<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 28, 1999
------------------------------
Clarion Technologies, Inc.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-24690 91-1407411
- ---------------------------- -------------------------- ------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1901 N. Roselle Road, Suite 340, Schaumburg, Illinois 60195
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 490-9900
----------------
N/A
-----------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
This report amends the current report filed by Clarion
Technologies, Inc. (the "Company") dated September 14, 1999.
Effective August 28, 1999, the Company, by and through its
wholly owned subsidiary, Clarion Plastics Technologies, Inc., completed the
acquisition of Wamar Products, Inc., a Michigan corporation ("Wamar Products"),
in exchange for $7,000,000 in cash and 200,000 shares of Clarion Common Stock,
and completed the acquisition of Wamar Tool & Machine Co., a Michigan
corporation ("Wamar Tool"), in exchange for 200,000 shares of Clarion Common
Stock.
The audited financial statements of Wamar Products as of
October 31, 1998 and November 1, 1997 and for each of the two fiscal years in
the periods ended October 31, 1998 and November 1, 1997 are presented below. The
interim unaudited financial statements of Wamar Products as of July 31, 1999 and
for the three and nine month periods ended July 31, 1999 and August 1, 1998 are
also presented.
The audited financial statements of Wamar Tool as of December
31, 1998 and 1997 and for each of the two fiscal years in the periods ended
December 31, 1998 and 1997 are presented below. The interim unaudited financial
statements of Wamar Tool as of June 30, 1999 and for the three and six month
periods ended June 30, 1999 and 1998 are also presented.
<PAGE>
WAMAR PRODUCTS, INC.
--------
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
--------
OCTOBER 31, 1998 AND NOVEMBER 1, 1997
<PAGE>
WAMAR PRODUCTS, INC.
--------
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
---------
OCTOBER 31, 1998 AND NOVEMBER 1, 1997
<PAGE>
WAMAR PRODUCTS, INC.
- CONTENTS -
PAGE NUMBER
-----------
Independent Auditors' Report 1
Financial Statements:
Balance Sheet 2
Statement of Income and Retained Earnings 3
Statement of Cash Flows 4 & 5
Notes to Financial Statements 6 - 11
<PAGE>
Independent Auditors' Report
----------------------------
To the Board of Directors
Wamar Products, Inc.
Caledonia, Michigan
We have audited the accompanying balance sheet of WAMAR PRODUCTS, INC. as of
October 31, 1998 and November 1, 1997, and the related statements of income and
retained earnings 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 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 above present fairly, in
all material respects, the financial position of WAMAR PRODUCTS, INC. at October
31, 1998 and November 1, 1997 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
PERRIN, FORDREE & COMPANY, P.C.
Troy, Michigan
July 16, 1999
<PAGE>
WAMAR PRODUCTS, INC.
BALANCE SHEET
ASSETS
------
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
OCTOBER 31, NOVEMBER 1,
1998 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 363,048 $ 110,357
Accounts receivable-net of allowance
of $59,200 in 1998 and $49,200 in
1997. 2,473,296 1,951,793
Inventories 1,287,710 1,105,960
Prepaid expenses:
Tooling 65,975 270,035
Other 97,169 48,546
------------- -------------
Total current assets 4,287,198 3,486,691
PROPERTY AND EQUIPMENT:
Warehouse 244,653 244,653
Leasehold improvements 1,129,897 1,063,741
Machinery and equipment 8,484,764 8,449,976
Furniture and fixtures 302,314 302,314
Vehicles 184,684 197,592
Construction in progress 5,392 459
------------- -------------
10,351,704 10,258,735
Less accumulated depreciation and amortization (7,064,306) (6,790,595)
------------- -------------
3,287,398 3,468,140
OTHER ASSETS:
Income tax deposit 45,940 60,863
Cash surrender value of life insurance 149,166 139,226
------------- -------------
195,106 200,089
------------- -------------
$ 7,769,702 $ 7,154,920
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
OCTOBER 31, NOVEMBER 1,
1998 1997
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 295,608 $ 388,533
Line-of-credit 1,218,780 1,050,000
Accounts payable 1,352,531 1,093,199
Accrued expenses:
Payroll and payroll taxes 153,085 157,509
Employee benefits 334,931 263,753
Other 106,869 43,704
Dividends payable 205,996 -
Tooling deposit 19,000 156,300
------------- -------------
Total current liabilities 3,686,800 3,152,998
LONG-TERM DEBT, less current portion 711,801 1,204,134
STOCKHOLDERS' EQUITY :
Common stock, - $1.00 par value,
Authorized - 50,000 shares
Issued and outstanding, 25,944 25,944 25,944
Retained earnings 3,345,157 2,771,844
------------- -------------
3,371,101 2,797,788
------------- -------------
$ 7,769,702 $ 7,154,920
============= =============
</TABLE>
<PAGE>
WAMAR PRODUCTS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
OCTOBER 31, NOVEMBER 1,
1998 1997
------------- -------------
<S> <C> <C>
SALES $ 19,713,565 $ 18,689,451
COST OF SALES 17,171,653 16,728,707
------------- -------------
GROSS PROFIT 2,541,912 1,960,744
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,242,634 1,135,992
------------- -------------
INCOME FROM OPERATIONS 1,299,278 824,752
OTHER INCOME (EXPENSE):
Other income 54,611 34,160
Interest income 8,696 10,617
Interest expense (195,929) (243,355)
Gain on sale of assets 16,547 -
------------- -------------
(116,075) (198,578)
------------- -------------
NET INCOME 1,183,203 626,174
RETAINED EARNINGS:
Beginning of year 2,771,844 2,538,227
Dividends declared (609,890) (392,557)
------------- -------------
End of year $ 3,345,157 $ 2,771,844
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
WAMAR PRODUCTS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
OCTOBER 31, NOVEMBER 1,
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 19,192,062 $ 18,785,078
Cash paid to suppliers and employees (17,107,893) (16,803,802)
Interest received 8,696 10,617
Interest paid (184,545) (236,742)
Miscellaneous income 54,611 34,160
------------- -------------
Net cash from operating activities 1,962,931 1,789,311
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (985,713) (1,275,758)
Increase in cash surrender value (9,940) (13,093)
(Increase) decrease in income tax deposit 14,923 (32,793)
Proceeds from sale of equipment 90,862 -
------------- -------------
Net cash to investing activities (889,868) (1,321,644)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of dividends (403,894) (392,557)
Proceeds from line-of-credit - net 168,780 531,940
Payment of long-term debt (250,178) (323,715)
Payments of shareholder loan (335,080) (474,716)
------------- -------------
Net cash to financing activities (820,372) (659,048)
------------- -------------
NET INCREASE (DECREASE) IN CASH EQUIVALENTS 252,691 (191,381)
CASH AND CASH EQUIVALENTS:
Balance - beginning of year 110,357 301,738
------------- -------------
Balance - end of year $ 363,048 $ 110,357
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
WAMAR PRODUCTS, INC.
STATEMENT OF CASH FLOWS - CONTINUED
RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
OCTOBER 31, NOVEMBER 1,
1998 1997
------------- -------------
<S> <C> <C>
NET INCOME $ 1,183,203 $ 626,174
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 1,092,140 1,035,138
Gain on sale of fixed asset (16,547) -
Changes in operating assets and liabilities
which increase (decrease) cash flow:
Accounts receivable (521,503) 95,627
Inventories (181,750) (21,504)
Prepaid expenses (48,623) 4,814
Prepaid tooling 204,060 (53,831)
Accounts payable 259,332 (101,249)
Accrued expenses 129,919 76,862
Tooling deposits (137,300) 127,280
------------- -------------
779,728 1,163,137
------------- -------------
NET CASH FROM OPERATING ACTIVITIES $ 1,962,931 $ 1,789,311
============= =============
NON-CASH INVESTING AND FINANCING TRANSACTIONS
---------------------------------------------
DIVIDENDS DECLARED $ 205,966 $ -
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
WAMAR PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND NOVEMBER 1, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
This summary of significant accounting policies of Wamar
Products, Inc. (the Company), is presented to assist in
understanding the Company's financial statements. The financial
statements and notes are representations of the Company's
management which is responsible for their integrity and
objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied
in the preparation of the financial statements.
BUSINESS ACTIVITY
-----------------
The Company is a manufacturer of plastic injection molded parts
for the automotive and furniture industries. Most of the
Company's business activity is with customers located primarily
in southwestern Michigan.
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statement of cash flows, cash equivalents
include cash in banks and all highly liquid debt instruments with
original maturities of three months or less.
INVENTORIES
-----------
Inventory is stated at the lower of cost or market, determined
using the first-in, first-out (FIFO) method. Inventories, net of
valuation reserves, consisted of the following as of October 31:
YEAR ENDED
-------------------------------
OCTOBER 31, NOVEMBER 1,
1998 1997
------------- -------------
Raw materials $ 533,022 $ 547,220
Finished goods 754,688 558,740
------------- -------------
Total inventories $ 1,287,710 $ 1,105,960
============= =============
PREPAID TOOLING
---------------
The costs to manufacture and supply customer-owned tooling are
recorded as prepaid tooling costs when incurred. Amounts incurred
are charged to cost of sales and revenue is recognized when the
tooling is shipped to customers. Gains incurred on tooling
projects are recognized into income upon completion, while
estimated losses are recognized immediately as cost of sales.
-6-
<PAGE>
WAMAR PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
OCTOBER 31, 1998 AND NOVEMBER 1, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
PROPERTY AND EQUIPMENT
----------------------
Property and equipment are stated at cost and include
expenditures that materially extend the useful lives of these
assets. Expenditures for normal repairs and maintenance are
charged to operations as incurred.
DEPRECIATION AND AMORTIZATION
-----------------------------
For financial statement purposes, depreciation is computed using
the straight-line and accelerated methods based on the estimated
useful lives of the fixed assets as follows:
Warehouse 5-32 years
Leasehold improvements 5-32 years
Machinery and equipment 5-10 years
Furniture and fixtures 5-7 years
Vehicles 5 years
For income tax purposes, depreciation is computed using the
modified accelerated cost recovery method (MACRS) as prescribed
by the Internal Revenue Service.
Depreciation expense was $1,092,140 and $1,035,138 for the years
ended October 31, 1998 and November 1, 1997, respectively.
INCOME TAXES
------------
The Company is taxed as an S Corporation under the Internal
Revenue Code and applicable state statutes. Under an S
Corporation election, the income of the Company flows through to
the stockholders to be taxed at the individual level rather than
the corporate level. Accordingly, the Company will have no tax
liability (with limited exceptions) as long as the S Corporation
election is in effect.
REVENUE RECOGNITION
-------------------
Revenue is recognized in the period in which products are shipped
to customers.
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 disclosure 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 may differ from those estimates.
-7-
<PAGE>
WAMAR PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
OCTOBER 31, 1998 AND NOVEMBER 1, 1997
NOTE 2 - RELATED PARTY TRANSACTIONS:
The Company leases its building from a related company. The lease
requires minimum monthly rental payments of $28,525 and expires
on January 1, 2004. The Company is responsible for all expenses
related to the building. Rent expense for this lease was $342,300
for the years ended October 31, 1998 and November 1,1997.
Annual future obligations are as follows:
Year ending October 31:
1999 $ 342,300
2000 342,300
2001 342,300
2002 342,300
2003 342,300
Thereafter 57,050
-------------
$ 1,768,550
=============
In addition to the related party transactions discussed above,
the Company also purchases goods from and provides management
support services to another related company. In connection
therewith, the accompanying financial statements include the
following:
YEAR ENDED
-------------------------------
OCTOBER 31, NOVEMBER 1,
1998 1997
------------- -------------
Accounts receivable $ 13,768 $ 18,939
Accounts payable 101,483 149,919
Approximate purchases 1,228,155 1,488,268
Other income 38,176 30,940
NOTE 3 - LINE-OF-CREDIT:
The Company has line-of-credit agreements with a bank which
provides for maximum borrowings for working capital and purchases
of equipment of $2,000,000 as of October 31, 1998 and November
1,1997. At October 31, 1998 and November 1, 1997, outstanding
balances under the agreements amounted to $1,218,780 and
$1,050,000, respectively. These agreements bear interest at a
variable rate, which was 7.4% and 8.5% on October 31, 1998 and
November 1, 1997 , respectively. These notes are due on demand
and are secured by the assets of the Company.
-8-
<PAGE>
WAMAR PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
OCTOBER 31, 1998 AND NOVEMBER 1, 1997
NOTE 4 - LONG-TERM DEBT:
Long-term debt at October 31 and November 1 consists of the
following:
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Note payable - bank, due in monthly
installments of $4,703, including interest
at a variable rate, which was, 8.25% and 7.41%
as of October 31, 1998 and November 1,
1997, respectively, maturing February 7,
2000, when any unpaid balance is due,
secured by a personal guarantee of a
major stockholder. $ 424,255 $ 446,216
Note payable - bank, due in monthly
installments of $25,326, including interest
at a variable rate, which was 8.25% and
7.41% as of October 31,1998 and
November 1, 1997, respectively, maturing
October 30, 2000, when any unpaid balance
is due, secured by equipment. 583,154 811,371
Note payable - related party, due in monthly
installments of $2,675, including interest at the
prime rate, which was 8.5% as of
November 1, 1997. The note was repaid
in 1998. - 335,080
------------- -------------
1,007,409 1,592,667
Less current portion 295,608 388,533
------------- -------------
Long-term debt $ 711,801 $ 1,204,134
============= =============
</TABLE>
-9-
<PAGE>
WAMAR PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
OCTOBER 31, 1998 AND NOVEMBER 1, 1997
NOTE 4 - LONG-TERM DEBT - CONTINUED:
Maturities of long-term debt are summarized as follows:
Year ending October 31:
1999 $ 295,608
2000 711,801
2001 -
2002 -
2003 -
Thereafter -
-------------
Total $ 1,007,409
=============
NOTE 5 - PROFIT SHARING PLAN:
The Company has a salary reduction/profit sharing plan under the
provisions of Section 401(k) of the Internal Revenue Code. The
Plan covers all full-time employees who have completed one full
year of service with the Company. Each employee may contribute up
to a maximum of 15% of their annual salary to the Plan. The
Company contributes a discretionary amount to the plan each year.
Company contributions to the Plan for the years ended October 31,
1998 and November 1, 1997 were $131,053 and $74,709,
respectively.
The Company has a profit-sharing bonus that covers all full-time
employees who have completed six months of service with the
Company. Bonus payments are contingent upon the attainment of
earnings as defined in the agreement. During 1998 and 1997, bonus
payments charged to operations were $116,179 and $57,236,
respectively.
NOTE 6 - MAJOR CUSTOMERS:
A substantial part of the Company's business is dependent upon
three major customers, the loss of which would have a materially
adverse effect on the Company. Product sales to the customers
during 1998 and 1997 were approximately $12.1 million and $10.9
million, respectively, representing 61% and 58% of the total
sales for those years. At October 31, 1998 and November 1, 1997,
amounts due from these customers included in trade accounts
receivable were approximately $1.7 million and $1.2 million,
respectively.
-10-
<PAGE>
WAMAR PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
OCTOBER 31, 1998 AND NOVEMBER 1, 1997
NOTE 7 - SUBSEQUENT EVENTS:
In the first quarter of 1999, there was a loss of a major
customer. Sales to this company during 1998 and 1997 were
approximately $2.8 million and $2.9 million, respectively,
representing 15% and 16% of the total sales for those years. The
Company does not anticipate that this will have a material
adverse effect on the results of future operations.
In June, 1999, Company stockholders entered into a stock purchase
agreement. Under this agreement, the buyer will purchase all of
the issued and outstanding capital stock of Wamar Products, Inc.
-11-
<PAGE>
WAMAR PRODUCTS, INC.
CONDENSED BALANCE SHEETS
July 31,
1999
---------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 532,324
Accounts receivable, less allowance
of $59,200 in 1999 and 1998 2,180,654
Inventories 831,051
Other current assets 282,665
---------------
Total current assets 3,826,694
PROPERTY AND EQUIPMENT, at cost 10,448,299
Less accumulated depreciation (7,757,755)
---------------
2,690,544
OTHER NONCURRENT ASSETS 101,288
---------------
$ 6,618,526
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ -
Current portion of long-term debt 250,178
Accounts payable 889,429
Other current liabilities 504,607
---------------
Total current liabilities 1,644,214
LONG-TERM DEBT 1,236,375
STOCKHOLDERS' EQUITY
Common stock 25,944
Retained earnings 3,711,993
---------------
3,737,937
---------------
$ 6,618,526
===============
<PAGE>
<TABLE>
WAMAR PRODUCTS, INC.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 3,867,067 $ 4,074,854 $ 12,772,517 $ 13,021,554
Cost of sales 3,547,287 3,760,049 11,062,829 11,496,133
------------- ------------- ------------- -------------
Gross profit 319,780 314,805 1,709,688 1,525,421
Selling, general and
administrative expense 380,546 257,737 935,634 853,336
------------- ------------- ------------- -------------
Operating income (60,766) 57,068 774,054 672,085
Other (income) expense
Interest expense 26,307 49,077 102,011 154,154
Interest income (7,443) (2,330) (13,147) (5,480)
Other, net (12,573) (47,230) (197,446) (114,419)
------------- ------------- ------------- -------------
6,291 (483) (108,582) 34,255
------------- ------------- ------------- -------------
Income (loss) before
income taxes (67,057) 57,551 882,636 637,830
Income taxes (1) - - - -
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (67,057) $ 57,551 $ 882,636 $ 637,830
============= ============= ============= =============
(1)Wamar Products, Inc. was historically taxed as an S Corporation under the Internal Revenue
Code. Under an S Corporation election, the income of the Company flows through to the the
stockholders to be taxed at the individual level rather than the corporate level. Accordingly,
the Company did not recorded income tax expenses or liabilities.
</TABLE>
<PAGE>
<TABLE>
WAMAR PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended
July 31, August 1,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 1,513,685 $ 1,155,575
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (88,973) (907,985)
Proceeds from sale of property and equipment - 90,862
Other - (10,602)
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES (88,973) (827,725)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings (1,218,780) 468,780
Borrowings from long-term debt 698,509 -
Payments on long-term debt (219,365) (203,821)
Payment of shareholder loan - (335,080)
Payment of dividends (515,800) (345,834)
------------ ------------
NET CASH USED FOR FINANCING ACTIVITIES (1,255,436) (415,955)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 169,276 (88,105)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 363,048 110,357
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 532,324 $ 22,252
============ ============
</TABLE>
<PAGE>
WAMAR TOOL & MACHINE CO.
CONDENSED BALANCE SHEETS
June 30,
1999
--------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 52,319
Accounts receivable 144,294
Inventories 47,157
Other current assets 11,809
--------------
Total current assets 255,579
PROPERTY AND EQUIPMENT, at cost 1,157,210
Less accumulated depreciation (686,248)
--------------
470,962
--------------
$ 726,541
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 68,744
Accounts payable 49,096
Other current liabilities 79,571
--------------
Total current liabilities 197,411
DEFERRED INCOME TAXES 6,200
LONG-TERM DEBT 138,983
STOCKHOLDERS' EQUITY
Common stock 10,000
Retained earnings 373,947
--------------
383,947
--------------
$ 726,541
==============
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
--------
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
--------
DECEMBER 31, 1998
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
--------
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
---------
DECEMBER 31, 1998
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
- CONTENTS -
PAGE NUMBER
-----------
Independent Auditors' Report 1
Financial Statements:
Balance Sheet 2
Statement of Income and Retained Earnings 3
Statement of Cash Flows 4 & 5
Notes to Financial Statements 6 - 11
<PAGE>
Independent Auditors' Report
To the Board of Directors
Wamar Tool and Machine Company
Caledonia, Michigan
We have audited the accompanying balance sheet of WAMAR TOOL AND MACHINE COMPANY
(a Michigan corporation) as of December 31, 1998 and 1997, and the related
statements of income and retained earnings 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those statements require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from 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 above present fairly, in
all material respects, the financial position of WAMAR TOOL AND MACHINE COMPANY
as of December 31, 1998 and December 31, 1997 and the results of its operations
and cash flows for the years ended December 31, 1998 and 1997, in conformity
with generally accepted accounting principles.
PERRIN, FORDREE & COMPANY, P.C.
Troy, Michigan
July 16, 1999
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
BALANCE SHEET
ASSETS
------
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 92,190 $ 61,445
Accounts receivable:
Trade 141,280 97,031
Related party 7,025 28,500
Inventories 42,953 117,687
Prepaid federal income taxes - 5,417
Deferred taxes 8,300 9,700
------------- -------------
Total current assets 291,748 319,780
PROPERTY AND EQUIPMENT:
Computer equipment 205,200 164,153
Leasehold improvements 55,816 55,815
Machinery and equipment 791,766 568,732
Furniture and fixtures 3,148 3,148
------------- -------------
1,055,930 791,848
Less accumulated depreciation and amortization 661,060 561,234
------------- -------------
394,870 230,614
------------- -------------
$ 686,618 $ 550,394
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 29,327 $ -
Accounts payable:
Trade 16,710 49,464
Related party 12,316 13,733
Accrued expenses:
Payroll and payroll taxes 8,241 9,539
Employee benefits 32,501 27,761
Income taxes 45,478 -
Other 8,809 5,194
Customer deposits - 113,411
------------- -------------
Total current liabilities 153,382 219,102
LONG-TERM DEBT 125,451 -
DEFERRED TAXES 6,200 8,700
STOCKHOLDERS' EQUITY :
Common stock, - $1.00 par value,
Authorized - 50,000 shares
Issued and outstanding, 10,000 10,000 10,000
Retained earnings 391,585 312,592
------------- -------------
401,585 322,592
------------- -------------
$ 686,618 $ 550,394
============= =============
</TABLE>
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
SALES $ 1,586,595 $ 1,372,521
COST OF SALES 1,279,936 1,174,417
------------- -------------
GROSS PROFIT 306,659 198,104
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 177,045 130,661
------------- -------------
INCOME FROM OPERATIONS 129,614 67,443
OTHER INCOME (EXPENSE):
Interest income 1,877 -
Interest expense (7,121) -
------------- -------------
(5,244) -
------------- -------------
INCOME BEFORE INCOME TAXES 124,370 67,443
INCOME TAXES 45,377 18,170
------------- -------------
NET INCOME 78,993 49,273
RETAINED EARNINGS:
Beginning of year 312,592 263,319
------------- -------------
End of year $ 391,585 $ 312,592
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 1,563,819 $ 1,424,128
Cash paid to suppliers and employees (1,418,053) (1,292,256)
Interest paid (6,595) (257)
Income taxes paid - net (999) (18,176)
Interest income 1,877 -
------------- -------------
Net cash from operating activities 140,049 113,439
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of property and equipment (264,082) (61,143)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 154,778 -
Repayment of long-term debt - (13,200)
------------- -------------
Net cash from (to) financing activities 154,778 (13,200)
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 30,745 39,096
CASH AND CASH EQUIVALENTS:
Balance - beginning of year 61,445 22,349
------------- -------------
Balance - end of year $ 92,190 $ 61,445
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
STATEMENT OF CASH FLOWS - CONTINUED
RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
NET INCOME $ 78,993 $ 49,273
Adjustments to reconcile net income to net
cash from operating activities -
Depreciation 99,826 77,623
Changes in assets and liabilities
which increase (decrease) cash flow:
Accounts receivable-trade 21,474 148,638
Accounts receivable - related party (44,249) (97,031)
Inventories 74,734 (53,857)
Accrued/prepaid taxes 50,895 (1,106)
Deferred tax assets 1,400 (5,500)
Accounts payable trade (32,754) (23,076)
Accounts payable - related party (1,417) 13,733
Accrued expenses 7,058 (19,466)
Customer deposits (113,411) 17,608
Deferred tax liabilities (2,500) 6,600
------------- -------------
61,056 64,166
------------- -------------
NET CASH FROM OPERATING ACTIVITIES $ 140,049 $ 113,439
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
This summary of significant accounting policies of Wamar Tool and
Machine Company (the Company), is presented to assist in
understanding the Company's financial statements. The financial
statements and notes are representations of the Company's
management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied
in the preparation of the financial statements.
BUSINESS ACTIVITY
-----------------
The Company's principal business activities are industrial
design, engineering, prototyping, and mold making of plastic
injection molding tooling. The Company's business activity is
primarily with customers located in southwestern Michigan.
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statement of cash flows, cash equivalents
include cash in banks and all highly liquid debt instruments with
original maturities of three months or less.
ACCOUNTS RECEIVABLE
-------------------
The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts is
required.
INVENTORIES
-----------
Inventories are stated at the lower of cost or market, determined
using the first-in, first-out (FIFO) method. Accordingly, at
December 31, 1998 and 1997, work-in-process inventory has been
written down to its estimated net realizable value, and results
of operations for 1998 and 1997 include a corresponding charge of
$45,000 and $27,300, respectively.
Inventories consisted of the following as of December 31:
1998 1997
------------- -------------
Raw materials $ 13,523 $ 11,631
Work-in-process 29,430 106,056
------------- -------------
Total inventories $ 42,953 $ 117,687
============= ==============
-6-
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
PROPERTY AND EQUIPMENT
----------------------
Property and equipment are stated at cost and include
expenditures that materially extend the useful lives of these
assets. Expenditures for normal repairs and maintenance are
charged to operations as incurred.
DEPRECIATION AND AMORTIZATION
-----------------------------
For financial statement purposes, depreciation is computed using
the straight-line and accelerated methods based on the estimated
useful lives of the fixed assets as follows:
Computer equipment 5 years
Leasehold improvements 39 years
Machinery and equipment 3 - 7 years
Furniture and fixtures 5 - 7 years
For income tax purposes, depreciation is computed using the
modified accelerated cost recovery method (MACRS) as prescribed
by the Internal Revenue Service. Deferred taxes have been
provided for the timing difference.
INCOME TAXES
------------
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due adjusted by deferred taxes. Deferred taxes are
recognized for differences between the basis of assets and
liabilities for financial statements and income tax purposes.
The deferred tax asset and liability represent the future tax
return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are
recovered or settled.
The primary components of the Company's deferred tax assets and
liabilities are employee benefits (assets) and tax over book
depreciation (liabilities).
REVENUE RECOGNITION
-------------------
Revenue is recognized in the period in which products are shipped
to the customer.
-7-
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
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 disclosure 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 may differ from those estimates.
NOTE 2 - RELATED PARTY TRANSACTIONS:
The following related party transactions occurred in the years
ending December 31, 1998 and 1997:
A substantial portion of the sales for the Company are to a
related party, the loss of which would have a materially adverse
effect on the Company. Related party sales for the years ended
December 31, 1998 and 1997 were approximately $1.41 million and
$1.35 million, respectively, representing 89% and 99% of the
total sales for those years.
The Company leases its facility from a related party on a monthly
basis. Rental expense for the years ended December 31, 1998 and
1997 was $25,560 for each period.
The Company also receives management support services from a
related party, which amounted to $22,006 and $8,169 for the years
ended December 31, 1998 and 1997, respectively.
NOTE 3 - LINE-OF-CREDIT:
The Company has a line-of-credit agreement with a bank which
provides for maximum borrowings of $200,000 as of December 31,
1998. At December 31, 1998 and 1997, there were no outstanding
borrowings under this agreement.
-8-
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 4 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
<S> <C>
Long-term debt at December 31, 1998 consists of the following:
Note payable - bank, due in monthly
installments of $3,358, including interest
at the bank's prime rate of 7.75%, maturing
August 14, 2003, when any unpaid balance
is due, secured by machinery and equipment. $ 154,778
Less current portion 29,327
-------------
Long-term debt $ 125,451
=============
Maturities of long-term debt are summarized as follows:
Year ending December 31:
1999 $ 29,327
2000 31,682
2001 34,226
2002 36,975
2003 22,568
Thereafter -
-------------
$ 154,778
=============
</TABLE>
NOTE 5 - INCOME TAXES:
The income tax provision consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Income taxes currently payable $ 46,477 $ 17,070
Deferred income taxes (1,100) 1,100
------------- -------------
Income taxes $ 45,377 $ 18,170
============= =============
</TABLE>
-9-
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 5 - INCOME TAXES - CONTINUED:
The components of deferred income taxes consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1998 1997
------------- -------------
<S> <C> <C>
Current deferred taxes - gross assets $ 8,300 $ 9,700
Noncurrent deferred taxes - gross liabilities (6,200) (8,700)
------------- -------------
Net noncurrent deferred tax liabilities $ 2,100 $ 1,000
============= =============
The tax effects of cumulative temporary differences as of
December 31,1998, and December 31, 1997 consisted of the
following:
DECEMBER 31,
------------------------------
1998 1997
------------- -------------
Depreciation $ (6,200) $ (8,700)
Vacation pay accrual 6,100 7,100
Self-insurance reserve 2,200 2,600
------------- -------------
$ 2,100 $ 1,000
============= =============
</TABLE>
NOTE 6 - PROFIT SHARING PLAN:
The Company has a salary reduction/profit sharing plan under the
provisions of Section 401(k) of the Internal Revenue Code. The
Plan covers all full-time employees who have completed one full
year of service with the Company. Each employee may contribute up
to a maximum of 15% of their annual salary to the Plan. The
Company contributes discretionary amounts to the Plan each year.
Company contributions to the Plan for the years ended December
31, 1998 and 1997 were $14,995 and $6,315 respectively.
The Company has a profit-sharing bonus that covers all full-time
employees who have completed six months of service with the
Company. Bonus payments are contingent upon the attainment of
earnings as defined in the agreement. During 1998 and 1997, bonus
payments charged to operations were $12,701 and $4,050,
respectively.
-10-
<PAGE>
WAMAR TOOL AND MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998
NOTE 7 - SUBSEQUENT EVENTS:
In June 1999, Company stockholders entered into a stock purchase
agreement. Under this agreement, the buyer will purchase all of
the issued and outstanding capital stock of Wamar Tool and
Machine Company.
Effective May 25,1999, a new agreement with the bank increased
maximum borrowing on the line-of-credit (Note 3) to $300,000.
-11-
<PAGE>
<TABLE>
WAMAR TOOL & MACHINE CO.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 474,678 $ 409,960 $ 686,284 $ 833,980
Cost of sales 456,505 285,279 634,644 651,100
------------- ------------- ------------- -------------
Gross profit 18,173 124,681 51,640 182,880
Selling, general and
administrative expense 33,556 42,732 83,362 93,683
------------- ------------- ------------- -------------
Operating income (loss) (15,383) 81,949 (31,722) 89,197
Other (income) expense
Interest expense 1,598 406 5,018 406
Interest income (139) - (984) -
Other, net (18,118) - (18,118) -
------------- ------------- ------------- -------------
(16,659) 406 (14,084) 406
------------- ------------- ------------- -------------
Income (loss) before
income taxes 1,276 81,543 (17,638) 88,791
Income taxes - 17,358 - 18,439
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ 1,276 $ 64,185 $ (17,638) $ 70,352
============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
WAMAR TOOL & MACHINE CO.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 20,164 $ 73,373
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (213,689) (135,247)
Proceeds from sale of property and equipment 100,705 -
----------- -----------
NET CASH USED FOR INVESTING ACTIVITIES (112,984) (135,247)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings - 63,667
Borrowings from long-term debt 174,794 -
Payments on long-term debt (121,845) -
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 52,949 63,667
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (39,871) 1,793
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 92,190 61,445
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 52,319 $ 63,238
=========== ===========
</TABLE>
<PAGE>
(b) Pro forma financial information.
The following unaudited pro forma combined income statements data for
the six months ended June 30, 1999 and for the year ended December 31, 1998
illustrates the effect of the acquisition of Wamar Products and the acquisition
of Wamar Tool as if the transactions had been completed on January 1, 1998. The
following unaudited pro forma combined balance sheet as of June 30, 1999
illustrates the effect of the acquisition of Wamar Products and the acquisition
of Wamar Tool as if the transactions had been completed on that date. The
acquisition of Wamar Products is reflected using the purchase method of
accounting for business combinations. The acquisition of Wamar Tool has been
accounted for under the pooling of interests method of accounting. Accordingly,
the historical financial statements of the Company have been restated as if the
Wamar Tool acquisition occurred at the beginning of the earliest period
presented. The unaudited pro forma combined financial data is provided for
comparative purposes only and does not purport to represent the results of
operations of the Company that actually would have been obtained if the
acquisitions of Wamar Products and Wamar Tool had been consummated on the date
specified, nor is it necessarily indicative of the results of operations that
may be achieved in the future. Adjustments to pro forma combined operating
results include changes cash and cash equivalents resulting from private sales
of preferred stock to fund the acquisitions, cash paid in the acquisitions, and
payment of Wamar Products bank debt; changes in current assets and current
liabilities to estimated fair values and to record a holdback liability payable
to an escrow fund; changes in property and equipment to estimated fair values;
recordation of goodwill associated with the Wamar Products acquisition;
elimination of Wamar Products historical stockholders' equity; issuance of
common stock as partial consideration in the acquisition; changes in
depreciation to reflect the basis step up in property and equipment; changes in
amortization expenses resulting from the goodwill associated with the Wamar
Products acquisition; the amortization of a portion and changes in interest
expense associated with financing the acquisition; and changes in the number of
outstanding shares resulting from the convertible preferred stock issued to
finance the transaction. The unaudited pro forma combined financial data set
forth below is based upon certain assumptions and adjustments described in the
notes thereto and should be read in conjunction therewith.
<PAGE>
<TABLE>
CLARION TECHNOLOGIES, INC.
CONDENSED COMBINED PRO FORMA BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<CAPTION>
(1) (2) (3)
Clarion Wamar Wamar (4)
Restated Tool Products Pro Forma
Historical Historical Historical Adjustments Pro Forma
----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 1,765,565 $ 52,319 $ 311,501 $11,901,260 B $ 9,152,507
(6,859,227) C
(1,518,911) D
3,500,000 E
Accounts receivable 2,709,739 144,294 2,541,380 (25,000) F 5,370,413
Inventories 1,651,478 47,157 885,546 (75,000) F 2,509,181
Other current assets 379,128 11,809 374,188 - 765,125
------------ ---------- ----------- ------------ ------------
Total current assets 6,505,910 255,579 4,112,615 6,923,122 17,797,226
PROPERTY AND EQUIPMENT, NET 19,794,563 470,962 2,771,994 1,538,301 G 24,575,820
COSTS IN EXCESS OF
NET ASSETS ACQUIRED 1,045,433 - - 3,067,316 H 4,112,749
OTHER NONCURRENT ASSETS 140,503 - 101,287 - 241,790
------------ ---------- ----------- ------------ ------------
$27,486,409 $ 726,541 $6,985,896 $11,528,739 $46,727,585
============ ========== =========== ============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 1,733,198 $ - $ - $ 3,500,000 E $ 5,233,198
Current portion of
long-term debt and
capital leases 396,563 68,744 250,178 (250,178) D 465,307
Accounts payable 4,948,116 49,096 1,187,624 - 6,184,836
Construction costs 925,959 - - - 925,959
Other current liabilities 243,824 79,571 525,751 400,000 F 1,249,146
------------ ---------- ----------- ------------ ------------
Total current liabilities 8,247,660 197,411 1,963,553 3,649,822 14,058,446
DEFERRED TAXES 1,300 6,200 - - 7,500
LONG-TERM DEBT AND CAPITAL
LEASE OBLIGATIONS 9,226,353 138,983 1,268,733 (1,268,733) D 9,365,336
STOCKHOLDERS' EQUITY:
Preferred stock options - - - 11,901,260 B 11,901,260
Common stock 17,287 10,000 25,944 (9,800) A 17,687
- - 200 I
(25,944) N
Additional paid in capital 19,746,588 - - 9,800 A 20,756,188
999,800 I
Retained earnings (deficit) (9,752,779) 373,947 3,727,666 (3,727,666) N (9,378,832)
------------ ---------- ----------- ------------ ------------
10,011,096 383,947 3,753,610 9,147,650 23,296,303
------------ ---------- ----------- ------------ ------------
$27,486,409 $ 726,541 $6,985,896 $11,528,739 $46,727,585
============ ========== =========== ============ ============
</TABLE>
<PAGE>
<TABLE>
CLARION TECHNOLOGIES, INC.
CONDENSED COMBINED PRO FORMA INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<CAPTION>
(1) (2) (3)
Clarion Wamar Wamar (4)
Restated Tool Products Pro Forma
Historical Historical Historical Adjustments Pro Forma
----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 6,462,602 $686,284 $8,618,732 $(600,886) O $15,166,732
Cost of sales 6,758,307 634,644 7,445,417 76,915 J 14,359,611
(555,672) O
------------ --------- ----------- ---------- ------------
Gross profit (loss) (295,705) 51,640 1,173,315 (122,129) 807,121
Selling, general and
administrative expense 3,133,399 88,379 640,108 102,244 K 3,964,130
------------ --------- ----------- ---------- ------------
Operating income (loss) (3,429,104) (39,739) 533,207 (224,373) (3,157,009)
Interest and other
expense (income) 499,836 (19,102) (95,554) 79,244 L 464,424
------------ --------- ----------- ---------- ------------
Income (loss) before
income taxes (3,928,940) (17,637) 628,761 (303,617) (3,621,433)
Income taxes (31,887) - - - (31,887)
------------ --------- ----------- ---------- ------------
NET INCOME (LOSS) $(3,897,053) $(17,637) $ 628,761 $(303,617) $(3,589,546)
============ ========= =========== ========== ============
Loss per share $(.24) $(.18)
====== ======
Weighted average shares
outstanding 16,518,855 200,000 A 19,898,855
=========== 2,980,000 M ===========
200,000 I
</TABLE>
<PAGE>
<TABLE>
CLARION TECHNOLOGIES, INC.
CONDENSED COMBINED PRO FORMA INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<CAPTION>
(1) (2) (3)
Clarion Wamar Wamar (4)
Restated Tool Products Pro Forma
Historical Historical Historical Adjustments Pro Forma
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales $ 8,379,038 $1,586,595 $19,713,565 $(1,419,228) O $28,259,970
Cost of sales 7,943,700 1,279,936 17,171,653 153,830 J 25,203,628
(1,345,491) O
------------ ----------- ------------ ------------ ------------
Gross profit (loss) 435,338 306,659 2,541,912 (227,567) 3,056,342
Selling, general and
administrative expense 4,940,307 177,045 1,242,634 204,488 K 6,564,474
------------ ----------- ------------ ------------ ------------
Operating income (loss) (4,504,969) 129,614 1,299,278 (432,055) (3,508,132)
Interest and other
expense (income) 252,785 5,244 116,075 158,488 L 532,592
------------ ----------- ------------ ------------ ------------
Income (loss) before
income taxes (4,757,754) 124,370 1,183,203 (590,543) (4,040,724)
Income taxes (100,622) 45,377 - - (55,245)
------------ ----------- ------------ ------------ ------------
NET INCOME (LOSS) $(4,657,132) $ 78,993 $ 1,183,203 $ (590,543) $(3,985,479)
============ =========== ============ ============ ============
Loss per share $(.55) $(.34)
====== ======
Weighted average shares
outstanding 8,462,711 200,000 A 11,842,711
========== 2,980,000 M ===========
200,000 I
</TABLE>
<PAGE>
CLARION TECHNOLOGIES, INC.
NOTES TO CONDENSED COMBINED PRO FORMA
FINANCIAL STATEMENTS
(1) The historical financial statements of Clarion Technologies, Inc. have been
restated to include a 1999 business combination transaction that has been
accounted for under the pooling of interests method of accounting. The
Company completed the acquisition of Mito Plastics, Inc. ("Mito") during
the second quarter of 1999 which resulted in Mito becoming a wholly-owned
subsidiary of Clarion. Accordingly, the historical financial statements of
the Company have been restated as if the acquisition occurred at the
beginning of the earliest period presented. Selected financial information
for the combining entities in the historical restated statements of income
for the six months ended June 30, 1999 and the year ended December 31, 1998
is as follows:
Six Months
Ended Year Ended
6/30/99 12/31/98
----------- ------------
Net sales:
Clarion $ 3,106,975 $ 3,400,786
Mito 3,355,627 4,978,252
------------ ------------
$ 6,462,602 $ 8,379,038
============ ============
Net income (loss):
Clarion $(3,833,269) $(4,396,612)
Mito (63,784) (260,520)
------------ ------------
$(3,897,053) $(4,657,132)
============ ============
(2) The historical balance sheet for Wamar Tool & Machine Co. is as of June 30,
1999. The historical income statements are for the year ended December 31,
1998 and the six months ended June 30, 1999.
(3) The historical balance sheet for Wamar Products, Inc. is as of June 26,
1999. The historical income statements are for the fiscal year ended
October 31, 1998 and the six months ended June 26, 1999. Income statements
for the months of November and December 1998 have been excluded from the
condensed combined pro forma income statements presented herein. Net sales
and net income for the two month period excluded was $2,817,971 and
$277,975, respectively.
(4) Amounts in this column represent pro forma adjustments required to account
for the Wamar Tool acquisition as a pooling of interests and the Wamar
Products acquisition as a purchase.
Wamar Tool & Machine Co.
------------------------
A Issue 200,000 shares of Clarion common stock to seller and record net
effect of pooling entry
Wamar Products, Inc.
---------------
B Record net cash proceeds received from private sales of preferred
stock options to fund acquisition
C Cash paid to sellers
D Payment of bank debt
E Record bank financing related to the acquisition
F Adjust current assets and current liabilities to estimated fair
values, and record holdback liability payable to escrow fund
G Adjust property and equipment to estimated fair values
H Record the excess of the acquisition cost over the fair value of net
assets acquired
I Issue 200,000 shares of Clarion common stock to sellers
J Record depreciation expense for the basis step up in property and
equipment
K Record amortization expense for the costs in excess of net assets
acquired
L Record interest expense associated with financing the acquisition
M Common stock equivalents; preferred stock options issued to finance
acquisition
Consolidating
-------------
N Eliminate historical stockholders' equity
O Eliminate sales from Wamar Tool to Wamar Products
<PAGE>
SIGNATURE
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.
Clarion Technologies, Inc.,
a Delaware corporation
(Registrant)
Date: November 15, 1999 By: /s/ Robert W. Martin
-------------------------------------------
Robert W. Martin, Chief Financial Officer
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 532,324
<SECURITIES> 0
<RECEIVABLES> 2,180,654
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<INVENTORY> 831,051
<CURRENT-ASSETS> 3,826,694
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<DEPRECIATION> 7,757,755
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<CURRENT-LIABILITIES> 1,644,214
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0
0
<COMMON> 25,944
<OTHER-SE> 3,711,993
<TOTAL-LIABILITY-AND-EQUITY> 6,618,526
<SALES> 12,772,517
<TOTAL-REVENUES> 12,772,517
<CGS> 11,062,829
<TOTAL-COSTS> 11,998,463
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<INCOME-PRETAX> 882,636
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