SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 8-K/A
Amendment No. 1
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 22, 1997
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
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(Exact name of registrant as specified in charter)
Delaware 333-20709 13-3391820
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(State or Other Jurisdiction (Commission) (IRS Employer
of Incorporation) File Number) Identification No.)
22700 Savi Ranch Parkway, Yorba Linda, California 92657
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (714) 974-7676
N/A
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(Former name or former address, if changed since last report)
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of business acquired.
See Financial Statements of Research Analysis Corporation
for the year ended August 31, 1997 commencing on page 3 and
pages referenced thereon.
(b) Pro Forma Financial Information.
See Financial Statements and Pro Forma Financial Information
of the registrant for the period ended September 30, 1997 commencing on page 12
and pages referenced thereon.
(c) Exhibits
See Exhibit Index.
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Item 7.(a) Financial Statements of business acquired.
RESEARCH ANALYSIS CORPORATION
Financial Statement
For the Year Ended August 31, 1997
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[Stephen Wojdowski Letterhead]
To the Board of Directors and Stockholders of
Research Analysis Corporation
We have audited the accompanying balance sheet of Research Analysis Corporation
as of August 31, 1997 and the related statements of operations, stockholders'
equity and cash flows for the year 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 Research Analysis Corporation
as of August 31, 1997, and the results of its operations and cash flow for the
year then ended, in conformity with generally accepted accounting principles.
/s/ Stephen Wojdowski
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November 18, 1997
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RESEARCH ANALYSIS CORPORATION
Balance Sheet
August 31, 1997
ASSETS
Current Assets
Cash in bank $ 45,409
Accounts receivable - trade 88,400 $ 133,809
---------
Property and Equipment
Office equipment and computers 49,793
Less: accumulated depreciation (23,792) 26,001
---------
Other Assets
Capitalized software development costs 59,920
Deposits 1,336 61,256
--------- ---------
Total Assets $ 221,096
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accrued payroll and employee benefits $ 84,102
Stockholders' Equity (per accompanying statement)
Common stock, authorized 10,000,000 shares $ 23,124
Additional paid-in capital 28,317
Retained earnings 85,553 136,994
--------- ---------
Total Liabilities and Stockholders' Equity $ 221,096
=========
See accompanying notes to financial statements.
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RESEARCH ANALYSIS CORPORATION
Income Statement
Year Ended August 31, 1997
Revenue $784,624
Contract Costs
Direct labor $ 335,402
Subcontracts 71,194
Travel 37,542
Other direct costs 2,467 446,605
--------- ---------
Gross Profit 338,019
Operating Expenses
Fringe benefits 273,238
Overhead 61,475
General and administrative 34,628 369,341
--------- ---------
Loss from Operations (31,322)
Other Income and Expenses
Interest income 838
--------
Loss before Taxes (30,484)
Tax Benefit 6,480
--------
Net Loss $(24,004)
========
See accompanying notes to financial statements.
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RESEARCH ANALYSIS CORPORATION
Statement of Stockholders' Equity
Common Stock
(Par Value $0.10) Additional
------------------- Paid-in Retained
Shares Value Capital Earnings
------- ------- --------- ---------
Balance at August 31, 1996 280,082 $20,868 $ 18,573 $ 109,557
Purchase of common stock 25,557 2,256 9,744
Shares surrendered (93,955)
Net Loss (24,004)
------- ------- --------- ---------
211,684 $23,124 $ 28,317 $ 85,553
======= ======= ========= =========
See accompanying notes to financial statements.
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RESEARCH ANALYSIS CORPORATION
Statement of Cash Flows
Year Ended August 31, 1997
Cash Flow from Operating Activities:
Net Loss $ (24,004)
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation and amortization 13,358
Accounts receivable 28,374
Accounts payable and accrued expenses (1,355)
Prepaid taxes 500
Deferred taxes (6,480)
---------
Net Cash Flow from Operating Activities 10,393
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Cash Flow from Investing Activities
Purchase of computers and office equipment (31,408)
Software development (59,920)
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Net Cash Flow from Investing Activities (91,328)
---------
Cash Flow from Financing Activities
Purchases of common stock 12,000
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Net Cash Flow from Financing Activities 12,000
---------
Net Increase/(Decrease) in Cash (68,935)
Cash, beginning 114,344
---------
Cash, ending $ 45,409
=========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest (net of amount capitalized) -0-
Income taxes -0-
See accompanying notes to financial statements.
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RESEARCH ANALYSIS CORPORATION
Notes to Financial Statement
Note A - Summary of Significant Accounting Policies
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RECOGNITION OF REVENUE
The major portion of revenues result from contract services performed for the
United States Government and its prime contractors under cost reimbursement and
fixed-price contracts and subcontracts. Contract revenues are accounted for
under the percentage of completion method wherein sales and estimated earnings
are recognized when work is performed.
INVENTORIES
No inventories are maintained. All cost is charged to operations in the period
in which it is incurred.
PROPERTY AND EQUIPMENT
Depreciation is provided over the estimated useful lives of assets using the
straight-line method. Estimated useful life is five years for furniture and
equipment.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
In accordance with the Statement of Financial Accounting Standard No. 86, the
Company has capitalized certain costs related to the development of software
products. Capitalized costs are amortized using the straight-line method over
five years. During the fiscal year, the Company incurred $59,920 in software
development costs which were capitalized; however, there was no amortization for
the year ended August 31, 1997.
INCOME TAXES
Taxes are provided at the appropriate rates for all taxable items included in
income regardless of the period in which such items are reported for tax
purposes. The principal difference arises from the use of a "Cash Basis" for tax
purposes and an "Accrual Basis" for financial statement purposes.
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RESEARCH ANALYSIS CORPORATION
Notes to Financial Statement
(continued)
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
LINE OF BUSINESS
The Company was incorporated in the State of California on September 13, 1983
and is engaged primarily in engineering consulting for reliability,
maintainability and logistics in military hardware.
Note B - Accounts Receivable
- ----------------------------
Accounts receivable are primarily billed to the U.S. Government or subcontracts
under U.S. Government prime contracts. All receivables are considered
collectible.
Note C - Accrued Payroll and Employee Benefits
- ----------------------------------------------
Accrued salaries $ 17,361
Accrued vacation 6,741
Accrued retirement plan 60,000
--------
$ 84,102
========
Note D - Income Taxes
The provision for federal income taxes includes the following:
Payable currently $ --
Deferred tax benefit 6,480
--------
$ 6,480
========
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RESEARCH ANALYSIS CORPORATION
Notes to Financial Statement
(continued)
Note F - Commitments
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Facilities are leased under operating leases. Rent expense was $17,982 for
fiscal year 1997.
As of August 31, 1997, future minimum annual lease payments are as follows:
Year Ended August 31
--------------------
1998 $ 16,392
1999 13,660
--------
$ 30,052
========
Note G - Retirement Plans
- -------------------------
The Company has both a profit sharing and money purchase retirement plan that
covers all eligible employees. Annual contributions to the profit sharing plan
are made at the discretion of the board of directors. The money purchase plan is
based on a fixed percentage of eligible compensation. Retirement plan expense
was $60,000 for fiscal year 1997.
Note H - Common Stock
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During the fiscal year, the majority stockholder surrendered 93,955 shares of
his stock as an equalizing transaction for no consideration. The two
stockholders of the Company now each own 50%.
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Item 7.(b) Pro Forma Financial Information.
Transition Analysis Component Technology, Inc.
CONSOLIDATED BALANCE SHEETS
A S S E T S
September 30 June 30
1997 1997
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(unaudited)
(000's omitted)
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Current Assets
Cash ................................................ $ 124 $ 133
Accounts receivable, less reserves of
$5,000 and $5,000, respectively .................. 538 419
Prepaid expenses .................................... 30 11
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Total Current Assets ................................ 692 563
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Furniture and Equipment .................................. 590 500
Less accumulated depreciation and amortization ...... 346 310
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244 190
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Other Assets
Rent security deposits .............................. 80 --
Software development ................................ 65 --
Excess of cost over assets acquired ................. 56 --
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TOTAL ASSETS ............................................. $1,137 $ 753
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L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
Current Liabilities
Accrued expenses .................................... $ 233 $ 321
Loan payable - bank ................................. 350 --
Deferred income ..................................... 63 80
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Total Current Liabilities ................................ 646 401
Stockholders' Equity
Common Stock, par value $.01 per share:
authorized 5,000,000 shares; issued
598,734 shares as of September 30, 1997
and 553,830 shares as of June 30, 1997 ........... 6 5
Additional paid-in capital .......................... 553 441
Retained earnings ................................... (68) (94)
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Total Stockholders' Equity ............................... 491 352
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $1,137 $ 753
====== ======
Note: The consolidated balance sheet at June 30, 1997 has been derived from the
audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
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Transition Analysis Component Technology, Inc.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
September 30,
1997 1996
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(000's omitted,
except per share data)
-----------------------
Revenues ......................................... $648 $527
Selling, general and administrative expenses ..... 600 395
Depreciation of equipment ....................... 11 7
Amortization of software development costs ....... 1 --
Interest expense ................................. 3 --
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Income before income taxes ....................... 33 125
Provision for income taxes ....................... 7 38
------- -------
Net income ....................................... $26 $87
======= =======
Net Income per Common Share ...................... $0.05 $0.16
======= =======
Number of shares used in computation ............. 568,798 553,830
See notes to condensed consolidated financial statements.
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Transition Analysis Component Technology, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
September 30,
1997 1996
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(000's omitted)
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OPERATING ACTIVITIES
Net income .............................................. $ 26 $ 87
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization .................. 12 7
Changes in operating assets and liabilities:
Accounts receivable ........................ (31) (59)
Prepaid expenses and other current assets .. (19) (8)
Accrued expenses ........................... (48) 33
Deferred income ................................ (17) --
Rent security deposits ......................... (79) --
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ..... (156) 60
---- ----
INVESTING ACTIVITIES
Costs related to RAC acquisition, net of cash received .. 12 --
Purchase of equipment ................................... (40) (28)
Additions to software development ....................... (5) --
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NET CASH USED IN INVESTING ACTIVITIES ........................ (33) (28)
---- ----
FINANCING ACTIVITIES
Proceeds from lines of credit ........................... 350 --
Net decrease in due to former parent .................... (170) (58)
---- ----
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES .......... 180 (58)
---- ----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......... (9) (26)
Cash at beginning of period ............................. 133 134
---- ----
CASH AT END OF PERIOD ........................................ $124 $108
==== ====
See notes to condensed consolidated financial statements.
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Transition Analysis Component Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended September 30, 1997 are not necessarily indicative of the results that may
be expected for the year ending June 30, 1998.
ORGANIZATION
Prior to June 30, 1997, Transition Analysis Component Technology, Inc.
("TACTech" or the "Company") was a 90% owned subsidiary of Zing Technologies,
Inc. ("Zing"), the Company's former parent, and the remaining 10% was owned by
one officer of the Company.
The Company filed a registration statement on Form SB-1, which became
effective June 30, 1997, for the purpose of distributing the Common Stock of the
Company which was owned by Zing to the shareholders of Zing (the
"Distribution"). In connection with the Distribution, the Common Stock
authorized and outstanding was split on approximately a 36.436-for-one basis.
Also, in connection with the Distribution, inter-company advances
(excluding income taxes) as of the effective date of the Distribution were
converted to equity and, accordingly, were included within additional paid-in
capital.
As of the date of the Distribution, the Company engaged certain employees
of Zing (with the permission of Zing) on a part-time basis to render to the
Company the following services for a cost not to exceed $100,000 per year
including: to advise in the development of the Company's business plan, to
advise the Company with respect to and to negotiate agreements on the Company's
behalf, to coordinate communications with the Company's stockholders, to advise
the Company with respect to and to negotiate acquisitions and financing, to
prepare and file the Company's tax returns and reports required by applicable
securities laws and rules of applicable stock exchanges, to review and supervise
the Company's accounting department and systems from time to time and suggest
revisions and changes thereto, and to perform such further services as such
employees may agree.
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Transition Analysis Component Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
Acquisition of Research Analysis Corp.
On September 22, 1997, TACTech acquired the search and report software of
Research Analysis Corporation ("RAC") pursuant to a merger ( the "Merger") of
Research Technology Analysis Corp., a California corporation formed for this
purpose and wholly-owned by the Company with and into RAC. Upon consummation of
the Merger, RAC, as the surviving corporation, became a wholly-owned subsidiary
of the Company. The RAC acquisition was accounted for pursuant to the purchase
method of accounting and is effective as of September 1, 1997.
The following unaudited pro-forma information has been prepared assuming
that this acquisition had taken place at the beginning of the respective
quarters, after giving effect to pro-forma adjustments for compensation accruals
and income taxes:
Three months ended September 30,
1997 1996
---- ----
Revenue .................................. $756,076 $737,123
Net (Loss) Income ........................ ($4,851) $100,807
Net (Loss) Income per Common Share ....... ($0.01) $0.17
Historically, RAC derived revenues from consulting services and
customer-specific projects (other than those specifically related to
indenturing/component library services being developed by TACTech and known as
"TACTRAC"). Such non-TACTRAC related revenue was derived by RAC typically under
cost plus fixed fee contracts with the Department of Defense and government
contractors and related specifically to training services, engineering support
and logistics support. These contractual services dealt with issue of
reliability, maintainability, failure analysis, reliability predictions, circuit
card redesign, provisioning and weapons system file data extraction.
It is the intention of TACTech selectively to disengage from RAC's
non-TACTRAC related activity, redirect resources toward software development and
marketing, and increase TACTRAC subscription revenue. Thus, in the short term,
as TACTech develops the TACTRAC product, software development costs will in all
likelihood increase and may exceed RAC revenues. TACTech anticipates marketing
the TACTRAC product through TACTech (rather than RAC) channels. There can be no
assurance that TACTech will be able successfully to develop and market the
TACTRAC product and that such failure will not result in a material adverse
effect upon TACTech.
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Transition Analysis Component Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
In Accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived assets for Long-Lived Assets to be Disposed of", the Company assesses
the recoverability of cost in excess of net assets acquired by determining
whether the amortization of the asset balance over its remaining life can be
recovered through the undiscounted future operating cash flows. The Company
believes that no impairment has occurred and that no reduction in the estimated
useful life is warranted.
Loan Payable - Bank
On August 28, 1997, the Company entered into a $1,500,000 revolving credit
facility with a commercial bank (the "Bank") to be used for working capital and
equipment acquisitions. The facility has a three year term and is guaranteed by
Zing. Interest on all borrowings is at a variable rate tied to the Bank's prime
rate. All of the Company's personal property collateralizes borrowings under
such facility.
Impact of New Accounting Standard
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, Earnings per Share, which specifies a change in the
computation, presentation and disclosure requirements for earnings per share and
requires the restatement of all prior periods. The Statement is required to be
adopted for periods ending after December 15, 1997. Accordingly, the Company
will comply with the requirements of this standard, however, the Company does
not expect that the impact of applying this standard will be material.
Stock-Based Compensation and Pro Forma Information
Under the provisions of FASB No. 123, the Company is required to disclose
the fair value, as defined, of options granted to employees and related
compensation expense. The fair value for these options is estimated at the date
of grant using a Black-Scholes option pricing model. The Black-Scholes option
valuation model was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.
The Company is also required to present pro forma information as if
provisions of FASB Statement No. 123 had been implemented as of the date of the
stock options were granted. For the year ended January 31, 1997. The disclosure
provisions of FASB Statement NO. 123 do not produce information that differs
materially from that contained in the consolidated financial statements.
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SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrants have duly caused this report to be signed on their
respective behalf by the undersigned, thereunto duly authorized.
Date: December 8, 1997
TRANSITION ANALYSIS COMPONENT
TECHNOLOGY, INC.
By: /s/ Martin S. Fawer
-------------------
Chief Financial Officer and
Vice President
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EXHIBIT INDEX
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Exhibit Description
- ------- -----------
2 Merger Agreement and Plan of Reorganization, dated as of September 1,
1997 by and among Transition Analysis Component Technology, Inc. (the
"Registrant"), Research Technology Analysis Corp., Research Analysis
Corporation, Jeff Hanser and Bruce L. Blackford.*
10.1 Option Agreement dated September 22, 1997, granting 22,452 options to
Bruce L. Blackford.*
10.2 Option Agreement, dated September 22, 1997, granting 22,452 options to
Jeff Hanser.*
10.3 Employment Agreement, dated September 22, 1997, between the Registrant
and Bruce L. Blackford.*
10.4 Employment Agreement, dated September 22, 1997, between the Registrant
and Jeff Hanser.*
99. Press release dated September 22, 1997.*
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* Previously filed.
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