<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of Earliest Event Reported): JUNE 30, 2000
-------------
NEMATRON CORPORATION
--------------------
(Exact name of registrant as specified in its charter)
MICHIGAN 0-21142 38-2483796
-------- ------- ----------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
5840 INTERFACE DRIVE, ANN ARBOR, MICHIGAN 48103
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(734) 214-2000
--------------
(Registrant's telephone number)
<PAGE> 2
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
Financial statements of the business acquired as of and for the periods
ended November 30, 1999 and June 30, 2000 are attached hereto and
included herein. The balance sheet of A-OK Controls Engineering, Inc.
as of June 30, 2000 was included in the Registrant's consolidated
balance sheet contained in the Registrant's Quarterly Report on Form
10-QSB for the period ended June 30, 2000, and therefore it is excluded
from this Current Report on Form 8-K/A.
(b) Pro forma financial information
Pro forma condensed consolidated financial information for the year
ended December 31, 1999 and the six months ended June 30, 2000 are
attached hereto and included herein.
(c) Exhibits
The following exhibits are filed herewith as a part of this report:
Exhibit 2.1 Stock Purchase Agreement, dated as of June 30, 2000, by
and among Nematron Corporation, Ronald C. Causley,
individually, and Ronald C. Causley, Trustee of the Ronald C.
Causley Revocable Trust Dated as of March 14, 1990, as amended
(filed as Exhibit 2.1 to the original Form 8-K filed July 10,
2000).
Exhibit 4.1 Registration Rights Agreement dated as of June 30, 2000,
between Nematron Corporation and Ronald C. Causley, Trustee of
the Ronald C. Causley Revocable Trust Dated as of March 14,
1990, as amended (filed as Exhibit 4.1 to the original Form
8-K filed July 10, 2000).
Exhibit 23.1 Consent of Grant Thornton LLP, Independent Auditors
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 hereto duly authorized.
NEMATRON CORPORATION
--------------------
(Registrant)
October 23, 2000 /S/ DAVID P. GIENAPP
---------------- ------------------------
Secretary, Treasurer and Vice
President, Finance and
Administration
2
<PAGE> 3
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
INDEX TO A-OK CONTROLS ENGINEERING, INC.
FINANCIAL STATEMENTS AND UNAUDITED CONSOLIDATED CONDENSED
PRO FORMA INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS................................................. 4
FINANCIAL STATEMENTS OF A-OK CONTROLS ENGINEERING, INC.
Balance Sheet as of November 30, 1999.......................................................... 5
Statement of Operations for the year ended November 30, 1999 and
the seven months ended June 30, 2000 (unaudited).......................................... 6
Statement of Stockholder's Equity for the year ended November 30, 1999 and
the seven months ended June 30, 2000 (unaudited).......................................... 7
Statement of Cash Flows for the year ended November 30, 1999 and
the seven months ended June 30, 2000 (unaudited).......................................... 8
Notes to Financial Statements.................................................................. 9
PRO FORMA UNAUDITED CONSOLIDATED CONDENSED FINANCIAL INFORMATION:
Description of the Acquisition of A-OK Controls Engineering, Inc............................... 13
Pro Forma Unaudited Consolidated Statement of Operations for the year
ended December 31, 1999................................................................... 14
Pro Forma Unaudited Consolidated Statement of Operations for the six-months
ended June 30, 2000....................................................................... 15
Notes to Pro Forma Unaudited Consolidated Financial Information................................ 16
</TABLE>
3
<PAGE> 4
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholder
A-OK Controls Engineering, Inc.
We have audited the accompanying balance sheet of A-OK Controls Engineering,
Inc. (a Michigan corporation) as of November 30, 1999, and the related
statements of operations, stockholder's equity and cash flows for the year 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 A-OK Controls Engineering, Inc.
as of November 30, 1999, and the results of its operations and their cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
/s/ Grant Thornton LLP
-----------------------
Southfield, Michigan
May 8, 2000
4
<PAGE> 5
A-OK CONTROLS ENGINEERING, INC.
BALANCE SHEET
NOVEMBER 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 742,924
Accounts receivable:
Trade, net of allowance for doubtful accounts of $17,717 $1,895,251
Unbilled 1,196,682
---------
3,091,933
Refundable income taxes 93,981
Prepaid expenses 55,022
------------
Total Current Assets 3,983,860
PROPERTY AND EQUIPMENT, AT COST
Automobiles 33,853
Furniture and fixtures 1,237,361
Leasehold improvements 146,607
Software 420,722
Computer equipment under capital lease 278,066
------------
2,116,609
Less accumulated depreciation and amortization (1,448,007)
------------
668,602
OTHER ASSETS
Deferred income taxes 10,000
Other receivable - related party 312,180
Deposits 13,915
------------
336,095
------------
$4,988,557
============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Line of credit $ 225,000
Current portion of long-term debt 96,417
Current portion of capital lease obligation 95,115
Note payable - stockholder 2,078,000
Accounts payable 162,838
Accrued liabilities 350,653
Deferred income taxes 139,000
------------
Total Current Liabilities 3,147,023
LONG-TERM DEBT, LESS CURRENT PORTION 100,358
CAPITAL LEASE OBLIGATION, LESS CURRENT PORTION 68,037
STOCKHOLDER'S EQUITY
Common stock, $1 par value, 50,000 shares
authorized; 1,000 shares issued and outstanding 1,000
Retained earnings 1,672,139
------------
1,673,139
------------
$4,988,557
============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE> 6
A-OK CONTROLS ENGINEERING, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1999 AND THE
SEVEN MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED
YEAR ENDED JUNE 30, 2000
NOVEMBER 30, 1999 (UNAUDITED)
----------------- ------------------
<S> <C> <C>
Net revenues $ 10,633,970 $ 5,768,725
Direct costs 8,527,390 4,736,659
------------ ------------
Gross margin 2,106,580 1,032,066
General and administrative expenses 1,987,941 942,787
------------ ------------
Operating income 118,639 89,279
Other income (expense)
Interest and other income 36,483 45,325
Interest expense (165,294) (114,423)
Loss on sale of property and equipment (22,697) -0-
------------ ------------
(151,508) (69,069)
------------ ------------
Income (loss) before income taxes (32,869) 20,181
Income tax benefit (expense) 15,763 (7,875)
------------ ------------
Net income (loss) $ (17,106) $ 12,306
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE> 7
A-OK CONTROLS ENGINEERING, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED NOVEMBER 30, 1999 AND THE
SEVEN MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK RETAINED STOCKHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at December 1, 1998 1,000 $ 1,000 $ 1,689,245 $ 1,690,245
Net loss for the year ended
November 30, 1999 -0- -0- (17,106) (17,106)
----------- ----------- ----------- -----------
Balance at November 30, 1999 1,000 $ 1,000 $ 1,672,139 $ 1,673,139
Net income for the seven months
ended June 30, 2000 (unaudited) -0- -0- 12,306 12,306
----------- ----------- ----------- -----------
Balance at June 30, 2000 (unaudited) 1,000 $ 1,000 $ 1,684,445 $ 1,685,445
=========== =========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
<PAGE> 8
A-OK CONTROLS ENGINEERING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED NOVEMBER 30, 1999 AND THE
SEVEN MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED
YEAR ENDED JUNE 30, 2000
NOVEMBER 30, 1999 (UNAUDITED)
----------------- ------------------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
Net income (loss) $ (17,106) $ 12,306
Adjustments to reconcile net earnings to net cash
used in operating activities
Depreciation and amortization 362,430 78,830
Loss (gain) on sale of property and equipment 22,697 (587)
Deferred income tax benefit (49,000) 37,000
Changes in assets and liabilities
Accounts receivable (310,978) (256,891)
Prepaid expenses and other deposits (45,838) (11,651)
Refundable income taxes (180,582) 63,841
Accounts payable 113,408 (94,710)
Other receivable (218,935) 312,180
Accrued liabilities (312,453) (195,543)
Customer deposits (90,811) -0-
----------- -----------
Net cash used in operating activities (727,168) (55,225)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of property and equipment (283,936) (24,268)
Proceeds from sale of property and equipment 15,500 3,650
----------- -----------
Net cash used in investing activities (268,436) (20,618)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds on lines of credit 145,000 1,195,115
Proceeds from long-term debt 150,000 -0-
Proceeds from note payable - stockholder 783,000 -0-
Proceeds from note payable - Nematron -0- 200,000
Principal payments on long-term debt (100,509) (196,775)
Principal payments on debt to shareholder -0- (1,738,439)
Principal payments on capital lease obligation (87,391) (54,503)
Payment of deferred financing fees -0- (30,000)
----------- -----------
Net cash provided by (used in) financing activities 890,100 (624,602)
----------- -----------
NET DECREASE IN CASH (105,504) (700,445)
CASH, BEGINNING OF PERIOD 848,428 742,924
----------- -----------
CASH, END OF PERIOD $ 742,924 $ 42,479
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for:
Interest $ 165,294 $ 114,423
Taxes (net tax refunds) 119,838 (55,966)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE> 9
A-OK CONTROLS ENGINEERING, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
NOTE A - NATURE OF OPERATIONS
A-OK Controls Engineering, Inc. is engaged in providing engineering and
consulting services to the automotive industry in the United States.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recognition of Income on Contracts
Projects are billed on a time and materials basis. Revenue is recognized as
services are performed.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using both
accelerated and straight-line methods over the estimated useful lives of the
assets ranging from 5 years to 15 years. Costs of maintenance and repairs are
charged to expense when incurred.
Profit-Sharing Plan
The Company has a defined contribution 401(k) plan that covers substantially all
of its employees. The amount of annual company contributions to the plan is
discretionary. Contributions of approximately $155,000 and $130,000 were made to
the plan during the year ended November 30, 1999 and the seven months ended June
30, 2000, respectively.
Income Taxes
The Company records the provision for federal income taxes under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, and the effect of operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period that
includes the enactment date.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
9
<PAGE> 10
A-OK CONTROLS ENGINEERING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOVEMBER 30, 1999 AND JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
NOTE C - LINE OF CREDIT
At November 30, 1999, the Company has borrowings of $225,000 under a $1,000,000
line of credit agreement with a bank. The line of credit bears interest at the
bank's prime rate (8.5% at November 30, 1999). The agreement requires quarterly
payments of interest only and is collateralized by accounts receivable of the
Company. The agreement contains certain financial and non-financial covenants.
NOTE D - LONG-TERM DEBT
Long-term debt at November 30, 1999 consists of the following:
<TABLE>
<S> <C>
Note payable to bank bearing interest at 8.25%, collateralized by substantially
all assets of the Company, payable in monthly installments of $4,717
including interest, due November 2002. $146,624
Note payable to bank bearing interest at 1% above the prime rate (effective rate
of 9.0% at November 30, 1999), collateralized by property and equipment,
payable in monthly installments of $9,609 including interest, due May 2000. 50,151
---------
Total 196,775
Less current portion 96,417
---------
Long-term debt, net of current portion $ 100,358
=========
Future maturities of long-term debt are as follows:
YEAR
----
2000 $ 96,417
2001 50,230
2002 50,128
---------
$ 196,775
=========
</TABLE>
NOTE E - NOTE PAYABLE - STOCKHOLDER
At November 30, 1999, the Company had unsecured borrowings of $2,078,000 from
its stockholder. The note bears interest at 8% per annum.
10
<PAGE> 11
A-OK CONTROLS ENGINEERING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOVEMBER 30, 1999 AND JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
NOTE F - OTHER RECEIVABLE - RELATED PARTY
At November 30, 1999, the Company had an amount due of $312,180 from a party
related to the Company's sole stockholder.
NOTE G - COMMITMENTS
The Company leases certain equipment and office facilities under noncancelable
agreements expiring from 2000 to 2009. The following is a schedule of future
minimum rental payments under these leases.
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
NON-
CAPITAL RELATED RELATED
YEAR LEASE PARTY PARTY TOTAL
----- ----- ----- -----
<S> <C> <C> <C> <C>
2000 $ 105,335 $ 397,800 $ 20,295 $ 523,430
2001 70,223 397,800 -- 468,023
2002 -- 397,800 -- 397,800
2003 -- 397,800 -- 397,800
2004 -- 397,800 -- 397,800
Thereafter -- 1,624,350 -- 1,624,350
---------- ---------- ---------- ----------
$ 175,558 $3,613,350 $ 20,295 $3,809,203
Less amounts representing interest 12,406
----------
Present value of minimum
lease payments $163,152
==========
</TABLE>
Rental expense was $403,000 and $263,000 for the year ended November 30, 1999
and the seven months ended June 30, 2000, respectively.
NOTE H - INCOME TAXES
The provision (benefit) for federal income taxes consists of the following:
<TABLE>
<CAPTION>
SEVEN MONTHS
YEAR ENDED ENDED
NOVEMBER 30, JUNE 30, 2000
1999 (UNAUDITED)
---- ------------
<S> <C> <C>
Current $ 33,237 $7,875
Deferred (49,000) -0-
-------- ------
$(15,763) $7,875
======== ======
</TABLE>
11
<PAGE> 12
A-OK CONTROLS ENGINEERING, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOVEMBER 30, 1999 AND JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
NOTE H - INCOME TAXES - CONTINUED
Deferred income taxes reflect the tax impact of temporary differences between
the amount of assets and liabilities recorded for financial reporting purposes
and such amounts as measured by tax laws and regulations. The significant
cumulative temporary differences giving rise to the deferred income tax balances
at November 30, 1999 are as follows:
<TABLE>
<S> <C>
Jobs in progress $ 145,000
Other (6,000)
----------
Current deferred income tax liability $139,000
==========
Depreciation and long-term deferred income tax asset $ 10,000
==========
</TABLE>
NOTE I - SIGNIFICANT CUSTOMERS
Sales to two major customers made up approximately 79% of net sales of the
Company for the year ended November 30, 1999 and the seven months ended June 30,
2000. Approximately $1,360,000 of accounts receivable at November 30, 1999 are
from these customers.
NOTE J - SUBSEQUENT EVENT
On June 30, 2000, the Company's sole stockholder entered into an agreement to
sell 100% of the outstanding stock of the Company to Nematron Corporation in
exchange for $2,750,000 and 604,186 shares of Nematron Corporation common stock.
12
<PAGE> 13
(b) PRO FORMA FINANCIAL INFORMATION.
On June 30, 2000, the Company completed its acquisition of A-OK Controls
Engineering, Inc. ("A-OK Controls"), a control systems design and integration
company located in Auburn Hills, Michigan. Under the terms of the related Stock
Purchase Agreement, the Company acquired 100% of the outstanding shares of A-OK
Controls in exchange for cash of $2,750,000 and issued 604,186 shares of
Nematron common stock to A-OK Controls' shareholder.
The purchase price for A-OK Controls, including expenses incurred in connection
with the acquisition, was approximately $4,065,000. The acquisition of A-OK
Controls has been accounted for as a purchase and approximately $2,328,000 of
goodwill, on preliminary basis, has been recorded.
In addition to the cash required for the cash portion of the total purchase
price, the Company also agreed to repay long-term debt of A-OK Controls
outstanding as of the purchase date. Accordingly, the Company advanced funds to
A-OK Controls in the amount of approximately $2,436,000 to extinguish
outstanding debt and accrued interest thereon. The Company funded the cash
requirements by borrowing under its line of credit, from a new long-term
agreement and from existing cash balances.
The pro forma unaudited consolidated condensed statements of operations for the
year ended December 31, 1999 and the six months ended June 30, 2000 present the
historical results of the Company combined with the operations of A-OK Controls
for the year ended November 30, 1999 and the six-month period from December 1,
1999 to May 31, 2000, respectively, and the pro forma adjustments as if the
purchase had been made at the beginning of the periods presented. The pro forma
financial information should be read in conjunction with the Company's
historical financial statements and notes thereto contained in the Company's
Form 10-KSB for the year ended December 31, 1999, and the Company's Form 10-QSB
for the six months ended June 30, 2000, and A-OK controls' historical financial
statements and notes thereto contained in this Form 8-K/A. The pro forma results
do not reflect any benefit from economies which might have been achieved from
combined operations. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the financial condition or
results of operations which actually would have occurred if the acquisition had
taken place on the basis presumed above, nor are they indicative of future
combined operations.
13
<PAGE> 14
NEMATRON CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pro Forma
A-OK Adjustments Pro Forma
Nematron Controls Amount Note Amount
-------- -------- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Net revenue $29,772,129 $10,633,970 $ 40,406,099
Cost of revenues 19,991,704 8,527,390 28,519,094
----------------- --------------- ------------------
Gross profit 9,780,425 2,106,580 11,887,005
Operating expenses:
Product development costs 794,207 794,207
Selling, general and
administrative expenses 6,471,046 1,987,941 $159,341 (1) 7,774,728
(843,600) (2)
----------------- --------------- ------------------
Total operating expenses 7,265,253 1,987,941 8,568,935
----------------- --------------- ------------------
Operating income 2,515,172 118,639 3,318,070
Interest expense (523,839) (165,294) (228,172) (3) (917,305)
Sundry income (expense) (25,883) 13,786 (12,097)
----------------- --------------- ------------------
Income before taxes 1,965,450 (32,869) 2,388,668
Income tax benefit (expense) 43,200 15,763 (15,763) (4) 43,200
----------------- --------------- ------------------
Net income $ 2,008,650 $ (17,106) $ 2,431,868
================= =============== ==================
Net earnings per share:
Basic $ 0.19 $ 0.21
================== ==================
Diluted $ 0.18 $ 0.20
================== ==================
Weighted average number of
common shares outstanding:
Basic 10,753,844 604,186 (5) 11,358,030
================== ============ ==================
Diluted 11,321,512 604,186 (5) 11,925,698
================== ============ ==================
</TABLE>
See notes to pro forma consolidated condensed statements.
14
<PAGE> 15
NEMATRON CORPORATION AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Pro Forma
A-OK Adjustments Pro Forma
-----------
Nematron Controls Amount Note Amount
-------- -------- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Net revenue $9,096,419 $ 4,998,906 $ 14,095,325
Cost of revenues 6,508,025 4,068,996 10,577,021
-------------- -------------- --------------------
Gross profit 2,588,394 929,910 3,518,304
Operating expenses:
Product development costs 258,344 258,344
Selling, general and
administrative expenses 3,247,619 796,987 $ 79,670 (1) 3,938,516
(185,760) (2)
-------------- -------------- --------------------
Total operating expenses 3,505,963 796,987 4,196,860
-------------- -------------- --------------------
Operating income (loss) (917,569) 132,923 (678,556)
Interest expense (147,625) (97,907) (63,669) (3) (309,201)
Sundry income (expense) 378,169 20,291 398,460
-------------- -------------- --------------------
Income (loss) before taxes (687,025) 55,307 (589,297)
Income tax benefit (expense) 21,600 (18,804) 18,804 (4) 21,600
-------------- -------------- --------------------
Net income (loss) $ (665,425) $ 36,503 $ (567,697)
============== ============== ====================
Net earnings per share:
Basic $ (0.05) $ (0.04)
============== ====================
Diluted $ (0.05) $ (0.04)
============== ====================
Weighted average number of
common shares outstanding:
Basic 12,608,750 604,186 (5) 13,212,936
============== =========== ====================
Diluted 12,608,750 604,186 (5) 13,212,936
============== =========== ====================
</TABLE>
See notes to pro forma consolidated condensed statements.
15
<PAGE> 16
NEMATRON CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL INFORMATION
The accompanying pro forma statements of operations present the results of
operations of Nematron Corporation and Consolidated Subsidiaries ("Nematron" or
the "Company") giving effect to the acquisition of A-OK Controls Engineering,
Inc. The purchase price was $4,065,000.
Pro forma adjustments for the year ended December 31, 1999 and June 30, 2000 are
as follows:
(1) Adjust for goodwill amortization based on the cost of the business
acquired, using an amortization period of twenty years.
(2) Adjust for the difference between the actual compensation of A-OK's
president and the compensation per the terms of his employment
agreement.
(3) Adjust for increased interest expense on amounts borrowed to fund the
acquisition.
(4) Adjust for the utilization of Nematron's available net operating loss
carryforward to eliminate the tax expense of A-OK Controls.
(5) Adjust for the number of shares exchanged in the acquisition of A-OK
Controls.
16
<PAGE> 17
EXHIBIT INDEX
Exhibit
Number Item
------ ----
23.1 Consent of Grant Thornton LLP, Independent Auditors
17
