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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------------------
Date of Report (Date of Earliest Event Reported): APRIL 29, 1998
HEARTLAND TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-11956 36-1487580
- ------------------------- ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
547 WEST JACKSON BOULEVARD
CHICAGO, ILLINOIS 60661
- ---------------------------------------- ------------------
(Address of Principal Executive Offices) (Zip Code)
(312) 294-0497
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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NYFS08\65\63765\0003\306\8-KA706A.DOC
<PAGE>
EXPLANATORY NOTE
This Amendment No. 1 on Form 8-K/A to the Current Report on Form 8-K (April 29,
1998) of Heartland Technology, Inc. (the "Registrant" or the "Company") amends
and restates in its entirety Item 7 solely to file the financial statements and
pro forma financial information required by Item 7(a) and (b), respectively.
* * *
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
<TABLE>
<CAPTION>
Zecal Incorporated Page
------------------ ----
<S> <C> <C>
Independent Auditor's Report................................. F-1
Balance Sheets at January 31, 1998 and 1997.................. F-2
Statements of Operations for the years ended January 31,
1998 and 1997............................................. F-3
Statements of Changes in Net Capital Deficiency for the
years ended January 31, 1998 and 1997..................... F-4
Statements of Cash Flows for the years ended January 31,
1997 and 1998............................................. F-5
Notes to Financial Statements................................ F-6
(b) Pro Forma Financial Information.
Heartland Technology, Inc. Page
-------------------------- ----
Introduction................................................. F-12
Unaudited Pro Forma Condensed Consolidated Balance Sheet at
March 31, 1998............................................ F-13
Notes........................................................ F-14
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the quarter ended March 31, 1998........... F-15
Notes........................................................ F-16
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1997........... F-17
Notes........................................................ F-18
</TABLE>
1
<PAGE>
(c) Exhibits.
Exhibit No. Description
----------- -----------
2.1 Acquisition Agreement, dated as of April 29, 1998, by and
between Zecal, Inc., as seller, and Zecal Corp., as buyer
(incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated May 13, 1998
(the "Registrant's Form 8-K")).+
99.1 Promissory Note, dated April 29, 1998, of Zecal Corp., in
the principal amount of $1,100,000, and payable to Zecal,
Inc. (incorporated by reference to Exhibit 99.1 to the
Registrant's Form 8-K).
99.2 Guaranty, dated April 29, 1998, by Heartland Technology,
Inc. in favor of Zecal, Inc. (incorporated by reference to
Exhibit 99.2 to the Registrant's Form 8-K).
99.3 Loan and Security Agreement, dated as of April 29, 1998, by
and between Zecal Corp., any other Credit Party executing
the agreement, and General Electric Capital Corporation Inc.
(incorporated by reference to Exhibit 99.3 to the
Registrant's Form 8-K).
99.4 Second Amendment and Consent, dated April 29, 1998, between
P.G. Design Electronics, Inc. (formerly known as PG Newco
Corp.) and General Electric Capital Corporation, to the Loan
and Security Agreement, dated May 29, 1997 (incorporated by
reference to Exhibit 99.4 to the Registrant's Form 8-K).
+ Certain schedules and similar attachments have been omitted.
The Registrant agrees to furnish supplementally a copy of
any omitted schedule or attachment to the Commission upon
request.
2
<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.
Heartland Technology, Inc.,
----------------------------
(Registrant)
Date: July 10, 1998 By: /s/ Leon F. Fiorentino
--------------------------------
Name: Leon F. Fiorentino
Title: Vice President
3
<PAGE>
Independent Auditor's Report
To the Board of Directors
Heartland Technology, Inc.
We have audited the accompanying balance sheets of Zecal Incorporated as of
January 31, 1998 and 1997 and the related statements of operations, net capital
deficiencies 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 the 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 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 Zecal Incorporated as of
January 31, 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.
The accompanying financial statements have been prepared assuming that Zecal
Incorporated will continue as a going concern. As more fully described in Note
1, the Company has incurred recurring operating losses and has working capital
and net capital deficiencies. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
Ernst & Young LLP
April 9, 1998, except for Note 11, as to
which the date is April 29, 1998
F-1
<PAGE>
ZECAL INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31,
ASSETS 1998 1997
----------------- ----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 407,088 $ 72,906
Accounts receivable:
Trade, net of allowance for doubtful accounts of $25,200 in 1997 (none
in 1998) 383,217 403,554
Related party 50,169 -
Inventories, net 185,605 441,082
Prepaid expenses and other assets 73,417 8,971
----------------- ----------------
Total current assets 1,099,496 926,560
Equipment and improvements, net 3,145,258 3,124,047
----------------- ----------------
$ 4,244,754 $ 4,050,560
================= ================
LIABILITIES AND NET CAPITAL DEFICIENCY:
Current liabilities:
Accounts payable $ 236,325 $ 702,347
Advances from Lucas Varity Corporation 12,731,947 11,455,486
Accrued bonuses 330,363 118,003
Severance obligation - current 83,333 100,000
Accrued payroll and other expenses 114,053 152,801
----------------- ----------------
Total current liabilities 13,496,021 12,528,637
Severance obligation - 83,333
Net capital deficiency:
Common stock, $.01 par value, 20,000 shares authorized, 16,269 shares
issued and outstanding (13,223 shares in 1997) 163 133
Paid-in-capital 13,643,684 8,419,090
Deficit (22,895,114) (16,980,633)
----------------- ----------------
(9,251,267) (8,561,410)
----------------- ----------------
$ 4,244,754 $ 4,050,560
================= ================
</TABLE>
See accompanying notes.
F-2
<PAGE>
ZECAL INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
1998 1997
----------------- ----------------
<S> <C> <C>
Net sales $ 2,930,881 $ 1,186,870
Cost of sales 4,776,714 2,940,632
----------------- ----------------
Gross margin (1,845,833) (1,753,762)
Selling, general and administrative expenses 3,175,748 4,264,647
----------------- ----------------
Loss from operations (5,021,58) (5,994,302)
Other expenses:
Legal - (6,850,999)
Interest (795,048) (267,037)
Other (97,852) (38,682)
----------------- ----------------
Net loss $ (5,914,481) $ (13,151,020)
================= ================
</TABLE>
See accompanying notes.
F-3
<PAGE>
ZECAL INCORPORATED
STATEMENTS OF CHANGES IN NET CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
COMMON STOCK
PAID-IN
SHARES AMOUNT CAPITAL DEFICIT
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Balance at January 31, 1996 4,864 $ 49 $ 2,238,795 $ (3,829,613)
Issuance of common stock 8,359 84 6,180,295
Net loss (13,151,020)
---------------- ----------------- ---------------- -----------------
Balance at January 31, 1997 13,223 133 8,419,090 (16,980,633)
Issuance of common stock 3,046 30 5,224,594
Net loss (5,914,481)
---------------- ----------------- ---------------- -----------------
Balance at January 31, 1998 16,269 $ 163 $ 13,643,684 $ (22,895,114)
================ ================= ================ =================
</TABLE>
See accompanying notes.
F-4
<PAGE>
ZECAL INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
1998 1997
----------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (5,914,481) $ (13,151,020)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 464,997 464,997
Loss on disposal of property and equipment 27,032 40,328
Change in operating assets and liabilities:
Accounts receivable 20,337 (155,269)
Related party receivable (50,169) -
Inventories 255,477 (356,209)
Prepaid expenses and other assets (64,446) 17,499
Accounts payable (466,022) 349,689
Accrued interest 795,048 313,601
Accrued bonuses 212,360 118,003
Accrued severance (100,000) (100,189)
Accrued payroll and other expenses (38,748) (96,760)
----------------- ----------------
Net cash used by operating activities (4,858,615) (12,555,330)
INVESTING ACTIVITIES
Purchase of property and equipment (513,240) (1,829,997)
----------------- ----------------
Net cash used in investing activities (513,240) (1,829,997)
FINANCING ACTIVITIES
Net borrowings form parent 481,413 8,235,173
Issuance of common stock 5,224,624 6,180,379
----------------- ----------------
Net cash provided by financing activities 5,706,037 14,415,552
----------------- ----------------
Net increase in cash and equivalents 334,182 30,225
Cash and equivalents at beginning of year 72,906 42,681
----------------- ----------------
Cash and equivalents at end of year $ 407,088 $ 72,906
================= ================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Zecal Incorporated
Notes to Financial Statements
January 31, 1998
1. OWNERSHIP, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
OWNERSHIP AND DESCRIPTION OF BUSINESS
Zecal Incorporated (the "Company") is owned by LucasVarity Corporation (95.3%)
and Kalman Zsamboky (4.7%). In 1995, LucasVarity Corporation ("the parent
company") purchased an 80% interest in Ceramic Packaging, Inc. and subsequently
changed the name to Zecal Incorporated. The purchase price of $4,000,000 created
goodwill of $2,217,000 which has not been reflected in the accompanying
financial statements of Zecal Incorporated.
Zecal Incorporated has a patented process to plate copper directly on ceramic
circuit board panels. The Company's production facility is located in
Churchville, New York.
GOING CONCERN
The Company has experienced significant operating losses since inception and, at
January 31, 1998, has a working capital deficiency of $12,396,525 and a net
capital deficiency of $9,251,267. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENT
The company considers all short term investments with an original maturity of
three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, first-out
basis.
F-6
<PAGE>
Zecal Incorporated
Notes to Financial Statements (continued)
1. OWNERSHIP, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
EQUIPMENT AND IMPROVEMENTS
Equipment is stated at cost. Depreciation and amortization are determined by the
straight-line method over the following estimated useful lives:
Manufacturing equipment 7-10
Engineering equipment 7-10
Computer equipment 5
Office furniture and fixtures 5
Leasehold improvements are amortized using the straight-line method over the
useful life of the improvement or the term of the lease, whichever is less.
REVENUE RECOGNITION
Revenue is recorded upon shipment of product to the customer.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts receivable and accounts payable approximate fair value.
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 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.
F-7
<PAGE>
Zecal Incorporated
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
2. INVENTORIES
Inventories consist of the following at January 31:
1998 1997
------------------ ------------------
<S> <C> <C>
Raw materials $ 321,850 $ 347,698
Work-in-process 70,049 93,384
391,899 441,082
Less reserve for obsolete inventory (206,294) -
------------------ ------------------
$185,605 $ 441,082
================== ==================
<CAPTION>
All finished goods are shipped immediately upon completion to the customer.
3. EQUIPMENT AND IMPROVEMENTS
Equipment consists of the following at January 31:
1998 1997
------------------ ------------------
<S> <C> <C>
Manufacturing equipment $ 2,976,475 $ 2,232,220
Engineering equipment 229,746 245,776
Computer equipment 204,952 180,732
Office furniture and fixtures 82,692 81,456
Leasehold improvements 948,344 706,274
Construction in progress 120,154 357,064
------------------ ------------------
4,562,363 3,803,522
Less: accumulated depreciation (1,417,105) (679,475)
------------------ ------------------
$ 3,145,258 $ 3,124,047
================== ==================
</TABLE>
4. SEVERANCE OBLIGATION
In 1995, the Company entered into a severance agreement with one of its
executive officers which provides for 36 monthly payments of $8,333 commencing
October 31, 1995.
F-8
<PAGE>
Zecal Incorporated
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
5. INCOME TAXES
The components of deferred income taxes are as follows at January 31:
1998 1997
------------------ ------------------
<S> <C> <C>
Deferred tax asset:
Receivables $ - $ 8,500
Inventory 70,000 -
Compensation 140,000 88,000
Annual net operating losses 2,200,000 3,000,000
Valuation allowance (2,324,000) (3,041,500)
------------------ ------------------
Total deferred tax asset 86,000 55,000
Deferred tax liability:
Equipment and improvements 86,000 55,000
------------------ ------------------
Net deferred tax asset $ - $ -
================== ==================
</TABLE>
The Company has not been required to pay income taxes due to its net loss
position. The Company has been included in the consolidated income tax return of
LucasVarity Corporation. In addition, LucasVarity Corporation has not allocated
any benefit for the net operating losses to the Company.
6. DEFINED CONTRIBUTION PLAN
LucasVarity Corporation sponsors a defined contribution plan with deferred
compensation (401k) provisions covering all eligible employees. The Company is
responsible for matching 50% for each dollar contributed, up to a maximum of 2%
of eligible compensation. After the 2% is met, the company will then contribute
25% of each dollar contributed, up to a maximum of 4% of eligible compensation.
Total Company contributions for the year ended January 31, 1998 and 1997
aggregated $20,046 and $17,438, respectively.
F-9
<PAGE>
Zecal Incorporated
Notes to Financial Statements (continued)
7. LEASE COMMITMENTS
The Company leases certain of its facilities, furniture and fixtures, and
equipment. Rent expense was $210,187 and $123,907 for years ended January 31,
1998 and 1997, respectively. Future commitments under these operating leases are
as follows:
1999 $ 164,400
2000 18,838
----------
$ 183,238
==========
8. CONCENTRATION OF CREDIT RISK
The Company's primary customers are Outboard Marine Corporation, Power Trends,
and World Access. At January 31, 1998 and 1997, respectively, $316,357 and
$347,497 of the Company's accounts receivable were from these customers. Sales
amounted to approximately 95.5% and 90.3% in 1998 and 1997, respectively.
9. COMMITMENTS
The Company entered into a contract with its supplier to provide exclusive
design services. The agreement stipulates a minimum monthly service charge of
$10,500 with additional savings through increased usage. The contract has
subsequently been terminated effective March 3, 1998.
In 1995, the Company granted a stock option to one of its officers to purchase
31 shares of the Company's common stock for $200 per share. As of January 31,
1998, these options have not been exercised and will expire on January 8, 2000.
10. RELATED PARTY TRANSACTIONS
The Company's operations are funded by LucasVarity Corporation through advances
which bear interest at the 6 month LIBOR rate plus 2%.
During the years ended January 31, 1998 and 1997, the Company was charged
$467,190 and $553,674, respectively, for costs incurred on its behalf by
LucasVarity Corporation and management fees. Such costs are included in selling,
general and administrative expenses. In addition, the Company was charged
$4,958,123 for legal expenses incurred on its behalf by LucasVarity Corporation
for the year ended January 31, 1997.
F-10
<PAGE>
Zecal Incorporated
Notes to Financial Statements (continued)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
During the year ended January 31, 1998, the Company had sales of $50,169 (none
in 1997) to an affiliated company of the LucasVarity Corporation.
11. SUBSEQUENT EVENTS
On April 29, 1998, substantially all assets (excluding cash) of the Company were
sold to Zecal Corporation, a newly formed wholly owned subsidiary of P.G. Design
Electronics, Inc. which is wholly owned by Heartland Technology, Inc. for
$500,000 in cash and $1,100,000 in notes and the assumption of substantially all
of the Company's liabilities (excluding advances from LucasVarity Corporation).
The notes are due in quarterly installments beginning July 1999 through April
2002. The notes bear interest at 8% per annum. The note is unconditionally
guaranteed by Heartland Technology, Inc.
F-11
<PAGE>
CONDENSED PRO FORMA FINANCIAL INFORMATION FOR THE COMPANY AS
OF MARCH 31, 1998 AND FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE
QUARTER ENDED MARCH 31, 1998
The following unaudited Pro Forma Condensed Balance Sheet and unaudited Pro
Forma Condensed Statements of Operations (collectively, the "Pro Forma Financial
Statements") are based on historical financial statements of Heartland
Technology, Inc. (the "Company") and Zecal Incorporated ("Zecal" or "Zecal,
Inc.") after giving effect to the Company's purchase of substantially all the
assets of Zecal and all transactions contemplated thereby.
The Pro Forma Financial Statements were prepared as if the transaction has
occurred as of January 1, 1997 and as of January 1, 1998 for Statements of
Operations purposes and as of March 31, 1998 for Balance Sheet purposes. The Pro
Forma Financial Statements are not necessarily indicative of the future
financial position or future results of operations of the Company after the
purchase of Zecal=s assets, or of the financial position or results of
operations of the Company had the purchase of Zecal=s assets occurred on the
dates indicted above or been in effect for the period presented.
The Pro Forma Adjustments are based upon available information and upon certain
assumptions the Company believes are reasonable. The Pro Forma Financial
Statements and accompanying notes should be read in conjunction with, and are
qualified in their entirety by, the historical financial statements and other
financial information pertaining to the Company and Zecal and related notes
thereto, included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 and historical financial statements and other financial
information pertaining to Zecal included in this Form 8-K/A and in the
previously filed Form 8-K.
F-12
<PAGE>
Heartland Technology, Inc. and Zecal, Inc.
Pro Forma Consolidated Financial Statements
Condensed Balance Sheet as of March 31, 1998
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Heartland Pro
Technology Zecal, Forma Pro
Inc. A Inc. A Adjustments Forma
------ ------ ----------- -----
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 2,318 $ 197 $ $ 2,515
Accounts receivable 3,601 469 4,070
Due from affiliate 531 531
Inventories 2,052 323 2,375
Prepaid expenses 77 39 116
--------- ---------- ------------ ---------
Total current assets 8,579 1,028 0 9,607
Property and equipment, net 4,862 3,553 (2,121) B 6,294
Other assets
Goodwill, net 8,774 8,774
Investment in partnerships 8,124 8,124
All other 760 246 (147) B 859
--------- ---------- ------------ ---------
Total other assets 17,658 246 (147) 17,757
--------- ---------- ------------- ---------
Total Assets $ 31,099 $ 4,827 $ (2,268) $ 33,568
========= ========== ============= =========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 1,909 $ 197 $ $ 2,106
Accrued expenses & other liabilities 1,216 507 (249) B 1,474
Payable to parent company 1,247 (1,247) B 0
Line of credit 1,023 1,004 C 2,027
Current portion of long term debt 1,601 1,601
Allowance for claims and liabilities 1,279 1,279
--------- ---------- ------------ ---------
Total current liabilities 7,028 1,951 (492) 8,487
Long term obligations
Payable to parent company 11,716 (11,716) B 0
Long term debt, less current portion 1,750 1,750
Notes payable 3,000 1,100 C 4,100
--------- ---------- ------------ ---------
Total long term obligations 4,750 11,716 (10,616) 5,850
Stockholders' equity 19,321 (8,840) 8,840 B 19,321
--------- ---------- ------------ ---------
Total Liabilities and Stockholders' Equity $ 31,099 $ 4,827 $ (2,268) $ 33,658
========= ========== ============= =========
</TABLE>
F-13
<PAGE>
Heartland Technology, Inc. and Zecal, Inc.
Pro Forma Consolidated Financial Statements
Notes to Condensed Balance Sheet as of March 31, 1998
(Unaudited)
(In Thousands)
A. Represents the historical financial position at March 31, 1998.
B. To adjust for assets $2,268, liabilities $13,212 and equity ($8,840)
of Zecal, Inc. not acquired/assumed in the acquisition; and
To record the purchase of Zecal, Inc. assets by Zecal Corp., a
wholly-owned subsidiary of P.G. Design Electronics, Inc., which is a
wholly-owned subsidiary of Heartland Technology, Inc.
<TABLE>
<S> <C>
Purchase Price:
Cash portion of purchase price $ 500
Acquisition costs from February 1, 1998 through April 29, 1998
consisting of legal, audit, due diligence and other acquisition
related costs 504
Promissory notes 1,100
Liabilities assumed 455
-------
Total purchase price $2,559
=======
Purchase price is allocated to: current assets, $1,028; property
and equipment, $1,432; and all other assets, $99.
C. To record debt issued in connection with the purchase:
Total purchase price $2,559
Less: liabilities assumed (455)
-------
Debt issued $2,104
=======
Debt issued consists of:
Increase in line of credit $1,004
Promissory notes 1,100
-------
Debt issued $2,104
=======
</TABLE>
F-14
<PAGE>
Heartland Technology, Inc. and Zecal, Inc.
Pro Forma Consolidated Financial Statements
Condensed Statement of Operations for the Quarter Ended March 31, 1998
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Heartland Pro
Technology Zecal, Forma Pro
Inc. A Inc. A Adjustments Forma
------ ------ ----------- -----
<S> <C> <C> <C> <C>
Net sales $ 5,242 $ 618 $ $ 5,860
Cost of Sales 3,801 639 (68) D 4,372
--------- ---------- ------------- ---------
Gross profit 1,441 (21) 68 1,488
Other income
Interest income 16 16
Management fee from affiliate 106 106
Income from investment in partnerships (28) (28)
Other income 0
--------- ---------- ------------ ---------
Total other income 94 0 0 94
Other expenses
Selling, general and administrative
expenses 1,633 463 (141) C 1,955
Interest expense 142 (34) B 108
All other expenses including legal 188 281 (246) C 223
--------- ---------- ------------- ---------
Total other expenses 1,963 744 (421) 2,286
Income (loss) before taxes (428) (765) 489 (704)
Income tax provision (benefit) (190) (49) E (239)
--------- ---------- ------------ ---------
Net income (loss) $ (238) $ (765) $ 538 $ (465)
========= ========== ============ =========
Net income (loss) per share - basic
and diluted $ (0.14) $ (0.28)
========= =========
Weighted average number of common
shares outstanding 1,671 1,671
========= =========
</TABLE>
F-15
<PAGE>
Heartland Technology, Inc. and Zecal, Inc.
Pro Forma Consolidated Financial Statements
Notes to Condensed Statement of Operations for the Quarter Ended March 31, 1998
(Unaudited)
(In thousands, except per share amounts)
A. Represents historical results of operations for the quarter ended
March 31, 1998.
B. To record interest expense incurred as part of the transaction:
Debt issued $ 1,600
Expected interest rate 2.125%
--------
$ 34
========
C. To eliminate nonrecurring expenses included in Selling,
general and administrative expenses:
Management fee $ 123
Bonuses 18
--------
$ 141
========
To eliminate nonrecurring expenses included in
All other expenses including legal. $ 246
========
D. Reduction in depreciation reflecting the write-down of
fixed assets. $ 68
========
E. To reflect the consolidated income tax benefit for the Company.
F-16
<PAGE>
Heartland Technology, Inc. and Zecal, Inc.
Pro Forma Consolidated Financial Statements
Condensed Statement of Operations for the Year Ended December 31, 1997
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Heartland Pro
Technology Zecal, Forma Pro
Inc. A Inc. A Adjustments Forma
------ ------ ----------- -----
<S> <C> <C> <C> <C>
Net sales $ 15,093 $ 2,931 $ $ 18,024
Cost of Sales 9,684 4,298 (876) CD 13,106
--------- ---------- ------------ ---------
Gross profit 5,409 (1,367) 0 4,918
Other income
Interest income 272 272
Management fee from affiliate 425 425
Income from investment in partnerships 587 587
Other income 28 28
--------- ---------- ------------ ---------
Total other income 1,312 0 0 1,312
Other expenses
Selling, general and administrative
expenses 3,119 2,905 (964) CD 5,060
Interest expense 416 (136) B 280
All other expenses including legal 438 5,494 (866) C 5,066
--------- ---------- ------------ ---------
Total other expenses 3,973 8,399 (1,966) 10,406
Income (loss) before taxes 2,748 (9,766) 2,842 (4,176)
Income tax provision (benefit) 773 (2,193) E (1,420)
--------- ---------- ------------- ----------
Net income (loss) $ 1,975 $ (9,766) $ 5,035 $ (2,756)
========= ========== ============ =========
Net income (loss) per share - basic
and diluted $ 1.18 $ (1.65)
========= =========
Weighted average number of common
shares outstanding 1,671 1,671
========= =========
</TABLE>
F-17
<PAGE>
Heartland Technology, Inc. and Zecal, Inc.
Pro Forma Consolidated Financial Statements
Notes to Condensed Statement of Operations for the Year Ended December 31, 1997
(Unaudited)
(In thousands, except per share amounts)
A. Represents historical results of operations for the year ended December
31, 1997 for Heartland Technology, Inc. and historical results of
operations for the year ended January 31, 1998 for Zecal, Inc.
B. To record interest expense incurred as part of the transaction:
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<S> <C>
Debt issued $ 1,600
Expected interest rate 8.5%
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$ 136
========
C. To eliminate nonrecurring expenses included in Cost of sales:
Reduction of payroll and related expenses $ 660
========
To eliminate nonrecurring expenses in Selling, general and
administrative expenses:
Reduction of payroll and related expenses $ 188
Management fee 640
Bonuses 84
--------
$ 912
========
To eliminate nonrecurring expenses included in All other expenses
including legal:
Intercompany interest $ 795
Restructuring charge 71
--------
$ 866
========
In addition, Zecal, Inc.'s 1997 expenses include a $4,601 charge for
legal expenses and the settlement of a patent infringement matter.
D. Reduction in depreciation reflecting the write-down of fixed assets in
the purchase:
Reduction in Cost of Goods Sold $ 216
Reduction in selling, general and administrative expenses 52
--------
$ 268
========
</TABLE>
E. To reflect the consolidated income tax benefit for the Company.
F-18
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Acquisition Agreement, dated as of April 29, 1998, by and
between Zecal, Inc., as seller, and Zecal Corp., as buyer
(incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated May 13, 1998
(the "Registrant's Form 8-K")).+
99.1 Promissory Note, dated April 29, 1998, of Zecal Corp., in
the principal amount of $1,100,000, and payable to Zecal,
Inc. (incorporated by reference to Exhibit 99.1 to the
Registrant's Form 8-K).
99.2 Guaranty, dated April 29, 1998, by Heartland Technology,
Inc. in favor of Zecal, Inc. (incorporated by reference to
Exhibit 99.2 to the Registrant's Form 8-K).
99.3 Loan and Security Agreement, dated as of April 29, 1998, by
and between Zecal Corp., any other Credit Party executing
the agreement, and General Electric Capital Corporation Inc.
(incorporated by reference to Exhibit 99.3 to the
Registrant's Form 8-K).
99.4 Second Amendment and Consent, dated April 29, 1998, between
P.G. Design Electronics, Inc. (formerly known as PG Newco
Corp.) and General Electric Capital Corporation, to the Loan
and Security Agreement, dated May 29, 1997 (incorporated by
reference to Exhibit 99.4 to the Registrant's Form 8-K).
+ Certain schedules and similar attachments have been omitted. The
Registrant agrees to furnish supplementally a copy of any omitted
schedule or attachment to the Commission upon request.
