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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): June 20, 1997
ORBIT/FR, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-22583 23-2874370
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
506 Prudential Road
Horsham, Pennsylvania 19044
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(Address of principal executive offices,
including zip code)
Registrant's telephone number, including area code: (215) 674-5100
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Item 2. Acquisition or Disposition of Assets.
Effective June 17, 1997, ORBIT/FR, Inc. ("ORBIT"), pursuant to
a Stock Purchase Agreement entered into on March 31, 1997 and in connection with
the completion of the initial public offering of its common stock on June 20,
1997 ("IPO"), acquired all of the issued and outstanding shares of Advanced
ElectroMagnetics, Inc., a California corporation ("AEMI").
The maximum consideration payable by ORBIT is $1,600,000, subject to
adjustment based on AEMI's financial performance for the three years ended March
31, 1997. One-half of the final purchase price is to be paid in cash received
from the IPO and the other half is to be paid by the issuance of shares of
ORBIT's common stock valued at the initial offering price of $8.25 per share.
The purchase price has been preliminarily determined to be $1,377,000, of which
ORBIT paid $450,000 in cash on June 20, 1997. The remainder purchase price will
be paid as soon as practicable after the determination of the final purchase
price pursuant to the Stock Purchase Agreement.
AEMI designs and manufactures specialized materials ("absorbers") that
line test chambers used in indoor electromagnetic compatibility testing
systems. By preventing microwave "echos", AEMI absorbers provide a distortion
and interference-free environment for testing emission, reception and/or
reflective properties of customer products.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
a. Financial Statements of Advanced ElectroMagnetics, Inc.
Report of Ernst & Young LLP, Independent Auditors
Balance Sheet as of March 31, 1997
Statement of Income for the year
ended March 31, 1997
Statement of Shareholders' Equity for the
year ended March 31, 1997
Statement of Cash Flows for the year
ended March 31, 1997
Notes to Financial Statements
b. Pro Forma Financial Information
*Unaudited Consolidated Pro Forma Balance Sheets
at March 31, 1997
*Unaudited Consolidated Pro Forma Statements of Operations for
the year ended December 31, 1996 and three months ended March
31, 1997
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*Incorporated by reference to ORBIT/FR, Inc's Final Prospectus (File
No. 333-25015) dated June 17, 1997.
c. Exhibits
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Number Title
*1. Stock Purchase Agreement, dated as of
March 31, 1997, by and among ORBIT/FR, Inc.,
a Delaware corporation, Anechoic, a Nevada corporation,
Gabriel A. Sanchez and Barbara J. Sanchez.
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*Incorporated by reference to ORBIT/FR, Inc's Registration Statement on
Form S-1 (File No. 333-25015) filed with the Securities and Exchange Commission
on April 11, 1997.
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Advanced ElectroMagnetics, Inc.
Financial Statements
Year ended March 31, 1997
CONTENTS
Report of Independent Auditors.........................................1
Audited Financial Statements
Balance Sheet..........................................................2
Statement of Income....................................................3
Statement of Shareholders' Equity......................................4
Statement of Cash Flows................................................5
Notes to Financial Statements..........................................6
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Report of Ernst & Young LLP, Independent Auditors
The Board of Directors
Advanced ElectroMagnetics, Inc.
We have audited the accompanying balance sheet of Advanced ElectroMagnetics,
Inc. as of March 31, 1997, and the related statements of income, shareholders'
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 Advanced ElectroMagnetics, Inc.
at March 31, 1997, and the result of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
July 18, 1997
San Diego, California
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Advanced ElectroMagnetics, Inc.
Balance Sheet
March 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 47,197
Accounts receivable, net of allowance for doubtful
accounts of $65,773 737,356
Inventories 179,360
Deferred income taxes (Note 6) 13,460
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Total current assets 977,373
Property and equipment, net 152,408
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Total assets $ 1,129,781
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 430,080
Accrued employee benefits 46,968
Accrued expenses and customer deposits 13,426
Income taxes payable 21,860
Deferred rent 3,481
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Total current liabilities 515,815
Notes payable to shareholder 254,021
Commitments (Note 5)
Shareholders' equity
Common stock, 30,000,000 shares authorized, 26,969,502
issued and outstanding 455,117
Accumulated deficit (95,172)
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Total shareholders' equity 359,945
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Total liabilities and shareholders' equity $ 1,129,781
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</TABLE>
See accompanying notes.
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Advanced ElectroMagnetics, Inc.
Statement of Income
Year ended March 31, 1997
<TABLE>
<S> <C>
Sales $ 3,365,405
Cost of sales 2,272,659
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Gross margin 1,092,746
Operating expenses:
Marketing and selling 145,564
General and administrative 394,340
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Total operating expenses 539,904
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Operating income 552,842
Other income (expense):
Merger costs (46,292)
Interest expense (37,413)
Other, net 3,349
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(80,356)
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Income before provision for income taxes 472,486
Provision for income taxes 8,400
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Net income $ 464,086
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Net income per common share $ 0.02
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Common shares used in per share computation 26,969,502
============
</TABLE>
See accompanying notes.
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Advanced ElectroMagnetics, Inc.
Statement of Shareholders' Equity
Year ended March 31, 1997
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
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<S> <C> <C> <C> <C>
Balance at March 31, 1996 26,969,502 $455,117 $(559,258) $(104,141)
Net income -- -- 464,086 464,086
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Balance at March 31, 1997 26,969,502 $455,117 $ (95,172) $ 359,945
======================================================
</TABLE>
See accompanying notes.
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Advanced ElectroMagnetics, Inc.
Statement of Cash Flows
Year ended March 31, 1997
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 464,086
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 46,058
Bad debt expense 12,935
Changes in operating assets and liabilities:
Accounts receivable (393,501)
Inventories (20,098)
Deferred income taxes (13,460)
Accounts payable 68,500
Income taxes payable 12,586
Deferred rent (2,385)
Other assets and accrued liabilities, net 3,609
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Net cash provided by operating activities 178,330
INVESTING ACTIVITIES
Purchase of property and equipment (86,489)
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Net cash used in investing activities (86,489)
FINANCING ACTIVITIES
Proceeds of increase in note payable 179,430
Repayment of notes payable to shareholder (224,465)
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Net cash used in financing activities (45,035)
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Net increase in cash 46,806
Cash at beginning of year 391
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Cash at end of year $ 47,197
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 30,446
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Income taxes paid $ 800
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SUPPLEMENTAL SCHEDULE OF NON CASH FINANCING ACTIVITY
Accounts payable to a customer offset against accounts receivable from
the same customer $ 153,000
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</TABLE>
See accompanying notes.
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Advanced ElectroMagnetics, Inc.
Notes to Financial Statements
March 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Advanced ElectroMagnetics, Inc. ("the Company") was formed in 1980, and designs,
manufactures and installs radar absorbing material for the military, aerospace
and communications market, primarily in the United States. The Company's
products provide electromagnetic interference control, compatibility, radar
cross section and general purpose antenna measurement capabilities. The Company
also provides services relating to installation, shielded enclosures and
state-of-the-art testing of finished facilities.
REVENUE RECOGNITION
The Company recognizes products and related service revenues at the time of
shipment or performance of service.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets of 7
- - 10 years. Leasehold improvements are amortized over the lesser of the
remaining life of the lease or the useful life of the asset.
Vehicles 7 years
Machinery and equipment 10 years
Office furniture and equipment 10 years
IMPAIRMENT OF ASSETS
Effective April 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of (FAS 121), which requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets'
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Advanced ElectroMagnetics, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
carrying amount. FAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The adoption of this standard had no
material effect on the Company's financial position or results of operation.
EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of common
shares outstanding during the year.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings per Share. SFAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997 and replaces APB Opinion 15, Earnings
per Share ("EPS"). SFAS No. 128 requires dual presentation of basic and diluted
earnings per share by entities with complex capital structures. Basic EPS
includes no dilution and is computed by dividing net income by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution of securities that could share in the earnings of the
entity. The impact of SFAS No. 128 on the calculation of either basic or diluted
net income per share for the year ended March 31, 1997 is not expected to be
material.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
about the future that affects the amounts reported in the financial statements.
These estimates include assessing the collectibility of accounts receivable and
the usage and recoverability of inventory. The actual results could differ from
those estimates.
2. INVENTORIES
Inventories consisted of the following at March 31, 1997:
<TABLE>
<S> <C>
Raw materials and components $ 36,059
Work in process 97,429
Finished goods 45,872
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$179,360
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</TABLE>
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Advanced ElectroMagnetics, Inc.
Notes to Financial Statements (continued)
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at March 31, 1997:
<TABLE>
<S> <C>
Machinery and equipment $ 522,119
Vehicles 22,075
Office furniture and equipment 64,395
Leasehold improvements 82,442
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691,031
Accumulated depreciation (538,623)
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$ 152,408
=========
</TABLE>
4. NOTES PAYABLE TO SHAREHOLDER
The Company's President and majority shareholder has obtained several personal
lines of credit from banks, for the benefit of the Company. The proceeds of
these credit lines, with a balance of $226,779 at March 31, 1997, were
transferred to the Company for working capital purposes in exchange for a
promissory note which bears interest at the same rate as the underlying lines of
credit. The interest on the lines of credit to the banks are at interest rates
between 10.25% and 16% at March 31, 1997. The Company has a second note payable
to the President and majority shareholder with a balance of $27,242 at March 31,
1997, which bears interest at 12% per annum. In connection with the acquisition
of the Company (Note 8), the terms of the notes payable to shareholders have
been extended to July 1998.
5. COMMITMENTS
The Company leases office, warehouse and production facilities under operating
leases which expire in January 1998. Rent expense amounted to $68,196 for the
year ended March 31, 1997 and the future minimum payments under the
noncancelable operating leases are approximately $58,000 at March 31, 1997.
6. INCOME TAXES
The significant components of the provision for income taxes are as follows:
<TABLE>
<S> <C>
Current:
Federal $ 8,100
State 13,760
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21,860
Deferred:
Federal (8,100)
State (5,360)
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(13,460)
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$ 8,400
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</TABLE>
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Advanced ElectroMagnetics, Inc.
Notes to Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. A valuation allowance has been
recognized to offset the deferred tax assets as realization of such assets is
uncertain.
Significant components of the Company's deferred tax liabilities and assets as
of March 31, 1997 are as follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Tax over financial reporting depreciation $(22,800)
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(22,800)
Deferred tax assets:
Vacation accrual 12,500
Reserves and accruals 29,000
California franchise tax 7,000
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Total deferred tax assets 48,500
Valuation allowance (12,240)
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Net deferred tax assets $ 13,460
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</TABLE>
The provision for income taxes reconciles to the amount computed by applying the
federal statutory rate (34%) to income before income taxes as of March 31, 1997
are as follows:
<TABLE>
<S> <C>
Tax at federal statutory rate $ 160,645
State taxes, net of federal benefit and 29,294
credits
Non deductible expenses 17,994
Decrease in valuation allowance (195,620)
Graduated tax rates (3,913)
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$ 8,400
=========
</TABLE>
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Advanced ElectroMagnetics, Inc.
Notes to Financial Statements (continued)
7. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Plan (the "Plan") for the benefit of eligible
employees, generally those who have completed one year of full time service.
Participants may contribute up to 15% of annual compensation. The Plan specifies
an employer matching contribution of up to $200 per year. Participants vest in
employer contributions over six years at a rate of 20% for each year of service.
Employer contributions to the Plan totaled $2,991 for the year ended March 31,
1997.
8. SUBSEQUENT EVENT (UNAUDITED)
On June 17, 1997, all of the Company's outstanding stock was purchased by
ORBIT/FR, Inc. ORBIT/FR, Inc. is a publicly held company which is traded on the
Nasdaq National Marketing System and which completed its initial public offering
on June 20, 1997.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ORBIT/FR, INC.
By: /s/ Aryeh Trabelsi
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Aryeh Trabelsi
President and
Chief Executive Officer
By: /s/ Joseph E. Sullivan
---------------------------------
Joseph E. Sullivan
Director of Finance and
Treasurer
Date: August 29, 1997
