SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 18,
1998
HADRON, INC.
(Exact name of the registrant as specified in its charter)
New York 0-5404 11-2120726
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
7611 Little River Turnpike, Suite 404 West, Annandale, Virginia 22003
(Address of principal executive offices) (Zip Code)
(703) 642-9404
Registrant's telephone number, including area code
4900 Seminary Road, Suite 800 Alexandria, Virginia 22311
(Former name or former address, if changed since last report)
<PAGE>
The undersigned Registrant hereby amends its Current Report
on Form 8-K dated December 18, 1998 by the addition of financial
statements as set forth in Item 7 below.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired:
Vail Research and Technology Corporation
Financial Statements for the Fiscal Years
Ended June 30, 1998 and 1997
Independent Auditors' Report
Balance Sheet
Statements of Income and Retained Earnings
Statements of Cash Flows
Notes to Financial Statements
Vail Research and Technology Corporation
Financial Statements for the Three Months
Ended September 30, 1998 and 1997 (Unaudited)
Balance Sheet as of September 30, 1998
Statements of Operations
Statements of Cash Flows
Notes to Financial Statements
(b) Pro Forma financial information:
Hadron, Inc. Pro Forma Financial Statements (Unaudited)
Pro Forma Combined Statements of
Operations for the Six Months Ended December 31, 1998
Pro Forma Combined Statements of
Operations for the Fiscal Year Ended June 30, 1998
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
(c) Exhibits:
Exhibit No. Description
23 Consent of Independent Accountants
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Item 7(a) Financial Statements of Business Acquired
Vail Research and Technology Corporation
Financial Statements for the Fiscal Years
Ended June 30, 1998 and 1997 Page No.
--------
Independent Auditors' Report 1
Balance Sheets 2
Statements of Income and Retained Earnings 3
Statements of Cash Flows 4
Notes to Financial Statements 5
Vail Research and Technology Corporation
Financial Statements for the Three Months
Ended September 30, 1998 and 1997 (Unaudited)
Balance Sheet as of September 30, 1998 10
Statements of Operations 12
Statements of Cash Flows 13
Notes to Financial Statements 14
Item 7(b) Pro Forma Financial Information
Hadron, Inc. Pro Forma Financial Statements (Unaudited)
Pro Forma Combined Statements of
Operations for the Six Months
Ended December 31, 1998 15
Pro Forma Combined Statements of
Operations for the Fiscal Year
Ended June 30, 1998 16
Notes to Unaudited Pro Forma Condensed
Combined Financial Statements
17
<PAGE>
Item 7(a) Financial Statements of Business Acquired
INDEPENDENT AUDITORS' REPORT
To the Stockholder
Vail Research and Technology Corporation
We have audited the accompanying balance sheets of Vail
Research and Technology Corporation as of June 30, 1998 and 1997,
and the related statements of income and retained earnings 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, the financial statements referred to above
present fairly, in all material respects, the financial position of
Vail Research and Technology Corporation as of June 30, 1998 and
1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting
principles.
/S/ RUBINO & MCGEEHIN
July 17, 1998
Bethesda, Maryland
1
<PAGE>
<TABLE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
BALANCE SHEETS
ASSETS
<CAPTION>
June 30,
1998 1997
---- ----
<S> <C> <C>
Current assets
Cash $ 701,230 $ 606,345
Accounts receivable 885,076 1,316,906
Other receivables 8,727 2,265
Income taxes receivable 1,024 -
---------- ----------
Total current assets 1,596,057 1,925,516
Property and equipment, net of
accumulated
depreciation and amortization 9,662 31,008
Other assets
Stockholder receivable 215,397 203,598
Deposits 26,182 35,152
---------- ----------
Total assets $1,847,298 $2,195,274
========== ==========
</TABLE>
<PAGE>
<TABLE>
LIABILITIES AND STOCKHOLDER'S EQUITY
<CAPTION>
<S> <C> <C>
Current liabilities
Accounts payable $ 22,158 $ 44,478
Accrued payroll liabilities 58,569 207,800
Income taxes payable - 167,595
Deferred income taxes 289,472 387,391
Billings in excess of revenue recognized 79,419 80,195
Other liabilities 30,688 30,688
---------- ----------
Total liabilities 480,306 918,147
---------- ----------
Stockholder's equity
Common stock, $.10 par value, 10,000
shares authorized, 1,000 shares issued
and outstanding 100 100
Additional paid-in capital 400 400
Retained earnings 1,366,492 1,276,627
---------- ----------
Total stockholder's equity 1,366,992 1,277,127
---------- ----------
Total liabilities and stockholder's
equity $1,847,298 $2,195,274
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
STATEMENTS OF INCOME AND RETAINED EARNINGS
<CAPTION>
Year Ended June 30,
-------------------
1998 1997
---- ----
<S> <C> <C>
Contract revenues $4,124,478 $6,539,697
---------- ----------
Contract costs
Direct labor 886,341 1,575,760
Other direct costs 1,943,276 3,043,323
Indirect costs 1,190,519 1,764,570
---------- ----------
Total contract costs 4,020,136 6,383,653
---------- ----------
Income from operations 104,342 156,044
Other income (expense)
Interest income 39,850 25,545
Interest expense - (292)
Other income 1,813 (2,512)
---------- ----------
Income before income taxes 146,005 178,785
Provision for taxes on income 56,140 70,819
---------- ----------
Net income 89,865 107,966
Retained earnings, beginning of the year 1,276,627 1,168,661
---------- ----------
Retained earnings, end of the year $1,366,492 $1,276,627
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended June 30,
-------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $89,865 $107,966
Adjustments to reconcile net income
to net cash
provided by operating activities:
Loss on disposal of fixed assets 3,127 6,326
Depreciation and amortization 23,741 21,670
Net (increase) decrease in:
Accounts receivable 431,830 710,424
Other receivables (18,261) (12,530)
Income taxes receivable (1,024) 134,654
Deposits 8,970 (5,420)
Net increase (decrease) in:
Accounts payable (22,320) (459,666)
Accrued payroll liabilities (149,231) (36,057)
Income taxes payable (167,595) 167,595
Deferred income taxes (97,919) (99,867)
Billings in excess of revenue recognized ( 776) 28,376
Other liabilities - (8,942)
--------- ---------
Net cash provided by operating activities 100,407 554,529
Cash flows from investing activities:
Acquisition of property and equipment (5,522) (3,859)
Net increase in cash 94,885 550,670
Cash, beginning of the year 606,345 55,675
Cash, end of the year $701,230 $606,345
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
Years Ended June 30, 1998 and 1997
1. Summary of Significant Accounting Policies
Vail Research and Technology Corporation (the Company)
provides services under prime contracts and subcontracts
with departments and agencies of the U.S. Government,
primarily with the Department of the Navy. Accounting
policies which affect significant aspects of the Company's
financial statements are summarized below.
Use of Estimates
The accompanying financial statements have been prepared
in conformity with generally accepted accounting
principles. This requires management to make estimates
and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ
from those estimates.
Revenue Recognition
Revenue from cost-plus-fixed-fee contracts is recognized
on the basis of direct and indirect costs incurred and an
allocable portion of the fixed fee. Revenue from fixed-
price contracts is recognized on the percentage-of-
completion method, with costs and estimated profits
recorded as work is performed. Revenue from time and
materials contracts is recognized based on fixed hourly
rates for direct labor expended. The fixed rate includes
direct labor, indirect expenses, and profits. Material
and other specified direct costs are recorded at actual
cost.
Contract costs include all direct material and labor costs
and those indirect costs related to contract performance.
Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are
determined. Changes in job performance, job conditions,
and estimated profitability, including final contract
settlements, may result in revisions to costs and income
and are recognized in the period in which the revisions
are determined.
<PAGE>
Depreciation and Amortization
Property and equipment are stated at cost and depreciated
over their estimated useful lives of five to seven years
using accelerated methods of depreciation, except for
software which is depreciated over five years using the
straight-line method.
Maintenance and repair costs are charged to expense as
incurred. Replacements and betterments are capitalized
and depreciated over their estimated useful lives. At the
time properties are retired or otherwise disposed of, the
property and related accumulated depreciation or
amortization accounts are relieved of the applicable
amounts, and any gain or loss is credited or charged to
income.
1. Summary of Significant Accounting Policies (continued)
Cash Equivalents and Cash Concentration
Cash includes demand deposits and overnight investments in
repurchase agreements. The Company maintains deposits
with federally insured financial institutions. Balances
often exceed insured limits. Management, however, does
not consider this a significant concentration of credit
risk.
Income Taxes
The Company recognizes deferred income tax liabilities and
assets for cumulative temporary differences between book
and tax methods of reporting revenue and expenses as of
the balance sheet date. Income tax expenses consist of
the taxes payable for the current year, plus the change in
the deferred tax net asset and liability.
<PAGE>
2. Accounts Receivable
Accounts receivable consist of the following:
<TABLE>
June 30,
--------
1998 1997
---- ----
<S> <C> <C>
Billed - prime contracts with government $392,902 $747,980
Billed - subcontracts with other
government contractors 3,656 14,136
-------- ----------
Total billed receivables 396,558 762,116
-------- ----------
Unbilled - prime contracts with government 479,824 547,775
Unbilled - subcontracts with other
government contractors 8,694 7,015
-------- ----------
Total unbilled receivables 488,518 554,790
-------- ----------
Total accounts receivable $885,076 $1,316,906
======== ==========
</TABLE>
Unbilled accounts receivable consist of fee retainages and
costs in excess of amounts billed using provisional
billing rates. Retainages and rate differentials are
generally billable after completion of contract cost
audits by government auditors (Note 8). Accordingly,
unbilled receivables will likely be billed and collected
after one year from the balance sheet date.
3. Property and Equipment
Property and equipment consist of the following:
<TABLE>
June 30,
1998 1997
---- ----
<S> <C> <C>
Furniture and equipment $177,069 $191,698
Leasehold improvements - 15,346
--------- ---------
177,069 207,044
Accumulated depreciation and amortization (167,407) (176,036)
--------- ---------
Property and equipment, net $ 9,662 $ 31,008
========= =========
</TABLE>
<PAGE>
4. Line of Credit
The Company had a line of credit with a bank at June 30,
1997, for $500,000. There was no balance due on the line
of credit as of June 30, 1997, and the agreement expired
April 30, 1998. Borrowings under the line of credit
accrued interest at the bank's prime rate plus 1/2% payable
monthly. The line of credit was guaranteed by the sole
stockholder of the Company and secured by all business
assets of the Company. The agreement had financial
covenants for working capital, net worth and debt.
5. Income Taxes
For income tax purposes, the Company reports its income on
the cash basis of accounting. Tax deferrals are provided
in the financial statements for significant differences
between the cash basis and the accrual basis used for
financial reporting. The provision for income taxes
consists of the following:
<TABLE>
Year Ended June 30,
-------------------
1998 1997
---- ----
<S> <C> <C>
Current
Federal $126,329 $ 143,361
State 27,730 27,325
-------- ---------
Current provision 154,059 170,686
-------- ---------
Deferred
Federal (79,640) (83,880)
State (18,279) (15,987)
-------- ---------
Deferred benefit (97,919) (99,867)
Total provision $ 56,140 $ 70,819
========= ===========
</TABLE>
5. Income Taxes (continued)
The provision for income taxes differs from the amount
that would result using the maximum federal corporate rate
due to state income taxes and changes in tax expense
estimates.
The deferred tax liability at June 30, 1998 and 1997, is
net of a deferred tax asset of $34,528 and $141,669,
respectively. The deferred tax asset results from
accounts payable, salaries, vacation, and other
liabilities that are deductible for tax purposes when
paid. The deferred tax liability results from the use of
accelerated methods of depreciation for tax purposes and
accounts receivables that are taxable when received.
<PAGE>
The Company paid $322,202 and $3,440 in taxes during the
years ended June 30, 1998 and 1997, respectively.
6. Profit Sharing and Employee Benefit Plans
The Company has a profit sharing plan under section 401(k)
of the Internal Revenue Code. The plan benefits
substantially all employees. The Company contributes a
discretionary amount determined annually by the Board of
Directors. In addition, the Company matches a portion of
the employee elective deferrals. During the years ended
June 30, 1998 and 1997, the Company contributed $17,277
and $26,346, respectively. The Company also has a
cafeteria plan, which enables employees to make pre-tax
contributions to a flexible spending account for certain
elected benefits.
7. Related Party Transaction
As of June 30, 1998 and 1997, the Company had a loan
receivable of $180,000 from the sole stockholder. The
loan provides for interest at an average of 6.5% payable
annually. Interest receivable at June 30, 1998 and 1997,
was $35,397 and $23,598, respectively, which is included
with stockholder receivable. Principal and any unpaid
interest is due on demand.
8. Commitments and Contingencies
Government Contracts
A significant portion of the revenues of the Company
represents payments made by the U.S. Government on cost
reimbursable contracts which are subject to audit by the
Defense Contract Audit Agency (DCAA). Audits by DCAA have
been completed through June 30, 1994. Audit adjustments
by DCAA would adversely affect the Company's financial
statements by reducing contract profitability. Management
believes that adjustments by government auditors, if any,
over amounts reserved by management will not materially
affect the Company's financial statements.
<PAGE>
8. Commitments and Contingencies (continued)
Operating Leases
The Company rents office space in several locations under
operating leases which expire at various dates through
2002. Future obligations under the leases as of June 30,
1998, are as follows:
Year ending June 30,
1999 $114,700
2000 60,300
2001 56,900
2002 43,600
--------
$275,500
========
The Company also leases equipment under operating leases.
These equipment leases expire at various dates through
June 30, 2000. The future minimum lease payments as of
June 30, 1998, are as follows:
Year ending June 30,
1999 $76,200
2000 20,200
-------
$96,400
=======
Office rent expense for the years ended June 30, 1998 and
1997, was $117,875 and $228,522, respectively. Rent
expense for equipment for the years ended June 30, 1998
and 1997, was $45,492 and $52,085, respectively.
In addition, the Company subleases certain office space.
The future minimum sublease income to be received under
sublease agreements in effect at June 30, 1998, are as
follows:
Year ending June 30,
1999 $135,281
2000 10,406
--------
$145,687
========
Rental income under these agreements for 1998 was $13,926
and none for 1997. The company recognizes rental income
as an offset to rental expense.
<PAGE>
<TABLE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<CAPTION>
SEPT. 30,
ASSETS 1998
------ -----------
(Unaudited)
<S> <C>
Current assets
Cash $ 797,340
Accounts receivable 866,255
Other receivables 42,727
Income taxes receivable 1,024
----------
Total current assets 1,707,346
----------
Fixed assets 7,917
Other assets
Stockholder receivable 180,000
Interest receivable 35,397
Deposits 26,182
----------
Total other assets 249,496
----------
Total assets $1,956,842
==========
</TABLE>
See Notes to Financial Statements
(Unaudited)
- 10 -
<PAGE>
<TABLE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<CAPTION>
SEPT. 30,
LIABILITIES AND STOCKHOLDER'S EQUITY 1998
------------------------------------ ----------
(Unaudited)
<S> <C>
Current liabilities
Accounts payable $ 104,246
Accrued payroll liabilities 51,919
Deferred income taxes 305,948
Billings in excess of revenue recognized 55,381
Other liabilities 64,239
----------
Total current liabilities 581,733
----------
Stockholder's equity
Common stock $.10 par value,
10,000 shares authorized,
1,000 issued and outstanding 100
Additional paid-in capital 400
Retained earnings 1,374,609
----------
Total stockholder's equity 1,375,109
----------
Total liabilities and stockholder's equity $1,956,842
==========
</TABLE>
See Notes to Financial Statements
(Unaudited)
- 11 -
<PAGE>
<TABLE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<CAPTION>
Three Months Ended
September 30,
1998 1997
----------- -----------
<S> <C> <C>
Contract revenues $ 794,412 $ 1,201,866
----------- -----------
Contract costs
Direct labor 102,072 348,520
Other direct costs 448,185 493,516
Indirect costs 214,090 323,831
----------- -----------
Total contract costs 764,347 1,165,867
----------- -----------
Income from operations 30,065 35,999
----------- -----------
Other income (expense)
Interest income 8,039 7,428
Other income (expense) (17,586) 130
----------- -----------
Total other income (expense) (9,547) 7,558
----------- -----------
Income before income taxes 20,518 43,557
Provision for income taxes 12,401 22,272
----------- -----------
Net income $ 8,117 $ 21,285
=========== ===========
</TABLE>
See Notes to Financial Statements
(Unaudited)
- 12 -
<PAGE>
<TABLE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1998 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,117 $ 21,285
----------- ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,745
Net (increase) decrease in:
Accounts receivable 18,821 (18,605)
Other receivables (34,000) (3,757)
Prepaid expense (12,128)
Deposits 1,315
Net increase (decrease) in:
Accounts payable 82,088 160,366
Accrued payroll liabilities 26,901 (95,031)
Income taxes payable (180,013)
Deferred income taxes 16,476
Billings in excess of revenue recognized (24,038)
----------- ------------
Total adjustments 87,993 (147,853)
----------- ------------
Net cash provided (used) by operating activities 96,110 (126,568)
----------- ------------
Cash flows from investing activities:
Acquisition of property and equipment (2,601)
----------- ------------
Net increase (decrease) in cash 96,110 (129,169)
----------- ------------
Cash, beginning of the period 701,230 606,345
----------- ------------
Cash, end of the period $ 797,340 $ 477,176
=========== ============
</TABLE>
See Notes to Financial Statements
(Unaudited)
- 13 -
<PAGE>
VAIL RESEARCH AND TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998 AND 1997
1. Basis of Presentation
The interim financial statements for Vail Research and
Technology Corporation ("Vail") are unaudited, but in the opinion
of management reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of results
for such periods. The results of operations for any interim period
are not necessarily indicative of results for the full year. These
financial statements should be read in conjunction with the
financial statements and notes thereto included in the Financial
Statements for the year ended June 30, 1998.
Certain reclassifications have been made to prior year amounts
to conform to current year classifications.
- 14 -
<PAGE>
Item 7(b) Pro Forma Financial Information
<TABLE>
HADRON, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
<CAPTION>
Historical Results
Six Months
December 31, 1998
Pro Forma
Hadron Vail Combined
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 9,795,000 $ 1,159,806 $10,954,806
----------- ----------- -----------
Operating costs and expenses:
Costs of revenue 8,693,600 920,096 9,613,696
Selling, general and administrative 915,400 181,295 1,096,695
----------- ----------- -----------
Total operating costs and expenses 9,609,000 1,101,391 10,710,391
----------- ----------- -----------
Operating income 186,000 58,415 244,415
----------- ----------- -----------
Other expense (23,400) (36,014) (59,414)
----------- ----------- -----------
Income before income taxes 162,600 22,401 185,001
Provision for income taxes 19,400 9,875 29,275
----------- ----------- -----------
Net income $ 143,200 $ 12,526 $ 155,726
=========== =========== ===========
Per share data:
Net income per share
Basic $ .08 $ n/a $ .09
=========== =========== ===========
Diluted $ .05 $ n/a $ .05
=========== =========== ===========
Weighted average number of shares
Basic 1,736,826 n/a 1,736,826
=========== =========== ===========
Diluted 3,093,459 n/a 3,093,459
=========== =========== ===========
</TABLE>
See Notes to Pro Forma Combined Financial Statements
(Unaudited)
- 15 -
<PAGE>
<TABLE>
HADRON, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
<CAPTION>
Historical Results for
Fiscal Year ended
June 30, 1998
Pro Forma
Hadron Vail Combined
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $21,133,900 $ 4,124,478 $25,258,378
----------- ----------- -----------
Operating costs and expenses:
Costs of revenue 18,118,100 3,387,981 21,506,081
Selling, general and administrative 2,127,500 632,155 2,759,655
----------- ----------- -----------
Total operating costs and expenses 20,245,600 4,020,136 24,265,736
----------- ----------- -----------
Operating income 888,300 104,342 992,642
----------- ----------- -----------
Other income (expense) (69,200) 41,663 (27,537)
----------- ----------- -----------
Income before income taxes 819,100 146,005 965,105
----------- ----------- -----------
Provision for income taxes 58,500 56,140 114,640
----------- ----------- -----------
Net income $ 760,600 $ 89,865 $ 850,465
=========== =========== ===========
Per share data:
Net income per share
Basic $ .45 $ n/a $ .50
=========== =========== ===========
Diluted $ .26 $ n/a $ .29
=========== =========== ===========
Weighted average number of shares
Basic 1,686,808 n/a 1,686,808
=========== =========== ===========
Diluted 2,990,897 n/a 2,990,897
=========== =========== ===========
</TABLE>
See Notes to Pro Forma Combined Financial Statements
(Unaudited)
- 16 -
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1998 AND JUNE 30, 1998
1. Basis of Presentation
The unaudited pro forma condensed combined financial
statements are based upon the historical consolidated financial
statements of Hadron, Inc. (the "Company") adjusted to give effect
to the acquisition of Vail Research and Technology Corporation
("Vail") by the Company under the purchase method of accounting in
accordance with Accounting Standards Board Opinion No. 16. The
acquisition of Vail was consummated in December 1998 and was
recorded and reported in the Company's Form 10-Q Report for the
period ended December 31, 1998 filed with the Securities and
Exchange Commission.
The unaudited pro forma condensed combined statement of
operations for the six months ended December 31, 1998 and the
fiscal year ended June 30, 1998 were prepared as if the above
transactions were consummated on July 1, 1997.
This information should be read in conjunction with the notes
and the consolidated financial statements of the Company
incorporated by reference herein and the financial statements of
Vail included herein. The unaudited pro forma condensed combined
financial data do not purport to represent what the Company's
results of operations actually would have been had such
transactions and events occurred on the dates specified, or to
project the Company's results of operations for any future period
or date. In the opinion of management of the Company, all
adjustments and reclassifications have been made that are necessary
to present the pro forma condensed combined data.
2. Acquisition of Vail Research and Technology Corporation
Effective December 18, 1998, the Company acquired Vail, a
privately-held information technology firm based in Annandale, VA,
for approximately $1,594,000. Vail will operate as a wholly-owned
subsidiary of Hadron. The purchase price was satisfied with a
payment of $1,194,000 and the issuance of two non-interest bearing
promissory notes in the amounts of $300,000 and $100,000 payable to
Jeannine Mantz. Ms. Mantz, the sole stockholder of Vail, remains
President of Vail in addition to holding a corporate vice-president
position at Hadron.
The fair value of the assets and liabilities acquired
approximated their book value of $1,833,000 and $121,000,
respectively. The Company incurred financial, legal and accounting
costs associated with the Vail purchase of approximately $55,000.
Included in these fees was a $25,000 payment made to Hadron
director, John D. Sanders, for advisory services in connection with
the purchase.
- 17 -
<PAGE>
3. Earnings Per Share
<TABLE>
The following table sets forth the computation of basic and
diluted earnings per share:
<CAPTION>
Pro Forma Combined Pro Forma Combined
Six Months ended Fiscal Year Ended
December 31, 1998 June 30, 1998
------------------ ------------------
<S> <C> <C>
Numerator: Net Income $ 155,726 $ 850,465
Effect of dilutive securities:
Convertible debt 6,000 12,000
--------- ---------
Numerator for diluted earnings
per share - income available
to common shareholders after
assumed conversion $ 161,726 $ 862,465
========= =========
Denominator:
Denominator for basic
earnings per share:
weighted average shares
outstanding 1,736,826 1,686,808
Effect of dilutive securities:
Warrants 885,079 855,064
Employee stock options 271,554 249,025
Convertible debt 200,000 200,000
--------- ---------
Denominator for diluted
earnings per share 3,093,459 2,990,897
========= =========
Basic earnings per share $ .09 $ .50
========= =========
Diluted earnings per share $ .05 $ .29
========= =========
</TABLE>
- 18 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Hadron, Inc.
Date: March 3, 1999 By: /s/ C.W. GILLULY
-------------------------
C.W. Gilluly
Chairman and Chief
Executive Officer
<PAGE>
Item 7(c) Exhibits
Index to Exhibits
Exhibit No. Description
23 Consent of Independent Accountants
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Hadron, Inc.
Form 8-K/A our report dated July 17, 1998, on our audits of the
financial statements of Vail Research and Technology Corporation
as of June 30, 1998 and 1997 and for the years then ended.
/s/
Rubino & McGeehin Chartered
March 1, 1999
Bethesda, Maryland
