<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of the earliest event reported): October 27, 1999
Commission File Number 0-14973
UNICO, INC.
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(Exact name of registrant as specified in charter)
New Mexico 85-0270072
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(State or other jurisdiction of IRS Employer
incorporation or organization) Identification No.
2925 Bayview Drive, Fremont, California 94538
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 510/770-3990
N/A
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(Former Name or Former Address, if Changed Since Last Report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Form 8-K/A is filed as an amendment to the November 6, 1998 Form 8-K which
disclosed that the definitive agreement for the acquisition of Multiwave
Innovation Pte. Ltd. by the Registrant had been signed.
(a) On October 27, 1998, the Registrant entered into a definitive agreement
to acquire 100% of shares outstanding of Multiwave Innovation Pte. Ltd, a
Singapore company. Multiwave, an engineering company with a focus on research
and development, is a pioneer in the design, development, production, and
marketing of high performance multimedia and Internet related products for
brand name sales or OEM contracts. Multiwave's products include modem cards,
sound cards, Web-TV and various other multimedia upgrade kits and accessories.
Multiwave markets products on a transcontinental scale with sales in Japan,
Australia, Malaysia, Korea, Hong Kong, most major European countries, North
America and Latin America. This acquisition will provide the Registrant's
distribution company, Paradise Innovations, Inc., with rapid access to new and
exciting products.
The purchase price of US$5 million shall be paid by the Registrant to Seller
through the issuance of the Registrant's "restricted" common stock as that
term is defined in Rule 144 promulgated under the Securities Act of 1933. The
number of shares issued to Seller (rounded upwards to the nearest whole
number) shall be derived by dividing the Base Purchase Price as defined in
the "Stock Purchase Agreement" ("Agreement", Exhibit 2.1), by the "Weighted
Average Price" of the Registrant's stock. As used in the Agreement, "Weighted
Average Price" shall be the weighted average of the bid and offer prices of
the Registrant's stock on NASDAQ from the date of the signing of the Letter of
Intent to the date immediately preceding the execution of the Agreement,
provided that such Weighted Average Price shall not: (i) exceed 130% of the
weighted average of the bid and offer prices of The Registrant's stock on the
7th day of July, 1998 (the "Weighted Reference Price"); or (ii) be less than
70% of the Weighted Reference Price. No fractional Shares shall be issued.
The purchase price has been calculated, in accordance to the Agreement to
consist of the following amounts of the Registrant's shares to be distributed
to the Sellers of Multiwave Innovations, Inc., as follows:
Percentage of Dollar Portion of Number of
Name of Seller Purchase Price Purchase Price Shares
-------------- -------------- ----------------- ---------
Uraco Holdings Ltd. 67.27% US$ 3,363,500 1,606,940
NatSteel Electronics Ltd. 27.27 1,363,500 651,424
James Tan Meng Dong 3.33 166,500 79,547
Dr. Soo Jia Sian 2.13 106,500 50,881
-------------- -------------- ----------------- ---------
TOTAL 100.00% US$ 5,000,000 2,388,792
Prior to the acquisition, the Registrant's subsidiary Paradise Innovations,
Inc. purchased products from Multiwave Innovation, Inc. Following the
acquisition, Mr. James Tan and Dr. Soo Jia Sian will become employees of the
Registrant. There is no other relationship between the Registrant, its
affiliates and its officers and the Sellers, their affiliates and their
officers.
(b) Multiwave did not own any real estate nor manufacturing facilities. All
material physical property acquired in this transaction were employed in the
normal course of business and will continue to be so employed.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired - Audited financial statements
of Multiwave were completed by the independent auditors of Multiwave on January
21, 1999. They are attached as Exhibit 2.2.
(b) Pro Forma Financial Information - The pro forma financial information is
being prepared and will be filed as a second amendment to the Form 8-K filed on
November 6, 1998, as soon as it becomes available.
(c) Exhibits - Exhibit filed in conjunction with this report in accordance
with Item 601 Regulation S-B are as follows:
2.1 Stock Purchase Agreement dated as of October 27, 1998, filed on Form 8-K
on November 6, 1998, is incorporated by reference.
2.2 Audited financial statements of Multiwave Innovation Pte. Ltd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNICO, INC.
Date: January 22, 1999 BY: /s/ Henry Tang
NAME: HENRY TANG
TITLE: Secretary
<PAGE>
Exhibit 2.2 Audited Financial Statements of Multiwave Pte. Ltd.
Multiwave Innovation Pte Ltd
Financial Statements
(In United States Dollars)
October 31 , 1998, June 30, 1998
and June 30, 1997
With Independent Auditors' Report
Thereon
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Multiwave Innovation Pte Ltd
We have audited the accompanying balance sheets of Multiwave Innovation
Pte Ltd as of October 31, 1998, June 30, 1998 and June 30, 1997, and the
related statements of operations and comprehensive operations,
shareholders' equity (deficit) and cash flows for the four-month period
ended October 31, 1998, the year ended June 30, 1998 and the nine-month
period ended June 30, 1997. 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 in Singapore, that are substantially equivalent to auditing
standards generally accepted in the United States. 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 Multiwave
Innovation Pte Ltd as of October 31, 1998, June 30, 1998 and June 30,
1997, and the results of its operations and cash flows for the four-
month period ended October 31, 1998, the year ended June 30, 1998 and
the nine-month period ended June 30, 1997, in conformity with generally
accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company has suffered recurring losses from
operations and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ KPMG
KPMG
Certified Public Accountants
SINGAPORE
21 January 1999
<PAGE>
Multiwave Innovation Pte Ltd
Balance Sheets
As of October 31, 1998, June 30, 1998 and June 30, 1997
(In United States Dollars)
- -----------------------------------------------------------------------------
Note October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents 3 1,360 953 803
Trade receivables 4 3,128 1,174 803
Other receivables and deposits 5 339 142 15
Prepaid expenses 128 18 4
Due from related parties 18 201 42 -
Due from affiliates 18 - - 1
Inventories 6 5,075 2,165 1,645
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Total Current Assets 10,231 4,494 3,271
Property, plant and equipment, net 7 222 211 210
- -----------------------------------------------------------------------------
Total Assets 10,453 4,705 3,481
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Bank overdrafts 8 193 149 194
Trust receipts 134 206 -
Current portion of obligations under
capital leases 15 7 7 -
Due to related parties 18 - - 34
Due to affiliates 18 2,235 2,073 431
Loans and advances from related
Parties 9 62 59 420
Trade accounts payables 8,267 3,023 1,159
Accrued operating expenses 10 142 144 178
Other payables 11 311 215 199
- -----------------------------------------------------------------------------
Total Current Liabilities 11,351 5,876 2,615
Long-term Liabilities
Obligations under capital leases,
less current portion 15 16 18 -
- -----------------------------------------------------------------------------
Total Liabilities 11,367 5,894 2,615
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Shareholders' Equity
Ordinary shares:
Par value - S$1;
Authorized: 14,000,000 ordinary shares;
Issued and outstanding: 9,900,000
ordinary shares 16 6,821 6,821 6,821
Share Premium Account 16 1,372 1,372 1,372
Other Paid-in Capital 16 2,451 2,451 2,451
Retained Deficit (11,446) (11,760) (9,731)
Cumulative Translation Adjustments (112) (73) (47)
- -----------------------------------------------------------------------------
Total Shareholders' Equity (Deficit) (914) (1,189) 866
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Total Liabilities and
Shareholders' Equity (Deficit) 10,453 4,705 3,481
- -----------------------------------------------------------------------------
See accompanying notes to the Financial Statements.
<PAGE>
Multiwave Innovation Pte Ltd
Statements of Operations and Comprehensive Operations
For four months ended October 31, 1998,
Year ended June 30, 1998 and nine months ended June 30, 1997
(In United States Dollars)
- -----------------------------------------------------------------------------
Nine
Four months Year months
ended ended ended
Note October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Net sales 9,153 8,571 7,497
Cost of sales (8,156) (7,842) (7,066)
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Gross profit 997 729 431
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Research and development costs (117) (312) (273)
Selling, general and
administrative expenses (1,058) (2,094) (2,924)
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Total operating expenses (1,175) (2,406) (3,197)
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Operating loss (178) (1,677) (2,766)
Interest income 8 11 8
Interest expense (10) (16) (33)
Other non-operating
income (expense) - net 12 494 (347) (206)
- -----------------------------------------------------------------------------
Income (loss) before income taxes 314 (2,029) (2,997)
Income taxes 13 - - -
- -----------------------------------------------------------------------------
Net income (loss) 314 (2,029) (2,997)
Foreign currency translation adjustments (39) (26) 91
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Comprehensive income (loss) 275 (2,055) (2,906)
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See accompanying notes to the Financial Statements.
<PAGE>
Multiwave Innovation Pte Ltd
Statements of Cash Flows
For four months ended October 31, 1998,
Year ended June 30, 1998 and nine months ended June 30, 1997
(In United States Dollars)
- -----------------------------------------------------------------------------
Nine
Four months Year months
ended ended ended
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Cash flows from operating activities
Net income (loss) 314 (2,029) (2,997)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
Grant income (11) (62) -
Depreciation 45 108 73
Loss on sale of property,
plant and equipment 1 9 1
Exchange (gain) loss of foreign
currency balances (6) (73) (4)
Changes in current assets and liabilities:-
Inventories (2,692) (822) (644)
Trade receivables (1,820) (525) 432
Other receivables, deposits
and prepaid expenses (276) (90) 89
Due from affiliates and related parties (150) (44) 6
Trade accounts payables 4,887 2,163 915
Accrued operating expenses
and other payables 74 43 114
Due to affiliates and related parties 66 1,777 (1,173)
- -----------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 432 455 (3,188)
- -----------------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures (47) (122) (129)
- -----------------------------------------------------------------------------
Net cash used in investing activities (47) (122) (129)
- -----------------------------------------------------------------------------
Cash flows from financing activities
Bank overdrafts 35 (15) (320)
Trust receipts (77) 218 (250)
Loans and advances from related parties - (312) 422
Proceeds from issuance of shares - - 3,651
Capital lease payments (3) (4) -
- -----------------------------------------------------------------------------
Net cash (used in) provided by
financing activities (45) (113) 3,503
- -----------------------------------------------------------------------------
Net increase in cash and cash equivalents
for the period 340 220 186
Cash and cash equivalents at beginning
of the period 953 803 572
Effect of exchange rate changes on cash balances
held in foreign currencies 67 (70) 45
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of the period 1,360 953 803
- -----------------------------------------------------------------------------
See accompanying notes to the Financial Statements.
<PAGE>
Multiwave Innovation Pte Ltd
Statements of Changes in Shareholders' Equity (Deficit)
For four months ended October 31, 1998,
Year ended June 30, 1998 and nine months ended June 30, 1997
(In United States Dollars)
- -----------------------------------------------------------------------------
Total
Share-
Other Cum. holders'
Ordinary Ordinary Share paid-in Retained Transl. Equity
Shares Shares Premium Capital Deficit Adj (Deficit)
$'000 $'000 $'000 $'000 $'000 $'000
- -----------------------------------------------------------------------------
Balances at
October 1,
1996 762,472 475 - - (6,734) (138) (6,397)
Shares
Issuance 9,137,528 6,346 1,372 2,451 - - 10,169
Net loss - - - - (2,997) - (2,997)
Translation
Adjustment - - - - - 91 91
- -----------------------------------------------------------------------------
Balances at
June 30,
1997 9,900,000 6,821 1,372 2,451 (9,731) (47) 866
Net loss - - - - (2,029) - (2,029)
Translation
Adjustment - - - - - (26) (26)
- -----------------------------------------------------------------------------
Balances at
June 30,
1998 9,900,000 6,821 1,372 2,451 (11,760) (73) (1,189)
Net income - - - - 314 - 314
Translation
adjustment - - - - - (39) (39)
- -----------------------------------------------------------------------------
Balances at
October 31,
1998 9,900,000 6,821 1,372 2,451 (11,446) (112) (914)
- -----------------------------------------------------------------------------
See accompanying notes to the Financial Statements.
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
1. Business and Liquidity
Multiwave Innovation Pte Ltd ("the "Company") designs, develops and
markets high performance multimedia and internet related products
such as modem cards, sound cards and web - TV products. The
Company operates in Singapore and its principal markets are in the
United States of America, Europe and Asia.
The Company was incorporated in 1988. As at September 30, 1996,
the Company's shareholders were:-
Percentage
Shareholder Ownership
%
NatSteel Electronics Limited 54.60
James Tan Meng Dong 40.50
Dr Soo Jia Sian 4.90
--------
100.00
========
In April 1997, as a result of the issue of further ordinary shares
by the Company, the percentage ownership of the issued and outstanding
shares of the Company became:-
Shareholder Ownership
%
Uraco Holdings Limited 45.50
NatSteel Electronics Limited 45.50
James Tan Meng Dong 5.50
Dr Soo Jia Sian 3.50
--------
100.00
========
The Company's financial statements for the year ended June 30, 1998
and for the four-month period ended October 31, 1998 have been
prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and
commitments in the normal course of business. At October 31, 1998,
the Company had an accumulated deficit of $914,000, and had a
working capital deficit of $1,120,000. The Company's working
capital at October 31, 1998 plus its revenue from product sales may
not be sufficient to meet its outstanding obligations.
Management's plans include consideration of raising additional
capital through the conversion of existing debt of an affiliate and
the sale of the Company. On October 27, 1998, the above
shareholders and Unico, Inc. ("Unico"), a United States
corporation, entered into a Stock Purchase Agreement under which
Unico agreed to purchase all the issued and outstanding shares of
the Company held by the current shareholders. This transaction is
conditional, inter alia, upon the approval of the existing
shareholders of Unico. Management believes that it is likely that
the acquisition will be approved by such shareholders.
Also, on October 27, 1998, Uraco Holdings Limited entered into two
separate sale and purchase agreements with James Tan Meng Dong and
Ivan Lek Eng Meng under which, inter alia, the Company will issue
3,300,000 additional ordinary shares of S$1 each by way of
conversion of amounts payable to subsidiaries of Uraco Holdings
Limited amounting to $2,000,000. This debt to equity conversion is
intended as a capital contribution. The completion of the
conversion of the amounts payable is conditional on the successful
completion of the Stock Purchase Agreement referred to above.
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
1. Business and Liquidity (Cont'd)
Management expects that the transactions contemplated in the
preceding paragraph will be successfully concluded and will enable
the Company to satisfy its outstanding obligations. However, no
certainty can be given that the Company will be successful in
completing the sale of the Company to Unico and the conditional
conversion of amounts payable to ordinary shares outlined above.
Further, there can be no certainty, assuming the Company
successfully completes these transactions, that the Company will
achieve profitability or positive cash flow or that Unico will be
able to provide adequate additional financing. If the Company is
unable to complete the transactions as contemplated or obtain
adequate additional financing, management may be required to seek
other alternatives.
2. Summary of Significant Accounting Policies
(a) Basis of Financial Statements Preparation
The financial statements have been prepared on the historical
cost basis.
(b) Use of Estimates in the Financial Statements
The preparation of financial statements requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet date of the
financial statements and the reported revenues and expenses
during the reporting period. Actual results could differ from
these estimates.
(c) Cash and Cash Equivalents
Cash and cash equivalents are represented by highly liquid
investments that are readily convertible to known amounts of
cash and have original maturities of three month or less.
(d) Inventories
Inventories are valued at the lower of cost and net realizable
value. Cost is based on the first-in first-out principle.
Finished goods and work-in-progress include cost of materials
and sub-contract manufacturing cost.
(e) Property, Plant and Equipment
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is calculated on the straight line method so as
to write off the cost of fixed assets over their estimated
useful lives of three years.
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
The cost of maintenance and repairs is charged to income as
incurred; significant renewals and betterments are capitalized.
When assets are retired or otherwise disposed of, the carrying
value and the related accumulated depreciation are removed from
the accounts and any resulting gain or loss is reflected for the period.
(f) Property, Plant and Equipment Under Lease
Property, plant and equipment under lease is accounted for as
a capital lease where the lease transfers ownership to the
lessees at the end of the lease term or the lease contains a
bargain purchase option. Additionally, property, plant and
equipment under lease is accounted for as a capital lease
where the lease term is equal to or greater than 75% of the
estimated economic life of the leased assets, or where the
present value of rental and other lease payments exceeds 90%
of the fair value of the leased assets. Leased assets which
meet these conditions are recorded at cost and depreciated
using the straight-line method over the terms of the leases.
(g) Operating Leases
Rental payments under operating leases are charged to the
profit and loss account on the straight-line basis over the
periods of the respective leases.
(h) Taxation
The Company accounts for income tax in accordance with SFAS
No. 109, "Accounting for Income Taxes". Under the asset and
liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the estimated future tax
effects of differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the years in
which those temporary differences are expected to be recovered
or settled. Under SFAS No. 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognised
in income in the period the rate change is enacted.
Where a deferred tax asset has been recognized, an appropriate
allowance must be established if, based upon the weight of
available evidence, it is more likely than not that some or
all of it will not be realized.
(i) Reserve Accounts
Where proceeds received from the issuance of shares exceed the
par value of the shares issued, the excess is recorded in a
Share Premium Account in accordance with statutory
requirements and accepted practice in Singapore. See Note 16
for additional information including restrictions on the
reduction of the Share Premium Account.
(j) Research and Development Costs
Research and development costs are written off against income
as and when they are incurred.
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
(k) Revenue Recognition
Sales represent the invoiced value of goods supplied,
excluding goods and services tax, net of goods returned, trade
discounts and allowances. Sales are recognized upon shipment
of goods or when the goods are accepted by the customer.
(l) Translation of Foreign Currencies
The Company maintains its accounting records in Singapore
dollars. Monetary assets and liabilities which are
denominated in currencies other than Singapore dollars are
translated into Singapore dollars at the rates of exchange
prevailing at the balance sheet date. Transactions in foreign
currencies are translated at rates ruling on transaction
dates. Translation differences are included in the profit and
loss account.
For the purposes of preparation of these financial statements,
which are presented in US dollars, assets and liabilities are
translated from Singapore dollars to US dollars at rates of
exchange closely approximate to those ruling at the balance
sheet dates. Profit and loss items are translated at the
average rates of the respective periods. Shareholders'
equity, share premium account, other paid-in capital and the
retained deficit brought forward are translated at historical
rates. Translation differences arising are taken to
cumulative translation adjustments.
(m) Year 2000
In 1998, the Company developed a plan to deal with the Year
2000 problem and began converting its computer systems to be
Year 2000 compliant. The plan provides for the conversion
efforts to be completed by April 1999. The year 2000 problem
is the result of computer programs being written using two
digits rather than four to define the applicable year. The
Company is expensing all costs associated with these systems
changes as the costs are incurred. As of October 31, 1998,
$1,000 had been expensed.
(n) Concentration of Credit Risks
The Company is a provider of multi-media hardware and software
systems. The five largest customers of the Company accounted
for 46%, 32% and 46% of total sales in the nine-month period
ended June 30, 1997, year ended June 30, 1998 and four-month
period ended October 31, 1998, respectively. (see Note 17).
The Company believes that the concentration of its credit risk
in trade receivables is mitigated substantially by its credit
evaluation process, credit policies and credit control and
collection procedures.
(o) Advertising costs
Advertising costs are expensed as incurred. Advertising
expenses for the nine-month period ended June 30, 1997, year
ended June 30, 1998 and the four-month period ended October
31, 1998 amounted to $99,000, $72,000 and $48,000
respectively.
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
(p) Comprehensive Income
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income", was adopted as of January 1,
1998. This Statement requires reporting of changes in share
owners' equity that do not result directly from transactions
with share owners.
3. Cash and Cash Equivalents
Cash and cash equivalents at October 31, 1998, June 30, 1998 and
June 30, 1997 consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Fixed deposits at banks 268 256 280
Cash at banks and in hand 1,092 697 523
- -----------------------------------------------------------------------------
1,360 953 803
- -----------------------------------------------------------------------------
4. Trade Receivables
Trade receivables at October 31, 1998, June 30, 1998 and June 30,
1997 consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Accounts receivable 3,356 1,392 1,050
Allowance for doubtful accounts:
Balance brought forward 218 248 177
Provision made during the period - 10 74
Translation loss (gain) for the period 10 (40) (4)
- -----------------------------------------------------------------------------
228 218 247
- -----------------------------------------------------------------------------
Total trade receivables 3,128 1,174 803
- -----------------------------------------------------------------------------
5. Other Receivables and Deposits
Other receivables and deposits at October 31, 1998, June 30, 1998
and June 30, 1997 consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Deposits 12 13 15
Grant receivable 73 59 -
Goods and services tax recoverable 211 64 -
Other 43 6 -
- -----------------------------------------------------------------------------
Total other receivables and deposits 339 142 15
- -----------------------------------------------------------------------------
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
6. Inventories
Inventories at October 31, 1998, June 30, 1998 and June 30, 1997
consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Raw materials 521 149 431
Work-in-progress 2,977 1,231 618
Finished goods 1,960 1,152 1,297
- -----------------------------------------------------------------------------
5,458 2,532 2,346
Allowance for inventory obsolescence:
Balance brought forward 367 701 818
Provision made during the period - 461 121
Amount written off during the period - (698) (227)
Translation loss (gain) for the period 16 (97) (11)
- -----------------------------------------------------------------------------
383 367 701
- -----------------------------------------------------------------------------
Total inventories 5,075 2,165 1,645
- -----------------------------------------------------------------------------
7. Property, Plant and Equipment
Property, plant and equipment at October 31, 1998, June 30, 1998
and June 30, 1997 consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Cost:
Testing equipment 50 33 25
Toolings 28 17 -
Office furniture and equipment 181 171 173
Computer equipment 259 228 250
Motor vehicles 43 42 28
- -----------------------------------------------------------------------------
Total cost 561 491 476
- -----------------------------------------------------------------------------
Less:
Accumulated depreciation
Testing equipment 23 19 16
Toolings 4 1 -
Office furniture and equipment 136 121 112
Computer equipment 164 133 110
Motor vehicles 12 6 28
- -----------------------------------------------------------------------------
Total accumulated depreciation 339 280 266
- -----------------------------------------------------------------------------
Total property, plant and equipment 222 211 210
- -----------------------------------------------------------------------------
Depreciation expense charged to operations for the nine-month
period ended June 30, 1997, the year ended June 30, 1998 and the
four-month period ended October 31, 1998 for property, plant and
equipment amounted to $73,000, $108,000 and $45,000, respectively.
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
7. Property, Plant and Equipment (Cont'd)
The Company is obligated under various capital leases for certain
office equipment and motor vehicles that expire at various dates
during the next four years. The gross amount of property, plant
and equipment and related accumulated depreciation recorded under
capital leases were as follows:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Motor equipment 17 17 -
Motor vehicles 18 18 -
- -----------------------------------------------------------------------------
Total cost 35 35 -
Less: Accumulated depreciation (10) (7) -
- -----------------------------------------------------------------------------
Net book value 26 28 -
- -----------------------------------------------------------------------------
Depreciation expense charged to operations for the nine-month
period ended June 30, 1997, the year ended June 30, 1998 and the
four-month period ended October 31, 1998 for property, plant and
equipment under capital leases amounted to $Nil, $7,000 and $3,000
respectively.
8. Bank Overdrafts
Bank overdrafts at October 31, 1998, June 30, 1998 and June 30,
1997 consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Repayable in US Dollars 39 - -
Repayable in Singapore Dollars 154 149 194
- -----------------------------------------------------------------------------
Total bank overdrafts 193 149 194
- -----------------------------------------------------------------------------
The weighted average rate of interest payable on the bank
overdrafts was 8.0%, 8.5% and 7% as of October 31, 1998, June 30,
1998 and June 30, 1997, respectively.
The Company's overdraft facilities are secured against the fixed
deposits which are pledged to the bank providing the facilities.
9. Loans and Advances from Related Parties
Loans and advances from related parties at October 31, 1998, June
30, 1998 and June 30, 1997 consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Loan from corporate shareholder 62 59 70
Advance from corporate shareholder - - 350
- -----------------------------------------------------------------------------
Total loans and advances
from related parties 62 59 420
- -----------------------------------------------------------------------------
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
9. Loans and Advances from Related Parties (Cont'd)
The loan from the corporate shareholder is unsecured and interest-
free, and has no fixed terms of repayment. The advance from the
corporate shareholder was unsecured and interest-free, and had no
fixed terms of repayment.
10. Accrued Operating Expenses
Accrued operating expenses at October 31, 1998, June 30, 1998 and
June 30, 1997 consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Accrual for staff costs 86 48 52
Others 56 96 126
- -----------------------------------------------------------------------------
Total accrued operating expenses 142 144 178
- -----------------------------------------------------------------------------
11. Other Payables
Other payables at October 31, 1998, June 30, 1998 and June 30, 1997
consist of:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
Staff costs 39 34 101
Others 272 181 98
- -----------------------------------------------------------------------------
Total other payables 311 215 199
- -----------------------------------------------------------------------------
12. Other Non-operating Income/Expenses
Other non-operating income (expenses) consist of :-
Nine
Four months Year months
ended ended ended
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Government grant income 11 62 -
Loss on disposal of fixed assets (1) (9) (1)
Gain (loss) on exchange 484 (400) (202)
Other - - (3)
- -----------------------------------------------------------------------------
Total other non-operating income (expenses) 494 (347) (206)
- -----------------------------------------------------------------------------
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
13. Income Taxes
A reconciliation of the expected tax payable at the statutory rate
of tax to the tax expense is as follows:-
Nine
Four months Year months
ended ended ended
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Income tax expense (benefit)
computed at Singapore statutory
rate of 26% 82 (527) (779)
Expenses not deductible for income tax 7 8 4
Loss of net operating losses due to change
in control - - 645
Change in the beginning of period balance
of the valuation allowance for deferred
tax assets (89) 519 130
- -----------------------------------------------------------------------------
Income tax expense - - -
- -----------------------------------------------------------------------------
14. Deferred Taxation
The significant components of deferred income tax expense (benefit)
attributable to income (loss) from continuing operations is as
follows:
Nine
Four months Year months
ended ended ended
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Deferred tax expense (benefit) 89 (519) (130)
Increase (decrease) in beginning
of period balance of the valuation
allowance for deferred tax assets (89) 519 130
- -----------------------------------------------------------------------------
Deferred income tax - - -
- -----------------------------------------------------------------------------
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets are presented below:-
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Deferred tax assets
Unrealized exchange (gains) losses (132) 98 69
Property, plant and equipment differences
between net book values and tax written
down values 93 82 83
Unutilized capital allowances 2 2 1
Net operating losses 634 479 49
- -----------------------------------------------------------------------------
Balance carried forward 597 661 202
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
14. Deferred Taxation (Cont'd)
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Balance brought forward 597 661 202
Less: valuation allowances:
Balance brought forward 661 202 72
Increase (decrease) in balance in period (89) 519 130
Translation loss (gain) 25 (60) -
- -----------------------------------------------------------------------------
597 661 202
- -----------------------------------------------------------------------------
- - -
- -----------------------------------------------------------------------------
Under Singapore income tax legislation, unutilized capital
allowances and net operating losses are available to carry forward
to be offset against future taxable profits of the Company without
time restriction, provided there is no substantial change in the
ultimate shareholders of the Company and their respective
shareholdings. In this context, a substantial change is considered
to have occurred if there has been a change in excess of 50% of the
ultimate shareholding in the Company.
At October 31, 1998, the Company had net operating losses of
$2,438,000, and unutilised capital allowances of $9,000. Due to
its historical net operating losses, the Company has provided a
valuation allowance to reduce its net deferred tax assets to zero
for each of the periods ended October 31, 1998, June 30, 1998 and
June 30, 1997.
15. Leases
The Company leases certain office equipment and motor vehicles, as
presented in note 7, under various non-cancellable capital leases.
These leases contain either a bargain purchase option on the leased
assets at the end of the lease or transfer of leased asset
ownership at the lease maturity. No other assets have been pledged
as security for the capital lease obligations.
The Company also has several non-cancellable operating leases.
Rental expenses for operating leases for the nine-month period
ended June 30, 1997, the year ended June 30, 1998 and the four-
month period ended October 31, 1998 amounted to $138,000, $320,000
and $93,000, respectively.
Future minimum capital lease payments and future minimum lease
payments under non-cancellable operating leases (with initial or
remaining lease terms in excess of one year) as of October 31, 1998
are:-
Capital Operating
Leases Leases
$'000 $'000
Year ending October 31,
1999 9 46
2000 9 21
2001 9 -
2002 2 -
-------- --------
Total minimum lease
payments carried forward 29 67
========
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
15. Leases (Cont'd)
Capital Operating
Leases Leases
$'000 $'000
Total minimum lease
payments carried forward 29 67
========
Less:
Amount representing interest 6
-------
Present value of net minimum
capital lease payments 23
Less:
Current portion of obligations
under capital leases 7
-------
Obligations under capital leases,
less current portion 16
========
The Company leases office premises from a subsidiary of a corporate
shareholder at a monthly rental charge of $19,000. The lease
expired on November 30, 1998. Subsequent to expiry, the Company
has continued to rent the office premises at a rental charge of
$19,000 a month, though no formal lease arrangements have been
made. Total rental expenses associated with this lease for the
nine-month period ended June 30, 1997, the year ended June 30, 1998
and the four-month period ended October 31, 1998 amounted to
$52,000, $278,000 and $77,000 respectively.
16. Share Capital, Share Premium Account and Other Paid-in Capital
In April 1997, the Company issued an additional 9,137,528 ordinary
shares of $1 each par value at a premium of $1,372,000. The
premium has been taken to the share premium account which is
described further below.
Of the total increase to capital of $7,718,000, an amount of
$3,651,000 was received in cash, the remaining $4,067,000 being
satisfied by way of capitalization of debts owing by the Company
from a corporate shareholder.
As part of the share subscription arrangement, a further amount of
$2,451,000 owing by the Company to a corporate shareholder was
forgiven. This debt forgiveness is considered to be an integral
part of the share issue transaction and has been treated as a
contribution of other paid-in capital.
The share premium account consists of the excess of proceeds
received from issues of share capital, over the par value of shares
issued. The application of the share premium account is restricted
under Singapore corporate law. The share premium may only be
applied in paying up unissued shares to be issued to shareholders,
paying up in whole or in part any balance unpaid on shares in
issue, in writing off preliminary expenses and share and debenture
issue expenses and by provision for premium payable on the
redemption of redeemable preferred shares, if any. The Company has
not utilized the share premium account for the above-mentioned
purposes.
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
17. Business Segment Data and Major Customers
Sales to customers by geographical areas were:-
Nine
Four months Year months
ended ended ended
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
United States 6,561 4,416 5,899
Europe 742 2,284 1,039
Asia 1,850 1,871 559
- -----------------------------------------------------------------------------
Total 9,153 8,571 7,497
- -----------------------------------------------------------------------------
Sales to major customers, as a percentage of total sales were as
follows:
Nine
Four months Year months
ended ended ended
October 31, June 30, June 30,
1998 1998 1997
% % %
- -----------------------------------------------------------------------------
Customer A 27 16 -
Customer B - 4 19
- -----------------------------------------------------------------------------
18. Significant Related Party Transactions
The Company has no manufacturing facilities and a significant
portion of the manufacturing of the Company's products is
subcontracted to NatSteel Electronics Limited, a corporate
shareholder of the Company, and Acura Manufacturing Pte Ltd and
Pantera Electronics Pte Ltd, subsidiaries of Uraco Holdings
Limited, a corporate shareholder of the Company.
The Company had the following significant transactions with related
parties and affiliates:-
Nine
Four months Year months
ended ended ended
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Corporate Shareholder
Sales - 368 215
Purchases - - 2,163
Other Affiliate Companies
Sales 2 26 16
Purchases 645 2,102 2,439
Rental expenses 77 278 52
- -----------------------------------------------------------------------------
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
18. Significant Related Party Transactions (Cont'd)
As of October 31, 1998, June 30, 1998 and June 30, 1997, there were
the following amounts owing by (to) affiliated companies:-
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Corporate Shareholders
Trade receivables 201 42 -
Trade accounts payable - - (34)
Loans to Company (62) (59) (70)
Advances to Company - - (350)
Other Affiliate Companies
Other receivables - - 1
Trade payables (1,970) (1,814) (403)
Other payables (265) (259) (28)
- -----------------------------------------------------------------------------
19. Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments
approximate their fair value due to the relatively short period of
maturity of these instruments as summarised in the following
table:-
Carrying Amount
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Financial Assets:
Cash and cash equivalents 1,360 953 803
Financial Liabilities:
Bank overdrafts 193 149 194
Trust receipts 134 206 -
Loans and advances from corporate
shareholder 62 59 420
- -----------------------------------------------------------------------------
Estimated Fair Value
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Financial Assets:
Cash and cash equivalents 1,360 953 803
Financial Liabilities:
Bank overdrafts 193 149 194
Trust receipts 134 206 -
Loans and advances from corporate
Shareholder 62 59 420
- -----------------------------------------------------------------------------
<PAGE>
Multiwave Innovation Pte Ltd
Notes to the Financial Statements
(In United States Dollars)
- -----------------------------------------------------------------------------
20. Cash Flow Supplemental Disclosures
Significant non-cash transactions are as follows:-
Nine
Four months Year months
ended ended ended
October 31, June 30, June 30,
1998 1998 1997
$'000 $'000 $'000
- -----------------------------------------------------------------------------
Acquisition of equipment through
capital lease - 35 -
Issuance of shares through capitalization
of debt - - 4,067
Debt forgiveness by corporate shareholder - - 2,451
- -----------------------------------------------------------------------------
21. New US GAAP Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This
Statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. This Statement
is effective for fiscal years beginning after June 15, 1999.
Therefore, management is in the process of determining the impact
that this statement will have on the Company.
In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits"
("SFAS 132"). This Statement standardizes the disclosure
requirements for defined benefit plans and recommends a parallel
format for presenting information about pensions and other
postretirement benefits. This Statement is effective for fiscal
years beginning after December 15, 1997. Since the Company has no
defined benefit plans, it has determined that this Statement will
have no significant impact.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131").
SFAS 131 establishes standards for the way that public enterprises
report information about operating segments in annual financial
statements and requires that selected information about those
operating segments be reported in interim financial statements.
This statements supersedes SFAS 14 "Financial Reporting for
Segments of a Business Enterprise". SFAS No. 131 requires that all
public enterprises report financial and descriptive information
about its reportable operating segments. Operating segments are
defined as components regularly evaluated by the chief operating
decision-maker in deciding how to allocate resources and in
assessing performance. This statement is effective for fiscal
years beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years should be
restated. Management is in the process of determining the impact,
if any, this statement will have on the Company.
