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
July 13, 2000
Date of Report
(Date of Earliest Event Reported)
CCM MANUFACTURING TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
15635 Vision Drive
Pflugerville, Texas 78660-3203
(Address of principal executive offices)
512/251-3484
(Registrant's telephone number)
Delaware 0-28681 52-2201514
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) On June 19, 2000, Mayford Acquisition Corporation ("Mayford")
amended its Certificate of Incorporation to change the total number of shares of
stock which it has the authority to issue to 100,000,000 shares, par value
$.0001 per share, consisting of 60,000,000 shares of Class A common stock,
10,000,000 shares of Class B common stock, and 30,000,000 shares of
non-designated preferred stock. Simultaneously Mayford filed certificates of
designation with the State of Delaware designating 3,000,000 shares of Series A
convertible preferred stock and 1,500,000 shares of Series B convertible
preferred stock.
On July 11, 2000, pursuant to an Agreement and Plan of Reorganization
("Acquisition Agreement") between Mayford, Syntec Acquisition Corporation
("Syntec") and the owners of the outstanding shares of Syntec, Mayford acquired
99.9% of the outstanding shares of Syntec from the shareholders thereof in an
exchange of stock at a ratio of one share of Syntec stock for 2.5 shares of
identical class of shares of Mayford, for an aggregate issuance of 13,527,083
shares of Class A common stock of Mayford and 2,972,504 shares of the Series A
preferred stock of Mayford. The outstanding warrants and options of Syntec and
other outstanding rights to purchase shares of common stock of Syntec represent
the right to purchase the equivalent number of shares of common stock of Mayford
(subject to the adjustment provisions therein).
On July 13, 2000, pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), between Mayford and its subsidiary, Syntec, Syntec was
merged with and into Mayford. In connection with the merger, Mayford changed its
name to "CCM Manufacturing Technologies, Inc." ("CCM").
Copies of the Acquisition Agreement and Merger Agreement are filed as
an exhibits to this Current Report and are incorporated in their entirety
herein. The foregoing description is modified by such reference.
1
(b) The following table contains information regarding the
shareholdings of CCM's current directors and executive officers and those
persons or entities who beneficially own more than 5% of its common stock
(giving effect to the exercise of any options and warrants held by each such
person or entity exercisable within 60 days of the date hereof):
Number of Shares of Percent of
Common Stock Beneficially Common Stock
Name Owned (1)(2) Beneficially Owned (1)(2)
- -----------------------------------------------------------------------------------------------------------
Jose G. Chavez 7,708,333 (3) 55%
Chief Executive Officer,
Chairman and Director
88021 Bottlebrush
Austin, Texas 78750
Jaime J. Munoz 1,553,125 (4) 11.3%
President and Director
15635 Vision Drive
Pflugerville, Texas 78660
Gustavo A. Cardenas 1,534,375 (5) 11.1%
Chief Financial Officer and Director
6801 Terra Oak Circle
Austin, Texas 78749
Lynn K. Bishop 2,875,000 (6) 20.9%
Vice President of Business Development
3280-85C South Shore Drive
Punta Gorda, Florida 33955
All executive officers and 13,670,833 95.8%
directors as a group
(4 persons)
* Represents less than 1% percent of the Company's outstanding shares of
common stock.
(1) Based upon 13,527,083 shares of the Company's common stock issued and
outstanding at the time of the merger, assuming no conversion of the
Company's Series A preferred stock into shares of the Company's Class A
common stock (convertible on a one for one share basis).
(2) Includes options which are exercisable within 60 days of the date
hereof.
(3) Includes 500,000 shares of common stock underlying options immediately
exercisable at an exercise price of $1.50 per share.
(4) Includes 250,000 shares of common stock underlying options immediately
exercisable at an exercise price of $1.50 per share.
(5) Includes 250,000 shares of common stock underlying options immediately
exercisable at an exercise price of $1.50 per share
(6) Includes 250,000 shares of common stock underlying options immediately
exercisable at an exercise price of $1.50 per share.
2
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
On October 16, 2000, the Company notified Weinberg & Company, P.A. that
it had terminated its services as accountants for Mayford effective with the
acquisition of Syntec by Mayford. None of the reports of Weinberg on the
financial statements during the past two fiscal years contained an adverse
opinion or disclaimer of opinion, or was modified as to audit scope or
accounting principles. During Mayford's engagement of Weinberg, there were no
disagreements with Weinberg on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Weinberg's satisfaction would have caused
Weinberg to make reference to the subject matter of the disagreement in
connection with its report. CCM has requested that Weinberg furnish it with a
letter addressed to the U.S. Securities and Exchange Commission stating whether
it agrees with the above statements.
On October 16, 2000, CCM engaged King, Griffin & Adamson, P.C., ("KGA")
to serve as its independent accountant and auditor for future periods.
The dismissal of Weinberg was approved and ratified by the Board of
Directors. CCM does not have an audit committee of the Board of Directors.
ITEM 7. FINANCIAL STATEMENTS
3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
This filing serves to amend the Form 8-K filed on July 19, 2000 by CCM
Manufacturing Technologies, Inc.(1) (CCM) by filing certain audited and
unaudited financial statements and unaudited pro forma financial information
(listed under headings (a) and (b) below) related to:
(1.) Acquisition by CCM of Syntec Acquisition Corp.
(2) Financial Statements of Businesses Acquired.
Financial Statements and Report of Independent Certified Public
Accountants for Syntec Acquisition Corp. and Subsidiaries and
predecessor companies as of May 31, 1998, December 31, 1998, June 30,
1999, December 31, 1999 and March 31, 2000 (unaudited).
(3) Pro Forma Financial Information.
Background to Pro Forma Consolidated Financial Information (unaudited)
Pro Forma Consolidated Balance Sheet as of March 31, 2000 (unaudited)
Pro Forma Consolidated Statement of Operations for the three months
ended March 31, 2000 (unaudited)
Pro Forma Consolidated Statement of Operations for the six months ended
December 31, 1999 (unaudited)
Pro Forma Consolidated Statement of Operations for the six months ended
June 30, 1999 (unaudited)
Pro Forma Consolidated Statement of Operations for the seven months
ended December 31, 1998 (unaudited)
Pro Forma Consolidated Statement of Operations for the five months
ended May 31, 1998 (unaudited)
Notes to Pro Forma Consolidated Financial Information (unaudited)
- --------------------
(1) Formerly Mayford Acquisition Corporation, effective as of June 19, 2000, the
Company changed its name to CCM Manufacturing Technologies, Inc.
CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
SYNTEC ACQUISTION CORP. AND SUBSIDIARIES
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants............................3
Financial Statements
Consolidated Balance Sheets ...............................................4
Consolidated Statements of Operations......................................7
Consolidated Statements of Changes in Shareholders' Equity (Deficit).......8
Consolidated Statements of Cash Flows......................................9
Notes to Consolidated Financial Statements................................11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Syntec Acquisition Corp.
We have audited the accompanying consolidated balance sheets of Syntec
Acquisition Corp. and subsidiaries and predecessor companies as of December 31,
1999, June 30, 1999, December 31, 1998 and May 31, 1998, and the related
consolidated statements of operations, changes in shareholders' equity
(deficit), and cash flows for the periods then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Syntec
Acquisition Corp. and subsidiaries and predecessor companies as of December 31,
1999, June 30, 1999, December 31, 1998 and May 31, 1998, and the results of
their operations and their cash flows for the periods then ended in conformity
with generally accepted accounting principles.
As described in Note C, the accompanying consolidated financial statements have
been prepared assuming that Syntec Acquisition Corp. and subsidiaries will
continue as a going concern. Syntec Acquisition Corp. and subsidiaries and its
predecessors have experienced recurring losses during 1999 and 1998.
Additionally, at December 31, 1999, Syntec Acquisition Corp. and subsidiaries
current liabilities exceeded its current assets by $1,882,182. These conditions
raise substantial doubt about Syntec Acquisition Corp. and subsidiaries ability
to continue as a going concern. Unless Syntec Acquisition Corp. and subsidiaries
obtain additional financing, it will not be able to meet its obligations as they
come due and it will be unable to execute its long-term business plan.
Management's plans as they relate to these issues are also explained in Note C.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
KING GRIFFIN & ADAMSON P.C.
Dallas, Texas
April 14, 2000, except for Note P to which the date is June 19, 2000
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
Syntec Acquisition Corp. Syntec Holding Group, Inc. Syntec
and Subsidiaries and Subsidiary Corporation
----------------------------- -------------------------- -----------
(Unaudited) December 31, June 30, December 31, May 31,
March 31, 2000 1999 1999 1998 1998
-------------- ------------ -------- ------------ -------
CURRENT ASSETS
Cash and cash equivalents $ 1,421 $ 11,649 $ 3,547 $ 20,068 $ 6,731
Accounts receivable, net of
allowance for doubtful accounts 476,945 545,433 321,072 124,463 196,415
Inventories 470,816 603,485 465,425 232,747 204,098
Prepaid expenses 15,363 35,107 16,462 14,492 --
----------- ----------- ----------- ----------- -----------
Total current assets 964,545 1,195,674 806,506 391,770 407,244
PROPERTY AND EQUIPMENT
Machinery and equipment 1,072,867 1,072,867 1,029,391 1,028,739 995,770
Furniture and fixtures 47,617 47,617 46,065 46,065 46,065
Automobiles 1,500 1,500 1,500 1,500 9,400
Leasehold improvements 896 896 896 896 896
----------- ----------- ----------- ----------- -----------
1,122,880 1,122,880 1,077,852 1,077,200 1,052,131
Accumulated depreciation and
amortization (906,823) (884,763) (836,393) (802,291) (748,842)
----------- ----------- ----------- ----------- -----------
Net property and equipment 216,057 238,117 241,459 274,909 303,289
OTHER ASSETS 33,887 33,219 31,754 30,099 28,982
EXCESS OF COST OVER FAIR
VALUE OF NET ASSETS OF
COMPANIES ACQUIRED, net 1,794,830 1,843,339 505,907 525,323 --
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $ 3,009,319 $ 3,310,349 $ 1,585,626 $ 1,222,101 $ 739,515
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Syntec Acquisition Corp. Syntec Holding Group, Inc. Syntec
and Subsidiaries and Subsidiary Corporation
----------------------------- -------------------------- -----------
(Unaudited) December 31, June 30, December 31, May 31,
March 31, 2000 1999 1999 1998 1998
-------------- ------------ -------- ------------ -------
CURRENT LIABILITIES
Line of credit $ 188,560 $ 252,257 $1,005,003 $ 987,896 $ 205,335
Current portion of long-term debt 330,869 200,000 -- -- --
Notes payable to shareholders 479,707 1,142,698 166,815 -- --
Current portion of capital
lease obligations 41,327 42,792 35,839 28,901 27,579
Accounts payable 644,297 1,035,706 699,125 332,033 181,499
Accrued liabilities 147,778 172,403 21,867 54,095 40,992
Deferred compensation -- 232,000 -- -- --
---------- ---------- ---------- ---------- ----------
Total current liabilities 1,832,538 3,077,856 1,928,649 1,402,925 455,405
LONG-TERM DEBT, less
current portion 366,667 391,667 -- -- --
CAPITAL LEASE OBLIGATIONS,
less current portion 83,623 96,045 91,429 114,944 132,084
---------- ---------- ---------- ---------- ----------
Total liabilities 2,282,828 3,565,568 2,020,078 1,517,869 587,489
COMMITMENTS AND CONTINGENCIES (Note J)
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.0001 par value,
30,000,000 shares authorized,
1,054,000 and 550,165 shares
issued and outstanding at
March 31, 2000 and
December 31, 1999, respectively
(liquidation preference of
$1,581,000 and $825,248 at
March 31, 2000 and
December 31, 1999, respectively.) 105 55 -- -- --
Class A Common stock, $0.0001
par value, 60,000,000 shares
authorized, 5,290,833 and
4,725,000 shares issued and
outstanding at March 31, 2000
and December 31,1999,
respectively; $1.00 par value,
100,000 shares authorized,
750 shares issued and outstanding
at June 30, 1999 and December 31,
1998; no par value, 300,000 shares
authorized, 46,000 issued and
outstanding at May 31, 1998 529 473 750 750 1,000
The accompanying notes are an integral part of these consolidated financial
statements.
1
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Syntec Acquisition Corp. Syntec Holding Group, Inc. Syntec
and Subsidiaries and Subsidiary Corporation
----------------------------- -------------------------- -----------
(Unaudited) December 31, June 30, December 31, May 31,
March 31, 2000 1999 1999 1998 1998
-------------- ------------ -------- ------------ -------
Class B Common stock, $0.0001
par value, 10,000,000 shares
authorized, none issued or
outstanding -- -- -- -- --
Additional paid-in capital 2,655,733 1,051,838 62,000 -- --
Retained earnings (accumulated
deficit) (1,929,876) (1,307,585) (497,202) (296,518) 151,026
----------- ----------- ----------- ----------- ------------
Total shareholders' equity
(deficit) 726,491 (255,219) (434,452) (295,768) 152,026
----------- ----------- ----------- ----------- ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIT) $ 3,009,319 $ 3,310,349 $ 1,585,626 $ 1,222,101 $ 739,515
=========== =========== =========== =========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
2
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Syntec Acquisition Corp. Syntec Holding Group, Inc. Syntec
and Subsidiaries and Subsidiary Corporation
----------------------------- ----------------------------- -----------
(Unaudited)
Three Month Six Month Six Month Seven Month Five Month
Period Period Period Period Period
Ended Ended Ended Ended Ended
March 31, December 31, June 30, December 31, May 31,
2000 1999 1999 1998 1998
----------- ------------ ----------- ------------ -----------
Net sales $ 802,667 $ 2,078,249 $ 1,776,086 $ 1,736,270 $ 1,208,898
Cost of sales 932,484 2,361,770 1,369,727 1,456,500 970,944
----------- ----------- ----------- ----------- -----------
Gross profit (loss) (129,817) (283,521) 406,359 279,770 237,954
Selling, general and administrative 446,002 952,797 554,389 565,957 224,132
----------- ----------- ----------- ----------- -----------
Income (loss) from operations (575,819) (1,236,318) (148,030) (286,187) 13,822
Other income (expenses)
Interest expense (48,105) (88,102) (51,062) (50,437) (12,038)
Other, net 1,633 16,835 (1,592) 40,106 225
----------- ----------- ----------- ----------- -----------
Total other income (expenses) (46,472) (71,267) (52,654) (10,331) (11,813)
----------- ----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes (622,291) (1,307,585) (200,684) (296,518) 2,009
Provision for income taxes -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (622,291) $(1,307,585) $ (200,684) $ (296,518) $ 2,009
=========== =========== =========== =========== ===========
Net income (loss) attributable
to common stockholders $ (622,291) $(1,307,585) $ (200,684) $ (296,518) $ 2,009
=========== =========== =========== =========== ===========
Basic and diluted net income (loss)
per share attributable to
common stockholders $ (0.13) $ (.28) $ (267.58) $ (395.36) $ .04
=========== =========== =========== =========== ===========
Number of weighted average shares
of common stock outstanding
(basic and diluted) 4,841,108 4,725,000 750 750 46,000
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
Class A
Preferred stock Common stock Additional
--------------- ------------ Paid-in
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
Syntec Corporation:
Balance at January 1, 1998 -- $ -- 46,000 $ 1,000 $ --
---------- ----------- ---------- ----------- -----------
Net income -- -- -- -- --
---------- ----------- ---------- ----------- -----------
Balance at May 31, 1998 -- $ -- 46,000 $ 1,000 $ --
========== =========== ========== =========== ===========
Syntec Holding Group, Inc. and Subsidiary:
Common stock issued for cash -- $ -- 750 $ 750 $ --
Net loss -- -- -- -- --
Balance at December 31, 1998 -- -- 750 750 --
Additional capital contributed -- -- -- -- 62,000
Net loss -- -- -- -- --
---------- ----------- ---------- ----------- -----------
Balance at June 30, 1999 -- $ -- 750 $ 750 $ 62,000
========== =========== ========== =========== ===========
Syntec Acquisition Corp. and Subsidiaries:
Preferred stock issued for cash 510,165 $ 51 -- $ -- $ 765,195
Preferred stock issued
for services 40,000 4 -- -- 59,996
Class A common stock
issued for cash -- -- 4,725,000 473 149,901
Class A common stock
warrants issued for services -- -- -- -- 76,746
Net loss -- -- -- -- --
---------- ----------- ---------- ----------- -----------
Balance at December 31, 1999 550,165 $ 55 4,725,000 $ 473 $ 1,051,838
========== =========== ========== =========== ===========
Issuance of preferred stock
for cash (unaudited) 503,835 50 -- -- 755,701
Issuance of Class A common
stock as payment of
compensation (unaudited) -- -- 232,500 23 348,227
Issuance of Class A common
stock in exchange for
reduction of note payable
to shareholders (unaudited) -- -- 333,333 33 499,967
Net loss (unaudited) -- -- -- -- --
---------- ----------- ---------- ----------- -----------
Balance at March 31, 2000
(unaudited) 1,054,000 $ 105 5,290,833 $ 529 $ 2,655,733
========== =========== ========== =========== ===========
Retained
Earnings
(Accumulated
Deficit) Total
-------- -----
Syntec Corporation:
Balance at January 1, 1998 $ 149,017 $ 150,017
Net income 2,009 2,009
----------- -----------
Balance at May 31, 1998 $ 151,026 $ 152,026
=========== ===========
Syntec Holding Group, Inc. and Subsidiary:
Common stock issued for cash $ -- $ 750
Net loss (296,518) (296,518)
----------- -----------
Balance at December 31, 1998 (296,518) (295,768)
Additional capital contributed -- 62,000
Net loss (200,684) (200,684)
----------- -----------
Balance at June 30, 1999 $ (497,202) $ (434,452)
=========== ===========
Syntec Acquisition Corp. and Subsidiaries:
Preferred stock issued for cash $ -- $ 765,246
Preferred stock issued
for services -- 60,000
Class A common stock
issued for cash -- 150,374
Class A common stock
warrants issued for services -- 76,746
Net loss (1,307,585) (1,307,585)
----------- -----------
Balance at December 31, 1999 $(1,307,585) $ (255,219)
Issuance of preferred stock
for cash (unaudited) -- 755,751
Issuance of Class A common
stock as payment of
compensation (unaudited) -- 348,250
Issuance of Class A common
stock in exchange for
reduction of note payable
to shareholders (unaudited) -- 500,000
Net loss (unaudited) (622,291) (622,291)
----------- -----------
Balance at March 31, 2000
(unaudited) $(1,929,876) $ 726,491
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
4
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Syntec Acquisition Corp. Syntec Holding Group, Inc. Syntec
and Subsidiaries and Subsidiary Corporation
----------------------------- ----------------------------- -----------
(Unaudited)
Three Month Six Month Six Month Seven Month Five Month
Period Period Period Period Period
Ended Ended Ended Ended Ended
March 31, December 31, June 30, December 31, May 31,
2000 1999 1999 1998 1998
----------- ----------- ----------- ----------- -----------
Cash flows from operating activities
Net income (loss) $ (622,291) $(1,307,585) $ (200,684) $ (296,518) $ 2,009
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 22,060 48,370 34,102 53,449 37,816
Amortization of excess of cost over fair
value of net assets of companies
acquired 48,509 97,018 19,416 22,651 --
Preferred stock issued for compensation 116,250 -- -- -- --
Warrants issued for services -- 76,746 -- -- --
Preferred stock issued for services -- 60,000 -- -- --
(Increase) decrease in (net of assets
and liabilities acquired)
Accounts receivable 68,488 (224,359) (196,609) 71,952 (57,348)
Inventories 132,669 (138,060) (232,678) (28,649) (19,296)
Prepaid expenses 19,744 (18,645) (1,970) (14,492) 16,053
Other assets (668) (1,465) (1,655) (1,117) (16,699)
Accounts payable (391,409) 336,581 367,451 150,534 48,045
Accrued expenses (24,625) 150,536 (32,228) 13,103 (3,548)
Deferred compensation -- 232,000 -- -- --
----------- ----------- ----------- ----------- -----------
Cash flows provided (used)
by operating activities (631,273) (688,863) (244,855) (29,087) 7,032
Cash flows from investing activities
Purchases of property and equipment -- (10,528) (652) (25,069) (76,436)
Cash paid for companies acquired -- (1,000,000) -- (700,000) --
----------- ----------- ----------- ----------- -----------
Cash flows used in investing
activities -- (1,010,528) (652) (725,069) (76,436)
Cash flows from financing activities
Proceeds from sale of preferred stock 755,751 765,246 -- -- --
Proceeds from sale of common stock -- 150,374 -- 750 --
Net activity on line of credit (63,697) (752,746) 17,107 782,561 185,335
Additional capital contributed -- -- 62,000 -- --
Proceeds from long-term debt 154,869 600,000 -- -- --
Repayment of long-term debt (49,000) (8,333) -- -- (14,683)
Payments on capital leases (13,887) (22,931) (16,577) (15,818) (2,200)
Net proceeds (payments) on notes
payable to shareholders (162,991) 975,883 166,456 -- (102,000)
----------- ----------- ----------- ----------- -----------
Cash flows provided by financing
activities 621,045 1,707,493 228,986 767,493 66,452
----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
5
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
Syntec Acquisition Corp. Syntec Holding Group, Inc. Syntec
and Subsidiaries and Subsidiary Corporation
----------------------------- ----------------------------- -----------
(Unaudited)
Three Month Six Month Six Month Seven Month Five Month
Period Period Period Period Period
Ended Ended Ended Ended Ended
March 31, December 31, June 30, December 31, May 31,
2000 1999 1999 1998 1998
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (10,228) 8,102 (16,521) 13,337 (2,952)
Cash and cash equivalents, beginning
of period 11,649 3,547 20,068 6,731 9,683
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of period 1,421 $ 11,649 $ 3,547 $ 20,068 $ 6,731
=========== =========== =========== =========== ===========
NON-CASH FINANCING AND INVESTING
ACTIVITIES:
Equipment acquired under capital leases $ -- $ 34,500 $ -- $ -- $ 161,863
=========== =========== =========== =========== ===========
Issuance of Class A common stock as
payment of deferred compensation $ 232,000 $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
Issuance of Class A common stock in
exchange for reduction of note
payable to shareholders $ 500,000 $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for interest $ 48,000 $ 75,000 $ 51,000 $ 50,000 $ 19,000
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
6
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE A - ORGANIZATION
- ---------------------
Syntec Corporation ("Corp") was formed on February 20, 1970, as a Texas
corporation. On April 21, 1998, Syntec Holding Group, Inc. ("Holding") was
formed as a Texas corporation for the purpose of acquiring 100% of the
outstanding stock of Corp. The acquisition was accounted for as a purchase. On
June 3, 1999, Syntec Acquisition Corp. ("Acquisition") was formed as a Texas
corporation for the purpose of acquiring 100% of the outstanding stock of
Holding. The acquisition was accounted for as a purchase.
Corp is a premier contract electronic manufacturer providing worldwide
electronic manufacturing services that include complete printed surface mount
and through-hole component placement, custom hand assembly, in circuit and
functional testing, chassis mounting and box builds, as well as complete supply
chain management from component sourcing to finished goods inventory. In
addition, Corp qualifies as a Minority Business Enterprise and an Historically
Underutilized Business.
These financial statements include the balance sheet at May 31, 1998 and the
related statements of operations and cash flows of Corp for the period January
1, 1998 to May 31, 1998 (the effective date of the purchase by Holding); the
consolidated balance sheets at December 31, 1998 and June 30, 1999 and the
related consolidated statements of operations and cash flows of Holding and
Subsidiary for the period June 1, 1998 to December 31, 1998 and January 1, 1999
to June 30, 1999 (the effective date of the purchase by Acquisition); and the
consolidated balance sheet at December 31, 1999 and the related consolidated
statements of operations and cash flows of Acquisition and Subsidiaries for the
period July 1, 1999 to December 31, 1999.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Acquisition, Holding and Corp. All significant intercompany transactions and
balances are eliminated in consolidation. The consolidated group is referred to
as the "Company".
Cash Equivalents
For purposes of the statement of cash flows the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
Inventories
Inventories are valued at the lower of cost, using the first-in, first-out
method, or market.
Property and Equipment
Property and equipment are carried at cost. Depreciation and amortization of
equipment is provided using the straight-line method over the estimated useful
lives of the assets ranging from 5 to 7 years. Assets held under capital leases
and leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or the estimated useful life of the related asset,
ranging from 3 to 5 years. Depreciation and amortization expense of property and
equipment recognized during the six month period ended December 31, 1999, the
six month period ended June 30, 1999, the seven month period ended December 31,
1998 and the five month period ended May 31, 1998 was $48,370, $34,102, $53,449
and $37,816, respectively.
Expenditures for major renewals and betterments that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred.
7
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
Long-Lived Assets
The Company accounts for the impairment and disposition of long-lived assets in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and Long- Lived Assets to Be
Disposed Of. In accordance with SFAS No. 121, long-lived assets are reviewed for
events or changes in circumstances which indicate that their carrying value may
not be recoverable. There was no impairment of the value of such assets for the
six month period ended December 31, 1999, the six month period ended June 30,
1999, the seven month period ended December 31, 1998 or the five month period
ended May 31, 1998.
Excess of Cost Over Fair Value of Net Assets of Companies Acquired
This asset results from the excess of the purchase price paid by Holding in 1999
and Corp in 1998, over the estimated fair value of the net assets acquired and
totaled $1,940,357 and $547,974 for the Holding and Corp acquisitions,
respectively. The asset is being amortized using the straight-line method over
10 years, it's estimated useful life. Accumulated amortization totaled $97,018.
$42,067, and $22,651 at December 31, 1999, June 30, 1999 and December 31, 1998,
respectively.
Revenue Recognition
Revenues from product sales are recognized upon shipment. Revenues from services
are recognized when the services are delivered.
Use of Estimates and Assumptions
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.
Income Taxes
The Company utilizes the asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statements and tax basis
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense or benefit is the tax payable
or refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
8
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
Stock-Based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees", and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation". Under APB
Opinion No. 25, compensation expense for employees is based on the excess, if
any, on the date of grant, of fair value of the Company's stock over the
exercise price.
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 and Emerging Issues Task Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services". All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
of the fair value of the equity instrument issued is the earlier of the date on
which the counterparty's performance is complete or the date on which it is
probable that performance will occur.
Net Income (Loss) Per Share
Basic income (loss) per share is computed by dividing consolidated net income
(loss) by the weighted average number of shares of common stock outstanding
during each respective period. Common stock equivalents are not included in the
diluted (loss) per share for the six month period ended December 31, 1999 as
they are antidilutive.
Recent Accounting Pronouncements
The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" during 1998. SFAS 131 establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports. SFAS 131 also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions about how to
allocate resources and assess performance. As the Company has only one operating
segment, this standard currently does not impact the Company's disclosures.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133", which establishes accounting and reporting standards for
derivative instruments. SFAS 137 is effective for all fiscal years beginning
after June 15, 2000. The adoption of SFAS 137 is not expected to have a
significant impact on the Company's results of operations or disclosures.
9
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
AND PREDECESSOR COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE C - GOING CONCERN UNCERTAINTY
- ----------------------------------
The consolidated financial statements have been prepared on the assumption that
the Company will continue as a going concern. The Company incurred a net loss of
$13307,585 during the six-month period ended December 31, 1999. Cash used by
operating activities for the same period aggregated $688,863. Current
liabilities at December 31, 1999 of $3,077,856 exceed current assets of
$1,195,674 by $1,882,182. Total liabilities at December 31, 1999 of $3,565,568
exceed total assets of $3,310,349 by $255,219. The Company's continued existence
depends upon the success of management's efforts to raise the additional capital
necessary to meet the Company's obligations as they come due and to obtain
sufficient capital to execute its business plan. The Company intends to obtain
additional capital primarily through the issuance of preferred stock. There can
be no degree of assurance given that the Company will be successful in
completing additional financing transactions. The consolidated financial
statements do not include any adjustments to reflect the possible effects on the
recoverability and classification of assets or classification of liabilities
which may result from the inability of the Company to continue as a going
concern.
NOTE D - ACQUISITIONS
- ---------------------
On May 14, 1998, Holding acquired 100% of the outstanding stock of Corp. The
purchase consideration was $700,000, plus the assumption of liabilities of
$587,489. The acquisition has been accounted for as a purchase. The excess of
the purchase price over the fair value of net assets acquired was $547,974.
A summary of the fair value of assets acquired and liabilities assumed is as
follows:
Current assets $ 407,244
Fixed assets 303,289
Other assets 28,982
Excess of cost over fair value of
net assets acquired 547,974
Current liabilities (455,405)
Long-term liabilities (132,084)
-----------
$ 700,000
===========
On June 30, 1999, Acquisition acquired 100% of the outstanding stock of Holding.
The purchase consideration totaled $1,000,000, which included $500,000 in cash
and the issuance of a $500,000 promissory note, in addition to assuming
liabilities of $2,020,078. The acquisition has been accounted for as a purchase.
The excess of the purchase price over the fair value of net assets acquired was
$1,940,357
A summary of the fair value of assets acquired and liabilities assumed is as
follows:
Current assets $ 806,506
Fixed assets 241,459
Other assets 31,756
Excess of cost over fair value of net
assets of companies acquired 1,940,357
Current liabilities (1,928,649)
Long-term liabilities (91,429)
-----------
$ 1,000,000
===========
10
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
AND PREDECESSOR COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE E - INVENTORIES
- --------------------
Inventories at the respective balance sheet dates are as follows:
December 31, June 30, December 31, May 31,
1999 1999 1998 1998
------------ -------- ------------ --------
Raw materials $530,959 $421,368 $188,388 $151,259
Work-in-process -- 44,057 44,359 52,839
Finished goods 72,526 -- -- --
-------- -------- -------- --------
$603,485 $465,425 $232,747 $204,098
======== ======== ======== ========
NOTE F - DEFERRED COMPENSATION
- ------------------------------
Deferred compensation is comprised of salaries and bonuses accrued for certain
officers of the Company that have not been paid at December 31, 1999. These
amounts were settled by the issuance of 154,667 shares of Class A common stock
of the Company subsequent to December 31, 1999.
NOTE G - LINE OF CREDIT
- -----------------------
The Company had a revolving credit agreement with a financial institution that
matured and was paid in full in July 1999. At June 30, 1999, December 31, 1998
and May 31, 1998, $1,005,003, $987,896 and $205,335, respectively, was
outstanding under this agreement.
During December 1999, the Company obtained a $500,000 revolving credit agreement
with a financial institution with monthly interest payments at prime rate plus
5.5% (14% at December 31, 1999) and all outstanding principal and interest due
at maturity, December 30, 2000. At December 31, 1999, $252,257 was outstanding
under this agreement. The line of credit is collateralized by accounts
receivable, inventory and equipment, and personally guaranteed by certain
shareholders. At December 31, 1999, the Company was not in compliance with
certain covenants associated with the line of credit.
NOTE H - NOTES PAYABLE TO SHAREHOLDERS
- --------------------------------------
The Company has an unsecured note payable due to the majority shareholder
totaling $500,000 at December 31, 1999. The note payable bears interest at 12%
per annum and payments are made as cash flow permits with the total outstanding
balance of principal and accrued interest due November 30, 2000. Subsequent to
December 31, 1999, this note payable was converted into 333,333 shares of Class
A common stock
The Company has an unsecured note payable due to several shareholders totaling
$500,000 at December 31, 1999. The note payable bears interest at 9.5% per annum
and payments are made as cash flow permits with the total outstanding balance of
principal and accrued interest due April 30, 2000.
The Company has two additional unsecured notes payable due to two shareholders
totaling $142,698 and $166,815 at December 31, 1999 and June 30, 1999,
respectively. The notes bear interest at 18% per annum and do not have a
specific maturity date but are repaid as cash flow permits.
11
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
AND PREDECESSOR COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE I -- LONG TERM DEBT
- ------------------------
Long-term debt at December 31, 1999 consists of the following:
Installment note payable to financial institution, due in monthly
installments of $8,333, including interest at the 30 day rate of commercial
paper plus 3.25% percent (14% as of December, 31, 1999), matures August
2004, secured by all assets of the Company excluding accounts receivable and inventory $491,667
Installment note payable to financial institution, due in weekly principal
installments of $2,000, interest is payable monthly at the prime rate plus
5.5% percent (14% as of December 31, 1999), matures December 2000, secured
by accounts receivable, inventory, and equipment and personally guaranteed
by certain shareholders (cross-collateralized with the line of credit) 100,000
--------
591,667
--------
Less current portion 200,000
--------
Long-term debt, less current portion $391,667
========
Principal payments on long-term debt for each of the next five years are as
follows:
Year ending December 31:
------------------------
2000 $200,000
2001 100,000
2002 100,000
2003 100,000
2004 91,667
--------
$591,667
========
NOTE J -- LEASES
- ----------------
The Company is obligated under certain capital leases that expire on April 1,
2003. The Company also leases its office facility under an operating lease with
a 15 year term expiring in 2013. Rental expense for operating leases was
approximately $86,000, $86,000, $59,000 and $42,000 for the six month period
ended December 31, 1999, the six month period ended June 30, 1999, the seven
month period ended December 31, 1998 and the five month period ended May 31,
1998, respectively.
12
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
AND PREDECESSOR COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE J -- LEASES (Continued)
- ----------------------------
Future minimum lease payments under non-cancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1999 are:
Capital Operating
Leases Leases
------ ------
Year ending December 31,
------------------------
2000 $ 52,387 $ 211,784
2001 52,387 210,984
2002 39,433 204,125
2003 13,145 177,387
2004 -- 172,800
Thereafter -- 1,469,200
--------- ------------
Total minimum lease payments 157,352 $ 2,446,280
============
Less amounts representing interest (18,515)
---------
Present value of net minimum
capital lease payments 138,837
Less current portion of capital lease payments (42,792)
---------
Capital lease obligation less current
portion $ 96,045
=========
NOTE K -- INCOME TAXES
- ----------------------
Deferred tax assets and liabilities at December 31, 1999, June 30, 1999,
December 31, 1998 and May 31, 1998 are as follows:
December 31, June 30, December 31, May 31,
1999 1999 1998 1998
--------- --------- --------- ---------
Current deferred tax asset $ 27,039 $ -- $ -- $ --
Non-current deferred tax asset 609,841 192,301 124,068 23,252
Less: valuation allowance (636,880) (192,301) (124,068) (23,252)
--------- --------- --------- ---------
Net deferred tax asset $ -- $ -- $ -- $ --
========= ========= ========= =========
The current deferred tax asset results from the allowance for doubtful accounts
and a portion of the deferred compensation and related payroll taxes. The
non-current deferred tax asset results from the net operating loss carryforward
and the difference in the amortization period of the excess of cost over fair
value of net assets of companies acquired. The net operating loss available at
December 31, 1999 amounts to approximately $1,800,000 and begins to expire in
2013. At December 31, 1999, June 30, 1999, December 31, 1998, and May 31, 1998,
the net deferred tax asset has a 100% allowance due to the uncertainty of the
Company generating future taxable income.
13
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
AND PREDECESSOR COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE K -- INCOME TAXES (Continued)
- ----------------------------------
A reconciliation of income tax expense using the statutory federal income tax
rate of 34% to the actual income tax expense for the six months ended December
31, 1999, the six months ended June 30, 1999, the seven months ended December
31, 1998 and the five months ended May 31, 1998 is as follows:
December 31, June 30, December 31, May 31,
1999 1999 1998 1998
--------- -------- --------- -----
Federal tax expense at statutory rate $(444,579) $(68,233) $(100,816) $ 683
Change in valuation allowance 444,579 68,233 100,816 (683)
--------- -------- --------- -----
$ -- $ -- $ -- $ --
========= ======== ========= =====
NOTE L -- STOCKHOLDERS' EQUITY
- ------------------------------
The Preferred Stock of Acquisition is non-voting and convertible, at the option
of the holder, to Class B common stock on a share for share basis. The Preferred
Stock bears non-cumulative dividends of 8% per annum which are payable at the
discretion of the Board of Directors. This stock has a liquidation preference of
$1.50 per share.
The Class B Common Stock is identical to Class A Common Stock, except that the
Class B stock has no voting rights. The Class B stock automatically converts to
Class A stock, on a share for share basis, upon the Class A stock being
registered with the Securities and Exchange Commission.
NOTE M -- STOCK OPTIONS AND WARRANTS
- ------------------------------------
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" in accounting for its compensatory options. Accordingly, no
compensation cost has been recognized for its employee stock options in the
financial statements for those options where the fair market value approximates
the exercise price. Had the Company determined compensation cost based on the
fair value at the grant date for its stock options under SFAS 123, the Company's
pro forma net loss for the six-month period ended December 31, 1999 would have
been increased to the pro forma amounts indicated below (the six month period
June 30, 1999, the seven month period December 31, 1998 and the five month
period May 31, 1998 have no pro forma differences):
Net loss
As reported (1,307,585)
----------
Pro forma (1,361,978)
----------
The fair value of each option grant is estimated on the date of grant using the
Black Scholes option-pricing model with the following assumptions used for
grants during the six-month period ended December 31, 1999: dividend yield of 0
percent; expected volatility of 0%; risk free interest rate of 5%; and an
expected life of 3 years.
14
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
AND PREDECESSOR COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE M -- STOCK OPTIONS AND WARRANTS (Continued)
- ------------------------------------------------
A summary of changes in the Company's compensatory options and warrants follows:
Employee Stock Option Plan Other Compensatory Combined Total
-------------------------- -------------------------- --------------
Weighted Weighted
Average Average
Exercise Exercise Options/
Options Price Warrants Price Warrants
------- ----- -------- ----- --------
Outstanding at June 30, 1999 -- $ -- -- $ -- -
--------- ------ ------- ----- ---------
Granted 1,580,000 1.50 371,215 1.50 1,951,215
Exercised -- -- -- -- -
Forfeited -- -- -- -- -
--------- ------ ------- ----- ---------
Outstanding at December 31, 1999 1,580,000 $ 1.50 371,215 $1.50 1,951,215
========= ====== ======= ===== =========
The following table summarizes information about employee stock options
outstanding at December 31, 1999 under the Stock Option Plan:
Options Outstanding Options Exercisable
-------------------------------------- -----------------------------------
Weighted
average Weighted
Range of Number remaining average Number Weighted average
exercise prices outstanding contractual life exercise price Exercisable exercise price
- --------------- ----------- ---------------- -------------- ----------- --------------
$1.50 1,580,000 7.50 years $1.50 263,333 $1.50
The following table summarizes information about warrants outstanding at
December 31, 1999.
Warrants Outstanding Warrants Exercisable
-------------------------------------- -------------------------------------
Weighted
average Weighted
Range of Number remaining average Number Weighted average
exercise prices outstanding contractual life exercise price Exercisable exercise price
- --------------- ----------- ---------------- -------------- ----------- --------------
$ 1.50 371,215 5.0 years $ 1.50 371,215 $ 1.50
15
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
AND PREDECESSOR COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE N -- CREDIT CONCENTRATIONS AND SIGNIFICANT CUSTOMERS
- ---------------------------------------------------------
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and accounts receivable.
Cash and cash equivalents are at risk to the extent that they exceed the Federal
Deposit Insurance Corporation insured amount. To minimize this risk, the Company
places its cash and cash equivalents with high credit quality financial
institutions.
The Company recognizes revenue upon shipment of goods or delivery of services
and does not maintain any set policy regarding the customer's right of return.
Customer requests to return products for refund or credit are handled on an
individual basis at the discretion of management. The refunds or credits in 1999
and 1998 were not significant to the results of operations of the Company. In
the normal course of business, the Company extends unsecured credit to virtually
all of its customers. The Company has a broad base of customers located
throughout the United States, which reduces its credit risk. Because of the
credit risk involved, management has provided an allowance for doubtful accounts
which reflects its opinion of amounts which will eventually become uncollectible
($9,197 at December 31, 1999; $0 at June 30, 1999, December 31, 1998 and May 31,
1998). In the event of complete non- performance by the Company's customers, the
maximum exposure to the Company is the outstanding accounts receivable balance
at the date of non-performance.
NOTE O -- FAIR VALUE OF FINANCIAL INSTRUMENTS
- ---------------------------------------------
Statement of Financial Accounting Standards No. 107 "Disclosure About Fair Value
of Financial Instruments", requires disclosure about the fair value of all
financial assets and liabilities for which it is practical to estimate. At
December 31, 1999, June 30, 1999, December 31, 1998 and May 31 1998 the carrying
value all of the Company's accounts receivable, accounts payable and accrued
liabilities approximate fair value because of their short-term nature.
Line of credit, long-term debt, capital lease obligations, and notes payable to
shareholders carrying values approximate fair values based on the borrowing
rates currently available to the Company for arrangements with similar terms.
NOTE P -- SUBSEQUENT EVENTS
- ---------------------------
Pursuant to an Agreement and Plan of Reorganization dated June 19, 2000,
Acquisition entered into a reverse merger acquisition agreement with Mayford
Acquisition Corporation ("Mayford"), a publicly held "shell" Deleware
Corporation. Mayford purchased 100% of Acquisition's outstanding stock in a tax
free reorganization. Mayford issued 13,527,083 shares of its $.0001 par value
Class A common stock and 2,972,504 shares of its $.0001 par value Series A
convertible preferred stock in exchange for all of the outstanding common and
preferred shares of Acquisition. Also effective June 19, 2000, Mayford changed
its name to CCM Manufacturing Technologies, Inc. For accounting purposes, the
merger will be treated as a recapitalization of Acquisition with Acquisition as
the acquirer (a reverse merger).
16
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
AND PREDECESSOR COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, June 30, 1999, December 31, 1998 and May 31, 1998
NOTE Q -- UNAUDITED INTERIM FINANCIAL INFORMATION
- -------------------------------------------------
The unaudited interim financial information as of March 31, 2000 and for the
three months then ended has been prepared on the same basis as the audited
financial statements. In the opinion of management, such unaudited information
includes all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of this interim information. Operating results
for the three months ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000.
17
(4) PRO FORMA FINANCIAL INFORMATION.
Pursuant to an Agreement and Plan of Reorganization dated June 19,
2000, Syntec Acquisition Corp. ("Acquisition") entered into a reverse
merger acquisition agreement with Mayford Acquisition Corporation
("Mayford"), a publicly held "shell" Deleware Corporation. Mayford
purchased 100% of Acquisition's outstanding stock in a tax free
reorganization. Mayford issued 13,527,083 shares of its $.0001 par
value Class A common stock and 2,972,504 shares of its $.0001 par value
Series A convertible preferred stock in exchange for all of the
outstanding common and preferred shares of Acquisition. Also effective
June 19, 2000, Mayford changed its name to CCM Manufacturing
Technologies, Inc. For accounting purposes, the merger will be treated
as a recapitalization of Acquisition with Acquisition as the acquirer
(a reverse merger).
The unaudited pro forma condensed consolidated balance sheet of Syntec
Acquisition Corp. and subsidiaries (the "Company") and CCM
Manufacturing Technologies, Inc. (formerly Mayford Acquisition
Corporation) as of March 31, 2000, reflects this reverse acquisition as
if it had occurred on March 31, 2000.
The unaudited pro forma condensed consolidated statements of operations
for the three months ended March 31, 2000, six months ended December
31, 1999, six months ended June 30, 1999, seven months ended December
31, 1998, and five months ended May 31, 1998, reflects the reverse
acquisition as if it had occurred on January 1, 1998.
The unaudited pro forma condensed consolidated balance sheet and
statements of operations should be read in conjunction with the
separate historical financial statements of the Company and related
notes appearing elsewhere in this document. The pro forma financial
information is not necessarily indicative of the results that would
have been reported had such events actually occurred on the dates
specified, nor is it necessarily indicative of the future results of
the combined entities.
SYNTEC ACQUISITION CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
March 31, 2000
Syntec
Acquisition Mayford
Corp. and Acquisition Pro-Forma
Subsidiaries Corporation Adjustments Pro-Forma
------------ ----------- ----------- ---------
Current assets
Cash and cash equivalents $ 1,421 $ 500 $ -- $ 1,921
Accounts receivable, net 476,945 -- -- 476,945
Inventories 470,816 -- -- 470,816
Prepaid expenses 15,363 -- -- 15,363
----------- ----------- ---------- -----------
Total current assets 964,545 500 -- 965,045
Property and equipment, net 216,057 -- -- 216,057
Excess of cost over fair value of net
assets of companies acquired, net 1,794,830 -- -- 1,794,830
Other assets 33,887 -- -- 33,887
----------- ----------- ---------- -----------
Total assets $ 3,009,319 $ 500 $ -- $ 3,009,819
=========== =========== ========== ===========
Current liabilities
Line of credit 188,560 -- -- 188,560
Current portion of long-term debt 330,869 -- -- 330,869
Notes payable to shareholders 479,707 -- -- 479,707
Current portion of capital lease
obligations 41,327 -- -- 41,327
Accounts payable 644,297 -- -- 644,297
Accrued liabilities 147,778 -- -- 147,778
----------- ----------- ---------- -----------
Total current liabilities 1,832,538 -- -- 1,832,538
Long-term debt, less current portion 366,667 -- -- 366,667
Capital lease obligations, less current
portion 83,623 -- -- 83,623
Shareholders' equity
Preferred stock 105 -- 159 (A) 264
Common stock 529 500 294 (A) 1,323
Additional paid-in capital 2,655,733 1,330 (1,783)(A) 2,655,280
Accumulated deficit (1,929,876) (1,330) 1,330 (A) (1,929,876)
----------- ----------- ---------- -----------
Total shareholders' equity 726,491 500 -- 726,991
----------- ----------- ---------- -----------
Total liabilities and shareholders'
equity $ 3,009,319 $ 500 $ -- $ 3,009,819
=========== =========== ========== ===========
CCM MANUFACTURING, INC. AND SUBSIDIARIES
(formerly Mayford Acquisition Corporation)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ending March 31, 2000
Syntec Mayford
Acquisition Acquisition Pro-Forma
Corp. Corporation Adjustments Pro-Forma
----------- ----------- ----------- ---------
Net sales $ 802,667 $ -- $ -- $ 802,667
Cost of sales 932,484 -- -- 932,484
--------- --------- --------- ----------
Gross loss (129,817) -- -- (129,817)
Selling, general and administrative 446,002 -- -- 446,002
--------- --------- --------- ----------
Loss from operations (575,819) -- -- (575,819)
Other income (expense)
Interest expense (48,105) -- -- (48,105)
Other, net 1,632 -- -- 1,632
--------- --------- --------- ----------
Total other expense (46,472) -- -- (46,472)
--------- --------- --------- ----------
Loss before provision for income taxes (622,291) -- -- (622,291)
Provision for income taxes -- -- -- --
--------- --------- --------- ----------
Net loss $(622,291) $ -- $ -- $ (622,291)
========= ========= ========= ==========
Loss attributable to common stock $ (622,291)
==========
Basic and diluted net loss per share
attributable to common stockholders $ (0.05)
==========
Number of weighted average shares of
common stock outstanding (basic
and diluted) 12,102,770
==========
CCM MANUFACTURING, INC. AND SUBSIDIARIES
(formerly Mayford Acquisition Corporation)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ending December 31, 1999
Syntec Mayford
Acquisition Acquisition Pro-Forma
Corp. Corporation Adjustments Pro-Forma
------------- ----------- ----------- --------------
Net sales $ 2,078,249 $ -- $ -- $ 2,078,249
Cost of sales 2,361,770 -- -- 2,361,770
------------- ---------- --------- --------------
Gross loss (283,521) -- -- (283,521)
Selling, general and administrative 952,797 1,330 -- 954,127
------------- ---------- --------- --------------
Loss from operations (1,236,318) -- -- (1,237,648)
Other income (expense)
Interest expense (88,102) -- -- (88,102)
Other, net 16,835 -- -- 16,835
------------- ---------- --------- --------------
Total other expense (71,267) -- -- (71,267)
------------- ---------- --------- --------------
Loss before provision for income taxes (1,307,585) -- -- (1,308,915)
Provision for income taxes -- -- -
------------- ---------- --------- --------------
Net loss $ (1,307,585) $ (1,330) $ -- $ (1,308,915)
============= ========== ========= ==============
Loss attributable to common stock $ (1,308,915)
==============
Basic and diluted net loss per share
attributable to common stockholders $ (0.11)
==============
Number of weighted average shares of
common stock outstanding (basic
and diluted) 11,812,500
==============
CCM MANUFACTURING, INC. AND SUBSIDIARIES
(formerly Mayford Acquisition Corporation)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Six Months Ending June 30, 1999
Syntec Mayford
Acquisition Acquisition Pro-Forma
Corp. Corporation Adjustments Pro-Forma
----------- ----------- ----------- ---------
Sales $ 1,776,086 $ -- $ -- $ 1,776,086
Cost of sales 1,369,727 -- -- 1,369,727
------------ ---------- ---------- ------------
Gross profit 406,359 -- -- 406,359
Selling, general and administrative 554,389 -- -- 554,389
------------ ---------- ---------- ------------
Loss from operations (148,030) -- -- (148,030)
Other income (expense)
Interest expense (51,062) -- -- (51,062)
Other, net (1,592) -- -- (1,592)
------------ ---------- ---------- ------------
Total other expense (52,654) -- -- (52,654)
------------ ---------- ---------- ------------
Loss before provision for income taxes (200,684) -- -- (200,684)
Provision for income taxes -- -- -- --
------------ ---------- ---------- ------------
Net loss $ (200,684) $ -- $ -- $ (200,684)
============ ========== ========== ============
Loss attributable to common stock $ (200,684)
============
Basic and diluted net loss per share
attributable to common stockholders $ (0.02)
============
Number of weighted average shares of
common stock outstanding (basic
and diluted) 11,812,500
============
CCM MANUFACTURING, INC. AND SUBSIDIARIES
(formerly Mayford Acquisition Corporation)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Seven Months Ending December 31, 1998
Syntec Mayford
Acquisition Acquisition Pro-Forma
Corp. Corporation Adjustments Pro-Forma
------------ ----------- ----------- -------------
Net sales $ 1,736,270 $ -- $ -- $ 1,736,270
Cost of sales 1,456,500 -- -- 1,456,500
------------ ---------- ---------- ------------
Gross profit 279,770 -- -- 279,770
Selling, general and administrative 565,957 -- -- 565,957
------------ ---------- ---------- ------------
Loss from operations (286,187) -- -- (286,187)
Other income (expense)
Interest expense (50,437) -- -- (50,437)
Other, net 40,106 -- -- 40,106
------------ ---------- ---------- ------------
Total other expense (10,331) -- -- (10,331)
------------ ---------- ---------- ------------
Loss before provision for income taxes (296,518) -- -- (296,518)
Provision for income taxes -- -- -- --
------------ ---------- ---------- ------------
Net loss $ (296,518) $ -- $ -- $ (296,518)
============ ========== ========== ============
Loss attributable to common stock $ (296,518)
============
Basic and diluted net loss per share
attributable to common stockholders $ (0.03)
============
Number of weighted average shares of
common stock outstanding (basic
and diluted) 11,812,500
============
CCM MANUFACTURING, INC. AND SUBSIDIARIES
(formerly Mayford Acquisition Corporation)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Five Months Ending May 31, 1998
Syntec Mayford
Acquisition Acquisition Pro-Forma
Corp. Corporation Adjustments Pro-Forma
------------ ----------- ----------- -------------
Net sales $ 1,208,898 $ -- $ -- $ 1,208,898
Cost of sales 970,944 -- -- 970,944
------------ ---------- ----------- ------------
Gross profit 237,954 -- -- 237,954
Selling, general and administrative 224,132 -- -- 224,132
------------ ---------- ----------- ------------
Income from operations 13,822 -- -- 13,822
Other income (expense)
Interest expense (12,038) -- -- (12,038)
Other, net 225 -- -- 225
------------ ---------- ----------- ------------
Total other expense (11,813) -- -- (11,813)
------------ ---------- ----------- ------------
Income before provision for income taxes 2,009 -- -- 2,009
Provision for income taxes -- -- -- --
------------ ---------- ----------- ------------
Net income $ 2,009 $ -- $ -- $ 2,009
============ ========== =========== ============
Income attributable to common stock $ 2,009 $ 2,009
============ ============
Basic and diluted net loss per share
attributable to common stockholders $ 0.00
============
Number of weighted average shares of
common stock outstanding (basic
and diluted) 11,812,500
============
CCM MANUFACTURING, INC. AND SUBSIDIARIES
(formerly Mayford Acquisition Corporation)
NOTES TO PROFORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(A) To record the issuance of CCM Manufacturing, Inc. common stock in
connection with the reverse acquisition of the assets of Syntec
Acquisition Corp.
EXHIBITS
2.1* Certificate of Amendment to the Certificate of Incorporation of Mayford
Acquisition Corporation
10.1* Agreement and Plan of Merger between Mayford Acquisition Corporation,
Syntec Acquisition Corporation, and the Shareholders of Syntec
16 Letter from former accountants expressing no disagreement with
disclosure.
o Previously filed as an exhibit to the Company's Current report on Form
8K filed with the Securities and Exchange Commission on July 19, 2000
and incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Current Report on Form 8-K to be signed on
its behalf by the undersigned hereunto duly authorized.
CCM MANUFACTURING TECHNOLOGIES, INC.
By: /s/ Jose G. Chavez
------------------------------------
Chief Executive Officer
Date: October 18, 2000
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