<PAGE> 1
8-K/A
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) February 9, 1999
TRANSMATION, INC.
(Exact Name of Registrant as Specified in Charter)
Ohio 0-3905 16-0874418
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
10 Vantage Point Drive, Rochester, New York 14624
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 716-352-7777
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
INDEX TO FINANCIAL STATEMENTS OF METERMASTER, INC.
Years Ended December 31, 1998 and 1997
Report of Independent Accountant.
Balance Sheets as of December 31, 1998 and 1997 (audited).
Statements of Operations for the 12 months ended December 31, 1998
and 1997 (audited).
Statements of Stockholders' Equity (Capital Deficit) Years Ended
December 31, 1998 and 1997 (audited).
Statements of Cash Flows December 31, 1998 and 1997 (audited).
Summary of Significant Accounting Principles December 31, 1998 & 1997.
Notes to Financial Statements December 31, 1998 and 1997.
Independent Auditors' Report on Supplemental Material
December 31, 1998 and 1997 (audited). Supplemental Material
December 31, 1998 and 1997 (audited).
Years Ended December 31, 1996 and 1995
Report of Independent Accountant.
Balance Sheets as of December 31, 1996 and 1995 (audited).
Statements of Income for the 12 months ended December 31,
1996 and 4.5 months ended December 31, 1995 (audited).
Statements of Stockholders' Equity
Years ended December 31, 1996 and 1995 (audited). Statements
of Cash Flows December 31, 1996 and 1995 (audited). Notes to Financial
Statements December 31, 1996 and 1995. Supplemental Schedules December
31, 1996 and 1995 (audited).
2
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Metermaster Inc.
Marietta, Georgia
We have audited the accompanying balance sheets of Metermaster Inc. (a Georgia
corporation) as of December 31, 1998 and 1997, and the related statements of
operations, stockholders' equity (capital deficit) and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Metermaster Inc. as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses, has a net
capital deficiency and is in violation of certain financial covenants under its
credit facility. These matters raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan in regard to these
matters is also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ BDO Seidman, LLP
January 29, 1999,
except for Note 11,
as to which the date is
February 8, 1999
Atlanta, Georgia
3
<PAGE> 4
METERMASTER INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
-------------------------------------------
1998 1997
------------- ------------------
<S> <C> <C>
Assets (Notes 4 and 11)
Current
Cash (Note 4) $ 84,043 $ 35,436
Accounts and notes receivable,
net of allowance for possible
losses of $60,000 each year
(Note 4) 2,450,410 3,146,787
Inventories (Notes 2 and 4) 1,921,885 2,511,270
Other receivables 19,045 48,297
Deferred income taxes (Note 9) 86,000 58,000
Prepaid expenses 127,385 104,579
---------- ----------
Total current assets 4,688,768 5,904,369
---------- ----------
Property and equipment (Note 4)
Test equipment 748,764 730,069
Computer equipment 373,044 332,991
Furniture, fixtures and
office equipment 167,224 166,044
Leasehold improvements 29,293 25,595
Machinery and equipment 28,003 28,003
Vehicles 9,545
---------- ----------
1,355,873 1,282,702
Less accumulated depreciation 435,814 233,407
---------- ----------
Net property and equipment 920,059 1,049,295
---------- ----------
Other Assets
Deposits 33,338 45,262
Loan origination/organization
costs (Note 3) 33,914 70,389
---------- ----------
Total other assets 67,252 115,651
---------- ----------
Total Assets $5,676,079 $7,069,315
========== ==========
</TABLE>
4
<PAGE> 5
METERMASTER INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31
---------------------------------------
1998 1997
------------- -----------
<S> <C> <C>
Liabilities and Stockholders' Equity (Capital Deficit)
Current liabilities
Revolving lines of credit (Note 4) $ 2,332,241 $ 3,257,681
Checks issued against future
deposits (Note 4) 250,020 429,557
Current maturities of long-term
debt (Note 5) 569,432 293,042
Accounts payable 2,611,915 2,212,654
Accrued salaries and commissions 88,153 81,398
Accrued vacation and employee benefits 114,711 120,053
Other accrued liabilities 89,211 121,915
----------- -----------
Total current liabilities 6,055,683 6,516,300
----------- -----------
Long-term liabilities
Long-term debt, less current
maturities (note 5) 265,144 312,555
Deferred income taxes (Note 9) 86,000 58,000
----------- -----------
Total long-term liabilities 351,144 370,555
----------- -----------
Commitments and contingencies (Notes 7, 8 and 11)
Stockholders' equity (capital deficit) (Note 6)
8% cumulative convertible preferred
stock, $100 par; 200,500 shares
authorized each year; 8,500 and 8,000
shares issued and outstanding 850,000 800,000
Common stock, $1 par; 2,000,000 and
100,000 shares authorized; 24,000
and 10,000 shares issued and
outstanding 24,000 10,000
Additional paid-in capital 426,000 90,000
Accumulated deficit (2,030,748) (717,540)
----------- -----------
Total stockholders' equity (capital deficit) (730,748) 182,460
----------- -----------
Total liabilities and stockholders' equity
(capital deficit) $ 5,676,079 $ 7,069,315
=========== ===========
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
5
<PAGE> 6
METERMASTER INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------ ----------------
1998 1997
------------------ ----------------
<S> <C> <C>
Net sales $ 20,991,257 $ 20,475,134
Cost of sales 13,499,633 13,532,708
------------ ------------
Gross profit 7,491,624 6,942,426
------------ ------------
Operating expenses
Payroll and fringe benefits 5,076,093 4,469,296
Overhead expenses 3,076,410 2,321,814
Depreciation 206,339 126,018
------------ ------------
Total operating expenses 8,358,842 6,917,128
------------ ------------
Income (loss) from operations (867,218) 25,298
------------ ------------
Other income (expense)
Interest expense and bank charges (489,730) (477,493)
Miscellaneous 43,740 53,574
------------ ------------
Total other expense (445,990) (423,919)
------------ ------------
Loss before income taxes (1,313,208) (398,621)
Income tax provision (Note 9) - - - - - -
------------ ------------
Net loss ($ 1,313,208) ($ 398,621)
============ ============
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
6
<PAGE> 7
METERMASTER INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ADD'L ACCUMU-
PREFER'D COMMON PAID-IN LATED
STOCK STOCK CAPITAL DEFICIT TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 650,000 $ 10,000 $ 90,000 ($ 318,919) $ 431,081
Issuance of 1,500 shares
of preferred stock 150,000 - - - - - - - - - 150,000
Net loss - - - - - - - - - (398,621) (398,621)
--------------------------------------------------------------------------------
Balance, December 31, 1997 800,000 10,000 90,000 (717,540) 182,460
Issuance of 500 shares
of preferred stock 50,000 - - - - - - - - - 50,000
Issuance of 14,000 shares
of common stock - - - 14,000 336,000 - - - 350,000
Net loss - - - - - - - - - (1,313,208) (1,313,208)
--------------------------------------------------------------------------------
Balance, December 31, 1998 $ 850,000 $ 24,000 $ 426,000 ($2,030,748) ($ 730,748)
================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
7
<PAGE> 8
METERMASTER INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997
--------------- -------------
<S> <C> <C>
Operating activities
Net loss ($1,313,208) ($ 398,621)
Adjustments to reconcile net loss to
cash provided by (used in) operating activities:
Depreciation and amortization 287,748 147,676
Increase in allowance for doubtful accounts 10,000
Increase in inventory reserve 90,000 125,000
Loss from disposal of assets 5,669
Changes in assets & liabilities net of effects of acquisitions:
Accounts receivable 696,377 (271,914)
Inventories 499,385 345,380
Other receivables 29,252 (8,524)
Prepaid expenses (22,806) 2,675
Refundable income taxes 87,088
Deposits 11,924 1,269
Accounts payable 399,261 (371,549)
Accrued salaries & commissions 6,755 59,936
Accrued vacation & employee benefits (5,342) (26,933)
Other accrued liabilities (32,704) 64,150
----------- -----------
Cash provided by (used in) operating activities 652,311 (234,367)
----------- -----------
Investing activities
Acquisition of net assets (Note 10) (304,000)
Additions to property and equipment (82,772) (73,648)
----------- -----------
Cash used in investing activities (82,772) (377,648)
----------- -----------
</TABLE>
<PAGE> 9
METERMASTER INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1998 1997
--------------- ------------
<S> <C> <C>
Financing activities
Net (decrease) increase in revolving lines of credit (925,440) 391,433
Net decrease in checks issued against
future deposits (179,537) (5,646)
Proceeds from issuance of notes payable 469,000 250,000
Principal payments on long-term debt (115,021) (39,719)
Proceeds from issuance of common stock
(Note 6) 225,000 - - -
Proceeds from issuance of preferred stock 50,000 - - -
Loan origination/organization costs (44,934) (37,774)
--------- ---------
Cash provided by (used in) financing activities (520,932) 558,294
--------- ---------
Net increase (decrease) in cash 48,607 (53,721)
Cash, beginning of year 35,436 89,157
--------- ---------
Cash, end of year $ 84,043 $ 35,436
========= =========
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
9
<PAGE> 10
METERMASTER INC.
----------------
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
--------------------------------------------
ORGANIZATION AND BUSINESS - Metermaster Inc. (the "Company") was incorporated in
the state of Georgia on May 25, 1995, and started operations on August 15, 1995.
The Company is a leading nationwide distributor of electrical and electronic
test and measurement instrumentation, and provides extensive modification,
calibration, and repair services to a broad range of industrial customers.
Metermaster (formerly known as Quality Electric Company) has been in business
continuously since 1895.
On January 22, 1999, the Company signed a definitive agreement to sell all of
the stock of the Company to a third party. The sale is to be consummated in
early February 1999 (see Note 11 for additional discussion).
INVENTORIES - Inventories are valued at the lower of cost (first-in, first-out)
or market.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation is provided using straight-line methods over the estimated useful
lives of the respective assets, primarily seven years or less.
REVENUE RECOGNITION - Revenues are recorded on the accrual basis of accounting
and are recognized upon the shipment of the product.
INCOME TAXES - The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS 109). Under the asset and liability method of SFAS 109,
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 net 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 in which these temporary differences are expected to
be recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
COMPREHENSIVE INCOME - In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130), which establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS 130 requires that all items that are required to be recognized
under current accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. SFAS 130 is effective for financial statements for
periods beginning after December 15, 1997 and requires comparative information
for earlier years to be restated. The Company was unaffected by implementation
of this standard for the years ended December 31, 1998 and 1997 as it had no
comprehensive income as defined herein.
10
<PAGE> 11
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 could differ from those estimates.
CONCENTRATION OF CREDIT RISK - The Company's financial instruments that are
exposed to concentrations of credit risk consist primarily of cash and trade
accounts receivable. The Company places its cash with high-quality credit
institutions. At times, such cash balances may be in excess of the FDIC
insurance limit of $100,000. Management continually monitors receivable balances
and believes that its exposure to accounts receivable credit risk is limited.
YEAR 2000 RISKS (UNAUDITED) - Like other companies, Metermaster Inc. could be
adversely affected if the computer systems we, our suppliers or customers use do
not properly process and calculate date-related information and data from the
period surrounding and including January 1, 2000. This is commonly known as the
"Year 2000" issue. Additionally, this issue could impact non-computer systems
and devices such as production equipment, elevators, etc. At this time, because
of the complexities involved in the issue, management cannot provide assurances
that the Year 2000 issue will not have an impact on the Company's operations.
RECLASSIFICATIONS - Certain 1997 amounts have been reclassified to conform to
the 1998 presentation.
11
<PAGE> 12
METERMASTER INC.
----------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. Going Concern
The Company incurred net losses of $1,313,208 and $398,621 for the
years ended December 31, 1998 and 1997, respectively. The Company has a net
capital deficiency of $730,748 as of December 31, 1998. Additionally, the
Company is in violation of certain financial covenants under its credit
facility. The Company's lender has reserved all of the rights available to it as
a result of the Company's default of these financial covenants. The foregoing
matters raise substantial doubt about the ability of the Company to continue as
a going concern. The financial statements do not reflect any adjustments which
might be necessary if the Company were unable to continue as a going concern.
Management plans to address these negative trends and losses through a
merger of the Company with a subsidiary of Transmation, Inc. A definitive
agreement was signed on January 21, 1999 with closing scheduled for early
February 1999. See Note 11 for additional discussion.
2. Inventories
Inventories are net of a reserve for slow-moving items of $315,000 and
$225,000 at December 31, 1998 and 1997, respectively. The components of
inventory at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Merchandise $ 1,574,904 $ 1,980,405
Demonstration equipment 161,764 162,725
Component parts 460,217 553,140
Freight 40,000 40,000
----------- -----------
Sub-total 2,236,885 2,736,270
----------- -----------
Inventory reserve (315,000) (225,000)
----------- -----------
Total inventory $ 1,921,885 $ 2,511,270
=========== ===========
</TABLE>
3. Loan Origination/Organization Costs
Loan origination and organization costs consist of $44,934 in loan
closing costs and bank fees which are being amortized over the loan term of
twenty-four months. Total accumulated amortization at December 31, 1998 and 1997
amounted to $11,020 and $42,215, respectively. Amortization expense was $78,430
and $20,740 in 1998 and 1997, respectively. Included in the 1998 expense were
previously capitalized costs of $42,836 relating to start-up activities that
were written off in the current year.
4. Credit Facility Agreement
On June 12, 1998, the Company obtained a new, two-year $5,000,000
credit facility (the "Facility") with Congress Financial Corporation
("Congress") to replace the existing credit facility with LaSalle National Bank
("LaSalle"). The Facility is comprised of a revolving loan, term loan
12
<PAGE> 13
and, if requested by the Company, equipment loans (the "Loan(s)"). Advances on
the facility are restricted to loan limits as defined in the loan agreement (the
"Agreement"). The terms of the Agreement provide for revolving cash borrowings
of up to 85% of eligible trade accounts receivable plus the lesser of (i) 60% of
eligible finished goods inventory plus $150,000 (reducing by $10,000 each month
commencing August 1, 1998) or (ii) $2,000,000, less any reserves as Congress
elects to establish. The aggregate Loan balance of the facility shall in no
event exceed $5,000,000, with the aggregate of equipment loans not to exceed
$100,000. As of December 31, 1998 and 1997, the Company owed $2,332,241 and
$3,257,681, respectively, under its revolving loans with Congress and LaSalle,
respectively. As of December 31, 1998 and 1997, the Company had $347,553 and
$333,349, respectively, available for cash borrowings under its revolving loans.
No equipment loans were outstanding as of December 31, 1998. A term loan in the
original principal amount of $469,000 is payable in sixty consecutive monthly
principal payments of $7,817. The outstanding balance on the term loan was
$422,100 as of December 31, 1998 (see Note 5). Interest is payable on the first
business day of each month, in arrears, at 0.5% above the prime rate, effective
8.25% at December 31, 1998. In addition, an unused line fee of 0.5% is payable
monthly, in arrears, on the amount by which $5,000,000 exceeds the average
monthly principal balance of the outstanding Loans.
The original term of the loan agreement expires June 11, 2000 and has
renewal options as defined in the Agreement. If, during the term of the
Agreement, the Company elects to prepay all or part of the debt outstanding, the
Company will be obligated to pay the bank an early termination fee. As
stipulated in the Agreement, this fee will be $150,000 if terminated prior to
June 12, 1999 and $100,000 if terminated between June 12, 1999 and June 11,
2000. As discussed in Note 11, if the Company's anticipated merger occurs as
planned, all of the Company's outstanding debt will be paid off. The Company has
negotiated with Congress to decrease the repayment penalty from $150,000 to
$100,000 if the closing date of the merger is prior to February 15, 1999. The
Facility is collateralized by virtually all tangible and intangible assets of
the Company and has the personal guarantee of the president of the Company.
Since August 1998, the Company has been in violation of certain
financial covenants under its credit facility agreement. The Company's lender
has reserved all of the rights available to it as a result of the Company's
default of these financial covenants. Consequently, the balances of the
revolving line of credit and term loan are classified as current liabilities at
December 31, 1998.
The checks issued against future deposits of $250,020 and $429,557 at
December 31, 1998 and 1997, respectively, represent outstanding checks which had
not cleared the bank account at year end.
13
<PAGE> 14
<TABLE>
<CAPTION>
5. Long-Term Debt
Long-term debt consists of the following:
1998 1997
---- ----
<S> <C> <C>
Term loan facility with bank; monthly principal payments of $7,817 plus
interest at prime (7.75% as of December 31, 1998) plus .5%, maturing
June 2003; collateralized by all fixed assets of the
Company $ 422,100
Installment note at 10.7% interest, monthly principal and interest
payments of $1,770 through 2015, secured by substantially all assets
but subordinated to the note payable to bank 189,747 $ 189,994
Note payable at 14% interest, principal due in 1998, subordinated to
the note payable to bank
The note is unsecured 75,000
Notes payable at 16% interest, principal due in 1999, subordinated to
the note payable to bank
These notes are unsecured 100,000 175,000
Installment note at 7% interest, monthly principal
and interest payments of $1,386 through 2001,
subordinated to the note payable to bank. The
Note is unsecured 38,046 51,500
Installment note at 8% interest, monthly principal and interest
payments of $3,124 through 2001, secured by an interest in accounts
receivable, subordinated to the note payable to bank 84,683 114,103
--------- ---------
834,576 605,597
Less current maturities (569,432) (293,042)
--------- ---------
Long-term portion $ 265,144 $ 312,555
========= =========
</TABLE>
Future maturities of long-term debt at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $569,432
2000 52,035
2001 29,337
2002 81
2003 1,136
Thereafter 182,555
-------
$834,576
========
</TABLE>
As discussed in Note 4, the entire balance of the term loan is
classified as a current liability at December 31, 1998.
14
<PAGE> 15
6. Stockholders' Equity
On March 11, 1998, the Company raised $400,000 of equity through the
conversion of $125,000 of subordinated notes to common stock and the issuance of
additional common and preferred stock for $275,000 cash. The subordinated notes
had been outstanding as of December 31, 1997, matured in 1998 and bore interest
rates ranging from 14% to 16%.
Eight thousand (8,000) of the 8,500 issued preferred shares ("Series
I") have a stated value of $100 per share, with a liquidation value of $200 per
share callable at the Company's option at $200 per share. These preferred shares
are convertible into 10 shares of common stock at the stockholders' election,
beginning five years from the date of purchase, subject to the Company's right
of first refusal to redeem any or all at $200 per share. In connection with the
ISL acquisition, discussed in Note 10, 1,500 shares of Series I convertible
preferred stock were issued. The remaining 500 preferred shares ("Series II")
have the same basic features of the Series I shares except that the Series II
shares have a liquidation value of $400 per share. Additionally, the Series II
shares are convertible into 10 shares of common stock beginning 10 years from
the date of issuance.
Preferred dividends, which must be approved by the Board of Directors,
are payable quarterly. Dividends are cumulative at 8% per annum and all
arrearages must be paid before any common dividends may be paid or before any
preferred shares may be called. Total cumulative unpaid dividends at December
31,1998 and 1997 amounted to $135,000 and $68,000, respectively. The aggregate
liquidation value of the preferred stock including cumulative unpaid dividends
was $1,935,000 and $1,768,000 as of December 31, 1998 and 1997, respectively.
7. Commitments
The Company leases certain offices, warehouses and office equipment
under noncancellable operating leases. Approximate future minimum payments at
December 31, 1998 under these leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $ 570,190
2000 457,089
2001 229,310
2002 10,412
----------
$1,267,001
==========
</TABLE>
Total lease and rent expense for the years ended December 31, 1998 and
1997 amounted to approximately $667,000 and $572,000, respectively.
8. Employee Benefit Plan
The Company has a 401(k) employee benefit plan that covers
substantially all employees. Employees are eligible to participate in the plan
after completion of ninety days of service, on eligible quarterly entry dates.
The Company will match 25% of an employee's contributions up to a maximum of 6%
of the employee's compensation excluding automobile allowances. The contribution
by the Company amounted to $38,570 and $30,419 for the years ended December 31,
1998 and 1997, respectively.
15
<PAGE> 16
9. Income Taxes
There was no provision for income taxes for the years ended December
31, 1998 and 1997.
The tax effects of temporary differences and carryforwards which give
rise to deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Deferred tax assets
Net operating loss carryforwards $ 620,000 $ 130,000
Inventory allowances 120,000 86,000
Accrued vacation expenses 35,000 36,000
Uniform capitalization costs 26,000 30,000
Allowance for doubtful accounts 23,000 23,000
--------- ---------
Total gross deferred tax assets 824,000 305,000
Valuation allowance (738,000) (247,000)
--------- ---------
Net deferred tax assets $ 86,000 $ 58,000
========= =========
Deferred tax liabilities
Basis difference of property
And equipment $ 86,000 $ 58,000
========= =========
</TABLE>
The realization of the deferred tax assets is primarily dependent upon
the Company's ability to generate sufficient taxable income which would allow it
to utilize approximately $1,654,000 and $340,000 of accumulated net operating
losses as of December 31, 1998 and 1997, respectively, as well as the ability to
deduct reserves and allowances for tax purposes which have already been provided
for book purposes. Management has determined that it is not "more likely than
not" that the benefits to be derived from such deferred tax assets will be
realized, accordingly, a 100% valuation allowance has been provided. The
utilization of net operating losses may be significantly limited in the event of
a change in ownership (Note 11).
10. Acquisitions
Effective November 1997, the Company acquired substantially all of the
assets and assumed substantially all of the liabilities of Industrial Service
Laboratories Corporation (ISL) in exchange for consideration of $644,000. This
consideration was comprised of a $304,000 cash payment, $150,000 of the
Company's Series I cumulative convertible voting preferred stock and a
subordinated promissory note in the amount of $190,000.
This transaction can be summarized as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $1,018,000
Fair value of liabilities assumed (374,000)
Series I convertible preferred stock
Issued to seller (150,000)
Note payable issued to seller (190,000)
----------
Cash paid to seller $ 304,000
==========
</TABLE>
This acquisition was accounted for as a purchase in accordance with
Accounting Principles Board Statement Number 16, "Business Combinations" (APB
16). Accordingly, the purchase price was allocated to the assets and
16
<PAGE> 17
liabilities based on their estimated fair values at the date of acquisition.
There was no excess of purchase price consideration over the fair value of the
assets and liabilities acquired.
Additionally, the Company entered into certain employment agreements
with two shareholders of ISL, a consulting and non-compete agreement with
another shareholder, and a commission agreement with ISL regarding the sale of
certain products upon reaching specified base sales levels of those products.
The employment, consulting, and commission agreements commenced in November 1997
and extend for a period of five years.
The unaudited proforma results of operations which follow assume the
ISL acquisition had occurred at the beginning of the period presented. In
addition to combining historical results of operations of the companies, the
proforma calculations include adjustments for estimated effects of the Company's
historical results of operations for officers' salaries, consulting services,
commissions, and depreciation. These results are not necessarily indicative of
the results which would have occurred if the transactions had occurred at the
beginning of each period presented, nor are the results indicative of future
results.
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
<S> <C>
Sales revenues (unaudited) $ 22,798,511
============
Net loss (unaudited) $ (379,672)
============
</TABLE>
11. Subsequent Event
On January 21, 1999, the board of directors of the Company unanimously
approved the merger of the Company with MM Acquisition Corp., a wholly-owned
subsidiary of Transmation, Inc., ("Transmation"). The merger closed on February
8, 1999. Prior to closing, the Company's Engineered Systems Division was sold to
the Company's present shareholders. The aggregate merger consideration was
$1,769,252. Included in this merger was a buyout by Transmation of all of the
Company's long-term employment and consulting contracts and the settlement of
certain liabilities, including all outstanding debt.
17
<PAGE> 18
12. Supplemental Cash Flows
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
----------------- ---------------
1998 1997
----------------- ---------------
<S> <C> <C>
Income taxes received $ 87,088
Non-cash investing activity
Assets acquired in
acquisitions (Note 10) 1,018,000
Liabilities assumed in
acquisitions (374,000)
Seller financing with
acquisitions (190,000)
Issuance of Series I
convertible preferred stock (150,000)
---------------- -----------
Acquisition of net assets $ 304,000
================ ===========
</TABLE>
As discussed in Note 6, $125,000 of subordinated notes payable were converted to
common stock on March 11, 1998.
18
<PAGE> 19
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL MATERIAL
Our audit was performed for the purpose of forming an opinion of the basic
financial statements taken as a whole. The information included in the
supplemental schedules is presented for purposes of additional analysis and is
not a required part of the basic financial statements. Such information has not
been subjected to the auditing procedures applied in our audits of the basic
financial statements, and, accordingly, we express no opinion on it.
/s/ BDO Seidman, LLP
Certified Public Accountants
January 29, 1999
except for Note 11,
as to which the date is
February 8, 1999
Atlanta, Georgia
19
<PAGE> 20
<TABLE>
<CAPTION>
METERMASTER INC.
PREPAID EXPENSES AND OTHER ACCRUED LIABILITIES
1998 1997
--------- --------
<S> <C> <C>
Prepaid expenses
Prepaid insurance $ 61,059 $ 19,936
Prepaid operating expenses 19,459 28,893
Prepaid bank fees 27,344 37,500
Prepaid software maintenance 9,225 8,528
Travel advances 5,807 5,000
Prepaid tradeshow expense 4,722
Prepaid franchise tax 4,491
-------- --------
Total prepaid expenses 127,385 104,579
======== ========
Other accrued liabilities
Sales tax payable 18,672 32,702
Accrued miscellaneous 48,739 47,322
Accrued property taxes 7,800 12,533
Accrued legal and accounting 12,000 14,408
Accrued workers compensation 7,205
Accrued franchise taxes 2,000 7,745
-------- --------
Total other accrued liabilities $ 89,211 $121,915
======== ========
</TABLE>
See independent auditors' report on supplemental material.
20
<PAGE> 21
<TABLE>
<CAPTION>
METERMASTER INC.
PAYROLL AND FRINGE BENEFITS AND OVERHEAD EXPENSES
1998 1997
------------ -----------
<S> <C> <C>
Payroll and fringe benefits
Salaries and wages $ 4,442,079 $ 3,858,411
Insurance 243,988 267,929
Employment taxes 351,456 312,537
401(k) company match 38,570 30,419
----------- -----------
Total payroll and fringe benefits $ 5,076,093 $ 4,469,296
=========== ===========
Overhead expenses
Rent expense $ 666,891 $ 571,664
Communications 460,962 341,035
Subcontract labor 461,477 213,130
Travel & automobile expense 260,718 206,875
Office supplies & equipment 116,649 118,936
Freight 349,656 334,167
Freight billed to customers (496,376) (441,964)
Agents' commissions 60,650 178,695
Operating supplies 242,266 197,255
Utilities 78,837 65,691
Bad debt & collection expense 87,056 38,970
Liability & property insurance 102,972 77,991
Repairs & maintenance 94,387 77,025
Legal and audit fees 148,199 72,597
Outside services 177,295 120,541
Personnel & relocation expense 109,751 38,675
Advertising & promotional expense 33,596 8,057
Miscellaneous expense 121,424 102,474
----------- -----------
Total overhead expenses $ 3,076,410 $ 2,321,814
=========== ===========
</TABLE>
See independent auditors' report on supplemental material.
21
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Metermaster Inc.
We have audited the accompanying balance sheets of Metermaster Inc. (a
Georgia corporation) as of December 31, 1996 and 1995, and the related
statements of income, stockholders' equity, and cash flows for the year ended
December 31, 1996 and the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Metermaster Inc. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the year and period then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
financial statements taken as a whole. The information included in the
supplemental schedules is presented for purposes of additional analysis and is
not a required part of the basic financial statements. This information has been
subjected to the auditing procedures applied in our audits of the basic
financial statements, and in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Gifford, Hillegass & Ingwersen, P.C.
February 20, 1997
Atlanta, Georgia
22
<PAGE> 23
<TABLE>
<CAPTION>
METERMASTER INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash (Note C) $ 59,737 $ 63,703
Accounts receivable (Notes A, C, and D) 2,525,873 2,219,736
Inventory (Notes A, B and C) 2,838,650 2,156,025
Note receivable (Notes A and B) 0 72,152
Other receivables 39,773 58,261
Refundable income taxes 87,088 0
Deferred income taxes (Notes A, H and I) 25,000 20,600
Prepaid expenses 99,254 114,025
---------- ----------
Total Current Assets 5,675,375 4,704,502
PROPERTY AND EQUIPMENT (Notes A, C and F)
Machinery and equipment 20,747 12,737
Test equipment 333,614 99,528
Furniture, fixtures & office equipment 123,211 96,192
Computer equipment 216,170 169,531
Leasehold improvements 16,230 19,259
---------- ----------
709,972 397,247
Less accumulated depreciation 107,389 19,526
---------- ----------
Net Property and Equipment 602,583 377,721
OTHER ASSETS
Utility deposits 3,210 9,845
Security deposits 35,321 29,681
Organizational/Acquisition costs
(Notes A and D) 53,355 39,750
---------- ----------
Total Other Assets 91,886 79,276
---------- ----------
TOTAL ASSETS $6,369,844 $5,161,499
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE> 24
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 2,231,203 $ 1,670,007
Accrued salaries and commissions 60,117 23,923
Accrued vacation and employee
benefits (Notes A and G) 102,331 83,922
Accrued income taxes (Notes A, H an I) 0 19,000
Other accrued liabilities 42,765 83,186
Current maturities of long-term debt
(Note D) 39,713 0
Note payable - bank (Note C) 2,866,248 2,427,238
Due to bank (Note C) 405,783 100,636
----------- -----------
Total Current Liabilities 5,748,160 4,407,912
LONG-TERM LIABILITIES
Long-term debt less current
maturities (Note D) 165,603 0
Deferred income taxes (Notes A, H, and I) 25,000 2,000
----------- -----------
Total Long-Term Liabilities 190,603 2,000
COMMITMENTS AND CONTINGENCIES (Note F)
STOCKHOLDERS' EQUITY
Common stock & paid-in capital (Note E) 100,000 150,000
Preferred stock (Note E) 650,000 600,000
Retained earnings (deficit) (Note I) (318,919) 1,587
----------- -----------
Total Stockholders' Equity 431,081 751,587
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,369,844 $ 5,161,499
=========== ===========
</TABLE>
24
<PAGE> 25
METERMASTER INC.
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
------------ -------------
(4 1/2 months
of operations)
<S> <C> <C>
NET SALES $ 18,761,596 $ 6,875,255
COST OF SALES 12,241,414 4,643,166
------------ ------------
Gross Profit 6,520,182 2,232,089
OPERATING EXPENSES
Payroll and fringe benefits 4,010,655 1,255,253
Overhead expenses 2,303,421 817,426
------------ ------------
Total Operating Expenses 6,314,076 2,072,679
------------ ------------
Income From Operations 206,106 159,410
OTHER EXPENSES
Depreciation and amortization 104,438 24,321
Interest expense and bank charges 366,824 133,102
------------ ------------
Total Other Expenses 471,262 157,423
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (265,156) 1,987
INCOME TAX BENEFIT (PROVISION) 400 (400)
------------ ------------
Net Income (Loss) ($ 264,756) $ 1,587
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 26
METERMASTER INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON PAID-IN PREFERRED RETAINED
STOCK CAPITAL STOCK EARNINGS TOTAL
---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Issuance of 15,000
shares of
common stock $ 15,000 $ 135,000 $ 0 $ 0 $ 150,000
Issuance of 6,000
shares of
preferred stock 0 0 600,000 0 600,000
Net income 0 0 0 1,587 1,587
--------- --------- --------- --------- ---------
Balance at
December 31, 1995 15,000 135,000 600,000 1,587 751,587
Exchange of 5,000
shares of common
stock for 500 shares
of preferred stock (5,000) (45,000) 50,000 0 0
Net loss 0 0 0 (264,756) (264,756)
Dividends paid 0 0 0 (55,750) (55,750)
--------- --------- --------- --------- ---------
Balance at
December 31, 1996 $ 10,000 $ 90,000 $ 650,000 ($318,919) $ 431,081
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 27
<TABLE>
<CAPTION>
1996 1995
------------ --------------
(4 1/2 MONTHS
OF OPERATIONS)
<S> <C> <C>
Cash Flows From Financing Activities
Bank financing for acquisition $2,935,000
Net increase (decrease) in notes payable $ 439,010 (507,762)
Net increase in due to bank 305,147 100,636
Proceeds from sale of common stock 0 150,000
Proceeds from sale of preferred stock 0 600,000
Dividends paid (55,750) 0
Principal payments on long-term debt (14,684) 0
----------- -----------
Net Cash Provided by Financing Activities 673,723 3,277,874
----------- -----------
NET INCREASE (DECREASE) IN CASH (3,966) 63,703
CASH, beginning of period 63,703 0
----------- -----------
CASH, end of period $ 59,737 $ 63,703
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for:
Interest $ 294,043 $ 109,829
Facility fee 60,000 60,000
Other bank fees 12,782 773
----------- -----------
Total Interest Expense & Bank Charges $ 366,825 $ 170,602
=========== ===========
Income Taxes Paid $ 87,088 $ 0
=========== ===========
Non-cash investing activity:
Assets acquired in acquisitions $ 461,634 $ 5,527,198
Liabilities assumed in acquisitions (211,902) (1,827,198)
Seller financing with acquisitions (220,000) 0
----------- -----------
Acquisition of Net Assets $ 29,732 $ 3,700,000
=========== ===========
</TABLE>
27
<PAGE> 28
METERMASTER, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS: Metermaster Inc. (the Company) was incorporated in
the state of Georgia on May 25, 1995, and started operations on August 15, 1995.
The Company is a leading nationwide distributor of electrical and electronic
test and measurement instrumentation, which provides extensive modification,
calibration, and repair services to a broad range of industrial customers.
Metermaster (originally known as Quality Electric Company) has been in business
continuously since 1895.
PURCHASE OF OPERATIONS: On August 15, 1995, the Company (previously known as MM
Holdings, Inc.) purchased substantially all of the assets and trade liabilities
of Metermaster Inc. (a subsidiary of BTR PLC) for $3,700,000. MM Holdings, Inc.
changed its name to Metermaster Inc., effective October 16, 1995. In June 1996
the Company made other asset acquisitions from three companies with similar
operations which were accounted for by the purchase method of accounting. Total
assets acquired amounted to $461,634. Total liabilities assumed amounted to
$211,902, and the Sellers accepted $220,000 in subordinated notes payable.
Reference Note D for terms of notes payable.
ACCOUNTS RECEIVABLE: Accounts receivable are stated net of a $50,000 reserve for
bad debts at December 31, 1996 and 1995, respectively.
INVENTORY: Inventory is valued at the lower of cost (first-in, first-out,
"FIFO") OR MARKET. Inventory is net of a reserve for slow moving items of
$100,000 and $75,000 at December 31, 1996 and 1995, respectively. The components
of inventory at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Merchandise $ 2,093,533 $ 1,447,164
Demonstration equipment 271,680 210,021
Component parts 533,437 540,840
Freight 40,000 33,000
----------- -----------
Sub-total 2,938,650 2,231,025
Inventory reserve (100,000) (75,000)
------------ ------------
Total inventory $ 2,838,650 $ 2,156,025
=========== ===========
</TABLE>
PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost.
Depreciation is provided using straight line methods over the estimated useful
lives of the respective assets.
ORGANIZATIONAL/ACQUISITION COSTS: Organizational and acquisition costs consist
of $31,680 in loan closing costs and bank fees which are being amortized over
the loan term of thirty-six months, and $43,150 in other organizational and
acquisition costs which are being amortized over sixty months. Total accumulated
amortization at December 31, 1996 amounted to $21,475.
INCOME TAXES: The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109. Deferred income taxes are provided
for temporary differences between book and income tax reporting,
28
<PAGE> 29
primarily related to differences in accumulated depreciation, reserves for bad
debts, accruals for vacation pay and inventory reserves. Bad debts are
deductible for tax purposes when written off and vacation pay is deductible for
tax purposes when taken or paid. Slow moving inventory is reserved when
identified for book purposes and directly written off when disposed of for tax
purposes. Note H details the provision for income taxes for the periods ended
December 31, 1996 and 1995.
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 revenues and expenses during
the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS: Certain 1995 amounts have been reclassified to conform to the
1996 presentation.
NOTE B - NOTE RECEIVABLE AND SALE OF INVENTORY
On November 30, 1995, the Company made a bulk sale of slow moving inventory. The
amount of inventory sold had an original cost value of $1,187,602 which was
offset by a reserve of $987,602 recorded at the time of acquisition of the
assets and operations effective August 15, 1995. The net book value of this
inventory of $200,000 was sold to the purchaser for $250,000.
Of the $250,000 sale price, $100,000 was paid at closing and a promissory note
was executed for the remaining $150,000, to be paid in three $50,000
installments due no later than December 28, 1995, January 30, 1996, and February
29, 1996. The agreement provided that any collection of sales proceeds from
resale would be first applied against the principal balance of the note
receivable. The agreement also provided that any proceeds from vendors for
returns and/or inventory shortages based on subsequent physical inventory counts
would be used to reduce the principal amount of the note receivable. The balance
of the note receivable at December 31, 1995 of $72,152 was paid in full in 1996.
The agreement also allows for the Company, at its option, to repurchase any of
the inventory if needed by the Company, if quantities are still available. The
repurchase price is 60% of the inventory's original cost to the Company.
NOTE C - NOTE PAYABLE
The Company has a demand note executed with LaSalle National Bank in the amount
of $4,000,000. Advances on the note are restricted to loan limits as defined in
the loan agreement. The loan limit may not exceed 85% of eligible trade accounts
receivable plus up to 60% (reducing 1% per month beginning two months after the
initial advance on the loan until 50%) of the lower of cost or market value of
eligible inventory (merchandise and component parts) or $1,500,000, whichever is
less, plus up to 75% of the purchase price of equipment or $150,000, whichever
is less, minus any reserves as the Bank elects to establish; provided that the
aggregate loan limit shall in no event exceed $4,000,000.
The principal balance payable to the bank at December 31, 1996 and 1995 amounted
to $2,866,248 and $2,427,238, respectively. Additional borrowings of $20,173 and
$288,623 were available at December 31, 1996 and 1995 under the loan limits as
defined in the agreement. Interest is payable on the last
29
<PAGE> 30
business day, in arrears, at 1.5% above prime rate. In addition, an annual
facilities fee equal to 1.5% of the aggregate loan limit of $4,000,000, or
$60,000, is payable annually on the first day of the loan and on each
anniversary date thereafter. The Company amortizes this fee $5,000 each month. A
prepaid balance of $37,500 is included with prepaid expenses at December 31,
1996 and 1995. The Company, under the terms of the agreement, is required to
repay monthly an amount sufficient to repay the extra principal amount of each
advance related to equipment purchases within forty-eight months following the
date of such advance. The original term of the loan agreement expires August 2,
1998 and has renewal options as defined in the agreement. If during the term of
the agreement the Company elects to prepay all or part of the debt outstanding,
the Company will be obligated to pay the bank a prepayment penalty equal to 50%
of the average monthly interest earned on the loan preceding the date of
prepayment multiplied by the number of months remaining under the terms of the
agreement.
The note payable to bank is secured by virtually all tangible and intangible
assets of the Company and has the personal guarantee of all common stockholders.
The loan agreement also requires the Company to keep compensating balances of
$50,000 in the general checking account with the bank. On January 19, 1997, the
bank waived the compensating balance requirement and reduced the outstanding
loan balance by $50,000.
The amount due to bank of $405,783 and $100,636 at December 31, 1996 and 1995,
respectively, represents the net of outstanding checks of $435,203 and $176,746
which had not cleared the bank at December 31, 1996 and 1995, respectively, and
deposits in transit of $29,420 and $76,110 at December 31, 1996 and 1995,
respectively.
NOTE D - LONG-TERM DEBT
Long-term debt resulting from business acquisitions in 1996, as noted in Note A,
consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Installment note at 7% interest,
monthly principal and interest
payments of $1,386 through
June 2001. The note is unsecured. $ 64,047
Installment note at 8% interest,
monthly principal and interest
payments of $3,124 through
June 2001, secured by a subordinated
interest in accounts receivable. 141,269
-------
$205,316
========
</TABLE>
Future maturities of long-term debt at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 39,713
1998 42,875
1999 46,289
2000 49,977
2001 26,462
--------
$205,316
========
</TABLE>
30
<PAGE> 31
NOTE E - STOCKHOLDERS' EQUITY
As of December 31, 1996 and 1995, common stock consists of 100,000 shares
authorized and 10,000 and 15,000 shares issued an outstanding, respectively. The
common stock was issued at $1 par value per share plus an additional $9 per
share of contributed capital in excess of par value for total capital of
$150,000. During 1996, 5,000 shares of common stock were exchanged for 500
shares of preferred stock.
As of December 31, 1996 and 1995, the preferred stock consists of 200,500 and
200,000 shares authorized, respectively, and 6,500 and 6,000 shares issued and
outstanding, respectively. The preferred shares have a stated value of $100 per
share, with a liquidation value of $200 per share callable at the Company's
option at $200 per share. The preferred shares are convertible into 10 shares of
common stock at the stockholders' election, beginning five years from the date
of purchase, subject to the Company's right of first refusal to redeem any or
all at $200 per share.
Preferred dividends, which must be approved by the Board of Directors, are
payable quarterly. Dividends are cumulative at 8% per annum and all arrearages
must be paid before any common dividends may be paid or before any preferred
shares may be called. Total cumulative unpaid dividends at December 31, 1996 and
1995 amount to $13,000 and $17,750, respectively.
NOTE F - COMMITMENTS
The Company leases certain offices, warehouses and office equipment under
noncancellable operating leases. Future minimum payments at December 31, 1996
under these leases are as follows:
<TABLE>
<S> <C>
1997 $525,486
1998 389,750
1999 264,175
2000 246,269
2001 154,864
Thereafter 10,412
</TABLE>
Total lease and rent expense for the periods ended December 31, 1996 and 1995
amounted to approximately $519,600 and $158,000, respectively.
NOTE G - EMPLOYEE BENEFIT PLAN
The Company has a 401(k) employee benefit plan that covers substantially all
employees. Employees are eligible to participate in the plan after completion of
ninety days of service, on eligible quarterly entry dates. The Company will
match 25% of an employee's contributions up to a maximum of 6% of the employee's
compensation excluding automobile allowances. The amount contributed by the
Company amounted to $30,036 and $12,200 for the periods ended December 31, 1996
and 1995, respectively.
31
<PAGE> 32
NOTE H - INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Federal States Total
------- ------ -----
<S> <C> <C> <C>
December 31, 1995
Current tax provision $ 14,000 $ 5,000 $ 19,000
Deferred tax expense (benefit) (13,700) (4,900) (18,600)
-------- -------- --------
$ 300 $ 100 $ 400
======== ======== ========
December 31, 1996
Current tax provision (benefit) $(14,000) $ (5,000) $(19,000)
Deferred tax expense (benefit) 13,700 4,900 18,600
Total $ (300) $ (100) $ (400)
======== ======== ========
</TABLE>
Deferred tax assets and liabilities are a result of the temporary differences
between book and tax as described in Note A. Deferred tax liabilities at
December 31, 1996 and 1995 were $25,000 and $2,000, respectively. Deferred tax
assets at December 31, 1996 and 1995 were $25,000 and $20,600, respectively. The
deferred tax asset at December 31, 1996 was limited to the extent of deferred
tax liabilities, resulting in a valuation allowance of $70,000.
As a result of the prior period adjustment as noted in Note I, the income tax
returns for 1995 will be amended, resulting in a recovery of income taxes of
approximately $33,000. A portion of the net operating losses for 1996 will be
carried back to 1995 to recover approximately $19,000 in additional income
taxes. Also, the Company made 1996 estimated income tax payments of
approximately $35,000, which will be refunded. The federal net operating loss
carryforward for future years is approximately $40,000 at December 31, 1996,
which will expire in the year 2011.
NOTE I - PRIOR PERIOD ADJUSTMENT
The financial statements for December 31, 1995 have been restated to reflect a
prior period adjustment due to an accounting error. The net effect of the
adjustment resulted in a reduction of previously reported net income and
retained earnings of $51,963. This amount is net of a $27,600 reduction of
previously reported income tax provision.
32
<PAGE> 33
SUPPLEMENTAL SCHEDULES
33
<PAGE> 34
METERMASTER INC.
SUPPLEMENTAL SCHEDULE
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
Prepaid Expenses
Prepaid insurance $ 29,000 $ 15,979
Prepaid operating expenses 18,247 12,899
Prepaid bank fees 37,500 37,500
Prepaid software maintenance 10,507 9,641
Travel advances 4,000 6,000
Prepaid rent 0 32,006
-------- --------
Total Prepaid Expenses $ 99,254 $114,025
======== ========
Other Accrued Liabilities
Sales tax payable $ 16,690 $ 27,106
Accrued miscellaneous 10,445 15,139
Accrued property taxes 10,130 21,000
Accrued legal & accounting 5,500 5,570
Accrued relocation cost 0 4,796
Accrued organizational cost 0 9,575
-------- --------
Total Other Liabilities $ 42,765 $ 83,186
======== ========
</TABLE>
34
<PAGE> 35
<TABLE>
<CAPTION>
METERMASTER INC.
SUPPLEMENTAL SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE PERIOD ENDED DECEMBER 31, 1995
1996 1995
------------ --------------
(4 1/2 months
of operations)
<S> <C> <C>
Payroll and Fringe Benefits
Salaries and wages $ 3,443,384 $ 1,083,414
Insurance 222,885 74,148
Employment taxes 314,350 85,491
401(k) company match 30,036 12,200
----------- -----------
Total Payroll & Fringe Benefits $ 4,010,655 $ 1,255,253
=========== ===========
Overhead Expenses
Rent expense $ 475,777 $ 158,063
Communications 350,273 119,638
Subcontractor labor 143,348 95,062
Travel expense 197,024 57,218
Office supplies & equipment 115,409 37,482
Prepaid operating expense
write-off 0 17,422
Freight
Freight $ 449,566 $ 144,237
Freight billed to customers (338,045) (92,290)
----------- -----------
Net freight expense 111,521 51,947
Agents' commissions 235,925 60,040
Operating supplies 166,064 55,681
Utilities 58,302 28,523
Bad debt expense 48,204 21,836
Liability & property insurance 80,739 34,743
Repairs & maintenance 85,218 33,134
Legal & audit fees 72,258 19,731
Temporary labor 48,209 30,167
Relocation expense 36,188 8,962
Advertising expense 24,885 3,952
Miscellaneous (income) expense 54,077 (16,175)
----------- -----------
Total Overhead Expenses $ 2,303,421 $ 817,426
=========== ===========
</TABLE>
35
<PAGE> 36
(b) Proforma Financial Information
INDEX TO PROFORMA FINANCIAL STATEMENTS OF TRANSMATION, INC.
Unaudited Proforma Combined Balance Sheet - December 31, 1998 Unaudited Proforma
Combined Balance Sheet - March 31, 1998 Unaudited Proforma Combined Balance
Sheet - March 31, 1997 Unaudited Proforma Combined Statement of Income for the
year ended December 31, 1998
Unaudited Proforma Combined Statement of Income for the year ended
March 31, 1998
Unaudited Proforma Combined Statement of Income for the year ended
March 31, 1997
Notes to Unaudited Proforma Combined Financial Statements
36
<PAGE> 37
TRANSMATION, INC. AND METERMASTER INC.
UNAUDITED PROFORMA COMBINED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
TRANSMATION METERMASTER PROFORMA
12/31/98 12/31/98 PROFORMA COMBINED
HISTORICAL HISTORICAL ADJUSTMENTS 12/31/98
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash 548,062 84,043 632,105
Accounts Receivable 10,777,484 2,450,410 13,227,894
Inventories 10,778,322 1,940,930 12,719,252
Prepaid Expenses & Def. Charges 1,828,400 127,385 1,955,785
Deferred Tax Assets 540,172 86,000 626,172
Taxes Receivable
------------ ------------ ------------
Current Assets 24,472,440 4,688,768 29,161,208
Properties, less depreciation 6,049,474 920,059 6,969,533
Goodwill 18,410,452 $ 2,533,914 20,944,366
Deferred Charges 277,779 277,779
Deferred Income Taxes 63,200 63,200
Other Assets 262,798 67,252 (33,914) 296,136
------------ ------------ ------------ ------------
$ 49,536,143 $ 5,676,079 $ 2,500,000 $ 57,712,222
============ ============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable
Revolving Credit $ 2,332,241 ($ 2,332,241)
Current Portion of Long-Term Debt $ 2,000,000 241,136 (41,136) $ 2,200,000
Accounts Payable 7,120,921 2,861,935 9,982,856
Accrued Liabilities 1,642,149 292,075 1,934,224
Income Taxes Payable 365,086 365,086
------------ ------------ ------------ ------------
11,128,156 5,727,387 (2,373,377) 14,482,166
Long-Term Debt 23,197,300 593,440 4,142,629 27,933,369
Deferred Taxes 86,000 86,000
Deferred Compensation 456,808 456,808
------------ ------------ ------------ ------------
34,782,264 6,406,827 1,769,252 42,958,343
------------ ------------ ------------ ------------
COMMITMENTS & CONTINGENT LIABILITIES
Stockholders' Equity:
Preferred Stock 850,000 (850,000)
Common Stock 2,960,946 24,000 (24,000) 2,960,946
Capital in Excess of Par Value 2,509,895 426,000 (426,000) 2,509,895
Accum. Translation Adjustment (230,599) (230,599)
Retained Earnings 9,919,702 (2,030,748) 2,030,748 9,919,702
------------ ------------ ------------ ------------
15,159,944 (730,748) 730,748 15,159,944
Treasury Stock, at Cost (406,065) (406,065)
------------ ------------ ------------ ------------
14,753,879 (730,748) 730,748 14,753,879
------------ ------------ ------------ ------------
$ 49,536,143 $ 5,676,079 $ 2,500,000 $ 57,712,222
============ ============ ============ ============
</TABLE>
37
<PAGE> 38
TRANSMATION, INC. AND METERMASTER INC.
UNAUDITED PROFORMA COMBINED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
TRANSMATION METERMASTER PROFORMA
3/31/98 12/31/97 PROFORMA COMBINED
HISTORICAL HISTORICAL ADJUSTMENTS 3/31/98
---------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 652,664 $ 35,436 $ 688,100
Accounts Receivable 12,540,347 3,195,084 15,735,431
Inventories 10,675,829 2,511,270 13,187,099
Prepaid Expenses & Def. Charges 1,344,799 104,579 1,449,378
Deferred Tax Assets 540,172 58,000 598,172
Taxes Receivable
----------- ---------- -----------
Current Assets 25,753,811 5,904,369 31,658,180
----------- ---------- -----------
Properties, less depreciation 6,405,053 1,049,295 7,454,348
Goodwill 19,199,947 $1,657,181 20,857,128
Deferred Charges 204,308 204,308
Deferred Income Taxes 58,582 58,582
Other Assets 253,513 115,651 (70,389) 298,775
----------- ---------- ---------- -----------
$51,875,214 $7,069,315 $1,586,792 $60,531,321
=========== ========== ========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $2,500,000 $ 2,500,000
Revolving Credit $3,257,681 3,257,681
Current Portion of Long-Term Debt 2,856,000 293,042 3,149,042
Accounts Payable 7,861,779 2,642,211 10,503,990
Accrued Liabilities 2,174,389 323,366 2,497,755
Income Taxes Payable 234,984 234,984
----------- ---------- -----------
15,627,152 6,516,300 22,143,452
Long-Term Debt 21,752,922 312,555 $1,769,252 23,834,729
Deferred Taxes 58,000 58,000
Deferred Compensation 509,981 509,981
----------- ---------- ---------- -----------
37,890,055 6,886,855 1,769,252 46,546,162
----------- ---------- ---------- -----------
COMMITMENTS & CONTINGENT LIABILITIES
Stockholders' Equity:
Preferred Stock 800,000 (800,000)
Common Stock 2,915,471 10,000 (10,000) 2,915,471
Capital in Excess of Par Value 2,227,117 90,000 (90,000) 2,227,117
Accum. Translation Adjustment (120,788) (120,788)
Retained Earnings 8,963,359 (717,540) 717,540 8,963,359
----------- ---------- ---------- -----------
13,985,159 182,460 (182,460) 13,985,159
Treasury Stock, at Cost
----------- ---------- ---------- -----------
13,985,159 182,460 (182,460) 13,985,159
----------- ---------- ---------- -----------
$51,875,214 $7,069,315 $1,586,792 $60,531,321
=========== ========== ========== ===========
</TABLE>
38
<PAGE> 39
TRANSMATION, INC. AND METERMASTER INC
UNAUDITED PROFORMA COMBINED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
TRANSMATION METERMASTER PROFORMA
3/31/97 12/31/96 PROFORMA COMBINED
HISTORICAL HISTORICAL ADJUSTMENTS 3/31/97
-------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash $ 758,215 $ 59,737 $ 817,952
Accounts Receivable 6,773,669 2,565,646 9,339,315
Inventories 7,790,166 2,838,650 10,628,816
Prepaid Expenses & Def. Charges 956,235 99,254 1,055,489
Deferred Tax Assets 394,402 25,000 419,402
Taxes Receivable 87,088 87,088
------------ ------------ ------------
Current Assets 16,672,687 5,675,375 22,348,062
------------ ------------ ------------
Properties, less depreciation 2,355,757 602,583 2,958,340
Goodwill 5,947,558 $ 1,391,526 7,339,084
Deferred Charges 118,214 118,214
Deferred Income Taxes 226,352 226,352
Other Assets 537,790 91,886 (53,355) 576,321
------------ ------------ ------------ ------------
$ 25,858,358 $ 6,369,844 $ 1,338,171 $ 33,566,373
============ ============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 600,000 $ 2,866,248 $ 3,466,248
Revolving Credit
Current Portion of Long-Term Debt 39,713 39,713
Accounts Payable 3,596,365 2,636,986 6,233,351
Accrued Liabilities 2,008,698 205,213 2,213,911
Income Taxes Payable 689,461 689,461
------------ ------------ ------------
6,894,524 5,748,160 12,642,684
Long-Term Debt 6,000,000 165,603 $ 1,769,252 7,934,855
Deferred Taxes 25,000 25,000
Deferred Compensation 594,026 594,026
------------ ------------ ------------ ------------
13,488,550 5,938,763 1,769,252 21,196,565
------------ ------------ ------------ ------------
COMMITMENTS & CONTINGENT LIABILITIES
Stockholders' Equity:
Preferred Stock 650,000 (650,000)
Common Stock 1,413,206 100,000 (100,000) 1,413,206
Capital in Excess of Par Value 3,121,746 3,121,746
Accum. Translation Adjustment (130,532) (130,532)
Retained Earnings 7,965,388 (318,919) 318,919 7,965,388
------------ ------------ ------------ ------------
12,369,808 431,081 (431,081) 12,369,808
Treasury Stock, at Cost
------------ ------------ ------------ ------------
12,369,808 431,081 (431,081) 12,369,808
------------ ------------ ------------ ------------
$ 25,858,358 $ 6,369,844 $ 1,338,171 $ 33,566,373
============ ============ ============ ============
</TABLE>
39
<PAGE> 40
<TABLE>
<CAPTION>
TRANSMATION, INC. AND METERMASTER INC.
UNAUDITED PROFORMA COMBINED PROFIT & LOSS
DECEMBER 31, 1998
TRANSMATION METERMASTER PROFORMA
1/1 - 1/1 - PROFORMA COMBINED
12/31/98 12/31/98 ADJUSTMENTS 1/1-12/31/98
-------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net Sales $ 71,111,352 $ 20,991,257 $ 92,102,609
Costs and Expenses:
Cost of Product Sold 47,254,620 13,499,633 ($ 195,000) 60,559,253
S G & A Expenses 17,942,580 8,315,102 (686,000) 25,571,682
R & D Expenses 1,709,128 1,709,128
Interest Expense 2,292,434 489,730 87,000 2,869,164
------------ ------------ ------------ ------------
69,198,762 22,304,465 (794,000) 90,709,227
------------ ------------ ------------ ------------
1,912,590 (1,313,208) 794,000 1,393,382
Other Income 244,494 244,494
------------ ------------ ------------ ------------
Income Before Taxes 2,157,084 (1,313,208) 794,000 1,637,876
Provision for Taxes 867,845 (208,845) 659,000
------------ ------------ ------------ ------------
Net Income $ 1,289,239 ($ 1,313,208) $ 1,002,845 $ 978,876
============ ============ ============ ============
EPS - Basic $ 0.22 $ 0.17
EPS - Diluted $ 0.21 $ 0.16
Shares Outstanding - Basic 5,838,101 5,838,101
Shares Outstanding - Diluted 6,042,775 6,042,775
</TABLE>
40
<PAGE> 41
TRANSMATION, INC. AND METERMASTER INC.
UNAUDITED PROFORMA COMBINED PROFIT & LOSS
MARCH 31, 1998
<TABLE>
<CAPTION>
PROFORMA
TRANSMATION METERMASTER COMBINED
4/1/97 - 1/1 - PROFORMA 4/1/97 -
3/31/98 12/31/97 ADJUSTMENTS 3/31/98
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net Sales $ 78,483,565 $ 20,475,134 $ 98,958,699
Costs and Expenses:
Cost of Product Sold 53,441,287 13,532,708 ($ 195,000) 66,778,995
S G & A Expenses 19,194,879 6,863,554 (686,000) 25,372,433
R & D Expenses 1,660,110 1,660,110
Interest Expense 2,547,218 477,493 87,000 3,111,711
------------ ------------ ------------ ------------
76,843,494 20,873,755 (794,000) 96,923,249
------------ ------------ ------------ ------------
1,640,071 (398,621) 794,000 2,035,450
Other Income
------------ ------------ ------------ ------------
Income Before Taxes 1,640,071 (398,621) 794,000 2,035,450
Provision for Taxes 642,100 154,900 797,000
------------ ------------ ------------ ------------
Net Income $ 997,971 ($ 398,621) $ 639,100 $ 1,238,450
============ ============ ============ ============
EPS - Basic $ 0.17 $ 0.22
EPS - Diluted $ 0.16 $ 0.20
Shares Outstanding - Basic 5,729,599 5,729,599
Shares Outstanding - Diluted 6,274,638 6,274,638
</TABLE>
41
<PAGE> 42
TRANSMATION, INC. AND METERMASTER INC.
UNAUDITED PROFORMA COMBINED PROFIT & LOSS
MARCH 31, 1997
<TABLE>
<CAPTION>
PROFORMA
TRANSMATION METERMASTER COMBINED
4/1/96 - 1/1 - PROFORMA 4/1/96 -
3/31/97 12/31/96 ADJUSTMENTS 3/31/97
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net Sales $ 47,311,224 $ 18,761,596 $ 66,072,820
Costs and Expenses:
Cost of Product Sold 28,733,887 12,241,414 ($ 195,000) 40,780,301
S G & A Expenses 13,580,402 6,418,514 (686,000) 19,312,916
R & D Expenses 1,560,974 1,560,974
Interest Expense 633,638 366,824 87,000 1,087,462
------------ ------------ ------------ ------------
44,508,901 19,026,752 (794,000) 62,741,653
------------ ------------ ------------ ------------
2,802,323 (265,156) 794,000 3,331,167
Other Income 479,013 479,013
------------ ------------ ------------ ------------
Income Before Taxes 3,281,336 (265,156) 794,000 3,810,180
Provision for Taxes 1,221,600 (400) 196,800 1,418,000
------------ ------------ ------------ ------------
Net Income $ 2,059,736 ($ 264,756) $ 597,200 $ 2,392,180
============ ============ ============ ============
EPS - Basic $ 0.37 $ 0.43
EPS - Diluted $ 0.35 $ 0.40
Shares Outstanding - Basic 5,606,752 5,606,752
Shares Outstanding - Diluted 5,942,410 5,942,410
</TABLE>
42
<PAGE> 43
TRANSMATION, INC.
NOTES TO UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS
Note 1: Basis of Presentation
The unaudited proforma combined statements of income and balance sheet
reflect the acquisition of Metermaster Inc. which is to be accounted for under
the purchase method of accounting, as of the beginning of the most recent two
fiscal years. The unaudited proforma combined statements also reflect combined
results for the most recent interim period (12/31/98).
Transmation's management believes the assumptions used in preparing the
unaudited proforma combined financial statements provide a reasonable basis for
presenting all of the significant effects of its transactions, that the proforma
adjustments give appropriate effect to those adjustments and that the proforma
adjustments are properly applied in the unaudited proforma financial statements.
Note 2: Proforma Adjustments
Unaudited proforma adjustments consist of the following:
Transmation will pay $1,769,252 for 100% of the outstanding preferred
and common stock of Metermaster Inc. That amount will be adjusted downward on a
dollar for dollar basis to the extent that the equity of Metermaster falls below
a deficit of $730,748. To the extent that Metermaster's deficit is less than
$730,748, Transmation will pay $1 more for each dollar Metermaster's deficit is
less than $730,748, up to a maximum of $100,000 should Metermaster's deficit be
reduced to $630,748. There will be no additional payments to Metermaster's
shareholders should Metermaster's deficit improve such that it is less than
$630,748. This transaction will be accounted for using the purchase method of
accounting.
The purchase price is allocated to the net assets acquired using the
assumption that the net book basis of the long-term assets is reflective of
their fair value. Goodwill is calculated as the difference between the purchase
price and the fair value of the net assets acquired and is amortized over 20
years.
The proforma adjustments to operating expenses in the statements of
income for the years ended December 31, 1998, March 31, 1998 and March 31, 1997
represent the amortization of goodwill, differences in interest rates and
amounts borrowed as between Transmation and Metermaster, differences in rental
costs resulting from former Metermaster space which will not be continued under
Transmation's ownership due to consolidations, and eliminations in employment,
primarily senior management of Metermaster, which were effected on the date of
the acquisition.
Transmation's historical tax rate is used in each period presented to
calculate the tax effect of the unaudited proforma combined statement of income
adjustments.
43
<PAGE> 44
(c) Exhibits. See Index to Exhibits.
44
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRANSMATION, INC.
April 12 , 1999 By: /s/ Eric W. McInroy
-------- -------------------------
Eric W. McInroy
President
April 12 , 1999 By: /s/ John A. Misiaszek
-------- ---------------------------
John A. Misiaszek
Vice President-Finance
45
<PAGE> 46
INDEX TO EXHIBITS
(1) Underwriting Agreement
Not applicable.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession
(a) Agreement and Plan of Merger dated January 21, 1999 and
amended and restated February 4, 1999 among the Registrant,
Metermaster Inc., MM Acquisition Corp., and certain other
parties, together with a brief identification of the contents
of all omitted exhibits and schedules thereto, is incorporated
herein by reference to Exhibit 2(a) to the Registrant's
Current Report on Form 8-K dated February 9, 1999, of which
this Form 8-K/A forms a part. Upon written request, the
Registrant will provide to security holders copies of any of
the referenced omitted exhibits and schedules.
(4) Instruments defining the rights of security holders, including
indentures
(a) Credit and Loan Agreement dated August 7, 1998 between the
Registrant and KeyBank National Association is incorporated
herein by reference to Exhibit 4(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1998.
(b) Second Amendment to Credit and Loan Agreement, dated as of
February 9, 1999, by and among the Registrant, KeyBank
National Association and the Lenders Party Thereto From Time
to Time, together with a brief identification of the contents
of all omitted exhibits thereto, is incorporated herein by
reference to Exhibit 4(b) to the Registrant's Current Report
on Form 8-K dated February 9, 1999, of which this Form 8-K/A
forms a part. Upon written request, the Registrant will
provide to security holders copies of any of the referenced
omitted exhibits.
(16) Letter re change in certifying accountant
Not applicable.
(17) Letter re director resignation
Not applicable.
(20) Other documents or statements to security holders
Not applicable.
(23) Consents of experts and counsel
(a) Consent of BDO Seidman LLP is included herein as Exhibit
23(a).
46
<PAGE> 47
(b) Consent of Gifford, Hillegass & Ingwersen, P.C. is included
herein as Exhibit 23(b).
(24) Power of Attorney
Not applicable.
(27) Financial Data Schedule
Not applicable.
(99) Additional Exhibits
Not applicable.
47
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in the Current Report on Form 8-K/A, dated
February 9, 1999, of Transmation, Inc., of our reports dated January 29, 1999
(except for Note 11, as to which the date is February 8, 1999) with respect to
the financial statements and the supplemental material of Metermaster Inc., and
to the incorporation of such reports by reference in the three Registration
Statements on Form S-8 (Registration No. 33-61665, Registration No. 33-08779 and
Registration No. 33-08781) of Transmation, Inc.
/s/ BDO Seidman, LLP
Atlanta, Georgia
April 12, 1999
48
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in the Current Report on Form 8-K/A, dated
February 9, 1999, of Transmation, Inc., of our report dated February 20, 1997
with respect to the financial statements of Metermaster Inc., and to the
incorporation of such report by reference in the three Registration Statements
on Form S-8 (Registration No. 33-61665, Registration No. 33-08779 and
Registration No. 33-08781) of Transmation, Inc.
/s/ Gifford, Hillegass & Ingwersen, P.C.
April 8, 1999
Atlanta, Georgia
49
