UNITED STATES
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
June 18, 1999 (February 25, 1999)
- -------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
MERRIMAC INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 0-11201 22-1642321
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
41 Fairfield Place, West Caldwell, New Jersey 07006-6287
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 575-1300
--------------------------
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
This Amended Current Report on Form 8-K/A amends and restates
the information included in Registrant's Current Report on Form 8-K filed March
1, 1999.
Item 2. Acquisition or Disposition of Assets.
- ------ ------------------------------------
On February 25, 1999, Merrimac Industries, Inc. ("Merrimac" or
"Registrant") completed the acquisition of all the outstanding shares of common
stock of Filtran Microcircuits Inc. ("FMI") of Ottawa, Ontario, Canada, a
leading manufacturer of microwave micro circuitry. The acquisition was made
pursuant to a previously announced Stock Purchase Agreement dated as of December
15, 1998 (the "Stock Purchase Agreement") among Merrimac, FMI and the direct and
indirect shareholders of FMI. Registrant's press release dated March 1, 1999 is
incorporated herein by reference.
The purchase price was approximately $4.5 million, net of $203,000 of
cash acquired and including the assumption of $451,000 existing indebtedness.
The purchase price for the acquisition was arrived at by arm's-length
negotiations between Registrant and FMI and was financed by utilizing Merrimac's
previously unused existing credit facility with Summit Bank.
The Stock Purchase Agreement is incorporated herein by reference.
Except for the Stock Purchase Agreement and as described in the
following sentence, Merrimac is not aware of any material relationship between
FMI or any of the shareholders of FMI, on the one hand, and Merrimac or any of
its affiliates, any director or officer of Merrimac or any associate of any such
director or officer, on the other hand, that existed at the date of the
acquisition by Merrimac of the shares of common stock of FMI pursuant to the
Stock Purchase Agreement. During Registrant's 1998 fiscal year, Registrant
purchased approximately $20,400 of goods and services from FMI in the normal
course of business. These purchases were on terms Merrimac believes were arm's
length.
Item 5. Other Events.
- ------ ------------
Registrant's press release dated March 1, 1999 is incorporated herein
by reference.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
- ------ ---------------------------------
(a) Financial Statements of Business Acquired.
-----------------------------------------
The following report and audited financial statements
of FMI prepared in accordance with Canadian generally
accepted accounting principles are attached hereto as
Appendix A. The amounts shown on the audited
financial statements are shown in Canadian dollars,
the reporting currency of FMI.
(i) Auditor's Report dated February 2, 1999;
(ii) Balance Sheet as at November 30, 1998;
(iii) Statement of Income and Retained Earnings for the year
ended November 30, 1998;
(iv) Statement of Changes in Financial Position for the year
ended November 30, 1998;
(v) Notes to Financial Statements;
(vi) Schedule of Cost of Goods Sold; and
(vii) Schedule of Expenses.
(b) Pro Forma Financial Information.
-------------------------------
The following unaudited pro forma financial information of
Merrimac is attached hereto as Appendix B:
(i) Introductory note;
(ii) Unaudited Pro Forma Condensed Combined Balance Sheet at
January 2, 1999;
(iii) Unaudited Pro Forma Condensed Combined Statement of
Income for the year ended January 2, 1999; and
(iv) Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.
3
<PAGE>
(c) Exhibits.
--------
2. Stock Purchase Agreement, dated as of December 15, 1998,
among Merrimac, FMI and the direct and indirect shareholders
of FMI is incorporated herein by reference to Exhibit 10(a)
to Registrant's Annual Report on Form 10-KSB for the fiscal
year ended January 2, 1999.
20. Press Release of Registrant dated March 1, 1999 is
incorporated herein by reference to Exhibit 20 to
Registrant's Current Report on Form 8-K dated March 1, 1999.
23. Consent of Thomas H. Busing, Chartered Accountant.
4
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this amended Current Report to be signed
on its behalf by the undersigned thereunto duly authorized.
MERRIMAC INDUSTRIES, INC.
--------------------------
(Registrant)
By /s/ Robert V. Condon
-----------------------------
Robert V. Condon
Vice President, Finance and
Chief Financial Officer
Date: June 18, 1999
5
<PAGE>
Appendix A
FILTRAN MICROCIRCUITS, INC.
Financial Statements
November 30, 1998
The following audited financial statements of FMI have been prepared in
accordance with Canadian generally accepted accounting principles. The amounts
shown on the audited financial statements are in Canadian dollars, the reporting
currency of FMI.
<PAGE>
FILTRAN MICRO-CIRCUITS INC.
Financial Statements
November 30, 1998
INDEX
Page
Auditor's Report A-1
Balance Sheet A-2
Statement of Income and Retained Earnings A-3
Statement of Changes in Financial Position A-4
Notes to Financial Statements A-5-A-8
Schedule of Cost of Goods Sold A-9
Schedule of Expenses A-10
<PAGE>
A-1
THOMAS H. BUSING
CHARTERED ACCOUNTANT
500-1580 MERIVALE ROAD
NEPEAN, ONT. K2G 4B5
TEL. (613) 226-3827
FAX (613) 224-6996
To the Shareholders of
Filtran Micro-Circuits Inc.
AUDITOR'S REPORT
----------------
I have audited the balance sheet of Filtran Micro-Circuits Inc. as at
November 30, 1998 and the statements of income and retained earnings, and
changes in financial position, for the year then ended. These financial
statements are the responsibility of the company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform an audit to obtain
reasonable assurance 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.
In my opinion, these financial statements present fairly, in all
material respects, the financial position of the company as at November 30,
1998, and the results of its operations and the changes in its financial
position for the year then ended in accordance with generally accepted
accounting principles.
Thomas H. Busing
CHARTERED ACCOUNTANT
NEPEAN, Ontario
February 2, 1999
<PAGE>
A-2
FILTRAN MICRO-CIRCUITS INC.
(Incorporated under the laws of Ontario)
Balance Sheet
As at November 30, 1998
- -------------------------------------------------------------------------------
1998 1997
$ $
ASSETS
Current
Cash and short-term investments 368,620 764,401
Accounts receivable - trade 1,005,936 1,108,832
Other receivables 1,366 1,129
Inventory (Note 1(a)) 329,076 178,132
Prepaid expense and deposits 52,200 44,923
Income taxes recoverable (Note 7b) 136,546 91,654
Due from 845470 Ontario Inc. - 29,644
------------ ------------
1,893,744 2,218,715
Capital (Note 2) 1,109,767 1,168,937
Other (Note 11) 31,470 1
------------ ------------
3,034,981 3,387,653
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 405,662 455,487
Due to shareholders - 36,338
Current portion of long-term debt 203,059 203,302
Deferred taxes payable 19,381 -
------------ ------------
628,102 695,127
Long-term Debt (Note 3) 528,554 731,655
------------ ------------
1,156,656 1,426,782
------------ ------------
Capital Stock (Note 4) 1,027 156,027
Retained Earnings 1,877,298 1,784,844
Contributed Surplus - 20,000
------------ ------------
1,878,325 1,960,871
3,034,981 3,387,653
============ ============
/s/ P.W. White On Behalf of the Board
- ----------------
/s/ Ian Bolt On Behalf of the Board
- ----------------
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
A-3
FILTRAN MICRO-CIRCUITS INC.
Statement of Income and Retained Earnings
For the year ended November 30, 1998
- -------------------------------------------------------------------------------
1998 1997
$ $
Sales 4,931,423 5,531,559
Cost of Goods Sold 2,451,106 2,644,253
------------ ------------
Gross Profit 2,480,317 2,887,306
------------ ------------
Expenses
Operating 327,654 402,740
Selling, general and administrative 1,090,241 887,580
Depreciation 525,235 520,648
Research and development (Note 5) 247,173 360,751
Interest on long-term debt 58,915 25,907
------------ ------------
2,249,218 2,197,626
------------ ------------
Income from Operations 231,099 689,680
Other Income (Expense) (Note 8) (93,643) 17,603
------------ ------------
Income before Taxes 137,456 707,283
Income Taxes (Note 7a) 45,002 187,397
------------ ------------
Net Income for the Year 92,454 519,886
Retained Earnings, Beginning of Year 1,784,844 1,264,958
------------ ------------
Retained Earnings, End of Year 1,877,298 1,784,844
============ ============
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
A-4
FILTRAN MICRO-CIRCUITS INC.
Statement of Changes in Financial Position
For the year ended November 30, 1998
- -------------------------------------------------------------------------------
1998 1997
$ $
Cash Provided From (Used In)
Operations
Net income for the year 92,454 519,886
Depreciation 525,235 520,648
------------ ------------
617,689 1,040,534
Working capital changes (137,835) (395,212)
------------ ------------
479,854 645,322
------------ ------------
Financing Activities
Net increase (decrease) in long-term debt (203,101) 412,080
Redemption of preferred shares (155,000) -
Distribution of contributed surplus (20,000) -
------------ ------------
(378,101) 412,080
------------ ------------
Investing Activities
Net acquisition of capital assets (475,669) (848,210)
Investment tax credits on capital assets 9,604 21,956
Deferred income taxes (31,469) -
------------ ------------
(497,534) (826,254)
------------ ------------
Increase (Decrease) in Cash for the Year (395,781) 231,148
Cash, Beginning of Year 764,401 533,253
------------ ------------
Cash, End of Year 368,620 764,401
============ ============
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
A-5
FILTRAN MICRO-CIRCUITS INC.
Notes to Financial Statements
November 30, 1998
- -------------------------------------------------------------------------------
1. Accounting Policies
a) Inventory is stated at the lower of cost and net realizable
value (cost being determined on the first-in, first-out method) for
raw materials; and at cost of direct labour, materials, sub-contracts
and overhead for work-in-process and finished goods.
Effective for 1998, the company has changed its accounting policy with
respect to valuation of its inventory of finished goods and
work-in-progress to include an element for overhead. The effect of
this change is to increase income from operations by $31,654.
b) Depreciation of capital assets is provided at the following annual
rates, on assets available for use as at year-end:
Dies 50% straight-line
Production and R&D equipment 25% straight-line
Furniture and office equipment 20% declining balance (1/2 in
year of acquisition)
Computer equipment 30% declining balance (1/2 in
year of acquisition)
Leasehold improvements 20% straight-line over the
remaining months of the lease
(1/2 in year of acquisition)
Parking and paving 8% declining balance (1/2 in
year of acquisition)
2. Capital Assets
Accumulated Net Book Value
Cost Depreciation 1998 1997
$ $ $ $
----------------------------------------------------
Land 160,683 - 160,683 -
Production & R&D
equipment & dies 2,601,798 1,947,809 653,989 958,293
Furniture & office
equipment 103,909 50,465 53,444 52,357
Computer equipment 263,187 117,609 145,578 61,753
Leasehold
improvements 364,412 296,797 67,615 96,534
Parking & paving 29,644 1,186 28,458 -
----------- ----------- ----------- -----------
3,523,633 2,413,866 1,109,767 1,168,937
=========== =========== =========== ===========
contd
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
A-6
FILTRAN MICRO-CIRCUITS INC.
Notes to Financial Statements
November 30, 1998
- -------------------------------------------------------------------------------
3. Long-Term Debt
1998 1997
$ $
------------ ------------
Bank of Nova Scotia - interest prime plus 1%
payable monthly, principal repayable at
$1,666.67 per month, due July 1999. 13,333 33,333
Bank of Nova Scotia - interest prime plus 1%
payable monthly, principal repayable at
$7,868 per month, due May, 2001. 183,170 277,586
Scotiabank - capital lease - interest 6.9%,
principal and interest repayable $10,507 per
month, due Nov. 23, 2003. 528,479 615,382
MTC Leasing Inc. - capital lease - principal
and interest repayable $241 per month, due
July, 2001. 6,631 8,656
------------ ------------
731,613 934,957
Less: amounts included in current liabilities 203,059 203,302
------------ ------------
528,554 731,655
============ ============
The loans are covered by a general security agreement and a chattel mortgage in
the amount of $472,000. Principal repayments on the long-term debt over the next
five years are:
1999 $203,059
2000 196,542
2001 147,926
2002 114,360
2003 69,726
Production equipment under the capital leases having a gross cost of $634,185
less accumulated depreciation of $317,093 is included in capital assets.
4. Capital Stock
Authorized
250,000 redeemable non-cumulative, non-voting, first preference shares
250,000 retractable non-cumulative, non-voting, second preference shares
300,000 Class A common shares
100,000 Class B common shares
100,000 Class C common shares
contd
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
A-7
FILTRAN MICRO-CIRCUITS INC.
Notes to Financial Statements
November 30, 1998
- -------------------------------------------------------------------------------
1998 1997
Issued and fully paid $ $
------------ ------------
155,000 First preference shares - 155,000
1,052 Class A common shares 1,027 1,027
------------ ------------
1,027 156,027
============ ============
5. Research and Development
The company expenses current research and development expenditures when
incurred. The amount of current expenditure is reduced by investment tax credits
claimed for qualifying expenditures as follows:
1998 1997
$ $
------------ ------------
Research and development expense 328,504 522,692
Less: Investment tax credits - current (81,331) (152,378)
Government assistance - (9,563)
------------ ------------
247,173 360,751
============ ============
6. Commitments and Related Party Transactions
a) The company's minimum lease payments for its rented premises are:
1999 $176,532
2000 $176,532
2001 $14,711
The lessor, 845470 Ontario Inc., is owned by shareholders and
directors of the company. Under the terms of its lease, the company is
also required to pay the lessor additional rent for costs
approximating $61,000 per year.
b) The company has entered a contract for ISO 9002 consulting services at
a cost to complete of $16,919.
7. Income Taxes
1998 1997
$ $
------------ ------------
a) Current income tax expense 57,090 190,788
Adjustment of prior year - (3,391)
Deferred income taxes (12,088) -
------------ ------------
45,002 187,397
============ ============
contd
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
A-8
FILTRAN MICRO-CIRCUITS INC.
Notes to Financial Statements
November 30, 1998
- -------------------------------------------------------------------------------
Income Taxes . . .cont'd
The company has changed to the tax allocation basis of accounting for
income taxes; the effect has been accounted for in the current period, and
arises because of timing differences between recording depreciation for
accounting purposes and for tax purposes and investment tax credits earned
on research and development.
1998 1997
---- ----
b) Income taxes recoverable (payable)
Current income tax expense $ (57,090) $ (187,397)
Investment tax credits - current year 90,935 174,334
Investment tax credits - prior year 43,121
Other adjustments - (3,391)
Installments paid 59,580 108,108
----------- -----------
$ 136,546 $ 91,654
=========== ===========
c) The cost of research and development equipment has been reduced by
investment tax credits claimed in the amount of $9,604 (1997 -
$21,956) for qualifying capital expenditures.
8. Other Income (Expense)
1998 1997
---- ----
Interest $ 23,092 $ 26,069
(Loss) gain on disposal of assets (9,301) (8,466)
Other (107,434) -
----------- -----------
(93,643) 17,603
=========== ===========
9. Guarantees
The company has provided a guarantee on a loan taken out by its affiliated
company 845470 Ontario Inc.
10. Comparative Figures
The comparative figures for 1997 are unaudited and no opinion is expressed.
11. Other Assets
1998 1997
---- ----
Goodwill $ 1 $ 1
Deferred tax assets 31,469 -
----------- -----------
$ 31,470 1
=========== ===========
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
A-9
FILTRAN MICRO-CIRCUITS INC.
Schedule of Cost of Goods Sold
For the year ended November 30, 1998
- -------------------------------------------------------------------------------
1998 1997
$ $
------------ ------------
Materials 717,891 834,419
Factory wages 795,072 770,461
General, contract and supervisory labour 535,934 525,323
Shop supplies and expense 191,689 206,314
Utilities and maintenance 210,520 307,736
------------ ------------
2,451,106 2,664,253
============ ============
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
A-10
FILTRAN MICRO-CIRCUITS INC.
Schedule of Expenses
For the year ended November 30, 1998
- -------------------------------------------------------------------------------
1998 1997
$ $
------------ ------------
Operating
Quality assurance and expense 139,457 168,159
Payroll costs and fringe benefits 177,316 193,156
Consulting and training 1,652 30,100
Mileage and vehicle costs 9,229 11,325
------------ ------------
327,654 402,740
============ ============
Selling, General and Administration
Marketing salaries, commissions and travel 423,920 343,081
Advertising, promotion and trade shows 75,487 72,515
Office salaries 92,312 90,625
Office supplies and expense 24,601 26,027
Bank charges and interest 5,447 4,813
Business taxes 904 10,850
Insurance 18,181 13,721
Professional fees 23,385 9,617
Rent and maintenance 266,705 275,846
General 30,803 23,102
Telephone 14,947 17,383
Bad debt expense 113,549 -
------------ ------------
1,090,241 887,580
============ ============
THOMAS H. BUSING CHARTERED ACCOUNTANT
<PAGE>
Appendix B
MERRIMAC INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Introductory Note
-----------------
The following unaudited pro forma condensed combined financial
statements have been prepared by Merrimac's management. These statements reflect
Merrimac's acquisition of FMI and combine the historical combined financial
statements of Merrimac and FMI for the periods indicated, using the purchase
method of accounting.
The unaudited pro forma condensed combined balance sheet reflects
adjustments as if the acquisition had occurred on January 2, 1999. The unaudited
pro forma condensed combined statement of income has been prepared assuming the
acquisition of FMI had occurred at January 4, 1998. These pro forma statements
should be read in conjunction with the historical financial statements and
related notes of Merrimac and FMI. The historical financial statements of FMI
have been translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation". A pro forma
adjustment to research and development expenses was made to reconcile the
historical financial statements of FMI, which were prepared in accordance with
Canadian generally accepted accounting principles, to United States generally
accepted accounting principles. The pro form financial statements include
preliminary estimates and assumptions which Merrimac's management believes are
reasonable. The pro forma results are not necessarily indicative of the results
which would have occurred if the business combination had been in effect on the
dates presented.
The following pro forma condensed combined financial statements give
effect to the acquisition by Merrimac of FMI using the purchase method of
accounting and are based on the respective historical financial statements as of
their most recent respective fiscal year-end dates and the fiscal years then
ended.
The purchase price of FMI, including an estimate of acquisition
expenses of approximately $200,000, has been allocated to the acquired assets
and assumed liabilities of FMI based upon their respective estimated fair values
in accordance with the provisions of Accounting Principles Board Opinion No. 16.
Accordingly, the allocation of the purchase price to the acquired assets and
assumed liabilities of FMI is subject to revision as a result of the final
determination of fair values.
<PAGE>
<TABLE>
<CAPTION>
MERRIMAC INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
Merrimac FMI
January 2, November 30, Pro Forma Pro Forma
1999 1998 Adjustments Combined
----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,852,666 $ 240,442 $ (162,200)(a) $ 1,930,908
Accounts receivable 3,755,131 657,036 4,412,167
Inventories 3,101,256 214,647 3,315,903
Income tax refund receivable 413,018 34,049 447,067
Other current assets 357,906 89,065 446,971
Deferred tax assets 899,600 -- 899,600
---------- --------- --------- ----------
Total current assets 10,379,577 1,235,239 (162,200) 11,452,616
Property, plant and equipment 16,539,251 2,298,371 18,837,622
Less accumulated depreciation 10,322,958 1,574,500 11,897,458
---------- --------- --------- ----------
Net property, plant and
equipment 6,216,293 723,871 6,940,164
Other assets 319,512 20,527 340,039
Goodwill -- -- 2,851,581 (b) 2,851,581
---------- --------- --------- ----------
Total Assets $16,915,382 $1,979,637 $2,689,381 $21,584,400
---------- --------- --------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt $ -- $ 132,450 $ 500,000 (b)(c) $ 632,450
Accounts payable 1,479,284 264,602 1,743,866
Accrued liabilities 1,499,917 -- 200,000 (b) 1,699,917
Income taxes payable -- 12,642 12,642
---------- --------- --------- ----------
Total current liabilities 2,979,201 409,694 700,000 4,088,895
Long-term debt, net of
current portion -- 344,762 3,526,845 (b)(c) 3,871,607
Deferred compensation 459,322 459,322
Deferred tax liabilities 54,600 -- 54,600
---------- --------- --------- ----------
Total liabilities 3,493,123 754,456 4,226,845 8,474,424
Shareholders' equity 13,422,259 1,225,181 (1,537,464)(d) 13,109,976
---------- --------- --------- ----------
Total Liabilities and
Shareholders' Equity $16,915,382 $1,979,637 $2,689,381 $21,584,400
---------- --------- --------- ----------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
B-2
<PAGE>
<TABLE>
<CAPTION>
MERRIMAC INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
Merrimac FMI
January 2, November 30, Pro Forma Pro Forma
1999 1998 Adjustments Combined
------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Net sales $20,101,835 $3,343,190 $ (20,400)(e) $23,424,625
---------- ---------- -------- ----------
Cost and expenses:
Cost of sales 11,547,529 1,650,545 (26,000)(e)(f) 13,172,074
Selling, general and
administrative 6,680,968 1,331,293 164,883 (b)(f) 8,177,144
Research and development 1,052,812 170,508 73,000 (f) 1,296,320
Restructuring charge 510,311 -- 510,311
---------- ---------- -------- ----------
19,791,620 3,152,346 211,883 23,155,849
---------- ---------- -------- ----------
Operating income 310,215 190,844 (232,283) 268,776
Interest and other income
(expense), net 110,085 (61,145) 77,000 (g) 125,940
Interest expense -- (40,013) (321,000)(h) (361,013)
---------- ---------- -------- ----------
Income before income taxes 420,300 89,686 (476,283) 33,703
Provision (benefit) for income
taxes 80,000 29,233 (164,000)(i) (54,767)
---------- ---------- -------- ----------
Net income $ 340,300 $ 60,453 $(312,283) $ 88,470
---------- ---------- -------- ----------
Net income per common share:
Basic $.19 $.05
Diluted $.19 $.05
Weighted average number of
shares outstanding:
Basic 1,766,120 1,766,120
Diluted 1,805,212 1,805,212
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
B-3
<PAGE>
MERRIMAC INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(a) Reflects the effect on cash of the pro forma adjustments.
(b) The purchase price, including an estimate for acquisition expenses of
approximately $200,000, has been allocated to the acquired assets and
assumed liabilities of FMI at their respective estimated fair values.
The allocation of the purchase price to the acquired assets and assumed
liabilities of FMI is subject to revision as a result of the final
determination of fair values. The estimated excess of the purchase
price over the net assets acquired of $3,001,664 is being carried as
goodwill and will be amortized over its estimated life of 20 years. The
pro forma amortization of goodwill charge was $150,083.
(c) Reflects $4,026,845 of indebtedness incurred to finance the purchase
price of the acquisition, of which $500,000 is due in less than one
year.
(d) Reflects (i) the elimination of shareholders' equity in FMI and (ii)
the pro forma net loss of $312,283 as a result of the acquisition.
(e) Reflects the elimination of purchases by Merrimac of goods and services
from FMI of $20,400 in fiscal 1998.
(f) Reflects (i) adjustments of $5,600 to the cost of sales, $17,000 to
research and development expenses and $14,800 to selling, general and
administrative expenses related to additional compensation to certain
officers of FMI under employment agreements entered into with FMI and
Merrimac in connection with the acquisition and (ii) an adjustment of
$56,000 to research and development expenses related to certain income
tax benefits obtained as a result of the reconciliation of the
historical financial statements of FMI from Canadian generally accepted
accounting principles to United States generally accepted accounting
principles.
(g) Reflects the elimination of transaction related costs and expenses of
$77,000 incurred by FMI in connection with the sale of FMI to Merrimac.
(h) Reflects interest expense of $321,000 (based on interest rates in
effect during fiscal 1998, assuming the acquisition had occurred on
January 4, 1998) related to $4,026,845 of indebtedness incurred to
finance the purchase price of the acquisition.
B-4
<PAGE>
(i) Reflects a tax benefit of $108,000 related to the deductibility of
compensation and interest expense, offset by the elimination of other
acquisition related expenses (see note (g) above) and the
reclassification of a research and development tax benefit adjustment
of $56,000 (see note (f) above).
B-5
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
- ------- -------------
2. Stock Purchase Agreement, dated as of December 15,
1998, among Registrant, FMI and the direct and indirect
shareholders of FMI is incorporated herein by reference
to Exhibit 10(a) to Registrant's Annual Report on Form
10-KSB for the fiscal year ended January 2, 1999.
20. Press Release of Registrant dated March 1, 1999 is
incorporated herein by reference to Exhibit 20 to
Registrant's Current Report on Form 8-K dated March 1,
1999.
23. Consent of Thomas H. Busing, Chartered Accountant.
Exhibit 23
CONSENT
I hereby consent to the inclusion in this Current Report on Form 8-K/A
of Merrimac Industries, Inc. of my report dated February 2, 1999 relating to the
financial statements of Filtran Microcircuits Inc. as at and for the fiscal year
ended November 30, 1998 and to the incorporation by reference of such report in
(i) the Registration Statement on Form S-8 (Registration No. 33-68862)
pertaining to the 1993 Stock Option Plan, (ii) the Registration Statement on
Form S-8 (Registration No. 333-09633) relating to the 1995 Stock Purchase Plan
of Merrimac Industries, Inc., (iii) the Registration Statement on Form S-8
(Registration No. 2-86405) relating to the 1983 Key Employees Stock Option Plan
of Merrimac Industries, Inc., (iv) the Registration Statement on Form S-8
(Registration No. 333-36795) relating to the Long-Term Incentive Plan of
Merrimac Industries, Inc. and (v) the Registration Statement on Form S-8
(Registration No. 333-36199) relating to the Stock Option Plan for Non-Employee
Directors of Merrimac Industries, Inc.
/s/ Thomas H. Busing
Thomas H. Busing,
Chartered Accountant
Nepean, Ontario, Canada
June 17, 1999
