Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
May 7, 1998 (March 27, 1998)
Tier Technologies, Inc.
(Exact Name of Registrant as Specified in Charter)
California 000-23195 94-3145844
(State or Other Jurisdiction of (Commission File Number) (IRS Employer Identification
Incorporation) Number)
1350 Treat Boulevard, Suite 250, Walnut Creek, California 94596
(Address of Principal Executive Offices) (Zip Code)
(925) 937-3950
(Registrant's Telephone
Number, Including Area Code)
None
(Former Name or Former Address,
if changed since last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As of March 1, 1998, Tier Technologies, Inc., a California corporation (the
"Registrant"), through the Registrant's wholly owned subsidiary, Tier
Technologies (Australia) Pty Limited, a company organized under the laws of the
Commonwealth of Australia, acquired the assets of Sancha Computer Services Pty
Limited and Sancha Software Development Pty Limited, each a company organized
under the laws of the Commonwealth of Australia and in the business of providing
information technology services (together, "Sancha"), for consideration of
$6,700,000 (Australian dollars) in cash and approximately 51,000 shares of Class
B Common Stock of the Registrant. Upon the achievement of certain performance
targets, Sancha may receive additional consideration in an aggregate amount not
to exceed $2,450,000 (Australian dollars) in calendar years 1998 through 2000.
The purchase price was determined by arms-length negotiations between
representatives of the Registrant and Sancha and the funds used and to be used
by the Registrant in connection with the acquisition are from the Registrant's
working capital. The value of the Class B Common Stock of the Registrant was
determined by dividing the average of the closing price (after conversion to
Australian dollars using the exchange rate quoted by the Commonwealth Bank of
Australia for buying U.S. dollars at the end of trading on the business day
preceding the Purchase Date (as such term is defined in the acquisition
agreement)) of the Class B Common Stock on the NASDAQ Exchange for each of the
three business days preceding the date of the acquisition agreement. The
foregoing description does not purport to be a complete description of the terms
of the acquisition agreement, as amended, copies of which are attached hereto as
exhibits and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
-----------------------------------------
Sancha Group Pty Ltd.
Report of Independent Auditors
Consolidated Balance Sheets as of June 30, 1996 and 1997
Consolidated Statements of Income for the Years Ended June 30, 1995, 1996,
1997, and the six months ended December 31, 1996 and 1997 (Unaudited)
Consolidated Statements of Stockholders' Equity for the Years ended June
30, 1995, 1996 and 1997 and the six months ended December 31, 1997
(Unaudited)
Consolidated Statements of Cash Flows for the Years ended June 30, 1995,
1996 and 1997 and the six months ended December 31, 1996 and 1997
(Unaudited)
Notes to Consolidated Financial Statements
-1-
(b) Pro Forma Financial Information.
-------------------------------
Introduction
Pro Forma Condensed Consolidated Statement of Income for the
nine months ended September 30, 1997 (Unaudited)
Pro Forma Condensed Consolidated Statement of Income for the six months
ended March 31, 1998 (Unaudited)
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)
(c) Exhibits. The following are filed as exhibits to this Form 8-K and are
--------
incorporated herein by reference.
EXHIBIT
REFERENCE
2.1 Business Purchase Agreement, among Sancha Computer Services Pty
Limited, Sancha Software Development Pty Limited and Tier (A)
Technologies (Australia) Pty Limited, dated as of February 26,
1998.
2.2 Amendment of Business Purchase Agreement, among Sancha Computer
Services Pty Limited, Sancha Software Development Pty Limited and (A)
Tier Technologies (Australia) Pty Limited
23.1 Consent of Ernst & Young, Independent Auditors
(A) Incorporated by reference to similarly numbered exhibit to the Registrant's
Form 8-K dated March 27, 1998
-2-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 7, 1998 TIER TECHNOLOGIES, INC.
By: /s/ George K. Ross
_______________________________________
Name: George K. Ross
Title: Executive Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
-3-
SANCHA COMPUTER GROUP PTY LTD
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Sancha Computer Group Pty Ltd
We have audited the accompanying consolidated balance sheets of Sancha
Computer Group Pty Ltd. as of June 30, 1996 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Sancha Computer Group Pty
Ltd. at June 30, 1996 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended June 30, 1997 in
conformity with generally accepted accounting principles.
ERNST & YOUNG
Sydney, Australia
April 29, 1998
4
SANCHA COMPUTER GROUP PTY LTD
CONSOLIDATED BALANCE SHEETS
JUNE 30,
-------------------
1996 1997
-------- ----------
ASSETS
Current assets:
Cash..................................................... $362,850 $ 547,380
Accounts receivable, net................................. 383,171 417,534
Other receivables........................................ 32,817 53,241
-------- ----------
Total current assets....................................... 778,838 1,018,155
Equipment and furniture, net............................... 17,683 37,281
-------- ----------
Total assets............................................... $796,521 $1,055,436
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft........................................... $103,299 $ 197,687
Accounts payable......................................... 144,589 228,259
Accrued liabilities...................................... 21,487 26,634
Accrued compensation and related liabilities............. 66,081 85,923
Accounts payable to affiliated entities.................. 54,663 65,310
Income taxes payable..................................... 96,725 132,452
-------- ----------
Total current liabilities.................................. 486,844 736,265
Other liabilities.......................................... 10,718 17,626
Stockholders' equity:
Common stock A$1 par; authorized shares - 82,000; Issued
and outstanding shares - 8,005 in 1996 and 1997......... 6,551 6,551
Settlement funds......................................... 44,415 9,496
Foreign currency translation adjustment.................. 21,542 1,884
Retained earnings........................................ 226,451 283,614
-------- ----------
Total stockholders' equity................................. 298,959 301,545
-------- ----------
Total liabilities and stockholders' equity................. $796,521 $1,055,436
======== ==========
See accompanying notes.
5
SANCHA COMPUTER GROUP PTY LTD
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS
YEAR ENDED JUNE 30, ENDED DECEMBER 31,
---------------------------------- ----------------------
1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ----------
Revenues................ $4,300,362 $5,159,888 $7,176,518 $3,750,299 $3,637,882
Cost of revenues........ 2,641,510 3,145,145 4,656,204 2,465,729 2,478,014
---------- ---------- ---------- ---------- ----------
Gross profit............ 1,658,852 2,014,743 2,520,314 1,284,570 1,159,868
General and
administrative
expense................ 310,123 599,270 749,379 330,271 432,693
---------- ---------- ---------- ---------- ----------
Net operating income.... 1,348,729 1,415,473 1,770,935 954,299 727,175
Interest income......... 11,454 15,435 18,848 10,116 7,814
Interest expense........ (1,862) (1,184) (951) (812) (351)
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 1,358,321 1,429,724 1,788,832 963,603 734,638
Provision for income
taxes.................. 62,989 102,737 133,685 72,013 34,711
---------- ---------- ---------- ---------- ----------
Net income.............. $1,295,332 $1,326,987 $1,655,147 $ 891,590 $ 699,927
========== ========== ========== ========== ==========
See accompanying notes.
6
SANCHA COMPUTER GROUP PTY LTD
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997
FOREIGN
COMMON STOCK CURRENCY TOTAL
------------- SETTLEMENT TRANSLATION RETAINED STOCKHOLDERS'
SHARES AMOUNT FUNDS ADJUSTMENT EARNINGS EQUITY
------ ------ ---------- ----------- ----------- -------------
Balance, July 30, 1994.. 1,604 $1,894 $ 9,457 $ -- $ 225,423 $ 236,774
Dividends paid........ -- -- -- -- (192,487) (192,487)
Distributions paid.... -- -- -- -- (1,160,414) (1,160,414)
Net income............ -- -- -- -- 1,295,332 1,295,332
Foreign currency
translation
adjustment........... -- -- -- (2,528) -- (2,528)
----- ------ -------- -------- ----------- -----------
Balance, June 30, 1995.. 1,604 1,894 9,457 (2,528) 167,854 176,677
Stock issued.......... 6,401 4,657 -- -- -- 4,657
Units issued.......... -- -- 34,958 -- -- 34,958
Dividends paid........ -- -- -- -- (126,452) (126,452)
Distributions paid.... -- -- -- -- (1,141,938) (1,141,938)
Net income............ -- -- -- -- 1,326,987 1,326,987
Foreign currency
translation
adjustment........... -- -- -- 24,070 -- 24,070
----- ------ -------- -------- ----------- -----------
Balance, June 30, 1996.. 8,005 6,551 44,415 21,542 226,451 298,959
Units redeemed........ -- -- (34,919) -- -- (34,919)
Dividends paid........ -- -- -- -- (204,022) (204,022)
Distributions paid.... -- -- -- -- (1,393,962) (1,393,962)
Net income............ -- -- -- -- 1,655,147 1,655,147
Foreign currency
translation
adjustment........... -- -- -- (19,658) -- (19,658)
----- ------ -------- -------- ----------- -----------
Balance, June 30, 1997.. 8,005 6,551 9,496 1,884 283,614 301,545
Dividends paid
(unaudited).......... -- -- -- -- (122,500) (122,500)
Distributions paid
(unaudited).......... -- -- -- -- (130,842) (130,842)
Net income
(unaudited).......... -- -- -- -- 699,927 699,927
Foreign currency
translation
adjustment
(unaudited).......... -- -- -- (76,473) -- (76,473)
----- ------ -------- -------- ----------- -----------
Balance, December 31,
1997 (unaudited)....... 8,005 $6,551 $ 9,496 $(74,589) $ 730,199 $ 671,657
===== ====== ======== ======== =========== ===========
See accompanying notes.
7
SANCHA COMPUTER GROUP PTY LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------------- ------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- -------- --------
OPERATING ACTIVITIES
Net income.............. $ 1,295,332 $ 1,326,987 $ 1,655,147 891,590 699,927
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation.......... 19,792 14,948 6,340 4,692 6,102
Write down of
equipment and
furniture............ 6,592 -- -- -- --
Changes in operating
assets and
liabilities:
Accounts
receivable......... (51,510) (151,435) (34,363) (170,660) (350,224)
Other receivables... -- (32,104) (20,424) (2,774) (908)
Bank overdraft...... 186,430 (83,131) 94,388 68,224 (63,395)
Accounts payable.... -- 144,589 83,670 39,171 2,947
Accrued
liabilities........ 12,125 9,362 5,147 55,574 69,990
Accrued compensation
and related
liabilities........ 39,860 21,135 19,842 (63,625) (24,676)
Other liabilities... 7,472 3,246 6,908 4,122 (2,202)
Income taxes
payable............ (55,357) 58,414 35,727 (30,637) (63,411)
Accounts payable to
affiliated
entities........... 47,442 (29,982) 10,647 28,125 (65,310)
----------- ----------- ----------- -------- --------
Net cash provided by
operating activities... 1,508,178 1,282,029 1,863,029 823,802 208,840
INVESTING ACTIVITIES
Purchases of equipment
and furniture.......... (18,341) (15,802) (25,938) (15,024) (6,844)
----------- ----------- ----------- -------- --------
Net cash used in
investing activities... (18,341) (15,802) (25,938) (15,024) (6,844)
FINANCING ACTIVITIES
Dividends paid.......... (192,487) (126,452) (204,022) (260,800) (122,500)
Distributions paid...... (1,160,414) (1,141,938) (1,393,962) (526,737) (130,842)
Repayments on loan...... 92,393 -- -- -- --
Units issued............ -- 34,958 (34,919) (34,919) --
Stockholders' capital
issued................. -- 4,657 -- -- --
----------- ----------- ----------- -------- --------
Net cash provided by
(used in) financing
activities............. (1,260,508) (1,228,775) (1,632,903) (822,456) (253,342)
Effect of exchange rate
changes on cash........ (2,528) 24,070 (19,658) (12,815) (76,473)
----------- ----------- ----------- -------- --------
Net increase (decrease)
in cash................ 226,801 61,522 184,530 (26,493) (127,819)
Cash at beginning of
period................. 74,527 301,328 362,850 362,850 547,380
----------- ----------- ----------- -------- --------
Cash at end of period... $ 301,328 $ 362,850 $ 547,380 336,357 419,561
=========== =========== =========== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid......... $ 1,862 $ 1,184 $ 951 $ 812 $ 345
=========== =========== =========== ======== ========
Income tax paid....... $ 118,346 $ 50,925 $ 129,507 $ 12,013 $ 34,711
=========== =========== =========== ======== ========
See accompanying notes.
8
SANCHA COMPUTER GROUP PTY LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Sancha Computer Services Pty Limited and its subsidiaries ("the Group") are
organized under the laws of Australia.
The Group comprises the following wholly owned entities:
Sancha Computer Group Pty Ltd
Sancha Computer Services Pty Ltd
Sancha Computer Services Unit Trust
Sancha Software Development Pty Ltd
Sancha Research Pty Ltd
Balesyn Computer Services Pty ltd
Balesyn Unit Trust
The Group is in the business of providing computer consultancy services to
businesses primarily in New South Wales, Victoria, Western Australia and South
Australia.
Basis of Presentation
The Company's financial statements are prepared using the accrual basis
under generally accepted accounting principles. The financial statements of
the subsidiaries are consolidated where the parent company controls the
subsidiary.
The Group operates wholly in Australia and conducts all transactions in
Australian dollars. The financial statements have been translated into U.S.
dollars, unless otherwise denoted, with the functional currency being
Australian dollars. All assets and liabilities are translated at the exchange
rate at the end of the period. Changes in stockholders' equity are translated
at the rate applicable on the day the transaction occurred. Income and expense
items are translated using the average rate for the period. Resulting
translation adjustments are included in stockholders' equity.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
Accordingly, the actual amounts could differ from those estimates. Any
adjustments applied to estimated amounts are recognized in the year in which
such adjustments are determined.
Cash
Cash consists of demand deposits and bank overdrafts held at a major
financial institution.
Revenue Recognition
Revenue from consultancy services is recognized as the service is performed.
9
SANCHA COMPUTER GROUP PTY LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Equipment and Furniture
Equipment and furniture are stated at cost. Depreciation of equipment and
furniture is computed using straight-line and declining balance methods over
the estimated useful lives of individual classes of assets, which range from
four to eight years. The cost and accumulated depreciation of fixed assets
sold or otherwise disposed are removed from the accounts and the resulting
gain or loss is included in income in the period realized.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and deferred tax liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and deferred tax liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Two of the operating entities which form part of the Group are unit trusts
established pursuant to trust deeds. Under Australian Taxation Law, unit
trusts are not required to pay tax on their net income provided the net
taxable income is distributed in full to the unitholders. Therefore, the
actual tax payable by the Group only represents tax payable on the income
earned by the companies which form part of the Group.
The Australian company tax rate was 33%, 36% and 36% for the years ended
June 30, 1995, 1996 and 1997, respectively.
Concentration of Credit Risk
In the normal course of business, the Company provides unsecured credit
terms to its customers. Accordingly, the Company performs ongoing credit
evaluations of its customers and maintains allowances for possible losses
which, when realized, have been within the range of management's expectations.
Employee Entitlements
Provision is made for the Group's liability for employee entitlements
arising from services rendered by employees to the period end. These
entitlements are payable pursuant to Australian employment legislation.
Entitlements expected to be paid within one year are recorded at their nominal
amount. Employee entitlements payable later than one year are recorded at the
present value of the estimated future cash outflows relating to those
entitlements and are classified as other long-term liabilities.
2. EQUIPMENT AND FURNITURE
The components of equipment and furniture are as follows:
JUNE 30,
-----------------
1996 1997
------- --------
Equipment................................................. $99,785 $125,909
Furniture................................................. 3,461 3,275
------- --------
103,246 129,184
Less Accumulated Depreciation............................. (85,563) (91,903)
------- --------
$17,683 $ 37,281
======= ========
10
SANCHA COMPUTER GROUP PTY LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. LINE OF CREDIT
Sancha Software Development Pty Limited had a line of credit agreement with
a financial institution which provided for maximum principle borrowings of
$60,000. Interest accrues at 13% per annum and amounts are secured by a debt
and interest guarantee by certain stockholders.
There were no amounts outstanding at June 30, 1997 and 1996 under this
agreement.
4. STOCKHOLDERS' EQUITY
The following table shows the shares issued and outstanding as at the end of
each period:
JUNE 30,
-----------------
1995 1996 1997
----- ----- -----
Ordinary Shares -- Par
Value A$1, 72,000
Shares Authorized ..... 1,600 8,000 8,000
Class A Stock -- Par
Value A$1, 2,000 Shares
Authorized............. 1 1 1
Class B Stock -- Par
Value A$1, 2,000 Shares
Authorized............. 1 1 1
Class C Stock -- Par
Value A$1, 2,000 Shares
Authorized............. 1 1 1
Class D Stock -- Par
Value A$1, 2,000 Shares
Authorized............. 1 1 1
Class E Stock -- Par
Value A$1, 2,000 Shares
Authorized............. -- 1 1
5. RETIREMENT PLAN
The Company has a statutory obligation under the laws of Australia to
contribute certain amounts into a regulated superannuation fund on behalf of
all employees, except where certain exemptions apply. The Company has no
involvement with the management, control or organization of the Fund. The
participants are fully vested at all times in both employee contributions and
statutory employer contributions. Employer contributions to superannuation
funds expensed in the financial statements for the years ended June 30, 1995,
1996 and 1997 were $49,121, $239,368 and $136,066, respectively.
6. SUBSEQUENT EVENTS
Pursuant to a Sale Agreement dated February 26, 1998 the Company sold
substantially all of the assets relating to its computer consulting business
to Tier Technologies (Australia) Pty Limited, a subsidiary of Tier
Technologies Inc. which is incorporated in the United States. The effective
date of the sale is March 1, 1998. The financial statements do not include any
adjustments to the recorded amounts of assets and liabilities which may result
from this transaction.
11
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated statements of income data
for the nine months ended September 30, 1997 and the six months ended March 31,
1998 set forth below gives effect to the acquisition of certain assets and
liabilities of Albanycrest Ltd ("Albanycrest") and Sancha Computer Group Pty
Ltd. ("Sancha"), as if both occurred on January 1, 1997. The unaudited pro forma
condensed consolidated financial information set forth below reflects certain
adjustments, including adjustments to reflect the amortization of the intangible
assets. The unaudited pro forma condensed consolidated financial information set
forth below does not purport to represent what the consolidated results of
operations or financial condition of the Company would actually have been if the
Albanycrest and Sancha acquisitions and related transactions had in fact
occurred on such date or to project the future consolidated results of
operations or financial condition of the Company.
12
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
COMPANY ALBANYCREST SANCHA PRO FORMA PRO FORMA
FOR THE NINE FOR THE SIX FOR THE NINE BUSINESS FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED COMBINATION MONTHS ENDED
SEPTEMBER 30, JUNE 30, SEPTEMBER 30, ADJUSTMENTS SEPTEMBER 30,
1997 1997 (1) 1997 (1) COMBINED (2)(3) 1997
------------- ------------ ------------- ----------- ----------- -------------
Revenues................ $22,478,643 $1,366,859 $5,259,723 $29,105,225 $ -- $29,105,225
Cost of revenues........ 14,916,846 1,281,856 3,473,715 19,672,417 -- 19,672,417
----------- ---------- ---------- ----------- --------- -----------
Gross profit............ 7,561,797 85,003 1,786,008 9,432,808 -- 9,432,808
Costs and expenses:
Selling and marketing.. 1,836,082 -- -- 1,836,082 -- 1,836,082
General and
administrative........ 4,397,315 7,057 671,156 5,075,528 -- 5,075,528
Depreciation and
amortization.......... 273,676 -- 4,700 278,376 320,346 598,722
----------- ---------- ---------- ----------- --------- -----------
Income from
operations............ 1,054,724 77,946 1,110,152 2,242,822 (320,346) 1,922,476
Interest income......... 70,429 -- 12,656 83,085 -- 83,085
Interest expense........ 169,299 -- 354 169,653 -- 169,653
----------- ---------- ---------- ----------- --------- -----------
Income before income
taxes.................. 955,854 77,946 1,122,454 2,156,254 (320,346) 1,835,908
Provision for income
taxes.................. 383,998 17,721 161,237 562,956 171,407 734,363
----------- ---------- ---------- ----------- --------- -----------
Net income.............. $ 571,856 $ 60,225 $ 961,217 $ 1,593,298 $(491,753) $ 1,101,545
=========== ========== ========== =========== ========= ===========
Pro forma basic net
income per share (4)... $ 0.20
===========
Shares used in computing
pro forma basic net
income per share (4)... 5,450,773
===========
Pro forma diluted net
income per share(4).... $ 0.19
===========
Shares used in computing
pro forma diluted net
income per share (4)... 5,845,368
===========
See accompanying notes.
13
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
INCOME FOR THE SIX MONTHS ENDED MARCH 31, 1998
COMPANY SANCHA PRO FORMA
FOR THE SIX FOR THE FIVE PRO FORMA FOR THE SIX
MONTHS ENDED MONTHS ENDED BUSINESS MONTHS ENDED
MARCH 31, FEBRUARY 28, COMBINATION MARCH 31,
1998 1998 (1) COMBINED ADJUSTMENTS (3) 1998
------------ ------------ ----------- --------------- ------------
Revenues................ $21,822,563 $3,060,957 $24,883,520 $ -- $24,883,520
Cost of revenues........ 14,436,706 2,041,731 16,478,437 -- 16,478,437
----------- ---------- ----------- --------- -----------
Gross profit............ 7,385,857 1,019,226 8,405,083 -- 8,405,083
Costs and expenses:
Selling and marketing.. 1,416,145 -- 1,416,145 -- 1,416,145
General and
administrative........ 3,703,190 257,396 3,960,586 -- 3,960,586
Depreciation and
amortization.......... 422,851 5,085 427,936 151,872 579,808
----------- ---------- ----------- --------- -----------
Income from operations.. 1,843,671 756,745 2,600,416 (151,872) 2,448,544
Interest income......... 407,799 5,181 412,980 -- 412,980
Interest expense........ 83,039 142 83,181 -- 83,181
----------- ---------- ----------- --------- -----------
Income before income
taxes.................. 2,168,431 761,784 2,930,215 (151,872) 2,778,343
Provision for income
taxes.................. 878,216 75,054 953,270 171,959 1,125,229
----------- ---------- ----------- --------- -----------
Net income.............. $ 1,290,215 $ 686,730 $ 1,976,945 $(323,831) $ 1,653,114
=========== ========== =========== ========= ===========
Pro forma basic net
income per share (4)... $ 0.21
===========
Shares used in computing
pro forma basic net
income per share (4)... 7,690,705
===========
Pro forma diluted net
income per share (4)... $ 0.18
===========
Shares used in computing
pro forma diluted net
income per share (4)... 9,000,800
===========
See accompanying notes.
14
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro forma and offering adjustments for statements of income for the nine
months ended September 30, 1997 and the six months ended March 31, 1998 are as
follows:
1. The Albanycrest and Sancha condensed statements of income are presented
after translation using the local currency as the functional currency.
2. Reflects the amortization of intangible assets acquired in the Albanycrest
acquisition recorded at $565,628 amortized over a six year period.
3. Reflects the amortization of intangible assets acquired in the Sancha
acquisition recorded at $5,202,858 amortized over eight to fifteen years.
4. Basic net income per share is computed using the weighted average number of
shares of common stock outstanding. Diluted net income per share is
computed using the weighted average number of shares of common stock
outstanding plus all dilutive common stock equivalents, which include stock
options and convertible preferred stock. Basic and diluted net income per
share amounts have been adjusted to reflect the issuance of 51,213 shares
of common stock issued as part of the Sancha acquisition as if the shares
had been outstanding for all periods presented.
15