<PAGE> 1
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report 0-16011
(Date of Earliest Event Reported) (Commission File Number)
December 17, 1997
USTMAN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2873757
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification
No.)
12265 W. BAYAUD AVE #110 80228
LAKEWOOD, CO
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (303) 986-8011
Formerly named Watson General Corporation
1
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 17, 1997, USTMAN Technologies, Inc. (the "Company") acquired
all of the outstanding capital stock of Advanced Tank Certification, Inc.
("ATC"), a Tennessee corporation, for an aggregate of approximately $3.4 million
in cash and stock. ATC was the fourth largest provider of statistical inventory
reconciliation (SIR) services in the United States. ATC operations will be
consolidated at the Company's Lakewood, Colorado headquarters in order to
eliminate duplication and increase efficiencies. The amount of consideration for
ATC was determined by negotiation based upon the customer base and revenues of
ATC.
In connection with the acquisition, the Company secured term and
acquisition financing from BankBoston, N.A. Pursuant to the agreement, the
Company obtained $3.75 million in the form of a term loan bearing interest at
the BankBoston Base Rate plus 2-1/2% (11% at December 31, 1997). Repayment of
the loan begins March 31, 1998 and continues in quarterly installments until
December 31, 2000 when the remaining principal is due. The agreement contains
financial covenants as well as restrictive covenants and other obligations of
the Company. If the Company fails to meet the covenants, the unpaid principal
and accrued interest will become immediately due. The Company used this
financing to facilitate the ATC acquisition, to pay existing debt, and for
working capital purposes. The agreement with BankBoston provides that additional
financing of up to $2.25 million can be made available to the Company for
approved future acquisitions.
Copies of the Primary Stock Purchase Agreement and Contingent Stock
Purchase Agreement with respect to the ATC acquisition, as well as the Term Loan
and Acquisition Line Agreement between the Company and BankBoston, were
previously filed as exhibits with the original Current Report on Form 8-K
on December 30, 1997 and are incorporated herein by this reference.
ITEM 5. OTHER EVENTS.
On December 18, 1997, the Board of Directors elected three new officers
from ATC as senior executives and officers of the Company.
JAMES B. GRANT, who was the President and Chief Executive Officer of
ATC, has been appointed the Company's Vice President of Corporate Development.
Mr. Grant has been with ATC since 1988 and was instrumental in broadening its
mix of services as well as attracting key customers.
Previously, he worked with the Tennessee Valley Authority (TVA).
ERICA BENGTSON, who was the Chief Operating Officer and
Secretary/Treasurer of ATC, has been named Chief Operating Officer of the
Company. She has been with ATC since 1987 and also worked as Director and Chief
Analyst of the SIR department, maintaining frequent contact with customers and
regulators. Ms. Bengtson is the spouse of David Booth.
DAVID BOOTH, who was Executive Vice President and General Counsel of
ATC, has been appointed Vice-President, Chief Financial Officer, and General
Counsel of the Company. Mr. Booth is the spouse of Erica Bengtson.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
o Financial Statements of Advanced Tank Certification, Inc. for
the years ended September 30, 1997 and 1996, together with
Report of Independent Auditors
(b) Pro Forma Financial Information.
o Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended June 30, 1997
o Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended December 31, 1997
o Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements.
(c.) Exhibits.
* Exhibit 10.1 Primary Stock Purchase Agreement
* Exhibit 10.2 Contingent Stock Purchase Agreement
* Exhibit 10.3 Term Loan and Acquisition Line Agreement
* Exhibit 10.4 Stock Pledge Agreement
* Exhibit 10.5 Security Agreement
* Exhibit 10.6 Intercreditor Agreement
Exhibit 23 Consent of Independent Auditors
* Exhibits previously filed with the original Current Report on Form 8-K on
December 30, 1997.
3
<PAGE> 4
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.
USTMAN TECHNOLOGIES, INC.
Date: March 2, 1998 By /s/ Dan R. Cook
------------- ---------------------------
Dan R. Cook
President and CEO
Date: March 2, 1998 By /s/ David Booth
------------- ---------------------------
David Booth,
Chief Financial Officer
4
<PAGE> 5
Financial Statements
Advanced Tank Certification, Inc.
Years ended September 30, 1997 and 1996
with Report of Independent Auditors
<PAGE> 6
Advanced Tank Certification, Inc.
Financial Statements
Years ended September 30, 1997 and 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors .......................................1
Audited Financial Statements
Balance Sheets .......................................................2
Statements of Operations .............................................4
Statements of Stockholders' Equity ...................................5
Statements of Cash Flows .............................................6
Notes to Financial Statements ........................................7
</TABLE>
<PAGE> 7
Report of Independent Auditors
The Board of Directors and Stockholders
Advanced Tank Certification, Inc.
We have audited the accompanying balance sheets of Advanced Tank Certification,
Inc. as of September 30, 1997 and 1996, and the related statements of
operations, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Tank Certification,
Inc. at September 30, 1997 and 1996, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
Denver, Colorado /s/Ernst & Young LLP
February 20, 1998
1
<PAGE> 8
Advanced Tank Certification, Inc.
Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30
1997 1996
----------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $112,923 $142,165
Accounts receivable, net of allowance for doubtful
accounts of $18,796 and $9,695, respectively 188,688 263,300
Prepaid expenses and other 5,367 15,909
----------------------------------------
Total current assets 306,978 421,374
Property, plant, and equipment:
Software 46,858 -
Vehicles 59,561 87,188
Machinery and equipment 653,272 653,272
Furniture and fixtures 10,035 8,404
----------------------------------------
769,726 748,864
Accumulated depreciation (557,121) (512,945)
----------------------------------------
212,605 235,919
Other assets 4,421 4,421
----------------------------------------
Total assets $524,004 $661,714
========================================
</TABLE>
2
<PAGE> 9
<TABLE>
<CAPTION>
SEPTEMBER 30
1997 1996
-----------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
Accounts payable $ 5,018 $ 9,098
Accrued expenses:
Salaries and wages 22,570 17,843
Other 57,776 136,103
Notes payable - 48,170
-----------------------------------------
Total current liabilities 85,364 211,214
Stockholders' equity:
Common stock, no par value:
Authorized shares - 100,000
Issued and outstanding shares - 10,112 393,428 393,428
Retained earnings 45,212 57,072
-----------------------------------------
Total stockholders' equity 438,640 450,500
-----------------------------------------
Total liabilities and stockholders' equity $524,004 $661,714
=========================================
</TABLE>
See accompanying notes.
3
<PAGE> 10
Advanced Tank Certification, Inc.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1997 1996
----------------------------------------
<S> <C> <C>
Net sales $1,885,746 $2,124,228
Cost of sales 1,024,403 1,199,907
----------------------------------------
Gross profit 861,343 924,321
General and administrative expenses 875,856 921,330
----------------------------------------
Operating profit (loss) (14,513) 2,991
Other income 2,653 13,630
----------------------------------------
Income (loss) before income taxes (11,860) 16,621
Income taxes - -
----------------------------------------
Net income (loss) $ (11,860) $ 16,621
========================================
</TABLE>
See accompanying notes.
4
<PAGE> 11
Advanced Tank Certification, Inc.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------------------ RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at September 30, 1995 10,112 $393,428 $40,451 $433,879
Net income - - 16,621 16,621
-------------------------------------------------------------------
Balances at September 30, 1996 10,112 393,428 57,072 450,500
Net loss - - (11,860) (11,860)
-------------------------------------------------------------------
Balances at September 30, 1997 10,112 $393,428 $45,212 $438,640
===================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 12
Advanced Tank Certification, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1997 1996
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (11,860) $ 16,621
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 49,260 93,104
Gain on sale of property, plant, and equipment (1,150) (13,471)
Changes in operating assets and liabilities:
Accounts receivable 74,612 (115,265)
Prepaid expenses and other 10,542 4,518
Accounts payable (4,080) (934)
Accrued expenses (73,600) 103,948
------------------------------------
Net cash provided by operating activities 43,724 88,521
INVESTING ACTIVITIES
Capital expenditures (48,487) (20,646)
Proceeds from sale of property, plant, and equipment 23,691 46,675
------------------------------------
Net cash provided by (used in) investing activities (24,796) 26,029
FINANCING ACTIVITIES
Repayments of notes payable (48,170) (13,013)
------------------------------------
Net cash used in financing activities (48,170) (13,013)
------------------------------------
Net increase (decrease) in cash and cash equivalents (29,242) 101,537
Cash and cash equivalents at beginning of year 142,165 40,628
------------------------------------
Cash and cash equivalents at end of year $112,923 $142,165
====================================
SUPPLEMENTAL INFORMATION
Equipment financed with note payable $ - $ 26,416
Interest paid 1,962 3,004
Income taxes paid - 1,000
</TABLE>
See accompanying notes.
6
<PAGE> 13
Advanced Tank Certification, Inc.
Notes to Financial Statements
September 30, 1997
1. ORGANIZATION
Advanced Tank Certification, Inc. (the "Company") provides environmental
services to owners and operators of underground and aboveground storage tanks.
The majority of the tanks contain petroleum products and are located in the
southeastern region of the United States. These services include statistical
inventory reconciliation, precision tightness testing, and cathodic protection.
Since its inception in 1987, and until its acquisition by USTMAN Technologies,
Inc. ("USTMAN") (see Note 3) on December 17, 1997, the Company was a privately
held corporation, incorporated under the laws of Tennessee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company primarily recognizes income through the process of providing
statistical inventory reconciliation services and precision tightness testing
and, to a lesser extent, cathodic protection services. Sales are recognized at
the time the service is performed.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Upon sale or retirement,
the cost of the assets and related accumulated depreciation are removed from the
accounts, and the resulting gains or losses are reflected in operations.
Depreciation is computed on the straight-line method using lives between 5 and
10 years. Depreciation charged to expense was $49,260 and $93,104 for the years
ended September 30, 1997 and 1996, respectively.
7
<PAGE> 14
Advanced Tank Certification, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as set
forth in Statement of Financial Standards No. 109, Accounting for Income Taxes.
Under the liability method, deferred taxes are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in the years in which the differences are
expected to reverse. Recognition of deferred tax assets is limited to amounts
considered by management to be more likely than not of realization in future
periods.
ADVERTISING
Advertising costs are expensed as incurred and include trade shows, direct
mailings, and trade publications. Advertising expenses were $10,011 and $10,328
for the years ended September 30, 1997 and 1996, respectively.
USE OF ESTIMATES
The preparation of the 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 at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
CONCENTRATION OF CREDIT RISK
The Company does not require customers to pay in advance for services performed
and generally requires no collateral. Accordingly, the Company performs ongoing
credit evaluations of its customers based upon its experience. Management
believes the allowance for doubtful accounts is adequate to absorb any expected
losses.
FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosures of fair value information about financial instruments for
which it is practicable to estimate that value. The Company's financial
instruments consist
8
<PAGE> 15
Advanced Tank Certification, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
principally of cash and cash equivalents, receivables, accounts payable, and
notes payable. The Company believes all of the financial instruments' recorded
values approximate current values.
NEW ACCOUNTING STANDARDS
In March 1996, FAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, was issued, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. FAS
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of. The Company adopted FAS No. 121 in the first quarter of 1997.
The effect of adoption was not material.
3. ACQUISITION OF THE COMPANY
On December 17, 1997, USTMAN acquired all of the outstanding stock of the
Company pursuant to stock purchase agreements. The purchase price of the Company
was approximately $3.4 million, comprised of $2.3 million in cash and 775,194
shares of common stock of USTMAN valued at approximately $1.1 million. The stock
value was determined using the average of the stock price before and after the
date of the transaction. The acquisition will be treated as a purchase by
USTMAN.
4. LINE OF CREDIT
In May 1997, the Company entered into a $50,000 line of credit agreement with a
bank. The line was personally guaranteed by certain officers of the Company and
was secured by all inventory, accounts, equipment and general tangible assets of
the Company. The line of credit bore interest at a rate of 10.5%. On September
30, 1997, there were no amounts outstanding under the line of credit. In
December 1997, the line of credit agreement was canceled.
5. NOTES PAYABLE
During 1994, 1995 and 1996, the Company entered into an aggregate of four loan
agreements for a total of $79,672 for the purchase of four vehicles. The notes
had a term of three years and interest rates ranging from 4.9% to 8.5%. The
notes were secured by the vehicles. During 1997, the notes were completely
repaid.
9
<PAGE> 16
Advanced Tank Certification, Inc.
Notes to Financial Statements (continued)
5. NOTES PAYABLE (CONTINUED)
Interest costs incurred during the years ended September 30, 1997 and 1996 were
$1,962 and $3,004, respectively.
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of the
Company's deferred tax assets and liabilities at September 30, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
1997 1996
----------------------------------------
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax credits $13,472 $14,330
Other 3,778 1,949
----------------------------------------
17,250 16,279
Valuation allowance (5,420) (6,296)
----------------------------------------
11,830 9,983
Deferred tax liability:
Depreciation (11,830) (9,983)
----------------------------------------
$ - $ -
========================================
</TABLE>
The reconciliation of income (loss) attributable to operations computed at U.S.
federal statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1997 1996
------------------------------------
<S> <C> <C>
Tax at U.S. statutory rate $(1,779) $993
Other 1,779 (993)
------------------------------------
$ - $ -
====================================
</TABLE>
10
<PAGE> 17
Advanced Tank Certification, Inc.
Notes to Financial Statements (continued)
7. COMMITMENTS
The Company's office space is leased under a noncancelable operating lease
agreement which expires in December 1997. Under the terms of the lease, the
Company is required to make minimum payments of $6,175 in the year ending
September 30, 1998.
Rental expense for the years ended September 30, 1997 and 1996 was $24,708 and
$24,705, respectively.
8. EMPLOYEE BENEFIT PLAN
The Company makes available to employees who have worked for the Company at
least three years the opportunity to participate in a retirement plan (the "SEP
Plan"). The SEP Plan allows the Company to determine its contribution
percentage annually. As of September 1997, the Company contributes into the
employee's account a minimum of 3% of each participating employee's
compensation up to the maximum amount for which social security is withheld. If
a participating employee chooses to make a salary reduction contribution into
their account, the Company matches the amount up to 6% of the employee's
compensation. For compensation in excess of amounts upon which social security
is withheld, the Company contributes 15% of the amount into the individual's
account.
During the years ended September 30, 1997 and 1996, the Company incurred pension
expenses of $47,171 and $49,754, respectively.
9. STOCK OPTION PLAN
The Company has an incentive stock option plan (the "Option Plan") for all
full-time officers and key employees. The Option Plan allows for options to
purchase up to 1,800 shares of common stock to be granted to eligible employees.
The options are to be issued at prices equal to or in excess of the market price
on the date of grant and expire on the fifth anniversary of the grant date.
As of September 30, 1997, there have been no options granted under the Option
Plan.
11
<PAGE> 18
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On December 17, 1997, USTMAN Technologies, Inc. (the Company) obtained $3.75
million in financing from BankBoston and used the proceeds to, among other
things, acquire all of the outstanding common stock of Advanced Tank
Certification, Inc. (ATC), pursuant to stock purchase agreements between the
Company and all of the shareholders of ATC. The ATC acquisition was accounted
for using the purchase method.
On May 22, 1997, Watson General Corporation (Watson) completed the private
placement of $7 million principal amount of its 10% Senior Subordinated Notes
Due 2002 and 7,304,520 shares of its common stock (the Private Placement). The
proceeds from the Private Placement were used to acquire all of the outstanding
capital stock of USTMAN Industries, Inc. (USTMAN), a subsidiary of NDE
Environmental Corporation (NDE), pursuant to a Stock Purchase Agreement between
Watson and NDE. The USTMAN acquisition was accounted for using the purchase
method. USTMAN and Watson were merged and the surviving company subsequently
was renamed USTMAN Technologies, Inc.
The following unaudited pro forma condensed consolidated statements of
operations are presented to reflect the USTMAN and ATC acquisitions as if such
acquisitions had occurred on October 1, 1996 and for the nine months ended June
30, 1997 and for the six months ended December 31, 1997. The nine months ended
June 30, 1997 is presented due to a change in the Company's year end during 1997
from September 30 to June 30. The 10-KSB filed for the year ended June 30, 1997
also reflects a nine month period. ATC prepared its financial statements on the
basis of a September 30 fiscal year-end. The unaudited pro forma condensed
consolidated statements of operations combine the results of operations of the
Company (both Watson and USTMAN) and ATC for the nine months ended June 30, 1997
and for the six months ended December 31, 1997. ATC operations have been
included in the Company's operations since December 17, 1997.
The unaudited pro forma condensed consolidated statements of operations and
accompanying notes should be read in conjunction with the respective historical
consolidated financial statements of the Company, as set forth in its Form
10-KSB for the nine months ended June 30, 1997 and its Form 10-QSB for the
period ended December 31, 1997 and the ATC audited financial statements for the
years ended September 30, 1997 and 1996 contained herein.
The unaudited pro forma condensed consolidated financial information is based on
the consolidated financial statements of Watson, USTMAN and ATC giving effect to
the transactions under the assumptions and adjustments outlined in the
accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial
Statements.
The pro forma adjustments are based upon available information and certain
assumptions that the Company's management believes are reasonable given the
circumstances. The unaudited pro forma condensed consolidated statements of
operations are provided for comparative purposes only and are not necessarily
indicative of the results that would have been obtained had the acquisitions,
Private Placement and bank financing occurred on the dates indicated or that may
be achieved in the future.
<PAGE> 19
USTMAN Technologies, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
<TABLE>
<CAPTION>
Advanced Tank
Watson General USTMAN Pro Forma USTMAN Certification,
Corporation Industries, Inc. Adjustments Technologies, Inc. Inc.
------------------ ----------------- -------------- -------------------- -------------------
For the nine For the period For the nine For the nine
months ended ended months ended June months ended June
June 30, 1997 May 22, 1997 30, 1997 30, 1997
------------------ ----------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 2,325,000 $ 2,876,000 $ 5,201,000 $ 1,391,000
Cost of sales 836,000 1,020,000 1,856,000 700,000
------------------ ----------------- -------------------- -------------------
Gross Profit 1,489,000 1,856,000 3,345,000 691,000
93,000 (A)
Selling, general and 136,000 (B)
administrative 2,912,000 1,458,000 21,000 (C) 4,620,000 729,000
Write-off of investment in
Toxguard Systems, Inc. 384,000 384,000
150,000 (D)
186,000 (E)
Interest expense 172,000 549,000 (F) 1,057,000 1,000
Interest income 4,000 11,000 15,000 3,000
------------------ ----------------- -------------- ----- -------------------- -------------------
Income (loss) before provision
for income taxes (1,975,000) 409,000 $ (2,701,000) (36,000)
Provision for income taxes (4,000) (4,000)
------------------ --------------------
Net loss $ (1,979,000) $ (2,705,000)
================== ====================
Net loss per share-Basic
Weighted average shares
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Consolidated
-------------- ----------------
<S> <C> <C>
Net sales $ 6,592,000
Cost of sales 2,556,000
----------------
Gross Profit 4,036,000
Selling, general and
administrative 220,000 (G) 5,569,000
Write-off of investment in
Toxguard Systems, Inc. 384,000
11,000 (H)
Interest expense 299,000 (I) 1,368,000
Interest income 18,000
-------------- ----------------
Income (loss) before provision
for income taxes (3,267,000)
Provision for income taxes (4,000)
----------------
Net loss $ (3,271,000)
================
Net loss per share-Basic (.17)
================
Weighted average shares 19,119,827 (J)
================
</TABLE>
<PAGE> 20
USTMAN Technologies, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
Six Months ended December 31, 1997
<TABLE>
<CAPTION>
Advanced Tank
USTMAN Certification, Pro Forma Pro Forma
Technologies, Inc. Inc. Adjustments Consolidated
-------------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 3,081,000 $ 814,000 $ 3,895,000
Cost of sales 1,457,000 418,000 1,875,000
-------------------- ----------------- ----------------
Gross Profit 1,624,000 396,000 2,020,000
Selling, general and administrative 1,969,000 389,000 134,000 (G) 2,492,000
7,000 (H)
Interest expense 701,000 1,000 87,000 (I) 796,000
Net income (loss) $ (1,046,000) $ 6,000 $ (1,268,000)
==================== ================= ================
Net loss per share-Basic (.07)
================
Weighted average shares 19,119,827 (J)
================
</TABLE>
<PAGE> 21
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. On December 17, 1997, USTMAN Technologies, Inc. (USTMAN), acquired all of
the outstanding stock of Advanced Tank Certification, Inc. (ATC) pursuant
to a stock purchase agreements. The purchase price of ATC was approximately
$3.4 million, comprised of $2.3 million in cash and approximately $1.116
million in stock (775,194 shares). The value of the shares issued was
determined by using the average of the stock price ten days before and
after the date of the transaction.
<TABLE>
<S> <C>
Purchase price $ 3,416,000
Less estimated fair market value of recorded net
tangible assets of acquired company 483,000
================
Excess of purchase price over fair value of net
tangible assets acquired $ 2,933,000
================
</TABLE>
The above purchase price allocation is preliminary and subject to change as
additional information necessary to complete the allocation becomes
available. All of the excess purchase price has been allocated to goodwill.
2. The pro forma condensed consolidated statements of operations gives effect
to the following pro forma adjustments:
(A) To amortize excess of purchase price over fair value of net assets
acquired in the USTMAN Industries, Inc. acquisition over fifteen
years on a straight-line basis.
(B) To amortize software over eight years on a straight-line basis.
(C) To adjust compensation expense for executives in connection with a
signed employment agreement with the President and agreements with
prior executives.
(D) To amortize original issue discount on Private Placement debt over
five years on a straight-line basis which approximates the effective
interest method.
(E) To amortize deferred debt issuance costs related to Private Placement
debt over five years on a straight-line basis which approximates the
effective interest method.
(F) Interest on Private Placement debt.
(G) To record amortization expense on the intangible assets related to
the ATC acquisition over ten years on a straight-line basis.
(H) To record amortization expense related to the capitalized deferred
debt issuance costs amortized over four years on a straight-line
basis which approximates the effective interest method.
(I) To record interest expense on the term loan entered into with
BankBoston, N.A.
(J) Weighted average shares outstanding were determined as follows:
<TABLE>
<S> <C>
Shares outstanding as of June 30, 1997 18,344,633
Shares issued for ATC purchase 775,194
--------------
19,119,827
==============
</TABLE>
Shares outstanding as of June 30, 1997 include all shares issued for
the USTMAN acquisition. Given that the Company is in a loss position,
any outstanding options or warrants would have an antidilutive effect
on earnings per share.
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
Exhibit 23 Consent of Independent Auditors
</TABLE>
<PAGE> 1
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Forms S-3 No. 33-64310) and related Prospectus of USTMAN Technologies, Inc. of
our report dated February 20, 1998, with respect to the financial statements of
Advanced Tank Certification, Inc. included in its Current Report on Form 8-K/A
dated March 2, 1998, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Denver, Colorado
March 2, 1998
