SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
May 6, 1998
(Date of report)
March 27, 1998
(Date of earliest event reported)
MILASTAR CORPORATION
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
DELAWARE 0-5105 13-2636669
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
No. 9 Via Parigi, Palm Beach, Florida 33480
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (561) 655-9590
Not Applicable
Former name, former address and former fiscal year, if changed
since last report.
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Form 8-K Report filed on
March 27, 1998 as set forth in the pages attached hereto:
Item 7.FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
The financial statements of Twin City Steel Treating Co., Inc.,
a Minnesota Corporation, ("Twin City Steel Treating") required
to be filed pursuant to Item 7 of Form 8-K filed on March 27,
1998.
(b) Pro Forma Financial Information
Pro forma financial information, required to be filed pursuant to
Item 7 of Form 8-K filed on March 27, 1998 reflecting the
acquisition of Twin City Steel Treating.
(c) Exhibits:
10.5 Asset Purchase Agreement dated as of March 16, 1998 by
and among Flame Metals Processing Corporation ("Flame"), Twin City
Steel Treating and Marvin Schendel.
ONLY THOSE ITEMS AMENDED ARE REPORTED
HEREIN. CAPITALIZED TERMS NOT OTHERWISE
DEFINED HEREIN SHALL HAVE THE MEANINGS
GIVEN TO THEM IN THE FORM 8-K FILED
ON MARCH 27, 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 hereunto duly authorized.
MILASTAR CORPORATION
/s/ L. MICHAEL McGURK
L. Michael McGurk
Chief Operating Officer
and President
Dated: May 6, 1998
MILASTAR CORPORATION AND SUBSIDIARIES
INTRODUCTION TO FINANCIAL STATEMENTS OF
BUSINESS ACQUIRED
Twin City Steel Treating was a privately held, family-owned business
and accordingly, does not have audited financial statements available.
The financial statements included herein were made available to Milastar
Corporation (the "Company") in evaluating the acquisition. These
financial statements were reviewed by an outside independent accountant
and the Company had sufficient access to other records to satisfy itself
as to the accuracy of these statements. However, the Company has been
advised that it is not reasonably possible for its independent public
accountants to audit these financial statements. In addition, the
Company is indemnified under the terms of the Purchase Agreement for
any inaccuracies in the financial statements which may become known
subsequent to closing.
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TWIN CITY STEEL TREATING CO., INC.
BALANCE SHEETS
(Unaudited)
ASSETS
July 31, July 31,
1996 1995
<C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . 22,248 30,649
Trade receivables, less allowance for doubtful
accounts of $-0-, 1996 and 1995. . . . . . . . . 270,493 250,134
Prepaid insurance. . . . . . . . . . . . . . . . . . 72,823 71,577
Income taxes receivable. . . . . . . . . . . . . . . 6,913
Deferred tax asset . . . . . . . . . . . . . . . . . 5,569 12,321
Other current assets . . . . . . . . . . . . . . . . 14,974 3,072
Total current assets . . . . . . . . . . . . . . . 393,020 367,753
Property, plant and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . . 248,526 26,779
Buildings and improvements . . . . . . . . . . . . . 128,116 128,116
New building - construction in progress. . . . . . . 224,851
Machinery and equipment. . . . . . . . . . . . . . . 904,018 734,506
Furniture and fixtures . . . . . . . . . . . . . . . 107,219 107,219
Land . . . . . . . . . . . . . . . . . . . . . . . . 98,178 98,178
1,710,908 1,094,798
Less accumulated depreciation . . . . . . . . . . . (752,092) (687,390)
958,816 407,408
Other assets:
Deposit on property and equipment. . . . . . . . . . 1,900 5,000
Loan costs, net of amortization. . . . . . . . . . . 38,855 6,400
Total assets . . . . . . . . . . . . . . . . . . . . . 1,392,591 786,561
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<C> <C>
Current liabilities:
Current maturities of long-term debt . . . . . . . . 55,550 92,550
Current maturities of capital lease obligations. . . 16,050 12,100
Accounts payable . . . . . . . . . . . . . . . . . . 83,786 43,477
Accrued income taxes . . . . . . . . . . . . . . . . 6,386 9,722
Insurance payable. . . . . . . . . . . . . . . . . . 56,630 59,596
Other current liabilities. . . . . . . . . . . . . . 19,405 21,099
Total current liabilities. . . . . . . . . . . . . 237,807 238,544
Long-term debt, less current maturities. . . . . . . . 517,429 33,086
Loan from stockholder. . . . . . . . . . . . . . . . . 65,500
Capital lease obligations, less current maturities . . 18,764 15,732
Total liabilities. . . . . . . . . . . . . . . . . . . 839,500 287,362
Stockholders' equity:
Common stock, 1,500 shares authorized,
500 shares issued. . . . . . . . . . . . . . . . . . 80,097 80,097
Retained earnings. . . . . . . . . . . . . . . . . . 472,994 419,102
Total stockholders' equity . . . . . . . . . . . . . . 553,091 499,199
Total liabilities and stockholders' equity . . . . . . 1,392,591 786,561
</TABLE>
<TABLE>
<CAPTION>
TWIN CITY STEEL TREATING CO., INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Fiscal Years Ended July 31,
(Unaudited)
1996 1995
<C> <C>
Net Sales. . . . . . . . . . . . . . . . . . . . . . 2,016,159 1,954,149
Cost of Sales. . . . . . . . . . . . . . . . . . . . 1,333,366 1,255,202
Gross profit . . . . . . . . . . . . . . . . . . . . 682,793 698,947
Selling expenses . . . . . . . . . . . . . . . . . . 99,444 90,918
General and administrative expenses. . . . . . . . . 493,545 448,557
Operating income . . . . . . . . . . . . . . . . . . 89,804 159,472
Other income (expense):
Interest income. . . . . . . . . . . . . . . . . . 137
Interest expense . . . . . . . . . . . . . . . . . (19,917) (18,807)
Miscellaneous income . . . . . . . . . . . . . . . 2,295
Total other income (expense) . . . . . . . . . . (17,485) (18,807)
Income (loss) before provision for income taxes. . . 72,319 140,665
Provision for income taxes . . . . . . . . . . . . . 18,427 38,265
Net income . . . . . . . . . . . . . . . . . . . . . 53,892 102,400
Retained earnings, beginning . . . . . . . . . . . . 419,102 316,702
Retained earnings, ending. . . . . . . . . . . . . . 472,994 419,102
</TABLE>
<TABLE>
<CAPTION>
TWIN CITY STEEL TREATING
STATEMENT OF CASH FLOWS
Fiscal Years Ended July 31,
(Unaudited)
1996 1995
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . 53,892 102,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . 66,656 67,034
Deferred taxes. . . . . . . . . . . . . . . . . . 6,752 20,943
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . (20,359) (22,048)
Prepaid insurance . . . . . . . . . . . . . . . . (1,246) (24,001)
Income taxes receivable . . . . . . . . . . . . . (6,913)
Other assets. . . . . . . . . . . . . . . . . . . (8,886) (1,464)
Accounts and insurance payable. . . . . . . . . . 37,343 41,824
Accrued income taxes. . . . . . . . . . . . . . . (3,336) 4,632
Other current liabilities . . . . . . . . . . . . (1,694) 2,521
Net cash provided by operating activities. . . . . 122,209 191,841
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment. . . . (244,304) (134,525)
Deposits on land and fixed assets . . . . . . . . (1,900) (5,000)
Loan costs paid . . . . . . . . . . . . . . . . . (19,716) (6,400)
Net cash used in investing activities. . . . . . . (265,920) (145,925)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt. . . . . 142,392 48,000
Principal payments on long-term debt. . . . . . . (72,582) (98,554)
Proceeds from issuance of note
payable - stockholder. . . . . . . . . . . . . . 65,500
Net cash provided by (used) financing activities . 135,310 (50,554)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . (8,401) (4,638)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR . . . . 30,649 35,287
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . 22,248 30,649
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . 23,021 18,966
Income taxes . . . . . . . . . . . . . . . . . . 24,622 12,690
</TABLE>
<TABLE>
<CAPTION>
TWIN CITY STEEL TREATING CO., INC.
BALANCE SHEETS
(Unaudited)
ASSETS
January 31, July 31,
1998 1997
<C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . 7,317 10,244
Trade receivables, less allowance for doubtful
accounts of $-0-, 1998 and 1997. . . . . . . . . 283,316 271,465
Prepaid insurance. . . . . . . . . . . . . . . . . . 43,401 55,450
Income taxes receivable. . . . . . . . . . . . . . . 3,210 11,713
Escrow balance . . . . . . . . . . . . . . . . . . . 2,824 2,542
Deferred tax asset . . . . . . . . . . . . . . . . . 5,402 5,402
Other current assets . . . . . . . . . . . . . . . . 8,529 7,051
Total current assets . . . . . . . . . . . . . . . 353,999 363,867
Property, plant and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . . 221,747 221,747
Buildings and improvements . . . . . . . . . . . . . 1,501,952 1,501,952
Machinery and equipment. . . . . . . . . . . . . . . 1,077,151 1,070,405
Furniture and fixtures . . . . . . . . . . . . . . . 134,907 133,397
Land . . . . . . . . . . . . . . . . . . . . . . . . 98,178 98,178
3,033,935 3,025,679
Less accumulated depreciation . . . . . . . . . . . (788,632) (734,092)
2,245,303 2,291,587
Other assets:
Loan costs, net of amortization. . . . . . . . . . . 41,272 43,972
Total assets . . . . . . . . . . . . . . . . . . . . . 2,640,574 2,699,426
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<C> <C>
Current liabilities:
Credit line payable. . . . . . . . . . . . . . . . . 195,000 195,000
Current maturities of long-term debt . . . . . . . . 100,700 88,450
Current maturities of capital lease obligations. . . 10,575 12,250
Accounts payable . . . . . . . . . . . . . . . . . . 371,795 293,452
Insurance payable. . . . . . . . . . . . . . . . . . 45,919 55,827
Other current liabilities. . . . . . . . . . . . . . 31,227 19,502
Total current liabilities. . . . . . . . . . . . . 755,216 664,481
Long-term debt, less current maturities. . . . . . . . 1,320,368 1,359,605
Loan from stockholder. . . . . . . . . . . . . . . . . 91,798 81,500
Capital lease obligations, less current maturities . . 31,724 36,483
Total liabilities. . . . . . . . . . . . . . . . . . . 2,199,106 2,142,069
Stockholders' equity:
Common stock, 1,500 shares authorized,
500 shares issued . . . . . . . . . . . . . . . . . 80,097 80,097
Retained earnings. . . . . . . . . . . . . . . . . . 361,371 477,260
Total stockholders' equity . . . . . . . . . . . . . . 441,468 577,357
Total liabilities and stockholders' equity . . . . . . 2,640,574 2,699,426
</TABLE>
<TABLE>
<CAPTION>
TWIN CITY STEEL TREATING CO., INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six Months Ended January 31, 1998 and Fiscal Year Ended July 31, 1997
(Unaudited)
Six Months Fiscal Year
Ended Ended
January 31, July 31,
1998 1997
<C> <C>
Net Sales. . . . . . . . . . . . . . . . . . . . . . . 1,033,737 1,922,500
Cost of Sales. . . . . . . . . . . . . . . . . . . . . 742,250 1,476,708
Gross profit . . . . . . . . . . . . . . . . . . . . . 291,487 445,792
Selling expenses . . . . . . . . . . . . . . . . . . . 38,916 98,063
General and administrative expenses. . . . . . . . . . 305,658 494,726
Operating income (loss). . . . . . . . . . . . . . . . (53,087) (146,997)
Other income (expense):
Interest income. . . . . . . . . . . . . . . . . . . 63
Interest expense . . . . . . . . . . . . . . . . . . (79,502) (129,689)
Net gain on sale of property and equipment . . . . . 257,825
Miscellaneous income . . . . . . . . . . . . . . . . 16,700 26,148
Total other income (expense) . . . . . . . . . . . (62,802) 154,347
Income (loss) before provision for income taxes. . . . (115,889) 7,350
Provision for income taxes . . . . . . . . . . . . . . 3,084
Net income . . . . . . . . . . . . . . . . . . . . . . (115,889) 4,266
Retained earnings, beginning . . . . . . . . . . . . . 477,260 472,994
Retained earnings, ending. . . . . . . . . . . . . . . 361,371 477,260
</TABLE>
<TABLE>
<CAPTION>
TWIN CITY STEEL TREATING CO., INC.
STATEMENT OF CASH FLOWS
Six Months Ended January 31, 1998 and Fiscal Year Ended July 31, 1997
(Unaudited)
Six Months Fiscal Year
Ended Ended
January 31, July 31,
1998 1997
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . (115,889) 4,266
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . 57,240 101,784
Deferred taxes. . . . . . . . . . . . . . . . . . . 2,076
Net gain on sale of property and equipment. . . . . (257,825)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . (11,851) (972)
Prepaid insurance . . . . . . . . . . . . . . . . . 12,049 17,373
Income taxes receivable . . . . . . . . . . . . . . 8,503 (4,800)
Escrow balance. . . . . . . . . . . . . . . . . . . (282) (2,542)
Other assets. . . . . . . . . . . . . . . . . . . . (1,478) 8,723
Accounts and insurance payable. . . . . . . . . . . 68,435 209,666
Accrued income taxes. . . . . . . . . . . . . . . . (6,386)
Other current liabilities . . . . . . . . . . . . . 11,725 (2,615)
Net cash provided by operating activities. . . . . . 28,452 68,748
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment. . . . . (8,256) (617,319)
Proceeds from disposal of property,
plant and equipment. . . . . . . . . . . . . . . . 298,019
Loan costs refunded (paid) . . . . . . . . . . . . 5,000
Net cash used in investing activities. . . . . . . . (8,256) (314,300)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank line of credit . . . . . . . . . 290,000
Repayments on bank line of credit . . . . . . . . . (95,000)
Proceeds from issuance of long-term debt. . . . . . 109,671
Principal payments on long-term debt. . . . . . . . (33,421) (87,123)
Proceeds from issuance of note
payable - stockholder. . . . . . . . . . . . . . . 10,298 16,000
Net cash provided by (used) financing activities . . (23,123) 233,548
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . (2,927) (12,004)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . 10,244 22,248
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . 7,317 10,244
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . 79,502 146,847
Income taxes . . . . . . . . . . . . . . . . . . . 12,207
</TABLE>
MILASTAR CORPORATION AND CONSOLIDATED SUBSIDIARIES
INTRODUCTION TO PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL INFORMATION
The Pro Forma Consolidated condensed Statements of Income for
the year ended April 30, 1997 and nine months ended January 31, 1998,
and the Pro Forma condensed Balance Sheet as of January 31, 1998
present the results of operations and financial position of Milastar
Corporation (the "Company") assuming the acquisition of Twin City
Steel Treating Co., Inc. ("Twin City Steel Treating") had been
consummated as of the beginning of the periods indicated. The
statements include all material adjustments necessary to present the
historical results based on these assumptions.
The pro forma information does not purport to be indicative of the
results of operations or the financial position which would have actually
been obtained if the acquisition had been consummated on the dates
indicated. In addition, the pro forma financial information does not
purport to be indicative of results of operations or financial positions
which may be obtained in the future.
The pro forma financial information has been prepared by the
Company and all calculations have been made by the Company based
upon assumptions deemed appropriate by the Company. Certain of
these assumptions are set forth under the Notes to Pro Forma
Consolidated Condensed Financial Statements.
The pro forma financial information should be read in conjunction
with the Company's historical Consolidated Financial Statement and
Notes thereto contained in the 1997 Annual Report on Form 10-K and
the Quarterly Report on Form 10-Q for the quarter ended January 31,
1998, and the financial statements of Twin City Steel Treating set forth
on pages 3 through 8 hereof.
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<CAPTION>
MILASTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
HISTORICAL
1/31/98 PRO FORMA PRO
PER FORM 10-Q ADJUSTMENTS FORMA
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Current assets:
Cash and cash equivalents. . . . . . . . 454,000 454,000
Accounts and notes receivable:
Trade, less allowance for doubtful
accounts of $54,000. . . . . . . . . . 889,000 255,000 (a)
142,000 (b) 1,286,000
Other. . . . . . . . . . . . . . . . . . 10,000 10,000
Inventory . . . . . . . . . . . . . . . . 137,000 137,000
Prepaid expenses and other. . . . . . . . 151,000 11,000 (a) 162,000
Total current assets . . . . . . . . . . 1,641,000 408,000 2,049,000
Property, plant and equipment:
Land. . . . . . . . . . . . . . . . . . . 199,000 222,000 (a) 421,000
Buildings and improvements. . . . . . . . 768,000 1,100,000 (a) 1,868,000
Equipment . . . . . . . . . . . . . . . . 6,852,000 730,000 (a) 7,582,000
7,819,000 2,052,000 9,871,000
Less accumulated depreciation. . . . . . 3,332,000 106,000 (b) 3,438,000
4,487,000 1,946,000 6,433,000
Other assets:
Non-compete agreements. . . . . . . . . . 52,000 421,000 (a)
(71,000)(b) 402,000
Total assets . . . . . . . . . . . . . . . 6,180,000 2,704,000 8,884,000
</TABLE>
<TABLE>
<CAPTION>
MILASTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
HISTORICAL
1/31/98 PRO FORMA PRO
PER FORM 10-Q ADJUSTMENTS FORMA
<C> <C> <C>
Current liabilities:
Notes payable to stockholders. . . . . . 165,000 165,000
Current maturities of long-term debt . . 342,000 280,000 (a) 622,000
Accounts payable . . . . . . . . . . . . 147,000 147,000
Income taxes payable . . . . . . . . . . 119,000 119,000
Accrued payroll and benefits . . . . . . 272,000 15,000 (a) 287,000
Accrued real estate taxes. . . . . . . . 51,000 21,000 (a) 72,000
Other accrued liabilities. . . . . . . . 151,000 6,000 (a) 157,000
Total current liabilities . . . . . . . 1,247,000 322,000 1,569,000
Long-term debt, less current maturities . 1,027,000 2,417,000 (a)
(210,000)(b) 3,234,000
Total liabilities . . . . . . . . . . . . 2,274,000 2,529,000 4,803,000
Stockholders' equity:
Preferred stock, $1.00 par value;
authorized 5,000,000 shares,
none issued . . . . . . . . . . . . . .
Common stock - Class A, $.05 par value;
authorized 7,500,000 shares, issued
2,728,264 shares at January 31, 1998. . 137,000 137,000
Note receivable from officer. . . . . . . (20,000) (20,000)
Additional paid-in capital. . . . . . . . 1,666,000 1,666,000
Retained earnings . . . . . . . . . . . . 2,123,000 175,000 (b) 2,298,000
Total stockholders' equity. . . . . . . . 3,906,000 175,000 4,081,000
Total liabilities and stockholders'
equity. . . . . . . . . . . . . . . . . 6,180,000 2,704,000 8,884,000
</TABLE>
<TABLE>
<CAPTION>
MILASTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
HISTORICAL
9 MONTHS ENDED
1/31/98
PER FORM PRO FORMA PRO
10-Q ADJUSTMENTS FORMA
<C> <C> <C>
Net sales . . . . . . . . . . . . . . . . 6,054,000 1,515,000 (b) 7,569,000
Cost of sales . . . . . . . . . . . . . . 4,234,000 1,054,000 (b) 5,288,000
Gross margin. . . . . . . . . . . . . . . 1,820,000 461,000 2,281,000
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 1,321,000 90,000 (b) 1,411,000
Amortization of non-compete agreements. . 18,000 71,000 (b) 89,000
Operating income. . . . . . . . . . . . . 481,000 300,000 781,000
Other income (expense):
Dividend and interest income . . . . . . 11,000 11,000
Interest expense . . . . . . . . . . . . (107,000) (125,000)(b) (232,000)
Income before provision for
income taxes . . . . . . . . . . . . . . 385,000 175,000 560,000
Provision for income taxes. . . . . . . . 7,000 7,000
Net income. . . . . . . . . . . . . . . . 378,000 175,000 553,000
Net income per common share:
Primary. . . . . . . . . . . . . . . . . .14 .06 .20
Fully diluted. . . . . . . . . . . . . . .14 .06 .20
Weighted average number of shares
outstanding during the period:
Primary. . . . . . . . . . . . . . . . . 2,738,264 2,738,264 2,738,264
Fully diluted. . . . . . . . . . . . . . 2,738,264 2,738,264 2,738,264
</TABLE>
<TABLE>
<CAPTION>
MILASTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
HISTORICAL
YEAR ENDED
4/30/97
PER FORM PRO FORMA PRO
10-K ADJUSTMENTS FORMA
<C> <C> <C>
Net sales . . . . . . . . . . . . . . . . 7,325,000 1,923,000 (b) 9,248,000
Cost of sales . . . . . . . . . . . . . . 5,414,000 1,349,000 (b) 6,763,000
Gross margin. . . . . . . . . . . . . . . 1,911,000 574,000 2,485,000
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 1,795,000 125,000 (b) 1,920,000
Amortization of non-compete agreements. . 54,000 95,000 (b) 149,000
Operating income. . . . . . . . . . . . . 62,000 354,000 416,000
Other income (expense):
Dividend and interest income . . . . . . 9,000 9,000
Interest expense . . . . . . . . . . . . (142,000) (180,000)(b) (322,000)
Net loss on sale of property
and equipment . . . . . . . . . . . . . (36,000) (36,000)
Net gain on sale of marketable
securities. . . . . . . . . . . . . . . 45,000 45,000
Income (loss) before provision
for income taxes . . . . . . . . . . . . (62,000) 174,000 112,000
Provision for income taxes. . . . . . . . 1,000 1.000
Net income (loss) . . . . . . . . . . . . (63,000) 174,000 111,000
Net income (loss) per common share:
Primary. . . . . . . . . . . . . . . . . (.02) .06 .04
Fully diluted. . . . . . . . . . . . . . (.02) .06 .04
Weighted average number of shares
outstanding during the period:
Primary. . . . . . . . . . . . . . . . . 2,738,264 2,738,264 2,738,264
Fully diluted. . . . . . . . . . . . . . 2,738,264 2,738,264 2,738,264
</TABLE>
MILASTAR CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(a). To record the acquisition of Twin City Steel Treating.
(b). To record the results of operations of Twin City Steel Treating as
if such acquisition had occurred at the beginning of the periods
indicated.
EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
AMONG
TWIN CITY STEEL TREATING COMPANY, INC.,
MARVIN SCHENDEL
AND
FLAME METALS PROCESSING CORPORATION
Dated as of March 16, 1998
TABLE OF CONTENTS
ARTICLE TITLE PAGE
RECITALS 1
I. SALE OF ASSETS 1
1.1 Sale of Assets 1
1.2 Retained Assets 3
1.3 Purchase Price 3
1.4 Closing Purchase Price Adjustment 4
1.5 Allocation of Purchase Price 5
1.6 Assumption of Specific Liabilities
by Purchaser 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement")
is made and entered into as of the 16th day of March, 1998, by and
between Flame Metals Processing Corporation, a Delaware
corporation ("Purchaser"), and Twin City Steel Treating Company,
Inc., a Minnesota corporation ("Seller") and Mr. Marvin Schendel
("Shareholder").
W I T N E S S E T H
WHEREAS, Seller has heretofore carried on the business of
heat treating of metals (the"Business"); and
WHEREAS, Shareholder is the owner of all of the
outstanding shares of capital stock of Seller; and
WHEREAS, Seller desires to sell, and Purchaser desires to
purchase, certain assets of the Business for the consideration and on
the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the warranties,
representations, covenants and indemnities set forth herein and other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties hereto
hereby agree as follows:
ARTICLE I
Sale of Assets
1.1 Sale of Assets. On the terms and subject to the conditions of
this Agreement, Seller shall sell, assign, transfer, convey and deliver
to Purchaser, and Purchaser shall purchase from Seller, at the
Closing on the Closing Date (as hereinafter defined), all right, title
and interest in and to all of the assets, properties, rights, powers,
privileges, estates and businesses of the Business of every kind,
nature and description, real, personal or mixed, tangible or
intangible, wherever located and by whomever possessed, related to
or used in, or otherwise associated with, the Business, whether or not
reflected on the books of Seller or the Financial Statements (as
hereinafter defined), including, without limitation, each of the
following (the assets, properties and rights to be so sold, assigned,
transferred, conveyed and delivered are herein sometimes referred to
severally as an "Asset" and collectively as the "Assets"):
(a) Cash. All positive balances of cash and cash
equivalents on hand and in banks, including checks deposited
for collection, and marketable securities;
(b) Receivables, Etc. All receivables of every kind
and character except intercompany account balances,
including without limitation all of the Business's trade
accounts and customer notes receivable, drafts and letters of
credit and guarantees of any of the foregoing (collectively, the
"Closing Receivables");
(c) Inventories and Supplies. All inventories
(including, without limitation, raw materials, supplies, work-
in-process and finished goods) wherever located;
(d) Machinery and Equipment. All machinery,
equipment, automobiles, trucks, tractors, trailers and other
vehicles, tools, dies, jigs, molds, patterns, test instruments,
lab equipment, shelving, racks, leasehold improvements,
office supplies, furniture and fixtures, computer hardware,
telephones and all related equipment and all other tangible
personal property, including, without limitation, those items
listed and described in Schedule 1.1(d);
(e) Real Estate. All interests in the real estate
(including, without limitation, land, buildings, fixtures,
fittings and improvements thereon, and easements, leases,
subleases, licenses, rights of way, permits, and the other
appurtenances thereto, including appurtenant rights in and to
public streets, whether or not vacated), whether owned in fee
or beneficially owned, or leased, subleased or otherwise,
including, but not limited to, the parcel of real property
owned by Seller legally described in Schedule 1.1(e) and
commonly known as 12450 Ironwood Circle, Rogers,
Minnesota 55374 (the "Real Estate").
(f) Prepaid Items. All prepaid expenses and
deposits;
(g) Contracts. All contract rights, franchises,
immunities, permits, restrictive covenants, consents,
authorizations, approvals, qualifications, registrations,
powers and privileges of every kind and nature, whether
written or oral, including, without limitation, all purchase
orders and commitments for materials and supplies and all
rights under contracts or agreements for receipt of services
and rights under contract or otherwise for the sale of goods or
services, all leases of real, personal or mixed property
(including, without limitation, leases of vehicles, office
furniture, machines and other equipment) together with the
leasehold estates created thereby and any leasehold
improvements thereon, and the agreements, contracts and
other items listed in Schedule 3.12;
(h) Books and Records. All books, records,
computer discs and tapes, computer software, files and other
papers and documents and information on any medium
whatsoever, including without limitation, all price lists, sales
records, ledgers, journals, statements, bills, invoices,
customer and supplier lists, data processing records and
correspondence;
(i) Know-How and Miscellaneous Information. All
advertising, promotional material, marketing know-how,
price and product lists, sales and other books and records,
customer lists, technical information and know-how,
inventions, custom and other formulae, processes, trade
secrets, logos, patents, trademarks, trade names, service
marks, service names, designs, licenses, copyrights, or any
applications for, or renewals of, any of the foregoing, or
rights in or to the same, and any derivations thereof,
including, without limitation, the name "Twin City Steel
Treating Co., Inc.", and the telephone numbers used by the
Business, and any logo with respect thereto and any derivation
thereof, together with the goodwill associated with such name
and all other such aforementioned intellectual property rights,
and all rights to recover for any past, present or future
infringement thereof;
(j) Licenses. All permits, licenses, franchises,
orders, registrations, certificates, variances, approvals and
similar rights obtained from governments and governmental
agencies, and all data and records pertaining thereto;
(k) Communications; Billing. All rights to receive
mail and other communications addressed to Seller and
relating to the Business or the Assets, including, without
limitation, Closing Receivable payments, and all rights to bill
and receive payment for products shipped or delivered and
from services performed at or prior to Closing but unbilled or
unpaid as of the Closing;
(l) Claims. All claims, warranties, guarantees,
refunds, rebates, causes of action, rights of recovery, setoff or
recoupment, credits and security interests, of any kind or
nature whatsoever; and
(m) Miscellaneous. All other interests to which
Seller has or may have any right, title or interest by
ownership, use or operation, and in which Seller has a
conveyable or assignable interest and which are used or held
in connection with the Business.
1.2 Retained Assets. Notwithstanding anything in this
Agreement to the contrary, the term "Assets" shall not include:
(a) All rights of Seller under or in connection with
this Agreement and the Purchase Price to be paid to Seller
hereunder;
(b) The originals of Seller's corporate record
book(s) containing the shareholders' and Board of Directors'
minutes and stock ledger and all employee records; or
(c) Any and all assets of Seller not used or useable
in connection with the Business; or
(d) The assets listed on Schedule 1.2(d) hereto.
1.3 Purchase Price. In addition to the assumption of the
Assumed Liabilities (as hereinafter defined), in full payment for the
Assets and for the restrictive covenants set forth in Section 5.3,
Purchaser agrees to pay Seller a purchase price, subject to the
adjustment set forth in Section 1.4 and the prorations as
described in Section 5.2 (the "Purchase Price"), atthe Closing on the
Closing Date, comprised of (a) an amount equal to One Hundred
Ninety Five Thousand Four Hundred Thirty-seven Dollars and Sixty
Cents ($195,437.60) (the "Closing Cash Purchase Price") in the form
of cash by wire transfer of immediately available funds to an account
designated by Seller and (b) a Promissory Note of Purchaser in the
aggregate principal amount of $453,559.42, payable in 54 equal
monthly installments of $10,000.00, in the form of Exhibit A hereto
(the "Closing Note"). The Closing Note shall be guaranteed by
Purchaser's parent corporation, Milastar Corporation, in the form of
Exhibit D.
1.4 Closing Purchase Price Adjustment.
(a) Seller shall prepare and deliver to Purchaser as soon as
practicable, but in any event within thirty (30) days after the Closing
Date, a balance sheet as of the close of business on the Closing Date
(the "Closing Balance Sheet"). The Closing Balance Sheet shall, with
respect to the items to be included thereon, be prepared in
accordance with Seller's past practices. Purchaser and Seller shall
cooperate with each other and their respective representatives in
connection with the preparation of the Closing Balance Sheet, and
Purchaser and Seller each shall have the right to be present during
the inventory conducted in connection therewith.
(b) Unless Purchaser delivers written notice to Seller on or
prior to the fifteenth (15th) day after the delivery to Seller of the
Closing Balance Sheet that Seller disputes the Closing Balance Sheet
(hereinafter, a "Dispute"), then Purchaser shall be deemed to have
accepted and agreed to the Closing Balance Sheet in the form in
which it was delivered by Seller. If such a notice of a Dispute is
given by Purchaser within such fifteen (15) day period, then Seller
and Purchaser shall, within fifteen (15) days after the giving of such
notice, attempt to resolve such Dispute and agree in writing upon the
final content of the Closing Balance Sheet. In the event that Seller
and Purchaser are unable to resolve any such Dispute within such
fifteen (15) day period, then an independent certified public
accounting firm jointly selected by Purchaser and Seller (the
"Independent Auditors") shall be employed as arbitrator hereunder
to settle such Dispute as soon as practicable. The Independent
Auditors shall have access to all documents and facilities necessary to
perform its function as arbitrator. The determination of the
Independent Auditors with respect to any Dispute shall be final and
binding on the parties hereto. Seller and Purchaser shall each pay
one-half of the fees and expenses of the Independent Auditors for
such services. Seller and Purchaser each agree to execute, if
requested by the Independent Auditors, a reasonable engagement
letter.
(c) If the total assets listed in Exhibit H, as reflected on the
Closing Balance Sheet are less than $297,604.18, then the amount of
the Closing Cash Purchase Price, or, at the sole option of the
Purchaser, the principal amount of the Closing Note, shall be
reduced, dollar for dollar, by the amount that the total assets are less
than $297,604.18. If the total assets reflected on the Closing Balance
Sheet are greater than $297,604.18, then the amount of the Closing
Cash Purchase Price, or, at the sole option of the Purchaser, the
principal amount of the Closing Note shall be increased, dollar for
dollar, by the amount that the total assets exceed $297,604.18.
(d) If the total amount of the Assumed Liabilities (as
hereinafter defined) reflected on the Closing Balance Sheet is less
than $2,030,163.94, then the amount of the Closing Cash Purchase
Price or, at the sole option of the Purchaser, the principal amount of
the Closing Note shall be increased, dollar for dollar, by the amount
that the Assumed Liabilities are less than $2,030,163.94. If the total
amount of the Assumed Liabilities reflected on the Closing Balance
Sheet is greater than $2,030,163.94, then the amount of the Closing
Cash Purchase Price or, at the sole option of the Purchaser, the
principal amount of the Closing Note shall be reduced, dollar for
dollar, by the amount that the total Assumed Liabilities exceed
$2,030,163.94
(e) Any adjustments to the Closing Purchase Price made
pursuant to this Section 1.4 shall, if made to the Closing Cash
Purchase Price, be paid by wire transfer in immediately available
funds to such account as is specified by the party to whom such
payment is owed within five (5) business days after the Closing
Balance Sheet is agreed to by Purchaser and Seller or any remaining
Disputes are ultimately determined by the Independent Auditors.
Any adjustments to the Closing Note shall be made by substitution of
a new Closing Note in exchange for the Closing Note executed at the
Closing.
1.5 Allocation of Purchase Price. The parties hereto shall
allocate the Purchase Price among the Assets as provided in Exhibit
B hereto, provided that promptly following the determination of the
Statement of Net Book Value pursuant to Section 1.4 such allocation
shall be adjusted to reflect any adjustment in the Purchase Price.
The parties hereto agree that for income tax reporting purposes they
shall report the transaction contemplated by this Agreement in a
manner consistent with such allocation.
1.6 Assumption of Specific Liabilities by Purchaser.
(a) Assumed Liabilities. Subject to the conditions
specified in this Agreement, from and after the Closing Date,
Purchaser will not assume or in any way be responsible for
any liabilities or obligations of Seller, or any other liabilities
or obligations whatsoever related to the operation of the
Business or condition of the Assets (including without
limitation the Real Estate) at any time on or prior to the
Closing Date, except as specifically provided below. From
and after the Closing Date, Purchaser will assume and agree
to pay and perform as and when due only the specific
liabilities and obligations of Seller that relate to the Business
set forth in Exhibit C hereto (the "Assumed Liabilities").
(b) Excluded Liabilities. Notwithstanding anything
in this Agreement to the contrary, Purchaser will not assume
or be liable for any liabilities or obligations of Seller not
described in Exhibit C, including, without limitation, any of
the following liabilities and obligations of Seller (the
"Excluded Liabilities"):
(i) attorneys' and accountants' and other
fees and expenses incurred by Seller in connection with
the sale of the Assets;
(ii) any debts, obligations or liabilities of
Seller of any kind or nature, whether absolute,
accrued, contingent or otherwise, existing in violation
of any of the representations, warranties, covenants or
agreements of Seller contained in this Agreement, the
Schedules or any certificate of Seller to be delivered to
Purchaser on or before the Closing Date pursuant to
this Agreement or in connection with the transactions
contemplated hereby;
(iii) any debts, obligations or liabilities of
Seller, whether absolute, accrued, contingent or
otherwise, for federal, state, county, local, foreign or
other income taxes or assessments for periods prior to
the Closing;
(iv) except as otherwise expressly provided
herein, any debts, obligations or liabilities for federal,
state, county, local foreign or other income, sales,
transfer, use or other taxes or assessments of any kind
whatsoever based upon, or related to, the sale and
transfer of any of the Assets;
(v) except as expressly set forth in Exhibit C,
any debts, obligations or liabilities of Seller, whether
absolute, accrued, contingent or otherwise, for salaries,
wages or bonuses payable with respect to periods prior
to the Closing Date or under any employee covering
any employees of the Business prior to the Closing
Date;
(vi) any debts, obligations or liabilities of
Seller whether absolute, accrued, contingent or
otherwise with respect to real or personal property
taxes or assessments due and payable prior to the
Closing;
(vii) any and all claims, suits, causes of
action, investigations, proceedings, liabilities, duties or
obligations of any kind whatsoever, in any way arising
out of any violation prior to the Closing Date of any
decree, order, arbitration, award, agreement with, or
any license or permit from or any law, rule, or
regulation of, any federal, state or local governmental
authority to which the properties, assets, personnel or
business activities of Seller are subject or to which
Seller itself is subject.
