EXHIBIT 99.2
REAL TIME LOGIC, INC.
dba
RT Logic!
[Logo Appears Here]
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY INFORMATION
WITH
INDEPENDENT AUDITOR'S REPORT
MARCH 29, 2002 AND MARCH 30, 2001
[Logo of Biggs Kofford Appears Here]
To the Board of Directors and Stockholders
Real Time Logic, Inc., dba RT Logic!
Colorado Springs, Colorado
We have audited the accompanying balance sheets of Real Time Logic, Inc., dba RT
Logic! (a Colorado corporation), as of March 29, 2002, and March 30, 2001, and
the related statements of income, changes in stockholders' equity, and cash
flows for the years then ended. 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 auditing standards generally accepted
in the United States of America. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Real Time Logic, Inc., dba RT
Logic!, as of March 29, 2002, and March 30, 2001, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on page 20
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Biggs, Kofford & Co., P.L.
May 20, 2002
REAL TIME LOGIC, INC.
dba RT LOGIC !
BALANCE SHEETS
MARCH 29, 2002 AND MARCH 30, 2001
ASSETS 2002 2001
- ------
--------------------------------------------------
Current assets:
Cash and cash equivalents $ 3,987,139 $ 2,178,417
- -----------------------------------------------------------------
Accounts receivable 1,202,162 1,710,766
- -----------------------------------------------------------------
Income taxes receivable 26,516 81,293
- -----------------------------------------------------------------
Costs and estimated earnings in excess of billings
on uncompleted contracts 2,443,065 1,069,970
----------------------------------------------------------------
Inventory 480,793 423,014
- -----------------------------------------------------------------
Prepaid expenses and other current assets 34,897 23,420
- -----------------------------------------------------------------
Deferred tax asset 264,000 244,000
- ------------------------------------------------------------------------------------------------------------------
Total current assets 8,438,572 5,730,880
-----------------------------------------------------------------------------------------------------------------
Property and equipment:
Computers and related equipment 465,854 367,929
- -----------------------------------------------------------------
Office furniture and equipment 43,743 25,883
- -----------------------------------------------------------------
Leasehold improvements 446,890 155,392
- ------------------------------------------------------------------------------------------------------------------
956,487 549,204
Less accumulated depreciation (320,437) (182,014)
- ------------------------------------------------------------------------------------------------------------------
636,050 367,190
--------------------------------------------------
Other assets:
Goodwill, net of accumulated amortization
of $530,247 and $477,222 respectively - 53,025
----------------------------------------------------------------
Deferred tax asset 7,000 12,000
- -----------------------------------------------------------------
Due from related party - 9,380
- ------------------------------------------------------------------------------------------------------------------
7,000 74,405
--------------------------------------------------
Total assets $ 9,081,622 $ 6,172,475
- ----------------------------------------------------------------==================================================
The accompanying notes and independent auditor's report
should be read with this financial statement.
2
LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001
- ------------------------------------ -------------------- --------------------
Current liabilities:
Accounts payable $ 671,029 $ 261,377
- ---------------------------------------------------------------------
Accrued wages, benefits and payroll taxes 282,426 300,059
- ---------------------------------------------------------------------
Commissions payable 132,433 113,103
- ---------------------------------------------------------------------
Bonuses payable 787,000 -
- ---------------------------------------------------------------------
Other accrued liabilities 51,091 22,601
- ---------------------------------------------------------------------
Warranty and extended maintenance liability 545,508 545,508
- ---------------------------------------------------------------------
Income taxes payable - 18,379
- ---------------------------------------------------------------------
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,208,357 1,141,674
---------------------------------------------------------------- -------------------- --------------------
Total current liabilities 3,677,844 2,402,701
---------------------------------------------------------------- -------------------- --------------------
Stockholders' equity:
Common stock, no par value; 25,000,000 shares
authorized; 1,056,640 and 1,055,000 shares
----------------------------------------------------------------
issued and outstanding, respectively 483,797 480,872
----------------------------------------------------------------
Retained earnings 4,919,981 3,288,902
- --------------------------------------------------------------------- -------------------- --------------------
5,403,778 3,769,774
-------------------- --------------------
Total liabilities and stockholders' equity $ 9,081,622 $ 6,172,475
- --------------------------------------------------------------------- ==================== ====================
The accompanying notes and independent auditor's report
should be read with this financial statement.
3
REAL TIME LOGIC, INC.
dba RT LOGIC !
STATEMENTS OF INCOME
YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2001
2002 2001
----------------------------------------------
Contract revenue $ 12,586,254 $ 10,563,124
- ---------------------------------------------------------------------
Cost of contract revenue 6,432,614 5,493,070
- -------------------------------------------------------------------------------------------------------------------
Gross profit 6,153,640 5,070,054
- ---------------------------------------------------------------------
Operating expenses:
Selling, general and administrative expenses 1,974,662 1,650,370
--------------------------------------------------------------------
Research and development costs 1,168,863 1,065,055
--------------------------------------------------------------------
Special bonus 525,000 525,000
------------------------------------------------------------------------------------------------------------------
Income from operations 2,485,115 1,829,629
- -------------------------------------------------------------------------------------------------------------------
Other income (expense):
Amortization of goodwill (53,025) (79,537)
--------------------------------------------------------------------
Other income 715 3,981
--------------------------------------------------------------------
Loss on disposal of assets (3,163) (3,572)
--------------------------------------------------------------------
Interest & dividend income 105,650 84,833
------------------------------------------------------------------------------------------------------------------
50,177 5,705
-----------------------------------------------
Income before income tax provision 2,535,292 1,835,334
- ---------------------------------------------------------------------
Income tax provision (884,276) (613,572)
- -------------------------------------------------------------------------------------------------------------------
Net income $ 1,651,016 $ 1,221,762
- --------------------------------------------------------------------===============================================
The accompanying notes and independent auditor's report
should be read with this financial statement.
4
REAL TIME LOGIC, INC.
dba RT LOGIC !
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2001
Common Stock
----------------------------------- Retained
Shares Amount Earnings Total
----------------- ----------------- ------------------- ---------------------
Balance, March 31, 2000 1,050,000 $ 472,747 $ 2,067,140 $ 2,539,887
- -------------------------------------
Issuance of common stock 5,000 8,125 - 8,125
- -------------------------------------
Net income - - 1,221,762 1,221,762
- ------------------------------------- ---------------- ----------------- ------------------- ---------------------
Balance, March 30, 2001 1,055,000 480,872 3,288,902 3,769,774
- -------------------------------------
Issuance of common stock 7,140 9,800 - 9,800
- -------------------------------------
Repurchase of common stock (5,500) (6,875) (19,937) (26,812)
- -------------------------------------
Net income - - 1,651,016 1,651,016
- ------------------------------------- ---------------- ----------------- ------------------- ---------------------
Balance, March 29, 2002 1,056,640 $ 483,797 $ 4,919,981 $ 5,403,778
- ------------------------------------- ================ ================= =================== =====================
The accompanying notes and independent auditor's report
should be read with this financial statement.
5
REAL TIME LOGIC, INC.
dba RT LOGIC !
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2001
CASH FLOWS FROM OPERATING ACTIVITIES 2002 2001
- ------------------------------------ --------------------------------------------------
Net income $ 1,651,016 $ 1,221,762
- ---------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 204,712 167,211
-------------------------------------------------------------
Deferred income taxes (15,000) (79,000)
-------------------------------------------------------------
Loss on disposal of assets 3,163 3,572
-------------------------------------------------------------
Decrease (increase) in operating assets:
Accounts receivable 508,604 (973,053)
-------------------------------------------------------------
Income tax receivable 54,777 (81,293)
-------------------------------------------------------------
Costs and estimated earnings in excess
of billings on uncompleted contracts (1,373,095) 246,428
-------------------------------------------------------------
Inventory (57,779) (220,554)
-------------------------------------------------------------
Prepaid expenses and other current assets (11,477) 1,634
-------------------------------------------------------------
Increase (decrease) in operating liabilities:
Accounts payable 409,652 (11,315)
-------------------------------------------------------------
Accrued wages, benefits and payroll taxes (17,633) 181,905
-------------------------------------------------------------
Accrued commissions and bonuses 806,330 (83,060)
-------------------------------------------------------------
Other accrued liabilities 28,490 9,987
-------------------------------------------------------------
Warranty and extended maintenance liability - 129,182
-------------------------------------------------------------
Income taxes payable (18,379) (269,266)
-------------------------------------------------------------
Billings in excess of costs and estimated
earnings on uncompleted contracts 66,683 569,510
---------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,240,064 813,650
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of property and equipment (423,710) (108,420)
- ---------------------------------------------------------------
Repayments from related party 9,380 6,000
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (414,330) (203,988)
- -----------------------------------------------------------------------------------------------------------------
The accompanying notes and independent auditor's report
should be read with this financial statement.
6
CASH FLOWS FROM FINANCING ACTIVITIES 2002 2001
- ------------------------------------ -------------------- --------------------
Issuance of common stock $ 9,800 $ 8,125
- --------------------------------------------------------------------- -------------------- --------------------
Repurchase of common stock (26,812) -
- --------------------------------------------------------------------- -------------------- --------------------
Net cash provided by (used in) financing activities (17,012) 8,125
- --------------------------------------------------------------------- -------------------- --------------------
Net increase in cash and cash equivalents 1,808,722 617,787
- ---------------------------------------------------------------------
Cash and cash equivalents, beginning of year 2,178,417 1,560,630
- --------------------------------------------------------------------- -------------------- --------------------
Cash and cash equivalents, end of year $ 3,987,139 $ 2,178,417
- --------------------------------------------------------------------- ==================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
- -------------------------------------------
Interest paid during the period $ - $ -
- --------------------------------------------------------------------- ==================== ====================
Income taxes paid during the period $ 862,437 $ 1,043,134
- --------------------------------------------------------------------- ==================== ====================
The accompanying notes and independent auditor's report
should be read with this financial statement.
7
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business and organization
- -----------------------------------
Real Time Logic, Inc., dba RT Logic!, (Company) was incorporated on March 26,
1997 and began doing business on April 1, 1997, in the State of Colorado. The
Company was formed through the tax-free divestiture of the Colorado Springs
operations of Advanced Processing Laboratories, Inc. (AP Labs), a California
company. The Company's fiscal year ends on the last Friday in March.
The Company specializes in the real-time satellite, ground and test computing
market. Services and products, provided under signed contracts, include software
driver products, hardware/firmware-based interface controllers, engineering
services, integrated development platforms, and complete turn-key systems. The
Company's customer base primarily consists of government contractors located in
Colorado and California; the Company grants credit to all of its customers. The
Company operates out of offices located in Colorado Springs and Denver, Colorado
and in San Diego, California.
Major customers
- ---------------
During the years ended March 29, 2002, and March 30, 2001, approximately 49% and
46%, respectively, of the Company's revenues were generated from major customers
located in Colorado and California as follows:
2002 2001
------------------- ------------------
Customer A 21% 13%
Customer B 2% 10%
Customer C 12% 12%
Customer D 14% 11%
------------------- ------------------
Totals 49% 46%
=================== ==================
In addition, approximately 38% of accounts receivable were from three of these
customers as of March 29, 2002, and approximately 41% of accounts receivable
were from three of these customers as of March 30, 2001.
8
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Use of estimates
- ----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the of the United States of America requires management to
make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
Cash equivalents
- ----------------
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with maturities of three months or less to be cash
equivalents. The Company maintains its cash and cash equivalents in bank
deposits which, at times, may exceed federally insured limits. The company has
not experienced any losses in such accounts. The Company believes it is not
exposed to any significant credit risk on cash and cash equivalents.
Accounts receivable
- -------------------
It is management's opinion that all accounts receivable as of March 29, 2002,
and March 30, 2001, are collectible. Therefore, an allowance for doubtful
accounts has not been recorded.
Inventory
- ---------
Inventory consists of service parts and materials and is stated at the lower of
cost or market using the first-in, first-out (FIFO) method of accounting.
Property and equipment
- ----------------------
Property and equipment are recorded at cost and are being depreciated over their
estimated useful lives using straight-line methods as follows:
Computers and related equipment 3 - 5 years
Office furniture and equipment 5 - 7 years
Leasehold improvements 3 - 5 years
9
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Property and equipment (continued)
- ----------------------------------
Depreciation expense for the years ended March 29, 2002 and March 30, 2001, was
$151,687 and $87,674, respectively; of which $130,156 and $78,957, respectively,
is included in cost of contract sales.
Goodwill
- --------
Goodwill is being amortized on an accelerated basis over five years. This method
has been selected as it approximates the goodwill on the contracts purchased.
Amortization expense for the years ended March 29, 2002 and March 30, 2001, was
$53,025 and $79,537, respectively. Goodwill was fully amortized as of March 29,
2002.
Warranty and extended maintenance liability
- -------------------------------------------
The Company offers a minimum of a ninety-day warranty on materials and labor for
most of its products. However, in many instances, the Company elects to extend
its responsibility for its products to include a period of time substantially
longer than the warranty period. In certain instances, products delivered to
customers may not be utilized or implemented by the customer for a number of
months or years. Management has established an estimate of such warranty costs
to be covered by the Company to include normal defects and claims, as well as
for any major breakdowns that could occur on products or systems delivered to
customers. The amount of warranty accrual for these estimated costs for the
years ended March 29, 2002 and March 30, 2001, was $280,751 and $349,121
respectively. Actual warranty costs incurred for the years ended March 29, 2002
and March 30, 2001, was $94,601 and $93,037 respectively.
The Company also offers extended maintenance contracts in one, two, or three
year terms. Revenue on these extended maintenance contracts is deferred and
recognized ratably over the period of the contract. Deferred revenue for
extended maintenance contracts for the years ended March 29, 2002 and March 30,
2001, was $264,757 and $196,387 respectively.
10
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue and cost recognition
- ----------------------------
Revenues from substantially all long-term cost plus fixed fee and fixed price
contracts are recognized on the percentage-of-completion method, measured by the
percentage of total contract costs incurred to date to estimated total contract
costs for each contract. This method is used because management considers total
contract costs to be the best available measure of progress on these contracts.
Initial cost estimates supporting the Company's contracts are necessarily based
on facts and circumstances known at the time the estimates are made. Estimates
of projected contract costs are continuously updated over the period of contract
performance and change order negotiations may affect overall job profitability.
Considerable judgment must be applied to reasonably evaluate the potential
outcomes of issues that arise during the contract performance period and the
effect their resolution will have on the ultimate margins or losses that may be
realized by the Company. Consequently, the estimates that support the Company's
revenue recognition decisions have a very significant impact on the results of
operations reported by the Company. Contract costs include all direct materials,
labor, subcontract costs and those indirect costs related to contract
performance such as indirect labor, supplies and general and administrative
costs allocable to direct labor. All other general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions and estimated profitability may result in
revisions to income, which are recognized in the period in which revisions are
determined.
The asset, "Costs and estimated earnings in excess of billings on uncompleted
contracts" represents revenues recognized in excess of amounts billed. The
liability, "Billings in excess of costs and estimated earnings on uncompleted
contracts" represents billings in excess of revenues recognized.
Income taxes
- ------------
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
Income taxes are provided for the tax effects of transactions reported in the
financial statements. Deferred tax assets are recognized on all deductible
temporary differences.
11
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Income taxes (continued)
- ------------------------
Deferred tax assets and 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.
Investment tax credits are recognized as a reduction of income taxes in the
period in which the credits are recognized.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform with current year
presentation.
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts consist of the following:
2002 2001
------------- -------------
Costs incurred on uncompleted contracts $ 19,307,399 $ 12,336,401
Estimated earnings 9,887,291 6,120,978
------------- -------------
29,194,690 18,457,379
Less billings to date (27,959,982) (18,529,083)
------------- -------------
$ 1,234,708 $ (71,704)
============= =============
12
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
(CONTINUED)
These amounts have been included in the accompanying balance sheets under the
following captions:
2002 2001
------------- -----------
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 2,443,065 $ 1,069,970
Billings in excess of costs and estimated
earnings on uncompleted contracts (1,208,357) (1,141,674)
------------- ------------
$ 1,234,708 $ (71,704)
============= ============
3. BACKLOG (UNAUDITED)
Backlog represents the amount of revenue the Company expects to realize from
work to be performed on uncompleted contracts in progress at year-end and from
contractual agreements on which work has not yet begun.
Backlog balance at March 30, 2001 $ 7,715,642
New contracts during the year 15,270,528
------------
22,986,170
Less contract revenue earned during the year 12,586,254
------------
Backlog balance at March 29, 2002 $ 10,399,916
============
The Company also entered into additional contracts with estimated revenues of
approximately $3,399,148 between April 1, 2002 and May 15, 2002.
13
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
4. COMMITMENTS AND CONTINGENCIES
Line-of-credit
- --------------
The Company has an unsecured revolving line of credit for $350,000 bearing
interest at 6.75% per annum and expiring on July 30, 2002. As of March 29, 2002
and March 30, 2001, there were no advances on the line of credit.
The line-of-credit is subject to provisions that require the Company to meet
certain financial ratios and other operating minimums and restrictions. As of
March 29, 2002, and March 30, 2001, the Company was in compliance with these
provisions.
Operating lease agreements
- --------------------------
The Company rents office space from unrelated parties under two operating leases
expiring January 31, 2004 and December 31, 2005, for the Denver and Colorado
Springs offices, respectively. As of March 29, 2002, the Colorado Springs lease
payments total $14,041 per month plus maintenance fees related to this lease.
These payments increase to $14,743 in January 2003 per the lease agreement. For
the Denver lease, monthly lease payments total $3,600 per month. A new Denver
lease became effective on July 1, 2001 and expires on January 31, 2004,
replacing the previous Denver lease which expired on January 31, 2002. Payments
under the previous lease were $1,884 per month. The increase is due to an
increase in square footage being leased by the Company. Total rent expense under
these operating leases was $163,670 and $111,661 for the years ended March 29,
2002, and March 31, 2000, respectively. Minimum lease payments under these lease
arrangements are as follows:
Years Ending
March,
---------------------
2003 $ 206,593
2004 179,118
2005 188,044
2006 146,223
2007 -
-----------
$ 719,978
===========
14
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
4. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Profit sharing plan
- -------------------
The Company has a discretionary 401(k) profit sharing plan (Plan), covering
employees over 21 years of age that meet the specific service and eligibility
requirements as defined by the Plan. The Plan provides for Company contributions
up to the maximum amount allowed by regulation. The Company contributed $199,282
and $213,387 for the years ended March 29, 2002, and March 30, 2001,
respectively.
5. RELATED PARTY TRANSACTIONS
Also during the fiscal year ended March 31, 2000, the Company advanced $20,000
to a stockholder. As of March 30, 2001, this receivable had a balance of $9,380
and was repaid as of March 29, 2002.
6. INCOME TAXES
As of March 29, 2002, and March 30, 2001, the Company has a deferred tax asset
of $271,000 and $256,000, respectively, resulting from future deductible
temporary differences related primarily to the warranty and extended maintenance
liability.
Components of the provision for income taxes for the years ending March 29,
2002, and March 30, 2001, is as follows:
2002 2001
---------- ----------
Current tax expense $ 899,276 $ 692,572
Deferred tax benefit (15,000) (79,000)
---------- ----------
$ 884,276 $ 613,572
========== ==========
Included in current income tax expense for the year ended March 29, 2002 is the
recognition of federal and state income tax credits of approximately $116,886
and $14,264, respectively. Included in current income tax expense for the year
ended March 30, 2001 is the recognition of federal and state income tax credits
of approximately $106,500 and $13,855, respectively.
15
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
7. STOCK OPTION PLAN
In 1999, the Company adopted a nonqualified stock option plan. The Company's
stock option plan provides for the granting of nonqualified stock options to
directors, key employees and independent contractors for the purchase of shares
of the Company's common stock at a price determined by the Board of Directors at
the date the option is granted. The options vest 20% each year and expire within
twenty years from the date of grant.
A summary of stock option activity follows:
Weighted
Average
Number of Exercise
Shares Price
--------- --------
Outstanding at beginning of year 1,304,500 $ 0.85
Granted 111,000 2.13
Exercised (1,640) 1.02
Cancelled (5,500) 1.25
--------- -------
Outstanding at end of year 1,408,360 $ 0.94
========= =======
Exercisable at end of year 826,444 $ 0.72
========= =======
In accordance with SFAS No. 123, Accounting for Stock-Based Compensation, the
Company applied APB Opinion 25 and related interpretations in accounting for its
stock option plan, and accordingly does not record compensation costs on grants
to associates. The effect of compensation cost based on the fair value of the
option granted at the grant date as prescribed by SFAS No. 123 is not considered
material.
16
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
8. SPECIAL BONUS PLAN
The Company has a discretionary bonus plan which covers substantially all
employees of the Company and provides for the distribution of the Company's
income before bonuses and certain other adjustments to all eligible employees.
For the years ended March 29, 2002 and March 30, 2001, the Company paid a
special bonus to eligible employees totaling $525,000 each year. This special
bonus had the following effect on the Company's statement of income for the
years ended March 29, 2002 and March 30, 2001.
2002
----------------------------
With Special Without
Bonus Special Bonus
------------ -------------
Contract revenue $12,586,254 $12,586,254
Cost of contract revenue 6,432,614 6,432,614
----------- -----------
Gross profit 6,153,640 6,153,640
Operating expenses 3,668,525 3,143,525
----------- -----------
Income from operations 2,485,115 3,010,115
Other income 50,177 50,177
----------- -----------
Income before income tax provision 2,535,292 3,060,292
Income tax provision (884,276) (1,067,389)
----------- -----------
Net income $ 1,651,016 $ 1,992,903
=========== ===========
2001
----------------------------
With Special Without
Bonus Special Bonus
----------- -------------
Contract revenue $10,563,124 $10,563,124
Cost of contract revenue 5,493,070 5,493,070
----------- -----------
Gross profit 5,070,054 5,070,054
Operating expenses 3,240,425 2,715,425
----------- -----------
Income from operations 1,829,629 2,354,629
Other income 5,705 5,705
----------- -----------
Income before income tax provision 1,835,334 2,360,334
Income tax provision (613,572) (789,085)
----------- -----------
Net income $ 1,221,762 $ 1,571,249
=========== ===========
17
REAL TIME LOGIC, INC.
dba RT LOGIC!
NOTES TO FINANCIAL STATEMENTS
MARCH 29, 2002, AND MARCH 30, 2001
8. SPECIAL BONUS PLAN (CONTINUED)
With Special Without
Bonus Special Bonus
------------ -------------
Key ratios for 2002 (as a percent of sales):
Operating expenses 29.15% 24.98%
Income from operations 19.74% 23.92%
Income before interest and taxes (EBIT) 20.14% 24.31%
Net income 13.12% 15.83%
18
SUPPLEMENTARY INFORMATION
REAL TIME LOGIC, INC.
dba RT LOGIC!
SCHEDULE I - SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2001
2002 2001
-------------------------- ----------------------------
Percent of Percent of
Revenues Revenues
----------- ----------
Advertising $ 46,839 0.37% $ 20,268 0.19%
- -------------------------------------------
Allocated rent, utilities,
telephone, and insurance 74,660 0.59% 42,162 0.40%
- -------------------------------------------
Bank charges 979 0.01% 928 0.01%
- -------------------------------------------
Bonuses 380,250 3.02% 252,898 2.39%
- -------------------------------------------
Bids and proposals 118,223 0.94% 82,439 0.78%
- -------------------------------------------
Depreciation 21,531 0.17% 8,717 0.08%
- -------------------------------------------
Donations 7,000 0.06% - 0.00%
- -------------------------------------------
Dues, fees, and subscriptions 1,054 0.01% 1,551 0.01%
- -------------------------------------------
Employee benefits 116,979 0.93% 100,263 0.95%
- -------------------------------------------
Entertainment and promotion 3,978 0.03% 4,021 0.04%
- -------------------------------------------
Equipment rental 491 0.00% 428 0.00%
- -------------------------------------------
Insurance 70,055 0.56% 62,947 0.60%
- -------------------------------------------
Miscellaneous 628 0.00% 585 0.01%
- -------------------------------------------
Outside services 52 0.00% 357 0.00%
- -------------------------------------------
Payroll taxes 43,627 0.35% 60,144 0.57%
- -------------------------------------------
Printing 8,106 0.06% 4,768 0.05%
- -------------------------------------------
Professional services 18,146 0.14% 17,181 0.16%
- -------------------------------------------
Recruitment 1,961 0.02% 520 0.00%
- -------------------------------------------
Sales representative services 333,527 2.65% 369,361 3.50%
- -------------------------------------------
Salaries 603,835 4.80% 511,201 4.84%
- -------------------------------------------
Supplies 50,380 0.40% 41,007 0.39%
- -------------------------------------------
Travel, conference & trade shows 70,146 0.56% 66,717 0.63%
- -------------------------------------------
Taxes and licenses 2,215 0.02% 1,907 0.02%
- ------------------------------------------- ---------- ------ ---------- ------
$1,974,662 15.69% $1,650,370 15.62%
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20