<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
January 8, 1999
------------------------------------------------
Date of Report (date of earliest event reported)
ASHA CORPORATION
----------------------------------------------------
Exact name of Registrant as Specified in its Charter
Delaware 0-16176 84-1016459
- --------------------------- --------------- ---------------------------
State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
600 C Ward Drive, Santa Barbara, California 93111
------------------------------------------------------------------
Address of Principal Executive Offices, Including Zip Code
(805) 683-2331
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
<PAGE>
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 8, 1999, ASHA Corporation (the "Company") acquired all of the
outstanding stock of McLaren Engines, Inc. ("McLaren") in exchange for 150,000
shares of the Company's authorized but unissued Common Stock. The acquisition
was made pursuant to the terms of a Stock Purchase Agreement among the
Company, McLaren and the shareholders of McLaren.
Immediately prior to the acquisition, the Company assisted McLaren to
complete a reorganization in which McLaren redeemed the stock of its two
shareholders and issued new shares to McLaren's employees. The Company loaned
McLaren $1,355,000 and McLaren borrowed $2,454,000 from an unaffiliated bank
to complete this reorganization.
McLaren was founded in 1969 as the U.S. base for the McLaren Racing Team,
and is currently involved in designing, fabricating, developing, validating
and certifying engines and related products for over 100 automotive Tier I and
OEM companies throughout the world. McLaren's operations are based in a
56,000 square foot office and laboratory facility in Livonia, Michigan.
McLaren has approximately 48 employees.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The following
financial statements of McLaren Engines, Inc. are filed herewith:
PAGE
Report of Independent Public Accountants ................ F-1
Balance Sheets as of September 30, 1998 and 1997 ........ F-2
Statements of Income for the years ended
September 30, 1998 and 1997 ............................. F-3
Statements of Stockholders' Equity for the years
ended September 30, 1998 and 1997 ....................... F-4
Statements of Cash Flows for the years ended
September 30, 1998 and 1997 ............................. F-5
Notes to Financial Statements ........................... F-6
(b) PRO FORMA FINANCIAL INFORMATION. The following pro forma financial
information is filed herewith:
PAGE
Unaudited Pro Forma Condensed Consolidated
Financial Data .......................................... F-9
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1998 .......................... F-10
Unaudited Pro Forma Condensed Consolidated Income
Statement for the year ended September 30, 1998 ......... F-12
2
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<PAGE>
(c) EXHIBITS. The following exhibits are filed herewith:
EXHIBIT
NUMBER DESCRIPTION LOCATION
10.1 Stock Purchase Agreement with Previously filed
McLaren Engines, Inc.
10.2 Loan Agreement with McLaren Previously filed.
Engines, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amended Report to be signed on its behalf by
the undersigned, hereunto duly authorized.
ASHA CORPORATION
Dated: February 11, 1999 By: /s/ John C. McCormack
John C. McCormack, President
3
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<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
McLAREN ENGINES, INC.:
We have audited the accompanying balance sheets of McLAREN ENGINES, INC. (a
Delaware corporation) as of September 30, 1998 and 1997, and the related
statements of income, 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 McLAREN ENGINES, INC. as of
September 30, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
January 15, 1999
F-1
<PAGE>
<PAGE>
McLAREN ENGINES, INC.
BALANCE SHEETS - SEPTEMBER 30, 1998 AND 1997
ASSETS
1998 1997
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $1,427,000 $1,064,000
Marketable securities 93,000 74,000
Accounts receivable, net of allowance
for doubtful accounts of $15,000 in
1998 and 1997 835,000 867,000
Inventories 22,000 40,000
Prepaid expenses and other 10,000 8,000
---------- ----------
Total current assets 2,387,000 2,053,000
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 82,000 82,000
Building improvements 2,355,000 2,355,000
Machinery and Equipment 2,982,000 2,779,000
Vehicles 80,000 80,000
---------- ----------
5,499,000 5,296,000
Less--Accumulated depreciation and
amortization (3,931,000) (3,752,000)
---------- ----------
1,568,000 1,544,000
---------- ----------
$3,955,000 $3,597,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 33,000 $ 35,000
Payroll and related 93,000 85,000
Accrued expenses 65,000 67,000
Customer deposits 150,000 190,000
Income taxes payable 79,000 38,000
---------- ----------
Total current liabilities 420,000 415,000
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $10 par value
Authorized - 1,000 shares
Issued and outstanding - 105 shares
in 1998 and 1997 1,000 1,000
Additional paid-in capital 23,000 23,000
Retained earnings 3,455,000 3,118,000
Unrealized gain on marketable securities 56,000 40,000
---------- ----------
3,535,000 3,182,000
---------- ----------
$3,955,000 $3,597,000
========== ==========
The accompanying notes are an integral part of these balance sheets.
F-2
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<PAGE>
McLAREN ENGINES, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
---------- ----------
NET SALES $3,673,000 $3,241,000
COST OF SALES 2,050,000 2,064,000
---------- ----------
Gross profit 1,623,000 1,177,000
---------- ----------
SELLING, GENERAL AND ADMINISTRATIVE 1,199,000 1,112,000
---------- ----------
Income from operations 424,000 65,000
INTEREST INCOME, net 123,000 95,000
---------- ----------
Income before provision for
income taxes 547,000 160,000
PROVISION FOR INCOME TAXES 210,000 77,000
---------- ----------
Net income $ 337,000 $ 83,000
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
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<PAGE>
McLAREN ENGINES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
Common Stock
---------------
Additional
Paid-in Retained Unrealized
Shares Amount Capital Earnings Gain Total
------ ------ ---------- -------- ---------- ----------
<C> <S> <S> <S> <S> <S> <S>
BALANCE,
September 30,
1996 105 $1,000 $23,000 $3,035,000 $11,000 $3,070,000
Increase in
fair value
of marketable
securities - - - - 29,000 29,000
Net income - - - 83,000 - 83,000
--- ------ ------- ---------- ------- ----------
BALANCE,
September 30,
1997 105 1,000 23,000 3,118,000 40,000 3,182,000
Increase in
fair value
of marketable
securities - - - - 16,000 16,000
Net income - - - 337,000 - 337,000
--- ------ ------- ---------- ------- ----------
BALANCE,
September 30,
1998 105 $1,000 $23,000 $3,455,000 $56,000 $3,535,000
=== ====== ======= ========== ======= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
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<PAGE>
McLAREN ENGINES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 337,000 $ 83,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 179,000 169,000
Changes in operating assets and liabilities:
Accounts receivable 32,000 (263,000)
Inventories 18,000 12,000
Prepaid expenses (2,000) 78,000
Accounts payable (2,000) (4,000)
Payroll and related 8,000 (62,000)
Accrued expenses (2,000) (13,000)
Customer deposits (40,000) 186,000
Income taxes payable 41,000 30,000
---------- ----------
Net cash provided by operating activities 569,000 216,000
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (203,000) (8,000)
Purchases of marketable securities (3,000) (2,000)
---------- ----------
Net cash used in investing activities (206,000) (10,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt - (93,000)
Payments on capital leases - (5,000)
---------- ----------
Net cash used in financing activities - (98,000)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 363,000 108,000
CASH AND CASH EQUIVALENTS, beginning of period 1,064,000 956,000
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $1,427,000 $1,064,000
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ - $ 2,000
========== ==========
Cash paid for income taxes $ 162,000 $ 88,000
========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
McLAREN ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. LINE OF BUSINESS
McLAREN ENGINES, INC. (the Company or McLaren) services the automotive, marine
and racing industries. The Company is involved in designing, fabricating,
developing, validating and certifying engines plus related components and
products for automotive original equipment manufacturer (OEM) companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes revenue from contracts over the life of the
contract using the percentage of completion method. When estimates
indicate a loss, the full amount of the loss is accrued. Service
revenues are recognized as services are performed.
CONCENTRATION OF RISK AND MAJOR CUSTOMERS
The Company maintains cash balances in highly qualified financial
institutions. At September 30, 1998 and 1997, the Company had $1,419,000
and $1,077,000, respectively, in bank deposits in excess of federally
insured limits. The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents.
Marketable securities are carried at the lower of aggregate cost or
quoted market value. The securities are accounted for as
"available-for-sale" in accordance with Statement of Financial Accounting
Standards (SFAS) No. 115, whereby unrealized gains and losses are
recorded as a component of stockholders' equity. At September 30, 1998
and 1997, the market value of the securities was $93,000 and $74,000,
respectively and the carrying cost amounts were $37,000 and $34,000,
respectively.
Two customers accounted for thirty-nine percent of sales in 1998 and
three customers had accounts receivable balances greater than ten percent
of the total net accounts receivable outstanding at September 30, 1998.
Three customers accounted for forty-eight percent of sales in 1997 and
four customers had accounts receivable balances greater than ten percent
of total net accounts receivable in 1997.
INVENTORIES
Inventories are stated at the lower of cost or market; cost is determined
using the first-in, first-out method (FIFO).
PROPERTY, PLANT AND EQUIPMENT
Property and equipment are recorded at cost, including significant
expenditures that increase the asset lives. Ordinary maintenance and
repairs are charged to operations as incurred. When assets are sold or
otherwise disposed of, the cost and accumulated depreciation or
amortization are removed from the accounts and any resulting gain or loss
is recognized. Realization of property and equipment is periodically
F-6
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<PAGE>
reviewed in accordance with SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Depreciation and amortization are provided over the estimated useful
lives of the assets, using straight-line and accelerated methods.
Estimated useful lives are as follows:
Building improvement 31.5 years
Machinery and equipment 5 years
Vehicles 5 - 7 years
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. LINE OF CREDIT
In March 1998, the Company entered into an agreement (the agreement) with
a financial institution renewing its existing line of credit. The agreement
allows for borrowings up to $700,000 bearing interest at the prime rate (8.5
percent at September 30, 1998). The line of credit is secured by all of the
Company's bank accounts maintained with the financial institution. The
agreement expires in May 1999 and provides for renewals. As of September 30,
1998 and 1997 no amounts were outstanding on this line of credit.
4. CUSTOMER DEPOSITS
At September 30, 1998 and 1997, customer deposits of $150,000 and
$190,000, respectively, represent amounts paid by customers for services to be
completed by the Company. This amounts will be recognized as revenue as the
related services are performed.
5. INCOME TAXES
Deferred income tax assets or liabilities are computed based on the
temporary difference between the financial statement and income tax bases of
assets and liabilities using the enacted marginal income tax rate in effect
for the year in which the differences are expected to reverse. Deferred
income tax expenses or credits are based on changes in the deferred income tax
assets or liabilities from period to period.
F-7
<PAGE>
<PAGE>
The provision for income taxes for the years ended September 30, 1998 and
1997 is as follows:
1998 1997
--------- ---------
Current federal $ 186,000 $ 47,000
Current state 24,000 30,000
Deferred - -
--------- ---------
$ 210,000 $ 77,000
========= =========
6. OPERATING LEASES
The Company leases certain automobiles under operating leases, expiring
through October 2000. Future minimum lease payments required under the above
leases are as follows:
Years ending September 30,
1999 $ 21,000
2000 11,000
---------
$ 32,000
=========
Total lease expense under the above operating leases was $23,000 and $17,000
for 1998 and 1997, respectively.
7. RETIREMENT PLAN
The Company has an established 401(K) retirement plan (the Plan) covering
all employees. Under the terms of the Plan, the Company contributes up to two
percent of the participant's annual salary. Company contributions have a
graded vesting period based on years of service. Additionally, the Plan
allows for contributions by the participant equal to eighteen percent of their
salary. Company contributions totaled $16,000 and $4,000 for the years ended
September 30, 1998 and 1997, respectively.
8. STATEMENT OF CASH FLOWS
The Company recorded $16,000 and $29,000 in increase in fair value of
marketable securities as of September 30, 1998 and 1997, respectively.
These non-cash transactions are excluded from the accompanying statement
of cash flows.
9. SUBSEQUENT EVENT
The Company borrowed a total of $3,809,000 from a bank and ASHA
Corporation ("ASHA"), a public company engaged in the design, development and
marketing of automobile components, and repurchased 105 shares of common stock
from its stockholders. The Company then sold 1,000 shares to one employee for
$1,000. These shares were then exchanged for 150,000 shares of ASHA.
F-8
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<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial data (the
"Pro Forma Financial Data") of ASHA Corporation (the "Company") has been
prepared utilizing the historical financial statements of the Company and
McLaren Engines, Inc. ("McLaren"). The acquisition included in the Pro Forma
Financial Data has been accounted for under the purchase method of accounting
utilizing estimates and assumptions as set forth below and in the notes
thereto. The Pro Forma Financial Data is presented for informational purposes
and is not necessarily indicative of the future financial position or results
of operations of the combined businesses that would have resulted had such
events actually occurred on the date specified, nor is it indicative of the
Company's future results. The purchase price allocations reflected in the Pro
Forma Financial Data have been based on preliminary estimates of the
respective fair market value of assets and liabilities, which may differ from
the actual allocations, and are subject to revision. In the opinion of
management, all adjustments necessary to fairly present this pro forma
information have been made.
On January 8, 1999, the Company acquired all of the outstanding stock of
McLaren in exchange for 150,000 shares of the Company's authorized but
unissued Common Stock. The acquisition was made pursuant to the terms of a
Stock Purchase Agreement among the Company, McLaren and the shareholders of
McLaren.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September
30, 1998, is presented as if the Company had completed the acquisition of
McLaren as of September 30, 1998. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations for the year ended September 30, 1998,
are presented as if the Company had completed the acquisition as of October 1,
1997.
The following presentation of the Pro Forma Financial Data for the year ended
September 30, 1998, should be read in conjunction with the historical
financial statements and notes thereto of the Company included in the
September 30, 1998 Form 10-KSB and the historical financial statements of
McLaren included in this Report.
F-9
<PAGE>
ASHA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS FOR THE
ASHA McLAREN ------------------------- MCLAREN
(Actual) ACQUISITION (1) (2) ACQUISITION
---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents $2,349,000 $1,427,000 (1,464,000) 2,454,000
1,355,000
(545,000)
(4,655,000)
---------- ---------- ---------- ---------- -----------
2,349,000 1,427,000 (1,464,000) (1,391,000) 921,000
Marketable
securities - 93,000 93,000
Accounts
receivable 3,653,000 835,000 4,488,000
Inventories - 22,000 22,000
Prepaid ex-
penses and
other 64,000 10,000 74,000
---------- ---------- ---------- ---------- -----------
Total current
assets 6,066,000 2,387,000 (1,464,000) (1,391,000) 5,598,000
PROPERTY AND
EQUIPMENT,
net 570,000 1,568,000 1,709,000 3,847,000
INVESTMENT IN
AFFILIATE 610,000 - 610,000
GOODWILL - - 740,000 740,000
---------- ---------- ---------- ---------- -----------
Total assets $7,246,000 $3,955,000 985,000 (1,391,000) $10,795,000
========== ========== ========== ========== ===========
CURRENT
LIABILITIES $ 401,000 $ 420,000 $ 821,000
NOTES PAYABLE -
net of current
portion 273,000 - (1,355,000) 2,454,000
1,355,000
---------- ---------- ---------- ---------- -----------
273,000 - (1,355,000) 3,809,000 2,727,000
STOCKHOLDERS'
EQUITY:
Common stock - 1,000 - (1,000) -
F-10
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<PAGE>
Additional
paid-in
capital 11,884,000 23,000 675,000 (23,000) 12,559,000
Unrealized
gain on
marketable
securities - 56,000 (56,000) -
Treasury
stock,
at cost (82,000) - (82,000)
Retained
earnings (5,230,000) 3,455,000 1,721,000 (5,176,000) (5,230,000)
---------- ---------- ---------- ---------- -----------
Total
stockholders'
equity 6,572,000 3,535,000 2,340,000 (5,200,000) 7,247,000
---------- ---------- ---------- ---------- -----------
Total li-
abilities
and stock-
holders'
equity $7,246,000 $3,955,000 985,000 (1,391,000) $10,795,000
========== ========== ========== ========== ===========
- --------------------
<FN>
(1) To reflect the acquisition of McLaren for $2,139,000, including
$1,464,000 in cash and $675,000 in aggregate value of common stock of the
Company.
(2) To reflect the reorganization in which McLaren redeemed the stock of its
two shareholders and issued new shares to McLaren's employees. The Company
loaned McLaren $1,355,000 and McLaren utilized $545,000 of cash on hand as
well as $2,454,000 borrowed from an unaffiliated bank to complete this
reorganization.
</FN>
</TABLE>
F-11
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ASHA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS FOR THE
ASHA McLAREN --------------------------------------- MCLAREN
(Actual) ACQUISITION (1) (2) (3) ACQUISITION
---------- ------------- ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE $5,685,000 $3,673,000 - - - $9,358,000
OPERATING
EXPENSES
Cost of
Sales - 2,050,000 2,050,000
Research and
development 1,605,000 - 1,605,000
Selling,
general and
administra-
tive 1,960,000 1,199,000 75,000 37,000 3,271,000
---------- ---------- ---------- ---------- -------- -----------
3,565,000 3,249,000 75,000 37,000 - 6,926,000
---------- ---------- ---------- ---------- -------- -----------
Income
from opera-
tions 2,120,000 424,000 (75,000) (37,000) - 2,432,000
---------- ---------- ---------- ---------- -------- -----------
OTHER INCOME
(EXPENSE) (286,000) 123,000 - - (206,000) (369,000)
---------- ---------- ---------- ---------- -------- -----------
Income
before pro-
vision for
income taxes 1,834,000 547,000 (75,000) (37,000) (206,000) 2,063,000
PROVISION FOR
INCOME TAXES 44,000 210,000 254,000
---------- ---------- ---------- ---------- -------- -----------
Net Income $1,790,000 $ 337,000 (75,000) (37,000) (206,000) $ 1,809,000
========== ========== ========== ========== ======== ===========
Basic
Earnings
Per Share $ .21 $ .20
========== ===========
Weighted
Average Num-
ber of Common
Shares Out-
standing 8,725,168 8,875,168
========== ===========
Diluted Earn-
ings Per
Share $ .20 $ .20
========== ===========
Weighted
Average Num-
ber of Common
Shares and
Equivalents
Outstanding 9,044,216 9,194,216
========== ===========
F-12
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__________________
<FN>
(1) The McLaren acquisition results in the valuation of the fixed assets at fair market
value of such assets, based on the preliminary purchase accounting treatment of the
acquisition. The fixed assets are being depreciated over useful lives utilizing the
straight-line method. The valuation results in additional annual depreciation of
$75,000.
(2) The McLaren acquisition results in the recognition of goodwill of $740,000 for the
excess of the aggregate purchase price paid over the fair value of the net assets
acquired, based on the preliminary purchase accounting treatment of the acquisition.
This adjustment reflects the pro forma amortization expense associated with this
goodwill, which is being amortized over a period of 20 years.
(3) The McLaren reorganization was partially financed through the assumption of notes
payable. McLaren received financing in the amounts of $1,816,000 and $638,000
collateralized by their building and equipment, respectively. The notes accrue interest
at approximately 8.4% and require the payment of interest and principal monthly. This
adjustment reflects pro forma interest expense assuming the notes payable were
outstanding as of October 1, 1997.
</FN>
</TABLE>
F-13
