<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: January 2, 1996
WESTERN MICRO TECHNOLOGY, INC.
----------------------------------------
(Exact name of registrant as specified in its charter)
California 0-11560 94-2414428
- ----------------------------- ------------- -----------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
254 East Hacienda, Campbell, CA 95008
----------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(408) 379-0177
------------------------
(Registrant's telephone number,
including area code)
<PAGE>
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial statements of business acquired.
Financial statements of R&D Hardware Systems Company of Colorado,
Inc., a Colorado corporation ("R&D"), pertaining to the
registrant's acquisition of substantially all of the assets and
the associated goodwill of R&D, are submitted herewith as shown
in Item 7(c) following.
(b) Pro Forma Financial Information.
Pro forma financial statements for Western Micro Technology,
Inc., showing the pro forma effects of the acquisition of R&D,
are submitted herewith as shown in Item 7(c) following.
(c) Exhibits.
99.1 Financial statements of R&D Hardware Systems Company of
Colorado, Inc.:
a. Report of Independent Public Accountants dated March
20, 1995
b. Balance Sheets as of December 31, 1994 and 1993
c. Statements of Operations for the Years Ended December
31, 1994 and 1993
d. Statements of Stockholders' Equity for the Years Ended
December 31, 1994 and 1993
e. Statements of Cash Flows for the Years Ended December
31, 1994 and 1993
f. Notes to Financial Statements for the Years Ended
December 31, 1994 and 1993
g. Report of Independent Public Accountants dated March
18, 1994
h. Balance Sheets as of December 31, 1993 and 1992
i. Statements of Operations for the Years Ended December
31, 1993 and 1992
j. Statements of Stockholders' Equity for the Years Ended
December 31, 1993 and 1992
k. Statements of Cash Flows for the Years Ended December
31, 1993 and 1992
l. Notes to Financial Statements for the Years Ended
December 31, 1993 and 1992
99.2 Pro Forma Financial Statements of Western Micro Technology,
Inc.:
-2-
<PAGE>
a. Pro Forma Condensed Consolidated Balance Sheet at
September 30, 1995 (Unaudited)
b. Notes to Pro Forma Condensed Consolidated Balance Sheet
at September 30, 1995 (Unaudited)
c. Pro Forma Condensed Consolidated Statements of
Operations for the Year Ended December 31, 1994
(Unaudited)
d. Notes to Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1994
(Unaudited)
e. Pro Forma Condensed Consolidated Statements of
Operations for the Nine Months Ended September 30, 1995
(Unaudited)
f. Notes to Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months Ended September 30, 1995
(Unaudited)
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 15, 1996
WESTERN MICRO TECHNOLOGY, INC.
By /s/ James W. Dorst
-------------------------------------------------
James W. Dorst
Chief Financial Officer
-4-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No. Description
--- -----------
99.1 Financial statements of R&D Hardware Systems Company
of Colorado, Inc.:
a. Report of Independent Public Accountants dated March 20,
1995
b. Balance Sheets as of December 31, 1994 and 1993
c. Statements of Operations for the Years Ended December 31,
1994 and 1993
d. Statements of Stockholders' Equity for the Years Ended
December 31, 1994 and 1993
e. Statements of Cash Flows for the Years Ended
December 31, 1994 and 1993
f. Notes to Financial Statements for the Years Ended
December 31, 1994 and 1993
g. Report of Independent Public Accountants dated March 18,
1994
h. Balance Sheets as of December 31, 1993 and 1992
i. Statements of Operations for the Years Ended December 31,
1993 and 1992
j. Statements of Stockholders' Equity for the Years Ended
December 31, 1993 and 1992
k. Statements of Cash Flows for the Years Ended
December 31, 1993 and 1992
l. Notes to Financial Statements for the Years Ended
December 31, 1993 and 1992
99.2 Pro Forma Financial Statements of Western Micro
Technology, Inc.:
a. Pro Forma Condensed Consolidated Balance Sheet at
September 30, 1995 (Unaudited)
b. Notes to Pro Forma Condensed Consolidated Balance Sheet
at September 30, 1995 (Unaudited)
<PAGE>
Exhibit
No. Description
--- -----------
c. Pro Forma Condensed Consolidated Statements of
Operations for the Year Ended December 31, 1994
(Unaudited)
d. Notes to Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1994
(Unaudited)
e. Pro Forma Condensed Consolidated Statements of
Operations for the Nine Months Ended September 30, 1995
(Unaudited)
f. Notes to Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months Ended September 30, 1995
(Unaudited)
<PAGE>
Exhibit 99.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of R & D Hardware Systems Company of Colorado, Inc.:
We have audited the accompanying balance sheets of R & D Hardware Systems
Company of Colorado, Inc. (a Colorado corporation) as of December 31, 1994 and
1993, and the related statements of operations, stockholders' equity 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 audits.
We conducted our audits 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 audits provide 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 R & D Hardware Systems Company of
Colorado, Inc. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 20, 1995
-1-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1994 AND 1993
--------------------------------
<TABLE>
<CAPTION>
ASSETS 1994 1993
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 521,526 $ 664,773
Accounts receivable (Notes 2 and 3) 1,054,110 785,396
Inventories (Note 2) 201,439 423,467
Current portion of notes receivable from related parties
(Note 3) 35,361 41,667
Prepaid expenses and other current assets 40,785 14,498
----------- -----------
Total current assets 1,853,221 1,929,801
OPERATING EQUIPMENT, net 7,265 11,082
NOTE RECEIVABLE FROM RELATED PARTY (Note 3) - 17,361
----------- -----------
Total assets $ 1,860,486 $ 1,958,244
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable (Note 3) $ 805,913 $ 1,475,333
Accrued liabilities 56,481 26,900
----------- -----------
Total current liabilities 862,394 1,502,233
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 100,000 shares authorized;
none issued - -
Common stock, $.001 par value; 500,000 shares authorized;
100,000 issued and outstanding 100 100
Additional paid-in capital 22,986 22,986
Retained earnings 975,006 432,925
----------- -----------
Total stockholders' equity 998,092 456,011
----------- -----------
Total liabilities and stockholders' equity $ 1,860,486 $ 1,958,244
=========== ===========
</TABLE>
The accompanying notes to financial statements are
an integral part of these balance sheets.
-2-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
AS OF DECEMBER 31, 1994 AND 1993
--------------------------------
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
NET SALES (Note 3) $ 7,490,319 $ 8,238,401
COST OF SALES (Note 3) 6,554,413 7,157,362
----------- -----------
GROSS MARGIN 935,906 1,081,039
----------- -----------
OPERATING EXPENSES:
General and administrative 691,114 665,617
Depreciation and amortization 3,817 4,862
----------- -----------
694,931 670,479
----------- -----------
OPERATING INCOME 240,975 410,560
----------- -----------
OTHER INCOME:
Interest income 38,132 42,158
Other, net (Note 3) 262,974 158,234
----------- -----------
301,106 200,392
----------- -----------
NET INCOME $ 542,081 $ 610,952
=========== ===========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
-3-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
----------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------- ----------------- Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
------ ------ ------ ------ ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1992 - $ - 100,000 $ 100 $ 22,986 $ 1,134,533 $ 1,157,619
Net income - - - - - 610,952 610,952
Distributions to shareholders - - - - - (1,312,560) (1,312,560)
--------- --------- -------- -------- ------------ ----------- -----------
BALANCES, December 31, 1993 - - 100,000 100 22,986 432,925 456,011
Net income - - - - - 542,081 542,081
--------- --------- -------- -------- ------------ ----------- -----------
BALANCES, December 31, 1994 - $ - 100,000 $ 100 $ 22,986 $ 975,006 $ 998,092
========= ========= ======== ======== ============ =========== ===========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
-4-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
----------------------------------------------
<TABLE>
<CAPTION>
1994 1993
---------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 542,081 $ 610,952
Adjustments to reconcile net income to net cash (used in)
provided by operating activities--
Depreciation and amortization 3,817 4,862
Changes in operating assets and liabilities--
Accounts receivable (268,714) 541,483
Inventories 222,028 109,920
Prepaid expenses and other current assets (26,287) 40,732
Accounts payable (669,420) (8,986)
Accrued liabilities 29,581 (43,758)
--------- -----------
Net cash (used in) provided by operating activities (166,914) 1,255,205
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of operating equipment - 4,538
Receipts from note receivable from related party 41,667 45,139
Note receivable from a related party (18,000) -
--------- -----------
Net cash provided by investing activities 23,667 49,677
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders - (1,312,560)
--------- -----------
Net cash used in financing activities - (1,312,560)
--------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (143,247) (7,678)
CASH AND CASH EQUIVALENTS, beginning of year 664,773 672,451
--------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 521,526 $ 664,773
========= ===========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
-5-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1994 AND 1993
--------------------------
(1) ORGANIZATION
------------
R & D Hardware Systems Company of Colorado, Inc. (the "Company"), is a
distributor of computer equipment, including equipment manufactured by Unisys
Corporation, International Business Machines, Inc. ("IBM"), WYSE, Uniplex and
FacetTerm. The Company sells computer equipment through a reseller network.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounts Receivable
-------------------
The Company grants credit to its customers in the form of short-term
receivables. The creditworthiness of customers is evaluated prior to the
extension of credit and management believes there are no significant
concentrations of credit risk.
Inventories
-----------
Inventories consist of computer equipment purchased for resale and are stated at
the lower of cost (average cost method) or market. In general, inventory
purchases are recorded at the time the equipment is shipped, at which time title
passes to the Company. In 1994 and 1993, IBM and Unisys were the primary
suppliers of inventory to the Company.
Income Taxes
------------
The Company has elected to be treated as an S Corporation under the Internal
Revenue Code. Accordingly, the taxable income, loss and credits of the Company
are included in the personal tax returns of the stockholders and the Company
itself has no income tax liability.
Cash Equivalents
----------------
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.
(3) RELATED PARTY TRANSACTIONS
--------------------------
During the years ended December 31, 1994 and 1993, the Company sold computer
equipment in the amounts of approximately $1,642,000 and $1,855,000, with
related costs of sales of approximately $1,444,000 and $1,700,000, respectively,
to an entity related through
-6-
<PAGE>
substantially common ownership. In 1994, the Company also provided equipment
procurement services for this entity, for which the Company recorded
approximately $200,000, which has been reflected as other income in the
statement of operations for the year ended December 31, 1994. Additionally, at
December 31, 1994 and 1993, the Company had accounts receivable from this entity
of approximately $101,000 and $69,000, and amounts payable to this entity of
approximately $25,000 and $285,000, respectively. In 1994 and 1993, this
related party performed a substantial amount of administration and management
activities for the Company, and the Company paid approximately $170,000 and
$192,000, respectively, in management fees and expense reimbursements.
In 1992, the Company recorded a $125,000 advance to an entity related through
substantially common ownership. The advance was classified as a note
receivable, which does not bear interest, and requires 36 monthly payments of
$3,472, with the last payment due in June 1995. Amounts due under this note are
$17,361 as of December 31, 1994.
In 1994, the Company advanced $18,000 in the form of a note receivable to a
shareholder. This note receivable has been reflected as a component of notes
receivable from related parties in the accompanying balance sheet as of December
31, 1994. The note bears interest at an annual rate of 5.95% and principle plus
accrued interest is due in December 1995.
The Company leases space from a related party under a month-to-month lease.
Rental expense paid to this related party totaled $46,847 and $48,975 for the
years ended December 31, 1994 and 1993, respectively.
(4) PROFIT SHARING PLAN
-------------------
The Company has a profit sharing plan covering substantially all full-time
employees who meet certain minimum age and employment requirements. In 1993,
the Company restated the profit sharing plan to include a qualified deferral
arrangement as described in Section 401(k) of the Internal Revenue Code. Under
this plan, as amended, the Company may declare a profit sharing contribution of
up to 15% of a participants compensation, and/or a discretionary match of a
percentage of participant deferrals. Profit sharing contributions of $17,579
were authorized for the year ended December 31, 1994, and no contributions were
authorized for 1993.
(5) MAJOR CUSTOMERS
---------------
In 1994 and 1993, the Company had two major customers, each of which comprised
more than 10% of sales. One of these customers, a related party through
substantially common ownership, represented 22% and 23% of sales in 1994 and
1993, respectively. The other customer represented 16% and 15% of sales in 1994
and 1993, respectively.
-7-
<PAGE>
(6) SUBSEQUENT EVENT
----------------
In February 1995, in a series of transactions, the Company acquired certain
assets of a software company for approximately $50,000 in cash and assumed
approximately $140,000 in payables.
-8-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of R & D Hardware Systems Company of Colorado, Inc.:
We have audited the accompanying balance sheets of R & D Hardware Systems
Company of Colorado, Inc. (a Colorado corporation) as of December 31, 1993 and
1992, and the related statements of operations, stockholders' equity 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 audits.
We conducted our audits 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 audits provide 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 R & D Hardware Systems Company
of Colorado, Inc. as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Denver, Colorado,
March 18, 1994
-9-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31, 1993 AND 1992
--------------------------------
<TABLE>
<CAPTION>
ASSETS 1993 1992
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 664,773 $ 672,451
Accounts receivable (Notes 2 and 3) 785,396 1,326,879
Inventories (Note 2) 423,467 533,387
Current portion of note receivable from related party
(Note 3) 41,667 45,139
Prepaid expenses and other current assets 14,498 55,230
----------- -----------
Total current assets $ 1,929,801 $ 2,633,086
OPERATING EQUIPMENT, net 11,082 20,482
NOTE RECEIVABLE FROM RELATED PARTY (Note 3) 17,361 59,028
----------- -----------
Total assets $ 1,958,244 $ 2,712,596
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable (Note 3) $ 1,475,333 $ 1,484,319
Accrued liabilities 26,900 65,520
Customer deposits - 5,138
----------- -----------
Total current liabilities 1,502,233 1,554,977
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; 100,000 shares authorized;
none issued - -
Common stock, $.001 par value; 500,000 shares authorized;
100,000 issued and outstanding 100 100
Additional paid-in capital 22,986 22,986
Retained earnings 432,925 1,134,533
----------- -----------
Total stockholders' equity 456,011 1,157,619
----------- -----------
Total liabilities and stockholders' equity $ 1,958,244 $ 2,712,596
=========== ===========
</TABLE>
The accompanying notes to financial statements are
an integral part of these balance sheets.
-10-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
AS OF DECEMBER 31, 1993 AND 1992
--------------------------------
<TABLE>
<CAPTION>
1993 1992
----------- ------------
<S> <C> <C>
NET SALES (Note 3) $ 8,238,401 $ 9,581,985
COST OF SALES (Note 3) 7,157,362 8,272,861
----------- -----------
GROSS MARGIN 1,081,039 1,309,124
----------- -----------
OPERATING EXPENSES:
General and administrative 665,617 795,641
Depreciation and amortization 4,862 4,877
----------- -----------
670,479 800,518
----------- -----------
OPERATING INCOME 410,560 508,606
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 42,158 24,678
Interest expense (Note 3) - (11,391)
Other, net 158,234 142,517
----------- -----------
200,392 155,804
----------- -----------
NET INCOME $ 610,952 $ 664,410
=========== ===========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
-11-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY
----------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
----------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------- ----------------- Paid-In Retained
Shares Amount Shares Amount Capital Earnings Total
------ ------ ------ ------ ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1991 - $ - 100,000 $ 100 $ 22,986 $ 621,512 $ 644,598
Net income - - - - - 664,410 664,410
Distributions to shareholders - - - - - (151,389) (151,389)
--------- --------- -------- -------- ------------ ----------- -----------
BALANCES, December 31, 1992 - - 100,000 100 22,986 1,134,533 1,157,619
Net income - - - - - 610,952 610,952
Distributions to shareholders - - - - - (1,312,560) (1,312,560)
--------- --------- -------- -------- ------------ ----------- -----------
BALANCES, December 31, 1993 - $ - 100,000 $ 100 $ 22,986 $ 432,925 $ 456,011
========= ========= ======== ======== ============ =========== ===========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
-12-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO, INC.
------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
----------------------------------------------
<TABLE>
<CAPTION>
1993 1992
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 610,952 $ 664,410
Adjustments to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization 4,862 4,877
Changes in operating assets and liabilities--
Accounts receivable 541,483 (131,382)
Inventories 109,920 736,324
Prepaid expenses and other current assets 40,732 (31,662)
Accounts payable (8,986) (520,645)
Accrued liabilities (38,620) 51,179
Customer deposits (5,138) (19,262)
----------- ---------
Net cash provided by operating activities 1,255,205 753,839
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of operating equipment - (3,236)
Sale of operating equipment 4,538 -
Note receivable from related party - (125,000)
Repayments of note receivable from related party 45,139 20,833
----------- ----------
Net cash provided by (used in) investing activities 49,677 (107,403)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of note to related party - (248,594)
Distributions to shareholders (1,312,560) (151,389)
----------- ---------
Net cash used in financing activities (1,312,560) (399,983)
----------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (7,678) 246,453
CASH AND CASH EQUIVALENTS, beginning of year 672,451 425,998
----------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 664,773 $ 672,451
=========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ - $ 13,638
=========== =========
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
-13-
<PAGE>
R & D HARDWARE SYSTEMS COMPANY OF COLORADO INC.
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1993 AND 1992
--------------------------
(1) ORGANIZATION
------------
R & D Hardware Systems Company of Colorado, Inc. (the "Company"), is a
distributor of computer equipment, including equipment manufactured by Unisys
Corporation, International Business Machines, Inc. ("IBM"), WYSE, Cambex,
Uniplex and FacetTerm. The Company sells computer equipment through a dealer
network.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounts Receivable
-------------------
The Company grants credit to its customers in the form of short-term
receivables. The creditworthiness of customers is evaluated prior to the
extension of credit and management believes there are no significant
concentrations of credit risk.
Inventories
-----------
Inventories consist of computer equipment purchased for resale and are stated at
the lower of cost (average cost method) or market. In general, inventory
purchases are recorded at the time the equipment is shipped, at which time title
passes to the Company. In 1993 and 1992, IBM and Unisys were the primary
suppliers of inventory to the Company.
Income Taxes
------------
The Company has elected to be treated as an S Corporation under the Internal
Revenue Code. Accordingly, the taxable income, loss and credits of the Company
are included in the personal tax returns of the stockholders and the Company
itself has no income tax liability.
Cash Equivalents
----------------
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.
(3) RELATED PARTY TRANSACTIONS
--------------------------
During the years ended December 31, 1993 and 1992, the Company sold computer
equipment in the amounts of approximately $1,855,000 and $2,019,000, with
related costs of sales of approximately $1,700,000 and $1,841,000, respectively,
to an entity related through
-14-
<PAGE>
substantially common ownership. Additionally, at December 31, 1993 and 1992,
the Company had accounts receivable from this entity of approximately $69,000
and $449,000, and amounts payable to this entity of approximately $285,000 and
$18,000, respectively. Interest expense related to a note payable to this
entity, which was fully repaid in 1992, was $11,391 in that year. In 1993, this
related party performed a substantial amount of administration and management
activities for the Company, and the Company paid approximately $192,000 in
management fees and expense reimbursements.
In 1992, the Company recorded a $125,000 advance to an entity related through
common ownership. The advance was reclassified as a note receivable, which does
not bear interest, and requires 36 monthly payments of $3,472. Repayments due
under the note are as follows:
1994 $ 41,667
1995 17,361
--------
$ 59,028
========
(4) LEASES
------
In December 1991, an entity owned by the Company's principal stockholders
purchased the building in which the Company leases space to conduct its
operations. Effective February 1, 1992, this lease was amended to become
cancelable, and payments are due on a month-to-month basis. Rental expense
totaled approximately $48,975 and $63,430 for the years ended December 31, 1993
and 1992, respectively.
(5) PROFIT SHARING PLAN
-------------------
The Company has a profit sharing plan covering substantially all full-time
employees who meet certain minimum age and employment requirements. The Board
of Directors may authorize contributions annually of up to 15% of a
participant's compensation. Contributions of approximately $14,800 were
authorized for the year ended December 31, 1992, and are included in accrued
liabilities in the accompanying balance sheet as of December 31, 1992. No
contributions were authorized for 1993.
(6) MAJOR CUSTOMERS
---------------
In 1993, the Company had two major customers each of which comprised more than
10% of sales. One of these customers, a related party through substantially
common ownership, had sales in the amount of approximately $1,855,000. The
other customer had sales in the amount of approximately $1,228,000. Related
accounts receivable for these two customers were approximately $69,000 and
$143,000, respectively, at December 31, 1993.
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<PAGE>
Exhibit 99.2
WESTERN MICRO TECHNOLOGY, INC.
PRO FORMA FINANCIAL STATEMENTS
The accompanying pro forma condensed consolidated balance sheet and
statements of operations have been derived from the historical financial
statements of Western Micro Technology, Inc. (the Company) and the systems
distribution business of R&D Hardware Systems Company of Colorado, Inc. (R&D)
and adjusts such information to give effect to the acquisition of the systems
distribution business of R&D.
The pro forma condensed consolidated balance sheet at September 30, 1995
assumes that the acquisition of R&D occurred on September 30, 1995. The pro
forma condensed, consolidated statement of operations for the year ended
December 31, 1994 and the nine months ended September 30, 1995 assume that the
acquisition of R&D occurred on January 1, 1994.
The pro forma financial information is not necessarily indicative of the
results which would actually have occurred had the transactions been in effect
on the dates and for the periods indicated or which may result in the future.
This pro forma information should be read in conjuncture with the notes thereto
and the historical financial information.
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<PAGE>
WESTERN MICRO TECHNOLOGY, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
---------------- Pro Forma Pro Forma
ASSETS Western R&D Adjustments Combined
------- --- ----------- --------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash $ 76 $ 449 $ (1,000) (1) $ 525
1,000 (2)
Trade accounts receivable, net of
allowance for doubtful
accounts 11,166 1,009 (100) (3) 12,075
Inventory, net 9,843 115 - 9,958
Other current assets 2,112 - - 2,112
-------- ------- ----------- ---------
Total current assets 23,197 1,573 (100) 24,670
Property and equipment, net 1,358 - - 1,358
Goodwill, net of accumulated amortization - - 1,275 (3) 1,275
Other assets 214 - - 214
-------- ------- ----------- ---------
$ 24,769 $ 1,573 $ 1,175 $ 27,517
======== ======= =========== =========
LIABILITIES
Current Liabilities
Notes Payable $ 2,959 $ - $ 1,000 (2) $ 3,959
Current portion of capital leases 88 - - 88
Accounts payable 10,397 958 - 11,355
Accrued expenses 1,832 14 96 (1) 1,942
-------- ------- ----------- ---------
Total current liabilities 15,276 972 1,096 17,344
Capital lease obligations, less current
portion 72 - - 72
Other 396 - - 396
SHAREHOLDERS' EQUITY
Preferred Stock - - - -
Common Stock 13,915 - 680 (1) 14,595
Retained Earnings (deficit) (4,890) - - (4,890)
Net assets acquired - 601 (601) (3) -
-------- ------- ----------- ---------
$ 24,769 $ 1,573 $ 1,175 $ 27,517
======== ======= =========== =========
</TABLE>
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<PAGE>
WESTERN MICRO TECHNOLOGY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
Note A - Acquisition:
On January 2, 1995, Western Micro Technology, Inc. (the Company) acquired
substantially all of the assets of R&D Hardware Systems Company of Colorado,
Inc. (R&D). The transaction was valued at approximately $2,750,000 consisting of
a cash payment of $1,000,000, stock payment of approximately $680,000 (125,000
shares of the Company s common stock), the assumption of accounts payable and
accrued liabilities of approximately $970,000, and approximately $100,000 in
acquisition costs. Of the $1,000,000 cash payment and 125,000 share payment,
ten percent of each amount, respectively, has been placed in escrow for four
months to serve as security for the collection of the accounts receivable, sale
of the inventory and certain indemnity obligations of R&D. The terms of the
agreement between the Company and R&D also contain an earn-out provision which
allows for R&D to earn up to an additional 142,500 shares of the Company's
common stock based on attainment of gross profit targets for certain fiscal year
1996 and 1997 sales (as defined in the agreement) up to a cumulative value not
to exceed $292,500.
Note B - Pro Forma Adjustments:
(1) A summary of the purchase price described in Note A is as follows:
<TABLE>
<S> <C>
Cash $ 1,000
Stock 680
Direct Acquisition Costs 96
-------
1,776
Assumed accounts payable and accrued liabilities 972
-------
$ 2,748
=======
</TABLE>
(2) Represents draw against credit line to fund acquisition.
(3) The total purchase price of the R&D acquisition was allocated in accordance
with the provisions of APB No. 16 for purchase transactions and accordingly
was based on fair value of net tangible assets acquired with the excess
allocated to goodwill.
<TABLE>
<S> <C>
Net tangible assets acquired consist of:
Cash $ 449
Accounts receivable 909
Inventory 115
Accounts payable (958)
Accrued liabilities (14)
-------
501
Intangible assets consist of:
Goodwill 1,275
-------
$ 1,776
=======
</TABLE>
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<PAGE>
WESTERN MICRO TECHNOLOGY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
------------------- Pro Forma Pro Forma
Western R&D Adjustments Combined
------- --- ----------- --------
<S> <C> <C> <C> <C> <C>
Net Sales $ 119,285 $ 7,490 $ - $ 126,775
Costs of Goods Sold 102,662 6,554 - 109,216
--------- ------- ----------- ---------
Gross Profit 16,623 936 - 17,559
Selling General and Administrative
Expenses 16,968 695 85 (1) 17,681
103 (2)
(170) (3)
--------- ------- ----------- ---------
Operating Income (Loss) (345) 241 (18) (122)
Interest (Income) Expense, net 884 (38) - 846
Other (Income) Expense (10) (263) 203 (4) (70)
--------- ------- ----------- ----------
Income (Loss) from Continuing Operations (1,219) 542 (221) (898)
Provision for Income Taxes 217 - (64) (5) 153
--------- ------- ----------- ---------
Net Income (Loss) from Continuing
Operations $ (1,002) $ 542 $ (285) $ (745)
========= ======= =========== =========
Net Earnings (Loss) Per Share $ (0.27) $ (0.21)
========= =========
Number of Shares used in per Share
Calculation 3,669 3,794
========= =========
</TABLE>
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<PAGE>
WESTERN MICRO TECHNOLOGY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(1) Represents goodwill amortization expense, using the straight-line method
over a 15 year amortization period.
(2) Represents interest expense on the funds advanced against the Company s
credit line to fund the purchase, calculated at the Company s average rate
of interest for the period.
(3) Represents the elimination of R&D administration expenses and activities,
i.e. data processing, human resources, accounting and finance and executive
labor which would be absorbed by the Company without additional incremental
costs to the Company.
(4) Represents the elimination of income generated by R&D for services provided
to a related party which would not have been provided by the Company.
(5) Represents income taxes on the net effect of the inclusion of R&D s
operating income and the pro forma adjustments as set forth above.
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<PAGE>
WESTERN MICRO TECHNOLOGY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
----------- Pro Forma Pro Forma
Western R&D Adjustments Combined
------- --- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 84,807 $ 7,406 $ - $ 92,213
Cost of Goods Sold 74,534 6,698 - 81,232
-------- ------- ---------- ----------
Gross Profit 10,273 708 - 10,981
Selling General and
Administrative Expenses 11,410 552 64 (1) 11,962
80 (2)
(144) (3)
Restructuring Costs 3,600 - - 3,600
-------- ------- ---------- ----------
Operating Income (4,737) 156 - (4,581)
Interest Expense, net 702 15 - 717
Other (Income) Expense (34) (252) 188 (4) (98)
-------- ------- ---------- ----------
Income (Loss) from
Continuing Operations (5,405) 393 (188) (5,200)
Provision for Income
Taxes - - - -
Net Income (Loss) from
Continuing Operations $ (5,405) $ 393 $ (188) $ (5,200)
======== ====== ========== ========
Net Loss Per Share $ 1.46 $ 1.36
======== ========
Number of Shares used in
per Share Calculation 3,706 3,831
======== ========
</TABLE>
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<PAGE>
WESTERN MICRO TECHNOLOGY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(1) Represents goodwill amortization expense, using the straight-line method
over a 15 year amortization period.
(2) Represents interest expense on the funds advanced against the Company s
credit line to fund the purchase, calculated at the Company s average rate
of interest for the period.
(3) Represents the elimination of R&D administration expenses and activities,
i.e. data processing, human resources, accounting and finance and executive
labor which would be absorbed by the Company without additional incremental
costs to the Company.
(4) Represents the elimination of income generated by R&D for services provided
to a related party which would not have been provided by the Company.
