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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 14, 1996 (May 31, 1996)
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BUILDERS WAREHOUSE ASSOCIATION, INC.
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(Exact name of Registrant as specified in charter)
Colorado 0-2108-2 84-1090968
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(State or other juris- (Commission (IRS Employer)
diction of incorporation) File Number) Identification No.)
2800 28th Street, Suite 100, Santa Monica, CA 90405
- - --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 453-4371
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following financial statements are filed herewith:
Balance Sheets as of December 31, 1995 and May 31, 1996.
Statements of Operations and Accumulated Deficit for the Year Ended
December 31, 1995 and the Five Months Ended May 31, 1996.
Statements of Cash Flows for the Year Ended December 31, 1995
and the Five Months Ended May 31, 1996.
Notes to Financial Statements.
(b) Pro Forma Information
The pro forma financial information is incorporated by reference to
Form 10-KSB for the year ended May 31, 1996.
(c) Exhibits - Previously filed under Form 8-K, June 14, 1996.
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SCITEQ ELECTRONICS, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND MAY 31, 1996
TABLE OF CONTENTS
Pages
Independent Accountants' Report 4
Balance Sheets as of December 31, 1995 and May 31, 1996 5-6
Statements of Operations and Accumulated Deficit Year Ended
December 31, 1995 and Five Months Ended May 31, 1996 7
Statements of Cash Flows Year Ended December 31, 1995 and
Five Months Ended May 31, 1996 8
Notes to Financial Statements 9-14
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Independent Accountants' Report
The Stockholder
Sciteq Electronics, Inc.
We audited the accompanying balance sheets of Sciteq Electronics, Inc.
(Sciteq) as of December 31, 1995 and May 31, 1996 and the related statements of
operations and accumulated deficit and cash flows for the year ended December
31, 1995 and the five months ended May 31, 1996. These financial statements are
the responsibility of Sciteq'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 also 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 our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, Sciteq's financial position as of December 31,
1995 and May 31, 1996 and the results of its operations and cash flows for the
year ended December 31, 1995 and five months ended May 31, 1996 in conformity
with generally accepted accounting principles.
Weinbaum & Yalamanchi
/s/ Weinbaum & Yalamanchi
Canoga Park, California
August 13, 1996
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Sciteq Electronics, Inc.
Balance Sheets
December 31, 1995 and May 31, 1996
ASSETS
<TABLE>
<CAPTION>
December May
---------- ----------
<S> <C> <C>
Current Assets
Cash $ 220,000 $ 398,000
Accounts receivable (less $190,000 and $22,000
allowances for doubtful accounts) 732,000 412,000
Note receivable - net (Note 11) 105,000
Inventories (Note 3) 399,000 555,000
Other current assets 23,000 59,000
---------- ----------
Total current assets 1,374,000 1,529,000
---------- ----------
Property and Equipment
Furniture and fixtures 72,000 72,000
Office equipment and computers 973,000 988,000
---------- ----------
1,045,000 1,060,000
Accumulated depreciation 904,000 931,000
---------- ----------
141,000 129,000
---------- ----------
$1,515,000 $1,658,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Sciteq Electronics, Inc.
Balance Sheets
December 31, 1995 and May 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December May
----------- -----------
<S> <C> <C>
Current Liabilities
Accounts payable $ 461,000 $ 294,000
Accrued expenses (Notes 4, 13 and 14) 548,000 507,000
----------- -----------
Total current liabilities 1,009,000 801,000
----------- -----------
Commitments and contingencies (Notes 7, 13 and 14)
Stockholders' Equity (Note 10)
Common stock, no par value
1,000,000 shares authorized
504,343 shares outstanding 362,000 362,000
Convertible preferred stock at liquidation preference
1,000,000 shares authorized
132,241 shares outstanding 1,388,000 1,388,000
----------- ------------
Accumulated deficit (1,244,000) (893,000)
----------- -----------
Total stockholders' equity 506,000 857,000
$ 1,515,000 $ 1,658,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Sciteq Electronics, Inc.
Statements of Operations and Accumulated Deficit
Year Ended December 31, 1995 and Five Months Ended May 31, 1996
<TABLE>
<CAPTION>
December May
----------- -----------
<S> <C> <C>
Net sales (Note 6) $ 3,797,000 $ 1,770,000
----------- -----------
Cost of sales 2,177,000 790,000
Inventory writedowns 115,000 18,000
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2,292,000 808,000
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Gross margin 1,505,000 962,000
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Selling, general and administrative expenses
(Notes 11 and 14) 1,345,000 449,000
Research and development 455,000 162,000
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1,800,000 611,000
----------- -----------
Operating income (loss) (295,000) 351,000
Royalty income (Note 12) 143,000
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Net (loss) income (152,000) 351,000
Accumulated deficit-beginning of period 1,092,000 1,244,000
----------- -----------
Accumulated deficit-end of period $ 1,244,000 $ 893,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Sciteq Electronics, Inc.
Statements of Cash Flows
Year Ended December 31, 1995 and Five Months Ended May 31, 1996
<TABLE>
<CAPTION>
December May
--------- ---------
<S> <C> <C>
Operating cash flows:
Net (loss) income $(152,000) $ 351,000
Adjustments to reconcile net (loss) income to
cash provided by operations
Depreciation and amortization 80,000 27,000
Changes in operating assets
Accounts receivable (68,000) 215,000
Inventories 232,000 (156,000)
Other current assets 18,000 (36,000)
Accounts payable (144,000) (167,000)
Accrued expenses 238,000 (41,000)
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Cash provided by operations (Note 11) 204,000 193,000
--------- ---------
Investing cash flows:
Property acquisitions 11,000 15,000
--------- ---------
Cash used by investing activities (Note 11) 11,000 15,000
--------- ---------
Financing cash flows:
Reduction in capitalized lease obligations 48,000
---------
Cash used by financing activities 48,000
---------
Increase in cash (Note 5) 145,000 178,000
Cash - beginning of period 75,000 220,000
--------- ---------
Cash - end of period $ 220,000 $ 398,000
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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Sciteq Electronics, Inc.
Notes To Financial Statements
December 31, 1995 and May 31, 1996
Note 1. Accounting Policies and Operations
Basis of Presentation - The financial statements include the assets and
liabilities of Sciteq Electronics, Inc. (Sciteq) a California Corporation.
Business Description - Sciteq manufactures frequency synthesizers for the
electronics industry.
Inventories - Inventories are valued at the lower of cost, first - in, first-
out method, or market.
Property and Equipment - Property and equipment are stated at cost. Depreciation
is recorded by the straight-line method over the related assets estimated useful
lives.
Advertising - Sciteq expenses advertising as incurred.
Accounts Receivable - Sciteq provides an allowance for doubtful accounts to
reduce receivables to net realizable value. Sciteq does not require collateral
from its customers. Sciteq's three largest May 31, 1996 receivables were
$60,000; $58,000 and $50,000.
Revenue Recognition - Revenue is recognized when products are shipped except for
long-term contracts which are recorded by the percentage of completion method.
Losses on long-term contracts are recorded as they become known.
Accounting 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 revenue and expenses during
the reported periods. Actual results could differ from those estimates.
Fair Value of Financial Instruments - Accounts receivable, cash, accounts
payable and accrued expenses carrying value approximates fair value because of
the short-term maturity of those instruments. The note receivable (Note 11) has
been reduced to estimated fair value.
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Sciteq Electronics, Inc.
Notes To Financial Statements (continued)
December 31, 1995 and May 31, 1996
Note 2. Sale of Sciteq
On May 31, 1996 Sciteq's stockholders sold 100% of Sciteq's stock to Builders'
Warehouse Association, Inc. (BWI). BWI agreed to pay Sciteq's former
stockholders additional consideration based on Sciteq's income for the year
ending December 31, 1996. On June 5, 1996 BWI contributed $200,000 to Sciteq's
capital.
Note 3. Inventories
Inventories were:
<TABLE>
<CAPTION>
December May
-------- --------
<S> <C> <C>
Raw materials $307,000 $413,000
Work in process 153,000 198,000
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460,000 611,000
Obsolescence reserve 61,000 56,000
-------- --------
$399,000 $555,000
======== ========
Note 4. Accrued Expenses
Accrued expenses include:
Vacations $ 26,000 $ 26,000
Compensation 232,000 287,000
Sales commissions 175,000 79,000
Warranty 20,000 20,000
Other 95,000 95,000
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$548,000 $507,000
======== ========
</TABLE>
Note 5. Supplemental Cash Flow Disclosures
Interest income and expense were not material for the periods. Taxes paid were
not material.
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Sciteq Electronics, Inc.
Notes To Financial Statements (continued)
December 31, 1995 and May 31, 1996
Note 6. Sales and Expense Information
Sales and expenses included these amounts by period:
<TABLE>
<CAPTION>
December May
-------- ---
<S> <C> <C>
FEL (Note 11) $386,000
Export sales 566,000 $365,000
Sales to customer A 338,000 326,000
Repair and maintenance expense 3,000 7,000
Advertising expense 35,000 1,000
</TABLE>
Note 7. Operating Leases
Rent expense was $106,000 and $42,000 for the periods. Sciteq's operating lease
commitments at May 31, 1996 were as follows, by years: $92,000 through May 31,
1997 and $24,000 through May 31, 1998. Sciteq's building lease has two renewal
options totaling 84 months.
Note 8. Retirement Plan
Sciteq has a 401K plan for certain employees which permits Sciteq to contribute
to the plan. Sciteq contributed $28,000 and $11,000 for the periods.
Note 9. Income Taxes
At May 31, 1996 the estimated differences between the book and tax bases of
Sciteq's assets and liabilities were:
<TABLE>
<S> <C>
Allowance for doubtful accounts and notes $ 182,000
Obsolescence reserve 56,000
Various accruals 96,000
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$ 334,000
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</TABLE>
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Sciteq Electronics, Inc.
Notes To Financial Statements (continued)
December 31, 1995 and May 31, 1996
At May 31, 1996 Sciteq had $406,000 of NOL carryforwards available to reduce
Sciteq's taxable income usable at the rate of $215,000 per year until 2010.
Future tax benefits attributable to the differences between the book and tax
basis of Sciteq's assets and liabilities and the NOL's realization are not
assured and therefore have not been recognized in these financial statements.
There was no tax benefit recorded in 1995 as there is no assurance of its
realization. No tax provision was recorded in 1996 as it was eliminated through
the use of NOL carryforwards.
Note 10. Stockholders' Equity
Convertible Preferred Stock - Each share of preferred stock was voting and
convertible at the holder's option, into one share of common stock. Upon
Sciteq's liquidation, holders of preferred stock were entitled to a distribution
equal to the original issuance price of their preferred shares in preference to
any distributions to common shareholders; all excess distributions were to be
made to the common shareholders.
Preferred Stock Warrants - At May 31, 1996 warrants to purchase 2,000 shares of
Sciteq's preferred stock at $16 per share were outstanding. The warrants expire
in May 1997.
Stock Option Plan - Sciteq's 1990 stock option plan provides for the issuance of
incentive options to certain key employees and non-qualified options to
consultants and others performing services for Sciteq, to purchase common stock.
All outstanding common stock options were exercisable at $2 per share. The
following summarizes transactions in this plan for the periods:
<TABLE>
<CAPTION>
December May
-------- --------
<S> <C> <C>
Outstanding - beginning of period $155,251 $131,250
Granted 18,000 20,000
Canceled 42,001
-------- --------
Outstanding - end of period $131,250 $151,250
======== ========
</TABLE>
On May 31, 1996 27,241 shares of convertible preferred stock and 398,093 shares
of common stock were converted into 169,306 shares of BWI and 105,000 shares of
convertible preferred stock and 106,250 shares of common stock were sold to BWI
for $600,000.
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Sciteq Electronics, Inc.
Notes To Financial Statements (continued)
December 31, 1995 and May 31, 1996
The 169,306 shares of BWI stock issued to Sciteq's former shareholders are
"puttable" to BWI at $11.77 per share on May 31, 1997, for an aggregate purchase
price of $1,994,000. The 151,250 options were converted to options to purchase
60,250 shares of BWI common stock at $5.02 per share.
Note 11. Note Receivable
On March 30, 1996 Frequency Engineering Laboratories (FEL) gave Sciteq a
$296,728 note receivable due in nine monthly installments of $34,675 including
12.25% interest. As of August 13, 1996, FEL had made three monthly installments.
Converting FEL's accounts receivable into a note neither provided nor used cash.
During 1995, Sciteq recorded a $160,000 impairment allowance to reduce this
receivable to estimated net realizable value.
Note 12. Royalty Income
In 1995 Sciteq received $143,000 as a non - refundable royalty allowing
Westinghouse to use certain of its technology in mobile terminals. Should
Westinghouse continue to use the technology Sciteq will receive royalties based
on units sold.
Note 13. Employment Agreements
In May 1996, Sciteq entered into employment agreements with two executives
providing for minimum annual payments as follows, by year:
1997 $220,000
1998 220,000
1999 220,000
--------
$660,000
========
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Sciteq Electronics, Inc.
Notes To Financial Statements (continued)
December 31, 1995 and May 31, 1996
Note 14. Comsat Dispute
During 1995, Comsat RSI, Inc. (Comsat), a Sciteq customer, claimed Sciteq failed
to meet its obligations under a purchase order and caused Comsat to incur
$104,000 of related costs. Comsat and Sciteq are currently negotiating a
settlement of this dispute. Sciteq recorded a $50,000 liability for the
estimated costs of settling this matter.
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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 thereunto duly authorized.
Builders Warehouse Association, Inc.
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(Registrant)
Dated: August 14, 1996 By: /s/ Barry Witz
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Barry Witz
Chief Executive Officer
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