<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 29, 1997
Bristol Retail Solutions, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-21633 58-2235556
(State or other juridiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
5000 Birch Street, Suite 205, Newport Beach, California 92660
(Address of prinicipal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 475-0800
Bristol Technology Systems, Inc.
18201 Von Karman Avenue, Suite 305, Irvine, California 92612
(Former name or former address, if changed since last report)
<PAGE> 2
The undersigned Registrant hereby amends the following item of its Current
Report on Form 8-K, filed on June 12, 1997. The Registrant is amending Item 7 to
include certain required financial statements and pro forma financial
information.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
<TABLE>
<CAPTION>
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Page
<S> <C>
Audited financial statements of the business acquired (Smyth Systems, Inc.) 4
as of and for the years ended December 31, 1996 and 1995, together
with the independent auditors' report thereon.
Unaudited financial statements of Smyth Systems, Inc. as of March 31, 1997 13
and for the three months ended March 31, 1997 and 1996.
(b) PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (UNAUDITED)
Unaudited pro forma condensed combined financial information of
Bristol Retail Solutions, Inc. and Smyth Systems, Inc.:
Introduction to pro forma condensed combined financial 18
information
Pro forma condensed combined balance sheet as of 19
March 31, 1997
Pro forma condensed combined statement of operations for the 20
period from inception (April 3, 1996) to December 31, 1996
Pro forma condensed combined statement of operations for the 21
three months ended March 31, 1997
Notes to pro forma condensed combined financial information 22
</TABLE>
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRISTOL RETAIL SOLUTIONS, INC.
(Registrant)
Date: July 29, 1997 By: /s/ ROGER MONACO
-------------------------------------------
Roger Monaco, Senior Vice President
and Chief Financial Officer
3
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Smyth Systems, Inc.:
We have audited the accompanying balance sheets of Smyth Systems, Inc. as of
December 31, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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 financial statements present fairly, in all material
respects, the financial position of Smyth Systems, Inc. as of December 31, 1996
and 1995, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Akron, Ohio
June 5, 1997
4
<PAGE> 5
SMYTH SYSTEMS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31
------------------------------------
1996 1995
---------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 232,848 $ 219,661
Accounts receivable - net of allowance for doubtful
accounts of $65,330 and $46,225 1,324,429 1,326,662
Inventories (Note 2) 1,089,193 977,462
Prepaid expenses and other current assets 105,270 72,379
Deferred income taxes (Note 5) 136,748 189,097
Refundable income taxes 54,788 -0-
---------- -----------
TOTAL CURRENT ASSETS 2,943,276 2,785,261
Furniture and fixtures 610,076 563,458
Leasehold improvements 113,707 111,601
Equipment 511,059 393,196
Automobiles 164,392 137,931
---------- -----------
Total property and equipment 1,399,234 1,206,186
Less accumulated depreciation and amortization (1,046,458) (912,586)
---------- -----------
Property and equipment, net 352,776 293,600
Other assets 81,328 62,638
---------- -----------
TOTAL ASSETS $3,377,380 $3,141,499
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $814,810 $815,994
Unearned maintenance and support revenue 735,613 671,882
Accrued employee compensation 424,503 476,842
Other accrued expenses 45,101 39,645
Income taxes payable (Note 5) 14,772 47,011
----------- ---------
TOTAL CURRENT LIABILITIES 2,034,799 2,051,374
DEFERRED INCOME TAXES (Note 5) 11,955 5,210
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY:
Common stock, no par value,
100,000 shares authorized,
86,720 shares issued 443,063 443,063
Retained earnings 1,199,043 943,592
---------- ----------
1,642,106 1,386,655
Less treasury stock, at cost, 15,544 and 14,899 shares (311,480) (301,740)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,330,626 1,084,915
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,377,380 $3,141,499
========== ==========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
SMYTH SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended
December 31
---------------------------------------
1996 1995
---------- -----------
<S> <C> <C>
REVENUE:
System sales and installation $8,428,097 $7,417,774
Service and supplies sales 3,701,068 3,615,927
------------ -----------
Net revenue 12,129,165 11,033,701
Costs and expenses:
Cost of system sales and installation 4,572,721 4,231,584
Cost of service and supplies sales 3,109,908 2,906,784
Selling, general and administrative 3,144,119 2,927,509
Research and development costs 825,388 779,845
------------ -----------
Total costs and expenses 11,652,136 10,845,722
------------ -----------
Operating income 477,029 187,979
Other (income) expense:
Investment income (32,092) (45,882)
Interest expense 43,136 45,662
------------ -----------
Total other (income) expense 11,044 (220)
------------ -----------
Income before income taxes 465,985 188,199
Income tax provision 174,624 74,910
------------ -----------
Net income $ 291,361 $ 113,289
============ ===========
Net income per common share $ 4.07 $ 1.52
============ ============
Average common shares outstanding 71,652 74,643
============ ===========
</TABLE>
See notes to financial statements.
6
<PAGE> 7
SMYTH SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Treasury Stock Total
---------------------------- Retained ----------------------------- Stockholders'
Shares Amount Earnings Shares Amount Equity
------------- -------------- -------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 86,720 $443,063 $ 849,049 (11,738) $ (265,911) $1,026,201
Net income 113,289 113,289
Cash dividends - $.25 per share (18,746) (18,746)
Purchases of common stock
for treasury (3,161) (35,829) (35,829)
------ -------- ---------- ------- --------- ----------
Balance at December 31, 1995 86,720 443,063 943,592 (14,899) (301,740) 1,084,915
Net income 291,361 291,361
Cash dividends - $.50 per share (35,910) (35,910)
Purchases of common stock
for treasury (645) (9,740) (9,740)
------ -------- ---------- ------- ---------- ----------
Balance at December 31, 1996 86,720 $443,063 $1,199,043 (15,544) $ (311,480) $1,330,626
====== ======== ========== ======== ========== ==========
</TABLE>
See notes to financial statements.
7
<PAGE> 8
SMYTH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended
December 31
------------------------------------
1996 1995
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 291,361 $ 113,289
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 140,169 133,604
Gain on sale of property and equipment -0- (961)
Deferred income taxes 59,094 1,302
Changes in operating assets and liabilities:
Accounts receivable 2,233 (167,301)
Inventories (111,731) (400,284)
Prepaid expenses and other current assets (32,891) (8,748)
Refundable income taxes (54,788) 15,000
Other assets (18,856) 23,083
Accounts payable (1,184) 313,418
Unearned maintenance and support revenue 63,731 55,140
Other current liabilities (79,122) 187,507
---------- ----------
Total adjustments (33,345) 151,760
---------- ----------
Net cash provided by operating activities 258,016 265,049
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment -0- 1,200
Additions to property and equipment (193,047) (109,379)
Additions to purchased software (6,132) (5,987)
---------- ----------
Net cash used for investing activities (199,179) (114,166)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on line of
credit agreement -0- (10,000)
Payments on long term debt -0- (140,000)
Purchase of treasury stock (9,740) (35,829)
Dividends (35,910) (18,746)
---------- ----------
Net cash used for financing activities (45,650) (204,575)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,187 (53,692)
CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 219,661 273,353
---------- ----------
CASH AND CASH EQUIVALENTS END OF YEAR $ 232,848 $ 219,661
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 43,136 $ 45,909
Income taxes, net of refunds 184,411 5,931
</TABLE>
See notes to financial statements.
8
<PAGE> 9
SMYTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business - Smyth Systems, Inc. (the "Company")
is in the business of retail automation, principally point-of-sale
("POS") systems installation and service and systems integration which
provides retailers with turnkey operating solutions, including hardware
and proprietary software products. The Company's systems integration
customers are primarily country clubs, golf courses, resorts, and
men's, ladies', sporting goods and museum specialty retailers. These
customers are located throughout the United States. The Company's POS
customers are retailers located in nineteen counties in Ohio and in
Southern California. The Company operates primarily out of the
corporate headquarters located in Canton, Ohio and Irvine, California,
with other locations in California, Utah, and Texas.
Concentration of Credit Risk - During 1996 the Company had
sales to one customer representing approximately 10% of total revenues.
At December 31, 1996, accounts receivable due from this customer
totaled $121,845. No customer exceeded 10% of revenue in 1995. The
Company generally does not require collateral for accounts receivable,
but discontinues ongoing maintenance and support if customers become
delinquent.
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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition - The Company recognizes revenue for
system sales upon delivery of the system to the customer. The Company
sells product service and support contracts for hardware, peripheral
support, and software which generally cover a period of twelve months.
Revenues from such service contracts are deferred and amortized on a
straight-line basis over the life of the contracts. Unearned
maintenance and support revenue represents the unrealized portion of
such contracts.
Cash Equivalents are highly liquid investments with a maturity
of three months or less when purchased.
Inventories of POS terminals, computers and related equipment
are stated at the lower of cost or market using the specific
identification method with identifying serial numbers. All other
inventories are stated at lower of cost (first-in, first-out method) or
market.
Property and Equipment - Property and equipment is stated at
cost. Depreciation is computed principally by accelerated methods for
income tax and financial reporting purposes over the estimated useful
lives of the assets which range from three to ten years. Leasehold
improvements are amortized over the length of the lease using the
straight-line method.
9
<PAGE> 10
Software Costs - As a systems integrator, the Company provides
its customers with turnkey software solutions including proprietary
software products exclusively for application to retail operations.
Purchased software, which generally has alternative future uses, is
included in other assets and amortized, using the straight-line method,
over the estimated economic life of the software of three to five
years. Unamortized purchased software costs at December 31, 1996 and
1995, and the related amortization expense for the years then ended,
were not material. The costs of internal development of proprietary
software are expensed as research and development until technological
feasibility is established. No internal software development costs were
capitalized at December 31, 1996 or 1995, or amortized during the years
then ended, as the Company generally has not established evidence of
technological feasibility pursuant to generally accepted accounting
principles prior to completing development of each software product.
Income Taxes - The provision for income taxes is based upon
income before taxes for financial reporting purposes. Deferred tax
assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the tax bases of assets
and liabilities and their carrying values for financial reporting
purposes.
Earnings Per Share - Earnings per share are computed based on
the weighted average number of shares of common stock outstanding
during each year.
2. INVENTORIES
Inventories consist primarily of POS terminals, computers,
peripherals, paper and other supplies for resale to customers, as well
as items to support maintenance contracts. Inventories at December 31
were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
----------- --------
<S> <C> <C>
Systems and installation inventories $ 935,880 $813,726
Service and supplies inventories 153,313 163,736
---------- --------
$1,089,193 $977,462
========== ========
</TABLE>
Included in inventories at December 31, 1996 and 1995 is
approximately $143,313 and $95,373, respectively, of used or
refurbished parts and components which the Company has on hand to
fulfill maintenance contract requirements. Due to the nature of the
systems installed and the longevity of the systems in general, service
may be provided for several years after sale, causing much of this
inventory to be for older models of equipment.
3. BORROWINGS AND CREDIT FACILITIES
The Company has a $750,000 line of credit with a bank. The
line of credit was unused at December 31, 1996 and 1995. Balances are
payable upon demand and interest is payable at .50% over prime for
1996. The rate was .75% over prime for 1995. Borrowings under this line
of credit are collateralized by accounts receivable, inventory and
equipment.
During 1995, the Company paid off $140,000 of long term debt
with interest at 1% over prime. The debt was collateralized by accounts
receivable, inventory and equipment.
10
<PAGE> 11
4. COMMITMENTS AND CONTINGENCIES
Rental expenses for 1996 and 1995 were $170,015 and $170,475, respectively.
Future minimum rentals under operating leases at December 31, 1996 were as
follows:
<TABLE>
<S> <C>
1997 $171,960
1998 164,168
1999 106,534
2000 38,082
2001 and later -0-
</TABLE>
The above amounts include Ohio building leases with a related party through
the specified lease period, although these leases can be terminated, without
penalty, with a six month advance notice. Several leases contain renewal options
and provisions whereby taxes, maintenance, insurance and other expenses are paid
by the Company.
5. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Current federal tax expense $100,056 $57,753
Current state and local tax expense 15,474 15,855
Deferred tax expense 59,094 1,302
-------- -------
$174,624 $74,910
======== =======
</TABLE>
The components of the Company's deferred tax balances at December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Allowance for doubtful accounts $ 26,132 $ 18,490
Compensation 40,122 52,841
Unearned maintenance and support revenue 79,600 106,133
Other (9,106) 11,633
-------- --------
Current deferred tax asset 136,748 189,097
Depreciation and other basis differences (11,955) (5,210)
-------- --------
Noncurrent deferred tax (liability) (11,955) (5,210)
-------- --------
Total $ 124,793 $ 183,887
======== ========
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rate to income tax expense is:
<TABLE>
<CAPTION>
1996 1995
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Tax at U.S. statutory rate $ 163,095 35.0% $ 65,869 35.0%
State income taxes net of
federal tax benefit 14,860 3.2% 10,872 5.8%
Non-deductible meals and
entertainment 8,862 1.9% 6,971 3.7%
Keyman life insurance (8,719) (1.9%) (6,937) (3.7%)
Other (3,474) (.7%) (1,865) (1.0%)
--------- ---- --------- ----
$ 174,624 37.5% $ 74,910 39.8%
========= ==== ========= ====
</TABLE>
11
<PAGE> 12
6. EMPLOYEE BENEFIT PLAN
The Company has a 401(K) profit sharing plan for substantially
all employees. The Company's contribution is established annually by
the Board of Directors. Contributions to the Plan were $107,459 and
$54,055 in 1996 and 1995, respectively. Participating employees also
contribute to this plan through payroll deductions.
7. RELATED PARTY TRANSACTIONS
Robert T. Smyth, President of the Company, is the
Secretary-Treasurer and a member of the Board of Directors of
R.S.M.G., a purchasing cooperative of cash register dealers. Purchases
by the Company from R.S.M.G. were $859,748 and $451,526 for the years
ending December 31, 1996 and 1995, respectively. Balances of $82,397
and $16,920 were in accounts payable to R.S.M.G. on December 31, 1996
and 1995, respectively. The Company also received patronage dividends
from R.S.M.G. of $29,407 and $18,006 on the membership share held by
the Company for the years ending December 31, 1996 and 1995,
respectively.
The Company leases its main office space from two minority
stockholders and paid rent and real estate taxes totaling $55,471 and
$57,665 for the years ended December 31, 1996 and 1995, respectively.
The Company's medical, life and disability insurances are purchased
through an insurance broker who is also a minority stockholder. The
Company paid insurance premiums of $292,582 and $260,733 directly to
the insurance carrier of the respective policies for the years ended
December 31, 1996 and 1995, respectively. The Company's property,
liability and auto insurances are purchased from the insurance agency
of a different minority stockholder. The Company paid insurance
premiums of $32,393 and $35,964 to this insurance agency for these
programs for the years ended December 31, 1996 and 1995, respectively.
The Company paid legal fees of $17,654 during the year ended December
31, 1995 to a law firm partially owned by the estate of a former
minority stockholder. In December 1995, the Company purchased the
Company stock held by the estate.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires
disclosure about fair value for all financial instruments. The
carrying value of accounts receivable and accounts payable are
reasonable estimates of fair values.
9. SUBSEQUENT EVENTS
Subsequent to December 31, 1996, the Company and Bristol
Technology Systems, Inc. ("Bristol") entered into an agreement to
merge the Company with and into a wholly-owned subsidiary of Bristol.
In connection with the transaction, which closed on May 29, 1997,
stockholders of the Company received a combination of cash and common
stock of Bristol.
12
<PAGE> 13
SMYTH SYSTEMS, INC.
BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31, 1997
--------------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 166,777
Accounts receivable - net of allowance for doubtful
accounts of $66,364 1,781,823
Inventories 1,104,905
Prepaid expenses and other current assets 125,945
Deferred income taxes 136,748
Refundable income taxes 54,788
-----------
TOTAL CURRENT ASSETS 3,370,986
Furniture and fixtures 615,796
Leasehold improvements 113,707
Equipment 594,133
Automobiles 153,249
-----------
Total property and equipment 1,476,885
Less accumulated depreciation and amortization (1,073,054)
-----------
Property and equipment, net 403,831
Other assets 128,780
-----------
TOTAL ASSETS $ 3,903,597
===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,1997
-------------
<S> <C>
CURRENT LIABILITIES:
Line of credit agreement $ 600,000
Accounts payable 810,685
Unearned maintenance and support revenue 744,290
Accrued employee compensation 394,017
Other accrued expenses 32,117
Income taxes payable 4,322
-----------
TOTAL CURRENT LIABILITIES 2,585,431
DEFERRED INCOME TAXES 11,955
STOCKHOLDERS' EQUITY:
Common stock, no par value,
100,000 shares authorized,
86,720 shares issued 443,063
Retained earnings 1,174,628
-----------
1,617,691
Less treasury stock, at cost, 15,544 shares (311,480)
-----------
TOTAL STOCKHOLDERS' EQUITY 1,306,211
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,903,597
===========
</TABLE>
See notes to financial statements.
13
<PAGE> 14
SMYTH SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31,1997 March 31, 1996
------------- --------------
<S> <C> <C>
REVENUE:
System sales and installation $ 2,019,485 $ 2,183,084
Service and supplies sales 925,399 936,330
----------- -----------
Net revenue 2,944,884 3,119,414
Costs and expenses:
Cost of system sales and installation 1,202,902 1,201,563
Cost of service and supplies sales 783,836 763,022
Selling, general and administrative 740,710 797,198
Research and development costs 183,435 208,036
----------- -----------
Total costs and expenses 2,910,883 2,969,819
----------- -----------
Operating income 34,001 149,595
Other (income) expense:
Investment (income) loss (23,240) 4,047
Interest expense 11,223 12,379
----------- -----------
Total other (income) expense (12,017) 16,426
----------- -----------
Income before income taxes 46,018 133,169
Income tax provision 17,050 59,250
----------- -----------
Net income $ 28,968 $ 73,919
=========== ===========
Net income per common share $ .41 $ 1.03
=========== ===========
Average common shares outstanding 71,176 71,815
=========== ===========
</TABLE>
See notes to financial statements.
14
<PAGE> 15
SMYTH SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------ -------------- Total
Retained Stockholders'
Shares Amount Earnings Shares Amount Equity
------ ------ -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 86,720 $443,063 $943,592 (14,899) $(301,740) $1,084,915
Net income 291,361 291,361
Cash dividends - $.50 per share (35,910) (35,910)
Purchases of common stock
for treasury (645) (9,740) (9,740)
------ ----------- ----------- ------- ----------- -----------
Balance at December 31, 1996 86,720 443,063 1,199,043 (15,544) (311,480) 1,330,626
Net income 28,968 28,968
Cash dividends - $.75 per share (53,383) (53,383)
------ ----------- ----------- ------- ----------- -----------
Balance at March 31, 1997 86,720 $443,063 $1,174,628 (15,544) $(311,480) $1,306,211
====== =========== =========== ======= =========== ===========
</TABLE>
15
<PAGE> 16
SMYTH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
CASH FLOWS FROM OPERATING ACTIVITIES: March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
NET INCOME $ 28,968 $ 73,919
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 28,332 28,025
Changes in operating assets and liabilities:
Accounts receivable (457,394) (289,364)
Inventories (15,712) 139,163
Prepaid expenses and other current assets (20,675) 13,889
Other assets (44,382) (30,863)
Accounts payable (4,125) (186,285)
Unearned maintenance and support revenue 8,677 (32,775)
Other current liabilities (53,919) (89,284)
--------- ---------
Total adjustments (559,198) (447,494)
--------- ---------
Net cash used in operating activities (530,230) (373,575)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (77,650) (27,616)
Additions to purchased software (4,807) (3,125)
--------- ---------
Net cash used for investing activities (82,457) (30,741)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of
credit agreement 600,000 250,000
Purchase of treasury stock -0- (215)
Dividends (53,383) (35,910)
--------- ---------
Net cash provided by financing activities 546,617 213,875
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (66,070) (190,441)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 232,847 219,661
--------- ---------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 166,777 $ 29,220
========= =========
</TABLE>
16
<PAGE> 17
SMYTH SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED MARCH 31, 1997 AND 1996
1. BASIS OF PRESENTATION
The accompanying interim financial statements of Smyth Systems,
Inc. (the "Company") have been prepared without audit. In the opinion
of Company management, the financial statements contain all
adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position as of March 31,1997
and the results of operations and cash flows for the quarters ended
March 31, 1997 and 1996. These unaudited interim financial statements
have been prepared using the same accounting principles used to
prepare the Company's financial statements for the year ended December
31, 1996.
Results of operations for the quarter ended March 31, 1997 are
not necessarily indicative of the results to be expected for the
fiscal year.
2. SOFTWARE COSTS
As a systems integrator, the Company provides its customers
with turnkey software solutions including proprietary software
products exclusively for application to retail operations. Purchased
software, which generally has alternative future uses, is included in
other assets and amortized, using the straight-line method, over the
estimated economic life of the software of three to five years.
Unamortized purchased software costs at March 31, 1997, and the
related amortization expense for the quarters ended March 31, 1997 and
1996, were not material. The costs of internal development of
proprietary software are expensed as research and development until
technological feasibility is established. After technological
feasibility is established, internal software development costs are
capitalized as other assets until the software product is completed.
Other assets at March 31, 1997 include capitalized internal software
development costs of $51,603, all of which were incurred during the
quarter ended March 31, 1997 for a software development project that
had established technological feasibility pursuant to generally
accepted accounting principles in December 1996. No internal software
development costs were capitalized during the quarter ended March 31,
1996 and no costs were amortized during the quarters ended March 31,
1997 and 1996.
3. SUBSEQUENT EVENTS
Subsequent to March 31, 1997, the Company and Bristol Technology
Systems, Inc. (subsequently renamed Bristol Retail Solutions, Inc.)
("Bristol") entered into an agreement to merge the Company with and
into a wholly-owned subsidiary of Bristol. In connection with the
transaction, which closed on May 29, 1997, stockholders of the Company
received a combination of cash and common stock of Bristol.
17
<PAGE> 18
Bristol Retail Solutions, Inc.
Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma condensed combined financial
information gives effect to the combination of Bristol Retail Solutions, Inc.
(the Company, formerly Bristol Technology Systems, Inc.) with (i) Cash
Registers, Incorporated (CRI), which was acquired by the Company effective June
28, 1996 for cash consideration of $955,000, including acquisition costs of
$72,000; (ii) Automated Register Systems, Inc. (ARS), which was acquired by the
Company effective December 31, 1996 for consideration of $1,103,000 in cash,
including acquisition costs of $78,000, and 58,154 shares of non-registered,
restricted common stock of the Company which were valued at $683,000 at the
acquisition date; and (iii) Smyth Systems, Inc. (Smyth), which was acquired by
the Company effective May 29, 1997 for consideration of $2,369,000 in cash,
including acquisition costs of $20,000, and 569,408 shares of non-registered,
restricted common stock of the Company which were valued at $2,064,000 at the
acquisition date. The unaudited pro forma condensed combined financial
information is based on the historical financial statements of the Company, CRI,
ARS and Smyth and certain assumptions set forth below and in the notes to the
unaudited pro forma condensed combined financial information. The Company
changed its name to Bristol Retail Solutions, Inc. in July 1997. The Company's
former name was Bristol Technology Systems, Inc.
The unaudited pro forma condensed combined balance sheet gives effect
to the combination of the Company with Smyth as if such merger had occurred on
the Company's latest balance sheet date, March 31, 1997. The carrying values of
the acquired tangible assets and assumed liabilities of Smyth are believed to
approximate fair value. The allocation of the purchase price is subject to final
determination based on the valuation of the assets acquired. Any purchase price
adjustments are not expected to be material to the pro forma financial
information taken as a whole. The balance sheets of CRI and ARS are included in
the Company's historical consolidated balance sheet at March 31, 1997.
The unaudited pro forma condensed combined statement of operations for
the period from inception (April 3, 1996) to December 31, 1996 gives effect to
the acquisitions of CRI, ARS and Smyth as if all of such acquisitions had been
made on April 3, 1996. The unaudited pro forma condensed combined statement of
operations for the period from inception (April 3, 1996) to December 31, 1996
includes the audited historical financial information of the Company for the
period from inception (April 3, 1996) to December 31, 1996; the financial
information of CRI for the period from April 3, 1996 to June 30, 1996; and the
financial information of ARS and Smyth for the period from April 3, 1996 to
December 31, 1996.
The unaudited pro forma condensed combined statement of operations for
the three months ended March 31, 1997 includes the unaudited interim financial
information of the Company and Smyth for the three months ended March 31, 1997.
The financial information of CRI and ARS is included in the Company's historical
consolidated statement of operations for the three months ended March 31, 1997.
Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. The
unaudited pro forma condensed combined financial information presented herein is
not necessarily indicative of the results the Company would have obtained had
such events occurred at the beginning of the period, as assumed, or the future
results of the Company. The unaudited pro forma condensed combined financial
statements should be read in conjunction with the Company's audited historical
financial statements and related notes thereto in its Annual Report on Form
10-KSB for the period from inception (April 3, 1996) to December 31, 1996 and
the Company's unaudited historical financial statements and related notes
thereto in its Quarterly Report on Form 10-QSB for the quarterly period ended
March 31, 1997, both previously filed, and the audited historical financial
statements and related notes thereto of Smyth Systems, Inc. as of and for the
years ended December 31, 1996 and 1995 and the unaudited historical financial
statements and related notes thereto of Smyth Systems, Inc. as of March 31, 1997
and for the three months ended March 31, 1997 and 1996, both included herein.
18
<PAGE> 19
BRISTOL RETAIL SOLUTIONS, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 1997
<TABLE>
<CAPTION>
Historical Smyth Pro Forma Pro Forma
Company Acquisition Adjustments Combined
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 4,519,770 $ 166,777 ($ 2,368,517)(a) $ 2,318,030
Accounts receivable 1,257,386 1,781,823 -- 3,039,209
Inventories 2,204,577 1,104,905 -- 3,309,482
Prepaid expenses and other current assets 59,238 317,481 (136,748)(a) 239,971
Amounts due from related parties 75,114 -- -- 75,114
------------ ------------ ------------ ------------
Total current assets 8,116,085 3,370,986 (2,505,265) 8,981,806
Property and equipment, net 264,688 403,831 -- 668,519
Intangible assets, net 1,664,878 -- 3,251,203 (a) 4,916,081
Other assets 190,978 128,780 -- 319,758
------------ ------------ ------------ ------------
Total assets $ 10,236,629 $ 3,903,597 $ 745,938 $ 14,886,164
============ ============ ============ ============
Current liabilities:
Line-of-credit $ 50,000 $ 600,000 $ -- $ 650,000
Accounts payable 840,281 810,685 -- 1,650,966
Accrued expenses 566,055 430,456 -- 996,511
Deferred revenue 491,203 744,290 -- 1,235,493
Customer advances 412,635 -- -- 412,635
Note payable to related party 40,000 -- -- 40,000
Current portion of capital lease obligation 19,193 -- -- 19,193
------------ ------------ ------------ ------------
Total current liabilities 2,419,367 2,585,431 -- 5,004,798
Capital lease obligation - non-current portion 32,485 -- -- 32,485
Other long-term liabilities 36,749 11,955 (11,955)(a) 36,749
------------ ------------ ------------ ------------
Total liabilities 2,488,601 2,597,386 (11,955) 5,074,032
Stockholders' equity:
Common stock 4,746 -- 569 (a) 5,315
Additional paid-in capital 8,284,893 -- 2,063,535 (a) 10,348,428
Accumulated deficit (541,611) -- -- (541,611)
Equity of purchased company -- 1,306,211 (1,306,211)(a) --
------------ ------------ ------------ ------------
Total stockholders' equity 7,748,028 1,306,211 757,893 9,812,132
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 10,236,629 $ 3,903,597 $ 745,938 $ 14,886,164
============ ============ ============ ============
</TABLE>
19
<PAGE> 20
BRISTOL RETAIL SOLUTIONS, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Period from Inception (April 3, 1996) to December 31, 1996
<TABLE>
<CAPTION>
Historical CRI ARS Smyth Pro Forma Pro Forma
Company Acquisition Acquisition Acquisition Adjustments Combined
------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
System sales and installation $3,120,350 $1,722,402 $2,500,571 $6,245,013 $ -- $13,588,336
Service and supplies sales 1,075,880 529,294 1,137,339 2,764,738 -- 5,507,251
---------- ---------- ---------- ---------- --------- -----------
Net revenue 4,196,230 2,251,696 3,637,910 9,009,751 -- 19,095,587
Costs and expenses:
Cost of system sales and installation 2,161,340 1,196,549 1,650,470 3,371,158 -- 8,379,517
Cost of service and supplies sales 684,655 316,059 769,223 2,346,886 -- 4,116,823
Selling, general and administrative expenses 1,452,215 720,737 817,792 2,346,921 127,524 (b) 5,518,756
53,567 (c)
Research and development costs -- -- -- 617,352 -- 617,352
---------- ---------- ---------- ---------- --------- -----------
Total costs and expenses 4,298,210 2,233,345 3,237,485 8,682,317 181,091 18,632,448
---------- ---------- ---------- ---------- --------- -----------
Operating income (loss) (101,980) 18,351 400,425 327,434 (181,091) 463,139
Other (income) expense:
Investment income (43,280) (2,036) -- (36,139) -- (81,455)
Interest expense 46,125 5,174 22,090 30,757 20,438 (d) 124,584
---------- ---------- ---------- ---------- --------- -----------
Total other (income) expense 2,845 3,138 22,090 (5,382) 20,438 43,129
---------- ---------- ---------- ---------- --------- -----------
Income (loss) before income taxes (104,825) 15,213 378,335 332,816 (201,529) 420,010
Income tax provision (benefit) 1,800 5,335 144,252 115,374 (27,591)(e) 239,170
---------- ---------- ---------- ---------- --------- -----------
Net income (loss) $ (106,625) $ 9,878 $ 234,083 $ 217,442 $(173,938) $ 180,840
========== ========== ========== ========== ========= ===========
Net income (loss) per common share: $ (0.03) $ 0.03
========== ===========
Common shares used in computing per
share amounts: 3,483,012 5,315,062 (g)
========== ===========
</TABLE>
20
<PAGE> 21
BRISTOL RETAIL SOLUTIONS, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
Historical Smyth Pro Forma Pro Forma
Company Acquisition Adjustments Combined
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
System sales and installation $ 1,748,821 $ 2,019,485 $ -- $ 3,768,306
Service and supplies sales 911,477 925,399 -- 1,836,876
----------- ----------- ----------- -----------
Net revenue 2,660,298 2,944,884 -- 5,605,182
Costs and expenses:
Cost of system sales and installation 1,171,596 1,202,902 -- 2,374,498
Cost of service and supplies sales 689,335 783,836 -- 1,473,171
Selling, general and administrative expenses 1,284,821 740,710 20,320 (f) 2,045,851
Research and development costs -- 183,435 -- 183,435
----------- ----------- ----------- -----------
Total costs and expenses 3,145,752 2,910,883 20,320 6,076,955
----------- ----------- ----------- -----------
Operating income (loss) (485,454) 34,001 (20,320) (471,773)
Other (income) expense:
Interest income (64,252) (23,240) -- (87,492)
Interest expense 12,734 11,223 -- 23,957
----------- ----------- ----------- -----------
Total other income (51,518) (12,017) -- (63,535)
----------- ----------- ----------- -----------
Income (loss) before income taxes (433,936) 46,018 (20,320) (408,238)
Income tax provision 1,050 17,050 -- 18,100
----------- ----------- ----------- -----------
Net income (loss) ($ 434,986) $ 28,968 ($ 20,320) ($ 426,338)
=========== =========== =========== ===========
Net loss per common share ($ 0.09) ($ 0.08)
=========== ===========
Common shares used in computing per share amounts 4,745,654 5,315,062(h)
=========== ===========
</TABLE>
21
<PAGE> 22
BRISTOL RETAIL SOLUTIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET ADJUSTMENTS
(a) Adjustment to reflect the acquisition of Smyth for consideration of
$2,369,000 in cash, including $20,000 of acquisition costs, and 569,408 shares
of common stock of the Company which were valued at approximately $2,064,000.
The preliminary purchase price allocation includes amounts assigned to goodwill
of $3,251,000 which represents the excess of the cost over the fair value of the
net assets acquired and is being amortized over a period of 40 years. The final
purchase price allocation may involve the assignment of amounts to different
intangible assets which may be amortized over different periods. The excess of
the cost over the fair value of the net assets acquired includes a valuation
allowance of $125,000 established by the Company against the net deferred income
tax asset acquired from Smyth.
2. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
ADJUSTMENTS
(b) Adjustment to reflect the increase in amortization expense relating to
the goodwill recorded in purchase accounting related to the CRI, ARS and Smyth
acquisitions and the amortization of such goodwill over its estimated useful
life. An aggregate of $1,712,000 of goodwill was recorded in connection with the
CRI and ARS acquisitions and is being amortized over an estimated useful life of
15 years and $3,251,000 of goodwill was preliminarily recorded in connection
with the acquisition of Smyth and is being amortized over an estimated useful
life of 40 years. The final allocation of the Smyth purchase price may involve
the assignment of amounts to different intangible assets which may be amortized
over different periods.
(c) Adjustment to reflect an increase in rent expense at ARS. As part of the
acquisition of ARS by the Company, ARS's office facility lease was renegotiated
and the monthly rental rate was increased.
(d) Adjustment to reflect an increase in interest expense as if the Company's
$817,500 subordinated notes payable had been issued on April 3, 1996. The
subordinated notes payable were issued in June 1996 and bore interest at 10% per
annum. The proceeds from the subordinated notes payable were used by the Company
to acquire CRI on June 28, 1996. The subordinated notes payable were retired on
November 22, 1996.
(e) Adjustment to calculate the impact on income taxes of the pro forma
adjustments at the effective income tax rate for the respective entities in the
respective periods to which the adjustments relate.
(f) Adjustment to reflect the increase in amortization expense relating to
the goodwill of $3,251,000 recorded in purchase accounting related to the Smyth
acquisition and the amortization of such goodwill over an estimated useful life
of 40 years.
(g) The weighted average shares outstanding used to calculate pro forma
earnings per share for the period from inception (April 3, 1996) to December 31,
1996 is based on the assumption that (i) the Company's actual common shares
outstanding at December 31, 1996 of 4,745,654, including 2,648,745 shares issued
at the inception of the Company, 577,417 shares issued in a private placement in
June 1996, 1,437,500 shares issued in the Company's initial public offering in
November 1996, 58,154 shares issued to the stockholders of ARS on December 31,
1996 and 23,838 shares issued to directors of the Company, and (ii) the 569,408
shares of common stock issued to the stockholders of Smyth had all been issued
at the beginning of the period. A portion of the proceeds from the private
placement and the initial public offering were used by the Company to acquire
CRI, ARS and Smyth.
(h) The weighted average shares outstanding used to calculate pro forma
earnings per share for the three months ended March 31, 1997 is based on the
actual weighted average shares outstanding of 4,745,654 for the quarter as
adjusted to reflect the issuance of 569,408 shares of common stock to the
shareholders of Smyth at the beginning of the quarter.
22
