<PAGE>
UNITED STATES
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): February 7, 1997 (November 26, 1996)
SUNQUEST INFORMATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 0-28212 86-0378223
(State or Other Jurisdiction (Commission (I.R.S.Employer
of Incorporation or Organization) File Number) Identification Number)
4801 East Broadway Boulevard
Tucson, Arizona 85711
(Address of principal executive offices) (Zip Code)
(520) 570-2000
(Registrant's telephone number, including area code)
<PAGE>
Item 7. Financial Statements and Exhibits.
Item 7 of the Form 8-K of Sunquest Information Systems, Inc. dated December
11, 1996, is hereby amended to include the following:
(a) Financial statements of businesses acquired.
The following financial statements of Antrim Corporation are filed as a
part of this report:
Page
----
AUDITED FINANCIAL STATEMENTS
Report of Independent Auditors, Ernst & Young LLP 3
Balance Sheets as of December 31, 1994 and
October 31, 1995 4
Statements of Operations for the Years Ended
December 31, 1993 and 1994 and for the Ten
Months Ended October 31, 1995 6
Statements of Stockholders' (Deficit) for the Years
ended December 31, 1993 and 1994 and for the Ten
Months Ended October 31, 1995 7
Statements of Cash Flows for the Years Ended
December 31, 1993 and 1994 and for the Ten
Months Ended October 31, 1995 8
Notes to Financial Statements 9
UNAUDITED INTERIM FINANCIAL STATEMENTS
Unaudited Balance Sheets as of December 31, 1995
and September 30, 1996 20
Unaudited Statements of Operations for the Nine
Months Ended September 30, 1995 and 1996 21
Unaudited Statements of Cash Flows for the Nine
Months Ended September 30, 1995 and 1996 22
Notes to Financial Statements 23
1
<PAGE>
(b) Pro forma financial information.
The following pro forma financial information is filed as a part of this
report:
Page
----
Unaudited Pro Forma Financial Statements 25
Unaudited Pro Forma Balance Sheet as of
September 30, 1996 26
Notes to Unaudited Pro Forma Balance Sheet 27
Unaudited Pro Forma Statement of Income for
the Nine Months Ended September 30, 1996 28
Unaudited Pro Forma Statement of Income for
the Year Ended December 31, 1995 29
Notes to Unaudited Pro Forma Statements
of Income 30
(c) Exhibits.
The following exhibits are filed as a part of this report:
2A - Stock Purchase Agreement with The Compucare Company dated as
of November 26, 1996, filed as Exhibit 2A to Form 8-K dated
December 11, 1996 and incorporated herein by reference.
23F - Consent of Independent Auditors dated February 4, 1997.
2
<PAGE>
Report of Independent Auditors
Board of Directors
Antrim Corporation
We have audited the accompanying balance sheets of Antrim Corporation as of
December 31, 1994 and October 31, 1995, and the related statements of
operations, stockholders' (deficit) and cash flows for each of the years ended
December 31, 1993 and 1994 and the ten month period ended October 31, 1995.
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 Antrim Corporation at December
31, 1994 and October 31, 1995, and the results of its operations and its cash
flows for each of the years ended December 31, 1993 and 1994 and the ten month
period ended October 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Vienna, Virginia
November 8, 1996
3
<PAGE>
Antrim Corporation
Balance Sheets
<TABLE>
<CAPTION>
December 31, October 31,
1994 1995
----------------------------------
(in thousands, except share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 807 $ 133
Accounts receivable, net of allowance
of $1,750 and $1,850 as of December
31, 1994 and October 31, 1995, 4,322 6,116
respectively
Employee receivable 21 13
Notes receivable 88 208
Taxes receivable 557 872
Inventory 171 51
Other current assets 398 285
----------------------------------
Total current assets 6,364 7,678
Property and equipment:
Computer equipment and purchased
software 2,584 2,759
Office furniture and equipment 1,112 1,115
----------------------------------
Accumulated depreciation (2,583) (2,963)
----------------------------------
1,113 911
Notes receivable, long term 134 131
Other assets 105 100
----------------------------------
Total assets $ 7,716 $ 8,820
==================================
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
December 31, October 31,
1994 1995
----------------------------------
(in thousands, except share data)
<S> <C> <C>
Liabilities and stockholders' (deficit)
Current liabilities:
Accounts payable $ 1,394 $ 2,649
Accrued expenses 2,165 1,375
Billings in excess of costs on
uncompleted contracts 1,513 4,202
Current portion of debt and
capital lease obligations (Note 3 1,314 1,327
and 4)
Other current liabilities 57 66
----------------------------------
Total current liabilities 6,443 9,619
Long term portion of debt and
capital lease obligations (Note 3 121 --
and 4)
Other liabilities 28 16
----------------------------------
Total liabilities 6,592 9,635
Redeemable convertible preferred stock,
8% cumulative dividends, voting, $1
par value, 980,000 shares authorized,
735,000 outstanding (Note 5) 5,586 5,831
Redeemable preferred stock, $.75 par
value, 735,000 shares authorized,
issued and outstanding (Note 5) 551 551
Stockholders' (deficit) (Notes 5 and 8):
Common stock, $0.01 par value,
10,000,000 shares authorized,
1,691,200 issued and outstanding as of 17 17
December 31, 1994 and October 31,
1995, respectively
Additional paid-in-capital 707 707
Treasury stock, 880,000 shares at cost (3,400) (3,400)
Accumulated deficit (2,337) (4,521)
----------------------------------
Total stockholders' (deficit) (5,013) (7,197)
----------------------------------
Total liabilities and stockholders' $ 7,716 $ 8,820
(deficit)
==================================
</TABLE>
See accompanying notes.
5
<PAGE>
Antrim Corporation
Statements of Operations
<TABLE>
<CAPTION>
Ten month
period ended
Year ended December 31, October 31,
1993 1994 1995
--------------------------------------
(in thousands)
<S> <C> <C> <C>
Revenues:
Software licenses and installations $ 3,779 $ 6,611 $ 3,741
Hardware sales 8,815 8,531 6,299
Post contract customer support 6,982 7,799 6,269
--------------------------------------
19,576 22,941 16,309
Cost of sales:
Cost of equipment sales 7,199 6,705 4,778
Installation and customer services 6,710 9,526 6,337
Selling and marketing 1,944 1,954 1,474
Software development 1,983 1,578 1,810
General and administrative 3,501 3,752 4,114
--------------------------------------
Operating loss (1,761) (574) (2,204)
Nonoperating income (expenses):
Interest income 90 75 68
Interest expense (136) (134) (140)
--------------------------------------
Loss before taxes (1,807) (633) (2,276)
Income tax benefit (Note 7) (421) (354) (337)
--------------------------------------
Net loss $(1,386) $ (279) $(1,939)
======================================
</TABLE>
See accompanying notes.
6
<PAGE>
Antrim Corporation
Statements of Stockholders' (deficit)
<TABLE>
<CAPTION>
Ten month
period ended
Year ended December 31, October 31,
1993 1994 1995
--------------------------------------
(in thousands)
<S> <C> <C> <C>
Common stock:
Balance, beginning of period $ 17 $ 17 $ 17
Issuance of common stock -- -- --
---------------------------------------
Balance, end of period 17 17 17
---------------------------------------
Additional paid-in-capital:
Balance, beginning of period 139 704 707
Issuance of common stock warrants 563 -- --
Issuance of common stock 2 3 --
---------------------------------------
Balance, end of period 704 707 707
---------------------------------------
Treasury stock:
Balance, beginning of period (3,400) (3,400) (3,400)
---------------------------------------
Balance, end of period (3,400) (3,400) (3,400)
---------------------------------------
Accumulated earnings (deficit):
Balance, beginning of period 1,030 (1,764) (2,337)
Accretion of dividend for redeemable
preferred stock (294) (294) (245)
Issuance of convertible preferred stock (551) -- --
Issuance of common stock warrants (563) -- --
Net loss (1,386) (279) (1,939)
---------------------------------------
Balance, end of period (1,764) (2,337) (4,521)
---------------------------------------
Total stockholders' (deficit) $(4,443) $(5,013) $(7,197)
=======================================
</TABLE>
See accompanying notes.
7
<PAGE>
Antrim Corporation
Statements of Cash Flows
<TABLE>
<CAPTION>
Ten month
period ended
Year ended December 31, October 31,
1993 1994 1995
------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating activities:
Net loss $(1,386) $ (279) $(1,939)
Adjustments to reconcile net loss to
net cash provided by operating activities
Depreciation and amortization 737 852 872
Provision for deferred income taxes (132) -- --
Provision for doubtful accounts 100 1,625 331
Changes in operating assets
and liabilities:
Accounts receivable 2,860 (2,372) (2,116)
Inventory 495 78 120
Notes receivable (277) 185 (118)
Other (35) (219) 113
Taxes receivable (328) (215) (315)
Accounts payable (2,487) 346 953
Accrued expenses 176 632 (488)
Income taxes payable (24) -- --
Deferred revenue (187) 501 2,689
Other liabilities 7 20 (3)
------------------------------------------------
Net cash provided by (used in) operating activities (481) 1,154 99
Investing activities:
Purchase of property and equipment (697) (813) (670)
Other 2 5 5
------------------------------------------------
Net cash used in investing activities (695) (808) (665)
Financing activities:
Proceeds from issuance of common stock 2 3 --
Principal payments on long-term debt and
capital lease obligations (330) (139) (108)
------------------------------------------------
Net cash used in financing activities (328) (136) (108)
------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,504) 210 (674)
Cash and cash equivalents at beginning of period 2,101 597 807
------------------------------------------------
Cash and cash equivalents at end of period $ 597 $ 807 $ 133
================================================
</TABLE>
See accompanying notes.
8
<PAGE>
Antrim Corporation
Notes to Financial Statements
1. Organization
Antrim Corporation (the "Company") was formed in 1982, under the laws of the
State of Texas. The Company is engaged in the selling of hardware, licensing of
proprietary software, and providing related support service to medical
laboratories. The Company's primary customers are reference laboratories. In
1992, the Company established a wholly owned subsidiary, Online Solutions
Company to expand into PC-based applications software. The subsidiary was
dissolved during 1994 and performed no material transactions.
2. Accounting Policies
Revenue Recognition
Software licenses and installations
- -----------------------------------
The Company accounts for revenue recognition of software license fees under the
provisions of AICPA Statement of Position 91-1, "Software Revenue Recognition"
(the "SOP"). Accordingly, revenue from the sale of software licenses is
recognized based on the achievement of contractual milestones assuming that
collection of license fees is probable and no significant obligations remain.
Hardware sales
- --------------
Revenue from hardware sales is recognized upon shipment and, if required,
delivery and installation of the related equipment.
Post contract customer support (PCS)
- ------------------------------------
PCS includes hardware and software maintenance, software support, and
enhancements. Revenue is recognized when services are rendered or the
enhancement is delivered and installed. These fees may also be based on actual
time and expenses incurred. These fees also represent amounts billed for
continued maintenance and support of computer software products.
Cash Equivalents
The Company considers all highly liquid investments with a maturity date of
three months or less to be cash equivalents.
9
<PAGE>
Antrim Corporation
Notes to Financial Statements
2. Accounting Policies (continued)
Inventory
Inventory is recorded at the lower of cost or market, as determined by the
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated on the basis of cost. Depreciation and
amortization are provided using straight-line and accelerated cost methods over
the estimated useful lives of the assets of five to ten years or, with respect
to leasehold improvements, the remaining term of the lease, if less.
Software Development Costs
Research and development costs are expensed as incurred. Statement of Financial
Accounting Standard No. 86, "Accounting for Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed" does not materially affect the Company
since "technological feasibility" is not reached until late in the development
stage of the Company's software products.
Management 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 assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes pursuant to the provisions of Statement of
Financial Accounting Standards No. 109. Deferred taxes result from temporary
differences in the recognition of revenues and expenses for tax and financial
reporting purposes.
10
<PAGE>
Antrim Corporation
Notes to Financial Statements
2. Accounting Policies (continued)
Recent Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which is effective for the Company's December 31, 1996 financial
statements. SFAS 123 allows companies to either account for stock-based
compensation under the new provisions of SFAS 123 or under the provisions of
Accounting Principles Board Opinion No. 25 (APB 25), but requires pro forma
disclosure in the footnotes of the financial statements as if the measurement
provisions of SFAS 123 had been adopted. The Company intends to continue
accounting for its stock based compensation in accordance with the provisions of
APB 25. As such, the adoption of SFAS 123 will not impact the financial
position or results of operations of the Company.
3. Revolving Credit and Security Agreement
The Company is party to a $2,500,000 revolving credit and security agreement
(the Agreement) with its bank. Borrowing under this credit facility may not
exceed the sum of 80% of the aggregate principal balance of Antrim's eligible
accounts as defined in the Agreement less the amount outstanding under the term
loan and less all amounts owed by Antrim to certain vendors. Under this credit
facility, the bank may issue letters of credit on behalf of the Company up to an
aggregate outstanding face amount of $200,000. The Company pays interest at a
rate of prime + 1% (or 9.75% at October 31, 1995) on the outstanding borrowings.
As of October 31, 1995, the Company was in violation of certain financial
covenants of its revolving credit agreement.
Upon the purchase of Antrim Corporation by The Compucare Company (see Note 11),
the outstanding balance of the Agreement was paid in full during November, 1995.
11
<PAGE>
Antrim Corporation
Notes to Financial Statements
4. Debt and Capital Lease Obligations
Long-term debt and capital lease obligations consist of the following:
<TABLE>
<CAPTION>
December 31, October 31,
1994 1995
-----------------------------
<S> <C> <C>
(in thousands)
Revolving Credit Agreement $1,183 $1,183
Capital lease 252 144
-----------------------------
Less Current Portion 1,314 1,327
-----------------------------
$ 121 $ -
=============================
</TABLE>
Future payments under current debt and capital lease obligations are as follows:
<TABLE>
<CAPTION>
October 31, 1995
------------------------------------
Revolving Capital
Credit Leases Total
------------------------------------
(in thousands)
<S> <C> <C> <C>
1996 $1,183 $135 $1,318
------------------------------------
Amounts representing
interest - 9 9
------------------------------------
$1,183 $144 $1,327
====================================
</TABLE>
Interest paid on the above debt, including the revolving credit agreements, was
$136,000, $134,000 and $140,000 during the years ended December 31, 1993, 1994,
and the ten month period ended October 31, 1995, respectively.
12
<PAGE>
Antrim Corporation
Notes to Financial Statements
4. Debt and Capital Lease Obligations (continued)
Property and equipment includes the following amounts for leases that have been
capitalized at December 31, 1994 and October 31, 1995:
<TABLE>
<CAPTION>
1994 1995
-----------------------
(in thousands)
<S> <C> <C>
Computer equipment and
purchased software $ 580 $ 580
-----------------------
Accumulated depreciation 367 464
-----------------------
$ 213 $ 116
=======================
</TABLE>
Amortization of assets recorded under capital leases is included in depreciation
and amortization expense.
5. Preferred Stock
Redeemable Convertible Preferred Stock
- --------------------------------------
In June, 1988 the Company authorized and issued 980,000 shares of $1.00 par-
value redeemable convertible preferred stock for $4,900,000 ($5.00 per share).
The preferred stock also has a cumulative annual dividend rate of $.40 per share
which is payable if earned and declared or otherwise if the preferred stock is
redeemed; the dividends are not otherwise payable if the preferred stock is
converted into common stock. As of December 31, 1993, 1994 and October 31, 1995
unredeemed accretion of $1,617,000, $1,911,000 and $2,156,000, respectively, in
dividends has been included in the preferred stock balance.
Under the amended terms, on January 1, 1996, the Company must redeem, unless
earlier converted, the lesser of all outstanding shares of preferred stock, or
245,000 shares of preferred stock for $5.00 per share, plus any accrued
dividends, whether or not earned or declared. Upon the purchase and
recapitalization of Antrim Corporation on October 31, 1995 by The Compucare
Company (Note 11), the Companys preferred stock was eliminated.
13
<PAGE>
Antrim Corporation
Notes to Financial Statements
5. Preferred Stock (continued)
Redeemable Preferred Stock
- --------------------------
In connection with an Amendment to the Preferred Stock Agreement in 1993 (the
Amendment), the Company authorized, and declared a stock dividend to the
preferred stockholders consisting of 735,000 shares of $.75 par-value redeemable
preferred stock.
The Company may redeem at any time all or any portion of the outstanding shares,
and is required to redeem all outstanding shares on January 1, 1997, for $.75
per share. Upon the purchase and recapitalization of Antrim Corporation on
October 31, 1995 by The Compucare Company (Note 11), the Company's redeemable
preferred stock was eliminated.
Common Stock Warrants
- ---------------------
In connection with an Amendment to the Preferred Stock Agreement, the Company
issued warrants exercisable for 225,000 shares of common stock. The warrants
are currently exercisable. The warrants expire on June 23, 1998. These
warrants entitle the holders to purchase common stock for $2.50 per share,
subject to certain adjustments. A fair value of $563,000 was assigned to the
warrants prior to purchase by Compucare. Upon the purchase and recapitalization
of Antrim Corporation on October 31, 1995 by The Compucare Company (Note 11),
the Company's redeemable preferred stock was eliminated.
14
<PAGE>
Antrim Corporation
Notes to Financial Statements
6. Operating Leases
The Company has entered into a noncancelable lease agreement for office space.
The rental agreement for the office space includes escalation clauses, which
allows increased operating costs to be passed through to the Company. Future
minimum payments, by year and in the aggregate under this lease, consist of the
following:
<TABLE>
<CAPTION>
October 31,
1995
---------------
(in thousands)
<S> <C>
1996 $ 688
1997 685
1998 720
1999 756
2000 791
Thereafter 336
---------------
Total $3,976
===============
</TABLE>
Rent expense was $634,000, $651,000 and $574,000 for the years ended December
31, 1993 and 1994 and for the ten months ended October 31, 1995, respectively.
Subsequent to the purchase of Antrim Corporation by The Compucare Company,
Antrim was party to a new rental agreement for office space effective June 1,
1996. The future minimum payments related to the new rental agreement are
included in the above disclosure.
15
<PAGE>
Antrim Corporation
Notes to Financial Statements
7. Income Taxes
Significant components of the provision (benefit) for income taxes follows:
<TABLE>
<CAPTION>
Ten month
Year ended Year ended period ended
December 31, December 31, October 31,
1993 1994 1995
---------------------------------------------
(in thousands)
<S> <C> <C> <C>
Current: ($421) ($354) ($337)
---------------------------------------------
($421) ($354) ($337)
=============================================
</TABLE>
A reconciliation of income tax (benefit) at the statutory Federal rate to the
Company's effective income tax rate follows:
<TABLE>
<CAPTION>
Ten month
Year ended Year ended period ended
December 31, December 31, October 31,
1993 1994 1995
-----------------------------------------------
<S> <C> <C> <C>
Federal income taxes
at statutory rate (34%) (34%) (34%)
State income taxes net
of federal tax (benefit) expense (2%) (2%) (2%)
Change in valuation allowance 12.7% - 21.2%
Other - (19.8%) -
-----------------------------------------------
(23.3%) (55.8%) (14.8%)
===============================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
16
<PAGE>
Antrim Corporation
Notes to Financial Statements
7. Income Taxes (continued)
Significant components of the Company's net deferred tax liability are as
follows:
<TABLE>
<CAPTION>
December 31, October 31,
1994 1995
-----------------------------
<S> <C> <C>
(in thousands)
Deferred tax liabilities
Depreciation $ 30 $ 30
-----------------------------
Deferred tax assets:
Bad debt reserves 597 629
Deferred revenues 515 1,429
State and local tax accruals 34 51
Other 10 10
-----------------------------
1,156 2,119
Less valuation allowance 1,126 2,089
-----------------------------
30 30
-----------------------------
Net deferred tax liabilities $ - $ -
=============================
</TABLE>
The Company made $74,000, $563,000, and $0 in federal income tax payments during
the years ended December 31, 1993 and 1994 and the ten month period ended
October 31, 1995, respectively.
17
<PAGE>
Antrim Corporation
Notes to Financial Statements
8. Stock Option Plan
The Company has granted stock options to certain employees under an incentive
stock option plan. The options generally become exercisable in whole or in part
during the ten year period subsequent to the grant date. A summary of the
option transactions follows:
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------------
Number of shares Price per share
---------------------------------------
<S> <C> <C>
Balance at December 31, 1993 115,900 $2.25-5.00
Granted 27,200 $ 5.00
Exercised (1,100) $2.40-5.00
Forfeited (11,700) $ 5.00
---------------------------------------
Balance at December 31, 1994 130,300 $2.25-5.00
Granted 7,800 $ 5.00
Exercised -
Forfeited (16,400) $2.50-5.00
---------------------------------------
Balance at October 31, 1995 121,700 $2.25-5.00
=======================================
</TABLE>
At December 31, 1994 and October 31, 1995, 22,800 and 30,000 options,
respectively, were exercisable.
9. Profit Sharing Plan
The employees profit sharing plan provides the Board of Directors, at its
discretion, the ability to contribute amounts from profits to the plan. The
amounts charged to income for this plan for the years ended December 31, 1993,
1994 and ten month period ended October 31, 1995 were $0, $20,000 and $45,000,
respectively.
10. 401(k) Plan
The Company and its subsidiaries maintain various 401(k) plans which cover
substantially all employees of the Company. Participants may contribute up to
15% of their annual compensation. Participants are immediately vested in their
voluntary contributions plus earnings thereon.
18
<PAGE>
Antrim Corporation
Notes to Financial Statements
11. Subsequent Event
Effective October 31, 1995, Antrim Corporation was acquired by The Compucare
Company in a transaction accounted for under the purchase method of accounting.
Upon purchase, the Company became a wholly owned subsidiary of The Compucare
Company. Further, the revolving credit agreement balance outstanding was paid in
full during November, 1995.
Effective November 26, 1996, Sunquest Information Systems, Inc. purchased Antrim
Corporation from The Compucare Company in a transaction accounted for under the
purchase method of accounting. The Company has received a funding commitment
from Sunquest Information Systems, Inc. through December 31, 1997.
19
<PAGE>
<TABLE>
<CAPTION>
Antrim Corporation
Balance Sheets
(unaudited)
December 31, September 30,
1995 1996
-------------------------------
<S> <C> <C>
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 1,986 $ 244
Accounts receivable, net 3,433 3,276
Notes receivable, current 183 359
Prepaid expenses and other current
assets 289 433
-------------------------------
Total current assets 5,891 4,312
Property and equipment, net 846 835
Software development costs, net 1,074 1,003
Intangibles, net 2,159 1,858
Notes receivable - long term 149 647
Other 99 94
-------------------------------
Total assets $10,218 $8,749
===============================
Liabilities and Stockholders' Equity
(Deficit)
Current liabilities:
Accounts payable and accrued expenses $ 4,533 $2,856
Billings in excess of costs on
uncompleted contracts 3,772 3,687
Current portion of debt and capital
lease obligations 121 628
Other current liabilities 214 1,504
-------------------------------
Total current liabilities 8,640 8,675
Long-term portion of debt and capital
lease obligations 13 144
-------------------------------
Total liabilities 8,653 8,819
Stockholders' equity (deficit) 1,565 (70)
-------------------------------
Total liabilities and stockholders' $10,218 $8,749
equity (deficit)
===============================
See accompanying notes.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Antrim Corporation
Statements of Operations
(unaudited)
Nine-month periods ended
September 30,
1995 1996
------------------------
(in thousands)
<S> <C> <C>
Revenues:
Software licenses and installations $ 4,788 $ 1,899
Hardware sales 5,821 4,161
Post contract customer support 5,625 5,485
----------------------
16,234 11,545
Cost of sales:
Cost of equipment sales 4,700 3,193
Installation and customer services 6,233 6,485
Selling and marketing 1,450 1,789
Software development 1,781 1,393
General and administrative 4,046 4,394
----------------------
Operating loss (1,976) (5,709)
Nonoperating income (expense):
Interest income 62 64
Interest expense (139) (48)
Other - 52
----------------------
Loss before taxes (2,053) (5,641)
Income tax benefit (337) -
----------------------
Net loss ($1,716) ($5,641)
======================
See accompanying notes.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Antrim Corporation
Statements of Cash Flows
(unaudited)
Nine-month periods ended
September 30,
1995 1996
-----------------------
(in thousands)
<S> <C> <C>
Net cash used in operating activities ($250) ($3,678)
------------------
Investing Activities:
Purchase of property and equipment (130) (57)
Capitalized software and development
costs - (135)
------------------
Net cash used in investing activities (130) (192)
------------------
Financing Activities:
Principal payments on long-term debt
and capital lease obligations (97) (752)
Proceeds from revolving credit
agreement and
other debt - 2,880
------------------
Net cash (used in) provided by (97) 2,128
financing activities
------------------
Net decrease in cash and cash
equivalents (477) (1,742)
Cash and cash equivalents at beginning
of period 807 1,986
------------------
Cash and cash equivalents at end of
period $ 330 $ 244
==================
See accompanying notes.
</TABLE>
22
<PAGE>
Antrim Corporation
Notes to Unaudited Financial Statements
September 30, 1996
1. Interim Statement Presentation
The unaudited financial statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission and in
accordance with generally accepted accounting principles for the preparation of
interim financial statements. Accordingly, certain information and footnote
disclosures normally included in annual financial statements have been omitted
or condensed. It is suggested that these financial statements be read in
conjunction with the audited financial statements and notes thereto included in
this Form 8-K/A.
In the opinion of management, all necessary adjustments have been made to
provide a fair presentation. The operating results for the nine months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for any other interim period or for the full year ending December 31,
1996.
2. Income Taxes
The Company's effective tax rate is lower than the statutory federal tax rate of
34% due primarily to changes in the deferred tax asset valuation allowance.
3. Software Development Costs
As a result of the acquisition of the Company by The Compucare Company
("Compucare") on October 31, 1995, software development costs with a fair
value of approximately $1,100,000 were recognized. These software development
costs are being amortized on a straight-line basis over four years.
4. Intangibles
As a result of the acquisition of the Company by Compucare, intangible assets of
approximately $2,300,000 were recognized. These assets consist of the fair value
assigned to the Companys assembled work force and the excess of the acquisition
cost over the fair value of the assets acquired and such amounts are being
amortized on a straight-line basis over five years.
23
<PAGE>
5. Subsequent Event
On November 26, 1996, Sunquest Information Systems, Inc. purchased all of the
outstanding stock of Antrim Corporation from The Compucare Company for
$5,000,000.
24
<PAGE>
Sunquest Information Systems, Inc.
Unaudited Pro Forma Financial Statements
The unaudited pro forma financial statements are included in order to
illustrate the effect on the Company's financial statements of its acquisition
of Antrim Corporation, formerly a subsidiary of The Compucare Company, on
November 26, 1996 (the "Acquisition").
The unaudited pro forma balance sheet at September 30, 1996 presents
adjustments for the Acquisition as if the Acquisition had occurred on September
30, 1996.
The unaudited pro forma statements of income for the nine months ended
September 30, 1996 and for the year ended December 31, 1995 present adjustments
for the Acquisition as if the Acquisition had occurred on January 1, 1995.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
The unaudited pro forma financial statements should be read in conjunction
with the Company's historic Consolidated Financial Statements and the Notes
thereto, and the historic Financial Statements and the Notes thereto of Antrim
Corporation. The unaudited pro forma statements of income are not necessarily
indicative of the results that would have been reported had such events actually
occurred on the date specified, nor are they indicative of the Company's future
results.
25
<PAGE>
<TABLE>
<CAPTION>
SUNQUEST INFORMATION SYSTEMS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
September 30, 1996
Pro Forma
Adjustments
Sunquest for Antrim
as Antrim Corporation Company
Reported Corporation Acquisition Pro Forma
------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $39,957 $ 244 ($5,000) (a) $35,201
Trade receivables, net 20,295 3,276 23,571
Loans receivable and accrued interest
from related party 31 - 31
Other current assets 4,735 792 5,527
Deferred tax asset 1,120 - 2,598 (f) 3,718
------------------------------------------------------------
Total current assets 66,138 4,312 (2,402) 68,048
Property and equipment, net 7,599 835 8,434
Capital leases from related party, net 5,086 - 5,086
Software development costs, net 7,326 1,003 1,740 (b) 10,069
Intangibles, net - 1,858 2 (b) 1,860
Other assets 461 741 1,202
------------------------------------------------------------
Total assets $86,610 $8,749 ($660) $94,699
============================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 6,601 $2,856 $ 273 (d) $ 9,730
Current portion of debt and capital
lease obligations - 628 628
Obligations under capital leases from
related party 586 - 586
Deferred revenue 10,119 3,687 13,806
Related party payable 3,900 - 3,900
Other current liabilities - 1,504 1,884 (c) 3,388
------------------------------------------------------------
Total current liabilities 21,206 8,675 2,157 32,038
Obligations under capital leases from
related party 5,946 - 5,946
Long-term portion of debt and capital
lease obligations - 144 144
Deferred income taxes 2,251 - 503 (f) 2,754
Shareholders' equity (deficit) 57,207 (70) (3,320) (e) 53,817
------------------------------------------------------------
Total liabilities and shareholders' $86,610 $8,749 ($660) $94,699
equity (deficit)
============================================================
See accompanying explanatory notes.
</TABLE>
26
<PAGE>
Sunquest Information Systems, Inc.
Notes to Unaudited Pro forma Balance Sheet
September 30, 1996
The pro forma balance sheet reflects several adjustments related to the
acquisition of Antrim Corporation (Antrim) by Sunquest Information Systems, Inc.
(Sunquest) as if the acquisition had occurred on September 30, 1996 as follows:
a) Represents the amount of cash paid ($5,000,000) for the acquisition of
Antrim by Sunquest.
b) Certain intangible assets were acquired as part of the Acquisition. The
following amounts were allocated as increases to the historical balance sheet of
Antrim to reflect the fair values of the intangibles acquired by Sunquest:
<TABLE>
<CAPTION>
Intangibles Amount Allocated
-------------------------- ----------------
<S> <C>
Software development costs $1,740,000
Other intangibles 2,000
</TABLE>
The estimated economic life of the intangibles acquired will be charged to
operations over periods ranging from four to seven years.
In addition to the amounts allocated to intangibles described above,
$3,390,000 was allocated to in-process technology that had not achieved
technological feasibility. This amount was charged to operations as an
adjustment to retained earnings in the pro forma balance sheet.
c) Management plans to replace certain Antrim products with Sunquest products
that provide similar benefits to their customers. Approximately $1,200,000 has
been established to provide for the costs that are expected to be incurred for
the replacement of certain Antrim products with those of Sunquest. Additionally,
an accrual of $470,000 has been established to provide for severance payments to
former Antrim employees. The remaining balance relates to other smaller
transition costs.
d) Represents costs incurred to complete the Acquisition consisting primarily
of legal and accounting services.
e) Amounts required to eliminate shareholder deficit of Antrim of $70,000
offset by the in-process technology charged to operations of $3,390,000
discussed above in b.
f) Amount provided to reflect deferred taxes related to the acquired temporary
differences and net operating losses.
27
<PAGE>
SUNQUEST INFORMATION SYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
For the Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Sunquest for Antrim Company
As Antrim Corporation Pro Forma
Reported Corporation Acquisition Combined
---------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
System sales $ 30,685 $ 6,060 $ 36,745
Support and service 25,256 5,485 30,741
---------------------------------------------------------------------
Total revenues 55,941 11,545 - 67,486
---------------------------------------------------------------------
Operating expenses:
Cost of system sales 13,579 3,193 $ 308 (b) 17,080
Client services 13,246 6,485 (626) (a) 19,105
Research and development 7,102 1,393 (48) (a) 8,447
Sales and marketing 7,562 1,789 (133) (a) 9,218
General and administrative 6,619 4,394 (64) (a) 10,832
(117) (b)
---------------------------------------------------------------------
Total operating expenses 48,108 17,254 (680) 64,682
---------------------------------------------------------------------
Operating income (loss) 7,833 (5,709) 680 2,804
Other income (expense):
Interest income 879 64 943
Interest expense (1,062) (48) (1,110)
Other 398 52 450
---------------------------------------------------------------------
Income (loss) before income taxes 8,048 (5,641) 680 3,087
Income tax provision (benefit):
Current year operations 1,711 - (2,133) (d) (422)
Change in tax status 1,122 - - 1,122
---------------------------------------------------------------------
Net income (loss) $ 5,215 ($5,641) $ 2,813 $ 2,387
=====================================================================
Pro forma net income (loss):
Historical / pro forma income (loss)
before income taxes $ 8,048 ($5,641) $ 680 $ 3,087
Pro forma income tax provision (benefit) 3,415 - (2,133) (d) 1,282
---------------------------------------------------------------------
Pro forma net income (loss) $ 4,633 ($5,641) $ 2,813 $ 1,805
=====================================================================
Weighted average shares outstanding 13,437 - - 13,437
=====================================================================
Pro forma net income per
common share $0.34 - - $0.13
=====================================================================
</TABLE>
See accompanying explanatory notes.
28
<PAGE>
SUNQUEST INFORMATION SYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENT OF INCOME
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Pro Forma
Sunquest Antrim Antrim Adjustments Company
As Reported Corporation Corporation for Antrim Pro Forma
Year Ended Ten Months Two Months Corporation Year Ended
12/31/95 Ended 10/31/95 Ended 12/31/95 Acquisition 12/31/95
--------------- ----------------------------------------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
System sales $ 32,262 $ 10,040 $ 3,718 $ 46,020
Support and service 29,270 6,269 1,243 36,782
--------------- ----------------------------------------------- -------------
Total revenues 61,532 16,309 4,961 - 82,802
--------------- ----------------------------------------------- -------------
Operating expenses:
Cost of system sales 14,085 4,778 1,274 $ 640 (b) 20,777
Client services 17,764 6,337 1,690 (578) (a) 25,213
Research and development 9,040 1,810 8,900 (5,510) (c) 14,240
Sales and marketing 8,734 1,474 393 (84) (a) 10,517
General and administrative 7,068 4,114 1,097 (65) (a) 12,431
217 (b)
--------------- ----------------------------------------------- -------------
Total operating expenses 56,691 18,513 13,354 (5,380) 83,178
--------------- ----------------------------------------------- -------------
Operating income (loss) 4,841 (2,204) (8,393) 5,380 (376)
Other income (expense):
Interest income 408 68 24 500
Interest expense (1,465) (140) (13) (1,618)
Other 78 - - 78
--------------- ----------------------------------------------- -------------
Income (loss) before income taxes 3,862 (2,276) (8,382) 5,380 (1,416)
Income tax provision (benefit) 73 (337) - (1,932) (d) (2,196)
--------------- ----------------------------------------------- -------------
Net income (loss) $ 3,789 ($1,939) ($8,382) $ 7,312 $ 780
=============== =============================================== =============
Pro forma net income (loss):
Historical / Pro forma income (loss)
before income taxes $ 3,862 ($2,276) ($8,382) $5,380 ($1,416)
Pro forma income tax provision
(benefit) 1,661 (337) - (1,932) (d) (608)
--------------- ----------------------------------------------- -------------
Pro forma net income (loss) $ 2,201 ($1,939) ($8,382) $7,312 ($808)
=============== =============================================== =============
Weighted average shares outstanding 11,904 - - - 11,904
=============== =============================================== =============
Pro forma net income (loss) per
common share $0.18 - - - ($0.07)
=============== =============================================== =============
See accompanying explanatory notes.
</TABLE>
29
<PAGE>
Sunquest Information Systems, Inc.
Notes to Unaudited Pro forma Statements of Income
For the nine-months ended September 30, 1996 and the year ended December 31,
1995
The pro forma income statements for the nine months ended September 30, 1996 and
the year ended December 31, 1995 reflect adjustments related to the acquisition
of Antrim Corporation (Antrim) by Sunquest Information Systems, Inc. (Sunquest)
as if the acquisition had occurred on January 1, 1995 as follows:
a) As a result of the Acquisition there has been a reduction in the workforce
of Antrim and 32 individuals who were employed at September 30, 1996 have
formally separated from Antrim. The financial impact of the decrease in
salaries and wages associated with the reduction in the workforce on pro forma
costs is as follows:
<TABLE>
<CAPTION>
Nine months ended September 30, 1996 Year ended December 31, 1995
---------------------------------------------------------------------------
<S> <C> <C>
Client services $626,000 $578,000
Research and development 48,000 -
Selling and marketing 133,000 84,000
General and administrative 64,000 65,000
---------------------------------------------------------------------------
$871,000 $727,000
===========================================================================
</TABLE>
b) This amount is to reflect the incremental amortization associated with the
assigned fair market value of the intangibles acquired. These intangibles are
being charged to operations over their estimated economic lives which range from
four to seven years.
c) Antrim was acquired by The Compucare Company (Compucare) on October 31,
1995. At that time $8,900,000 was charged to operations for in-process
technology as a part of the purchase price allocation made by Compucare. The
$8,900,000 in-process technology value charged to operations by Compucare has
been eliminated as a pro forma adjustment to prevent duplicate allocation of
purchase price by Sunquest. Sunquest's Acquisition required an adjustment to
in-process technology of Antrim of $3,390,000.
d) Amount provided to recognize federal taxes at an estimated effective rate of
43%. Sunquest was taxed as an S Corporation for federal and certain state
income tax purposes during 1995 and through the effective date of its initial
public offering in May 1996 at which time it became a C Corporation. The pro
forma tax provision included in the Sunquest historical statement of income
assumes that Sunquest was taxed as a C corporation for the entire period
presented.
30
<PAGE>
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.
SUNQUEST INFORMATION SYSTEMS, INC.
(Registrant)
Date: February 7, 1997 By: /s/ Nina M. Dmetruk
_____________________________
Nina M. Dmetruk
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
31
<PAGE>
Exhibit 23F
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-06015) pertaining to the Employee Stock Purchase Plan of Sunquest
Information Systems, Inc. of our report dated November 8, 1996 with respect to
the financial statements of Antrim Corporation included in Sunquest's current
report on Form 8-K/A dated February 7, 1997, filed with the Securities and
Exchange Commission.
ERNST & YOUNG LLP
Vienna, Virginia
February 4, 1997
