1 FORM 8 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT TO APPLICATION OR REPORT FILED PURSUANT TO SECTION 12, 13, OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 WPI GROUP, INC. --------------- (Exact name of registrant as specified in charter) AMENDMENT NO. 1 --------------- The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its CURRENT REPORT DATED JULY 23, 1996 on Form 8-K as set forth in the pages attached hereto: Item 7: Financial Statements and Exhibits --------------------------------- Financials: Oyster Terminals Limited Consolidated Financial Statements as of April 30, 1996. Pro Forma Combined Financial Statements for WPI Group, Inc and Oyster Terminals Limited as of June 30, 1996. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. WPI Group, Inc. BY: /s/ Charles F. Johnson -------------------------------- Charles F. Johnson Vice President and Chief Financial Officer Date: September 27, 1996 2 OYSTER TERMINALS LIMITED 3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Oyster Terminals Limited We have audited the accompanying balance sheet of OYSTER TERMINALS LIMITED as of April 30, 1996 and the related profit and loss accounts, statements of changes in shareholders' equity and statements of cash flows for the years ended April 30, 1996 and 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 audit. We conducted our audit in accordance with United Kingdom generally accepted auditing standards, which are substantially in accordance with United States 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 Oyster Terminals Limited as of April 30, 1996 and the results of their operations and their cash flows for each of the two years then ended in conformity with generally accepted United Kingdom accounting principles. Accounting practices used by the Company in preparing the accompanying financial statements conform with generally accepted accounting principles in the United Kingdom, but do not conform with accounting principles generally accepted in the United States. A description of these differences and a complete reconciliation of net income and shareholders' equity to United States generally accepted accounting principles is set out in Note 14 to the financial statements. Arthur Andersen LLP Bristol, England September 11, 1996 -1- 4 OYSTER TERMINALS LIMITED PROFIT AND LOSS ACCOUNTS FOR THE YEARS ENDED APRIL 30, 1995 AND 1996 YEAR ENDED APRIL 30 -------------------------- 1995 1996 ---------- ---------- [POUND] [POUND] TURNOVER (Note 2) 4,257,487 4,885,480 COST OF SALES (1,892,613) (2,214,139) ---------- ---------- GROSS PROFIT 2,364,874 2,671,341 DISTRIBUTION COSTS (653,386) (527,133) ADMINISTRATIVE EXPENSES (698,496) (708,259) ---------- ---------- OPERATING PROFIT (Note 3) 1,012,992 1,435,949 INTEREST (Note 4) 31,968 94,091 ---------- ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 1,044,960 1,530,040 TAX ON PROFIT ON ORDINARY ACTIVITIES (Note 5) (343,782) (546,182) ---------- ---------- PROFIT FOR THE FINANCIAL YEAR 701,178 983,858 DIVIDEND PAID (252,000) (320,000) ---------- ---------- RETAINED PROFIT FOR THE FINANCIAL YEAR 449,178 663,858 ---------- ---------- There are no recognised gains and losses other than the profits for each financial year, and accordingly, no statements of recognised gains and losses are presented. None of the Company's activities were acquired or discontinued during the current and previous years. A summary of the significant adjustments to profit for the financial years that would have been required had United States generally accepted accounting principles been applied instead of those generally accepted in the United Kingdom is set forth in Note 14 to the Financial Statements. The accompanying notes are an integral part of these profit and loss accounts. -2- 5 OYSTER TERMINALS LIMITED BALANCE SHEET APRIL 30, 1996 APRIL 30, 1996 ---------- [POUND] FIXED ASSETS: Tangible assets (Note 8) 392,908 ---------- CURRENT ASSETS: Stocks (Note 9) 951,906 Debtors (Note 10) 869,129 Cash at bank and in hand 1,718,543 ---------- 3,539,578 CREDITORS: Amounts falling due within one year (Note 11) (1,290,887) ---------- NET CURRENT ASSETS 2,248,691 PROVISIONS FOR LIABILITIES AND CHARGES (Note 12) (11,377) ---------- NET ASSETS 2,630,222 ---------- CAPITAL AND RESERVES: Called-up share capital 100,000 Profit and loss account 2,530,222 ---------- SHAREHOLDERS' FUNDS (ALL EQUITY) 2,630,222 ---------- A summary of the significant adjustments to shareholders' equity that would be required had United States generally accepted principles been applied instead of those generally accepted in the United Kingdom is set forth in Note 14 of the Financial Statements. The accompanying notes are an integral part of this balance sheet. -3- 6 OYSTER TERMINALS LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED APRIL 30, 1995 AND 1996 ORDINARY ORDINARY SHARES SHARES TOTAL OF[POUND]1 OF[POUND]1 RETAINED SHAREHOLDERS' EACH EACH EARNINGS EQUITY ---------- ---------- -------- ------------- NUMBER [POUND] [POUND] [POUND] May 1, 1994 100,000 100,000 1,417,186 1,517,186 Profit for the financial year - - 701,178 701,178 Dividends ([pound]2.52 per ordinary share) - - (252,000) (252,000) ------- ------- --------- --------- April 30, 1995 100,000 100,000 1,866,364 1,966,364 Profit for the financial year - - 983,858 983,858 Dividends ([pound]3.20 per ordinary share) - - (320,000) (320,000) ------- ------- --------- --------- April 30, 1996 100,000 100,000 2,530,222 2,630,222 ------- ------- --------- --------- Share capital comprises ordinary shares, [pound]1 par value: 100,000 shares authorised, allotted and fully paid. The accompanying notes are an integral part of these statements of changes in shareholders' equity. -4- 7 OYSTER TERMINALS LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 1995 AND 1996 YEAR ENDED APRIL 30 --------------------- 1995 1996 --------- --------- [POUND] [POUND] NET CASH INFLOW FROM OPERATING ACTIVITIES (Note A) 1,014,450 1,391,589 --------- --------- RETURNS ON INVESTMENTS AND SERVICING OF FINANCE: Interest received 34,543 97,623 Interest paid (2,575) (3,532) Dividends paid (252,000) (320,000) --------- --------- Net cash outflow from returns on investments and servicing of finance (220,032) (225,909) --------- --------- TAX: Corporation tax paid (49,171) (327,910) --------- --------- INVESTING ACTIVITIES: Payments to acquire tangible fixed assets (12,455) (75,315) Receipts from sales of tangible fixed assets 1,750 3,404 --------- --------- Net cash outflow from investing activities (10,705) (71,911) --------- --------- NET CASH INFLOW BEFORE AND AFTER FINANCING, BEING THE INCREASE IN CASH AND CASH EQUIVALENTS (Note B) 734,542 765,859 --------- --------- A summary of the significant adjustments to the Statements of Cash Flows that would be required had United States generally accepted accounting principles been applied instead of those generally accepted in the United Kingdom is set forth in Note 14 of Notes to the Financial Statements. The accompanying notes are an integral part of these statements. -5- 8 OYSTER TERMINALS LIMITED NOTES TO THE STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 1995 AND 1996 A. RECONCILIATION OF OPERATING PROFIT TO CASH FLOWS Reconciliation of operating profit to net cash inflow from operating activities: YEAR ENDED APRIL 30 --------------------- 1995 1996 --------- --------- [POUND] [POUND] OPERATING PROFIT 1,012,992 1,435,949 Depreciation 61,110 57,218 Profit on sale of tangible fixed assets - (317) Decrease/(increase) in stocks 226,809 (288,327) (Increase)/decrease in debtors (269,119) 215,418 Decrease in creditors (17,342) (28,352) --------- --------- NET CASH INFLOW FROM OPERATING ACTIVITIES 1,014,450 1,391,589 --------- --------- B. CASH AND CASH EQUIVALENTS Analysis of balances shown in the balance sheet and changes during the current and previous year: APRIL 30, CHANGE APRIL 30, CHANGE APRIL 30, 1994 IN YEAR 1995 IN YEAR 1996 -------- ------- --------- ------- --------- [POUND] [POUND] [POUND] [POUND] [POUND] Cash at bank and in hand 300,692 588,045 888,737 829,806 1,718,543 Short term borrowings (216,451) 146,497 (69,954) (63,947) (133,901) -------- ------- ------- ------- --------- 84,241 734,542 818,783 765,859 1,584,642 -------- ------- ------- ------- --------- -6- 9 OYSTER TERMINALS LIMITED NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES A summary of the principal accounting policies, all of which have been applied consistently throughout the year and the preceding year, is set out below: GENERAL The Company was incorporated as a limited company under the laws of England and Wales on April 25, 1974 as G R Electronics Limited. On September 2, 1986 the Company changed its name to Oyster Terminals Limited. The financial statements of the Company have been prepared from records maintained in the United Kingdom. BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention and are presented in conformity with accounting principles generally accepted in the United Kingdom. These financial statements do not comprise "statutory accounts" within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the period ended September 30, 1996 will be delivered to the Registrar of Companies for England and Wales in due course, and statutory accounts for the year ended April 30, 1995 have been so delivered. The auditors' report on such accounts was unqualified. TURNOVER Turnover represents amounts receivable for goods and services provided in the normal course of business, net of trade discounts and value added tax. TANGIBLE FIXED ASSETS Tangible fixed assets are stated at cost, less amounts provided to write off the cost, less anticipated residual value of the assets over their useful economic lives, which are as follows: Freehold buildings 50 years Fixtures and equipment 6 2/3 years Vehicles are depreciated by the reducing balance method at 25%. LEASES Rents for operating leases are charged to the profit and loss account in equal annual amounts over the period of the lease. RESEARCH AND DEVELOPMENT Expenditure on research and development is written off to the profit and loss account in the year in which it is incurred. TAX Corporation tax payable is provided on taxable profits at the current rate of corporation tax. Deferred tax is calculated using the liability method. Deferred tax is provided on timing differences, which are expected to reverse without being replaced at the rates of tax likely to be in force at the time of reversal. The amounts of all deferred tax, including that which has not been provided, is shown in Note 12 to the financial statements. -7- 10 OYSTER TERMINALS LIMITED NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED) PENSION COSTS The Company operates defined contribution pension schemes and charges contributions payable for the year to the profit and loss account in that year. STOCKS AND WORK-IN-PROGRESS Stocks are valued at the lower of cost and net realisable value. The valuation of work-in-progress is based on the cost of labour, plus appropriate overheads and the cost of materials. Net realisable value is based on estimated selling price less further costs expected to be incurred to completion and disposal. Provision is made for obsolete, slow-moving or defective items where appropriate. FOREIGN CURRENCY Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the profit and loss account. MANAGEMENT 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. CASH AND CASH EQUIVALENTS For the purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. 2. TURNOVER The directors do not wish to disclose a geographical analysis of turnover, profit before taxation or net assets as they believe this would be prejudicial to the interests of the Company (CA 1985 Sch 4.55(5)). 3. OPERATING PROFIT Operating profit is stated after charging/(crediting): YEAR ENDED APRIL 30 ------------------- 1995 1996 ------- ------- [POUND] [POUND] Depreciation - owned assets 61,110 57,218 Profit on disposal of fixed assets - (317) Auditors' remuneration 6,950 6,950 Foreign currency exchange gains (1,503) (9,396) Research and development expenditure 142,337 147,226 ------- ------- -8- 11 OYSTER TERMINALS LIMITED NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED) 4. INTEREST YEAR ENDED APRIL 30 --------------------- 1995 1996 --------- --------- [POUND] [POUND] Interest payable and similar charges (2,575) (3,532) --------- --------- Interest receivable on deposit accounts 34,543 97,623 --------- --------- 5. TAX ON PROFIT ON ORDINARY ACTIVITIES YEAR ENDED APRIL 30 --------------------- 1995 1996 --------- --------- [POUND] [POUND] Payable in the United Kingdom: Corporation tax at 33% (1995 - 32.17%) 340,911 506,751 Deferred tax (Note 12) 1,388 1,417 Foreign taxes - 40,000 Adjustment to current tax in respect of prior years 1,483 (1,986) --------- --------- 403,782 546,182 --------- --------- 6. DIVIDEND YEAR ENDED APRIL 30 --------------------- 1995 1996 --------- --------- [POUND] [POUND] Dividend paid of(pound)3.20 per ordinary share (1995 - [pound]2.52 per ordinary share) 252,000 320,000 --------- --------- 7. EMPLOYEE COSTS AND NUMBERS INCLUDING DIRECTORS YEAR ENDED APRIL 30 --------------------- 1995 1996 --------- --------- [POUND] [POUND] Employee costs: Total employee costs during the year amounted to: Wages and salaries 1,003,218 912,055 Social Security costs 95,431 81,946 Pension costs 22,598 134,900 --------- --------- 1,121,247 1,128,901 --------- --------- -9- 12 OYSTER TERMINALS LIMITED NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED) 7. EMPLOYEE COSTS AND NUMBERS INCLUDING DIRECTORS (continued) The average number of employees during each year was as follows: HEAD COUNT ------------------- YEAR ENDED APRIL 30 ------------------- 1995 1996 -------- -------- Production and development 33 33 Sales and marketing 8 8 Administration 13 13 -- -- 54 54 -- -- 8. TANGIBLE FIXED ASSETS FREEHOLD PLANT AND MOTOR BUILDINGS MACHINERY VEHICLES TOTAL --------- --------- -------- ------- [POUND] [POUND] [POUND] [POUND] Cost: At May 1, 1994 229,842 364,578 77,024 671,444 Additions - 12,455 - 12,455 Disposals - - (9,933) (9,933) ------- ------- ------ ------- At April 30, 1995 229,842 377,033 67,091 673,966 Additions - 27,217 48,097 75,314 Disposals - (5,000) (16,000) (21,000) ------- ------- ------ ------- April 30, 1996 229,842 399,250 99,188 728,280 ------- ------- ------ ------- Depreciation: At May 1, 1994 9,022 198,190 35,928 243,140 Charge for the year 5,400 44,833 10,877 61,110 Disposals - - (8,183) (8,183) ------- ------- ------ ------- At April 30, 1995 14,422 243,023 38,622 296,067 Charge for the year 5,385 43,459 8,374 57,218 Disposals - (5,000) (12,913) (17,913) ------- ------- ------ ------- April 30, 1996 19,807 281,482 34,083 335,372 ------- ------- ------ ------- Net book values: At May 1, 1994 220,820 166,388 41,096 428,304 ------- ------- ------ ------- At April 30, 1995 215,420 134,010 28,469 377,899 ------- ------- ------ ------- At April 30, 1996 210,035 117,768 65,105 392,908 ------- ------- ------ ------- -10- 13 - - OYSTER TERMINALS LIMITED NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED) 9. STOCKS AND WORK-IN-PROGRESS APRIL 30, 1996 --------- [POUND] Raw materials and consumables 859,825 Work-in-progress 22,810 Goods for resale 69,271 --------- 951,906 --------- 10. DEBTORS APRIL 30, 1996 --------- [POUND] Amounts falling due within one year: Trade debtors 765,661 Advanced corporation tax recoverable 80,000 Other debtors 6,995 Prepayments and accrued income 16,473 --------- 869,129 --------- 11. CREDITORS APRIL 30, 1996 --------- [POUND] Amounts falling due within one year: Bank loans and overdrafts 133,901 Trade creditors 223,554 Corporation tax 544,765 Advanced corporation tax payable 80,000 Taxation and Social Security 66,880 Other creditors 180,432 Accruals and deferred income 61,355 --------- 1,290,887 --------- -11- 14 OYSTER TERMINALS LIMITED NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED) 12. PROVISIONS FOR LIABILITIES AND CHARGES DEFERRED TAX APRIL 30, 1996 --------- [POUND] Deferred tax provided on capital allowances in excess of depreciation 11,377 Deferred tax in respect of other timing differences - ------ 11,377 ------ There was no unprovided deferred tax at April 30, 1996. Movement in deferred taxation: [POUND] Balance at May 1, 1994 8,572 Charged to profit and loss account 1,388 ------ Balance at April 30, 1995 9,960 Charged to profit and loss account 1,417 ------ Balance at April 30, 1996 11,377 ------ 13. CAPITAL AND OTHER COMMITMENTS There are annual commitments under operating leases for land and buildings which expire: APRIL 30, APRIL 30, 1995 1996 --------- --------- [POUND] [POUND] Within one year 22,500 22,500 ------ ------ APRIL 30, APRIL 30, 1995 1996 --------- --------- [POUND] [POUND] Contracted but not provided for in the financial statements - 15,610 ------ ------ -12- 15 OYSTER TERMINALS LIMITED NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED) 14. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United Kingdom ("UK GAAP"), which differ in certain material respects from United States generally accepted accounting principles ("US GAAP"). Significant differences between UK GAAP and US GAAP applicable to Oyster Terminals Limited are as follows: CASH FLOW STATEMENTS The cash flow statements included in the financial statements have been prepared in conformity with the UK Financial Reporting Standard No. 1. The principal differences between this statement and the cash flows presented in accordance with US Statement of Financial Accounting Standards No. 95, "Cash Flow Statements" ("SFAS No. 95") are as follows: Under US GAAP, cash and cash equivalents would not include bank overdrafts and borrowings with original maturities of less than three months. Under UK GAAP, cash flows are presented separately for operating activities, returns on investments and servicing of finance, taxation, investing activities, and financing activities. US GAAP, however, requires only three categories of cash flow activity to be reported: operating, investing, and financing. Cash flows from taxation and returns on investments and servicing of finance shown under UK GAAP would, with the exception of dividends paid, be included as operating activities under US GAAP. The payment of dividends would be included as a financing activity under US GAAP. Categories of cash flow activity under US GAAP can be summarised as follows: YEAR ENDED APRIL 30 -------------------- 1995 1996 -------- --------- [POUND] [POUND] Cash flows provided by operating activities 995,744 1,148,374 Cash flows used in investing activities (10,705) (71,911) Cash flows used in financing activities (398,497) (256,053) -------- --------- Increase in cash and cash equivalents 586,542 820,410 Cash and cash equivalents at beginning of year 300,692 888,737 Exchange gain on foreign currency deposits 1,503 9,396 -------- --------- Cash and cash equivalents at end of year 888,737 1,718,543 -------- --------- -13- 16 OYSTER TERMINALS LIMITED NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED) RECONCILIATION OF NET PROFIT AND SHAREHOLDERS' EQUITY No material adjustments are required to state net profit and shareholders' equity in accordance with US GAAP. A RECONCILIATION OF THE UK STATUTORY RATE TO THE EFFECTIVE RATE FOR THE YEARS ENDED APRIL 30, 1995 AND 1996 IS AS FOLLOWS: YEAR ENDED APRIL 30 ------------------- 1995 1996 ------ ------ % % UK statutory rate 33.0 33.0 Small companies relief - (0.1) Foreign taxes - 2.8 Absolute items 0.1 - Effective income tax rate 33.1 35.7 ---- ---- 15. SUBSEQUENT EVENTS On July 16, 1996, a wholly-owned subsidiary of WPI Group Inc. (a U.S. company headquartered at 1155 Elm Street, Manchester, New Hampshire 03101) acquired all of the outstanding shares of the Company. On July 15, 1996, the Company's US distributor, ESCOM International Marketing Inc, filed a complaint against the Company in the United States District Court. The directors do not believe any further provision is required. D Watkins, C Allen, M Ludlow and J Eskdale resigned as directors on July 16, 1996. D Watkins, M Ludlow, and J Eskdale have remained in their executive positions. -14- 17 WPI GROUP, INC PRO FORMA COMBINED STATEMENTS OF OPERATIONS SEPTEMBER 24, 1995 (UNAUDITED) The following unaudited pro forma combined statements of operations give effect to the acquisition of Oyster Terminals Limited, by WPI Group, Inc., assuming that the acquisition was effective on September 26, 1994 and that the transaction was accounted for as a purchase. The pro forma data reflect the acquisition of the assets and assumption of liabilities of Oyster Terminals Limited by WPI Group, Inc. The unaudited pro forma combined statements of operations for the period ended September 24, 1995 combine the historical statements of operations of WPI Group, Inc. for the year ended September 24, 1995 and of Oyster Terminals Limited for the year ended April 30, 1995. The following pro forma information is presented for illustrative purposes only and is not necessarily indicative of the actual results of operations that would have been reported if the acquisition had been effected at that date or which may be reported in the future. This statement shall be read in conjunction with the accompanying explanatory notes; the pro forma combined balance sheet and the respective historical financial statements and related notes of WPI Group, Inc. and Oyster Terminals Limited. The unaudited pro forma statement of operations of Oyster Terminals Limited has been translated for convenience at [pound]1 = $1.5050, the noon buying rate in New York City in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York on April 30, 1996, which is not materially different from the average rate for the period. No representation is made that the pounds sterling amounts have been, could have been, or could be converted into US dollars at that or any other rate of exchange. -15- 18 WPI GROUP INC PRO FORMA COMBINED STATEMENTS OF OPERATIONS PERIOD ENDED SEPTEMBER 24, 1995 OYSTER TERMINALS WPI GROUP,INC LIMITED SEPT 24, APRIL 30, ADJUSTMENTS COMBINED 1995 1995 (UNAUDITED) (UNAUDITED) ----------- --------- ---------- ----------- $ $ $ $ Net sales 25,855,790 6,407,518 - 32,263,308 Cost of sales 15,959,216 2,848,383 - 18,807,599 ---------- --------- ---------- ---------- Gross profit 9,896,574 3,559,135 - 13,455,709 ---------- --------- ---------- ---------- Operating expenses: Research and new product development 1,508,942 214,217 - 1,723,159 Selling, general and administration 6,597,060 1,820,365 402,430 (1) 8,590,855 (229,000)(7) ---------- --------- ---------- ---------- Total operating expenses 8,106,002 2,034,582 173,430 10,314,014 ---------- --------- ---------- ---------- Operating income 1,790,572 1,524,553 (173,430) 3,141,695 ---------- --------- ---------- ---------- Other income (expense): Interest income 22,386 51,987 (51,987)(8) 22,386 Miscellaneous income 72,141 - - 72,141 Interest expense (129,981) (3,875) (815,270)(4) (945,251) 3,875 (8) ---------- --------- ---------- ---------- Income before provision for income taxes 1,755,118 1,572,665 (1,036,812) 2,290,971 Provision for income taxes 600,000 517,392 (217,000)(6) 900,392 ---------- --------- ---------- ---------- Net income 1,155,118 1,055,273 (819,812) 1,390,579 ---------- --------- ---------- ---------- Net income per share $.20 $.24 Weighted average common shares and common equivalent shares outstanding 5,822,906 5,822,906 SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS. -16- 19 WPI GROUP, INC PRO FORMA COMBINED STATEMENTS OF OPERATIONS JUNE 30, 1996 (UNAUDITED) The following unaudited pro forma combined statements of operations give effect to the acquisition of Oyster Terminals Limited, by WPI Group, Inc., assuming that the acquisition was effective on September 26, 1994 and that the transaction was accounted for as a purchase. The pro forma data reflect the acquisition of the assets and assumption of liabilities of Oyster Terminals Limited by WPI Group, Inc. The unaudited pro forma combined statements of operations for the period ended June 30, 1996 combine the historical statements of operations of WPI Group, Inc. for the nine months ending June 30, 1996 and of Oyster Terminals Limited for the nine month period ending April 30, 1996. The following pro forma information is presented for illustrative purposes only and is not necessarily indicative of the actual results of operations that would have been reported if the acquisition had been effected at that date or which may be reported in the future. This statement should be read in conjunction with the accompanying explanatory notes; the pro forma combined balance sheet and the respective historical financial statements and related notes of WPI Group, Inc. and Oyster Terminals Limited. The unaudited pro forma statement of operations of Oyster Terminals Limited has been translated for convenience at [pound]1 = $1.5050, the noon buying rate in New York City in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York on April 30, 1996, which is not materially different from the average rate for the period. No representation is made that the pounds sterling amounts have been, could have been, or could be converted into US dollars at that or any other rate of exchange. -17- 20 WPI GROUP INC PRO FORMA COMBINED STATEMENTS OF OPERATIONS NINE MONTHS ENDED JUNE 30, 1996 OYSTER TERMINALS WPI GROUP,INC LIMITED 9 MONTHS TO 9 MONTHS TO JUNE 30, 30 APRIL, 1996 1996 DJUSTMENTS COMBINED (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- ----------- ----------- $ $ $ $ Net sales 33,003,591 5,500,427 - 38,504,018 Cost of sales 20,086,060 2,492,462 - 22,578,522 ---------- --------- -------- ---------- Gross profit 12,917,531 3,007,965 - 15,925,496 ---------- --------- -------- ---------- Operating expenses: Research and new product development 2,471,985 168,602 - 2,640,587 Selling, general and administration 7,576,963 1,271,855 301,822 (1) 9,003,640 (147,000)(7) ---------- --------- -------- ---------- Total operating expenses 10,048,948 1,440,457 154,822 11,644,227 ---------- --------- -------- ---------- Operating income 2,868,583 1,567,508 (154,822) 4,281,269 ---------- --------- -------- ---------- Other income (expense): Interest income 15,067 118,843 (118,843)(8) 15,067 Miscellaneous income 77,896 - - 77,896 Interest expense (350,960) (3,912) (611,452)(4) (962,412) 3,912 (8) ---------- --------- -------- ---------- Income before provision for income taxes 2,610,586 1,682,439 (881,205) 3,411,820 Provision for income taxes 835,000 616,353 (185,000)(6) 1,266,353 ---------- --------- -------- ---------- Net income 1,775,586 1,066,086 (696,205) 2,145,467 ---------- --------- -------- ---------- Net income per share $.30 $.36 Weighted average common shares and common equivalent sales outstanding 5,973,851 5,973,851 SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS. -18- 21 WPI GROUP, INC PRO FORMA COMBINED BALANCE SHEET AS OF JUNE 30, 1996 (UNAUDITED) The following unaudited pro forma combined balance sheet gives effect to the acquisition of Oyster Terminals Limited by WPI Group, Inc., assuming that the acquisition was consummated as of June 30, 1996 and assumes that the acquisition was accounted for as a purchase. The pro forma data reflect the acquisition of the assets and assumption of liabilities of Oyster Terminals Limited by WPI Group, Inc. The unaudited pro forma combined balance sheets combine the historical balance sheets of WPI Group, Inc. as of June 30, 1996 and of Oyster Terminals Limited as of April 30, 1996. The following pro forma information is presented for illustrative purposes only and is not necessarily indicative of the financial position that would have been reported had the acquisition been consummated as of June 30, 1996 or which may be reported in the future. This statement shall be read in conjunction with the accompanying explanatory notes; the pro forma combined statement of operations and the respective historical financial statements and related notes of WPI Group, Inc. and Oyster Terminals Limited. The unaudited pro forma balance sheet for Oyster Terminals Limited has been translated for convenience at [pound]1 = $1.5050, the noon buying rate in New York City in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York on April 30, 1996. No representation is made that the pounds sterling amounts have been, could have been, or could be converted into US dollars at that or any other rate of exchange. -19- 22 WPI GROUP INC COMBINED BALANCE SHEETS JUNE 30, 1996 OYSTER WPI GROUP,INC TERMINALS JUNE 30, LIMITED 1996 APRIL 30, ADJUSTMENTS COMBINED (UNAUDITED) 1996 (UNAUDITED) (UNAUDITED) ----------- --------- ---------- ----------- $ $ $ $ ASSETS Current assets: Cash and equivalents 176,570 2,586,407 (2,500,000)(3) 262,977 Accounts receivable net of allowance for doubtful accounts 9,131,732 1,152,320 - 10,284,052 Accounts receivable, other 3,376,177 35,319 - 3,411,496 Inventories 6,170,370 1,432,619 - 7,602,989 Prepaid expenses and other current assets 192,225 - - 192,225 Prepaid income taxes 505,000 120,400 - 625,400 Total current assets 19,552,074 5,327,065 (2,500,000) 22,379,139 Property, plant and equipment: At cost less accumulated depreciation 7,350,165 591,326 - 7,941,491 Other assets 9,060,312 - - 9,060,312 Goodwill - - 10,060,266 (2) 10,060,266 35,962,551 5,918,391 7,560,266 49,441,208 ---------- --------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft - 201,521 (201,521)(3) - Accounts payable 3,702,315 336,449 - 4,038,764 Accrued expenses 2,267,478 464,544 850,000 (5) 3,582,022 Accrued income taxes 306,409 940,271 - 1,246,680 6,276,202 1,942,785 648,479 8,867,466 Long term liabilities: - Long term debt 8,625,000 - 10,870,271 (3) 19,495,271 Non compete agreement 30,000 - - 30,000 Deferred income taxes 1,367,000 17,122 - 1,384,122 10,022,000 17,122 10,870,271 20,909,393 Stockholders' equity: Common stock - WPI Group($.01 par) 59,268 - - 59,268 Common stock - Oyster([pound]1.00 par) - 150,500 (150,500)(2) - Additional paid-in capital 13,534,884 - - 13,534,884 Retained earnings 6,070,197 3,807,984 (3,807,984)(2) 6,070,197 Total stockholders' equity 19,664,349 3,958,484 (3,958,484) 19,664,349 35,962,551 5,918,391 7,560,266 49,441,208 ---------- --------- ---------- ---------- SEE NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS. -20- 23 NOTES TO PROFORMA COMBINED FINANCIAL STATEMENTS (1) Adjustment to reflect amortization of goodwill over 25 years. (2) Adjustment to reflect goodwill arising on acquisition and elimination of share capital and pre acquisition retained earnings. (3) Adjustment to reflect the net debt drawn down to finance the acquisition of Oyster Terminals Limited, the paydown of Oyster's bank overdraft and the use of substantially all of Oyster's cash balance to reduce the debt drawn to finance the acquisition. (4) Adjustment to reflect interest expense on debt drawn down to finance the acquisition, at a rate of 7..5%. (5) Adjustment to reflect estimated accrued acquisition expenses, primarily legal and accounting expenses, and estimated employee related costs.. (6) Adjustment to reflect tax effect of pro forma adjustments. (7) Adjustment to reflect specific cost savings which would not have been incurred had the acquisition occurred on September 26, 1994. Such cost savings relate to compensation expense in excess of amounts that will be paid in the future. (8) Adjustment to eliminate historical interest income on cash balances used to finance the acquisition, and historical interest expense related to bank overdrafts. -21-