<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A
AMENDMENT NO. 2
TO
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 5, 1997
Omtool, Ltd.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-22871 02-0447481
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File number) Identification No.)
8 Industrial Way, Salem, NH 03079
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 898-8900
<PAGE> 2
Omtool, Ltd. hereby amends and restates Item 7 of its Current Report on
Form 8-K dated December 5, 1997, so that as so amended and restated said Item 7
shall read in its entirety as set forth on the following pages.
-2-
<PAGE> 3
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Business Acquired.
------------------------------------------
The following audited financial statements of CMA, together with the
report thereon manually signed by Arthur Andersen LLP, are included as Exhibit
99.1 to this report and incorporated herein by this reference:
Consolidated Balance Sheets as of March 31, 1996 and 1997
Consolidated Statements of Operations for the years ended March 31,
1996 and 1997
Consolidated Statements of Stockholders' Equity for the years ended
March 31, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended March 31,
1996 and 1997
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information.
--------------------------------
The following unaudited pro forma consolidated financial statements are
included as Exhibit 99.2 to this report and are incorporated herein by this
reference:
Unaudited Pro Forma Condensed Consolidated Balance Sheets as of
September 30, 1997
Unaudited Pro Forma Consolidated Statements of Operations for the
year ended December 31, 1996 and the nine months ended September 30,
1997
Notes to Unaudited Pro Forma Combined Financial Information
(c) Exhibits.
---------
Exhibit No. Description
- ----------- -----------
2.1* Share Sale and Purchase Agreement dated as of December 5,
1997 among the Company, CMA and its former stockholders
(including Schedule 6 and Schedule 7 attached thereto).
-3-
<PAGE> 4
99.1 The following audited financial statements of CMA, together
with the report thereon manually signed by Arthur Andersen
LLP:
Consolidated Balance Sheets as of March 31,1996 and 1997
Consolidated Statements of Operations for the years ended
March 31, 1996 and 1997
Consolidated Statements of Stockholders' Equity for the years
ended March 31, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1997
Notes to Financial Statements
99.2 The following unaudited pro forma combined financial statements:
Unaudited Pro Forma Condensed Consolidated Balance Sheets as of
September 30, 1997
Unaudited Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1996 and the nine months ended
September 30, 1997
Notes to Unaudited Pro Forma Combined Financial Information
- ----------------
*Previously filed with the Company's Current Report on Form 8-K dated December
5, 1997 filed on December 19, 1997.
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this amendment to be signed on its behalf by the
undersigned hereunto authorized.
OMTOOL, LTD.
Date: February 18, 1998
By: /S/ Darioush Mardan
-------------------------------
Darioush Mardan
Vice President, Finance,
Chief Financial Officer,
Treasurer and Secretary
-5-
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
NO. DESCRIPTION
- ------- -----------
<S> <C>
2.1* Share Sale and Purchase Agreement dated as of December 5, 1997
among the Company, CMA and its former stockholders (including
Schedule 6 and Schedule 7 attached thereto).
99.1 The following audited financial statements of CMA, together
with the report thereon manually signed by Arthur Andersen
LLP:
Consolidated Balance Sheets as of March 31, 1996 and 1997
Consolidated Statements of Operations for the years ended
March 31, 1996 and 1997
Consolidated Statements of Stockholders' Equity for the years
ended March 31, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended
March 31, 1996 and 1997
Notes to Financial Statements
99.2 The following unaudited pro forma combined financial
statements:
Unaudited Pro Forma Condensed Consolidated Balance Sheets as of
September 30, 1997
Unaudited Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1996 and the nine months ended
September 30, 1997
Notes to Unaudited Pro Forma Combined Financial Information
- --------------
*Previously filed with the Company's Current Report on Form 8-K dated December
5, 1997 filed on December 19, 1997.
</TABLE>
-6-
<PAGE> 1
Exhibit 99.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CMA ETTWORTH GROUP LIMITED:
We have audited the accompanying consolidated balance sheets of CMA Ettworth
Group Limited (a United Kingdom company) and subsidiaries as of March 31, 1996
and 1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the two 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, the financial statements referred to above present fairly, in
all material respects, the financial position of CMA Ettworth Group Limited and
subsidiaries as of March 31, 1996 and 1997, and the results of their operations
and their cash flows for the years then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 17, 1998
<PAGE> 2
CMA ETTWORTH GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
--------------------------
1996 1997
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 482,289 $ 602,729
Accounts receivable 1,579,883 1,691,964
Inventory 101,741 90,868
Prepaid expenses 124,858 202,520
---------- ----------
Total current assets 2,288,771 2,588,081
Property and equipment, net 376,675 377,216
Other assets 51,216 50,763
---------- ----------
$2,716,662 $3,016,060
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 87,655 $ 58,821
Accounts payable 229,556 346,668
Accrued liabilities 932,556 956,923
Income taxes payable 191,340 175,349
Deferred revenue 661,579 678,864
---------- ----------
Total current liabilities 2,102,686 2,216,625
Long-term debt, net of current portion 41,989 24,361
---------- ----------
Stockholders' equity:
Common Stock, $1.608 par value --
Authorized, issued and outstanding-- 1,000; 1,608 1,608
Retained earnings 610,310 789,658
Cumulative translation adjustment (39,931) (16,192)
---------- ----------
Total stockholders' equity 571,987 775,074
---------- ----------
$2,716,662 $3,016,060
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
CMA ETTWORTH GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31,
----------------------------
1996 1997
---- ----
Revenues:
Software license $1,030,732 $1,218,856
Hardware 765,450 905,156
Service and other 2,116,731 2,503,066
---------- ----------
Total revenues 3,912,913 4,627,078
---------- ----------
Cost of revenues:
Software license 77,767 120,273
Hardware 485,224 548,149
Service and other 1,000,316 1,121,964
---------- ----------
Total cost of revenues 1,563,307 1,790,386
---------- ----------
Gross profit 2,349,606 2,836,692
---------- ----------
Operating expenses:
Sales and marketing 1,163,792 1,352,473
Research and development 583,356 677,933
General and administrative 279,570 324,897
---------- ----------
Total operating expenses 2,026,718 2,355,303
---------- ----------
Income from operations 322,888 481,389
Interest income 7,736 11,845
Interest expense (12,604) (16,374)
---------- ----------
Income before provision for income taxes 318,020 476,860
Provision for income taxes 94,361 168,840
---------- ----------
Net income $ 223,659 $ 308,020
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
CMA ETTWORTH GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK,
$1.608 PAR VALUE
---------------- CUMULATIVE TOTAL
NUMBER RETAINED TRANSLATION STOCKHOLDERS'
OF SHARES AMOUNT EARNINGS ADJUSTMENT EQUITY
--------- ------ -------- ---------- ------
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1995 1,000 $1,608 $ 631,019 $ (5,745) $ 626,882
Net income 223,659 223,659
Dividends (244,368) (244,368)
Translation adjustment (34,186) (34,186)
----- ------ --------- -------- ---------
BALANCE, MARCH 31, 1996 1,000 1,608 610,310 (39,931) 571,987
Net income 308,020 308,020
Dividends (128,672) (128,672)
Translation adjustment 23,739 23,739
----- ------ --------- -------- ---------
BALANCE, MARCH 31, 1997 1,000 $1,608 $ 789,658 $(16,192) $ 775,074
===== ------ ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
CMA ETTWORTH GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1996 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 223,659 $ 308,020
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 121,267 123,276
Loss on disposal of fixed assets 27,912 28,295
Amortization of goodwill 5,876 453
Changes in assets and liabilities-
Accounts receivable (41,589) (112,081)
Inventory (14,004) 10,873
Prepaid expenses 18,398 (77,662)
Accounts payable (74,220) 117,112
Accrued liabilities 303,271 25,659
--------- ---------
Net cash provided by operating activities 570,570 423,945
--------- ---------
Cash Flows from Investing Activities:
Purchases of property and equipment 220,318 (132,641)
Proceeds from sale of property and equipment 6,420 -
--------- ---------
Net cash used in investing activities (213,898) (132,641)
--------- ---------
Cash Flows from Financing Activities:
Payments on long-term debt (1,997) (46,462)
Dividends paid (244,368) (128,672)
--------- ---------
Net cash used in financing activities (246,365) (175,134)
--------- ---------
Effect of exchange rates on cash (34,019) 4,270
--------- ---------
Net increase in cash and cash equivalents 76,288 120,440
Cash and cash equivalents, beginning of period 406,001 482,289
--------- ---------
Cash and cash equivalents, end of period $ 482,289 $ 602,729
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for -
Interest $ 12,604 $ 16,374
========= =========
Income taxes $ 28,910 $ 184,831
========= =========
</TABLE>
<PAGE> 6
CMA ETTWORTH GROUP LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) OPERATIONS
CMA Ettworth Group Limited (the Group) designs, develops, markets and supports
open client/server fascimile software, delivering solutions which automate and
integrate fax communication throughout the enterprise. The Group predominantly
does business in markets located within Europe.
The Group is subject to a number of risks associated with emerging,
technology-oriented companies with a limited operating history, including
continued market acceptance of the Group's products, competition from substitute
products and larger companies, and the continued ability to manage and finance
the Group's anticipated future growth.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements reflect the application of certain
accounting policies as described in this note and elsewhere in the notes to the
consolidated financial statements.
(a) Principles of Consolidation
These financial statements include the accounts of the Group and its
wholly-owned subsidiaries. All significant intercompany amounts have been
eliminated in consolidation.
(b) Revenue Recognition
The Group generates revenue from licensing the rights to use its software
products directly to end users and indirectly through resellers. The Group also
generates revenue from sales of support contracts and consulting services to
customers who license its products.
Revenues from software license agreements are recognized upon shipment of the
software, if there are no significant post-delivery obligations and if payment
is due within one year, less an allowance for estimated future returns. If an
acceptance period is required, revenues are recognized upon the earlier of the
customer's acceptance or the expiration of the acceptance period.
Revenue from support contracts is recognized ratably over the term of the
support period, which is generally one year. Service and other revenue is
primarily related to implementation services performed on a time-and-material
basis under separate service agreements related to the installation of the
Group's software products.
Service and other revenues are recognized as services are performed. If a
transaction includes both license and service elements, license fee revenue is
recognized upon shipment of the software, provided services do not include
significant customization or modification of the base product and the payment
terms for licenses are not subject to acceptance criteria. In cases where
license fee payment is contingent upon the acceptance of services, revenues from
both the license and the service elements are deferred until the acceptance
criteria are met.
Cost of license revenue consists of the cost of media on which the product is
delivered and any related royalties. Cost of service revenue consists primarily
of salaries and benefits related to consulting personnel and the customer
support group.
<PAGE> 7
CMA ETTWORTH LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(c) Research and Development and Software Development Costs
Software development costs are considered for capitalization when technological
feasibility is established in accordance with Statement of Financial Accounting
Standards (SFAS) No. 86, Accounting for the Costs of Computer Software To Be
Sold, Leased or Otherwise Marketed. The Group sells software in a market that is
subject to rapid technological change, new product introductions and changing
customer needs. Accordingly, the Group has determined that it cannot determine
technological feasibility until the development state of the product is nearly
complete. The time period during which cost could be capitalized from the point
of reaching technological feasibility until the time of general product release
is very short and, consequently, the amounts that could be capitalized are not
material to the Group's financial position or results of operations. Therefore,
the Group charges all research and development expenses to operations in the
period incurred.
(d) Inventory
Inventory consists of hardware purchased for resale and is valued at the lower
of cost or net realizable value.
(e) Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation is calculated using accelerated and straight-line
methods over the following useful lives:
Computer equipment 1 - 4 Years
Equipment fixtures and fittings 4 - 6 Years
Motor vehicles 4 Years
The Group capitalizes expenditures that materially increase asset lives and
charges ordinary repairs and maintenance to operations as incurred.
(f) Use of Estimates in the Preparation of Financial Statements
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 periods.
Actual results could differ from those estimates.
<PAGE> 8
CMA ETTWORTH LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(g) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Concentrations of Credit Risk, requires disclosure of any significant
off-balance sheet and credit risk concentration. Financial instruments that
potentially expose the Group to concentrations of credit risk consist primarily
of cash and cash equivalents and trade accounts receivable. The Group places its
temporary cash investments in financial institutions. The Group has not
experienced significant losses related to receivables from individual customers
or groups of customers in any specific industry or by geographic area. Due to
these factors, no additional credit risk beyond amounts provided for collection
losses is believed by management to be inherent in the Group's accounts
receivable.
For the years ended March 31, 1996 and 1997 no single customer accounted for
greater than 10% of the Group's revenues.
Revenues earned for the years ended March 31, 1996 and 1997, were as follows:
MARCH 31,
---------------------------
1996 1997
---- ----
United Kingdom $1,991,899 $2,073,623
Europe, Middle East & Africa 681,215 1,243,736
America 1,239,799 1,309,719
---------- ----------
$3,912,913 $4,627,078
========== ==========
(h) Foreign Currency Translation
The accompanying financial statements have been translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards No. 52.
<PAGE> 9
CMA ETTWORTH LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(3) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
MARCH 31,
--------------------
1996 1997
---- ----
Computer equipment, fixtures and fittings $552,431 $567,270
Motor vehicles 250,630 263,938
-------- --------
803,061 831,208
Less--accumulated depreciation and amortization 426,386 453,992
-------- --------
$376,675 $377,216
======== ========
<PAGE> 10
CMA ETTWORTH LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(4) LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 31,
----------------------
1996 1997
---- ----
Bank loan $ 16,177 $13,948
Capital lease
obligations 113,467 69,234
-------- -------
129,644 83,182
Less--current
maturities 87,655 58,821
-------- -------
$ 41,989 $24,361
======== =======
Maturities of long-term debt at March 31, 1997 are as follows:
BANK CAPITAL LEASE
LOAN OBLIGATIONS
---- -----------
Years ended March 31,
1998 $13,948 $48,425
1999 - 26,289
------- -------
$13,948 74,714
=======
Less - amounts representing interest 5,480
-------
Present value of minimum lease payments $69,234
=======
(5) INCOME TAXES
The Group accounts for income taxes in accordance with SFAS No. 109, Accounting
for Income Taxes, the objective of which is to recognize the amount of current
and deferred income taxes at the date of the financial statements as a result of
all differences in the tax basis and financial statement carrying amounts of
assets and liabilities as measured by enacted tax laws.
Under SFAS No. 109, the Group recognizes a deferred tax asset for the future
benefit of its temporary differences if it concludes that it is more likely than
not that the deferred tax asset will be realized.
<PAGE> 11
CMA ETTWORTH LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(6) LEASE COMMITMENTS
The Group leases certain equipment and its office facility under operating
leases that expire before March 31, 1998.
Future minimum lease payments under these leases at March 31, 1997 are as
follows:
Period ending March 31, 1998 $42,165
=======
Rent expense included in the accompanying statements of operations was
approximately $77,344, and $60,363 for the years ended March 31, 1996 and 1997,
respectively.
(7) SUBSEQUENT EVENTS
(a) Acquisition
On December 5, 1997, Omtool, Ltd., a United States Corporation, ("Omtool")
acquired all of the outstanding share capital of the Group pursuant to a Share
Sale and Purchase Agreement dated December 5, 1997 by and among the Group and
its shareholders and Omtool. The purchase price was paid in a combination of
363,637 newly issued shares of common stock, $.01 par value, of Omtool and
$4,000,000 in cash.
<PAGE> 1
Exhibit 99.2
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In December 1997, Omtool Ltd. (the "Company") purchased all of CMA
Ettworth Limited's ("CMA Ettworth") common stock for approximately $8 million in
cash and stock. The Company also incurred approximately $500,000 in acquisition
related costs resulting in a total purchase price of approximately $8.5 million.
This acquisition is being accounted for as a purchase, and due to the
different bases in certain assets for book and tax purposes, deferred taxes have
been provided as part of the purchase price allocation in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109. A significant
portion of the purchase price, as outlined in the attached notes to these pro
forma financial statements, has been identified in an appraisal as intangible
assets, including approximately $6.7 million of in-process R&D (see discussion
in Note 1 to December 31, 1996 and September 30, 1997 Pro Forma Consolidated
Statement of Operations).
The accompanying Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1996 and the nine months ended September 30, 1997
assume that the acquisition of CMA Ettworth took place on January 1, 1996, the
beginning of Omtool's fiscal year ended December 31, 1996. The Pro Forma
Consolidated Statements of Operations do not include the effect of any
non-recurring write-offs directly attributable to the acquisition. The
accompanying Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1997 assumes that the acquisition of CMA Ettworth took place on September 30,
1997.
The accompanying pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the financial position or
results of operations which would actually have been reported had the
acquisition been in effect during the periods presented, or which may be
reported in the future.
The accompanying Pro Forma Condensed Consolidated Financial Statements
should be read in conjunction with the historical financial statements and
related notes thereto for the Company and CMA Ettworth.
<PAGE> 2
OMTOOL LTD.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
CMA
OMTOOL ETTWORTH
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS COMBINED
---- ---- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,209,225 $ 705,467 $ $ 2,914,692
Short-term investments 24,991,657 - (4,500,000)(1) 20,491,657
Accounts receivable, net 3,508,316 914,117 4,422,433
Inventory 153,939 106,878 260,817
Prepaid expenses 423,399 300,634 724,033
Deferred tax asset 108,000 - 108,000
----------- ---------- ----------- -----------
Total current assets 31,394,536 2,027,096 (4,500,000) 28,921,632
Property and equipment, net 1,289,762 401,788 1,691,550
Goodwill - 50,537 (50,537)(1) 991,601
991,601 (1)
Acquired intangible assets - - 590,000 (1) 590,000
Other assets 31,712 - 31,712
----------- ---------- ----------- -----------
$32,716,010 $2,479,421 $(2,968,936) $32,226,495
=========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 33,355 $ 23,469 $ $ 56,824
Accounts payable 499,231 320,758 819,989
Accrued liabilities 1,057,823 309,398 1,367,221
Income taxes payable 513,112 203,406 716,518
Deferred revenue 1,398,823 705,645 (140,000)(1) 1,964,468
----------- ---------- ----------- -----------
Total current liabilities 3,502,344 1,562,676 (140,000) 4,925,020
Long-term debt, net of current portion 10,549 16,300 26,849
Long-term liabilities 3,250 - 3,250
Deferred tax liability - - 236,000 (1) 236,000
Stockholders' equity:
Total stockholders' equity 29,199,867 900,445 (3,064,936)(1) 27,035,376
----------- ---------- ----------- -----------
$32,716,010 $2,479,421 $(2,968,936) $32,226,495
=========== ========== =========== ===========
</TABLE>
NOTE 1: For purpose of this Pro Forma Condensed Consolidated Balance Sheet,
the acquisition of all of the outstanding shares of CMA Ettworth is
assumed to have occurred on September 30, 1997.
NOTE 2: The following is a description of each of the pro forma adjustments.
(1) To record the purchase of CMA Ettworth, together with related
costs, as of September 30, 1997.
<PAGE> 3
OMTOOL LTD.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
CMA
OMTOOL ETTWORTH
YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, PRO FORMA PRO FORMA
1996 1997 ADJUSTMENTS COMBINED
---- ---- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Software license $5,304,083 $1,218,856 $ $ 6,522,939
Hardware 1,532,887 905,156 2,438,043
Service and Other 1,564,248 2,503,066 4,067,314
---------- ---------- --------- -----------
Total revenue 8,401,218 4,627,078 13,028,296
---------- ---------- --------- -----------
Cost of revenues:
Software license 109,151 120,273 229,424
Hardware 1,083,852 548,149 1,632,001
Service and Other 815,828 1,121,964 1,937,792
---------- ---------- --------- -----------
Total cost of revenues 2,008,831 1,790,386 3,799,217
---------- ---------- --------- -----------
Gross profit 6,392,387 2,836,692 9,229,079
Operating Expenses:
Sales and marketing 2,824,287 1,352,473 4,176,760
Research and development 1,972,545 677,933 2,650,478
General and administrative 949,548 324,897 1,274,445
Amortization of acquired intangible assets - - 325,463 (1) 325,463
---------- ---------- --------- -----------
Total operating expenses 5,746,380 2,355,303 325,463 8,427,146
Income from operations 646,007 481,389 (325,463) 801,933
Interest income 43,093 11,845 54,938
Interest expense (11,437) (16,374) (396,000)(2) (423,811)
---------- ---------- --------- -----------
Income before provision for income
taxes 677,663 476,860 (721,463) 433,060
Provision for income taxes 238,000 168,840 (203,792)(3) 203,048
---------- ---------- --------- -----------
Net income $ 439,663 $ 308,020 $(517,671) $ 230,012
========== ========== ========= ===========
Net income per common and common
equivalent share $ 0.04 $ 0.02
========== ===========
Weighted average common and common
equivalent shares outstanding 9,929,167 363,637 (4) 10,292,804
========== ========= ===========
</TABLE>
NOTE 1: For purpose of this Pro Forma Consolidated Statement of Operations,
the acquired in-process R&D was assumed to have been written off prior
to the period presented herein, so that the statement of operations
includes only recurring costs.
NOTE 2: The following is a description of each of the pro forma adjustments.
(1) Amortization of acquired intangible assets over lives ranging
from 4 to 7 years.
(2) Interest expense on assumed debt issued to finance acquisition,
at an assumed average borrowing rate of 8.8%.
(3) Related tax effect of adjustments (1) and (2).
(4) Shares issued in connection with the transaction.
NOTE 3: Because Omtool and CMA Ettworth have different fiscal year-ends,
the results of operations for CMA Ettworth for the three months ended
March 31,1997 are included in both the combined periods ended December
31, 1996 and September 30, 1997. Revenues of $1.2 million and net
income of $77,000 are included in both periods.
<PAGE> 4
OMTOOL LTD.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
CMA
OMTOOL ETTWORTH
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS COMBINED
---- ---- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Software license $ 8,823,556 $ 740,059 $ $ 9,563,615
Hardware 2,750,075 637,381 3,387,456
Service and Other 1,706,304 1,069,063 2,775,367
----------- ---------- ----------- -----------
Total revenue 13,279,935 2,446,503 15,726,438
----------- ---------- ----------- -----------
Cost of revenues:
Software license 347,552 86,865 434,417
Hardware 1,859,156 309,150 2,168,306
Service and Other 820,619 489,403 1,310,022
----------- ---------- ----------- -----------
Total cost of revenues 3,027,327 885,418 3,912,745
----------- ---------- ----------- -----------
Gross profit 10,252,608 1,561,085 11,813,693
Operating Expenses:
Sales and marketing 4,819,931 759,097 5,579,028
Research and development 2,436,436 380,501 2,816,937
General and administrative 1,158,969 182,354 1,341,323
Amortization of acquired intangible assets - - 244,097 (1) 244,097
----------- ---------- ----------- -----------
Total operating expenses 8,415,336 1,321,952 244,097 9,981,385
Income from operations 1,837,272 239,133 (244,097) 1,832,308
Interest income 202,323 - (24,218)(2) 178,105
Interest expense (25,521) (5,481) (244,110)(3) (275,112)
----------- ---------- ----------- -----------
Income before provision for
income taxes 2,014,074 233,652 (512,425) 1,735,301
Provision for income taxes 665,000 81,778 (136,257)(4) 610,521
----------- ---------- ----------- -----------
Net income $ 1,349,074 $ 151,874 $ (376,168) $ 1,124,780
=========== ========== =========== ===========
Net income per common and common
equivalent share $ 0.13 $ 0.11
=========== ===========
Weighted average common and common
equivalent shares outstanding 10,098,658 363,637 (5) 10,462,295
=========== =========== ===========
</TABLE>
NOTE 1: For purpose of this Pro Forma Consolidated Statement of Operations,
the acquired in-process R&D was assumed to have been written off prior
to the period presented herein, so that the statement of operations
includes only recurring costs.
NOTE 2: The following is a description of each of the pro forma adjustments.
(1) Amortization of acquired intangible assets over lives ranging
from 4 to 7 years.
(2) Reduce interest income as a result of utilizing cash for
acquisition.
(3) Interest expense on assumed debt issued to finance acquisition,
at an assumed average borrowing rate of 8.8%.
(4) Related tax effect of adjustments (1) through (3).
(5) Shares issued in connection with the transaction.
<PAGE> 5
NOTE 3: Because Omtool and CMA Ettworth have different fiscal year-ends,
the results of operations for CMA Ettworth for the three months ended
March 31, 1997 are included in both the combined periods ended
December 31, 1996 and September 30, 1997. Revenues of $1.2 million and
net income of $77,000 are included in both periods.
