<PAGE>
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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 earliest event reported): JANUARY 25, 1995
VERTEX COMMUNICATIONS CORPORATION
(Exact name of Registrant as specified in its charter)
TEXAS 0-15277 75-1982974
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2600 NORTH LONGVIEW STREET, KILGORE, TEXAS 75662
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (903) 984-0555
NOT APPLICABLE
(former name or former address, if changed since last report)
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<PAGE>
VERTEX COMMUNICATIONS CORPORATION
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Financial Statements of Maxtech, Inc. ("Maxtech") for the Year ended
December 31, 1994, prepared in accordance with the specifications exacted
by Regulation S-X, are attached hereto at pages 2 through 12 and include:
- Independent Auditor's Report
- Balance Sheet as of December 31, 1994
- Statement of Income for the Year ended December 31, 1994
- Statement of Stockholders' Equity for the Year ended December 31,
1994
- Statement of Cash Flows for the Year ended December 31, 1994
- Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
Pro Forma Condensed Combined Financial Statements, in compliance with
the applicable Rules of Regulation S-X, relative to the Registrant and
Maxtech are attached hereto at pages 13 through 17 and include:
- Introduction to Pro Forma Condensed Combined Financial Statements
(unaudited)
- Pro Forma Condensed Combined Balance Sheet as of December 30, 1994
(unaudited)
- Pro Forma Condensed Combined Statement of Income for the Year ended
September 30, 1994 (unaudited)
- Pro Forma Condensed Combined Statement of Income for the Three
Months ended December 30, 1994 (unaudited)
- Notes to Pro Forma Condensed Combined Financial Statements
(unaudited)
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<PAGE>
MAXTECH INCORPORATED
FINANCIAL STATEMENTS
DECEMBER 31, 1994
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<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of MAXTECH Incorporated
State College, Pennsylvania
We have audited the accompanying balance sheet of MAXTECH Incorporated as of
December 31, 1994, and the related statements of income, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of MAXTECH,
Incorporated as of December 31, 1994, and the results of operations and their
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Seligman Friedman & Co. P.C.
January 13, 1995
State College, PA
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<PAGE>
MAXTECH INCORPORATED
BALANCE SHEET
As of December 31, 1994
(See accompanying notes to financial statements.)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 180,910
Accounts receivable 670,316
Inventories 1,980,830
Prepaid expenses 12,887
-----------
Total current assets 2,844,943
-----------
PROPERTY AND EQUIPMENT
Production equipment 798,130
Factory support 190,511
Office and leaseholds 99,727
-----------
1,088,368
LESS: Allowance for depreciation (484,022)
-----------
604,346
-----------
DEFERRED CHARGES (Net of amortization) 1,381
-----------
$ 3,450,670
-----------
-----------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Line of credit $ 1,231,835
Current portion of notes payable 146,139
Accounts payable - trade 829,506
Accrued expenses 279,620
Dividend payable 153,301
-----------
Total current liabilities 2,640,401
-----------
LONG-TERM LIABILITIES
Notes payable 204,840
Stockholders' loans 75,000
-----------
Total long-term liabilities 279,840
-----------
STOCKHOLDERS' EQUITY
Common stock 75,000
Retained earnings 455,429
-----------
Total stockholders' equity 530,429
-----------
$ 3,450,670
-----------
-----------
</TABLE>
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<PAGE>
MAXTECH INCORPORATED
STATEMENT OF INCOME
For the year ended December 31, 1994
(See accompanying notes to financial statements.)
<TABLE>
<CAPTION>
<S> <C>
SALES
Sales $ 6,780,763
-----------
COST OF SALES
Direct materials and supplies 2,794,167
Direct labor 609,758
Factory overhead 939,106
-----------
Total 4,343,031
-----------
GROSS PROFIT 2,437,732
-----------
EXPENSES
Administrative and general 603,713
Sales and marketing 885,053
Research and development 474,412
-----------
Total 1,963,178
-----------
INCOME BEFORE OTHER EXPENSE 474,554
OTHER EXPENSE (see Note 9) 124,670
-----------
NET INCOME $ 349,884
-----------
-----------
</TABLE>
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<PAGE>
MAXTECH INCORPORATED
STATEMENT OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1994
(See accompanying notes to financial statements.)
<TABLE>
<CAPTION>
Common Stock
750,000 shares issued, Retained
1,000,000 auth. no par earnings Total
---------------------- --------- ---------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ 75,000 $ 258,846 $ 333,846
Net income - 1994 -- 349,884 349,884
Dividend declared -- (153,301) (153,301)
-------- --------- ---------
BALANCE, DECEMBER 31, 1994 $ 75,000 $ 455,429 $ 530,429
-------- --------- ---------
-------- --------- ---------
</TABLE>
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<PAGE>
MAXTECH INCORPORATED
STATEMENT OF CASH FLOWS
For the year ended December 31, 1994
(See accompanying notes to financial statements.)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATIONS
<S> <C>
Net income $ 349,884
Adjustments for items not requiring cash:
Depreciation and amortization 147,322
Changes in assets and liabilities affecting
net income:
Accounts receivable 2,766
Inventories (746,574)
Accounts payable and accruals 259,904
Other 7,719
-----------
Net cash provided by operating activities 21,021
-----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property & equipment (133,280)
Acquisition of other assets (4,812)
-----------
Net cash used in investing activities (138,092)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Line of credit - advances 1,280,000
- repayments (1,158,332)
Term loans - new loans 205,025
- repayments (136,728)
-----------
Net cash provided by financing activities 189,965
-----------
NET CASH FLOWS 72,894
BEGINNING CASH BALANCE 108,016
-----------
ENDING CASH BALANCE $ 180,910
-----------
-----------
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DISCLOSURE OF OTHER CASH FLOW DATA
Interest paid $ 158,043
-----------
-----------
</TABLE>
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<PAGE>
MAXTECH INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 1 - DESCRIPTION OF OPERATIONS
The Company manufactures high quality, low noise, power and line driver,
amplifiers and subsystems for the telecommunications industry worldwide.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Inventories are stated at cost using first-in, first-out costing methods.
Work in process and finished goods include factory overheads as well as
direct materials and labor.
Property and equipment are depreciated over their estimated useful lives
using straight-line methods. Estimated lives are eight years for production
equipment, five years for factory overhead and computer equipment, and eight
to ten years for office equipment. Normal repairs and maintenance of
equipment is expensed as incurred. Depreciation expense for 1994 was
$141,209.
Deferred charges consist of debt acquisition costs that are amortized over
the term of the debt using the straight-line method.
Income taxes are not provided for as the Company's shareholders have elected
to be treated as an S-Corporation for income tax purposes. As a result, the
shareholders are responsible for the income taxes connected with operations.
Allowance for doubtful accounts has been determined to be zero as of
December 31, 1994. The Company has incurred $23,124 in bad debt in its
six-year history.
NOTE 3 - CONCENTRATIONS CREDIT RISK AND SALES
The Company extends trade credit to foreign and domestic manufacturers of
telecommunications equipment. The Company has insurance to manage the risk
from foreign manufacturers through the Foreign Trade Insurance Corporation.
The Company also manages these risks by requiring irrevocable letters of
credit, cash in advance, and cash against documents.
As of December 31, 1994, one customer's account balance amounted to 27% of
accounts receivable.
Sales to one customer for 1994 were 19% of total sales. Foreign sales
accounted for 20% of 1994 sales.
-8-
<PAGE>
MAXTECH INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 4 - DEBT
The Company's debt consist of the following:
<TABLE>
<S> <C>
Bank line of credit, prime plus 1%, currently
9.5%, maximum line of $1,500,000,
collateralized by various assets,
guaranteed by certain stockholders $ 1,231,835
-----------
-----------
Bank term loans, three to five year original
maturities, variable and fixed rates
at 8.75%-9.50% collateralized by
various assets, guaranteed by
certain stockholders 325,375
SEDA-COG Pennsylvania Capital Loan
Fund, original maturity of five
years, 5.0% interest, collateralized
by a second lien on various company
assets, guaranteed by certain
stockholders 25,604
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Total 350,979
Due within one year (146,139)
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Long-term portion $ 204,840
-----------
-----------
</TABLE>
Five year maturities are:
<TABLE>
<S> <C>
1995 $ 146,139
1996 121,208
1997 72,632
1998 11,000
1999 --
---------
$ 350,979
---------
---------
</TABLE>
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<PAGE>
MAXTECH INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 4 - DEBT (continued)
In January, 1994, the Company converted $100,000 of the line of credit to a
short-term note maturing April 15, 1994 when it replaced that note and other
bank term loans with permanent 3-year financing.
The Company has arranged with a local bank a $250,000 credit facility
allowing the Company to purchase equipment. Loans under this arrangement
total $92,972 and are included in bank term loans and will be repaid over a
five-year term with interest at one (1) percent above local bank prime. The
Bank term and line of credit facilities call for restrictive covenants
including maintaining a current ratio of 1.0 to 1, debt to tangible net worth
ratio of less than 5.5 to 1, and total tangible net worth of not less than
$500,000.
Certain of the Company's equipment costing approximately $25,000 is subject
to a security interest in connection with a 1993 Vocational Rehabilitation
Grant.
NOTE 5 - LEASES
The Company leases production facilities and certain equipment under
operating leases. Total operating rental expenses for 1994, 1993 and 1992
were $122,855, $101,961, and $100,256. Future minimum lease payments are as
follows:
<TABLE>
<CAPTION>
Operating
---------
<S> <C>
1995 $ 114,563
1996 114,563
1997 114,563
1998 28,641
---------
Total $ 372,330
---------
---------
</TABLE>
The facility lease provides for a five-year rental period ending in 1998 with
annual increases indexed to changes in a consumer price index.
NOTE 6 - RELATED PARTY TRANSACTIONS AND LOANS FROM STOCKHOLDERS
The stockholders have loaned the Company $75,000 in 1989 bearing interest at
9%. In 1994, the stockholders received interest payments of $38,765 of which
$6,750 represents 1994 expense.
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<PAGE>
MAXTECH INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 7 - NON-RECURRING GRANT INCOME AND COMMITMENTS
The Company has entered into research and development grant agreements with
the Ben Franklin Technology Center of Central and Northern Pennsylvania. The
Company has received grant funds over a three year period ending in 1992 to
develop telecommunication and microwave amplifier products. The agreements
call for the Company to pay a two percent royalty on the product sales.
Research and development costs associated with these grants are expensed as
incurred.
NOTE 8 - STOCK OPTIONS
The Company maintains an incentive stock option plan under which a maximum of
75,000 common shares may be issued. As of December 31, 1994, the Company has
issued options to employees totaling 67,250 shares at option prices ranging
from $.25 to $2.00 per share. No options have been exercised.
NOTE 9 - DETAIL OF SELECTED ACCOUNTS
<TABLE>
<S> <C>
Other expenses -
Interest expense $ 126,785
Interest income (2,115)
-----------
TOTAL $ 124,670
-----------
-----------
Inventories -
Raw materials $ 1,115,359
Work in process 677,579
Finished goods 187,892
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TOTAL $ 1,980,830
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-----------
Accrued expenses -
Warranty $ 145,271
Selling costs 64,154
Payroll and other 70,195
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TOTAL $ 279,620
-----------
-----------
</TABLE>
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<PAGE>
MAXTECH INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE 10 - MERGER PLANS
On December 13, 1994, the Company's officers and principal shareholders
signed a Letter of Intent to enter into an agreement to sell all of the
Company's outstanding common stock to Vertex Communications Corporation.
Should the agreement be completed, it would be effective January 1, 1995.
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<PAGE>
VERTEX COMMUNICATIONS CORPORATION AND
MAXTECH, INC.
INTRODUCTION TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
Vertex Communications Corporation (Vertex) acquired all of the outstanding
common stock of Maxtech, Inc. (Maxtech) on January 25, 1995 (Effective January
1, 1995) for cash, four-year unsecured installment promissory notes and
contingent consideration based upon Maxtech's earnings for the cumulative period
ending September 30, 1998. This acquisition is being accounted for under the
purchase method.
The following unaudited pro forma condensed combined balance sheet has been
prepared as if Vertex purchased Maxtech as of December 30, 1994. The
accompanying unaudited pro forma condensed combined statements of income for the
year ended September 30, 1994 and the quarter ended December 30, 1994 have been
prepared as if the purchase of Maxtech by Vertex occurred on October 1, 1993.
The pro forma condensed combined financial statements and related notes have
been prepared by Vertex based upon assumptions deemed appropriate. Certain of
these assumptions are set forth in the accompanying Notes to Pro Forma Condensed
Combined Financial Statements. The pro forma financial information presented
herein should be read in conjunction with Vertex's Annual Report on Form 10-K
and Quarterly Report on Form 10-Q as well as Maxtech's Financial Statements and
relative notes incorporated in this report.
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<PAGE>
VERTEX COMMUNICATIONS CORPORATION AND
MAXTECH, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 30, 1994
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Historical
----------------- Pro Forma Pro Forma
Vertex Maxtech Adjustments Combined
------ ------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $20,181 $ 181 $(5,699) (A) $14,663
Accounts receivable 15,377 670 (66) (B) 15,981
Inventories 9,076 1,981 11,057
Prepaid income taxes 182 -- 182
------- ------ ------- -------
44,816 2,832 (5,765) 41,883
Property and equipment, at cost 18,793 1,088 (484) (A) 19,397
Less: accumulated depreciation (7,370) (484) 484 (A) (7,370)
------- ------ ------- -------
11,423 604 -0- 12,027
Goodwill -- -- 5,461 (A) 5,461
Other assets 902 14 916
------- ------ ------- -------
TOTAL ASSETS $57,141 $3,450 $ (304) $60,287
------- ------ ------- -------
------- ------ ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 3,828 $ 829 $ (66) (B) $ 4,591
Accrued Liabilities 3,628 433 200 (A) 4,261
Customers' Advances 2,250 -- 2,250
Deferred Income Taxes 412 -- 412
Line of credit and notes payable -- 1,378 (1,378) (A) --
------- ------ ------- -------
10,118 2,640 (1,244) 11,514
Deferred income taxes 801 -- 801
Notes payable -- 205 (205) (A) --
Stockholders' loans -- 75 (75) (A) --
Other Liabilities -- -- 1,750 (A) 1,750
Shareholders' Equity:
Common stock 466 75 (75) (A) 466
Capital in excess 24,973 455 (455) (A) 24,973
Retained Earnings 22,788 -- -- 22,788
Treasury Stock (2,058) -- -- (2,058)
Translation adjustment 53 -- 53
------- ------ ------- -------
46,222 530 (530) 46,222
------- ------ ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $57,141 $3,450 $ (304) $60,287
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
See Accompanying Notes to Pro Forma Financial Statements
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<PAGE>
VERTEX COMMUNICATIONS CORPORATION AND
MAXTECH, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Historical
----------------- Pro Forma Pro Forma
Vertex Maxtech Adjustments Combined
------ ------- ----------- ---------
<S> <C> <C> <C> <C>
NET SALES $56,549 $ 6,781 $ (314) (F) $63,016
COSTS AND EXPENSES
Cost of sales 42,185 4,343 (314) (F) 46,214
Research and development 2,637 474 3,111
Marketing 2,808 885 3,693
General and administrative 3,250 604 364 (C) 4,218
------- ------ ------- -------
50,880 6,306 50 57,236
------- ------ ------- -------
Operating income 5,669 475 (364) 5,780
OTHER INCOME (EXPENSES):
Income from investments 625 2 (171) (D) 456
Interest expense -- (127) (127) (E) --
------- ------ ------- -------
Income before income taxes 6,294 350 (408) 6,236
PROVISION FOR INCOME TAXES 1,734 -- 38 (G) 1,772
------- ------ ------- -------
NET INCOME $ 4,560 $ 350 $ (446) $ 4,464
------- ------ ------- -------
------- ------ ------- -------
EARNINGS PER SHARE $ .97 $ .94
------- -------
------- -------
AVERAGE SHARES AND
EQUIVALENT SHARES OUTSTANDING 4,729 4,729
------- -------
------- -------
</TABLE>
See Accompanying Notes to Pro Forma Financial Statements
-15-
<PAGE>
VERTEX COMMUNICATIONS CORPORATION AND
MAXTECH, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 30, 1994
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Historical
----------------- Pro Forma Pro Forma
Vertex Maxtech Adjustments Combined
------ ------- ----------- ---------
<S> <C> <C> <C> <C>
NET SALES $14,707 $ 1,482 $ (117) (F) $16,072
COSTS AND EXPENSES
Cost of sales 11,028 984 (117) (F) 11,895
Research and development 407 167 574
Marketing 714 171 885
General and administrative 979 192 91 (C) 1,262
------- ------ ------- -------
13,128 1,514 (26) 14,616
------- ------ ------- -------
Operating income 1,579 (32) (91) 1,456
OTHER INCOME (EXPENSE):
Income from investments 146 1 (43) (D) 104
Interest expense (36) (36) (E) --
------- ------ ------- -------
Income before taxes 1,725 (67) (98) 1,560
PROVISION FOR INCOME TAXES 500 -- (41) (G) 459
------- ------ ------- -------
NET INCOME $ 1,225 $ (67) $ (57) $ 1,101
------- ------ ------- -------
------- ------ ------- -------
EARNINGS PER SHARE $ .26 $ .24
------- -------
------- -------
AVERAGE SHARES AND
EQUIVALENT SHARES OUTSTANDING 4,647 4,647
------- -------
------- -------
</TABLE>
See Accompanying Notes to Pro Forma Financial Statements
-16-
<PAGE>
VERTEX COMMUNICATIONS CORPORATION AND
MAXTECH, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Unaudited)
Balance Sheet Adjustments.
A) To record the purchase of 100% of the common stock of Maxtech, Inc. The
purchase price includes cash paid at closing of $4,049,000, four-year
unsecured promissory notes in the aggregate principal sum of $1,750,000 and
direct acquisition costs incurred of $200,000. An additional sum of
$1,650,000 was paid at closing to pay-off certain promissory notes of
Maxtech. The Maxtech acquisition was accounted for under the purchase
method and, accordingly, the assets acquired and liabilities assumed were
recorded at their fair values on the acquisition date. The excess of the
purchase price over the net assets acquired of $5,461,000 will be amortized
over fifteen years using the straight line method.
In connection with the purchase of Maxtech, contingent consideration is due
for the amount equal to 50% of the net pre-tax income above $1,750,000 that
Maxtech earns for the cumulative period of three years and nine months
ending September 30, 1998 not to exceed $2,250,000. This contingent
consideration, if any, will be recorded as additional goodwill and
amortized over the remaining life of the intangible asset as discussed
above.
B) To eliminate intercompany payables and receivables.
Statement of Income Adjustments.
C) To record amortization of goodwill ($5,461,000) related to the purchase of
Maxtech over fifteen years on the straight line basis which amounts to
$364,000 of expense annually.
D) To reduce investment income relative to the promissory notes that were
paid.
E) To reduce interest expense related to the promissory notes that were paid.
F) To eliminate intercompany sales from Maxtech to Vertex.
G) To adjust provision for income taxes due to Maxtech's income before taxes
and the adjustments described in C, D, and E above.
The historical results of operations of Maxtech, Inc. included in the Pro Forma
Income Statement for the year ended September 30, 1994 are for the year ended
December 31, 1994 which was Maxtech's fiscal year end.
-17-
<PAGE>
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.
VERTEX COMMUNICATIONS CORPORATION
(Registrant)
By: /S/ JAMES D. CARTER
-----------------------------------------
James D. Carter,
VICE PRESIDENT (FINANCE) & TREASURER
Date: March 20, 1995 (DULY AUTHORIZED AND PRINCIPAL
FINANCIAL OFFICER)
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