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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
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Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
April 14, 1998
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DIGITAL RECORDERS, INC.
(Exact name of registrant as specified in its charter)
North Carolina 1-13408 56-1362926
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
2300 Englert Drive, Suite B
Durham, North Carolina 27713
(Address of principal executive offices)
(919) 361-2155
(Registrant's telephone number, including area code)
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ITEM 2. Acquisition or Disposition of Assets
On April 14, 1998, Digital Recorders, Inc. (the "Company") sold its
Highway Information Systems ("HIS") business group to Quixote Corporation for
$2.8 million in cash plus other non-cash consideration of approximately
$200,000. Operating revenues from the HIS business group comprised approximately
23% and 19% of the Company's revenues for the three months ended March 31, 1998
and twelve months ended December 31, 1997, respectively. Net proceeds to the
Company will be used primarily to reduce bank borrowings under the Company's
credit facility. The Company will continue to own and operate its four other
business groups.
ITEM 7. Financial Statements and Exhibits.
The following financial information and exhibits are filed as part of this
report:
(a) Not required
(b) Pro Forma Financial Information:
Unaudited Condensed Consolidated Pro Forma Financial
Information of Digital Recorders, Inc.
Unaudited Condensed Consolidated Pro Forma Balance Sheet as of
March 31, 1998
Unaudited Condensed Consolidated Pro Forma Statements of
Operations for the three months ended March 31, 1998 and the year
ended December 31, 1997.
(c) Exhibits:
The exhibits which are filed with this Form 8-K are set forth in
the Exhibit Index, which immediately precedes the exhibits to this
report.
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DIGITAL RECORDERS, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION
The following unaudited condensed consolidated pro forma balance sheet as of
March 31, 1998, and the unaudited condensed consolidated pro forma statements of
operations for the three month period ended March 31, 1998 and the year ended
December 31, 1997 have been prepared to give effect to the sale of the Company's
Highway Information Systems business group. The adjustments to the unaudited
condensed consolidated pro forma balance sheet have been prepared as if the
transaction was consummated on March 31, 1998 while the adjustments to the
unaudited condensed consolidated pro forma statements of operations have been
prepared as if the transaction was consummated at the beginning of the
respective periods presented. The unaudited condensed consolidated pro forma
financial information has been adjusted to reflect the effect of the pro forma
adjustments described in the accompanying notes and is not necessarily
indicative of the consolidated financial position or results of operations as
they may be in the future or as they might have been had the sale transaction
been effected as of the assumed dates. The unaudited condensed consolidated pro
forma financial information should be read in conjunction with the Company's
separate historical financial statements and notes thereto.
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DIGITAL RECORDERS, INC.
Unaudited Condensed Consolidated Pro Forma Balance Sheet
March 31, 1998
Pro Forma
Assets Historical Adjustments Pro Forma
------------- ---------------- --------------
Current Assets:
Cash and cash equivalents $ 717,987 2,800,000 (b) 1,064,987
(2,453,000)(c)
Trade accounts receivable 3,033,018 (1,044,232)(a) 1,988,786
Other receivables 38,213 26,384 (a) 64,597
Inventories 3,915,815 (326,713)(a) 3,589,102
Prepaids and other current assets 122,988 (65,694)(a) 57,294
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Total current assets 7,828,021 (1,063,256) 6,764,765
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Property and equipment, net 512,255 (192,705)(a) 319,550
Goodwill, net 1,476,900 - 1,476,900
Intangible assets, net 378,830 (10,538)(a) 368,293
Other assets 118,958 - 118,958
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$ 10,314,964 (1,266,498) 9,048,466
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Liabilities and Stockholders' Equity
Current Liabilities:
Short-term bank borrowings $ 2,453,000 (2,453,000)(c) -
Accounts payable 1,560,953 - 1,560,953
Accrued expenses 169,591 (15,511)(a) 259,080
105,000 (d)
Accrued commissions 203,164 - 203,164
Accrued warranty reserve 271,914 - 271,914
Dividends payable 39,825 - 39,825
Deferred revenue - - -
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Total current liabilities 4,698,447 (2,363,511) 2,334,936
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Total liabilities 4,698,447 (2,363,511) 2,334,936
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Series AAA Redeemable, Convertible, Nonvoting Preferred Stock, $.10 par value,
Liquidation Preference of $5,000 per share, 20,000 shares authorized; 354
shares issued and outstanding at March 31, 1998 and December 31, 1997,
respectively 1,770,000 - 1,770,000
Stockholders' Equity:
Common stock, $.10 par value, 10,000,000 shares authorized;
2,674,075 shares issued and outstanding at March 31,
1998 and December 31, 1997, respectively 267,407 - 267,407
Additional paid-in capital 10,654,618 - 10,654,618
Translation adjustment (229,615) - (229,615)
Accumulated deficit (6,845,893) 1,097,012 (e) (5,748,881)
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Total stockholders' equity 3,846,517 1,097,012 4,943,529
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$ 10,314,964 (1,266,498) 9,048,466
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DIGITAL RECORDERS, INC.
Notes to Unaudited Condensed Consolidated Pro Forma Balance Sheet
March 31, 1998
Details of Pro Forma Adjustments
(a) To record the disposition of the assets and liabilities of the business
group sold.
(b) To record the net cash proceeds from the sale of the business group.
(c) To reflect the application of $2.453 million of net cash proceeds from
the sale to reduce outstanding amounts on the Company's secured line of
credit facility.
(d) To record various estimated transaction-related expenses.
(e) To record the estimated retained earnings impact of the sale of the
business group.
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DIGITAL RECORDERS, INC.
Unaudited Condensed Consolidated Pro Forma Statement of Operations
Three Months Ended March 31, 1998
Pro Forma
Historical Adjustments Pro Forma
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Net sales $ 2,894,305 (685,930)(a) 2,208,375
Cost of sales 1,681,846 (369,830)(a) 1,312,016
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Gross profit 1,212,459 (316,100) 896,359
Selling, general and administrative expenses 1,370,418 (113,008)(a) 1,242,410
(15,000)(b)
Research and development expenses 278,917 (65,669)(a) 213,248
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Operating loss (436,876) (122,422) (559,298)
Other income (expense):
Interest income 1,962 6,000 (c) 7,962
Interest expense (45,063) 45,063 (c) -
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Total other income (expense) (43,101) 51,063 7,962
Loss before income taxes (479,977) (71,359) (551,336)
Income tax expense - - -
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Net loss (479,977) (71,359) (551,336)
Preferred dividend requirements (39,825) - (39,825)
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Net loss applicable to common stockholders $ (519,802) (71,359) (591,161)
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Basic net loss per common share $ (0.19) (0.03) (0.22)
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Diluted net loss per common share $ (0.19) (0.03) (0.22)
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Weighted average number of common shares outstanding
for basic and diluted calculations 2,674,075 2,674,075 2,674,075
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DIGITAL RECORDERS, INC.
Unaudited Condensed Consolidated Pro Forma Statement of Operations
Year Ended December 31, 1997
Pro Forma
Historical Adjustments Pro Forma
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Net sales $ 11,672,773 (2,266,743)(a) 9,406,030
Cost of sales 6,878,372 (1,047,743)(a) 5,830,629
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Gross profit 4,794,401 (1,219,000) 3,575,401
Selling, general and administrative expenses 5,388,923 (522,809)(a) 4,806,114
(60,000)(b)
Research and development expenses 1,157,997 (305,900)(a) 852,097
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Operating loss (1,752,519) (330,291) (2,082,810)
Other income (expense):
Interest income 58,485 60,000 (c) 118,485
Interest expense (62,405) 62,405 (c) -
Other income, net (9,200) - (9,200)
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Total other income (expense) (13,120) 122,405 109,285
Loss before income taxes (1,765,639) (207,886) (1,973,525)
Income tax expense - - -
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Net loss (1,765,639) (207,886) (1,973,525)
Preferred dividend requirements (159,300) - (159,300)
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Net loss applicable to common stockholders $ (1,924,939) (207,886) (2,132,825)
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Basic net loss per common share $ (0.72) (0.08) (0.80)
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Diluted net loss per common share $ (0.72) (0.08) (0.80)
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Weighted average number of common shares outstanding
for basic and diluted calculations 2,674,075 2,674,075 2,674,075
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DIGITAL RECORDERS, INC.
Notes to Unaudited Condensed Consolidated Pro Forma Statements of Operations
March 31, 1998 and December 31, 1997
Details of Pro Forma Adjustments
(a) To eliminate the direct operations of the business group disposed of in
the sale transaction.
(b) To allocate estimated selling, general and administrative expenses
incurred at the corporate office that were directly related to the
business group sold.
(c) To reduce interest expense and increase interest income based on
elimination of debt outstanding assuming the sale transaction was
consummated at the beginning of each period presented.
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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.
DIGITAL RECORDERS, INC.
Date: June 12, 1998 By: /s/ David L. Turney
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David L. Turney, Chief Executive
Officer
By: /s/ Lawrence A. Taylor
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Lawrence A. Taylor, Chief Financial
Officer
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EXHIBIT INDEX
Exhibit No. Description
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2.3 Asset Purchase Agreement between Quixote Corporation and the
Company