SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 8-K / A AMENDMENT NO. 1 ------------------------- CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 21, 1995 IFR SYSTEMS, INC. - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION) 0-14224 48-0777904 - ---------------------------- --------------------------------- (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.) 10200 WEST YORK STREET, WICHITA, KANSAS 67215 - -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (316) 522-4981 - -------------------------------------------------------------------------------- (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Item 2. ACQUISITION OR DISPOSITION OF ASSETS. On June 21, 1995, the Registrant consummated the acquisition of substantially all of the assets of York Technology Limited, a company incorporated in England ("York Tech England"), and York Technology Inc. , a New Jersey Corporation ("York Tech USA"), as well as the real estate and building previously leased by York Tech England (the "York Tech Building"). The total purchase price for all of these assets was approximately $6,900,000 (including estimated acquisition costs of $300,000). Cornibi Limited, a company incorporated in England and a subsidiary formed by the Registrant for purposes of the York Tech England acquisition ("Cornibi"), acquired substantially all of the assets of York Tech England pursuant to the terms of an Agreement for the purchase of the business of York Technology Limited dated June 21, 1995 by and among York Limited, the parent company of York Tech England, York Tech England, Cornibi Limited, and the Registrant, as amended by supplemental agreement dated June 29, 1995 (as amended, the "York Tech England Acquisition Agreement"). Under the terms of the York Tech England Acquisition Agreement, Cornibi acquired substantially all of the assets of York Tech England for a total purchase price of $4,071,000, payable with a note in the principal amount of $1,872,000 (the "Term Note") and with the balance paid in cash at closing. The balance of the Term Note, without interest, is to be paid on December 31, 1996, and may, at the option of Cornibi, be paid with shares of the Registrant's common stock based on the average market price of the Registrant's common stock for the twenty trading days ending the business day prior to the date of delivery of the shares in full or partial payment of the Term Note. Contemporaneously with the closing of the York Tech England Acquisition Agreement, Cornibi also purchased the York Tech Building from TKM Group Pension Trust Limited("TKM") for 700,000 British pounds or $1,123,000 pursuant to the terms and conditions of a Freehold Agreement dated June 21, 1995 by and between TKM and Cornibi (the "York Tech Building contract"). At the same time as the closing of the York Tech England Acquisition Agreement and the York Tech Building Contract, Photon Kinetics, Inc., an Oregon corporation and wholly-owned subsidiary of Registrant ("PK"), acquired substantially all of the assets of York Tech USA pursuant to the terms of an Agreement for the purchase of the business of York Technology Inc. dated June 21, 1995 by and among York Limited, the English parent company of York Tech USA, York Tech USA, PK, and the Registrant (the "York Tech USA Acquisition Agreement"). Under the terms of the York Tech USA Acquisition Agreement, PK acquired substantially all of the assets of York Tech USA for a total purchase price of $1,550,000, payable in cash at closing. York Tech England and York Tech USA designed, manufactured, and sold fiber optic test and measurement equipment primarily for the fiber production and preparation market. Registrant currently intends for Cornibi to continue the business of York Tech England and for PK to continue the business of York Tech USA. The purchase prices for York Tech England and York Tech USA transactions were determined by arms-length negotiations between representatives of the Registrant and York Limited. The purchase price for the York Tech Building was determined by arms-length negotiation between representatives of the Registrant and TKM. With the exception of the Term Note, Registrant's source of funds for the acquisitions was a combination of cash reserves and cash from existing credit facilities. The foregoing summary of the acquisition of substantially all of the assets of York Tech England and York Tech USA as well as the York Tech Building is qualified in its entirety by reference to the York Tech England Acquisition Agreement, the York Tech USA Acquisition Agreement, and the York Tech Building Contract, copies of which are exhibits hereto and are incorporated herein by reference. Item 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS. Set forth below are the financial statements of York Tech England appearing on pages F-1 through F-23 of the attached Appendix, which are hereby incorporated by reference: 1. Independent auditors report for the year ended September 30, 1994. 2. Profit and loss account for year ended September 30, 1994 3. Balance sheet as of September 30, 1994. 4. Cash flow statement for year ended September 30, 1994. 5. Notes to the cash flow statement. 6. Notes to the financial statements. 7. Unaudited condensed profit and loss account for the six months ended March 31, 1995. 8. Unaudited condensed balance sheet as of March 31, 1995. 9. Unaudited condensed cash flow statement for the six months ended March 31, 1995. 10. Notes to the unaudited condensed cash flow statement. 11. Notes to the unaudited condensed financial statements. Financial information for York Tech USA and the York Tech Building is not included in these financial statements of York Tech England, but such information is included in the pro forma financial information described below. (b) PRO FORMA FINANCIAL INFORMATION. Set forth below are the unaudited PRO FORMA condensed consolidated financial statements and accompanying explanatory notes, appearing on pages P-1 through P-6 of the attached Appendix, which are hereby incorporated by reference: 1. Unaudited PRO FORMA condensed consolidated balance sheet as of March 31, 1995. 2. Unaudited PRO FORMA condensed consolidated statement of income for the year ended June 30, 1994. 3. Unaudited PRO FORMA condensed consolidated statement of income for the nine months ended March 31, 1995. 4. Notes to unaudited PRO FORMA condensed consolidated financial statements. (c) EXHIBITS. 2.1 Acquisition Agreement for York Technology, Inc. dated June 21, 1995. * 2.2 Acquisition Agreement for York Technology, Ltd. dated June 21, 1995. * 2.3 Building transfer agreement with TKM Group Pension Trust Limited dated June 21, 1995. * 2.4 Supplemental Agreement dated June 29, 1995. * 99 Press Release dated June 21, 1995. * * Document has been previously filed with the Securities and Exchange Commission and is incorporated herein by reference and made a part hereof. SIGNATURE Pursuant to the requirements of Securities Exchange Act of 1984, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. IFR Systems, Inc. By /s/ Bruce C. Bingham ----------------------------------- Bruce C. Bingham Treasurer and Chief Financial Officer Annex I YORK 1995 LIMITED (FORMERLY YORK TECHNOLOGY LIMITED) FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 1994 Registered number 1721892 F-1 York 1995 Limited (formerly York Technology Limited) Financial statements CONTENTS PAGE Independent auditors' report 1 Profit and loss account 2 Balance sheet 3 Cashflow statement 4 Notes to the cash flow statement 5 Notes to the financial statements 6 - 16 Unaudited financial information for the six month period ended 31 March 1995 Profit and loss account 17 Balance sheet 18 Cash flow statement 19 Notes to the cash flow statement 20 Notes to the financial statements 21 F-2 KPMG [LOGO] Dukes Keep Marsh Lane Southampton Hampshire SO14 3EX INDEPENDENT AUDITORS' REPORT The Board of directors and shareholders York 1995 Limited We have audited the accompanying balance sheet of York 1995 Limited (formerly York Technology Limited) as at September 30, 1994, and the related profit and loss account and cash flow statement for the year ended September 30, 1994. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States. 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 York 1995 Limited (formerly York Technology Limited) as of September 30, 1994 and the results of their operations and cash flows for the year ended September 30, 1994 in conformity with generally accepted accounting principles in the United Kingdom. The accompanying financial statements have been prepared assuming the company will continue as a going concern. As discussed in notes 1 and 20 to the financial statements, the company's equity and liquidity position both before and after the sale of its business raise substantial doubt about its ability to continue as a going concern as of September 30, 1994 and about its ability to meet its obligations, including the contingent obligations described in note 16 to the financial statements, after June 21, 1995. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. Accounting principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States. A description of certain significant differences, as applicable to the company, is included in note 19 to the financial statements. KPMG Chartered Accountants Registered Auditors Southampton, England 12 December 1994, except as to note 20, which is as of .. August 1995. F-3 York 1995 Limited (formerly York Technology Limited) Profit and loss account FOR THE YEAR ENDED 30 SEPTEMBER 1994 NOTE 1994 L TURNOVER 1 & 2 4,778,324 Cost of sales (3,770,288) ---------- GROSS PROFIT 1,008,036 Selling and distribution expenses (508,987) Administrative expenses (333,590) ---------- OPERATING PROFIT 165,459 Interest payable and similar charges 2 (1,093) ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2 164,366 Taxation on profit on ordinary activities 5 (5,000) ---------- PROFIT FOR THE FINANCIAL YEAR 159,366 Accumulated deficit brought forward (1,359,924) ---------- ACCUMULATED DEFICIT CARRIED FORWARD (1,200,558) ---------- ---------- There are no recognised gains and losses other than those set out above. All results arise from activities that have now been discontinued (note 20). F-4 York 1995 Limited (formerly York Technology Limited) Balance sheet AS AT 30 SEPTEMBER 1994 NOTE 1994 L L FIXED ASSETS Intangible assets 6 41,986 Tangible assets 7 152,656 ------- 194,642 CURRENT ASSETS Stocks 8 815,964 Debtors 9 975,569 ---------- 1,791,533 CREDITORS: amounts falling due within one year 10 (2,580,678) ---------- NET CURRENT LIABILITIES (789,145) -------- TOTAL ASSETS LESS CURRENT LIABILITIES (594,503) CREDITORS: amounts falling due after more than one year 11 (3,667) PROVISIONS FOR LIABILITIES AND CHARGES 12 (93,097) -------- NET LIABILITIES (691,267) -------- -------- CAPITAL AND RESERVES Called up share capital 13 100 Share premium account 14 509,191 Profit and loss account (1,200,558) --------- (691,267) --------- --------- F-5 York 1995 Limited (formerly York Technology Limited) Cash flow statement FOR THE YEAR ENDED 30 SEPTEMBER 1994 NOTE 1994 L L NET CASH INFLOW FROM OPERATING ACTIVITIES A 96,819 NET CASH OUTFLOW FROM SERVICING OF FINANCE Interest paid (1,093) TAXATION Overseas tax paid (5,000) INVESTING ACTIVITIES Purchase of tangible fixed assets (108,537) Purchase of intangible fixed assets (9,048) Sale of fixed assets 5,430 -------- NET CASH OUTFLOW FROM INVESTING ACTIVITIES (112,155) FINANCING: Capital element of finance leases C (8,570) --------- DECREASE IN CASH AND CASH EQUIVALENTS B (29,999) --------- --------- F-6 York 1995 Limited (formerly York Technology Limited) Notes to the cash flow statement FOR THE YEAR ENDED 30 SEPTEMBER 1994 A NET CASH INFLOW FROM OPERATING ACTIVITIES 1994 L Operating profit 165,459 Depreciation charges 76,138 Increase in debtors (202,758) Decrease in creditors (83,923) Decrease in stocks 188,201 Reduction in warranty provision (46,298) ------- 96,819 ------- ------- B DECREASE IN CASH AND CASH EQUIVALENTS 1994 Change 1993 L L L Bank overdraft 1,226,660 (29,999) 1,196,661 ========== ========== ========== C ANALYSIS OF CHANGES IN FINANCING FINANCE LEASE L At 1 October 1993 459 New financing 15,960 Repayments made (8,570) ------- At 30 September 1994 7,849 ======= F-7 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements 1 ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the company's financial statements. BASIS OF PREPARATION The financial statements have been prepared under the historical cost accounting rules and in accordance with applicable accounting standards. The financial statements have also been prepared on a going concern basis. The validity of this basis is dependent upon the continued support of the holding company for the company and certain other group undertakings, the bank loans and overdrafts of which have been guaranteed by the company (see note 16b). The continued support of the holding company is in turn dependent on the continued support of the group's bankers, creditors and shareholders. If the company were unable to continue to trade, adjustments would have to be made to reduce the value of assets to their recoverable amount and to provide for any further liabilities that might arise. See note 20 for the effects of the sale of the business. TURNOVER Turnover is stated at the value of sales net of discounts, returns and value added tax. DEPRECIATION Depreciation is provided on a straight line basis to write off the cost of fixed assets over their estimated useful lives. No depreciation is provided until an asset is brought into use. The rates of depreciation are as follows:- Per annum Leasehold improvements 10% Intangible assets 20% Computer aided design equipment 20% Prototypes 50% Tooling 100% All other plant and equipment 33 1/3% STOCKS Stocks and work in progress are valued at the lower of cost and net realisable value. The weighted average method is used in determining cost. The cost of work in progress includes production overheads. F-8 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 1 ACCOUNTING POLICIES (CONTINUED) DEFERRED TAXATION Deferred taxation is provided using the liability method in respect of the taxation effect of all timing differences to the extent that it is probable that liabilities will crystallise in the foreseeable future. FOREIGN EXCHANGE Assets and liabilities denominated in foreign currencies have been translated into sterling at rates ruling at the balance sheet date and transactions during the year have been translated at rates which approximate to those ruling on the transaction date. The resulting gains and losses arising on foreign exchange have been credited or charged to the profit and loss account. RESEARCH AND DEVELOPMENT Expenditure on research and development is written off in the period during which it is incurred. GRANTS Revenue based grants are credited to profit and loss account in the same period in which the expenditure to which they relate is incurred. WARRANTIES FOR PRODUCTS Provision is made for the estimated liability on all products still under warranty. LEASES Expenditure on operating leases is charged to the profit and loss account on a basis representative of the benefit derived from the assets, normally corresponding to the payment of rentals. Assets acquired under finance leases are capitalised and the corresponding liability is included as a creditor. Rentals paid are apportioned between finance charges and a reduction in the liability. PENSIONS The company participates in a group pension scheme providing benefits based on final pensionable pay. The assets of the scheme are held separately from those of the group, being invested with an insurance company. Contributions to the group pension scheme are charged to the profit and loss account so as to spread the cost of pensions over employees' working lives within the group. SHORT TERM CONTRACTS Amounts received in advance on short term development contracts are deferred until the terms of the contract are substantially complete. F-9 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 2 TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION Turnover and profit on ordinary activities before taxation derive from sales of optical fibre instrumentation. An analysis of turnover and profit on ordinary activities before taxation by geographical area and activity has not been given because, in the opinion of the directors, such disclosure would be seriously prejudicial to the interests of the company. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION IS STATED 1994 L AFTER CHARGING/(CREDITING) Redundancy and reorganisation costs 9,028 Depreciation Owned tangible assets 64,523 Intangible fixed assets 11,615 Auditors' remuneration 10,000 Finance charges on finance leases 1,093 Hire of plant and machinery 55,740 Foreign currency exchange loss 3,994 ====== Bank overdraft interest is borne by the holding company, York Limited. 3 EMOLUMENTS OF DIRECTORS 1994 L Directors' emoluments in the year were as follows: As directors - As executives 97,387 Pension costs 5,604 ------- 102,991 ======= F-10 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 3 EMOLUMENTS OF DIRECTORS (CONTINUED) The emoluments of the Chairman in the year were LNil and those of the highest paid director, excluding pension contributions, were L50,149. The emoluments of the directors in the year were within the following ranges: NUMBER OF DIRECTORS 1994 L0 - L 5,000 4 L45,001 - L50,000 1 L50,001 - L55,000 1 4 EMPLOYEE INFORMATION The average number of persons employed (including directors) during the year was as follows: 1994 Production and engineering 52 General administration, sales and marketing 17 ----- 69 ===== The costs of these employees during the year were as follows: 1994 L Wages and salaries 1,371,743 Social security costs 115,673 Other pension costs (see note 17) 49,071 --------- 1,536,487 ========= F-11 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 5 TAXATION 1994 L Foreign withholding tax 5,000 ====== There is no corporation tax charge for the year, due to losses available. There are tax losses of approximately L1,039,000 available for offset against future profits. 6 INTANGIBLE FIXED ASSETS Licences and patents L COSTS At beginning of year 85,363 Additions 9,048 ------ At end of year 94,411 ------ AMORTISATION At beginning of year 40,810 Charge for the year 11,615 ------ At end of year 52,425 ------ NET BOOK VALUE AT 30 SEPTEMBER 1994 41,986 ====== F-12 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 7 TANGIBLE FIXED ASSETS Leasehold Motor Plant and Furniture Total improvements vehicles machinery and office equipment L L L L L COST At beginning of year 222,912 57,311 417,109 311,841 1,009,173 Additions 872 13,655 35,023 74,947 124,497 Disposals - (23,902) - (1,514) (25,416) -------- -------- -------- -------- ----------- At end of year 223,784 47,064 452,132 385,274 1,108,254 -------- -------- -------- -------- ----------- DEPRECIATION At beginning of year 172,408 51,311 403,677 283,665 911,061 Charge for year 24,082 3,561 10,006 26,874 64,523 Disposals - (19,902) - (84) (19,986) -------- -------- -------- -------- ----------- At end of year 196,490 34,970 413,683 310,455 955,598 -------- -------- -------- -------- ----------- NET BOOK VALUE AT 30 SEPTEMBER 1994 27,294 12,094 38,449 74,819 152,656 -------- -------- -------- -------- ----------- -------- -------- -------- -------- ----------- 8 STOCKS 1994 L Raw materials and consumables 154,923 Work in progress 476,793 Finished goods and goods for sale 184,248 --------- 815,964 ========= F-13 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 9 DEBTORS 1994 L Trade debtors 866,800 Amounts owed by group companies 58,020 Other debtors 12,520 Prepayments and accrued income 38,229 ------- 975,569 ======= 10 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 1994 L Bank overdraft (secured) 1,226,600 Trade creditors 717,766 Payroll taxes and social security 85,648 Accruals and deferred income 546,422 Hire purchase creditors 4,182 --------- 2,508,678 --------- --------- The bank overdraft is secured by a fixed and floating charge over the assets of York Limited, York 1995 Limited, York Ventures and Special Optical Products Limited, York Fibres Limited and York Sensors Limited. 11 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 1994 L Total hire purchase and finance lease liability (excluding finance charges allocated to future periods) 7,849 Less: amounts falling due in one year (4,182) ------- Hire purchase and finance lease obligations due between two and five years 3,667 ====== F-14 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 12 PROVISIONS FOR LIABILITIES AND CHARGES L a Warranty provision At 1 October 1993 139,395 Credit to profit and loss account in year (46,298) ------- At 30 September 1994 93,097 ======= b Deferred taxation The amounts provided for deferred tax, being the full potential liability, are set out below: 1994 L Accelerated capital allowances 234 Other timing differences (234) ----- Provision at 30 September 1994 - ===== 13 CALLED UP SHARE CAPITAL L AUTHORISED, ISSUED AND FULLY PAID 100 ordinary shares of L1 each at 30 September 1994 100 ===== 14 SHARE PREMIUM ACCOUNT L At 30 September 1994 509,191 ======= F-15 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 15 COMMITMENTS At the end of the financial year the company had annual commitments under non-cancellable operating leases as follows: 1994 LAND AND OTHER BUILDINGS L L OPERATING LEASES WHICH EXPIRE: Within one year - 3,038 In second to fifth year - 41,151 Over five years 90,000 - ------ ------ 90,000 44,189 ====== ====== 16 CONTINGENT LIABILITIES a There are contingent liabilities amounting to L5,160 at 30 September 1994, in respect of guarantees given in the ordinary course of business. b There is a contingent liability amounting to L640,491 at 30 September 1994, in respect of a guarantee and debenture between York Limited, York 1995 Limited, York Ventures and Special Optical Products Limited, York Sensors Limited, York Fibers Limited and Barclays Bank plc. 17 PENSIONS As explained in the accounting policy note 1, the company participates in a group pension scheme providing benefits based on final pensionable pay, contributions being charged to the profit and loss account so as to spread the cost of pensions over employees' working lives with the company. The contributions are determined by a qualified actuary on the basis of triennial valuations using the projected unit method. The most recent valuation was at 1 June 1993. The assumptions which have the most significant effect on the results of the valuation are those relating to the rate of return on investments and the rates of increase in salaries and pensions. It was assumed that the investment returns would be 9% per annum, that salary increases would average 7% per annum and that present and future pensions would increase at the rate of 5% per annum. The company pension charge for the year was L49,071. The most recent actuarial valuation showed that the market value of the scheme's assets was L1,079,417 and that the actuarial value of those assets represented 94% of the benefits that had accrued to members, after allowing for expected future increases in earnings. F-16 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 17 PENSIONS (CONTINUED) The contributions of the company and employees were 6% and 5% respectively, with the company's contribution increasing to 7.3% with effect from 1 June 1994. At 30 September 1994 contributions amounting to L76,581 were payable by the company to the pension scheme and are included in creditors. 18 ULTIMATE HOLDING COMPANY York 1995 Limited is a wholly owned subsidiary of York Limited, a company incorporated in England. 19 SIGNIFICANT DIFFERENCES BETWEEN UK GENERALLY ACCEPTED ACCOUNTING PRACTICE "GAAP" AND US GAAP DEFERRED TAXATION Deferred corporation tax has, in accordance with UK GAAP, been provided under the liability method to the extent that it is probable that a liability will crystallise in the foreseeable future. US GAAP requires that deferred taxes be provided fully under the liability method for all temporary differences between carrying values for financial reporting purposes and the tax bases of assets and liabilities. A valuation allowance is recognised to the extent it is more likely than not that any deferred tax assets will not be realised. LEASES UK GAAP requires the capitalisation of a leased asset and recording of the related lessee liability if the lease transfers substantially all the risks and rewards of ownership of the asset to the lessee. US GAAP requires the capitalisation of a lease by the lessee if one of the following criteria applies: - the lease transfers ownership; - the lease contains a bargain purchase option; - the lease term is equal to or greater that 75% of the estimated economic life of the property; or - the present value of the minimum lease payments equal or exceeds 90% of the fair value of the property, less any investment tax credit retained by the lessor. CASH FLOW STATEMENTS The principal differences between cash flow statements prepared in conformity with UK GAAP and those prepared in conformity with US GAAP are as follows: - Under UK GAAP, net cash flow from operating activities is determined before considering cash flows from (a) servicing of finance and (b) taxes paid. Under US GAAP, net cash flow from operating activities would be determined after these items. - The UK GAAP definition of cash and cash equivalents includes advances from banks or financial institutions with a maturity of three months or less at the date of the advance. Under US GAAP these liabilities would be part of financing activities. F-17 York 1995 Limited (formerly York Technology Limited) Notes to the financial statements (CONTINUED) 19 SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP (CONTINUED) PENSIONS Under UK and US GAAP, pension costs are determined on a systematic basis over the length of service of employees. US GAAP is more prescriptive in the application of the actuarial method and assumptions to be applied in the calculation of pension costs. As a result, the calculations under US GAAP are more liable to amendment from year to year, giving rise to adjustments by comparison with UK GAAP. COSTS BORNE BY HOLDING COMPANY When costs and expenses (eg interest on overdraft positions) are borne by a parent company, UK GAAP does not require that the effect of such support be reflected in the accounts of the company. Under US GAAP, these costs would be reflected in the company's financial statements as an expense and a capital contribution. OTHER DISCLOSURE REQUIREMENTS US GAAP requires a number of significant additional footnote disclosures which are not required under UK GAAP. 20 SUBSEQUENT SALE OF THE BUSINESS On June 21, 1995, the company's business activities were sold to an unrelated party for cash of L1,280,683 and a note receivable from the acquiror for the balance of the purchase price which can be in the range from L1,447,000 to L2,307,000 depending on the performance of the business after acquisition. The aggregate proceeds may be insufficient to eliminate the company's negative equity and, in any case, will not permit the company to meet its obligations when due since the note is not payable until December 31, 1996. The company has not yet made any specific arrangements to overcome its resulting liquidity problems or its potential insolvency nor is there any assurance that such arrangements can be successfully made. F-18 York 1995 Limited (formerly York Technology Limited) Profit and loss account FOR THE SIX MONTH PERIOD ENDED 31 MARCH 1995 199 TURNOVER 1,886,42 Cost of sales (1,628,555 ---------- GROSS PROFIT 257,86 Selling and distribution expenses (224,273 Administrative expenses (197,718 ---------- OPERATING LOSS (164,126 Interest payable and similar charges ( 91,505 ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION (255,631 Taxation on profit on ordinary activities ---------- LOSS FOR THE FINANCIAL YEAR (255,631 Accumulated deficit brought forward (1,200,558 ---------- ACCUMULATED DEFICIT CARRIED FORWARD (1,456,189 ---------- ---------- <FN> There are no recognised gains and losses other than those set out above. All results arise from activities that have now been discontinued. F-19 York 1995 Limited (formerly York Technology Limited) Balance sheet AS AT 31 MARCH 1995 (UNAUDITED) Note 1995 L L FIXED ASSETS Intangible assets 44,025 Tangible assets 150,184 ------- 194,209 CURRENT ASSETS Stocks 2 797,251 Debtors 1,164,780 --------- 1,962,031 CREDITORS: amounts falling due within one year (2,005,148) --------- NET CURRENT LIABILITIES (1,043,118) - -------- TOTAL ASSETS LESS CURRENT LIABILITIES (848,909) CREDITORS: amounts falling due after more than one year (3,667) Provisions for liabilities and charges (94,322) -------- NET LIABILITIES (946,898) -------- -------- CAPITAL AND RESERVES Called up share capital 100 Share premium account 509,191 Profit and loss account (1,456,189) --------- (946,898) --------- --------- F-20 York 1995 Limited (formerly York Technology Limited) Cash flow statement FOR THE SIX MONTH PERIOD ENDED 31 MARCH 1995 1995 NET CASH OUTFLOW FROM OPERATING ACTIVITIES (139,818) NET CASH OUTFLOW FROM SERVICING OF FINANCE Interest paid (91,505) INVESTING ACTIVITIES Purchase of tangible fixed assets (64,326) Purchase of intangible fixed assets (8,477) Sale of fixed assets 33,531 -------- NET CASH OUTFLOW FROM INVESTING ACTIVITIES (39,272) FINANCING: Capital element of finance leases (2,091) -------- DECREASE IN CASH AND CASH EQUIVALENTS (272,686) -------- -------- F-21 York 1995 Limited (formerly York Technology Limited) Notes to the cash flow statement (unaudited) A NET CASH OUTFLOW FROM OPERATING ACTIVITIES 1995 L Operating loss (164,126) Depreciation charges 39,705 Increase in debtors (189,211) Increase in creditors 153,876 Decrease in stocks 18,713 Increase in warranty provision 1,225 ------- (139,818) ------- ------- B DECREASE IN CASH AND CASH EQUIVALENTS 1995 Change 1994 L L L Bank overdraft 1,499,346 272,686 1,226,660 ---------- ---------- ---------- ---------- ---------- ---------- C ANALYSIS OF CHANGES IN FINANCING FINANCE LEASE L At 1 October 1994 7,849 Repayments made (2,091) ------- At 31 March 1995 5,758 ------- ------- F-22 York 1995 Limited (formerly York Technology Limited) Notes to financial statements (unaudited) 1 BASIS OF PRESENTATION The condensed interim financial statements included herein have been prepared in conformity with generally accepted accounting principles in the United Kingdom and should be read in conjunction with the September 30, 1994 audited financial statements. The condensed interim statements are unaudited but reflect all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the Company's financial position and the results of operations for interim periods. The results for the six months ended 31 March 1995 are not necessarily indicative of the results to be expected for the full year. 2 STOCKS 1995 L Raw materials and consumables 207,313 Work in progress 372,147 Finished goods and goods for sale 217,791 -------- 797,251 -------- ------- 3 CONTINGENT LIABILITIES a There are contingent liabilities amount to L19,153 at 31 March 1995, in respect of guarantees given in the ordinary course of business. b There is a contingent liability amounting to L248,468 at 31 March 1995, in respect of a guarantee and debenture between York Limited, York 1995 Limited, York Ventures and Special Optical Products Limited, York Sensors Limited, York Fibers Limited and Barclays Bank plc. 4 POST BALANCE SHEET EVENT On June 21, 1995, the company's business activities were sold to an unrelated party for cash of L1,280,683 and a note receivable from the acquiror for the balance of the purchase price which can be in the range from L1,447,000 to L2,307,000 depending on the performance of the business after acquisition. The aggregate proceeds may be insufficient to eliminate the company's negative equity and, in any case, will not permit the company to meet its obligations when due since the note is not payable until December 31, 1996. The company has not yet made any specific arrangements to overcome its resulting liquidity problems or its potential insolvency nor is there any assurance that such arrangements can be successfully made. F-23 PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following pro forma condensed consolidated balance sheet as of March 31, 1995, and the pro forma condensed consolidated statements of income for the year ended June 30, 1994, and nine months ended March 31, 1995, give effect to the acquisition of all of the inventory and fixed assets of York Technology Limited, a company incorporated in England ("York Tech England"), and York Technology, Inc., a New Jersey Corporation ("York Tech USA"), as well as the real estate and building previously leased by York Tech England ("York Tech Building") as if these acquisitions occurred at the beginning of the period presented. The pro forma information is based on the historical financial statements of York Tech England, York Tech USA (collectively "York") and IFR Systems, Inc. and subsidiary ("IFR") giving effect to the transaction under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the pro forma financial statements. The pro forma financial statements have been prepared by IFR management based upon the financial statements of York Tech England, included elsewhere herein, and York Tech USA. These pro forma statements may not be indicative of the results that actually would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. The pro forma financial statements should be read in conjunction with the audited financial statements and notes of York Tech England appearing on pages F-1 through F-23 of the attached Appendix, and the audited consolidated financial statements of IFR included in its 1994 Annual Report on Form 10-K. P-1 IFR SYSTEMS, INC. AND SUBSIDIARIES PRO FORMA CONSENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) (IN THOUSANDS) MARCH 31, 1995 ----------------------------------------------------------------- ACQUISITION AS REPORTED PRO FORMA PRO FORMA IFR ADJUSTMENTS CONSOLIDATED ----------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 80 $ - $ 80 Accounts receivable 12,959 - 12,959 Inventory 20,748 1,791 (B) 22,539 Prepaid expenses and other 1,221 - 1,221 ------------- ------------- ------------- Total current assets 35,008 1,791 36,799 Property and equipment, net 6,160 1,357 (B) 7,517 Property under capital lease, net 2,365 - 2,365 Other assets: Cost in excess of net assets acquired 6,182 3,752 (B) 9,934 Patents, trademards and other intangibles 712 - 712 Sundry 495 - 495 Total other assets 7,389 3,752 11,141 ------------- ------------- ------------- TOTAL ASSETS $ 50,922 $ 6,900 $ 57,822 ------------- ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term bank borrowings $ 2,175 $ 4,308 (B) $ 6,483 Accounts payable 3,211 - 3,211 Other liabilities and accrued expenses 4,808 22 (B) 4,830 ------------- ------------- ------------- Total current liabilities 10,194 4,330 14,524 Capital lease obligations 2,430 - 2,430 Long-term debt 65 2,570 (B) 2,635 Deferred income taxes 451 - 451 Shareholders' equity Common stock 62 - 62 Additional paid-in capital 6,403 - 6,403 Cost of common stock in treasury (6,400) - (6,400) Unamortized deferred compensation (16) (16) Retained earnings 37,733 - 37,733 ------------- ------------- ------------- Total shareholders' equity 37,782 - 37,782 ------------- ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 50,922 $ 6,900 $ 57,822 ------------- ------------- ------------- See notes to unaudited pro forma condensed consolidated financial statements. P-2 IFR SYSTEMS, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (IN THOUSANDS) YEAR ENDED JUNE 30, 1994 ------------------------------------------------------------------------- AS REPORTED PRO FORMA PRO FORMA IFR YORK ADJUSTMENTS CONSOLIDATED ------------------------------------------------------------------------- SALES $ 65,073 $ 8,705 $ -- $ 73,778 COST OF PRODUCTS SOLD 41,467 4,324 -- 45,791 --------- -------- -------- --------- GROSS PROFIT 23,606 4,381 -- 27,987 OPERATING EXPENSES Selling 7,867 1,402 (280(C) 8,989 Administrative 4,757 902 60(C) 5,719 Engineering 8,981 1,680 (25)(C) 10,411 --------- -------- -------- --------- 21,605 3,984 (470) 25,119 --------- -------- -------- --------- OPERATING INCOME 2,001 397 470 2,868 OTHER INCOME (EXPENSE) (310) (41) (425)(C) (776) INCOME BEFORE INCOME --------- -------- -------- --------- TAXES 1,691 356 45 2,092 INCOME TAXES 704 18 178(C) 900 --------- -------- -------- --------- NET INCOME $ 987 $ 338 $ (133) $ 1,192 --------- -------- -------- --------- --------- -------- -------- --------- Net Income Per Common Share $ 0.19 $ 0.06 $ (0.03) $ 0.23 --------- -------- -------- --------- --------- -------- -------- --------- Average Common Shares Outstanding 5,237 5,237 5,237 5,237 --------- -------- -------- --------- --------- -------- -------- --------- See notes to unaudited pro forma condensed consolidated financial statements. P-3 IFR SYSTEMS, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (IN THOUSANDS) NINE MONTHS ENDED MARCH 31, 1994 ------------------------------------------------------------------------- AS REPORTED PRO FORMA PRO FORMA IFR YORK ADJUSTMENTS CONSOLIDATED ------------------------------------------------------------------------- SALES $ 57,800 $ 5,714 $ -- $ 63,514 COST OF PRODUCTS SOLD 36,330 3,047 -- 39,377 --------- -------- -------- --------- GROSS PROFIT 21,470 2,667 -- 24,137 OPERATING EXPENSES Selling 6,784 907 (210(C) 7,481 Administrative 3,851 701 45(C) 4,597 Engineering 7,600 1,295 (188)(C) 8,707 --------- -------- -------- --------- 18,235 2,903 (353) 20,785 --------- -------- -------- --------- OPERATING INCOME 3,235 (236) 353 3,352 OTHER INCOME (EXPENSE) (290) (188) (319)(C) (797) INCOME BEFORE INCOME --------- -------- -------- --------- TAXES 2,945 (424) 34 2,555 INCOME TAXES 1,227 18 -- 1,245 --------- -------- -------- --------- NET INCOME $ 1,718 $ (442) $ 34 $ 1,310 --------- -------- -------- --------- --------- -------- -------- --------- Net Income Per Common Share $ 0.32 $ (0.08) $ (0.01) $ 0.24 --------- -------- -------- --------- --------- -------- -------- --------- Average Common Shares Outstanding 5,391 5,391 5,391 5,391 --------- -------- -------- --------- --------- -------- -------- --------- See notes to unaudited pro forma condensed consolidated financial statements. P-4 IFR SYSTEMS, INC. AND SUBSIDIARIES NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (A) The pro forma condensed consolidated statements of income for the year ended June 30, 1994 and the nine months ended March 31, 1995 have been prepared as if the purchase had taken place on July 1, 1993 and July 1, 1994, respectively. The March 31, 1995 pro forma condensed consolidated balance sheet has been prepared assuming the transaction occurred on that date. Becuase IFR and York have different fiscal year ends, York's results of operations for the period from July 1, 1994 to September 30, 1994, have been included in the pro forma condensed consolidated statements of income for both the year ended June 30, 1994, and the nine months ended March 31, 1995. Sales and net income for this period which is included in both pro forma condensed consolidated statements of income were $2,268,000 and $94,000, respectively. (B) This transaction is being accounted for as a purchase. The purchase price has been allocated to the assets based on their estimated fair market values. Estimated fair market values may not represent fair market values that ultimately may be determined. The following are the pro forma adjustments made to reflect York's estimated fair market values as of June 21, 1995, the acquisition date. ASSETS ------ (in thousands) Inventories $1,791 Intangibles 3,752 Property and Equipment 1,357 ------ Total Purchase Price $6,900 ------ ------ The pro forma financial statements assume a $6,900,000 purchase price, which includes transaction costs of approximately $300,000. This amount includes approximately $5,028,000 representing estimated cash payments and approximately $1,872,000 representing issuance of a non-interest bearing note. The cash payments were financed with a term loan of $720,000 and short-term bank borrowings. The purchase agreement specifies that the purchase price may be increased or decreased by an amount not to exceed $425,000, based on the level of sales achieved by the acquired businesses in fiscal 1996. Any such change in purchase price will be reflected as an adjustment to cost in excess of net assets acquired. P-5 (C) For purposes of determining the pro forma effect of the acquisition on the IFR consolidated statement of income, the following pro forma adjustments have been made: YEAR ENDED NINE MONTHS ENDED JUNE 30, 1994 MARCH 31, 1995 INCREASE (DECREASE) INCOME 1. Increase in amortization expense resulting from amortization over 20 years of cost in excess of net assets acquired. $( 188) $( 141) 2. Increase in interest expense resulting from short-term bank borrowings to finance cash portion of the purchase price. ( 360) ( 270) 3. Increase in interest expense resulting from term loan obtained on building purchased. ( 65) ( 49) 4. Increase in depreciation expense resulting from purchase of building ( 45) ( 34) 5. Decrease in rent expense resulting from purchase of building. 173 130 6. Decrease in engineering cost including travel due to redundancy in positions at IFR subsidiary Photon Kinetics and York. 250 188 7. Decrease in selling costs including travel due to redundancy in positions at IFR subsidiary Photon Kinetics. 280 210 8. Increase in income tax expense resulting from pro forma adjustments and normalizing of York's income tax expense. ( 178) TOTAL $( 133) $ 34 -------- -------- -------- -------- P-6 Exhibit Index EXHIBIT SEQUENTIALLY NO. DESCRIPTION OF EXHIBIT NUMBERED PAGE - ------- ---------------------- ------------- 2.1 Acquisition Agreement for York Technology, Inc. dated June 21, 1995. * 2.2 Acquisition Agreement for York Technology, Ltd dated June 21, 1995 * 2.3 Building transfer agreement with TKM Group Pension Trust Limited dated June 21, 1995. * 2.4 Supplemental Agreement dated June 29, 1995. * 99 Press Release dated June 21, 1995. * * Document has been previously filed with the Securities and Exchange Commission and is incorporated herein by reference and made a part hereof.