<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 9, 1997
-----------------
PRINTRAK INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
Delaware 000-20719 33-0070547
-----------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No)
1250 North Tustin Avenue, Anaheim, California 92807
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 238-2000
---------------
Not Applicable
--------------
(Former name or former address, if changed since last report)
Page 1 of 23
Exhibit Index on Page 5
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 9, 1997, the Registrant completed the acquisition of SunRise
Imaging, a California corporation ("SunRise"), pursuant to an Agreement of
Merger dated August 29, 1997 (the "Merger Agreement") among the Registrant,
SunRise Acq. Corp., a California corporation and wholly-owned subsidiary of the
Registrant, and SunRise.
On such date, SunRise Acq. Corp. was merged with and into SunRise, with
SunRise surviving such merger and becoming a wholly-owned subsidiary of the
Registrant. In connection with such merger, the outstanding shares of Common
Stock of SunRise were converted into the right to receive an aggregate of
$10,175,000, plus an additional amount of up to $725,000 to be determined
based on the revenues of SunRise for fiscal 1997. The terms of the
additional consideration provided an additional cash payment of $50,000 for
every $100,000 of revenue earned in excess of a calendar year revenue total
of $11,500,000, and an additional cash payment of $45,000 for every $100,000
of revenue earned in excess of $12,500,000, but not to exceed $13,000,000,
for the calendar year ended December 31, 1997. The purchase price and all
other terms of the transaction were determined by arms-length negotiations
between the parties.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
- Independent Auditors' Reports
- Consolidated Balance Sheets as of December 31, 1995 and 1996
- Consolidated Statements of Operations for the years ended
December 31, 1995 and 1996
- Consolidated Statement of Stockholders' Equity (Deficit) for
the years ended December 31, 1995 and 1996
- Consolidated Statements of Cash Flow for the years ended
December 31, 1995 and 1996
- Notes to Consolidated Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
- PRO FORMA consolidated Balance Sheet as of June 30,
1997 (unaudited)
- PRO FORMA consolidated Statements of Operations for the
year ended March 31, 1997 and the three months ended
June 30, 1997 (unaudited)
<PAGE>
(c) EXHIBITS.
2.1 Agreement and Plan of Merger dated August 29, 1997
(incorporated by reference to Exhibit 2.1 of the
Registrant's Form 8-K filed on September 24, 1997)
23.1 Report of Independent Accountants
99.1 Press Release dated September 2, 1997 (incorporated by
reference to Exhibit 99.1 of the Registrant's Form 8-K filed
on September 24, 1997)
99.2 Press Release dated September 10, 1997 (incorporated by
reference to Exhibit 99.2 of Registrant's Form 8-K filed on
September 24, 1997).
99.3 Financial Statements of SunRise described in Item 7(a) above
99.4 PRO FORMA Financial Statements of SunRise described in Item
7(b) above
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRINTRAK INTERNATIONAL INC.
Date: November 24, 1997 By: /s/ Richard M. Giles
------------------------------------
Richard M. Giles
Chairman of the Board, Chief Executive
Officer and President
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
2.1 Agreement and Plan of Merger dated August 29, 1997 --
(incorporated by reference to Exhibit 2.1 of the
Registrant's Form 8-K filed on August 24, 1997)
23.1 Report of Independent Accountants
99.1 Press Release dated September 2, 1997 (incorporated --
by reference to Exhibit 99.1 of the Registrant's Form
8-K filed on September 24, 1997)
99.2 Press Release dated September 10, 1997 (incorporated --
by reference to Exhibit 99.2 of Registrant's Form 8-K
filed on September 24, 1997).
99.3 Financial Statements of SunRise described in Item 7(a)
above 8
99.3 PRO FORMA Financial Statements of SunRise described in
Item 7(b) above 19
<PAGE>
[LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
SunRise Imaging, Inc.:
We have audited the accompanying balance sheets of SunRise Imaging, Inc. as
of December 31, 1996 and 1995 and the related statements of operations,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SunRise Imaging, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND LLP
San Jose, California
March 28, 1997
<PAGE>
SUNRISE IMAGING, INC.
BALANCE SHEETS, December 31, 1996 and 1995
---------
ASSETS 1996 1995
------ ------
Current assets:
Cash $ 1,233,657 $ 364,163
Accounts receivable, less allowance for doubtful
accounts of $32,200 in 1996 and $20,000 in 1995 1,314,768 914,103
Inventories 899,860 735,482
Deferred tax asset 136,219 72,429
Prepaid expenses and other 94,054 61,442
----------- -----------
Total current assets 3,678,558 2,147,619
Property and equipment, net 140,430 62,938
Other assets 6,881 6,642
----------- -----------
Total assets $ 3,825,869 $ 2,217,199
----------- -----------
----------- -----------
LIABILITIES
Current liabilities:
Notes payable to shareholders $ 18,131
Accounts payable $ 722,754 546,674
Accrued liabilities 280,558 481,978
Taxes payable 539,982 327,263
Deferred revenue 104,124 166,768
----------- -----------
Total current liabilities 1,647,418 1,540,814
----------- -----------
Commitments (Note 7)
SHAREHOLDERS' EQUITY
Common stock, no par value:
Authorized: 5,000,000 shares;
Issued and outstanding: 3,359,161 shares in 1996
and 2,981,888 shares in 1995 30,393 3,297
Retained earnings 2,148,058 673,088
----------- -----------
Total shareholders' equity 2,178,451 676,385
----------- -----------
Total liabilities and shareholders' equity $ 3,825,869 $ 2,217,199
----------- -----------
----------- -----------
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUNRISE IMAGING, INC.
STATEMENTS OF OPERATIONS
---------
Year Ended December 31,
-----------------------
1996 1995
------ ------
Revenues:
Product $ 8,625,042 $ 5,668,873
Service 382,460 413,240
----------- -----------
Total revenues 9,007,502 6,082,113
----------- -----------
Operating Costs and Expenses:
Product 2,710,461 2,087,667
Service 479,557 383,485
Research and development 1,120,770 956,200
Selling and administrative 2,363,465 1,748,534
----------- -----------
Total operating costs and expenses 6,674,253 5,175,886
----------- -----------
Income from operations 2,333,249 906,227
----------- -----------
Interest and other expense, net 4,560 7,023
----------- -----------
Income before provision for
income taxes 2,328,689 899,204
Provision for income taxes 853,719 287,157
----------- -----------
Net income $ 1,474,970 $ 612,047
----------- -----------
----------- -----------
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUNRISE IMAGING, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1996 and 1995
---------
<TABLE>
<CAPTION>
Common Stock
------------ Retained
Shares Amount Earnings Total
------ ------ -------- -----
<S> <C> <C> <C> <C>
Balances, January 1, 1995 2,880,000 $ 1,403 $ 61,041 $ 62,444
Issuance of common stock 97,000 1,650 1,650
Issuance of common stock upon exercise of
stock options 4,888 244 244
Net income 612,047 612,047
----------- ----------- ----------- -----------
Balances, December 31, 1995 2,981,888 3,297 673,088 676,385
Issuance of common stock upon exercise of
warrants 184,220 1,842 1,842
Issuance of common stock upon exercise of
stock options 193,053 25,254 25,254
Net income 1,474,970 1,474,970
----------- ----------- ----------- -----------
Balances, December 31, 1996 3,359,161 $ 30,393 $ 2,148,058 $ 2,178,451
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUNRISE IMAGING, INC.
STATEMENTS OF CASH FLOWS
---------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,474,970 $ 612,047
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 48,005 33,744
Provision for inventory obsolescence 5,096 47,079
Provision for doubtful accounts 12,200 13,000
Deferred tax asset (63,790) (70,898)
Change in operating assets and liabilities:
Accounts receivable (412,865) (254,986)
Inventories (189,202) (296,510)
Prepaid and other assets (32,851) 4,142
Accounts payable 176,080 (63,175)
Accrued liabilities (201,420) 67,629
Taxes payable 212,719 273,800
Deferred revenues (62,644) 76,090
---------- ---------
Net cash provided by operating activities 966,298 441,962
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment (105,769) (19,693)
---------- ---------
Net cash used in investing activities (105,769) (19,693)
---------- ---------
Cash flows from financing activities:
Repayment of note payable to shareholder (18,131) (60,000)
Proceeds from issuance of common stock 27,096 1,894
---------- ---------
Net cash provided by (used in) financing activities 8,965 (58,106)
---------- ---------
Net increase in cash 869,494 364,163
Cash at beginning of the year 364,163
---------- ---------
Cash at end of year $1,233,657 $ 364,163
---------- ---------
---------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 6,916 $ 5,878
Cash paid for taxes $ 705,139 $ 57,323
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Other receivables offset against notes payable to shareholder $ 5,000
Transfer of inventories to fixed assets $ 19,728
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SUNRISE IMAGING, INC.
NOTES TO FINANCIAL STATEMENTS
---------
1. DESCRIPTION OF BUSINESS:
SunRise Imaging, Inc. (the Company) develops, manufactures and markets
multi-format, high performance microfilm scanners which perform automated,
robotic conversion of film to digital images. The Company's products are
sold primarily to distributors and end-users worldwide.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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 amount 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 reported period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
INVENTORIES:
Inventories are stated at the lower of cost (first-in, first-out basis) or
market.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Equipment is depreciated using
the straight-line method over the estimated useful lives of the assets,
with a range from three to five years.
REVENUE RECOGNITION:
Revenue from product sales is recognized upon passage of title on the
product. Maintenance revenues are recognized ratable over the term of the
support period, which is typically twelve months. Training revenues
generally are recognized when the services are performed.
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are expensed as incurred.
Continued
<PAGE>
SUNRISE IMAGING, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
---------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
ADVERTISING COSTS:
Advertising costs are charged to operations as incurred. Advertising costs
for the years ended December 31, 1996 and 1995 were $296,636 and $167,068,
respectively.
ACCOUNTING FOR INCOME TAXES:
Income taxes are accounted for under the liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of the existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
STOCK-BASED COMPENSATION:
Statement of Financial Accounting standards No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation," which is effective for the
Company's financial statements for fiscal years beginning after December 5,
1995, allows companies to either account for stock-based compensation under
the new provisions of SFAS No. 123 or under the provisions of Accounting
Principles Board Opinion No. 25 (APB No. 25), "Accounting for Stock Issued
to Employees," but requires pro forma disclosure in the footnotes to the
financial statements as if the measurement provisions of SFAS No. 123 had
been adopted. The Company has elected to account for its stock based
compensation in accordance with the provisions of APB No. 25 and present
pro forma disclosures required by SFAS No. 123.
CERTAIN RISKS AND CONCENTRATIONS:
The Company performs period credit evaluations of their customers'
financial condition. Credit losses have consistently been within
management's expectations. Two customers accounted for 25% and 12% of
sales in 1996 and 37% and 10% of sales in 1995. At December 31, 1996, two
customers accounted for 24% and 13% of the accounts receivable balance and,
at December 31, 1995, accounted for 49% and 12% of the accounts receivable.
Substantially all of the Company's cash is held by two financial
institutions.
The market for microfilm scanners, is subject to rapid technological
change. As a result, the Company must continually anticipate and adapt its
products to emerging products and evolving consumer preferences. The
introduction of new products and technologies can render existing products
obsolete.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
Carrying amounts of certain of the Company's financial instruments
including cash, accounts receivable, accounts payable, notes payable, taxes
payable and accrued liabilities approximate fair value due to their short
maturities.
Continued
<PAGE>
SUNRISE IMAGING, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
---------
3. INVENTORIES:
Inventories consist of the following:
December 31,
----------------------------
1996 1995
---------- ----------
Raw materials $ 484,342 $ 397,791
Work-in-progress 159,419 144,648
Finished goods 256,099 193,043
---------- ----------
$ 899,860 $ 735,482
---------- ----------
---------- ----------
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
December 31,
----------------------------
1996 1995
---------- ----------
Computers and equipment $ 197,486 $ 80,457
Furniture and fixtures 37,384 28,916
Leasehold improvements 10,304 10,304
---------- ----------
245,174 119,677
Less accumulated depreciation (104,744) (56,739)
---------- ----------
$ 140,430 $ 62,938
---------- ----------
---------- ----------
5. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
December 31,
----------------------------
1996 1995
---------- ----------
Accrued payroll and related items $ 228,246 $ 344,597
Customer deposits 26,890 117,235
Other 25,422 20,146
----------- ----------
$ 280,558 $ 481,978
----------- ----------
----------- ----------
6. BANK DEBT:
As of December 31, 1996, the Company's revolving line of credit with a bank
provides for maximum borrowing of $500,000. The line of credit, which
expires on September 30, 1997, is collateralized by the Company's assets.
The interest rate is the bank's prime lending rate plus 2% (10.25% as of
December 31, 1996). Per the terms of the line of credit, the Company is
required to maintain certain financial ratios and to comply with other
financial covenants. In the event of a default (as defined in the
agreement), the bank has the right to accelerate repayment of the
outstanding balance. No borrowing was outstanding at December 31, 1996.
Continued
<PAGE>
SUNRISE IMAGING, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
---------
7. LEASE COMMITMENTS:
OPERATING LEASE:
The Company leases facilities and equipment under noncancelable operating
lease agreements. The leases expire through 2001, subject to renewal
options under certain agreements. At December 31, 1996, future minimum
lease payments under these noncancelable operating leases are as follows:
1997 $ 8,540
1998 1,494
1999 1,494
2000 1,494
---------
$ 13,022
---------
---------
Rental expenses for operating leases were approximately $56,258 and $58,900
for the years ended December 31, 1996 and 1995, respectively.
8. SHAREHOLDERS' EQUITY:
WARRANTS:
The Company has warrants outstanding to purchase 12,360 shares of the
Company's common stock generally exercisable at $0.01 per share. The
warrants are generally issued to consultants in return for services
rendered in accordance with the consulting agreements and are vested as and
when issued. The warrants generally expire seven years from date of
issuance. At December 31, 1996, warrants to purchase 12,360 shares of
common stock were exercisable.
STOCK OPTION PLAN:
In December 1994, the Company established the 1994 Key Employee Stock
Option Plan (the Plan), which provides for both incentive stock options and
nonqualified stock options, to be granted to employees and consultants
(except that consultants may only receive nonqualified options). Under the
Plan, both incentive and nonqualified stock options allow for the purchase
of common stock at prices not less than 100% of the fair market value as
determined by the Board of Directors at the date of grant. If at any time
the Company grants an option to an optionee who owns more than 10% of the
total combined voting power of all classes of stock of the company, then
the option price shall be at least 110% of the fair market value at the
date of grant. All options must be exercised within ten years form the
date of grant. Options vest as determined by the Board of Directors,
generally over three years.
Continued
<PAGE>
SUNRISE IMAGING, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
---------
8. SHAREHOLDERS' EQUITY, continued
Stock Option Plan, continued:
Activity under the Plan is as follows:
<TABLE>
<CAPTION>
Outstanding Options
Weighted
Average
Shares Exercise
Available Number Price Price Per
for Grant of Shares Per Share Total Share
-------- -------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1995 670,500 129,500 $0.05 $ 6,475 $0.05
Options granted (277,000) 277,000 $0.05 13,850 $0.05
Options exercised (4,888) $0.05 (244) $0.05
Options Canceled 8,112 (8,112) $0.05 (406) $0.05
-------- -------- --------
Balances, December 31, 1996 401,612 393,500 $0.05 $ 19,675 $0.05
Options granted (548,505) 548,505 $0.05-$0.25 115,926 $0.21
Options exercised (193,053) $0.05-$0.25 (25,254) $0.13
Options canceled 198,379 (198,379) $0.05-$0.25 (11,319) $0.06
-------- -------- --------
Balances, December 31, 1996 51,486 550,573 $0.05-$0.25 $ 99,028 $0.18
-------- -------- --------
-------- -------- --------
</TABLE>
At December 31, 1996, options to purchase 137,381 shares of common stock
were exercisable.
No compensation cost has been recognized for the Plan in the financial
statements. Had compensation cost for the Plan been determined based on
the fair value of the options at the grant date for awards in 1995 and 1996
consistent with the provisions of SFAS No. 123, it would not result in a
significant difference from the reported net income for 1996 and 1995.
However, such difference may not be representative of future compensation
cost because options vest over several years and additional grants are made
each year.
9. INCOME TAXES
The components of the provision for (benefit from) income taxes comprise:
December 31,
-------------------
1996 1995
---- ----
Current
Federal $ 730,426 $ 295,342
State 203,371 64,244
--------- ---------
933,797 359,586
Deferred
Federal (75,663) (63,894)
State (4,415) (8,535)
--------- ---------
$ 853,719 $ 287,157
--------- ---------
--------- ---------
Continued
<PAGE>
SUNRISE IMAGING, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
---------
9. INCOME TAXES, continued
The tax effects of the significant temporary differences which comprise the
deferred tax assets are as follows:
December 31,
-------------------
1996 1995
---- ----
Current-deferred tax assets:
Accrued liabilities $ 77,532 $ 29,006
Accrued payroll and related items 24,793 10,035
Inventories and accounts
receivable reserves 45,038 38,094
Long-term deferred tax assets:
Depreciation (11,144) (4,706)
-------- --------
$136,219 $ 72,429
-------- --------
-------- --------
Although realization of the deferred tax assets is not assured, the Company
believes that it is more likely than not that all of the deferred tax
assets will be realized. The amount of the deferred tax assets considered
realizable could be reduced if estimates of future taxable income decline
significantly.
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate of 34% to income before provision for
income taxes as follows:
1996 1995
------ ------
Statutory provision 34 % 34 %
State tax, net of federal benefits 6 6
Tax credits (2) (4)
Benefit of foreign sales corporation (2) (1)
Other 1 (3)
------ ------
37 % 32 %
------ ------
------ ------
10. RELATED PARTY TRANSACTIONS:
During 1996 and 1995, the Company incurred consulting fees of approximately
$770,000 and $167,000, respectively, of which approximately $331,000 and
$90,000 is payable at December 31, 1996 and 1995, respectively, to two
directors and to two consulting companies which are owned by individuals
who are shareholders and directors of the Company.
Continued
<PAGE>
SUNRISE IMAGING, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
---------
11. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION:
The Company operates primarily on one business segment, comprising the
microfilm scanners industry.
The Company's export revenues are all denominated in U.S. dollars and
account for 42% and 56% of total revenues for fiscal years 1996 and 1995,
respectively. The Company's export revenues were as follows:
Year Ended December 31,
1996 1995
------------ -----------
Europe $ 1,016,524 $ 1,089,062
Asia 2,457,087 2,269,862
Other 328,853 74,706
------------ -----------
$ 3,802,464 $ 3,433,630
------------ -----------
------------ -----------
Continued
<PAGE>
SUNRISE IMAGING, INC.
INTERIM FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC").
These consolidated financial statements reflect all adjustments, which are
normal and recurring in nature, and which in the opinion of management are
necessary to a fair statement of the financial position and results of
operations as of and for the six month periods ended June 30, 1996 and 1997.
The results of operations for interim periods are not necessarily indicative
of results of operations for the entire year.
These financial statements should be read in conjunction with the financial
statements and related footnotes presented in this report on Form 8K/A.
SUNRISE IMAGING INC.
BALANCE SHEET
AS OF JUNE 30, 1997 AND JUNE 30, 10996
<TABLE>
<CAPTION>
As of As of
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents 1,102,000 266,000
A/R 1,467,000 1,180,000
Inventories, net 658,000 800,000
Prepaid expenses and other current assets 25,000 20,000
Deferred income tax 136,000 72,000
--------- ---------
Total Current Assets 3,388,000 2,338,000
Other long-term assets 13,000 7,000
Property, Plant & Equipment 179,000 88,000
Deferred income tax - -
--------- ---------
Total Assets 3,580,000 2,433,000
--------- ---------
--------- ---------
Current Liabilities:
Accounts payable 192,000 324,000
Other accrued liabilities 378,000 346,000
Current portion of long-term debt 28,000 -
Deferred revenue 381,000 411,000
Income taxes payable 58,000 371,000
--------- ---------
Total Current Liabilities 1,037,000 1,452,000
Other long-term liabilities - -
--------- ---------
Total Liabilities 1,037,000 1,452,000
Common Stock 34,000 7,000
Retained Earnings 2,509,000 974,000
--------- ---------
Total Liabilities & Equity 3,580,000 2,433,000
--------- ---------
--------- ---------
</TABLE>
<PAGE>
SUNRISE IMAGING INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Six Months Six Months
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
Revenue:
System 4,133,000 3,437,000
Maintenance 287,000 204,000
--------- ---------
Total Revenue 4,420,000 3,641,000
Cost of Revenue:
System 1,538,000 1,318,000
Maintenance 299,000 193,000
--------- ---------
Total Cost of Revenue 1,837,000 1,511,000
Gross Profit 2,583,000 2,130,000
Operating Expenses:
Research, development and engineering 466,000 517,000
Selling, general and administrative 1,393,000 1,134,000
--------- ---------
Total Operating Expenses 1,859,000 1,651,000
Operating Income 724,000 479,000
Interest Expense - -
Other [Income] Expense (4,000) 8,000
--------- ---------
Income before provision for income taxes 728,000 471,000
Provision for Income taxes 368,000 170,000
--------- ---------
Net Income 360,000 301,000
--------- ---------
--------- ---------
</TABLE>
<PAGE>
SUNRISE IMAGING INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 360,000 301,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,000 8,000
Changes in operating assets and liabilities:
Accounts receivable, net (94,000) (246,000)
Inventories, net 242,000 (65,000)
Prepaid expenses and other assets 11,000 23,000
Accounts payable (12,000) 97,000
Accrued liabilities (371,000) (351,000)
Sales tax payable (23,000) (6,000)
Income taxes payable (482,000) 44,000
Customer advances 44,000 69,000
Deferred revenue 206,000 58,000
Leases payable 28,000 --
------------- -------------
Net cash used in operating activities (82,000) (68,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (48,000) (33,000)
Deposits (5,000) --
------------- -------------
Net cash used in investing activities (53,000) (33,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 3,000 3,000
------------- -------------
3,000 3,000
NET DECREASE IN CASH AND CASH EQUIVALENTS (132,000) (98,000)
CASH AND CASH EQUIVALENTS, beginning of year 1,234,000 364,000
------------- -------------
CASH AND CASH EQUIVALENTS, end of year 1,102,000 266,000
------------- -------------
------------- -------------
</TABLE>
<PAGE>
PRINTRAK INTERNATIONAL INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Printrak Sunrise Combined Pro Forma Pro Forma
Adjustments
<S> <C> <C> <C> <C> <C>
Revenues:
System 54,728,000 8,395,000 63,123,000 63,123,000
Maintenance 10,855,000 437,000 11,292,000 11,292,000
---------- --------- ---------- ----------
Total Revenues 65,583,000 8,832,000 74,415,000 74,415,000
Cost of Revenues:
System Cost of Revenue 28,111,000 2,421,000 30,532,000 30,532,000
Maintenance Cost of Revenue 6,032,000 577,000 6,609,000 6,609,000
---------- --------- ---------- ----------
Total Cost of Revenue 34,143,000 2,998,000 37,141,000 37,141,000
Gross Profit 31,440,000 5,834,000 37,274,000 37,274,000
Operating Expenses:
Research, development and engineering 10,859,000 1,178,000 12,037,000 12,037,000
Selling, general and administrative 13,861,000 2,387,000 16,248,000 332,000 d 16,580,000
---------- --------- ---------- -------- ----------
Total operating expenses 24,720,000 3,565,000 28,285,000 332,000 28,617,000
Operating income 6,720,000 2,269,000 8,989,000 (332,000) 8,657,000
Amortization of deferred credit -
Foreign currency (loss) (144,000) - (144,000) (144,000)
Interest (expense) income (86,000) (7,000) (93,000) (350,000)e (443,000)
Other income (expense) 283,000 (47,000) 236,000 236,000
---------- --------- ---------- -------- ----------
Total other income, net 53,000 (54,000) (1,000) (350,000) (351,000)
Income before provision for income taxes 6,773,000 2,215,000 8,988,000 (682,000) 8,306,000
Provision (benefit) for income taxes 2,141,000 853,000 2,994,000 (218,000)f 2,776,000
---------- --------- ---------- -------- ----------
Net income 4,632,000 1,362,000 5,994,000 (464,000) 5,530,000
---------- --------- ---------- -------- ----------
---------- --------- ---------- -------- ----------
Net Income per share .42 0.50
---------- ----------
---------- ----------
Weighted average shares outstanding 10,963,000 10,963,000
---------- ----------
---------- ----------
</TABLE>
<PAGE>
PRINTRAK INTERNATIONAL INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Printrak Sunrise Combined Pro Forma Pro Forma
Adjustments
<S> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalent 2,979,000 1,102,000 4,081,000 4,081,000
Short-term investments 5,162,000 - 5,162,000 (5,000,000) a 162,000
A/R including unbilled of $5,315,000 24,632,000 1,467,000 26,099,000 26,099,000
Inventories-Net 4,447,000 658,000 5,105,000 5,105,000
Prepaid expenses and other current assets 356,000 25,000 381,000 381,000
Deferred income tax 955,000 136,000 1,091,000 1,091,000
---------- ---------- ---------- ---------- ----------
Total current assets 38,531,000 3,388,000 41,919,000 (5,000,000) 36,919,000
Other Long-term Assets 2,305,000 13,000 2,318,000 1,732,000 c 4,050,000
Property, Plant & Equipment 5,412,000 179,000 5,591,000 5,591,000
Deferred Income Tax 2,866,000 - 2,866,000 55,000 f 2,921,000
---------- ---------- ---------- ---------- ----------
Total Assets 49,114,000 3,580,000 52,694,000 (3,213,000) 49,481,000
Current Liabilities:
Accounts payable 3,867,000 192,000 4,059,000 4,059,000
Other accrued liabilities 6,105,000 378,000 6,483,000 240,000 b 6,958,000
235,000 b
Current portion of long-term debt 353,000 28,000 381,000 381,000
Deferred revenue 3,571,000 381,000 3,952,000 3,952,000
Income taxes payable 11,000 58,000 69,000 69,000
---------- ---------- ---------- ---------- ----------
Total current liabilities 13,907,000 1,037,000 14,944,000 475,000 15,419,000
Long-term Debt, less current portion 760,000 - 760,000 5,175,000 a 5,935,000
Other Long-term Liabilities 159,000 - 159,000 159,000
---------- ---------- ---------- ---------- ----------
Total Liabilities 14,826,000 1,037,000 15,863,000 5,650,000 21,513,000
Stockholders' Equity:
Preferred stock $.0001 par value; 5,000,000 shares
authorized; not shares outstanding
Common stock $.0001 par value; 20,000,000 shares
authorized; 8,723,000 shares issued and
outstanding 1,000 34,000 35,000 (34,000) 1,000
Additional paid-in capital 16,940,000 16,940,000 16,940,000
Retained earnings 17,581,000 2,509,000 20,090,000 (8,829,000) b,c 11,261,000
Note receivable from stockholder (300,000) - (300,000) (300,000)
Cumulative foreign exchange translation adjustment 66,000 - 66,000 66,000
---------- ---------- ---------- ---------- ----------
Total Liabilities & Stockholder's Equity 49,114,000 3,580,000 52,694,000 (3,213,000) 49,481,000
</TABLE>
<PAGE>
PRINTRAK INTERNATIONAL INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Printrak Sunrise Combined Pro Forma Pro Forma
Adjustments
<S> <C> <C> <C> <C> <C>
REVENUES:
System 12,406,000 2,891,000 15,297,000 15,297,000
Maintenance 2,856,000 144,000 3,000,000 3,000,000
---------- --------- --------- -------- ----------
Total Revenues 15,262,000 3,035,000 18,297,000 18,297,000
COST OF REVENUES:
System 6,350,000 1,072,000 7,422,000 7,422,000
Maintenance 1,625,000 131,000 1,756,000 1,756,000
---------- --------- --------- -------- ----------
Total Cost of Revenues 7,975,000 1,203,000 9,178,000 9,178,000
Gross Profit 7,287,000 1,832,000 9,119,000 9,119,000
OPERATING EXPENSES:
Research, development and engineering 2,590,000 189,000 2,779,000 2,779,000
Selling, general and administrative 3,810,000 675,000 4,485,000 83,000 d 4,568,000
---------- --------- --------- -------- ----------
Total operating expenses 6,400,000 864,000 7,264,000 83,000 7,347,000
Operating income 887,000 968,000 1,855,000 (83,000) 1,772,000
Interest expense 87,500 e 87,500
Other (income) expense 804,000 (54,000) 750,000 750,000
---------- --------- --------- -------- ----------
Income before provision for income taxes 83,000 1,022,000 1,105,000 (170,500) 934,500
Provision (benefit) for income taxes 29,000 368,000 397,000 (55,000)f 342,000
---------- --------- --------- -------- ----------
Net income 54,000 654,000 708,000 (115,500) 592,500
Net income per share .00 0.05
---------- ----------
---------- ----------
Weighted average shares outstanding 11,742,000 11,742,000
---------- ----------
---------- ----------
</TABLE>
<PAGE>
PRINTRAK INTERNATIONAL INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 1997 AND THE PERIOD ENDED JUNE 30, 1997
(UNAUDITED)
1. Unaudited Pro Forma Consolidated Financial Information
On September 9, 1997 Printrak International Inc. ("Printrak") acquired all
outstanding shares of SunRise Imaging, and following on September 14, 1997, cash
consideration of $10,175,000 was exchanged to consummate the transaction. The
unaudited pro forma consolidated statements of income for the year ended March
31, 1997 and the three months ended June 30, 1997 and unaudited pro forma
consolidated balance sheet as of June 30, 1997 give effect on a purchase
accounting basis to the acquisition of 100% of the outstanding common stock of
SunRise by Printrak. The year-end of SunRise Imaging has been conformed to
the Company's fiscal year end for all pro forma financial statements
presented.
The pro forma consolidated statement of income for the fiscal year ended
March 31, 1997 and the three months ended June 30, 1997 assumes that the
acquisition occurred at April 1, 1996. The pro forma consolidated balance sheet
as of June 30, 1997 assumes that the acquisition occurred on June 30, 1997. The
pro forma consolidated statement of income and balance sheet do not purport to
represent the results of operations or financial position of the Company had the
transactions and events assumed therein occurred on the dates specified, nor are
they necessarily indicative of the results of operations that may be achieved in
the future. The pro forma consolidated financial information is based upon
certain assumptions and adjustments described in the notes to the pro forma
financial statements. The pro forma consolidated financial information should
be read in conjunction with the historical statements, and related notes, of
Printrak, included in its previously filed Annual Report on Form 10-K for the
year ended March 31, 1997, and SunRise, included in this report on Form 8-K.
In accordance with FASB Interpretation No. 4, the Company is required to
write-off the amount allocated to in-process research and development acquired
in the acquisition of $5,900,000. This write-off was reflected in the period in
which the acquisition was consummated and has been reflected as a reduction in
retained earnings in the pro forma consolidated balance sheet at June 30, 1997,
but has not been reflected in the pro forma consolidated statement of income, as
it is a material nonrecurring charge which resulted directly from the
acquisition.
2. The allocation of the $10,175,000 purchase price for SunRise Imaging is
allocable to the specific indentifiable tangible and intangible assets and
liabilities as follows:
<TABLE>
<S> <C>
Current assets $3,388,000
Tangible long-term assets 192,000
Liabilities assumed (1,037,000)
In-Process research and development 5,900,000
Existing technology 300,000
Workforce value 440,000
Goodwill 992,000
----------
10,175,000
</TABLE>
3. Pro Forma Adjustments
a. This adjustment records the purchase price of the acquisition. Upon
the Company's purchase of SunRise Imaging, the purchase price of
$10,175,000 was funded with $5,000,000 in cash and $5,175,000 of
additional debt, funded through the Company's revolving line of
credit. Interest is payable monthly at either the bank's reference
rate or the bank's LIBOR rate, plus 1.75%, with principal due
July 31, 1999. The bank's reference rate and LIBOR rate at
March 31, 1997 were 8.5% and 5.4375%, respectively. As the Company has
traditionally utilized the LIBOR option, an approximate interest rate
of 7% was used in the pro forma calculations.
b. Certain purchase accounting adjustments were recorded as Printrak has
estimated it will incur certain acquisition related expenses consisting
of severance and facility closure costs for a research and development
facility in Boise, Idaho. The severance related costs of $235,000 are
attributable to employees of the Company's Boise, Idaho research and
development facility which will be closed by December 31, 1997.
Additionally, the Company has estimated the costs to close this
facility at $240,000.
c. Adjustment records the effect of the write-off of acquired in-process
research and development. Additionally, the historical stockholders'
equity of SunRise is eliminated and the the excess of purchase price
over net tangible assets and acquired in-process research and
development is recorded as intangible assets.
Intangible assets:
Value of existing technology $ 300,000
Workforce Value 440,000
Goodwill 992,000
----------
$1,732,000
The purchase price was allocated based on management's estimates and
projections of future cash flows. The valuation method used to value
the in-process and existing technology was the income approach,
otherwise known as the discounted cash flow method. To value the
workforce, the cost approach was utilized.
d. The adjustment to selling, general and administrative expenses
relates to the amortization of the intangible assets acquired based
on the following estimated useful lives: Existing technology, 42
months; workforce value, 36 months; and goodwill, 120 months. The
useful lives were based on management's estimates and projections of
future cash flows and a valuation performed for the Company.
e. The adjustment for interest expense is recorded as a result of the
Company's increased borrowing to fund the acquisition, assuming
borrowings of $5,000,000 and an interest rate of 7%.
f. The adjustment for income taxes reflects the tax benefit, at an
effective tax rate of 32%, associated with the incremental
amortization expense and interest expense incurred as a direct
result of the acquisition.
<PAGE>
4. Supplemental Pro Forma Information
Pro forma net income per share is based on the weighted average number of
shares of common stock and common stock equivalents (stock options) outstanding
during the period.
