited Pro Forma Combined Condensed Statements of
Operations for the twelve months ended December 31, 1993, and nine months ended
September 30, 1994, give effect to the consummation of the business combination
with Tanon contemplated by the Tanon Acquisition Agreement accounted for under
the purchase method of accounting. The Unaudited Pro Forma Combined Condensed
Financial Statements are based on the historical financial statements of the
Company and Tanon under the assumptions and adjustments set forth in the
accompanying Notes to the Unaudited Pro Forma Combined Condensed Financial
Statements.
The Unaudited Pro Forma Combined Condensed Balance Sheet assumes that the
business combination with Tanon was consummated on September 30, 1994, and the
Unaudited Pro Forma Combined Condensed Statements of Operations assume the
business combination with Tanon was consummated on January 1, 1993.
The Pro Forma adjustments are based on the Tanon Acquisition Agreement,
which provides for Tanon stockholders to receive a .91033 share of Common Stock
of the Company for each share of Tanon Common Stock. Such exchange ratio was
used in developing the pro forma combined financial statements based on
1,690,000 shares of Tanon Common Stock outstanding at September 30, 1994. For
purposes of developing the Unaudited Pro Forma Combined Condensed Balance Sheet,
the book values of Tanon's assets have been adjusted to estimated fair value,
identified intangible assets have been established at estimated fair value and
the excess purchase price has been assigned to goodwill. While the Company's
management does not expect any material adjustments to this assignment, the
determination of the final assignment to goodwill is subject to appraisals,
evaluations and other studies of the fair value of Tanon's assets and
liabilities, including intangible assets, which are currently in process as
of the date of this report.
In December 1994, in contemplation of the Tanon acquisition, the Company
committed to a formal plan to close its Southwest operations in Tucson,
Arizona and Nogales, Mexico. The Company also decided to substantially
consolidate its administrative facilities, currently located in West Long
Branch, New Jersey, into Fremont, California. In connection with these decisions
the Company expects to record a restructuring charge of between $2,000,000 and
$2,500,000 in the fourth quarter of 1994. This charge is not reflected in the
accompanying Unaudited Pro Forma Combined Condensed Statements of Operations.
Also, excluded from the Unaudited Pro Forma Combined Condensed Statements of
Operations are any benefits which may result from the business combination
with Tanon due to synergies that may be derived and the elimination of
duplicate efforts.
The Unaudited Pro Forma Combined Condensed Financial Statements may not be
indicative of the results that actually would have occurred if the business
combination with Tanon had been in effect on the dates indicated or which may be
obtained in the future. The Unaudited Pro Forma Combined Condensed Financial
Statements should be read in conjunction with the historical financial
statements and accompanying notes for the Company and Tanon.
2
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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
EAI TANON ADJUSTMENTS COMBINED
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................. $ 2,688 $ 699 $ 3,387
Accounts receivable - trade................................ 6,769 8,186 14,955
Notes receivable........................................... 1,160 -- (1,000)(a) 160
Inventory.................................................. 5,055 4,626 9,681
Net assets of discontinued operations...................... 322 -- 322
Prepaid expenses and other assets.......................... 377 633 1,010
Income taxes receivable.................................... 101 101
--------- --------- ----------- -----------
TOTAL CURRENT ASSETS....................................... 16,371 14,245 (1,000) 29,616
--------- --------- ----------- -----------
Equipment and leasehold improvements - net................. 3,125 2,286 66(b) 5,477
Goodwill and other intangible assets - net................. 639 12,127(b) 12,766
Other assets............................................... 304 90 394
Deferred income taxes...................................... 144 (144)(b) 0
Long-term receivable from sale of discontinued
operations.............................................. 558 558
--------- --------- ----------- -----------
$ 20,997 $ 16,765 $ 11,049 $ 48,811
--------- --------- ----------- -----------
--------- --------- ----------- -----------
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Bank debt & current portion of long-term liabilities....... $ 6,037 7,031 (1,000)(a) 12,068
Accounts payable - Trade................................ 4,578 6,583 11,161
Accrued expenses........................................ 1,074 773 1,000 (b) 2,847
--------- --------- ----------- -----------
TOTAL CURRENT LIABILITIES.................................. 11,689 14,387 0 26,076
LONG-TERM LIABILITIES:
Long-term debt and capitalized leases...................... 755 950 1,705
Other long-term liabilities................................ 2,382 577 2,959
--------- --------- ----------- -----------
TOTAL LONG TERM DEBT.................................... 3,137 1,527 0 4,664
--------- --------- ----------- -----------
COMMITMENTS AND CONTINGENCIES................................ -- -- -- --
SHAREHOLDERS EQUITY
Common stock............................................... 15,128 42 11,858 (c) 27,028
Retained earnings (deficit)................................ (8,482) 809 (809)(c) (8,482)
--------- --------- ----------- -----------
6,646 851 11,049 18,546
Less common stock in treasury, at cost....................... (475) 0 (475)
--------- --------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY.............................. 6,171 851 11,049 18,071
--------- --------- ----------- -----------
$ 20,997 $ 16,765 $ 11,049 $ 48,811
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Balance Sheet.
3
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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
EAI TANON ADJUSTMENTS COMBINED
--------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Sales........................................................... $ 26,024 $ 39,451 $ -- $ 65,475
Cost and Expenses
Cost of Sales................................................. 24,344 35,867 13(a) 60,224
Selling, general and administrative........................... 7,000 2,653 809(b) 10,462
Nonrecurring (expenses) income................................ (454) 815 -- 361
Other expenses, net........................................... 482 408 -- 890
--------- --------- ------------- -----------
Total Costs and Expenses................................... 31,372 39,743 822 71,937
--------- --------- ------------- -----------
Loss from Continuing Operations before Income Tax (benefit)..... (5,348) (292) (822) (6,462)
Income Tax (benefit).......................................... (684) (70) -- (754)
--------- --------- ------------- -----------
Loss from Continuing Operations................................. (4,664) (222) (822) (5,708)
Income from Discontinued Operations............................. 1,327 -- -- 1,327
--------- --------- ------------- -----------
Net Loss...................................................... $ (3,337) $ (222) $ (822) $ (4,381)
--------- --------- ------------- -----------
--------- --------- ------------- -----------
Earnings/(Loss) Per Share of Common Stock....................... $ (1.26) -- -- $ (1.05)(c)
Weighted Average Number of Common Stock Outstanding............. 2,647 -- -- 4,185 (c)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements of
Operations.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
EAI TANON ADJUSTMENTS COMBINED
--------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Sales........................................................... $ 22,491 $ 35,774 $ -- $ 58,265
Cost and Expenses
Cost of Sales................................................. 19,715 33,902 10(a) 53,627
Selling, general and administrative........................... 3,204 1,978 607(b) 5,789
Other expenses, net........................................... 440 485 -- 925
--------- --------- ------------- -----------
Total Costs and Expenses................................... 23,359 36,365 617 60,341
--------- --------- ------------- -----------
Net Loss...................................................... $ (868) $ (591) $ (617) $ (2,076)
--------- --------- ------------- -----------
--------- --------- ------------- -----------
Earnings/(Loss) Per Share of Common Stock....................... $ (.20) -- -- $ (.35)(c)
Weighted Average Number of Common Stock Outstanding............. 4,390 -- -- 5,928 (c)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements of
Operations.
4
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
The Unaudited Pro Forma Combined Condensed Balance Sheet was prepared to
reflect the business combination between the Company and Tanon pursuant to the
Tanon Acquisition Agreement, accounted for under the purchase method of
accounting as of September 30, 1994.
The following is a summary of pro forma adjustments reflected in the
Unaudited Pro Forma Combined Condensed Balance Sheet:
a) Represents the elimination of the $1,000,000 Note due to the Company
from Tanon.
b) The business combination with Tanon will be accounted for by the Company
using the purchase method of accounting and, therefore, a preliminary
allocation of the purchase price to the Company's assets and liabilities
to reflect their estimated fair values has been made, with the remainder
allocated to excess of purchase price over net assets acquired. Pro
forma adjustments are based upon currently available information,
including a preliminary estimate of the fair value of certain assets and
a preliminary estimate of certain liabilities. The excess of purchase
price over net assets acquired (goodwill) has been determined as
follows:
<TABLE>
<S> <C>
Purchase Price:
Estimated value of shares of
Common Stock of the Company
exchanged for 100% of the
outstanding shares of Tanon
Common Stock (1) ................................................................. $10,500,000
Conversion of options to acquire
shares of Tanon Common Stock into
options to acquire shares of Common
Stock of the Company (2) ......................................................... 1,400,000
Estimated fees, expenses and other accruals (3)................................... 1,000,000
--------------
Subtotal.......................................................................... $12,900,000
Less:
Historical Stockholders' Equity of Tanon at
September 30, 1994................................................................ 851,000
Adjustment to acquired assets and liabilities to reflect estimated fair values
Customer Relationships (4)........................................................ 1,740,000
Equipment (5)..................................................................... 66,000
Deferred Income Taxes (6)......................................................... (144,000)
--------------
Excess of purchase price over net assets acquired................................. $10,387,000
--------------
--------------
</TABLE>
(1) Represents the issuance of 1,538,462 shares of Common Stock of the
Company at an appraised value of $6.82 per share to acquire 100% of the
outstanding shares of Tanon Common Stock at the conversion rate of a
.91033 share of Common Stock of the Company for each share of Tanon
Common Stock. The appraised value was developed by applying an
estimated discount factor to the $8.50 per share market value of the
Common Stock of the Company at the effective time of the business
combination based on the lack of liquidity associated with the
unregistered shares of Common Stock of the Company issued to the former
Tanon shareholders.
Approximately 610,000 of the shares of Common Stock of the Company
issued have been discounted by 35% from the $8.50 market value, as no
effort will be made by the Company's management to register these
shares. The remaining 928,000 shares of Common Stock of the Company
have been discounted by 10% from the $8.50 market value as the
Company's management has agreed to use its best efforts to register
these shares.
5
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(2) Represents additional consideration from the exchange of outstanding
options to acquire shares of Tanon Common Stock for options to acquire
shares of Common Stock of the Company based on options to acquire
221,389 shares of Tanon Common Stock outstanding at September 30, 1994
at an average exercise price of $.95 per share. The additional
consideration reflects the exchange of an option to purchase a .91033
share of Common Stock of the Company for each Tanon option and a
corresponding increase in the average exercise price to $1.05 versus a
market value of $8.50 per share of Common Stock of the Company. The
number of option shares determined based upon the conversion rate has
been reduced by 8% in order to provide for the estimated cancellation
of options before they vest resulting from normal employee turnover.
(3) Represents an estimate of expenses related to the acquisition,
including legal fees, accounting fees, due diligence costs and other
accruals.
(4) Represents the estimated value of the existing customers with whom
Tanon has significant relationships.
(5) Represents the adjustment to Tanon's fixed assets acquired to reflect
estimated fair value.
(6) Represents the establishment of a valuation allowance against Tanon's
deferred tax assets because of its uncertain realization in the
Company's consolidated federal tax return.
c) Represents the elimination of Tanon's historical stockholders' equity
and the estimated value of shares of the Company's Common Stock and options to
acquire shares of the Company's Common Stock exchanged for shares of Common
Stock of Tanon and options to acquire shares of Common Stock of Tanon.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
The Unaudited Pro Forma Combined Condensed Statements of Operations have
been prepared to reflect the business combination between the Company and Tanon
pursuant to the Tanon Acquisition Agreement as if the business combination
occurred January 1, 1993 and was accounted for under the purchase method of
accounting. The excess of the purchase price over the fair value of the net
assets acquired (goodwill) is being amortized on a straight-line basis over a
20-year period. Included in goodwill is a component of the purchase price
associated with Tanon's research and development activities conducted prior to
the date of the business combination. Management is currently evaluating whether
such acquired research and development is economically viable and whether it has
an alternative future use.
To the extent that such research and development has no alternative future
use, it will be expensed immediately. Further, management is assessing the
estimated fair value and estimated economic lives of other acquired intangibles.
To the extent such intangibles are identified, amortization expense based on
their estimated useful life will be reflected in the Company's future
consolidated statements of operations.
The following is a summary of pro forma adjustments reflected in the
Unaudited Pro Forma Combined Condensed Statements of Operations:
a) Represents the increase in depreciation resulting from the adjustment to
Tanon's fixed assets to reflect estimated fair value.
b) Represents amortization of estimated goodwill of $10,387,000 over a
period of 20 years and amortization of the estimated value of customer
relationships of $1,740,000 over a period of 6 years.
c) Pro forma combined earnings per share amounts as presented in the
accompanying unaudited Pro Forma Combined Condensed Statements of
Operations are based on the combined weighted average number of shares
of Common Stock of the Company outstanding for each
6
<PAGE>
period presented, adjusted to reflect the additional 1,538,462 shares of
Common Stock of the Company to be issued to Tanon shareholders at the
conversion rate of a .91033 share of Common Stock of the Company for
each share of Tanon Common Stock.
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - -------------- --------------------------------------------------------------------------------------------------
<S> <C>
2* Agreement and Plan of Reorganization by and among Electronic Associates, Inc., Tanon
Manufacturing, Inc., EAI Acquisition Corp. and Joseph R. Spalliero, dated December 12, 1994.
99* The audited financial statements of Tanon Manufacturing, Inc. as of December 31, 1993 and December
31, 1992 and for the years ended December 31, 1993, 1992 and 1991, together with the unaudited
financial statements of Tanon Manufacturing, Inc. as of October 1, 1994 and for the nine months
ended October 1, 1994 and October 2, 1993.
</TABLE>
- - ------------------
* previously filed.
7
<PAGE>
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 hereto duly authorized.
ELECTRONIC ASSOCIATES, INC.
Registrant
By: /s/__Jonathan R. Wolter___________
JONATHAN R. WOLTER
Treasurer and Vice President, Finance
(Principal Financial and Accounting
Officer)
Date: March 17, 1995
8
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- - -------------- ---------------------------------------------------------------------------------------- --------
<S> <C> <C>
2* Agreement and Plan of Reorganization by and among Electronic Associates, Inc., Tanon
Manufacturing, Inc., EAI Acquisition Corp. and Joseph R. Spalliero, dated December 12,
1994.
99* The audited financial statements of Tanon Manufacturing, Inc. as of December 31, 1993
and December 31, 1992 and for the years ended December 31, 1993, 1992 and 1991, together
with the unaudited financial statements of Tanon Manufacturing, Inc. as of October 1,
1994 and for the nine months ended October 1, 1994 and October 2, 1993.
</TABLE>
- - ------------------
* previously filed.
9
