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Previous: BALCOR REALTY INVESTORS LTD 82, 10-Q, 1998-11-12 |
Next: HOLLYWOOD PARK INC/NEW/, 10-Q, 1998-11-12 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): AUGUST 28, 1998
AVIATION GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
TEXAS 0-10124 75-2631373
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification No.)
700 N. PEARL STREET, SUITE 2170
DALLAS, TEXAS 75201
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 922-8100.
1
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Businesses Acquired.
Financial Statements of General Electrodynamics Corporation
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants dated October 21, 1998 by Rodriguez
Holland & Co., P.C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Balance sheets of August 31, 1998 and August 31, 1997 . . . . . . . . . . . . . . . . . . F-2
Statements of operations for the years ended August 31, 1998 and
August 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statements of cash flow for the years ended August 31, 1998
and August 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
</TABLE>
(b) Pro Forma Financial Information.
Unaudited Pro Forma Financial Statements of Aviation Group, Inc. and
its Subsidiaries
The Company's Unaudited Pro Forma Consolidated Statement of Operations
for the fiscal year ended June 30, 1998, and the Company's Unaudited Pro Forma
Consolidated Balance Sheet at June 30, 1998, contained herein give effect to
the acquisition in August 1998 of General Electrodynamics Corporation ("GEC")
utilizing the purchase method of accounting.
The Company's Unaudited Pro Forma Consolidated Statement of Operations
is presented as if the GEC acquisition had been consummated at the beginning of
the period presented. The Company's Unaudited Pro Forma Consolidated Balance
Sheet assumes the GEC acquisition had been consummated on June 30, 1998. The
pro forma adjustments relating to the allocation of the purchase price of GEC
represent the Company's preliminary determinations of the purchase accounting
and other adjustments and are based upon available information and certain
assumptions that the Company considers reasonable under the circumstances.
Final amounts could differ from those set forth therein.
The Unaudited Pro Forma Consolidated Financial Statements of the
Company are presented for illustrative purposes only and do not purport to
present the financial position or results of operations of the Company nor are
they necessarily indicative of the results of operations which may be expected
to occur in the future.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Pro forma balance sheet as of June 30, 1998 . . . . . . . . . . . . . . . . . . . . . . . F-12
Pro forma statement of operations for the year ended June 30, 1998 . . . . . . . . . . . . F-13
</TABLE>
2
<PAGE> 3
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Stock Purchase Agreement dated as of August 28, 1998 among Aviation Group, Inc., General
Electrodynamics Corporation, Omega Management Corporation and Thomas J. Smith (schedules
and exhibits are omitted but will be provided to the Commission upon request).*
</TABLE>
- --------------------------
*Previously filed
3
<PAGE> 4
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.
Dated: November 11, 1998.
AVIATION GROUP, INC.
By: /s/ Richard L. Morgan
------------------------------
Richard L. Morgan, Executive
Vice President and Chief
Financial Officer
4
<PAGE> 5
[RODRIGUEZ HOLLAND & CO., P.C. LETTERHEAD]
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
General Electrodynamics Corporation
We have audited the accompanying balance sheets of General Electrodynamics
Corporation as of August 31, 1998 and 1997, and the related statements of
income, retained earnings, 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 audit.
We conducted the 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 General Electrodynamics
Corporation as of August 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ RODRIGUEZ HOLLAND & CO., P.C.
October 21, 1998
F-1
<PAGE> 6
GENERAL ELECTRODYNAMICS CORPORATION
BALANCE SHEETS
AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 41,196 $ 43,968
Accounts receivable - trade 244,396 243,332
Inventories 1,039,490 1,020,118
Prepaid expenses and other current assets 4,805 11,519
Income tax refund receivable -- 39,337
----------- -----------
Total current assets 1,329,887 1,358,274
Property and equipment. net 848,783 989,405
Intangible assets, net 271,989 306,067
----------- -----------
Total assets $ 2,450,659 $ 2,653,746
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
1998 1997
----------- -----------
Current liabilities:
Note payable to bank $ 400,000 $ --
Current portion of long-term debt 354,978 485,275
Accounts payable 391,320 515,269
Accrued liabilities 80,801 83,319
Customer advances 205,329 429,080
----------- -----------
Total current liabilities 1,432,428 1,512,943
Long-term debt, net of current portion 819,766 888,574
----------- -----------
Total liabilities 2,252,194 2,401,517
Stockholder's equity:
Common stock, par value $.01, 100,000 shares authorized;
1,000 shares issued and outstanding 10 10
Additional paid-in capital 336,854 249,990
Retained earnings (deficit) (138,399) 2,229
----------- -----------
Total stockholder's equity 198,465 252,229
----------- -----------
Total liabilities and stockholder's equity $ 2,450,659 $ 2,653,746
=========== ===========
</TABLE>
F-2
The accompanying notes are an integral part of these financial statements
<PAGE> 7
GENERAL ELECTRODYNAMICS CORPORATION
STATEMENTS OF INCOME AND RETAINED EARNINGS
For the years ended August 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Sales $ 3,642,646 $ 5,187,039
Cost of sales 2,195,707 3,166,924
----------- -----------
Gross profit 1,446,939 2,020,115
Warehousing, selling, general and
administrative expenses 1,426,948 1,916,510
----------- -----------
Income (loss) from operations 19,991 103,605
Interest expense (160,619) (167,786)
----------- -----------
Income (loss) before income taxes (140,628) (64,181)
Income tax expense (benefit) -- (11,185)
----------- -----------
Net income (loss) (140,628) (52,996)
Beginning retained earnings 2,229 55,225
----------- -----------
Ending retained earnings (deficit) $ (138,399) $ 2,229
=========== ===========
</TABLE>
F-3
The accompanying notes are an integral part of these financial statements
<PAGE> 8
GENERAL ELECTRODYNAMICS CORPORATION
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED AUGUST 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (140,628) $ (52,996)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 127,571 121,909
Amortization of intangible assets 34,078 30,176
Loss on sale of equipment 7,814 8,842
Deferred income taxes -- (4,842)
Changes in assets and liabilities:
Accounts receivable - trade (1,064) 202,713
Inventories (19,372) (177,117)
Prepaid expenses and other current assets 6,714 21,598
Income tax refund receivable 39,337 (39,337)
Accounts payable (123,949) 80,806
Accrued liabilities (2,518) (1,995)
Customer advances (223,751) 429,080
Income taxes payable -- (13,396)
----------- -----------
Net cash provided (used) by operating activities (295,768) 605,441
Cash flows from investing activities:
Purchase of property and equipment (3,563) (58,454)
Proceeds from sale of property and equipment 8,800 10,300
----------- -----------
Net cash provided (used) by investing activities 5,237 (48,154)
Cash flows from financing activities:
Payments on notes payable -- (80,000)
Proceeds from issuance of long-term debt -- 14,622
Proceeds from notes payable 400,000 --
Payments on long-term debt (199,105) (475,381)
Additional paid-in capital 86,864 --
----------- -----------
Net cash provided (used) by financing activities 287,759 (540,759)
----------- -----------
Net increase (decrease) in cash (2,772) 16,528
Cash at beginning of year 43,968 27,440
----------- -----------
Cash at end of year $ 41,196 $ 43,968
=========== ===========
</TABLE>
F-4
The accompanying notes are an integral part of these financial statements
<PAGE> 9
GENERAL ELECTRODYNAMICS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1998 AND 1997
NOTE 1 - ORGANIZATION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Omega Acquisition Corporation (Omega) was organized and incorporated in
Texas in August 1995. Omega changed its name to General Electrodynamics
Corporation (GEC) in September 1995, when it was capitalized. GEC was a
wholly owned subsidiary of Omega Management Corporation until August 1998,
when it was purchased by Aviation Group, Inc.
GEC is in the business of manufacturing and selling portable electronic
scales and weighing devices throughout the world to a variety of customers
including the airline industry and governments. The following is a summary
of GEC's significant accounting policies.
INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation.
Additions to, and major improvements of, property and equipment are
capitalized. Maintenance and repair costs are expensed as incurred. When
assets are retired, or otherwise disposed of, their costs and related
accumulated depreciation are removed from the accounts. Any resulting gains
or losses are included in the operations of the period.
Depreciation for financial reporting purposes is computed using the
straight-line method over the estimated useful lives of the assets as
follows:
Production equipment 10 years
Furniture and fixtures 10 years
Office equipment 6 years
Transportation equipment 3-5 years
INTANGIBLE ASSETS
ORGANIZATION COSTS - The costs of forming the Company, primarily legal
fees, were capitalized and are being amortized on a straight-line
basis over five years.
COVENANT NOT TO COMPETE - The value assigned to the covenant not to
compete is its acquisition cost, measured by the present value of
the liability incurred. The covenant not to compete is being
amortized on a straight-line basis over 15 years.
F-5
<PAGE> 10
GENERAL ELECTRODYNAMICS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
GEC provides deferred taxes on income for differences between income
reported for financial reporting purposes and taxable income, in accordance
with Statement of Financial Accounting Standards No. 109. Deferred income
taxes reflect the impact of temporary differences between amounts of assets
and liabilities for financial reporting purposes and such amounts as
measured by tax laws.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as
incurred. Research and development expense was approximately $306,563 and
$240,000 for the years ended August 31, 1998 and 1997, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments in accordance with Statement of
Financial Accounting Standards No. 107:
NOTES PAYABLE AND LONG-TERM DEBT
Based on the borrowing rates currently available to the Company for
loans with similar terms and average maturities, and due to all bank
debt being at variable rates, the fair value of long-term debt
approximates its carrying amount.
USES OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. Such estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues during the reporting periods. Actual results could differ from
estimates. GEC uses estimates to calculate depreciation and amortization
expense.
F-6
<PAGE> 11
GENERAL ELECTRODYNAMICS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1998 AND 1997
NOTE 2 - ASSET PURCHASE AGREEMENT
On September 19, 1995, GEC acquired substantially all of its operating
assets under a purchase and sale agreement. The asset acquisition was
accounted for by the purchase method of accounting. Under the terms of the
purchase and sale agreement, GEC acquired certain assets for $1,880,000 in
cash, which was funded through a bank term note and assumed certain
specific liabilities of the seller.
GEC also executed a royalty agreement and an ancillary covenant not to
compete with the seller. The noncompetition agreement provides for payments
to the seller over a four year period in exchange for covenants not to
compete from the seller for a period of 15 years. The noncompetition
agreement is partially guaranteed by the sole stockholder of Omega
Management Corporation, which had been GEC's parent company. It is
subordinate to GEC's bank debt.
NOTE 3 - INVENTORIES
Inventories consisted of the following at August 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Finished goods $ 50,388 $ 21,475
Work in process 264,762 442,719
Raw materials 724,340 555,924
---------- ----------
$1,039,490 $1,020,118
========== ==========
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at August 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Production equipment $1,088,564 $1,088,564
Furniture and fixtures 39,506 39,506
Office equipment 72,549 68,986
Transportation equipment 8,910 33,832
---------- ----------
1,209,529 1,230,888
Less accumulated depreciation 360,746 241,483
---------- ----------
Total property and equipment, net $ 848,783 $ 989,405
========== ==========
</TABLE>
F-7
<PAGE> 12
GENERAL ELECTRODYNAMICS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
August 31, 1998 and 1997
NOTE 5 - INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
Accumulated
Cost Amortization Net
---- ------------ ---
<S> <C> <C> <C>
August 31, 1998:
----------------
Organization costs $ 68,473 $ 41,085 $ 27,388
Covenant not to compete 305,750 61,149 244,601
--------- --------- ---------
Total 374,223 $ 102,234 $ 271,989
========= ========= =========
August 31, 1997:
----------------
Organization costs $ 68,473 $ 27,390 $ 41,083
Covenant not to compete 305,750 40,766 $ 264,984
--------- --------- ---------
Total 374,223 $ 68,156 $ 306,067
========= ========= =========
</TABLE>
NOTE 6 - NOTE PAYABLE TO BANK
Note payable to bank of $400,000 at August 31, 1998 consisted of a revolving
note with interest at the bank base rate (9.5% at August 31, 1998) plus 1%, due
October 1998, collateralized by equipment, inventory and accounts receivable.
NOTE 7 - ADDITIONAL PAID-IN CAPITAL
In connection with its purchase of GEC in August 1998, Aviation Group, Inc.
contributed $86,864 in additional paid-in capital, which was used to repay a
loan from its former shareholder.
NOTE 8 - INCOME TAXES
The income tax benefit in 1997 resulted from the carryback of part of that
year's operating loss to the prior year. After the carryback, GEC had remaining
approximately $160,000 of tax losses available for carryforward to offset
future taxable income. The tax loss of approximately $140,000 sustained in 1998
is also available for carryforward to offset future taxable income.
F-8
<PAGE> 13
GENERAL ELECTRODYNAMICS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1998 AND 1997
NOTE 9 - LONG-TERM DEBT
Long-term debt consisted of the following at August 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Note payable to bank, interest at bank base rate adjusted
periodically (9% and 10% at August 31, 1998 and 1997,
respectively); collateralized by equipment, inventories,
accounts receivable, intangibles and stock of the Company's
Parent. Due in monthly payments of $17,222 plus interest
through April 2003. 964,445 $1,133,333
Covenant not to compete 210,299 229,436
Note payable to bank in monthly installments of $554,
including interest of 10.25%; secured by vehicle. -- 11,080
----------- -----------
1,174,744 1,373,849
Less current portion 354,978 485,275
----------- -----------
$ 819,766 $ 888,574
=========== ===========
</TABLE>
Maturities of long-term debt at August 31, 1998, were as follows:
<TABLE>
<S> <C>
1999 $ 354,978
2000 268,655
2001 206,667
2002 206,667
2003 137,777
-----------
$ 1,174,744
===========
</TABLE>
F-9
<PAGE> 14
GENERAL ELECTRODYNAMICS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1998 AND 1997
NOTE 10 - COVENANT NOT TO COMPETE
As part of the asset purchase agreement, as amended by a compromise and
settlement agreement on May 24, 1996, GEC agreed to pay the Seller $400,000
over the next four years in exchange for covenants not to compete. Payments
are due quarterly with an initial payment of $10,000 due May 31, 1996,
and $25,000 thereafter through February 28, 2000. A final payment of
$15,000 is due on May 31, 2000. All of the above amounts include imputed
interest. The expected flow of payments has been discounted at 10.25% as
follows:
<TABLE>
<S> <C>
Face amount of agreement $ 400,000
Discount at 10.25% (94,250)
-----------
305,750
Payments to August 31, 1996 (4,475)
-----------
Discounted amount included
in long-term debt at August 31, 1996 301,275
Payments during year ended August 31, 1997 (71,839)
-----------
Discounted amount included
in long-term debt at August 31, 1997 229,436
Payments during year ended August 31, 1998 (19,137)
-----------
Discounted amount included in long-term
debt at August 31, 1998 $ 210,299
===========
</TABLE>
The covenant not to compete is partially guaranteed by the sole stockholder
of Omega Management Corporation, which had been GEC's parent company. It is
subordinate to GEC's bank debt. The amortization of the discount is
included in interest expense.
NOTE 11 - COMMITMENTS
GEC has building and equipment operating lease agreements. Total rent
expense was approximately $65,800 and $80,600 for the years ended August
31, 1998 and 1997, respectively.
The following is a schedule of future minimum lease payments required under
operating leases that had initial or remaining noncancellable terms in
excess of one year at August 31, 1998:
<TABLE>
<S> <C>
1999 $ 8,280
2000 8,280
2001 3,450
-------
$20,010
=======
</TABLE>
F-10
<PAGE> 15
GENERAL ELECTRODYNAMICS CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 1998 AND 1997
NOTE 12 - PROFIT SHARING PLAN
GEC maintains a voluntary 401(k) profit sharing plan covering all
employees. Employees may choose to defer a portion of their compensation,
not to exceed the Internal Revenue Service limitations, by contributing to
the Plan. Company contributions are discretionary. GEC did not contribute
to the Plan during fiscal years ended August 31, 1998 and 1997.
NOTE 13 - MAJOR CUSTOMERS
Approximately 31% and 26% of GEC's revenue during the years ended August
31, 1998 and 1997, respectively, were from transactions with a U.S.
government defense agency. In addition, for the year ended August 31, 1997,
approximately 57% of GEC's revenue were from transactions with a Russian
government agency.
NOTE 14 - YEAR 2000 ISSUE
GEC may be affected by the problems associated with the Year 2000 issue. An
in-depth examination will need to be made of all computer programs and
computer equipment to ensure that they comply. Critical vendors and
grantors will also need to be contacted to make sure they will be Year 2000
compliant.
F-11
<PAGE> 16
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AVIATION GROUP, INC. AND SUBSIDIARIES
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
Historical
----------------------------------------------------
Aviation Group, Inc. General Electroydnamics
Consolidated Balance Sheet Balance Sheet
30-Jun-98 31-Aug-98
(audited) (audited)
-------------------------- -----------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 509,000 $ 41,00
Restricted Time Deposit 200,000
Accounts receiveable, net 2,020,000 244,000
Inventory, net 1,513,000 1,040,000
Deferred income taxes 88,000
Prepaid expenses and other 129,000 5,000
-------------- --------------
Total Current Assets 4,459,000 1,330,000
-------------- --------------
Property and equipment 4,812,000 1,210,000
Less: accumulated depreciation (1,099,000) (361,000)
-------------- --------------
3,713,000 849,000
-------------- --------------
Goodwill, net 3,135,000
Deferred income taxes 112,000
Other 181,000 272,000
-------------- --------------
3,428,000 272,000
-------------- --------------
Total Assets $ 11,600,000 $ 2,451,000
============== ==============
LIABILITIES AND SHARHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 625,000 $ 355,000
Current portion of capital lease obligations 71,000
Other short-term borrowings 855,000 400,000
Accounts payable 1,424,000 391,000
Accrued interest 44,000
Income taxes payable 25,000
Accrued and other liabilities 1,023,000 286,000
-------------- --------------
Total Current Liabilities 4,067,000 1,432,000
-------------- --------------
Long-Term Liabilities
Long-term debt, net of current maturities 723,000 820,000
Capital lease obligations, net of current maturities 181,000
Loan from shareholder 15,000
Deferred income taxes
-------------- --------------
Total Long-Term Liabilities 919,000 820,000
-------------- --------------
Total Liabilities 4,986,000 2,255,000
Shareholders' Equity
Common Stock 33,000
Additional Paid-in capital 8,957,000 337,000
Retained earnings (deficit) (2,376,000) (138,000)
-------------- --------------
Total Shareholders' Equity 6,614,000 199,000
-------------- --------------
Total Liabilities and Shareholders' Equity $ 11,600,000 $ 2,451,000
============== ==============
<CAPTION>
Pro-Forma
----------------------------------------
Adjustments As Adjusted
and Consolidated
Eliminations Balance Sheet
(unaudited) (unaudited)
------------- ---------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 550,000
Restricted Time Deposit 200,000
Accounts receiveable, net 2,264,000
Inventory, net 2,553,000
Deferred income taxes 88,000
Prepaid expenses and other 134,000
-------------- --------------
Total Current Assets -- 5,789,000
-------------- --------------
Property and equipment 6,022,000
Less: accumulated depreciation (1,460,000)
-------------- --------------
4,562,000
-------------- --------------
Goodwill, net 151,000 (2) 3,280,000
(6,000)(3)
Deferred income taxes 112,000
Other 453,000
-------------- --------------
145,000 3,845,000
-------------- --------------
Total Assets $145,000 $ 14,196,000
============== ==============
LIABILITIES AND SHARHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 980,000
Current portion of capital lease obligations 71,000
Other short-term borrowings 1,255,000
Accounts payable 56,000 (2) 1,871,000
Accrued interest 44,000
Income taxes payable 25,000
Accrued and other liabilities 1,309,000
-------------- --------------
Total Current Liabilities 56,000 5,555,000
-------------- --------------
Long-Term Liabilities
Long-term debt, net of current maturities 1,543,000
Capital lease obligations, net of current maturies 181,000
Loan from shareholder 15,000
Deferred income taxes --
-------------- --------------
Total Long-Term Liabilities -- 1,739,000
-------------- --------------
Total Liabilities 56,000 7,294,000
Shareholders' Equity
Common Stock 1,000 (2) 34,000
Additional Paid-in capital (337,000)(1) 9,244,000
293,000 (2)
(6,000)(3)
Retained earnings (deficit) 138,000 (1) (2,376,000)
-------------- --------------
Total Shareholders' Equity 89,000 6,902,000
-------------- --------------
Total Liabilities and Shareholders' Equity $ 145,000 $ 14,196,000
============== ==============
</TABLE>
- ---------------------------------------------------------------------------
(1) TO ELIMINATE GEC SHAREHOLDERS' EQUITY AND RETAINED EARNINGS FROM
CONSOLIDATED SHAREHOLDERS' EQUITY.
(2) TO RECORD THE PURCHASE OF GEC FOR 112,029 SHARES OF COMMON STOCK, PLUS
ACCRUAL FOR CLOSING COSTS OF APPROXIMATELY $56,000 AND RELATED GOODWILL OF
$151,000.
(3) TO RECORD PRO FORMA GOODWILL AMORTIZATION OF $6,000 FOR GOODWILL EXPENSE.
<PAGE> 17
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
AVIATION GROUP, INC. AND SUBSIDIARIES
FOR YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Historical
----------------------------------------------------
Aviation Group, Inc. General Electrodynamics
30-Jun-98 31-Aug-98
(audited) (audited)
-------------------------- -----------------------
<S> <C> <C>
Revenues $ 18,244,000 $ 3,643,000
Cost of revenue 14,618,000 2,196,000
-------------- --------------
Gross Profit 3,626,000 1,447,000
-------------- --------------
General and administrative expenses 4,672,000 1,265,000
Depreciation and amortization 694,000 l62,000
-------------- --------------
Income (loss) from operations (1,740,000) 20,000
Other income (expenses)
Interest income 116,000
Other, net 13,000
Interest expense (386,000) (161,000)
-------------- --------------
(257,000) (161,000)
Income (loss) before provision for
income taxes (1,997,000) (141,000)
Provision (benefit) for income taxes (359,000) --
-------------- --------------
Net income (loss) $ (1,638,000) $ (141,000)
============== ==============
Net income (loss) per common and
common equivalent share-
basic and diluted ($0.54)
==============
Basic and diluted weighted average
shares 3,059,632
<CAPTION>
Pro-Forma
-----------------------------------------
Adjustments As Adjusted
Eliminations Balance Sheet
(unaudited) (unaudited)
------------- ---------------
<S> <C> <C>
Revenues $ 21,887,000
Cost of revenue 16,814,000
-------------- --------------
Gross Profit 5,073,000
General and administrative expenses 5,937,000
Depreciation and amortization (6,000)(1) 862,000
-------------- --------------
Income (loss) from operations (6,000) (1,726,000)
Other income (expenses)
Interest income 116,000
Other, net 13,000
Interest expense (547,000)
-------------- --------------
(418,000)
Income (loss) before provision for
income taxes (6,000) (2,144,000)
Provision (benefit) for income taxes (359,000)
-------------- --------------
Net income (loss) (6,000) (1,785,000)
============== ==============
Net income (loss) per common and
common equivalent share-
basic and diluted ($0.56)
==============
Basic and diluted weighted average
shares 112,029 3,171,661
</TABLE>
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(1) TO RECORD PRO FORMA GOODWILL AMORTIZATION.
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