INDEPENDENT AUDITORS' REPORT
The Board of Directors
Benchmark Systems of Va., Inc.
We have audited the balance sheet of Benchmark Systems of Va.,
Inc. as of December 31, 1994 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the
years ending December 31, 1994 and 1993. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Benchmark Systems of Va., Inc. at December 31, 1994
and the results of its operations and its cash flows for the
years ended December 31, 1994 and 1993 in conformity with
generally accepted accounting principles.
Glass, Green, May & Associates, L.L.C.
/s/ Glass, Green, May & Associates, L.L.C.
Salt Lake City, Utah
August 26, 1995
BENCHMARK SYSTEMS OF VA., INC.
Balance Sheets
12/31/94 6/30/95
ASSETS (Unaudited)
------------------------
Current Assets:
Cash $ 30,991 26,134
Trade accounts receivable, net of
allowance for doubtful accounts of
$68,266 at December 31, 1994 and
$17,690 at June 30, 1995
(notes 2 and 6) 367,907 383,460
Inventories (note 2) 149,730 215,691
Advances to officers and
stockholders (note 8) 22,454 9,344
Prepaid expenses and other assets 15,290 16,417
------- -------
Total current assets 586,372 651,046
Property and equipment:
Leasehold improvements 12,338 13,541
Furniture, fixtures and equipment 668,232 680,704
------- -------
Total property and equipment 680,570 694,245
------- -------
Less accumulated depr. & amort. (500,962) (550,635)
------- -------
Net property and equipment 179,608 143,610
Other assets 10,675 2,337
------- -------
$776,655 796,993
======= =======
<FN>
See accompanying notes to the financial statements
Benchmark Systems of Va., Inc.
Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
12/31/94 6/30/95
(Unaudited)
----------------------
Current Liabilities:
Line of credit with
commercial bank (note 2) $ 55,000 229,500
Accounts payable (note 7) 272,015 468,431
Accrued liabilities 68,844 23,227
Customer deposits 5,618 -
Deferred revenue 262,336 208,378
------- -------
Total current liabilities 663,813 929,536
Stockholders' equity (deficit):
Common stock, $10 par value;
authorized 1,500 shares; 310 shares
issued and outstanding (note 7) 3,100 3,100
Retained earnings
(accumulated deficit) 109,742 (135,643)
Total stockholders' equity (deficit) 112,842 (132,543)
------- -------
$ 776,655 796,993
======= =======
<FN>
See accompanying notes to financial statements.
BENCHMARK SYSTEMS OF VA., INC.
Statements of Operations
Year ended Six month ended
12/31/94 12/31/93 6/30/95 6/30/94
(Unaudited)
Net service and sales revenue
(note 6) $4,729,807 3,924,852 1,940,680 2,726,027
Cost of goods sold and
other direct costs 3,003,386 2,369,607 1,280,475 1,711,027
Gross profit 1,726,421 1,555,245 660,205 1,015,000
Selling, general & administrative
expenses (notes 3, 4, 5) 1,678,079 1,605,807 804,109 910,478
Operating income (loss 48,342 (50,562) (143,904) 104,522
Other income (expense):
Interest expense (7,771) (11,504) (7,041) (4,086)
Other, net - 2,481 - -
Total other income (expense (7,771) (9,023) (7,041) (4,086)
Net income (loss) $ 40,571 (59,585) (150,945) 100,436
<FN>
See accompanying notes to financial statements
BENCHMARK SYSTEMS OF VA., INC.
Statements of Stockholders' Equity (Deficit)
December 31, 1994 and 1993 and June 30, 1995
Common Stock Retained Total
------------------- Earnings Stockholders'
Number of (Accumulated Equity
Shares Amount Deficit) (Deficit)
--------- -------- ---------- -----------
Balance at 1/1/93 310 $3,100 $356,564 $359,664
Net loss year ended 12/ 31/93 - - (59,585) (59,585)
Distributions to stockholders - - (140,239) (140,239)
------- ------- -------- --------
Balance at 12/31/93 310 3,100 156,740 159,840
Net income year ended 12/31/94 - - 40,571 40,571
Distributions to
stockholders (unaudited) - - (87,569) (87,569)
-------- --------- --------- ---------
Balance at December 31, 1994 310 3,100 109,742 112,842
Net loss six months ended
June 30, 1995 (Unaudited) - - (150,945) (150,945)
Distributions to stockholders
(unaudited) - - (94,440) (94,440)
-------- -------- -------- ----------
Balance at 6/30/95 (unaudited) 310 $3,100 (135,643) ($132,543)
<FN>
See accompanying notes to financial statements.
BENCHMARK SYSTEMS OF VA., INC.
Statements of Cash Flows
Year ended Six months ended
12/31/94 12/31/93 6/30/95 6/30/94
(Unaudited)
------------------- --------------------
Cash flows from operating activities:
Net income (loss) $ 40,571 (59,585) (150,945) 100,436
Adjustments to reconcile net income
(loss)to net cash provided by
(used in) operating activities:
Depreciation and amortization 89,703 102,464 450,463 46,895
Net change in current assets
and liabilities:
Trade accounts receivable (3,256) 125,904 (15,553) (1,810)
Advances to officers
and stockholders 22,700 (45,154) 13,110 26,683
Inventories 104,040 48,090 (65,961) 34,894
Other current assets (7,282) 557 (1,127) (19,473)
Customer deposits (7,442) (6,266) (5,618) 1,368
Deferred revenue 26,708 63,061 (53,958) 57,627
Accounts payable and
accrued liabilities 52,316 (53,209) 150,799 25,478
Net cash provided by ------- ------- ------- -------
(used in) operating activities 318,058 175,862 (78,790) 272,098
Cash flows from investing activities:
Equipment purchases (76,467) (124,696) (13,675) (48,657)
Decrease (increase)
in other assets (2,913) 3,405 8,338 4,938
Other 1,224 (535) (790) (735)
-------- --------- ------- --------
Net cash used in investing activites (78,156) (121,826) (6,127) (44,454)
Cash flows from financing activities:
Repayments of bank line of credit (130,184) (14,879) - (173,934)
Borrowings on line of credit - 109,000 174,500 -
Distributions to stockholders (87,569) (140,239) (94,440) (45,232)
Net cash provided by (used in) --------- --------- -------- ---------
financing activities (217,753) (46,118) 80,060 (219,166)
-------- -------- -------- --------
Net increase (decrease) in cash 22,149 7,918 (4,857) 8,478
Cash at beginning of period 8,842 924 30,991 8,842
-------- ------- ------- ------
Cash at end of period $ 30,991 8,842 26,134 17,320
======== ======= ======= ======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 7,748 11,50 7,041 4,086
======= ======= ======= ======
<FN>
See accompanying notes to financial statements.
BENCHMARK SYSTEMS OF VA., Inc.
Notes to Financial Statements
December 31, 1994 and 1993 and June 30, 1995 and 1994
(1) Organization, Line of Business, & Summary of Accounting
Policies
(a) Organization and Line of Business
Benchmark Systems of Va., Inc. (the Company) is a value
added reseller of computer hardware and software. Its customers
consist primarily of credit unions and medical offices. The
company maintains its corporate headquarters and sales
facilities in the eastern United States.
(b) Inventories
Inventories are stated at the lower of cost or market.
Cost is determined using the first-in, first-out method. All
inventories consist of purchased computers and certain peripheral
equipment, purchased software, computer parts and supplies.
(c) Property and Equipment
Property and equipment are stated at cost. Depreciation
is calculated using accelerated and straight-line methods over
the estimated useful lives of the assets.
(d) Income Taxes
The Company has elected to be treated as an S Corporation
under the Internal revenue code and as such all items of taxable
income, loss and credit flow through to the individual stockholders
and the Company has no income tax liability or expense for Federal
or state income tax purposes.
(e) Deferred Revenue
Amounts billed as software license and maintenance fees
and hardware maintenance fees are deferred and recognized on a
straight-line basis over the term of the maintenance contracts.
(f) Basis of Presentation
In the opinion of management, the accompanying
unaudited financial statements contain all the adjustments
necessary to fairly present the Company's financial position as
of June 30, 1995 and its results of operations and cash flows for
the six months ended June 30, 1995 and 1994. The results of
operations for the six months ended June 30, 1995 may not be
indicative of the results that may be expected for the year
ending December 31, 1995.
(2) Line of Credit with Commercial Bank
The line of credit with a commercial bank bears interest at
the rate of prime plus 1/2 %, with interest payable monthly and
principal payable on the due date of April 30, 1995 which was
subsequently renewed until June 30, 1995, with payment on demand
subsequent to June 30, 1995. The line of credit is secured by
inventories, accounts receivable and personal guarantees of the
stockholders.
(3) Leases
The Company leases real estate and personal property under
leases expiring through 1999. The Company's principal lease of
real estate is from a former stockholder under a lease agreement
which provides for annual increases based on the consumer price
index.
As of December 31, 1994 future minimum lease payments under
the noncancelable operating leases with initial or remaining
lease terms in excess of one year were as follows:
Year ending
1995 $ 154,368
1996 160,046
1997 159,344
1998 149,537
1999 106,015
Thereafter -
Total minimum lease payments $ 729,310
========
Rental expense for operating leases was $134,384 and
$103,040 for the years ended December 31, 1994 and 1993
respectively. Rental expense for the six months ended June 30,
1995 and 1994 was $67,029 and $63,787, respectively.
(4) Employee Savings Plan
All eligible employees of the Company are included in the
Company's 401(K) savings plan. Under the 401(K) plan the Company
matches 25% of the employees' contributions up to three percent
of gross pay. During the years ended December 31, 1994 and 1993,
the Company contributed $9,456 and $9,576, respectively to the
401(K) plan and $3,122 and $3,989 respectively during the six
months ended June 30, 1995 and 1994.
(5) Commitments
The company has non-compete and consulting agreements with
a former stockholder, and a corporation owed by this person.
Under the terms of these agreements the company paid a total of
$150,438 and $150,875 respectively for the years ended December
31, 1994 and 1993 and $75,000 for each of the six months ended
June 30, 1995 and 1994. These commitments expire in 1995.
(6) Credit Concentrations
The Company's customers are primarily in the medical and
credit union markets and are located in the eastern United
States. No single customer accounted for more than 5 percent of
sales for any period presented in the finamcial statements, or of
the accounts receivable balance at December 31, 1994 or June 30,
1995.
(7) Subsequent Event
Subsequent to December 31, 1994 and effective June 30, 1995,
100% of the Company's outstanding common stock was purchased by
CUSA Technologies, Inc. (CTI). CTI principally develops, sells
and supports credit union, medical and rental software.
In consideration for the Company's common stock the
shareholders received 380,000 shares of CTI's restricted common
stock and $1,000,000 in cash to be paid by January 1996.
At June 30, 1995 the Company owed CTI a total of $239,051
representing amounts due for goods, services, royalties and
payroll paid or provided to the Company by CTI.
(8) Related Party Transactions
At December 31, 1994 and June 30, 1995 the Company had
advanced $22,454 and $9,344, respectively, to officers and
stockholders of the Company.
CUSA TECHNOLOGIES, INC.
Note: A cover page and the footnotes to the pro forma statements follow the
June 30, 1994 and March 31, 1995 pro forma income statements below (the pro
forma balance sheet follows the footnotes).
Pro forma Condensed Consolidating Statement of Operations
For the year ending June 30, 1994
Consolidated
Pro Forma
Balance
(Excluding Consolidated
Benchmark of Benchmark of Pro Forma Pro Forma
Va., Inc) Va., Inc. Adjustments Balance
----------- ------------ ----------- ----------
Net Sales $32,406,759 4,648,907(1) (204,370) 36,851,296
Cost of goods sold 13,810,892 2,903,439(1) (204,370) 16,509,961
Gross profit 18,595,867 1,745,468 -20,341,335
Selling, general and
administrative expense 19,836,893 1,732,672(4) 128,557 21,698,122
Operating income (loss) (1,241,026) 12,796 - (1,356,787)
Other income (expense):
Interest, net (365,786) (10,523) (376,309)
Other 414,285 - 414,285
Earnings (loss)
before income taxes (1,192,527) 2,273 - (1,318,811)
Income taxes (477,011) - (2) (50,514) (527,525)
Net income (loss) before
preferred stock dividends (715,516) 2,273 - (791,287)
Less pref. stock dividends 120,000 - - 120,000
Net income (loss) available
to common shareholders $ (595,516) 2,273 - (671,287)
Loss per common share (0)
Weighted average number of shares outstanding 7,763,634
<FN>
See accompanying notes to condensed pro forma financial statements.
CUSA TECHNOLOGIES, INC.
Pro forma Condensed Consolidating Statement of Operations
For the nine months ending March 31, 1995
Consolidated
Pro forma
Balance
(excluding Consolidated
Benchmark of Benchmark of Pro forma Pro forma
Va., Inc.) Va., Inc. Adjustments Balance
Net Sales $ 26,143,523 2,951,327(1) (134,357) 28,960,493
Cost of goods sold 12,380,126 1,916,088(1) (134,357) 14,161,857
Gross profit 13,763,397 1,035,239 - 14,798,636
Selling, general and
administrative expense 13,103,244 1,159,442(4) 96,418 14,359,104
Operating income (loss) 660,153 (124,203) - 439,532
Other income (expense):
Interest, net (349,272) (5,395) (354,667)
Other (35,767) - (35,767)
Earnings (loss) before
income taxes 275,114 (129,598) - 49,098
Income taxes 110,046 - (2) (90,407) 19,639
Net income(loss) before
preferred stock dividends 165,068 (129,598) - 29,459
Less preferred stock dividends 90,000 - - 90,000
Net income (loss) available
to common share holders $ 75,068 (129,598) 0 (60,541)
Loss per common share (0)
Weighted average number of shares outstanding 8,143,634
<FN>
See accompanying notes to condensed pro forma financial statements.
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The following pro forma condensed consolidating balance sheet
as of March 31, 1995 and the related pro forma condensed
consolidating statements of operations for the nine months ending
March 31, 1995 and the fiscal year ending June 30, 1994 are based
on the consolidated Pro forma balance sheet of CUSA Technologies,
Inc. (CTI) as previously reported on form 10-QSB (Amendment No. 1)
for the quarter ended March 31, 1995 (which included the historical
consolidated financial statements of CTI adjusted to reflect the
(1) acquisition of Benchmark Computer Systems, Inc. and
subsidiaries (collectively, Benchmark), (2) the acquisition of RK
& DR Concepts, Inc. dba: Versyss Data Systems (VDS), (3) the
acquisition of Outside Force, Inc. (OFI), (4) the acquisition of
Computer Ease, (5) the merger with Sierra Surgery Center, Inc., and
(6) the merger with Medical Computer Management, Inc. and it's
subsidiaries (collectively, MCMI) assuming the acquisitions were
completed as of the beginning of the periods for the statements of
operations and as of March 31, 1995 for the balance sheet.),
and the acquisition of Benchmark Systems of Va., Inc. (Virginia)
The pro forma condensed consolidating financial statements
should be read in conjunction with the audited financial statements
of CTI, Benchmark, VDS, MCMI and Virginia and the related notes
thereto. The pro forma adjustments include certain assumptions as
discussed in the accompanying notes and are subject to change.
Furthermore, the pro forma condensed consolidated results of
operations are not necessarily indicative of actual results which
might have occurred had the acquisitions occurred on the dates
indicated or of results that may be obtained in the future.
CUSA TECHNOLOGIES, INC.
Notes to Pro Forma Condensed Consolidating Financial Statements
(1) General Assumptions
The accompanying pro forma condensed balance sheet as of March
31, 1995 and the pro forma condensed consolidating statements
of operations for the nine months ending March 31, 1995 and
the year ended June 30, 1994 were prepared based on the
following assumptions:
o The pro forma adjustments were made assuming the
companies were combined as of the beginning of the
periods for the statements of operations and as of
the end of the period for the balance sheet.
(2) Pro Forma Adjustments
The adjustments to the accompanying condensed pro forma
balance sheet as of March 31, 1995 and the pro forma condensed
statements of operations for the nine months ending March 31,
1995 and the year ending June 30, 1994 are as follows:
(1) Adjustment to eliminate software and royalty fees
charged to Virginia by CUSA.
(2) Adjustment to record income tax benefit at the
estimated effective rate of 40% of net income
(loss) before income taxes.
(3) Adjustment to record acquisition of Benchmark
Systems of Va., Inc.
(4) Adjustment to amortize goodwill acquired on the
acquisitions over a period of fifteen years on a
straight-line basis.
CUSA TECHNOLOGIES, INC.
Pro forma Condensed Consolidating Balance Sheet
March 31, 1995
Consolidated
Pro Forma
Balance
(excluding Benchmark Total Consolidated
Benchmark Systems Combined Pro forma Pro forma
of Va., Inc) of Va. Inc. Balance Adjustments Balance
ASSETS ----------- ---------- -------- ---------- ------------
Current Assets:
Cash and cash equivalents $ 1,341,779 (26,537) 1,315,242(3) (100,000) 1,215,242
Trade accounts receivable, net 4,747,459 342,057 5,089,516 5,089,516
Receivables from related parties 181,560 42,036 223,596 223,596
Inventories (net of obsolesence) 1,674,465 155,312 1,829,777 1,829,777
Prepaid and other assets 175,565 36,525 212,090 212,090
Total current assets 8,120,828 549,394 8,670,222 8,570,222
Property and equipment:
Land 297,688 0 297,688 297,688
Building and improvements 2,138,339 0 2 138,339 2,138,339
Equipment 1,284,094 0 1,284,094 1,284,094
Office furniture, fixtures,
and equipment 744,503 549,601 1,294,104 1,294,104
Vehicles 66,821 106,101 172,922 172,922
Leasehold Improvements 12,306 13,541 25,847 25,847
Software 85,441 (45,954) 39,487 39,487
4,629,192 623,290 5,252,482 - 5,252,482
Less accumulated depreciation 750,738 452,316 1,203,054 1,203,054
Net property and equipment 3,878,454 170,974 4,049,428 - 4,049,428
Equipment under capital lease, net 297,842 1,841 299,683 299,683
Receivables from related parties 170,688 6,778 177,466 177,466
Software development and
acquisition costs 2,964,427 0 2,964,427 2,964,427
Excess purchase price over fair
value of net tangible 0 0 0
and identifiable intangible
assets acquired 9,317,236 0 9,317,236(3) 1,928,361 11,245,597
Other assets 178,901 9,989 188,890 188,890
Total Assets $ 24,928,376 738,975 25,667,351 - 27,495,712
========== ======== ========== ========= ==========
LIABILITIES AND EQUITY
Current liabilites:
Lines of credit with bank $ 143,747 0 143,747 143,747
Current installments of
long-term debt and
subordinated long-term debt 570,403 0 570,403 570,403
Current installments of
obligations under
capital leases 155,789 0 155,789 155,789
Accounts payable 2,262,303 251,228 2,513,531 2,513,531
Accrued liabilities 2,716,296 233,674 2,949,970 2,949,970
Income taxes payable 379,084 0 379,084 379,084
Payables to related parties 1,360,434 0 1,360,434(3) 900,000 2,260,434
Deferred revenue 5,523,328 56,934 5,580,262 5,580,262
Total current liabilites 13,111,384 541,836 13,653,220 - 14,553,220
Long-term line of credit 995,000 175,500 1,170,500 1,170,500
Long-term debt and subordinated
long-term debt, excluding
current installments 1,903,652 0 1,903,652 1,903,652
Obligations under capital leases,
excluding current installments 215,794 0 215,794 215,794
Minority interest in susidiary 2,826 0 2,826 2,826
Deferred income tax liability 288,938 0 288,938 288,938
Total liabilites 16 517,594 717,336 17,234,930 - 18,134,930
Stockholders Equity:
Series A convertible
preferred stock 1,000 0 1,000 1,000
Common stock 7,764 3,100 10,864(3) (2,720) 8,144
Additional paid in capital 7,389,579 0 7,389,579(3) 949,620 8,339,199
Retained earnings 1,012,439 18,539 1,030,978(3) (18,539) 1,012,439
Total stockholders' equity 8,410,782 21,639 8,432,421 - 9,360,782
Total liability &
stockholders equity $ 24,928,376 738,975 25,667,351 - 27,495,712
============ ======= ========== ========= ===========
<FN>
See accompanying notes to condensed pro forma financial statements.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
& Exchange Act of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 13, 1994
CUSA TECHNOLOGIES, INC.
By /s/ Michael K. Hirano
Michael K. Hirano, C.F.O.