<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRINTRAK INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 33-0070547
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1250 N. TUSTIN AVENUE, ANAHEIM, CALIFORNIA 92807 (714) 238-2000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RICHARD M. GILES
PRINTRAK INTERNATIONAL INC.
1250 N. TUSTIN AVENUE, ANAHEIM, CALIFORNIA 92807
(714) 238-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
BRUCE FEUCHTER, ESQ.
CHRISTINE MILLER, ESQ.
STRADLING, YOCCA, CARLSON & RAUTH, A PROFESSIONAL CORPORATION
660 NEWPORT CENTER DRIVE, SUITE 1600, NEWPORT BEACH, CALIFORNIA 92660
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.0001 par value................ 279,899 shares $9.13 $2,555,478 $753.86
</TABLE>
(1) The offering price is estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) using the average of the
high and low price reported by the Nasdaq National Market for the Common
Stock on December 16, 1997, which was approximately $9.13 per share.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
279,899 SHARES OF COMMON STOCK
($.0001 PAR VALUE)
------------------------
There may be offered for sale from time to time for the accounts of the
stockholders of Printrak International Inc. (the "Company"), identified herein
(the "Selling Stockholders") up to 279,899 shares of Common Stock, $.0001 par
value per share (the "Common Stock"), of the Company which were issued to the
stockholders of TFP Inc., a South Carolina corporation ("TFP") pursuant to an
Agreement and Plan of Reorganization and Merger, dated April 7, 1997 among the
Company, TFP, TFP Acquisition Corp., a South Carolina corporation and
wholly-owned subsidiary of the Company, and Barry B. White (the "TFP Merger
Agreement"), under which the Company acquired 100% of the outstanding common
stock of TFP.
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol AFIS. The average of the high and low price of the Common Stock on
December 16, 1997, as reported by Nasdaq, was $9.13.
All or a portion of the Common Stock offered by this Prospectus may be
offered for sale, from time to time on the Nasdaq National Market or on one or
more exchanges, or otherwise at prices and terms then obtainable, or in
negotiated transactions. The distribution of these securities may be effected in
one or more transactions that may take place on the over-the-counter market,
including, among others, ordinary brokerage transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Stockholders.
The Company will not receive any part of the proceeds from the sale of
Common Stock. See "Use of Proceeds." The Selling Stockholders and intermediaries
through whom such securities are sold may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
which event commissions received by such broker may be deemed to be underwriting
commissions under the Securities Act.
All expenses of the registration of securities covered by this Prospectus
are to be borne by the Company, except that the Selling Stockholders will pay
any applicable underwriters' commissions and expenses, brokerage fees or
transfer taxes.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is December , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
of 1934 and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 500 West Madison Street, Chicago, Illinois 60606 and 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
at prescribed rates from the Public Reference Section of the Commission at its
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may be obtained electronically by visiting the Commission's
web site on the Internet at http://www.sec.gov. The Common Stock of the Company
is traded on the Nasdaq National Market System. Reports, proxy statements and
other information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc., at 1735 K Street, N.W., Washington D.C.
20006.
This Prospectus does not contain all of the information set forth in the
Registration Statement of which this Prospectus is a part and which the Company
has filed with the Commission. For further information with respect to the
Company and the securities offered hereby, reference is made to the Registration
Statement, including the exhibits filed as a part thereof, copies of which can
be inspected at, or obtained at prescribed rates from the Public Reference
Section of the Commission at the address set forth above. Additional updating
information with respect to the Company may be provided in the future by means
of appendices or supplements to this Prospectus.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Exchange Act and are incorporated by reference herein:
a. The Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1997, filed with the Commission on June 30, 1997.
b. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997, filed with the Commission on August 14, 1997.
c. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, filed with the Commission on November 14, 1997.
d. The Company's Current Report on Form 8-K, filed with the Commission on
April 17, 1997.
e. The Company's Current Report on Form 8-K, filed with the Commission on
May 22, 1997, as amended by the Current Report on Form 8-K/A, filed with
the Commission on July 21,1997.
f. The Company's Current Report on Form 8-K, filed with the Commission on
July 9, 1997.
g. The Company's Current Report on Form 8-K, filed with the Commission on
September 24, 1997, as amended by the Current Report on Form 8-K/A, filed
with the Commission on November 24, 1997.
h. The Company's definitive Proxy Statement, filed with the Commission on
July 21, 1997.
i. The Company's two Registration Statements on Form S-8, filed with the
Commission on October 20, 1997.
j. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A.
k. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the Company's fiscal year
ended March 31, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the filing of a post effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any and all of the information that has been or may be incorporated by
reference herein (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to Printrak International Inc., Attention: Jeannine Cormane,
1250 N. Tustin Avenue, Anaheim, California 92807, telephone number (714)
666-2700.
3
<PAGE>
THE COMPANY
The Company designs, develops and manufactures automated fingerprint
identification systems (AFIS) primarily for use in law enforcement applications,
as well as in emerging applications in civil and commercial markets. The Company
was originally formed in 1974 as a business unit of the Navigation Systems
division of Rockwell International. The business and technology of the Company
were acquired by Thomas De La Rue and Company Limited in 1981, and the Company
was incorporated in California in December 1984 as "De La Rue Printrak, Inc." In
a series of transactions commencing in 1990 and ending in 1991, the Company was
acquired by management and was subsequently renamed "Printrak International
Incorporated." The Company was reincorporated in Delaware in March 1996. Unless
the context otherwise requires, references to the "Company" herein include
Printrak International Inc. and each of its operating subsidiaries. The
principal executive offices of the Company are located at 1250 North Tustin
Avenue, Anaheim, California 92807. The Company's telephone number is (714)
666-2700, and the Company's address on the World Wide Web is
http://www.printrakinternational.com.
On May 7, 1997, the Company acquired all of the issued and outstanding
capital stock of TFP Inc. ("TFP"), a South Carolina corporation. As a result of
the transaction, TFP became a wholly-owned subsidiary of the Company. The
business combination was accounted for by the pooling of interest method of
accounting. Founded in 1988, TFP is considered a premier supplier of digital
mugshot systems used by law enforcement, jail and correctional agencies. TFP's
software applications also include jail management, jail property management and
document management. TFP has approximately 250 customers in the United States,
New Zealand, and certain parts of Europe.
On July 21, 1997 the Company acquired a business unit of SCC Communications
Corp. ("SCC") located in Boulder, Colorado, in a transaction accounted for under
purchase accounting. The business unit provides computer-aided dispatch systems
and records management systems for law enforcement, fire and emergency medical
services agencies. As a result of the acquisition, the business unit operates as
a division of the Company.
On September 9, 1997, the Company acquired SunRise Imaging ("SunRise"), a
California corporation, in a transaction accounted for under purchase
accounting. SunRise is a leading developer and manufacturer of high performance
systems which digitize microfilm and microfiche records.
RISK FACTORS
THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE MAKING AN INVESTMENT IN THE COMMON STOCK OFFERED
HEREBY, TOGETHER WITH ALL OF THE OTHER INFORMATION SET FORTH OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS.
DEPENDENCE ON LARGE ORDERS; CUSTOMER CONCENTRATION
In any given fiscal year, the Company's revenues have principally consisted,
and will continue to consist, of large orders from a limited number of
customers. While the individual customer may vary from period to period, the
Company is still dependent upon large orders for a significant portion of its
total system revenues. During the fiscal year ended March 31, 1997, revenues
from the Royal Canadian Mounted Police and the Florida Department of Law
Enforcement were $9.0 million, or 13.7%, and $6.9 million, or 10.5%,
respectively, of the Company's total revenues. During the fiscal year ended
March 31, 1996, revenues from the State of Louisiana were $8.3 million, or 15.9%
of the Company's total revenues. There can be no assurance that the Company will
continue to obtain such large orders on a consistent basis, and as such, the
Company's inability to obtain sufficient large orders would have a material
adverse effect on the Company's business, operating results and financial
condition. Moreover, the timing and shipment of such orders may cause the
operating results of the Company in any given quarter to differ from projections
of securities analysts which could adversely affect the trading price of the
Company's Common Stock.
4
<PAGE>
LENGTHY SALES AND COLLECTION CYCLE
The sale of the Company's products is often subject to delays associated
with the lengthy approval processes that typically accompany large capital
expenditures. The Company's total revenues depend in significant part upon the
decision of a government agency to upgrade and expand existing facilities, alter
workflows, and hire additional technical expertise in addition to procuring the
Company's products, all of which involve a significant capital commitment as
well as significant future support costs. The Company's systems therefore often
have a lengthy sales cycle while the customer evaluates and receives approvals
for the purchase of the Company's products, while existing workflows are
augmented so as to properly assimilate the Company's system, and while the
system is configured and shipped. Typically, the evaluation and execution of a
customer contract may take one year. Another six to nine months elapse while the
system is configured, file conversion services are performed and the customer
site is prepared. As such, it is not uncommon for the sales cycle to approximate
two years. During this time, the Company expends substantial resources yet
receives no associated revenue. Any significant failure by the Company to
execute a contract after expending such effort and funds could have a material
adverse effect on its business, operating results and financial condition.
A customer contract typically provides payment terms associated with the
achievement of certain contractual milestones. Often, the contract provides for
a customer deposit at contract signature, however, much of the customer's
payment may ultimately be associated with the delivery and final acceptance of
the complete system. Because the system configuration, file conversion, and
system acceptance testing consumes a six to nine month time period, the
Company's collection cycle is often quite lengthy. As such, the Company expends
substantial resources but may not receive payment from the customer until the
completion of a substantial portion of the contract. Any significant failure by
the Company to perform to the requirements of a specific contract could have a
material adverse effect on its business, operating results and financial
condition.
DEPENDENCE ON CAPITAL SPENDING BY PUBLIC AGENCIES
Substantially all of the Company's revenues are derived from the sale and
maintenance of AFIS products delivered to domestic and foreign governmental
agencies, particularly law enforcement agencies. The decision to purchase an
AFIS system generally involves a significant commitment of capital and frequent
delays are often associated with significant capital expenditures. The Company's
future performance is directly dependent upon the capital expenditure budgets of
its customers and the continued demand by such customers for AFIS products. Many
domestic and foreign governmental agencies have experienced budget deficits that
have also led to significant reductions in capital expenditures. The Company's
operations in the future may be subject to period-to-period fluctuations as a
consequence of such deficits or other negative factors affecting capital
spending. There can be no assurance that such factors will not have a material
adverse effect on the Company's business, operating results and financial
condition.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, in less than two years, computer systems and
software used by many agencies may need to be upgraded to comply with such "Year
2000" requirements. Although the Company believes that its products and internal
systems are Year 2000 compliant, the Company believes that the purchasing
patterns of customers and potential customers may be affected by Year 2000
issues as agencies expend significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase systems such as those offered by the
Company, which could result in a material adverse effect on the Company's
business, operating results and financial condition.
5
<PAGE>
RISKS ASSOCIATED WITH EXPANSION INTO ADDITIONAL MARKETS; RELIANCE ON TEAMING
ARRANGEMENTS
The Company believes that its future performance is, in part, dependent upon
its ability to successfully develop and market AFIS technology for use outside
of the law enforcement market. These markets may include the detection of
welfare fraud, voter registration and identification, verification of
immigration status, drivers' license identification and verification of
eligibility of pension or medical benefits. There can be no assurance that any
of these products, once developed, will achieve market acceptance.
In order to pursue civil and commercial applications, the Company has
entered into and will continue to enter into, where appropriate, teaming
arrangements with third party system integrators. There can be no assurance
regarding the performance of such third parties, or the overall success, if any,
of such teaming arrangements.
RISKS ASSOCIATED WITH ACQUISITIONS
An important element of the Company's strategy is to expand its operations
by acquiring companies with complementary product offerings in order to augment
market coverage and strengthen technological capabilities. In May 1997, the
Company completed the acquisition of TFP in exchange for 1,399,494 shares of
Printrak Common Stock. In July 1997, the Company completed the acquisition of a
business unit of SCC Communications Corp. In September 1997, the Company
completed the acquistion of SunRise Imaging for consideration of $10,175,000
plus up to an additional $725,000 earnout in the event that certain financial
objectives are satisfied. The Company may make additional acquisitions of
businesses, products or technologies in the future. These acquisitions may
result in dilutive issuances of securities, the incurrence of debt and
amortization expenses related to goodwill or other intangible assets or may
cause large write-offs of research and development expenses at the time of such
acquisitions. Any of these factors could adversely affect the Company's
business, operating results and financial condition.
Acquisitions present and will continue to present the Company with numerous
challenges, including difficulties in the assimilation of the operations,
technologies and products of the acquired companies, as well as managing
separate geographic operations of the consolidated company. These challenges
absorb and may continue to absorb significant management attention that would
otherwise be available to the ongoing development of the Company's business.
Moreover, there can be no assurance that the anticipated benefits of any
acquisition will ultimately be realized. The Company and the acquired companies
could experience difficulties or delays in integrating their respective
technologies or developing and introducing new products. If the Company's
management does not effectively respond to these challenges, the Company's
business, operating results and financial condition could be adversely affected.
6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth for the periods and the
dates indicated has been restated to reflect the business combination between
the Company and TFP accounted for on a pooling-of-interests basis and thus
combines the historical financial information of the Company and TFP. The
historical amounts for TFP have been adjusted to conform TFP's year-end and
certain accounting policies to those of the Company. The selected consolidated
financial data of the Company as of March 31, 1996 and 1997 and for the years
ended March 31, 1995, 1996 and 1997 is derived from audited restated
consolidated financial statements of the Company included elsewhere in this
Prospectus. The selected consolidated financial data of the Company as of March
31, 1993, 1994 and 1995 and for the years ended March 31, 1993 and 1994 is
derived from audited consolidated financial statements of the Company and
unaudited financial statements of TFP not included in this Prospectus. The
following information should be read in conjunction with the Restated
Consolidated Financial Statements of the Company and the related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(000S)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
System................................................. $ 21,862 $ 20,512 $ 22,036 $ 41,400 $ 54,728
Maintenance............................................ 7,634 8,580 9,607 10,667 10,855
--------- --------- --------- --------- ---------
Total revenues......................................... 29,496 29,092 31,643 52,067 65,583
Cost of revenues(1): 16,711 14,787 18,215 29,782 34,143
--------- --------- --------- --------- ---------
Gross profit............................................. 12,785 14,305 13,428 22,285 31,440
Operating expenses:
Research, development and engineering.................. 931 3,907 4,867 9,274 10,859
Selling, general and administrative.................... 6,589 8,012 9,353 12,283 13,861
--------- --------- --------- --------- ---------
Total operating expenses............................... 7,520 11,919 14,220 21,557 24,720
Operating income (loss).................................. 5,265 2,386 (792) 728 6,720
Other income, net........................................ 1,007 976 1,315 848 53
--------- --------- --------- --------- ---------
Income before provision for income taxes and cumulative
effect of accounting change............................ 6,272 3,362 523 1,576 6,773
Provision for income taxes............................... 244 1,001 221 386 2,141
--------- --------- --------- --------- ---------
Income before cumulative effect of accounting change..... 6,028 2,361 302 1,190 4,632
Cumulative effect of accounting change(2)................ -- 5,750 -- -- --
Net income............................................... $ 6,028 $ 8,111 $ 302 $ 1,190 $ 4,632
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share..................................... $ 0.03 $ 0.13 $ 0.42
--------- --------- ---------
--------- --------- ---------
Weighted average common and common equivalent shares
outstanding............................................ 8,755 9,085 10,963
--------- --------- ---------
--------- --------- ---------
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........ 1,245 1,816 1,272 3,625 8,431
Working capital.......................................... 5,920 5,736 5,475 10,130 24,842
Total assets............................................. 15,648 25,649 29,964 34,657 49,558
Long-term liabilities.................................... 3,796 5,405 7,834 5,742 1,683
Total stockholders' equity............................... 5,004 12,554 11,931 14,041 33,997
</TABLE>
- ------------------------
(1) Amount in 1996 includes additional amortization of $832,000 due to a change
in the estimated useful life of capitalized software and development costs.
(2) Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The cumulative
effect of the adoption of this statement resulted in the recognition of a
$5,750,000 gain during the year ended March 31, 1994.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. These
forward-looking statements include (i) the existence and development of the
Company's technical and manufacturing capabilities, (ii) anticipated
competition, (iii) potential future growth in revenues and income, (iv)
potential future decreases in costs, and (v) the need for, and availability of,
additional financing.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions that the Company's markets
will continue to grow, that the Company's products will remain accepted within
their respective markets and will not be replaced by new technology, that
competitive conditions within the Company's markets will not change materially
or adversely, that the Company will retain key technical and management
personnel, that the Company's forecasts will accurately anticipate market
demand, and that there will be no material adverse change in the Company's
operations or business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. In addition, the business and operations of the Company are subject to
substantial risks which increase the uncertainty inherent in such
forward-looking statements. In light of the significant uncertainties inherent
in the forward-looking information included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives or plans of the Company will be achieved.
The following is management's discussion and analysis of certain significant
factors which have affected the earnings and financial position of the Company
during the period included in the accompanying financial statements. This
discussion compares the year ended March 31, 1997 with the year ended March 31,
1996 and the year ended March 31, 1996 is compared against the year ended March
31, 1995. This discussion should be read in conjunction with the financial
statements and associated notes to the financial statements.
FISCAL YEARS ENDED MARCH 31, 1997 AND 1996
TOTAL REVENUES. The Company's total revenues are comprised of system
revenues, which include products, file conversion services, and system
installations; and maintenance revenues related to hardware and software
support.
Revenues increased 26.0% to $65.6 million for the year ended March 31, 1997
from $52.1 million for the year ended March 31, 1996. TFP contributed $368,000
or 2.7% of the revenue increase over the prior period. System revenues
experienced an increase of 32.2%, or $13.3 million, to $54.7 million for fiscal
year 1997, up from $41.4 million for the previous fiscal year. The system
revenue increase is primarily attributable to an increasing number of AFIS 2000
system installations worldwide.
Maintenance revenues equaled $10.9 million for the year ended March 31,
1997, up 1.8% from prior year revenues of $10.7 million. Year-over-year, TFP's
maintenance base increased, offsetting Printrak Anaheim's maintenance revenue
decrease. Anaheim's year-over-year decrease is the result of sales to existing
customers, reducing maintenance revenue during the customer's warranty period.
COST OF REVENUES. Cost of revenues primarily consist of purchased materials
procured for use in the assembly of the Company's products, manufacturing labor
and overhead, file conversion costs and maintenance expenses.
Overall gross profit increased to $31.4 million for the year ended March 31,
1997, up from $22.3 million for the same period of the previous year. Overall
gross margin for fiscal year 1997 increased to
8
<PAGE>
47.9% from 42.8% for fiscal year 1996. The gross profit for system revenues
increased to $26.6 million for the year ended March 31, 1997 in comparison to
$17.3 million for the year ended March 31, 1996. Additionally, system gross
margin equaled 48.6% for the current fiscal year, a significant increase from
41.8% for the previous fiscal year. The gross margin associated with maintenance
revenues declined to 44.4% for the year ended March 31, 1997 from 46.6% for the
year ended March 31, 1996. Overall maintenance gross profit also declined and
approximated $4.8 million at March 31, 1997, versus $5.0 million for the prior
year.
The overall increase in system gross margin to 48.6% is partially related to
$2.2 million of software amortization, present in the prior year but absent in
the current year because all capitalized software was fully amortized in the
previous fiscal year. Absent the software amortization in the prior year, the
Company's system margin would have approximated 47.1%. Additionally, favorable
order mix and favorable raw material prices resulted in an increase in the
overall system margin. The reduction in the Company's maintenance revenue margin
is the result of increased maintenance support costs without a corresponding
increase in the price of maintenance support service.
RESEARCH, DEVELOPMENT AND ENGINEERING. Research, development and
engineering expenses (RD&E) are comprised primarily of compensation paid to
personnel engaged in research, development and engineering activities, amounts
paid for outside services and consultants and the cost of materials used in the
development of hardware and software products.
RD&E expenses increased 17.1% to $10.9 million for the year ended March 31,
1997, up from $9.3 million for the year ended March 31, 1996. The increase in
RD&E expense is comprised of increased salary and contract labor expense related
to additional personnel engaged in research, as well as engineering enhancement
of existing products. Depreciation expense also increased due to a higher amount
of equipment used principally for development efforts. RD&E expense, as a
percentage of revenues, decreased to 16.6% for the current year, down from 17.8%
for the same period of the previous year, primarily due to the increased level
of total revenues.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
(SG&A) expense consist principally of compensation paid to sales, marketing, and
administrative personnel, professional service fees, travel and related
expenses, and other marketing expenses.
For the year ended March 31, 1997, SG&A expenses increased to $13.9 million
from $12.3 million for the year ended March 31, 1996. This reflects an overall
SG&A expense increase of $1.6 million or 12.8%. The increase in SG&A expenses
results from increased sales and administrative salary expense to support the
infrastructure of a higher level of revenues, increased travel costs, and
increased professional service fees. SG&A expenses, as a percentage of revenues,
decreased to 21.1% for the current year, down from 23.6% for the prior year, due
primarily to the increased level of total revenues.
OTHER INCOME, NET. Other income in the current year is primarily associated
with interest income of $364,000 and other miscellaneous income items, offset,
in part, by interest expense of $450,000. For the previous year, other income is
associated with the amortization of the deferred credit which became fully
amortized in March, 1996. Approximately $1.2 million of this credit was
amortized to income in 1996.
PROVISION FOR INCOME TAXES. Income tax expense for the year ended March 31,
1997 equaled $2.1 million in comparison to tax expense of $386,000 in the prior
year. This represents an overall increase in tax expense of approximately $1.8
million. The Company's tax provision is based on the federal statutory rate of
35% and reflects the impact of state and foreign taxes and the changes in the
deferred tax valuation allowance, primarily associated with net operating loss
carryforwards.
9
<PAGE>
FISCAL YEARS ENDED MARCH 31, 1996 AND 1995
TOTAL REVENUE. Total revenues increased 64.5% to $52.1 million for the year
ended March 31, 1996 from $31.6 million for the year ended March 31, 1995. TFP
contributed $1.5 million or 7.4% of the revenue increase over the prior period.
The increase in 1996 revenues is primarily attributable to increased market
acceptance of the Company's AFIS 2000 series of products, the broadening of the
Company's product line, as well as increased maintenance revenue from existing
customers.
GROSS PROFIT. Gross profit increased 66.0% to $22.3 million in fiscal year
1996 from $13.4 million in fiscal year 1995. Gross profit as a percentage of
total revenues was 42.8% for the year ended March 31, 1996, versus 42.4% for the
year ended March 31, 1995. In fiscal year's 1996 and 1995, gross margins were
impacted by higher amortization of capitalized software development costs. Costs
associated with software amortization were $2.2 million and $1.3 million for the
years ended March 31, 1996 and 1995, respectively.
RESEARCH, DEVELOPMENT AND ENGINEERING. In 1996, the Company's management
reevaluated the useful life of existing capitalized software, as well as the
point at which technological feasibility of current projects is established.
Based upon this evaluation, the Company determined that the remaining useful
life of existing capitalized software development was shorter than originally
estimated based on the fact that technological feasibility is established
concurrent with the completion of a working model, and as of March 31, 1996 all
previously capitalized software was fully expensed. As such, costs which were
previously capitalized and amortized over a three year period are now expensed
as engineering costs.
Research, development and engineering expenditures increased 90.5% to $9.3
million in 1996 from $4.9 million in 1995. Research, development and engineering
expenditures were 17.8% and 15.4% (17.8% and 23.9% including capitalized
software development costs), respectively, of the Company's total revenues in
1996 and 1995. The increase in research, development, and engineering for 1996
was primarily due to the addition of personnel for the development of new
products and the continued enhancement of existing products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenditures increased 31.3% to $12.3 million for the year ended March 31, 1996,
up from $9.4 million for the year ended March 31, 1995. Selling, general and
administrative expenditures were 23.6% of the Company's revenues for fiscal year
1996, down from 29.6% of revenues for the same fiscal period in 1995. The
increase in expense from 1995 to 1996 primarily reflects the addition of sales,
marketing, and support capabilities needed to support a higher level of
revenues.
OTHER INCOME, NET. In 1991, the Company was acquired from De La Rue, Inc.,
the successor-in-interest to Thomas De La Rue and Company Limited, which
acquisition was accounted for as a purchase. The excess of the fair market value
of the net assets acquired over the purchase price was recorded as a deferred
credit (negative goodwill) and was amortized on a straight-line basis over five
years. Other income, net results primarily from amortization of this deferred
credit. Approximately $1.2 million was amortized to income in both fiscal year
1996 and fiscal year 1995. As of March 31, 1996, this credit was fully utilized.
This was partially offset by $426,000 of interest expense.
PROVISION FOR INCOME TAXES. Income tax expense was $386,000 and $221,000,
respectively, for fiscal years 1996 and 1995. These tax provisions are based on
the federal rate of 35% and reflects the impact of state and foreign taxes and
the changes in the deferred tax valuation allowance, primarily associated with
net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations through the cash provided by its
operations, the utilization of its revolving credit line and cash provided by
its initial public offering. The Company's operating activities used net cash of
approximately $5.2 million for the year ended March 31, 1997, primarily as a
result of the
10
<PAGE>
increase in accounts receivable, offset by other working capital changes. The
increase in the Company's accounts receivable is primarily the result of two
large contracts for which the customers negotiated extended payment terms based
on acceptance testing. The Company's operating activities generated net cash of
approximately $2.2 million for the year ended March 31, 1996 primarily as a
result of depreciation expense, increases in accounts payable and other
liabilities which were somewhat offset by increases in accounts receivable and
inventory.
The Company's investing activities used net cash of approximately $4.8
million for fiscal year 1997, due to capital expenditures of $1.5 million,
approximately $0.9 million cash received from the collection of a note
receivable and $4.2 million of short-term investment purchase. Investing
activities generated net cash of $531,000 for the year ended March 31, 1995,
primarily from the sale of the Company's headquarters for proceeds of $3.3
million, partially offset by the purchase of capital equipment of $2.6 million.
Financing activities provided net cash of approximately $10.6 million for
the year ended March 31, 1997 while financing activities for the same period of
the previous year used net cash of $376,000. For the current period, net debt
repayments equaled $4.8 million. Net proceeds of approximately $14.7 million
were realized from the Company's initial public offering and proceeds of $.7
million were realized from employee's participation in the Company's employee
stock purchase plan. For the period ended March 31, 1996, the Company's borrowed
$3.6 million and paid principal payments on its long-term debt of $4.7 million.
MATERIAL CHANGES
TFP LEASE. In connection with the acquisition of TFP, the Company, through
its newly acquired subsidiary TFP, obtained a lease with TFP's principal
shareholder, Barry B. White, now a director and Vice President of the Company.
On November 12, 1997, the Company and its subsidiary, TFP, negotiated an
amendment to the Lease Agreement dated July 23, 1996 (the "Amendment") which
superseded the previous Lease Agreement dated January 2, 1996. The Amendment
permits TFP to terminate the lease with one hundred eighty (180) days notice
from and after February 7, 1998, and increases the current rent to $16,667 per
month effective December 1, 1997. Prior to such Amendment the lease continued
without the right to terminate until December 31, 2004.
HIRING OF CHIEF FINANCIAL OFFICER. The Company recently entered into an
employment agreement with Alfred B. Castleman, effective December 8, 1997, for a
term expiring December 8, 1999, pursuant to which he will serve as Vice
President--Finance and Chief Financial Officer of the Company (the "Employment
Agreement"). Mr. Castleman has also been elected to the Company's board of
directors. The Employment Agreement provides for a base salary of $190,000 per
year, with annual raises to be determined by the Compensation Committee. Mr.
Castleman may earn a performance bonus based upon the attainment of certain
operating goals of the Company. Mr. Castleman's target performance bonus is
forty percent (40%) of his base salary. Such performance bonus may be increased
or decreased depending on the Company's financial performance in relation to its
operating income budget. Mr. Castleman is also eligible to participate in
incentive compensation and other employee benefit plans established by the
Company from time to time. The Company also granted Mr. Castleman 60,000 options
with an exercise price of $10.63 per share. Mr. Castleman's employment agreement
provides for a severance benefit equal to twelve months' base salary in the
event of termination of his employment by the Company under certain
circumstances after he has been employed with the Company for twelve months.
USE OF PROCEEDS
The proceeds from the sale of each Selling Stockholder's Common Stock will
belong to the Selling Stockholders. The Company will not receive any proceeds
from such sales of the Common Stock.
11
<PAGE>
SELLING STOCKHOLDERS
The Company issued 1,399,494 shares of Common Stock to the TFP stockholders
on May 7, 1997, pursuant to the terms of the TFP Merger Agreement under which
TFP was merged with a subsidiary of the Company, becoming a wholly-owned
subsidiary of the Company. Pursuant to the TFP Merger Agreement, five percent
(5%) of the shares were placed in an escrow account for one year as collateral
to secure the indemnification obligations of the TFP stockholders. Pursuant to
the TFP Merger Agreement, the Company agreed to file a registration statement
with the Commission to register up to twenty percent (20%) of the shares of
Common Stock received by the TFP stockholders for resale by them, and to keep
the registration statement effective for a period of up to 4 months after such
registration statement is declared effective. The Registration Statement of
which this Prospectus is a part was filed with the Commission pursuant to the
TFP Merger Agreement.
The following table sets forth (i) the name of each Selling Stockholder who
has elected to register a portion of his or her shares of the Company's Common
Stock acquired pursuant to the TFP Merger Agreement, (ii) the number and
percentage of shares of Common Stock owned by each Selling Stockholder prior to
the offering including shares held in the escrow account, and (3) the number of
shares and the percentage of the class to be owned by each Selling Stockholder
upon completion of this offering.
<TABLE>
<CAPTION>
SHARES OWNED AFTER
OFFERING
SHARES PRIOR ----------------------
NAME TO OFFERING SHARES OFFERED NUMBER PERCENT
- --------------------------------------------------------------- ------------ -------------- --------- -----------
<S> <C> <C> <C> <C>
Barry B. White................................................. 732,179 153,072 579,107 5.2%
Palmetto Seed Capital(1)....................................... 203,415 40,683 162,732 1.4%
John W. Martin II(2)........................................... 118,184 24,708 93,476 *
J. Daniel Whisenhunt(2)........................................ 101,707 21,263 80,444 *
Arno Ernst(3).................................................. 50,854 10,632 40,222 *
Bradley E. & Robin R. Bylenga(4)............................... 49,471 9,894 39,577 *
Ron Shaw....................................................... 20,342 4,068 16,274 *
Don Shaw....................................................... 20,342 4,068 16,274 *
Julia O. Turlington and C. Lynn Ogle(5)........................ 16,883 3,377 13,506 *
Peter D. Bylenga............................................... 15,378 2,800 12,578 *
Peter G. & Gregorie P. Bylenga................................. 13,181 2,500 10,681 *
Richard W. Johnson, Sr......................................... 10,984 2,000 8,984 *
Richard W. & Lesley S. Johnson, Jr.(6)......................... 4,394 834 3,560 *
</TABLE>
- ------------------------
* less than 1%
(1) Capers Easterby, the President of Palmetto Seed Capital, was a director of
TFP prior to the acquisition by Printrak.
(2) Former director of TFP prior to the acquisition by Printrak.
(3) Serves as President of TFP GmbH, a wholly-owned subsidiary of TFP.
(4) Bradley Bylenga is the Director of Operations of TFP and formerly served as
a Vice President of TFP.
(5) Julia Turlington is the Director of Accounting and Finance of TFP and
formerly served as the Controller of TFP.
(6) Richard W. Johnson, Jr. is the Sales Director of TFP and he previously
served as Vice President and was a former director of TFP.
BARRY B. WHITE. In connection with the acquisition of 100% of the
outstanding common stock of TFP by the Company, TFP entered into (i) an
employment agreement with Mr. Barry B. White pursuant to which Mr. White will
serve as a President of TFP, Vice President of Printrak, and serve on Printrak's
Board of Directors until April 30, 1998. In November 1997, Mr. White resigned as
President of TFP, but will
12
<PAGE>
continue to serve as a Vice President and a director of Printrak. Mr. White is
also the owner of the building currently leased by TFP pursuant to a lease dated
July 23, 1996 and amended on November 12, 1997. See "Material Changes" regarding
the lease amendment.
PLAN OF DISTRIBUTION
All or a portion of the Common Stock offered by this Prospectus may be
offered for sale from time to time on the Nasdaq National Market or on one or
more exchanges, or otherwise at prices and terms then obtainable, or in
negotiated transactions. The distribution of these securities may be effected in
one or more transactions that may take place on the over counter market,
including, among others, ordinary brokerage transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Stockholders.
The Company will not receive any part of the proceeds from the sale of
Common Stock. The Selling Stockholders and intermediaries through whom such
securities are sold may be deemed "underwriters" within the meaning of the
Securities Act, in which event commissions received by such intermediary may be
deemed to be underwriting commissions under the Securities Act. All expenses of
the registration of securities covered by this Prospectus are to be borne by the
Company, including the reasonable fees and expenses of counsel for the TFP
Stockholders. The Selling Stockholders will pay any applicable underwriters'
commissions and expenses, brokerage fees or transfer taxes.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Stradling, Yocca, Carlson & Rauth, a Professional
Corporation, Newport Beach, California.
EXPERTS
The restated consolidated financial statements included herein have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that to the fullest
extent permitted by Delaware law, a director will not be liable for monetary
damages for breach of the director's fiduciary duty of care to the Company and
its stockholders. This provision in the Certificate of Incorporation does not
eliminate a director's fiduciary duty of care, and, in appropriate
circumstances, equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under Delaware law. Each director
will continue to be subject to liability for (i) breach of the director's duty
of loyalty to the Company or its stockholders for acts or omissions not in good
faith or involving intentional misconduct or knowing violations of law, (ii)
acts or omissions that the director believes to be contrary to the best
interests of the Company or its stockholders, (iii) any transaction from which
the director derives an improper personal benefit, (iv) acts or omissions
involving reckless disregard for the director's duty to the Company or its
stockholders when the director was aware or should have been aware of the risk
of serious injury to the Company or its stockholders, (v) acts or omissions that
constitute an unexpected pattern of inattention that amounts to an abdication of
the director's duty to the Company or its stockholders, (vi) improper
transactions between a director and the Company, and (vii) improper
distributions and loans to directors and officers. This provision does not
affect a director's responsibilities under any laws, such as the federal
securities laws or state or federal environmental laws.
13
<PAGE>
In addition, the Company's Bylaws provide that the Company will indemnify
its directors and executive officers and may indemnify its other officers,
employees and other agents to the fullest extent permitted by Delaware law. The
Company is also empowered under its Bylaws to enter into indemnification
contracts with its directors and officers and to purchase insurance on behalf of
any person whom the Company is required or permitted to indemnify. The Company
has entered into agreements with its directors and executive officers, which
requires the Company to indemnify them to the fullest extent permitted by law
against certain losses they may incur in legal proceedings arising in connection
with their services to the Company.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
14
<PAGE>
PRINTRAK INTERNATIONAL INC.
INDEX TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Stockholders' Equity........................... F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Restated Consolidated Financial Statements....................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Printrak International Inc.:
We have audited the accompanying restated consolidated balance sheets of
Printrak International Inc. and subsidiaries (the Company) as of March 31, 1996
and 1997 and the related restated consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended March 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such restated consolidated financial statements present
fairly, in all material respects, the financial position of Printrak
International Inc. and subsidiaries as of March 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally accepted
accounting principles.
June 26, 1997 (except for Note 16, as to which the date is September 9, 1997)
Costa Mesa, California
F-2
<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1996 AND 1997 (RESTATED)
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ 3,261,000 $ 3,832,000
Short-term investments............................................................. 364,000 4,599,000
Accounts receivable, net, including unbilled amounts of $5,315,000 (1996) and
$8,337,000 (1997) (Notes 4 and 5)................................................ 11,715,000 23,539,000
Inventories, net (Note 6).......................................................... 9,166,000 5,174,000
Prepaid expenses and other current assets.......................................... 412,000 518,000
Deferred income taxes (Note 10).................................................... 86,000 1,058,000
------------- -------------
Total current assets......................................................... 25,004,000 38,720,000
NOTES RECEIVABLE FROM RELATED PARTIES (Note 14).................................... 1,390,000 543,000
PROPERTY AND EQUIPMENT, net (Notes 7 and 9)........................................ 3,383,000 5,570,000
DEFERRED INCOME TAXES (Note 10).................................................... 4,847,000 2,867,000
OTHER LONG-TERM ASSETS............................................................. 33,000 1,858,000
------------- -------------
TOTAL ASSETS....................................................................... $ 34,657,000 $ 49,558,000
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................... $ 5,282,000 $ 4,431,000
Accrued wage and employee benefits................................................. 1,575,000 1,807,000
Other accrued liabilities (Note 8)................................................. 2,016,000 2,843,000
Current portion of long-term debt (Notes 9 and 11)................................. 949,000 247,000
Deferred revenue................................................................... 4,818,000 3,919,000
Income taxes payable (Note 10)..................................................... 234,000 631,000
------------- -------------
Total current liabilities.................................................... 14,874,000 13,878,000
LONG-TERM DEBT, less current portion (Notes 9 and 11).............................. 5,742,000 1,524,000
OTHER LONG-TERM LIABILITIES........................................................ 159,000
------------- -------------
Total liabilities............................................................ 20,616,000 15,561,000
COMMITMENTS AND CONTINGENCIES (Note 11) STOCKHOLDERS' EQUITY (Note 12): Preferred
stock, $0.0001 par value; 5,000,000 shares authorized; no shares outstanding.
Common stock, $0.0001 par value; 20,000,000 shares authorized; 8,722,694 (1996)
and 10,425,494 (1997) shares issued and outstanding............................ 1,000 1,000
Additional paid-in capital......................................................... 1,301,000 16,756,000
Retained earnings.................................................................. 12,961,000 17,542,000
Note receivable from stockholder (Note 14)......................................... (300,000) (300,000)
Unrealized gain on short-term investments.......................................... 41,000 46,000
Cumulative foreign exchange translation adjustment................................. 37,000 (48,000)
------------- -------------
Total stockholders' equity................................................... 14,041,000 33,997,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................... $ 34,657,000 $ 49,558,000
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to restated consolidated financial statements.
F-3
<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997 (RESTATED)
<TABLE>
<CAPTION>
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES (Note 5):
System.............................................................. $ 22,036,000 $ 41,400,000 $ 54,728,000
Maintenance......................................................... 9,607,000 10,667,000 10,855,000
------------- ------------- -------------
Total revenues................................................ 31,643,000 52,067,000 65,583,000
COST OF REVENUES:
System.............................................................. 12,931,000 24,088,000 28,111,000
Maintenance......................................................... 5,284,000 5,694,000 6,032,000
------------- ------------- -------------
Total cost of revenues........................................ 18,215,000 29,782,000 34,143,000
------------- ------------- -------------
GROSS PROFIT........................................................ 13,428,000 22,285,000 31,440,000
OPERATING EXPENSES:
Research, development and engineering............................... 4,867,000 9,274,000 10,859,000
Selling, general and administrative................................. 9,353,000 12,283,000 13,861,000
------------- ------------- -------------
Total operating expenses...................................... 14,220,000 21,557,000 24,720,000
INCOME (LOSS) FROM OPERATIONS....................................... (792,000) 728,000 6,720,000
OTHER INCOME (EXPENSE):
Amortization of deferred credit (Note 2)............................ 1,207,000 1,207,000
Foreign currency (loss) gain........................................ (12,000) 67,000 (144,000)
Interest expense, net............................................... (494,000) (426,000) (86,000)
Other income........................................................ 614,000 283,000
------------- ------------- -------------
Total other income, net....................................... 1,315,000 848,000 53,000
------------- ------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES............................ 523,000 1,576,000 6,773,000
PROVISION FOR INCOME TAXES (Note 10)................................ 221,000 386,000 2,141,000
------------- ------------- -------------
NET INCOME.......................................................... $ 302,000 $ 1,190,000 $ 4,632,000
------------- ------------- -------------
------------- ------------- -------------
NET INCOME PER SHARE................................................ $ 0.03 $ 0.13 $ 0.42
------------- ------------- -------------
------------- ------------- -------------
WEIGHTED AVERAGE SHARES OUTSTANDING................................. 8,755,000 9,085,000 10,963,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to restated consolidated financial statements.
F-4
<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997 (RESTATED)
<TABLE>
<CAPTION>
COMMON STOCK NOTE UNREALIZED
------------------------ ADDITIONAL RECEIVABLE GAIN ON
NUMBER OF PAID-IN RETAINED FROM SHORT-TERM
SHARES PAR VALUE CAPITAL EARNINGS STOCKHOLDER INVESTMENTS
----------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, April 1, 1994............................ 8,213,514 $ 1,000 $ 83,031 $12,490,000 $ -- $ --
Net income........................................ 302,000
Dividend.......................................... (1,000,000)
Foreign currency translation adjustment...........
Other............................................. (21,000)
----------- ----------- ---------- ---------- ----------- -----------
BALANCE, March 31, 1995........................... 8,213,514 1,000 83,031 11,771,000
Exercise of common stock options and receipt of
note receivable from stockholder................ 123,200 308,000 (300,000)
Issuance of common stock.......................... 385,980 909,969
Net income........................................ 1,190,000
Unrealized gain on short-term investments......... 41,000
Foreign currency translation adjustment...........
----------- ----------- ---------- ---------- ----------- -----------
BALANCE, March 31, 1996........................... 8,722,694 1,000 1,301,000 12,961,000 (300,000) 41,000
Issuance of common stock.......................... 1,702,800 15,405,000
Net income........................................ 4,632,000
Unrealized gain on short-term investments......... 5,000
Foreign currency translation adjustment...........
Accretion of TFP Preferred stock prior to
merger.......................................... 50,000 (50,000)
Other............................................. (1,000)
----------- ----------- ---------- ---------- ----------- -----------
BALANCE, March 31, 1997........................... 10,425,494 $ 1,000 $16,756,000 $17,542,000 $(300,000) $ 46,000
----------- ----------- ---------- ---------- ----------- -----------
----------- ----------- ---------- ---------- ----------- -----------
<CAPTION>
CUMULATIVE
FOREIGN
EXCHANGE TOTAL
TRANSLATION STOCKHOLDERS'
ADJUSTMENT EQUITY
----------- ------------
<S> <C> <C>
BALANCE, April 1, 1994............................ $ (20,000) $12,554,031
Net income........................................ 302,000
Dividend.......................................... (1,000,000)
Foreign currency translation adjustment........... 96,000 96,000
Other............................................. (21,000)
----------- ------------
BALANCE, March 31, 1995........................... 76,000 11,931,031
Exercise of common stock options and receipt of
note receivable from stockholder................ 8,000
Issuance of common stock.......................... 909,969
Net income........................................ 1,190,000
Unrealized gain on short-term investments......... 41,000
Foreign currency translation adjustment........... (39,000) (39,000)
----------- ------------
BALANCE, March 31, 1996........................... 37,000 14,041,000
Issuance of common stock.......................... 15,405,000
Net income........................................ 4,632,000
Unrealized gain on short-term investments......... 5,000
Foreign currency translation adjustment........... (85,000) (85,000)
Accretion of TFP Preferred stock prior to
merger..........................................
Other............................................. (1,000)
----------- ------------
BALANCE, March 31, 1997........................... $ (48,000) $33,997,000
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to restated consolidated financial statements.
F-5
<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997 (RESTATED)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................. $ 302,000 $1,190,000 $ 4,632,000
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization............................................ 3,196,000 4,087,000 2,659,000
Amortization of deferred credit.......................................... (1,207,000) (1,207,000)
Deferred income taxes.................................................... (41,000) 136,000 1,008,000
Changes in operating assets and liabilities:
Accounts receivable, net............................................... (145,000) (4,874,000) (11,824,000)
Inventories, net....................................................... (3,373,000) (2,463,000) 601,000
Prepaid expenses and other assets...................................... 34,000 57,000 (1,725,000)
Accounts payable....................................................... 1,154,000 2,512,000 (852,000)
Accrued liabilities.................................................... (737,000) 978,000 1,061,000
Deferred revenue....................................................... 1,980,000 1,693,000 (899,000)
Income taxes payable................................................... (5,000) 58,000 397,000
Other.................................................................. (36,000) 40,000 (254,000)
---------- ---------- -----------
Net cash provided by (used in) operating activities.................. 1,122,000 2,207,000 (5,196,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................................................... (1,482,000) (2,580,000) (1,459,000)
Proceeds from sale of land and building, net............................... 3,330,000
Capitalized software development costs..................................... (2,668,000)
Purchases of short-term investments........................................ (1,000) (4,235,000)
Notes receivable from related parties...................................... 215,000 (219,000) 888,000
---------- ---------- -----------
Net cash (used in) provided by investing activities.................. (3,936,000) 531,000 (4,806,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of redeemable preferred stock................... 690,000
Proceeds from long-term debt............................................... 4,186,000 3,607,000 6,116,000
Principal payments on long-term debt....................................... (968,000) (4,681,000) (10,878,000)
Dividends paid............................................................. (1,000,000)
Proceeds from exercise of stock options.................................... 8,000 690,000
Net proceeds received from initial public offering......................... 14,715,000
---------- ---------- -----------
Net cash provided by (used in) financing activities.................. 2,218,000 (376,000) 10,643,000
EFFECT OF EXCHANGE RATE CHANGES ON CASH BALANCES........................... 96,000 (50,000) (70,000)
---------- ---------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....................... (500,000) 2,312,000 571,000
CASH AND CASH EQUIVALENTS,
beginning of year........................................................ 1,449,000 949,000 3,261,000
---------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of year..................................... $ 949,000 $3,261,000 $ 3,832,000
---------- ---------- -----------
---------- ---------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION--Cash paid during the year
for:
Interest................................................................. $ 531,000 $ 565,000 $ 450,000
---------- ---------- -----------
---------- ---------- -----------
Income taxes............................................................. $ 266,000 $ 96,000 $ 833,000
---------- ---------- -----------
---------- ---------- -----------
NONCASH TRANSACTIONS:
</TABLE>
For the years ended March 31, 1995 and 1997, the Company entered into
capital lease agreements for equipment amounting to $405,000 and $551,000,
respectively.
During the year ended March 31, 1997, the Company capitalized $3,391,000 of
equipment and materials, previously classified as inventory, into fixed assets.
During the year ended March 31, 1996, the Company received a note for
$1,230,000 from a related party in conjunction with the sale of land and a
building, and received a note of $300,000 from an officer for the exercise of
stock options (Note 14).
See accompanying notes to restated consolidated financial statements.
F-6
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS
Printrak International Inc. (Printrak or the Company) is a worldwide
supplier of biometric identification systems used primarily in law enforcement
applications and with increasing frequency in civil applications such as welfare
and immigration control.
On May 7, 1997, the Company acquired TFP Inc. (TFP) (Note 3). TFP is engaged
in the business of developing, manufacturing and selling "turnkey" computerized
video electronic image-based systems and document retrieval systems for law
enforcement and correctional agencies worldwide.
The accompanying consolidated financial statements have been restated to
reflect the business combination between the Company and TFP accounted for on a
pooling-of-interests basis. The restated consolidated financial statements
combine the historical financial statements for the Company and TFP as of March
31, 1996 and 1997 and for each of the three years ended March 31, 1997. The
historical amounts for TFP have been adjusted to conform TFP's year-end and
certain accounting policies to those of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Printrak International Inc. and its wholly-owned subsidiaries:
Printrak Limited, TFP, I2 Incorporated and TFP GmbH. All material intercompany
transactions and accounts have been eliminated.
REVENUE RECOGNITION--Revenue is recognized for system sales with
insignificant customer obligations when the system is shipped. The Company
records an accrual for any remaining obligations which typically consist of
installation and warranty costs. Certain of the Company's system sales are
considered long-term contracts due to a significant amount of custom
modification to the basic system or to extended delivery terms. Under these
types of contracts, the Company recognizes revenue under the percentage of
completion method, principally using the ratio of labor costs incurred to total
estimated labor costs at completion or based on units of delivery. During the
present year, no contracts of this type existed, and as such, no revenue was
recognized on a percentage of completion basis. At the time a loss on a contract
becomes known, the entire amount of the estimated loss on the contract is
accrued. Revenue for file conversion service is recognized as such services are
performed. Revenue for maintenance service contracts is recognized on a monthly
basis ratably over the period of the contract. Cash payments for maintenance
received in advance of revenue recognition are accounted for as deferred
revenue.
FOREIGN CURRENCY--The financial position and results of operations of the
Company's foreign subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities of this subsidiary are translated at
the exchange rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from differences in exchange rates from period
to period are included in the accumulated foreign currency translation
adjustments account in shareholders' equity. Realized gains or losses from
foreign currency transactions are included in operations as incurred.
CASH EQUIVALENTS--Cash equivalents are deemed to be highly-liquid
investments with an original maturity of three months or less.
SHORT-TERM INVESTMENTS--The Company accounts for its investments in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Marketable
equity and debt securities available for current operations are classified in
the balance sheet as current assets. Unrealized holding gains and losses, if
any, are included as a component of
F-7
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
stockholders' equity until realized. At March 31, 1996 and 1997, short-term
investments consist of common stock-based mutual funds which have been
categorized as available for sale and, as a result, are stated at fair value.
INVENTORIES--Inventories are stated at the lower of cost or market, with
cost being determined on a first-in, first-out (FIFO) basis.
PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from three to seven years. Leasehold
improvements are amortized over the shorter of the lease term or the useful
lives of the related assets. Maintenance, repairs and minor renewals are charged
to expense, as incurred. Additions and improvements are capitalized.
DEFERRED CREDIT--The deferred credit (negative goodwill) relates to the
excess of the fair market value of current assets acquired and liabilities
assumed over the purchase price of the Company in 1991 and has been amortized on
a straight-line basis over five years. This credit was fully amortized in March
1996.
INCOME TAXES--Effective April 1, 1993, the Company adopted SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. SFAS No. 109 provides that deferred income taxes
are recognized for the tax consequences in future years for differences between
the tax bases of assets and liabilities (temporary differences) and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory rates applicable to the periods in which the temporary differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
SOFTWARE DEVELOPMENT COSTS--Development costs incurred in the research,
development and engineering of new software products and enhancements to
existing software products are expensed as incurred until technological
feasibility has been established. For the years ended March 31, 1996 and 1997,
software development was substantially completed concurrent with the
establishment of technological feasibility due to the nature of the development
effort and, accordingly, no costs were capitalized. The Company considers
technological feasibility to be established when all planning, designing, coding
and testing has been completed according to design specifications. After
technological feasibility is established, any additional costs are capitalized
in accordance with SFAS No. 86, ACCOUNTING FOR COSTS OF COMPUTER SOFTWARE TO BE
SOLD, LEASED OR OTHERWISE MARKETED.
Prior to fiscal 1996, the Company capitalized software development costs
related to the development of its AFIS 2000 system. Such costs were being
amortized over a three-year period. In fiscal 1996, the Company changed the
estimated remaining life of such costs due to the increased exposure to
continued modifications of the software to meet changing demands of its
customers as well as more rapid technological changes. This change resulted in
the remaining balance being fully amortized as of March 31, 1996 and additional
costs of $832,000 being expensed during fiscal 1996.
RESEARCH, DEVELOPMENT AND ENGINEERING--Research, development and engineering
costs are expensed as incurred. Research, development and engineering includes
costs for the development of new products and prototype units. The Company also
incurs engineering costs associated with modifications to its system, testing of
such systems and the integration of equipment to comply with customer
requirements. Management believes that system modifications can generally be
utilized by other customers and accordingly, has combined such costs with
research, development and engineering.
F-8
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTING FOR STOCK-BASED COMPENSATION--The Company accounts for
stock-based awards to employees, using the intrinsic value method in accordance
with Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES (Note 12).
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of 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.
NET INCOME PER SHARE--Net income per share is computed by dividing net
income by the weighted average number of common and common equivalent shares
outstanding. Weighted average common and common equivalent shares include common
shares and stock options using the treasury stock method. Pursuant to Securities
and Exchange Commission Staff Accounting Bulletin Topic 4D, stock options
granted during the 12 months prior to the date of the initial filing of the
Company's Form S-1 Registration Statement have been included in the calculation
of common equivalent shares, using the treasury stock method, as if they were
outstanding as of the beginning of the period.
NEW ACCOUNTING PRONOUNCEMENT--In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128, EARNINGS PER SHARE (EPS), which is
effective for financial statements for interim and annual periods ending after
December 15, 1997. SFAS No. 128 requires the Company to report basic EPS, as
defined therein, which excludes all common share equivalents from the earnings
per share computation, and diluted EPS, as defined therein, which is calculated
similar to the Company's primary earnings per share computation. The Company has
determined that the adoption of this statement would not have had a material
impact on the earnings per share calculations for the periods presented in the
accompanying consolidated financial statements.
RECLASSIFICATIONS--Certain amounts in the accompanying consolidated
financial statements have been reclassified to conform with the March 31, 1997
presentation.
3. ACQUISITION OF TFP
On May 7, 1997, the Company acquired all of the issued and outstanding
capital stock of TFP, a South Carolina corporation, in accordance with the terms
and conditions of the Agreement and Plan of Reorganization and Merger dated as
of April 7, 1997, by and among Printrak, TFP Acquisition Corp., a South Carolina
corporation and wholly-owned subsidiary of Printrak, and TFP. Pursuant to the
Merger Agreement, TFP became a wholly-owned subsidiary of Printrak and the
outstanding shares and outstanding warrants to purchase shares of TFP common
stock and Series A preferred stock have been converted into an aggregate of
1,399,494 shares of fully paid and non assessable common stock, $.0001 par
value, of Printrak. The outstanding options to purchase shares of TFP common
stock have been converted into the right to acquire 116,496 shares of common
stock of Printrak. The terms of the Merger Agreement were the result of
arm's-length negotiations among the parties.
F-9
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITION OF TFP (CONTINUED)
The following table shows the separate historical results of the Company and
TFP for the years ended March 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
MARCH 31, 1995 MARCH 31, 1996 MARCH 31, 1997
-------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Printrak...................................................... $ 26,799 $ 45,717 $ 58,865
TFP........................................................... 4,844 6,350 6,718
------- ------- -------
Total....................................................... $ 31,643 $ 52,067 $ 65,583
------- ------- -------
------- ------- -------
Net Income (Loss)
Printrak...................................................... $ 1,026 $ 1,836 $ 4,428
TFP........................................................... (522) (848) 204
------- ------- -------
Total....................................................... $ 504 $ 988 $ 4,632
------- ------- -------
------- ------- -------
</TABLE>
4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at March 31:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Billed receivables............................................. $ 6,667,000 $ 15,495,000
Unbilled receivables........................................... 5,315,000 8,337,000
------------- -------------
11,982,000 23,832,000
Less allowance for doubtful accounts........................... (267,000) (293,000)
------------- -------------
$ 11,715,000 $ 23,539,000
------------- -------------
------------- -------------
</TABLE>
Unbilled receivables consist of system and maintenance revenues which have
been earned but not invoiced because of contractual terms of the underlying
agreements.
5. CONCENTRATIONS OF REVENUE AND CREDIT RISK
MAJOR CUSTOMERS--The Company's revenues are generated from credit sales to
customers primarily in the law enforcement market. The Company performs ongoing
credit evaluations of its customers and maintains reserves for potential credit
losses and generally does not require collateral. The Company's ten largest
customers represented 53% of total revenues in fiscal 1997; and, as a result,
the Company has a large proportion of its receivables outstanding with these
customers. Accounts receivable from the Company's ten largest customers were
$15,661,000 as of March 31, 1997.
Major customers have varied from year to year. Sales to individual customers
amounting to more than 10% of total revenues were $2,700,000 in fiscal 1995,
$8,300,000 in fiscal 1996, and $9,040,000 and $6,863,000 in fiscal 1997. Given
the significant amount of revenues derived from such customers, the loss of any
such customer or the uncollectibility of related receivables could have a
material adverse effect on the Company's financial condition and results of
operations.
F-10
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. CONCENTRATIONS OF REVENUE AND CREDIT RISK (CONTINUED)
INTERNATIONAL SALES--A substantial portion of the Company's total revenues
are derived from international sales. International sales as a percent of the
Company's total revenues are summarized as follows for the year ended March 31:
GEOGRAPHIC AREA
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Europe............................................................... 29.8% 24.2% 10.8%
Canada............................................................... 11.0 7.6 18.8
Other................................................................ 10.5 1.4 1.3
--- --- ---
51.3% 33.3% 30.9%
--- --- ---
--- --- ---
</TABLE>
International sales are subject to inherent risks, including unexpected
changes in regulatory requirements, tariffs and other barriers, fluctuating
exchange rates, difficulties in staffing and managing foreign sales and support
operations, greater working capital requirements, political and economic
instability, and potentially limited intellectual property protection.
6. INVENTORIES
Inventories consist of the following at March 31:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Raw materials..................................................... $ 2,930,000 $ 3,827,000
Work-in-process................................................... 4,467,000 1,758,000
Finished goods.................................................... 257,000 36,000
Replacement parts, net of accumulated amortization of $635,000
(1996).......................................................... 1,926,000
------------ ------------
9,580,000 5,621,000
Less allowance for excess and obsolete inventories................ (414,000) (447,000)
------------ ------------
$ 9,166,000 $ 5,174,000
------------ ------------
------------ ------------
</TABLE>
The replacement parts primarily related to older generation systems which
were still under maintenance contracts. Such parts were fully amortized and
disposed of in fiscal 1997.
F-11
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Building and improvements (Note 14)............................. $ 143,000 $ 97,000
Computer equipment.............................................. 6,482,000 7,944,000
Purchased software.............................................. 902,000 735,000
Other equipment and furniture................................... 630,000 551,000
------------- -------------
8,157,000 9,327,000
Less accumulated depreciation and amortization.................. (4,774,000) (3,757,000)
------------- -------------
$ 3,383,000 $ 5,570,000
------------- -------------
------------- -------------
</TABLE>
Computer equipment includes assets under capital lease of $468,000 and
$1,019,000 as of March 31, 1996 and 1997, respectively. Accumulated amortization
on such leased equipment amounted to $325,000 and $497,000, respectively (Note
11).
8. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following at March 31:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Warranty.......................................................... $ 651,000 $ 1,238,000
Sales taxes and V.A.T............................................. 235,000 132,000
Professional fees................................................. 101,000 208,000
Insurance......................................................... 266,000
Profit sharing.................................................... 227,000
Other............................................................. 802,000 999,000
------------ ------------
$ 2,016,000 $ 2,843,000
------------ ------------
------------ ------------
</TABLE>
F-12
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. LONG-TERM DEBT
Long-term debt consists of the following at March 31:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Revolving line of credit with bank, collateralized by substantially all assets of the
Company, interest payable monthly at the bank's reference rate or the bank's LIBOR
rate, plus 1.75%, principal due July 31, 1998....................................... $ 4,200,000 $ 1,000,000
Term loan with bank, collateralized by substantially all assets of the Company,
interest payable monthly at the bank's reference rate plus 0.75% or the bank's LIBOR
rate plus 2.75%, principal due in monthly installments of $55,556, balance due
September 1, 1998................................................................... 1,611,000
Term loan with bank, collateralized by equipment, interest payable monthly at the
bank's reference rate plus 1.0% or the bank's LIBOR rate plus 3.0%, principal due in
monthly installments of $11,200 until paid.......................................... 385,000
Obligations under capital leases (Note 11)............................................ 495,000 771,000
------------ ------------
6,691,000 1,771,000
Less current portion of long-term debt................................................ (949,000) (247,000)
------------ ------------
$ 5,742,000 $ 1,524,000
------------ ------------
------------ ------------
</TABLE>
The bank's reference rate and LIBOR rate at March 31, 1997 were 8.5% and
5.4375%, respectively.
Annual debt principal repayments are as follows:
<TABLE>
<CAPTION>
Year ending March 31:
<S> <C>
1998.................................................... $ 251,000
1999.................................................... 1,232,000
2000.................................................... 127,000
2001.................................................... 91,000
2002.................................................... 70,000
---------
$1,771,000
---------
---------
</TABLE>
The revolving line of credit and term loan agreements with a bank contain
certain restrictive covenants which restrict the Company's ability to pay
dividends and require the Company to maintain minimum tangible net worth and
certain financial ratios such as current ratio, cash flow to debt service ratio,
and total liabilities to tangible net worth ratio. The Company was in compliance
with such financial covenants, as amended, at March 31, 1997.
F-13
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES
The Company's provision for income taxes consists of the following for the
year ended March 31:
<TABLE>
<CAPTION>
1995 1996 1997
----------- ---------- ------------
<S> <C> <C> <C>
Current:
Federal.......................................................... $ 34,000 $ 90,000 $ 499,000
State............................................................ 41,000 42,000 551,000
Foreign.......................................................... 119,000 100,000 280,000
----------- ---------- ------------
Total current.................................................... 194,000 232,000 1,330,000
----------- ---------- ------------
Deferred:
Federal.......................................................... 22,000 145,000 528,000
State............................................................ 5,000 9,000 283,000
----------- ---------- ------------
Total deferred................................................... 27,000 154,000 811,000
----------- ---------- ------------
Total provision.................................................. $ 221,000 $ 386,000 $ 2,141,000
----------- ---------- ------------
----------- ---------- ------------
</TABLE>
The reconciliation between the Company's effective tax rate and the
statutory federal income tax rate is as follows for the year ended March 31:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate............................................ 35.0% 35.0% 35.0%
State taxes net of federal benefit........................................... 5.7 1.3 8.1
Amortization of deferred credit.............................................. (78.4) (26.0) --
Foreign operations........................................................... 0.4 3.1 1.2
Increase (decrease) in valuation allowance................................... 70.0 12.1 (15.8)
Other........................................................................ 9.5 (1.0) 3.1
--------- --------- ---------
42.2% 24.5% 31.6%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes in the accompanying consolidated balance sheets are
comprised of the following at March 31:
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- -------------
<S> <C> <C> <C>
Net deferred tax asset.................................. $ 21,601,000 $ 21,009,000 $ 6,895,000
Valuation allowance..................................... (16,330,000) (16,072,000) (2,963,000)
-------------- -------------- -------------
Net deferred tax asset.................................. $ 5,271,000 $ 4,937,000 $ 3,932,000
Deferred tax liability.................................. (4,000) (7,000)
-------------- -------------- -------------
$ 5,271,000 $ 4,933,000 $ 3,925,000
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>
The Company has not provided for U.S. federal income and foreign withholding
taxes on the earnings of its foreign subsidiary because it is currently
anticipated that these earnings will be permanently reinvested. If these
earnings are distributed, foreign tax credits will become available under U.S.
law to reduce the effect on the Company's overall tax liability.
F-14
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
Deferred tax assets consist primarily of the following temporary
differences:
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- -------------
<S> <C> <C> <C>
Net operating loss carryforwards........................ $ 17,973,000 $ 16,971,000 $ 3,169,000
Intangible asset basis.................................. 1,245,000 2,147,000 1,854,000
Patent amortization..................................... 1,233,000
Deferred revenue........................................ 433,000 531,000 776,000
Reserves................................................ 348,000 457,000 663,000
Employee benefits....................................... 298,000 307,000 378,000
Depreciation............................................ (5,000) 249,000 300,000
Other................................................... 76,000 343,000 (252,000)
-------------- -------------- -------------
Gross deferred assets................................... 21,601,000 21,005,000 6,888,000
Valuation allowance..................................... (16,330,000) (16,072,000) (2,963,000)
-------------- -------------- -------------
Net deferred tax assets................................. $ 5,271,000 $ 4,933,000 $ 3,925,000
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>
At March 31, 1997, the Company has net operating loss carryforwards of
approximately $43,300,000 and $2,800,000, respectively, for federal and
California income tax purposes, which begin to expire in 2003. As a result of an
equity ownership change in prior years, the use of federal and California net
operating loss carryforwards is limited to approximately $1,000,000/yr. During
fiscal 1997, in conjunction with an Internal Revenue Service audit, the Company
made the decision that due to such limitations, a portion of the net operating
loss carryforwards would never be realized. As a result, the gross deferred tax
asset and valuation allowance were reduced by approximately $12,100,000.
Additionally, the valuation allowance changed by $798,000 as a result of the
utilization and expiration of net operating losses.
11. COMMITMENTS AND CONTINGENCIES
COMMITMENTS--The Company is obligated under noncancelable capital and
operating leases for its principal operating facility and certain furniture and
office equipment. The Company incurred $191,000, $849,000 and $958,000 in rent
expense during the years ended March 31, 1995, 1996 and 1997, respectively.
During the year ended March 31, 1997, $773,000 of such rent expense was to
related parties (Note 14).
F-15
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease commitments at March 31, 1997 under noncancelable
leases that have initial or remaining terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- ------------
<S> <C> <C>
Year ending March 31:
1998............................................................... $ 321,000 $ 1,074,000
1999............................................................... 280,000 939,000
2000............................................................... 156,000 873,000
2001............................................................... 99,000 61,000
2002............................................................... 73,000
----------- ------------
Total minimum payments required.................................... 929,000 $ 2,947,000
----------- ------------
Less amount representing interest.................................. (158,000)
-----------
Capital lease obligations (Note 9)................................. 771,000
Less current portion of capital lease obligations.................. (247,000)
-----------
$ 524,000
-----------
-----------
</TABLE>
Certain of the Company's customers require the Company to be bonded to
ensure performance under certain contracts or to guarantee outstanding bids. At
March 31, 1997, the Company had outstanding performance bonds ensuring
performance under various contracts, which totaled $6,369,000.
LITIGATION--From time to time, the Company may be involved in litigation
relating to claims arising out of its operations in the normal course of
business. As of March 31, 1997, the Company is not a party to any legal
proceedings, the adverse outcome of which, in management's opinion, individually
or in aggregate, would have a material adverse effect on the Company's results
of operations or financial position.
12. STOCK BENEFIT PLANS
EXECUTIVE STOCK OPTION PLAN--The Company adopted the Executive Stock Option
Plan (the Executive Plan) in May 1992, which provides for the granting of
incentive stock options and nonstatutory options to purchase shares of the
Company's common stock and restricted stock grants covering an aggregate of
800,000 shares of the Company's common stock. As of March 31, 1997, there were
options outstanding to purchase 546,000 shares under the Executive Plan at a
weighted average exercise price of $5.51 per share.
1994 STOCK OPTION PLAN--The Company adopted the 1994 Stock Option Plan (the
1994 Plan) in December 1993. The 1994 Plan provides for the granting of
incentive stock options and nonstatutory options to purchase shares of the
Company's common stock and restricted stock grants covering an aggregate of
744,000 shares of the Company's common stock. As of March 31, 1997, there were
options outstanding to purchase 532,000 shares under the 1994 Plan at a weighted
average exercise price of $5.51 per share.
1996 STOCK INCENTIVE PLAN--The Company adopted the 1996 Stock Incentive Plan
(the 1996 Plan) in April 1996. The 1996 Plan provides for the granting of
incentive stock options and nonstatutory options. The 1996 Plan provides for
options to purchase shares of the Company's common stock and restricted stock
grants covering an aggregate of 500,000 shares of the Company's common stock. As
of March 31,
F-16
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCK BENEFIT PLANS (CONTINUED)
1997, there were options outstanding to purchase 97,000 shares under the 1996
Plan at a weighted average exercise price of $9.65 per share.
TFP STOCK INCENTIVE PLAN--TFP adopted a stock option plan in August 1994.
The TFP Plan provided for the granting of incentive stock options and
nonstatutory options to purchase an aggregate of 360,000 shares of the TFP
common stock. In conjunction with the acquisition of TFP, the outstanding
options were converted into the right to acquire 116,496 shares of common stock
of Printrak. As of March 31, 1997, there were options outstanding to purchase
116,496 shares under the Plan at a weighted average exercise price of $2.69 per
share.
The exercise price of incentive stock options under the above Plans must at
least be equal to the fair market value of a share of common stock on the date
the option is granted (110% with respect to optionees who own at least 10% of
the outstanding common stock). Nonstatutory options shall have an exercise price
of not less than 85% of the fair market value of a share of common stock on the
date such option is granted (110% with respect to optionees who own at least 10%
of the outstanding common stock). The options must expire no later than ten
years from the date of grant (five years with respect to optionees who own at
least 10% of the outstanding common stock). Vesting is generally 20% at the end
of the first year with the remaining vesting over four years on a pro rata
basis. As of March 31, 1997, there were options exercisable under these Plans to
purchase 641,500 shares at a weighted average exercise price of $4.08 per share.
The following is a summary of stock option activity:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- -----------------
<S> <C> <C>
BALANCE, April 1, 1994......................................... 456,000 $ 2.50
Granted........................................................ 362,600 $ 2.50
Canceled....................................................... (12,400) $ 2.50
----------
BALANCE, March 31, 1995........................................ 806,200 $ 2.50
Granted (weighted average fair value of $3.16)................. 689,500 $ 8.94
Exercised...................................................... (123,200) $ 2.50
Canceled....................................................... (23,200) $ 5.12
----------
BALANCE, March 31, 1996........................................ 1,349,300 $ 5.74
Granted (weighted average fair value of $5.62)................. 260,600 $ 8.45
Exercised...................................................... (152,000) $ 2.84
Canceled....................................................... (166,400) $ 10.21
----------
BALANCE, March 31, 1997........................................ 1,291,500 $ 6.06
----------
----------
</TABLE>
Common shares reserved for future grant under the above option plans were
594,000 at March 31, 1997.
F-17
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCK BENEFIT PLANS (CONTINUED)
The outstanding stock options primarily vest ratably over a five-year
period. Stock options outstanding at March 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISEABLE
--------------------------------------------- ------------------------
RANGE OF # SHARES WTD AVG WTD AVG # SHARES WTD AVG
EXERCISE OUTSTANDING REMAIN CONTRACT EXERCISE EXERCISEABLE EXERCISE
PRICES 31-MAR-97 LIFE PRICE 31-MAR-97 PRICE
- ---------------- ----------- ------------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
.83-2.50 640,500 6.75 $ 2.54 487,500 $ 2.55
3.75-6.25 147,000 8.56 $ 5.21 58,000 $ 5.31
7.5 182,000 8.6 $ 7.50 32,000 $ 7.50
8.75-10.25 144,000 9.1 $ 9.50 26,000 $ 8.90
12.50-22.50 178,000 8.89 $ 15.64 38,000 $ 15.76
----------- -----------
1,291,500 7.77 $ 6.12 641,500 $ 4.08
</TABLE>
ADDITIONAL STOCK PLAN INFORMATION (SFAS NO. 123)
As discussed in Note 1, the Company continues to account for its stock-based
awards using the intrinsic value method in accordance with APB Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and its related interpretations. No
compensation expense has been recognized in the financial statements for
employee stock arrangements, as all grants have been at exercise prices equal to
or greater than the market value of the underlying shares at the date of grant.
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the
disclosure of pro forma net income and earnings per share had the Company
adopted the fair value method as of the beginning of fiscal 1996. Under SFAS No.
123, the fair value of stock-based awards to employees is calculated through the
use of option pricing models, even though such models were developed to estimate
the fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock-option awards.
These models also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the calculated
values.
The Company's calculations were made using the Black-Scholes option-pricing
model with the following weighted average assumptions: expected life, two years
following vesting; stock volatility, 55% in 1996 and 78% in 1997; risk-free
interest rates, 5.8% in 1996 and 6.00% in 1997 and no dividends during the
expected term. The Company's calculations are based on a single-option approach
and forfeitures are recognized as they occur. If the computed fair values of the
1996 and 1997 awards had been amortized to expense over the vesting period of
the awards, pro forma net income would have been $770,000, or $0.08 per share;
and $3,922,000, or $0.21 per share, in 1996 and 1997, respectively. These
amounts are based on calculated values for option awards in 1996 and 1997 of
$347,000 and $1,038,000, respectively. The impact of stock options granted prior
to 1996 has been excluded from the pro forma calculation; accordingly, the 1996
and 1997 pro forma adjustments are not indicative of future period pro forma
adjustments, when the calculation may apply to all applicable stock options. The
impact of the stock options associated with the acquisition of TFP have been
excluded from the pro forma calculation, as their impact on the overall
calculation is immaterial.
EMPLOYEE STOCK PURCHASE PLAN--The Company adopted the Employee Stock
Purchase Plan (the Purchase Plan) in April 1996, covering an aggregate of
100,000 shares of common stock. Employees are eligible to participate if they
are employed by the Company for at least 30 hours per week and if they have been
employed by the Company for at least one year. The Purchase Plan permits
eligible employees to
F-18
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. STOCK BENEFIT PLANS (CONTINUED)
purchase common stock through payroll deductions, which may not exceed 15% of an
employee's compensation or a specified number of shares. The price of stock
purchased under the Purchase Plan is equal to 85% of the fair market value of
the common stock. The Purchase Plan will terminate on December 31, 2006. As of
March 31, 1997, 20,400 shares were available for purchase.
13. EMPLOYEE BENEFIT PLANS
The Company's 401(k) Savings Plan (the Savings Plan) covers domestic
full-time employees with 90 days of consecutive service. Under the terms of the
Savings Plan, the Company, at its election, can match participant contributions.
For the fiscal years ended March 31, 1995, 1996 and 1997, the Company elected
not to match participant contributions.
Effective April 1, 1993, the Company adopted a Profit Sharing Plan (the
Plan) that covers all domestic full-time employees with 90 days of consecutive
service. Under the Plan, each eligible employee will receive a bonus, determined
under the formula set forth in the Plan, based on the Company's earnings.
Bonuses incurred under the Plan totaled approximately $447,000, $408,000 and
$747,000 for the years ended March 31, 1995, 1996 and 1997, respectively. The
Plan was terminated as of December 31, 1996.
14. RELATED-PARTY TRANSACTIONS
On May 13, 1995, the Company sold its principal operating facility (the
Property) to RICOL, LLC, a California limited liability company (RICOL), which
is controlled by Richard M. Giles, the Company's Chairman, President and Chief
Executive officer, for a total purchase price equal to $4,630,000, the appraised
fair market value of the Property plus $70,000 to cover certain closing costs,
which also approximated its net book value. Such purchase price was paid to the
Company by delivery of a promissory note in the principal amount of $1,230,000
and cash in the amount of $3,400,000. In connection with such transaction, the
Company and RICOL entered into a lease for the Property for a term of five
years, expiring May 12, 2000, with rent of $58,930 per month, subject to
increases based on increases in the Consumer Price Index, not to exceed 6% or be
less than 2% during any year of such term. During fiscal 1997, the Company
received $730,000 of principal payments on the note receivable from RICOL. The
remaining balance bears interest at a bank's reference rate (8.5% at March 31,
1997), payable annually with the principal balance due in 2003. No gain or loss
was recognized on this transaction.
From time to time, the Company has made loans to Mr. Giles, which have been
evidenced by promissory notes. During fiscal 1997, the principal amount
outstanding equaled $50,000. During fiscal 1996, the principal amount
outstanding under such loans ranged from $23,000 to $147,000, and all of such
loans had been repaid as of March 31, 1996. In February 1996, the Company loaned
$150,000 to Mr. Giles. Such loan is collateralized by a pledge of 150,000 of the
shares of the Company's common stock owned by Mr. Giles, bears interest at 5.5%,
and principal and interest are due as of March 1, 1998. The principal amount
along with accrued interest was repaid during fiscal year 1997.
In November 1994, the Company loaned $50,000 to Charles L. Smith, a member
of the Board of Directors and the Company's former chief operating officer. In
February 1996, the Board of Directors voted to grant this individual a bonus in
the amount of such loan, through the forgiveness of the related indebtedness,
and to provide him and his eligible dependents with medical and dental insurance
coverage equal to that provided to all vice presidents of the Company, so long
as he continues to serve as a member of the Company's Board of Directors.
F-19
<PAGE>
NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. RELATED-PARTY TRANSACTIONS (CONTINUED)
In February 1996, the Company loaned an executive of the Company the sum of
$300,000 to enable him to exercise 120,000 vested options to purchase shares of
the Company's common stock, and $10,000 to pay certain tax obligations. The loan
is collateralized by the related shares, bears interest at 5.5%, and principal
and interest are due as of March 1, 1998. Due to its nature, the loan has been
classified as a reduction of stockholders' equity in the accompanying
consolidated financial statements.
Effective January 2, 1996, TFP entered into an operating lease agreement
with a related party for the corporate headquarters of TFP. Annual payments
under this lease agreement approximated $65,000 for the year ended March 31,
1997.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's balance sheets include the following financial instruments:
cash and cash equivalents, trade accounts receivable, notes receivable from
related parties, accounts payable, accrued, liabilities, and debt. The Company
considers the carrying amounts in the financial statements of all financial
instruments to approximate their fair value because of the relatively short
period of time between origination of the instruments and their expected
realization or the fact that such instruments have interest rates which
approximate current market rates.
16. SUBSEQUENT EVENTS
On July 21, 1997 the Company acquired a business unit of SCC Communications
Corp. (SCC) located in Boulder, Colorado, in a transaction accounted for under
purchase accounting. The business unit provides computer-aided dispatch systems
and records management systems for law enforcement, fire and emergency medical
services agencies. As a result of the acquisition, the business unit operates as
a division of the Company.
On September 9, 1997, the Company acquired SunRise Imaging (SunRise), a
California corporation in a transaction accounted for under purchase accounting.
SunRise is a leading developer and manufacturer of high-performance systems
which digitize microfilm and microfiche records.
F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS OR ANY UNDERWRITERS,
BROKERS OR AGENTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO
MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 3
The Company.................................... 4
Risk Factors................................... 4
Selected Consolidated Financial Data........... 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 8
Material Changes............................... 11
Use of Proceeds................................ 11
Selling Stockholders........................... 12
Plan of Distribution........................... 13
Legal Matters.................................. 13
Experts........................................ 13
Indemnification of Officers and Directors...... 13
Restated Consolidated Financial Statements..... F-1
</TABLE>
279,899 SHARES
[LOGO]
COMMON STOCK
---------------------
PROSPECTUS
---------------------
DECEMBER , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the costs and expenses, all of which shall be borne
by the Company, in connection with the offering of the shares of Common Stock
pursuant to this Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission Fee............................. $ 754
Accounting Fees and Expenses....................................... $ 10,000*
Legal Fees and Expenses............................................ $ 10,000*
Miscellaneous Expenses............................................. $ 5,000*
---------
Total.......................................................... $ 25,754
---------
---------
</TABLE>
- ------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) As permitted by the Delaware General Corporation Law, the Certificate of
Incorporation, as amended, eliminates the liability of directors to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent otherwise required by the Delaware General
Corporation Law.
(b) The Certificate of Incorporation, as amended, provides that the Company
will indemnify each person who was or is made a party to any proceeding by
reason of the fact that such person is or was a director or officer of the
Company against all expense, liability and loss reasonably incurred or suffered
by such person in connection therewith to the fullest extent authorized by the
Delaware General Corporation Law. The Company's Bylaws provide for a similar
indemnity to directors and officers of the Company to the fullest extent
authorized by the Delaware General Corporation Law.
(c) The Certificate of Incorporation, as amended, also gives the Company the
ability to enter into indemnification agreements with each of its officers and
directors. The Company has entered into indemnification agreements with each of
its directors and officers. The indemnification agreements provide for the
indemnification of directors and officers of the Company against any and all
expenses, judgments, fines, penalties and amounts paid in settlement, to the
fullest extent permitted by laws.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of April 7, 1997 among Printrak
International Inc., TFP Inc., TFP Acquisition Corp. and Barry B. White
(incorporated by reference to Exhibit 10.1 of the Company's Form 8-K,
filed with the Commission on April 17, 1997).
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of
the Company's Registration Statement on Form S-1 as filed with the
Commission on May 3, 1996).
3.2 Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.2 of the Company's Registration Statement on Form
S-1, filed with the Commission on June 28, 1996).
3.3 Bylaws (incorporated by reference to Exhibit 3.3 of the Company's Annual
Report on Form 10-K, filed with the Commission on June 30, 1997).
5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional Corporation.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.1 Employment Agreement, entered into by and between Alfred B. Castleman and
the Company on December 8, 1997.
10.2 Printrak International Inc. Nonqualified Stock Option Agreement entered
into by and between Alfred B. Castleman and the Company on December 8,
1997.
10.3 Indemnification Agreement, entered into by and between Alfred B. Castleman
and the Company on December 8, 1997 (incorporated by reference to Exhibit
10.16 of the Company's Registration Statement on Form S-1 as filed with
the Commission on May 3, 1996).
10.4 Amendment to Lease, entered into by and between Barry B. White and TFP on
November 12, 1997.
23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional Corporation
(included in Exhibit 5).
23.2 Consent of Deloitte & Touche LLP, independent auditors of Printrak
International, Inc.
24 Power of Attorney (included on the signature page to the Registration
Statement (see pages II-4 and II-5).
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b). If, in the
aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference is the registration
statement.a
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim information.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S 3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the City of Anaheim, State of California, on the 12th day of
December, 1997.
<TABLE>
<S> <C> <C>
PRINTRAK INTERNATIONAL INC.
By: /s/ RICHARD M. GILES
-----------------------------------------
Richard M. Giles,
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Printrak International Inc. do
hereby constitute and appoint Richard M. Giles our true and lawful attorney and
agent, to do any and all acts and things in our name and behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorney and
agent may deem necessary or advisable to enable said corporation to comply with
the Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names and in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto or any related registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended; and we do
hereby ratify and confirm all that the said attorney and agent shall do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board, December 12, 1997
/s/ RICHARD M. GILES Chief Executive Officer
- ------------------------------ and President (Principal
Richard M. Giles Executive Officer)
/s/ JOHN G. HARDY Division President, Chief December 12, 1997
- ------------------------------ Operating Officer and
John G. Hardy Director
Vice President--Finance, December 12, 1997
/s/ ALFRED B. CASTLEMAN Chief Financial Officer
- ------------------------------ and Director (Principal
Alfred B. Castleman Financial Officer)
/s/ KENNETH W. SIMONDS
- ------------------------------ Director December 12, 1997
Kenneth W. Simonds
/s/ CHARLES L. SMITH
- ------------------------------ Director December 12, 1997
Charles L. Smith
/s/ BARRY B. WHITE
- ------------------------------ Vice President and December 12, 1997
Barry B. White Director
/s/ ALBERT WONG
- ------------------------------ Director December 12, 1997
Albert Wong
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of April 7, 1997 among Printrak International Inc.,
TFP Inc., TFP Acquisition Corp. and Barry B. White (incorporated by reference to Exhibit
10.1 of the Company's Form 8-K, filed with the Commission on April 17, 1997).
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of the Company's
Registration Statement on Form S-1 as filed with the Commission on May 3, 1996).
3.2 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit
3.2 of the Company's Registration Statement on Form S-1, filed with the Commission on
June 28, 1996).
3.3 Bylaws (incorporated by reference to Exhibit 3.3 of the Company's Annual Report on Form
10-K, filed with the Commission on June 30, 1997).
5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional Corporation.
10.1 Employment Agreement, entered into by and between Alfred B. Castleman and the Company on
December 8, 1997.
10.2 Printrak International Inc. Nonqualified Stock Option Agreement entered into by and
between Alfred B. Castleman and the Company on December 8, 1997.
10.3 Indemnification Agreement, entered into by and between Alfred B. Castleman and the Company
on December 8, 1997 (incorporated by reference to Exhibit 10.16 of the Company's
Registration Statement on Form S-1 as filed with the Commission on May 3, 1996).
10.4 Amendment to Lease, entered into by and between Barry B. White and TFP on November 12,
1997.
23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional Corporation (included in
Exhibit 5).
23.2 Consent of Deloitte & Touche LLP, independent auditors of Printrak International, Inc.
24 Power of Attorney (included on the signature page to the Registration Statement (see pages
II-4 and II-5).
</TABLE>
<PAGE>
Exhibit 5.1
December 19, 1997
Printrak International Inc.
1250 N. Tustin Avenue
Anaheim, California 92807
RE: REGISTRATION STATEMENT ON FORM S-3
----------------------------------
Ladies and Gentlemen:
At your request, we have examined the form of Registration Statement on
Form S-3 (the "Registration Statement") being filed by Printrak International
Inc., a Delaware corporation (the "Company"), with the Securities and Exchange
Commission in connection with the registration under the Securities Act of 1933,
as amended, of an aggregate of 279,899 shares of the Company's common stock,
$0.0001 par value ("Common Stock") which were issued to the stockholders of TFP
Inc. ("TFP") in connection with the acquisition of TFP (the "Selling
Stockholders"). The shares of Common Stock may be offered for resale from time
to time by and for the account of the Selling Stockholders of the Company as
named in the Registration Statement.
We have reviewed the corporate action of the Company in connection with
this matter and have examined such documents, corporate records and other
instruments as we have deemed necessary for the purposes of this opinion.
Based on the foregoing, it is our opinion that 279,899 shares of Common
Stock covered by the Registration Statement have been duly authorized and
validly issued, and are fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
STRADLING, YOCCA, CARLSON & RAUTH
/S/ STRADLING, YOCCA, CARLSON & RAUTH
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into this 8th
day of December, 1997 by and between PRINTRAK INTERNATIONAL INC. (the "Company")
and ALFRED B. CASTLEMAN ("Employee").
1. EMPLOYMENT: Employee shall be employed as Vice President, Finance and
Chief Financial Officer of the Company, or such other position as may be
designated from time to time by the Board of Directors, and shall faithfully and
diligently perform all duties and responsibilities required of such position or
assigned by the Company from time to time. In addition, Employee shall serve as
a member of the Company's Board of Directors for a term extending at least until
the Company's next Annual Meeting of Shareholders or so long as he holds the
titles stated herein.
2. TERM: This Agreement and Employee's employment shall be for a term of
two (2) years commencing on the date hereof and expiring on December 8, 1999,
but may be terminated earlier at any time in accordance with Section 4 of this
Agreement.
3. COMPENSATION: In consideration for all services to be performed under
this Agreement, Employee shall receive the following compensation:
(a) SALARY: Employee shall be paid base salary at the rate of One
Hundred Ninety Thousand Dollars ($190,000) per year, which salary shall be
reviewed annually in conjunction with Employee's annual merit review.
(b) INCENTIVE BONUS: Employee shall be eligible for participation in
Printrak's Executive Bonus Plan. Employee's target bonus under the
Executive Bonus Plan for fiscal 1998 will be 40% of Employee's base salary
pro rated for the period Employee was employed by Printrak, conditioned
upon the attainment of performance goals to be established by the Company
and subject to the written provisions of the Executive Bonus Plan.
(c) VACATION: Per year Employee shall accrue, and be deemed to have
earned, vacation at the rate of two (2) weeks per year hereunder, pursuant
to the Company's policy for paid time off, plus one week of personal time
off. Upon the termination of Employee's employment with the Company, any
vacation not previously used by Employee shall be paid to Employee at the
rate set forth in paragraph (a) above, but personal time shall not be so
paid and shall not be carried over to any following period.
(d) EMPLOYEE BENEFIT PLANS: Employee shall be entitled to
participate in such group medical, dental, visual, disability, death
benefit, life insurance and other benefit plans as the Company may offer
from time to time for personnel of comparable stature, it being understood
that neither the Company shall be obligated to provide such benefits to any
employee.
<PAGE>
4. TERMINATION: This Agreement and Employee's employment with the
Company, as well as his service as an officer of the Company, are subject to
immediate termination at any time as follows:
(a) DEATH: This Agreement shall terminate immediately upon
Employee's death, in which event the Company's only obligation shall be to
pay all compensation (as defined below) owing for services rendered by
Employee prior to the date of his death.
(b) DISABILITY: The Company may, to the extent permitted by
applicable law, terminate Employee's employment in the event that Employee
is disabled from performing all assigned duties under this Agreement due to
illness or injury for a period in excess of one hundred eighty (180)
consecutive days, in which event the Company's only obligation shall be to
pay all compensation (as defined below) owing for services rendered by
Employee prior to the date of his termination.
(c) TERMINATION FOR CAUSE: The Company may terminate this Agreement
immediately upon written notice to Employee in the event Employee (i)
commits any material misconduct, willful breach, or habitual neglect of his
duties to the Company; (ii) materially violates any policy or procedure of
the Company, the effect of which violation could reasonably be expected to
materially damage the Company; or (iii) engages in job performance which is
materially inferior to that reasonably expected of an executive in a
position of responsibility and compensation comparable to those of
Employee, which inferior performance is not cured after counseling by the
Company. In either event, the Company's sole obligation to Employee shall
be to pay all compensation (as defined below) owing for services rendered
by Employee prior to notice of termination under this subsection.
(d) TERMINATION WITHOUT CAUSE: The Company in its sole discretion
may also terminate Employee's employment without cause or prior warning
immediately upon written notice to Employee, in which event the Company's
only obligation shall be to pay all compensation (as defined below) owing
for services rendered by Employee prior to the effective date of such
termination, and if such termination occurs at any time during the term
hereof from and after December 8, 1998, then to pay Employee the sum total
of an amount equal to one year's salary as is then currently being paid
under Section 3(a) hereof over the following twelve months payable as all
payroll bi-weekly.
(e) VOLUNTARY TERMINATION: Employee may terminate this Agreement at
any time, for any reason, upon written notice to the Company, in which
event the Companies' only obligation to Employee shall be to pay all
compensation (as defined below) owing for services rendered by Employee
prior to the date of such termination.
(f) COMPANY'S SOLE OBLIGATION: In the event of any termination
pursuant to this Section 4, the payment of the amounts set forth in
subsections (a) through (e) above, as and if applicable, constitute the
sole obligations of the Companies and are in lieu of any damages or other
compensation that Employee may claim in connection with this Agreement.
The Company shall make payment of said compensation as required by
California Law.
(g) RETURN OF COMPANY PROPERTY: Upon termination of employment for
any reason, Employee shall immediately return to the Company, as
appropriate, without condition, all files,
2
<PAGE>
records, keys, and other property of the Company.
5. CONFIDENTIALITY: Employee acknowledges and agrees that Employee has
been entrusted with trade secrets and proprietary information regarding the
products, processes, methods of manufacture and delivery, know-how, designs,
formula, work in progress, research and development, computer software and data
bases, copyrights, trademarks, patents, marketing techniques, and future
business plans, as well as customer lists and information concerning the
identity, needs, and desires of actual and potential customers of the Company
and its subsidiaries, joint ventures, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
Accordingly, Employee agrees to execute and be bound by the terms of the
Employee Proprietary Information Agreement attached hereto as Annex 1.
6. INVENTIONS: Any and all patents, copyrights, trademarks, inventions,
discoveries, developments, or trade secrets developed or perfected by Employee
during or as the result of Employee's employment with the Company shall
constitute the sole and exclusive property of the Company, as more particularly
set forth in the Employee Proprietary Information Agreement.
7. CONFLICT OF INTERESTS: During the term of this Agreement, Employee
shall devote Employee's full working time, ability, and attention to the
business of the Company, and shall not accept other employment or engage in any
other outside business activity which interferes with the performance of
Employee's duties and responsibilities under this Agreement or which involves
actual or potential competition with the business of the Company, except with
the express written consent of the Boards of Directors of the Company.
8. EMPLOYEE BENEFIT PLANS: All of the employee benefit plans referred to
or contemplated by this Agreement shall be governed solely by the terms of the
underlying plan documents and by applicable law, and nothing therein shall
create any contract or guarantee of employment with the Company. Nothing in
this Agreement shall impair the Company's right to amend, modify, replace, and
terminate any and all such plans in its sole discretion as provided by law.
This Agreement is for the sole benefit of Employee and the Company, and is not
intended to create an employee benefit plan or to modify the terms of existing
plans.
9. INDEMNIFICATION: The Company has in force, and shall maintain in
force during the term of Employee's service as an officer or director of the
Company, Director and Officer Liability insurance covering Employee.
10. ASSIGNMENT: This Agreement may not be assigned by Employee, but may
be assigned by the Company to any successor in interest to its business. This
Agreement shall bind and inure to be benefit of the Company's successors and
assigns, as well as Employee's heirs, executors, beneficiaries, administrators,
and legal representatives.
3
<PAGE>
11. NOTICES: All notices required by this Agreement may be delivered by
first class mail at the following addresses:
To the Company: PRINTRAK INTERNATIONAL INC.
1250 North Tustin Avenue
Anaheim, California 92807
Attn: Chairman of the Board
To Employee: Alfred B. Castleman
273 Promontory Drive West
Newport Beach, California 92660
12. AMENDMENT: This Agreement may be modified only by written agreement
signed by the party against whom any amendment is to be enforced, and in the
case of the Company, pursuant to consent by the Board of Directors of such
entity.
13. CHOICE OF LAW: This Agreement shall be governed by the laws of the
State of California, and the parties submit to the jurisdiction of the courts of
Orange County, California for enforcement.
14. WAIVER: No waiver of any breach of this Agreement shall constitute a
waiver of any subsequent breach.
15. COMPLETE AGREEMENT: This Agreement contains the entire agreement
between the parties, and supersedes any and all prior and contemporaneous oral
and written agreements, including Employee's previous employment contracts (if
any), which shall have no further force and effect.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the date first written above.
ALFRED B. CASTLEMAN
/s/ Alfred B. Castleman
-------------------------------------------
PRINTRAK INTERNATIONAL INC.,
a Delaware corporation
By: /s/ Susanna Bennett
-------------------------------------------
Its: Vice President of Corporate Administration
------------------------------------------
4
<PAGE>
ANNEX 1
PRINTRAK INTERNATIONAL INC.
EMPLOYEE PROPRIETARY INFORMATION AGREEMENT
In consideration and as a condition of my employment, or continued
employment, by PRINTRAK INTERNATIONAL INC. and/or by companies which it owns,
controls, or is affiliated with (including without limitation Printrak
International Inc.), or their successors in business (hereafter referred to as
"the Company"), and the compensation paid therefor and payable under the
Employment Agreement of even date herewith between me, and Printrak
International Inc. (the "Employment Agreement"):
1. CONFIDENTIALITY.
I agree to keep confidential, except as the Company may otherwise consent
in writing and not to disclose or make any use of except for the benefit of the
Company, at any time, either during or subsequent to my employment, any trade
secrets, confidential information, knowledge, data or other information of the
Company relating to products, processes, know-how, designs, formulas, test data,
customer lists, business plans, marketing plans and strategies, pricing
strategies or other subject matter pertaining to any business of the Company or
any of its clients, customers, consultants, licensees or affiliates, which I may
produce, obtain or otherwise acquire during the course of my employment, except
as herein provided. I further agree not to deliver, reproduce or in any way
allow any such trade secrets, confidential information, knowledge, data or other
information, or any documentation relating thereto, to be delivered or used by
any third parties without specific direction or consent of a duly authorized
representative of the Company.
2. CONFLICTING EMPLOYMENT/RETURN OF CONFIDENTIAL MATERIAL.
I agree that during my employment with the Company, as set forth in the
Employment Agreement, I will not engage in any other employment, occupation,
consulting or other activity relating to the business in which the Company is
now or may hereafter become engaged or which would otherwise conflict with my
obligations to the Company. In the event of my termination of employment with
the Company pursuant to the Employment Agreement for any reason whatsoever, I
agree to promptly surrender and deliver to the Company all records, materials,
equipment, drawings, documents and data of any nature pertaining to any
invention, trade secret or confidential information of the Company or to my
employment, and I will not take with me any description containing or pertaining
to any confidential information, knowledge or data of the Company which I may
produce or obtain during the course of my employment. In the event of the
termination of my employment for any reason whatsoever, I agree to sign and
deliver the "Termination Certificate" attached hereto as Exhibit A.
3. ASSIGNMENT OF INVENTIONS.
I agree that all computer programs, documentation and other copyrightable
materials to which I contribute during my employment shall be considered "works
made for hire" and shall be the sole
<PAGE>
property of the Company. I hereby assign and transfer to the Company my entire
right, title and interest in and to all inventions (as used in the Agreement,
"inventions" shall include but not be limited to ideas, improvements, designs
and discoveries) whether or not patentable and whether or not reduced to
practice, made or conceived by me (whether made solely by me or jointly with
others) during the period of my employment with the Company, which relate in any
manner to the actual or demonstrably anticipated business, work or research and
development of the Company or its subsidiaries, or result from or are suggested
by any task assigned to me or any work performed by me for or on behalf of the
Company or its subsidiaries. I agree that all such inventions are the sole
property of the Company provided, however, that this Agreement does not require
assignment of an invention for which no equipment, supplies, facility, or trade
secret information of the Company was used, and which was developed entirely on
my own time, and:
(a) which does not relate to the business of the Company or to the
Company's actual or demonstrably anticipated research or development; or
(b) which does not result from any work performed by me for the Company.
4. DISCLOSURE OF INVENTIONS AND PATENTS.
I agree that in connection with any "invention" as defined in Paragraph 3
above:
(a) I will disclose such invention promptly in writing to my immediate
superior at the Company, with a copy to the Board of Directors, regardless of
whether I believe the invention is protected by Paragraph 3 above, in order to
permit the Company to claim rights to which it may be entitled under this
Agreement. Such disclosure shall be received in confidence by the Company.
(b) I will, at the Company's request, promptly execute a written
assignment of title to the
Company for any invention required to be assigned by Paragraph 3 ("assignable
invention"), and I will preserve any such assignable invention as confidential
information of the Company.
(c) Upon request, I agree to assist the Company or its nominee (at its
expense) during
and at any time subsequent to my employment in every reasonable way to obtain
for its own benefit patents and copyrights for such assignable inventions in any
and all countries, which inventions shall be and remain the sole and exclusive
property of the Company or its nominee whether or not patented or copyrighted.
I agree to execute such papers and perform such lawful acts as the Company deems
to be necessary to allow it to exercise all right, title, and interest in such
patents and copyrights.
5. EXECUTION OF DOCUMENTS.
In connection with Paragraph 4(c), I further agree to execute, acknowledge
and deliver to the Company or its nominee upon request and at its expense all
such documents, including applications for patents and copyrights and
assignments of inventions, patents and copyrights to be issued therefore, as the
Company may determine necessary or desirable to apply for and obtain letters,
patents and copyrights on such assignable inventions in any and all countries
and/or to protect the interest of the Company or its nominee in such inventions,
patents and copyrights, and to vest title thereto in the Company or its nominee.
2
<PAGE>
6. MAINTENANCE OF RECORDS.
I agree to keep and maintain adequate and current written or printed
records of all inventions made by me (in the form of notes, sketches, drawings
and as may be specified by the Company), which records shall be available to and
remain the sole property of the Company at all times.
7. OTHER OBLIGATIONS.
I acknowledge that the Company from time to time may have agreements with
other persons or with the U.S. Government or governments of other countries, or
agencies thereof, which impose obligations or restrictions on the Company
regarding inventions made during the course of work thereunder or regarding the
confidential nature of such work. During my employment with the Company, I
agree to be bound by all such obligations and restrictions and to take all
action necessary to discharge the obligations of the Company thereunder.
8. TRADE SECRETS OF OTHERS.
I represent that my performance of all the terms of this Agreement and as
an employee of the Company does not and will not breach any agreement to keep in
confidence proprietary information, knowledge or data acquired by me in
confidence or in trust prior to my employment with the Company, and I will not
disclose to the Company or induce the Company to use any confidential or
proprietary information or material belonging to any previous employer or
others. I agree not to enter into any agreement either written or oral in
conflict herewith.
9. MODIFICATION.
This Agreement may not be changed, modified, released, discharged,
abandoned or otherwise amended, in whole or in part, except by an instrument in
writing, signed by me and the Company. I agree that any subsequent change or
changes in my duties, salary, or compensation shall not affect the validity or
scope of this Agreement.
10. ENTIRE AGREEMENT.
I acknowledge receipt of this Agreement and agree that with respect to the
subject matter thereof it is my entire agreement with the Company, superseding
any previous oral or written communications, representations, understandings or
agreements with the Company or any officers or representative thereof.
11. SEVERABILITY.
In the event that any paragraph or provision of this Agreement shall be
held to be illegal or unenforceable in any jurisdiction, such paragraph or
provision shall, as to that jurisdiction, be adjusted and reformed, if possible,
in order to achieve the intent of the parties, and if such paragraph or
provision cannot be adjusted and reformed, such paragraph or provision shall,
for the purposes of that jurisdiction be voided and severed from this Agreement,
and the entire Agreement shall not fail on account thereof but shall otherwise
remain in full force and effect.
3
<PAGE>
12. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon my heirs, executors, administrators or
other legal representative and is for the benefit of the Company, its successors
and assigns. This Agreement may be assigned by the Company to any purchaser or
successor in interest to the business of the Company.
13. GOVERNING LAW.
This Agreement shall be governed by the laws of the location of the
Company's corporate headquarters, which is presently located in the State of
California; provided, however, that in the event this provision is deemed to be
unenforceable by a local judicial authority or governmental agency, then the
laws of the location of my employment shall apply.
14. COUNTERPARTS.
This Agreement may be signed in two counterparts, each shall be deemed an
original and both of which shall together constitute one agreement.
/s/ Alfred B. Castleman
----------------------------------------------
Alfred B. Castleman
PRINTRAK INTERNATIONAL INC.,
a Delaware corporation
By: /s/ Susanna Bennett
-------------------------------------------
Its: Vice President of Corporate Administration
-----------------------------------------
4
<PAGE>
EXHIBIT A
TERMINATION CERTIFICATE
This is to certify that I do not have in my possession, nor have I failed
to return any records, documents, data, specifications, drawings, blueprints,
reproductions, sketches, notes, reports, proposals, or copies of them, or other
documents or materials, equipment, or other property belonging to the Company,
its successors and assigns (hereafter referred to as "the Company").
I further certify that I have complied with and will continue to comply
with all the terms of the Employee Proprietary Information Agreement signed by
me with the Company, including the reporting of any inventions (as defined
therein) conceived or made by me covered by the Agreement.
I further agree that in compliance with the Employee Proprietary and
Confidential Information Agreement, I will preserve as confidential all trade
secrets, confidential information, knowledge, data, or other information
relating to products, processes, know-how, designs, formulas, test data,
customer lists, or other subject matter pertaining to any business of the
Company or any of its clients, customers, consultants, licensees, or affiliates.
I further certify and agree that I have been paid, and have received, all
compensation required to be paid to me at any time under Section 4 of the
Employment Agreement dated December 8, 1997 between me and the Company.
---------------------------------------
Employee's Signature
---------------------------------------
Print Name
---------------------------------------
Date
<PAGE>
PRINTRAK INTERNATIONAL INC.
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualifed Stock Option Agreement (the "Agreement") is entered into
as of December 8, 1997, by and between Printrak International Inc., a Delaware
corporation (the "Company") and Alfred B. Castleman (the "Optionee") pursuant to
a special approval by the Company's Board of Directors on December 5, 1997.
1. GRANT OF OPTION. The Company hereby grants to Optionee an option (the
"Option") to purchase all or any portion of a total of 60,000 shares (the
"Shares") of the Common Stock of the Company at a purchase price of $10.625 per
share (the "Exercise Price"), subject to the terms and conditions set forth
herein. This Option shall constitute a nonqualified stock option.
2. VESTING OF OPTION. The right to exercise this Option shall vest in
quarterly installments, and this Option shall be exercisable from time to time
in whole or in part as to any vested installment. The Optionee's right to
exercise this Option shall vest in 3,000 Shares each and every three (3) month
period commencing on December 8, 1997 and subject to the terms of this
Agreement, continuing each three (3) month period and shall be fully vested as
of December 8, 2002.
No additional shares shall vest after the date of termination of Optionee's
"Continuous Service" (as defined in Section 3 below), but this Option shall
continue to be exercisable in accordance with Section 3 hereof with respect to
that number of shares that have vested as of the date of termination of
Optionee's Continuous Service. Notwithstanding the foregoing, immediately prior
to the consummation of a Change in Control (as defined in Section 10 below), the
vesting of this Option shall accelerate as if Optionee had held such Option for
a period two years longer than actually held.
3. TERM OF OPTION. Optionee's right to exercise this Option shall
terminate upon the first to occur of the following:
a. the expiration of ten (10) years from the date of this Agreement;
b. the expiration of thirty (30) days from the date of termination
of Optionee's Continuous Service if such termination occurs for any reason other
than permanent disability or death; provided, however, that if Optionee dies
during such three-month period the provisions of Section 3(d) below shall apply;
c. the expiration of one (1) year from the date of termination of
Optionee's Continuous Service if such termination is due to permanent disability
of the Optionee (as defined in Section 22(e)(3) of the Internal Revenue Code
(the "Code"));
d. the expiration of one (1) year from the date of termination of
Optionee's Continuous Service if such termination is due to Optionee's death or
if death occurs during either the three-month or one-month period following
termination of Optionee's Continuous Service pursuant to Section 3(b) or 3(c)
above, as the case may be; or
e. a Change in Control of the Company if such options are terminated
pursuant to Section 10.
As used herein, the term "Continuous Service" means (i) employment by
either the Company or any parent or subsidiary corporation of the Company, or by
a corporation or a parent or subsidiary of a corporation issuing or assuming a
stock option in a transaction to which Section 424(a) of the Code applies, which
is uninterrupted except for vacations, illness (except for permanent disability,
as defined in Section 22(e)(3) of the Code) or leaves of absence which are
approved in writing by the Company or any of such other employer corporations,
if applicable, (ii) service as a member of the Board of Directors of the
Company, or (iii) so long as
<PAGE>
Optionee is engaged as a consultant or service provider to the Company or other
corporation referred to in clause (i) above.
4. EXERCISE OF OPTION. On or after the vesting of any portion of this
Option in accordance with Section 2 above, and until termination of this Option
in accordance with Section 3 above, the portion of this Option which has vested
may be exercised in whole or in part by the Optionee (or, after Optionee's
death, by the successor designated in Section 5 below) upon delivery of the
following to the Company at its principal executive offices:
a. a written notice of exercise which identifies this Agreement and
states the number of Shares then being purchased (but no fractional Shares may
be purchased);
b. a check or cash in the amount of the Exercise Price (or payment
of the Exercise Price in such other form of lawful consideration as the
Administrator may approve from time to time (a) cash; (b) check; (c) the
surrender of shares of Common Stock owned by the Optionee that have been held
by the Optionee for at least six (6) months, which surrendered shares shall be
valued at Fair Market Value as of the date of such exercise; (d) the Optionee's
promissory note in a form and on terms acceptable to the Administrator; (e) the
cancellation of indebtedness of the Company to the Optionee; (f) the waiver of
compensation due or accrued to the Optionee for services rendered; (g) provided
that a public market for the Common Stock exists, a "same day sale" commitment
from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise the Option and to sell a portion of the shares so purchased to pay for
the Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt
of such shares to forward the Exercise Price directly to the Company;
(h) provided that a public market for the Common Stock exists, a "margin"
commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably
elects to exercise the Option and to pledge the shares so purchased to the NASD
Dealer in a margin account as security for a loan from the NASD Dealer in the
amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits
upon receipt of such shares to forward the Exercise Price directly to the
Company; or (i) any combination of the foregoing methods of payment or any other
consideration or method of payment as shall be permitted by applicable corporate
law.
c. the Company shall have the power to withhold, or require Optionee
to remit to the Company, an amount sufficient to satisfy any applicable Federal,
state, and local tax withholding requirements with respect to any Options
exercised hereunder. To the extent permissible under applicable tax, securities
and other laws, the Administrator may, in its sole discretion and upon such
terms and conditions as it may deem appropriate, permit Optionee to satisfy his
obligation to pay any such tax, in whole or in part, up to an amount determined
on the basis of the highest marginal tax rate applicable to Optionee, by
(a) directing the Company to apply shares of Common Stock to which Optionee is
entitled as a result of the exercise of an Option or (b) delivering to the
Company shares of Common Stock owned by Optionee hereunder. The shares of
Common Stock so applied or delivered in satisfaction of the Optionee's tax
withholding obligation shall be valued at their fair market value as of the date
of measurement of the amount of income subject to withholding.
d. a letter, if requested by the Company, in such form and substance
as the Company may require, setting forth the investment intent of the Optionee,
or person designated in Section 5 below, as the case may be.
5. DEATH OF OPTIONEE; NO ASSIGNMENT. The rights of the Optionee under
this Agreement may not be assigned or transferred except by will or by the laws
of descent and distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee. Any attempt to sell, pledge, assign,
hypothecate, transfer or dispose of this Option in contravention of this
Agreement shall be void and shall have no effect. If the Optionee's Continuous
Service terminates as a result of Optionee's death, and provided Optionee's
rights hereunder shall have vested pursuant to Section 2 hereof, Optionee's
legal representative, Optionee's legatee, or the person who acquired the right
to exercise this Option by reason of the death of the Optionee (individually, a
"Successor") shall succeed to the Optionee's rights and obligations under this
Agreement. After the death of the Optionee, only a Successor may exercise this
Option.
<PAGE>
6. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.
a. Optionee represents and warrants that this Option is being
acquired by Optionee for Optionee's personal account, for investment purposes
only, and not with a view to the distribution, resale or other disposition
thereof.
b. Optionee acknowledges that the Company may issue Shares upon the
exercise of the Option without registering such Shares under the Securities Act
of l933, as amended (the "Act"), on the basis of certain exemptions from such
registration requirement. Accordingly, Optionee agrees that Optionee's exercise
of the Option may be expressly conditioned upon Optionee's delivery to the
Company of an investment certificate including such representations and
undertakings as the Company may reasonably require in order to assure the
availability of such exemptions, including a representation that Optionee is
acquiring the Shares for investment and not with a present intention of selling
or otherwise disposing thereof and an agreement by Optionee that the
certificates evidencing the Shares may bear a legend indicating such
non-registration under the Act and the resulting restrictions on transfer.
Optionee acknowledges that, because Shares received upon exercise of an Option
may be unregistered, Optionee may be required to hold the Shares indefinitely
unless they are subsequently registered for resale under the Act or an exemption
from such registration is available.
c. Optionee acknowledges that all rights and obligations connected
with this Option are set forth in this Agreement.
7. RESTRICTIVE LEGENDS. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of this Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may deem necessary or advisable.
8. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. The Company agrees
to use its reasonable best efforts to obtain from any applicable regulatory
agency such authority or approval as may be required in order to issue and sell
the Shares to the Optionee pursuant to this Option. Inability of the Company to
obtain, from any such regulatory agency, authority or approval deemed by the
Company's counsel to be necessary for the lawful issuance and sale of the Shares
hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such Shares as to which such requisite authority or
approval shall not have been obtained.
9. ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event that the
outstanding Shares of Common Stock of the Company are hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of a recapitalization, stock split,
combination of shares, reclassification, stock dividend or other change in the
capital structure of the Company, then appropriate adjustment shall be made by
the Administrator to the number of Shares subject to the unexercised portion of
this Option and to the Exercise Price per share, in order to preserve, as nearly
as practical, but not to increase, the benefits of the Optionee under this
Option.
10. MERGERS AND OTHER REORGANIZATIONS. In the event that the Company at
any time proposes to enter into any transaction approved by the Board to sell
substantially all of its assets or merge or consolidate with any other entity as
a result of which either the Company is not the surviving corporation or the
Company is the surviving corporation and the ownership of the voting power of
the Company's capital stock changes by more than 50% as a result of such
transaction, or in the event of a "Recommended Share Purchase Offer" (as defined
below) (a "Change in Control"), this Option, if not already exercisable, shall
concurrent with and conditioned upon the effective date of the proposed
transaction, be accelerated according to Section 2 hereof and the Optionee shall
have the right to exercise the Option in respect to any or all of the vested
Shares at such time. In addition, in the event of a Change in Control, this
Option shall terminate upon the effective date of such transaction unless
provision is made in writing in connection with such transaction for the
continuance or assumption of this Option or the substitution for this Option of
a new option of comparable value covering shares of a successor corporation,
with appropriate adjustments as to the number and kind of shares and the
Exercise Price, in which event this Option or the new option substituted
therefor shall continue in the manner and under the terms so provided. If such
provision is not made in such transaction, then the Administrator shall cause
written notice of the proposed
<PAGE>
transaction to be given to Optionee not less than fifteen (15) days prior to the
anticipated effective date of the proposed transaction. For purposes of this
Section 10, a "Recommended Share Purchase Offer" shall be a transaction in which
an offer is made to purchase outstanding securities of the Company constituting
more than 50% of the voting power of the Company's capital stock, which offer is
recommended to the Company's securityholders by the Company's Board.
11. NO EMPLOYMENT CONTRACT CREATED. Neither the granting of this Option
nor the exercise hereof shall be construed as granting to the Optionee any right
with respect to continuance of employment by the Company or any of its
subsidiaries. The right of the Company or any of its subsidiaries to terminate
at will the Optionee's employment at any time (whether by dismissal, discharge
or otherwise), with or without cause, is specifically reserved, subject to any
other written employment agreement to which the Company and Optionee may be a
party.
12. RIGHTS AS SHAREHOLDER. The Optionee (or transferee of this option by
will or by the laws of descent and distribution) shall have no rights as a
shareholder with respect to any Shares covered by this Option until the date of
the issuance of a stock certificate or certificates to him or her for such
Shares, notwithstanding the exercise of this Option.
13. "MARKET STAND-OFF" AGREEMENT. Optionee agrees that, if requested by
the Company or the managing underwriter of any proposed public offering of the
Company's securities, Optionee will not sell or otherwise transfer or dispose of
any Shares held by Optionee without the prior written consent of the Company or
such underwriter, as the case may be, during such period of time, not to exceed
180 days following the effective date of the registration statement filed by the
Company with respect to such offering, as the Company or the underwriter may
specify.
14. INTERPRETATION. This Option is granted by action of the Board of
Directors and shall in all respects be interpreted in accordance with the terms
hereof. The Administrator shall interpret and construe this Option, and any
action, decision, interpretation or determination made in good faith by the
Administrator shall be final and binding on the Company and the Optionee. As
used in this Agreement, the term "Administrator" shall refer to the Board of
Directors of the Company.
15. NOTICES. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed given when
delivered personally or three (3) days after being deposited in the United
States mail, as certified or registered mail, with postage prepaid, and
addressed, if to the Company, at its principal place of business, Attention:
the Chief Executive Officer, and if to the Optionee, at Optionee's most recent
address as shown in the employment or stock records of the Company.
16. ANNUAL AND OTHER PERIODIC REPORTS. During the term of this Agreement,
the Company will furnish to the Optionee copies of all annual and other periodic
financial and informational reports that the Company distributes generally to
its stockholders.
17. SEVERABILITY. Should any provision or portion of this Agreement be
held to be unenforceable or invalid for any reason, the remaining provisions and
portions of this Agreement shall be unaffected by such holding.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"PRINTRAK INTERNATIONAL INC." "OPTIONEE"
By: /s/ Susanna Bennett /s/ Alfred B. Castleman
-------------------------------- ---------------------------------------
Susanna Bennett Alfred B. Castleman
Its: Corporate Secretary SS#:
<PAGE>
AMENDMENT TO LEASE
I. PARTIES AND DATE.
This Amendment to Lease ("Amendment") dated November 12, 1997, is by and
between BARRY B. WHITE ("Lessor"), and TFP INC., a South Carolina corporation
("Lessee").
II. RECITALS.
Lessor and Lessee entered into that certain Lease Agreement dated as of
July 23, 1996 ("Lease"), for the premises ("Premises") commonly known as 110
Frederick Street, Greenville, South Carolina, as more particularly described in
the Lease.
Landlord and Tenant desire to modify the Lease in the manner provided in
the next section as "Modifications," which modifications shall be deemed
effective on the date of this Amendment as indicated above.
III. MODIFICATIONS.
Lessor and Lessee hereby agree that the Lease shall be modified and/or
supplemented as follows:
A. TERM . Section 2 of the Lease is hereby modified to provide that
Lessee shall have the right to terminate the Lease at any time upon giving
notice in writing of such election to Lessor, which termination shall be
effective on the date (the "Effective Date") that is one hundred eighty (180)
days after the date Lessee sends such termination notice, but the Effective Date
can be no earlier than August 7, 1998. Should Lessee elect to terminate the
Lease, Lessee shall surrender the Premises on or before the Effective Date in
accordance with Section 9 of the Lease. Lessee shall pay all rental and other
charges due under the Lease up to and including the Effective Date. This option
to terminate may be assigned by Lessee to any assignee of the Lease or sublessee
of the Premises
B. RENTAL. Section 4 of the Lease shall be modified to provide that
effective upon the first day of the month following the date of this Amendment
and on the first day of each month thereafter, Lessee shall pay to Lessor as
rental for the Premises, during the term of this Lease, an amount equal to
Sixteen Thousand Six Hundred Sixty Six and 67/100 Dollars ($16,666.67) per
month, being an aggregate annual amount of Two Hundred Thousand and No/100
Dollars ($200,000.00).
C. MAINTENANCE AND REPAIR. Section 6 and Exhibit D of the Lease shall be
modified to provide that Lessee shall, at its sole cost and expense, maintain
and repair, in good order, condition and repair as founded on May 7th, 1997,
only the interior, non-structural portions of the space occupied by Lessee in
the building on the Premises. Lessor shall, at its sole cost and expense,
maintain and repair, in good order, condition and repair, the remainder of the
Premises including, but not limited to, the parking lots, roof, exterior and
structural portions of the Premises and all buildings and other improvements
thereon.
IV. GENERAL.
A. EFFECT OF AMENDMENTS. Except to the extent the Lease is modified by
this Amendment, the remaining terms and provisions of the Lease shall remain
unmodified and in full force and effect.
B. ENTIRE AGREEMENT. This Amendment embodies the entire understanding
between Lessor and Lessee with respect to its subject matter and can be changed
only by an instrument in writing signed by Lessor and Lessee.
<PAGE>
C. COUNTERPARTS. If this Amendment is executed in counterparts, each
counterpart shall be deemed an original.
D. DEFINED TERMS. All words commencing with initial capital letters in
this Amendment and not defined in this Amendment, but defined in the Lease,
shall have the same meaning in this Amendment as in the Lease.
E. ATTORNEYS' FEES. In the event that either Lessor or Lessee shall
institute any action or proceeding against the other relating to the provisions
of this Amendment or the Lease or any default thereunder, the party not
prevailing in such action or proceeding shall reimburse the prevailing party for
its actual attorneys' fees, and all fees, costs and expenses incurred in
connection with such action or proceedings including, without limitation, any
post-judgment fees, costs or expenses incurred on any appeal or bankruptcy
action or in collection of any judgment.
LESSOR LESSEE
TFP INC.,
/s/ BARRY B. WHITE a South Carolina corporation
- -----------------------------------
Barry B. White
By: /s/ GUNNAR HILDEMANN
----------------------------------
Its: General Manager
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Printrak
International, Inc. on Form S-3 of our report dated June 26, 1997 (except for
Note 16 as to which the date is September 9, 1997) on the restated consolidated
financial statements of Printrak International, Inc. as of March 31, 1997 and
1996 and for each of the three years in the period ended March 31, 1997,
appearing in the Prospectus, which is a part of this Registration Statement and
to the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Costa Mesa, California
December 18, 1997
