<PAGE>
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 3, 1996
----------------
INTEK Diversified Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-9160 04-2450145
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer Iden-
of incorporation) File Number) tification No.)
970 West 190th St., Suite 720, Torrance, CA 90502
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 310-366-7335
------------
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF SECURICOR RADIOCOMS LIMITED (RADIOCOMS)
1. Audited Balance Sheets of Radiocoms as of
September 30, 1996 and 1995 and related Statements
of Operations and Cash Flows for the years ended
September 30, 1996, 1995, and 1994; and
(b) PRO FORMA FINANCIAL INFORMATION.
1. Pro forma Combined Balance Sheet of INTEK and
Radiocoms dated September 30, 1996; and
2. Pro forma Statements of Operations of INTEK and
Radiocoms for the twelve months ended September
30, 1996, based on Statements of Operations of
INTEK for the twelve-month period ended September
30, 1996 and on Statement of Operations for
Radiocoms for the year ended September 30, 1996.
2
<PAGE>
SECURICOR RADIOCOMS LIMITED
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors
Securicor Radiocoms Limited
We have audited the accompanying balance sheets of Securicor Radiocoms Limited
(Radiocoms), as of September 30, 1995 and 1996, and the related statements of
operations and cash flows for the years ended September 30, 1994, 1995 and 1996.
These financial statements are the responsibility of Radiocom's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing standards
in the United Kingdom which are substantially the same as those used in the
United States of America. 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 Securicor Radiocoms Limited at
September 30, 1995 and 1996, and the results of its operations and its cash
flows for the years ended September 30, 1994, 1995 and 1996, in conformity with
generally accepted accounting principles used in the United States of America.
/s/ Baker Tilly
----------------------
London, England BAKER TILLY
[24 January 1997] CHARTERED ACCOUNTANTS
<PAGE>
SECURICOR RADIOCOMS LIMITED
BALANCE SHEETS
(THOUSANDS OF US DOLLARS)
ASSETS
- --------------------------------------------------------------------------------
SEPTEMBER 30 SEPTEMBER 30
1995 1996
CURRENT ASSETS
Cash and cash equivalents $ 601 $ 417
Accounts receivable
net of allowance for
doubtful accounts of:
$475 in September 1995 and
$128 in September 1996 10,374 4,074
Inventories 15,101 18,895
Taxation receivable
from group companies 562 2,983
Amounts due from related parties 3,402 5,587
Prepaid expenses and
other current assets 723 1,481
------- -------
Total current assets 30,763 33,437
------- -------
INVESTMENT IN E F JOHNSON - 10,177
PROPERTY & EQUIPMENT,
less accumulated depreciation 4,948 4,543
EQUIPMENT FOR RENTAL
On operating leases, 4,208 3,467
less accumulated depreciation (2,456) (1,371)
------- -------
1,752 2,096
------- -------
TOTAL ASSETS $ 37,463 $ 50,253
====== ======
The accompanying notes are an integral part of these balance sheets.
Page 1
<PAGE>
SECURICOR RADIOCOMS LIMITED
BALANCE SHEETS
(THOUSANDS OF US DOLLARS)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
- --------------------------------------------------------------------------------
SEPTEMBER 30 SEPTEMBER 30
1995 1996
CURRENT LIABILITIES
Bank overdraft $ 582 $ 1,313
Accounts payable 4,275 3,051
Amounts due to related parties 1,436 2,660
Accrued expenses 2,111 1,373
Deferred income 2,007 760
Taxes, other than income taxes 161 203
Related party loan payable to
Security Services plc
(interest bearing) 16,653 29,345
------- -------
Total current liabilities 27,225 38,705
------- -------
Related party loan payable to
Securicor Communications Limited
(non-interest bearing) 23,108 32,837
Deferred income taxes 79 -
------- -------
23,187 32,837
------- -------
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock (L1 par value; 100,000
shares authorised; 100,000 shares
issued and outstanding) 150 150
Deficit (13,111) (21,611)
Foreign currency translation
adjustment 12 172
------- -------
Total shareholders' equity (deficit) (12,949) (21,289)
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT) $ 37,463 $ 50,253
====== ======
The accompanying notes are an integral part of these balance sheets.
Page 2
<PAGE>
SECURICOR RADIOCOMS LIMITED
STATEMENTS OF OPERATIONS
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1994 1995 1996
NET SALES
Third parties $ 9,089 $ 20,517 $ 11,457
Related parties 7,290 9,866 8,984
------- ------- -------
16,379 30,383 20,441
Rental income 1,701 2,218 3,458
------- ------- -------
18,080 32,601 23,899
Cost of goods sold 11,222 19,426 20,084
------- ------- -------
GROSS PROFIT 6,858 13,175 3,815
Selling, general and
administrative expenses 8,394 11,249 10,156
Research and development
expenses 1,766 2,831 3,154
Provision for doubtful
accounts 15 491 923
------- ------- -------
OPERATING LOSS (3,317) (1,396) (10,418)
Interest expense 236 512 1,715
------- ------- -------
LOSS FROM CONTINUING
OPERATIONS (3,553) (1,908) (12,133)
Income tax (benefit) (281) (737) (3,044)
------- ------- -------
NET LOSS $ (3,272) $ (1,171) $ (9,089)
======= ======= =======
The accompanying notes are an integral part of these statements of operations.
Page 3
<PAGE>
SECURICOR RADIOCOMS LIMITED
STATEMENTS OF CASH FLOWS
(THOUSANDS OF US DOLLARS)
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1994 1995 1996
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (3,272) $ (1,171) $ (9,089)
------- ------- -------
ADJUSTMENTS TO RECONCILE
NET LOSS TO NET CASH USED
IN OPERATING ACTIVITIES
Depreciation and
amortisation 2,358 1,706 1,510
Deferred income taxes (8) (183) -
Loss/(gain) on sale of
fixed assets (5) - 29
Provision for doubtful
accounts 15 491 933
CHANGES IN ASSETS AND
LIABILITIES
Decrease/(increase) in:
Accounts receivable (2,332) (7,811) 2,544
Inventories (2,134) (10,303) (2,984)
Prepaid expenses and other
current assets (628) (755) 67
Increase/(decrease) in:
Accounts payable 1,205 1,851 (1,513)
Accrued expenses (701) 1,082 (645)
Deferred income - 2,015 (1,209)
Taxes, other than income
taxes (118) 64 44
------- ------- -------
Total adjustments (2,348) (11,843) (1,224)
------- ------- -------
Net cash (used in) operating
activities (5,620) (13,014) (10,313)
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures (2,550) (2,377) (1,657)
Proceeds from sale of
fixed assets 900 56 96
------- ------- -------
NET CASH (USED IN) INVESTING
ACTIVITIES (1,650) (2,321) (1,561)
------- ------- -------
Continued................
Page 4
<PAGE>
SECURICOR RADIOCOMS LIMITED
STATEMENTS OF CASH FLOWS (CONTINUED)
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1994 1995 1996
CASH FLOWS FROM FINANCING
ACTIVITIES
Principal payments on capital
lease obligations (14) - -
Net change in bank
overdraft (338) 130 (731)
Related party loan
proceeds 7,852 15,537 12,463
------- ------- -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 7,500 15,667 11,732
------- ------- -------
EFFECT OF FOREIGN EXCHANGE
RATE CHANGES ON CASH 11 (1) (42)
------- ------ -------
Net increase/(decrease)
in cash and cash equivalents 241 331 (184)
Cash and cash equivalents
at beginning of period 29 270 601
------- ------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 270 $ 601 $ 417
======= ======= =======
SUPPLEMENTAL DISCLOSURE
OF CASHFLOW INFORMATION
Cash paid for interest $ 210 $ 230 $ 1,715
Cash received for income tax
(group tax relief receipt) (405) (319) (285)
NON-CASH TRANSACTIONS
In 1996, the Company received $10,000 from value of E F Johnson preferred stock
in exchange for a note payable to a related party (see note 8(C)).
The accompanying notes are an integral part of these statements of cash flows.
Page 5
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND NATURE OF BUSINESS
Securicor Communications Limited ("Securicor Communications"), a wholly
owned subsidiary of Securicor plc a publicly held company whose shares are
traded on the London Stock Exchange, has three wholly owned subsidiaries.
These companies subsequently referred to as the "Company" are Securicor
Radiocoms Limited, Linear Modulation Technology Limited, and Securicor
Electronics Limited.
The Company designs, develops and manufactures a range of land mobile radio
products using linear modulation technology. The Company also provides
technical and project management expertise for "turn-key" custom engineered
land mobile radio communications systems and radio equipment for
businesses, using products purchased from established manufacturers.
On March 8, 1996, the Company, together with Securicor Communications
reached an agreement in principle to combine the operations of the Company
with certain operations of Midland International Corporation ("Midland"), a
company located in the United States engaged in the sale and distribution
in the U.S. of land mobile radio products bearing the Midland trademark and
INTEK Diversified Corporation ("INTEK"), a publicly held company located in
the United States which is engaged in the business of developing,
constructing and managing a specialized radio network in the United States.
On December 3, 1996 pursuant to the terms of a stock purchase agreement
dated June 18, 1996 (the "Stock Purchase Agreement"), INTEK acquired from
Securicor Communications the common stock of Securicor Radiocoms Limited
("Radiocoms") in exchange for 25,000,000 shares of INTEK's common stock
("the Securicor Transaction"). The Company believes that the Securicor
Transaction will be accounted for as a reverse acquisition with the Company
as the Acquirer and INTEK and Midland as the Acquirees.
2. GROUP SUPPORT AND GOING CONCERN STATUS
Securicor Communications and Security Services plc, an affiliate, have
confirmed their willingness to support the Company and its operating
activities for the foreseeable future. In particular, they have extended
an additional line of credit up to the value of $15,000,000, following
consummation of the Securicor Transaction, on the terms set forth in the
Stock Purchase Agreement.
Management have prepared these accounts on a going concern basis in the
expectation that all amounts shown in the balance sheet will be
recoverable, and subject to group support as detailed above.
Page 6
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
3. FINANCIAL STATEMENT PRESENTATION
The financial statements include the results of Radiocoms and its wholly
owned subsidiaries; Private Mobile Radio Limited ("PMR") which was acquired
on March 1, 1993 and SOCOM Group Limited ("SOCOM") acquired on June 30,
1993; combined with Securicor Electronics Limited ("SEL") and Linear
Modulation Technology Limited ("LMT"). All material intercompany
transactions have been eliminated in combination.
Effective October 1, 1995, the assets and liabilities of SEL and LMT were
transferred to Radiocoms at historical value.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")
The financial statements have been prepared in accordance with GAAP used in
the United States. Such accounting principles differ in certain respects
from United Kingdom GAAP, which is applied by the Company for local and
statutory financial reporting purposes. In addition, certain
reclassifications and changes in terminology have been made to the
financial statements previously issued in the United Kingdom including
conversion into US dollars from British pounds in order that these
financial statements conform with reporting practices prevailing in the
United States.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements under GAAP 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 period. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. There were no
cash equivalents at September 30, 1994, 1995 and 1996.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out basis) or
market value. Inventories include purchased parts, labour and overheads.
Page 7
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
4. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (CONTINUED)
INVESTMENT IN E F JOHNSON
The investment in E F Johnson ("EFJ") is stated at cost, and is classified
as held to maturity in accordance with the provisions of Statement of
Financial Accounting Standards No.115.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives as follows:
Buildings over 50 years
Manufacturing equipment over 3 to 10 years
Office furniture and equipment over 3 to 10 years
Gains and losses on disposal are recognized in the year of the disposition.
Expenditures for repairs and maintenance are charged to expense as
incurred, and significant renewals and betterments are capitalized.
REVENUE RECOGNITION
Revenue related to system and mobile sales is recognized at the time of
title transfer, which ordinarily occurs at the time of shipment. From time
to time, customers request delayed shipment. If the Company's substantial
performance obligations otherwise have been fulfilled, revenue on such
delayed shipment transactions generally is recognized upon acceptance of
goods by the customer at the Company's facility. Revenue related to
service activities and sale of items from inventory is recognized when the
service has been performed or when the items are shipped. Revenue from
long term contracts is recognized as the units are completed.
RENTAL INCOME
Rental income is recognised on short term operating leases on a straight
line basis over the life of the lease. The assets from which the income is
derived are capitalized on the balance sheet and called 'Equipment for
rental on operating leases'.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
Page 8
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
4. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (CONTINUED)
FOREIGN CURRENCY
Transactions in foreign currencies are recorded at the prevailing exchange
rate at the time of the related transactions. The related transaction gains
and losses are recognized in the statement of operations as they occur and
historically have not been material. Assets and liabilities denominated in
foreign currencies are translated at the rate of exchange in effect at the
balance sheet date. Income and expense items are translated at the average
rate of exchange prevailing during the period of operations.
INCOME TAXES
The Company accounts for income taxes using the liability method in
accordance with the provisions of Statement of Financial Accounting
Standards No. 109. The liability method provides that deferred tax assets
and liabilities are recorded based on the difference between the tax bases
of assets and liabilities and their carrying amount for financial reporting
purposes, as measured by the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
CONCENTRATIONS OF CREDIT RISK
The equipment sales and contract manufacturing parts of the business have a
broad range of established customers. In contrast, the sales of
communications systems is a new market with a limited number of customers
in an emerging overseas environment and consequently may involve greater
credit risks. The Company has derived a substantial amount of its sales
from related parties. No formal agreements with these parties are held to
allow trade to continue on the same terms or volume of business in the
future. To the extent these sales do not continue, it may adversely affect
the Company's financial position and results of operations.
Page 9
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
SEPTEMBER 30 SEPTEMBER 30
1995 1996
- --------------------------------------------------------------------------------
5. ACCOUNTS RECEIVABLE
Accounts receivable consist of
the following:
Billed $ 9,877 $ 3,989
Unbilled contract amounts 972 213
------- -------
10,849 4,202
Allowance for doubtful accounts (475) (128)
------- -------
$ 10,374 $ 4,074
======= =======
6. INVENTORIES
Inventories consist of the following:
Raw materials $ 6,328 $ 8,314
Work in progress 5,929 2,321
Finished goods 2,844 8,260
------- -------
$ 15,101 $ 18,895
======= =======
7. PROPERTY AND EQUIPMENT
Property and equipment consists of
the following:
Land $ 506 $ 469
Buildings 2,327 2,329
Manufacturing equipment 2,713 4,731
Office furniture and equipment 2,368 555
------- -------
7,914 8,084
Less: Accumulated depreciation
and amortization (2,966) (3,541)
------- -------
$ 4,948 $ 4,543
======= =======
Page 10
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
8. BANK OVERDRAFT
The bank overdraft bears interest at 1% over prevailing United Kingdom bank
base rates, (6.75%, 7%, and 6.75% at September 30, 1994, 1995 and 1996,
respectively). Interest is payable monthly and the overdraft is unsecured.
9. RELATED PARTY TRANSACTIONS
(A) At September 30, 1994, 1995 and 1996, the Company had borrowings from
Security Services plc, an affiliate, of $4,072, $16,652 and $29,345,
respectively which bears interest at 1% over prevailing United Kingdom bank
base rates, (6.75%, 7% and 6.75% at September 30, 1994, 1995, and 1996,
respectively).
<TABLE>
<CAPTION>
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1994 1995 1996
<S> <C> <C> <C>
(B) Other related party transactions include:
Interest expense $ 190 $ 493 $ 1,682
Management fees 792 1,903 1,592
Sales 4,946 9,866 8,984
</TABLE>
In 1994 the Company received a payment of $491 from Securicor Alarms
Limited, an affiliate, representing its proportionate share of the related
expenses of a joint development project. This has been offset against
selling, general and administrative expenses for that year.
(C) In March 1995, Securicor Communications Inc ("Comms Inc"), an affiliated
company located in the United States, acquired 925,850 voting preferred
shares and a warrant to acquire 291,791 shares of common stock of EFJ, a
United States based communications company, for $10,000. Concurrent with
this transaction, the Company entered into an agreement with EFJ to sell
certain inventory products and granted manufacturing and technology
licenses to EFJ for approximately $9,671. Of this amount, $3,997 was
attributable to the technology license which required future support by the
Company through September 30, 1996. Revenues derived form EFJ have been
reflected as related party sales.
On June 17, 1996, the Company acquired the 925,850 voting preferred stock
and a warrant to acquire 291,791 shares of common stock of EFJ from
Securicor Communications at cost of $10,000, the consideration being a
promissory note payable on June 17, 1997 for $10,000 (the "principal
amount") together with interest on the principal amount at a rate of 8% per
annum. Redemption of the preferred stock together with accumulated unpaid
interest is mandatory on March 14, 2000. The Company has received an
unconditional indemnity against adverse
Page 11
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
9. RELATED PARTY TRANSACTIONS (CONTINUED)
movements in the value of this investment from Securicor Communications.
10. ACCRUED EXPENSES
Included within accrued expenses, no one particular category represents
more than 5% of total current liabilities.
11. COMMITMENTS AND CONTINGENCIES
(A) The Company leases various office equipment, motor vehicles and land and
buildings under non-cancellable operating leases which expire at various
dates through to 2001. Rent expense was approximately $420, $477 and $741
for the years ended September 30, 1994, 1995 and 1996 respectively.
Minimum annual payments for the operating leases for each of the next five
fiscal years are as follows:
September 30
1997 $ 164
1998 53
1999 46
2000 41
2001 41
----
$ 345
===
(B) There are no legal proceedings pending against or involving the Company
which, in the opinion of management, will have a material adverse effect on
the Company's financial position or results of operations.
(C) The Company is included in a Group Registration for UK sales tax purposes
(Valued Added Tax "V.A.T.") and is therefore jointly and severally liable
for any unpaid sales tax debts of the parent and fellow group undertakings
in this connection.
Page 12
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
12. INCOME TAXES
Tax laws in the UK permit the exchange of taxable income and losses between
companies within a group provided 75% or more of their ordinary stock is
held. The Company's past losses have been compensated by Group members
with the taxable companies paying the loss making companies at the
corporate tax rate applied to the losses subject to any waivers.
Management has provided a valuation allowance on deferred tax assets due to
the Company's history of losses and upon consummation of the Merger the
Company will no longer be eligible for tax relief from Group membership.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1994 1995 1996
<S> <C> <C> <C>
Deferred tax assets:
Depreciation $ 155 $ 3 $ -
General provisions - 33 -
Development costs 1,359 1,692 3,275
Operating loss carry forwards - 130 145
------- ------- -------
1,514 1,858 3,420
Valuation allowance (1,514) (1,825) (3,357)
------- ------- -------
- 33 63
Deferred tax liabilities:
Depreciation (260) (112) (63)
------- ------- -------
Net deferred tax liability $ (260) $ (79) $ -
====== ====== ======
The Company's provision (benefit)
for the income taxes was as follows:
Current $ (273) $ (554) $ (3,044)
Deferred (8) (183) -
------- ------- -------
Total $ (281) $ (737) $ (3,044)
====== ====== ======
</TABLE>
Page 13
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
12. INCOME TAXES (CONTINUED)
The reconciliation of the (benefit) for the income taxes at September 30,
1994, 1995 and 1996 to the amounts computed at the UK statutory rate of 33%
for all periods is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1994 1995 1996
<S> <C> <C> <C>
(Benefit) at the statutory
rate $ (1,172) $ (629) $ (4,004)
Permanent differences:
Goodwill amortization 379 199 -
Waiver of group tax relief
benefit 508 - -
Other 4 5 9
Operating losses not currently
available for use - - 1,045
Prior period group loss relief - (312) (94)
------- ------- -------
$ (281) $ (737) $ (3,044)
====== ====== ======
</TABLE>
13. RETIREMENT PLANS
The Company contributes to the pension scheme of Securicor plc, the
ultimate parent company, which maintains a defined benefit pension plan
that covers executives and selected other employees based no merit. The
plan calls for benefits to be paid to eligible employees at retirement
based primarily upon years of service with the Company and compensation
rates near retirement. Contributions to the plan reflect benefits
attributed to employees' services to date, as well as services expected to
be earned in the future.
The pension costs are assessed on the advice of independent qualified
actuaries using the projected unit credit method. The most recent
actuarial valuation was April 5, 1995. The assets of the scheme are held
in separate trustee administered funds. Full particulars of the
pension scheme are disclosed in the published accounts of Securicor plc.
The Company's share of the costs of the group's defined benefit pension
scheme amounted to:
<TABLE>
<CAPTION>
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1994 1995 1996
<S> <C> <C> <C>
Pension expense $ 95 $ 170 $ 175
====== ====== ======
</TABLE>
Page 14
<PAGE>
SECURICOR RADIOCOMS LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
(THOUSANDS OF US DOLLARS)
- --------------------------------------------------------------------------------
14. FOREIGN SALES AND MAJOR CUSTOMER
Net sales to international customers primarily located in the United States
amounted to approximately $2,695, $14,922 and $2,067 for the years ended
September 30, 1994, 1995 and 1996 respectively. Sales to these
international customers were in respect of communication systems. Certain
sales contracts are denominated in US dollars. Accordingly, significant
fluctuations in the US dollar versus the British pound could have a
significant effect on the Company's profits.
The following table summarises significant third party customers with sales
in excess of 10% to total net revenues for the years ended September 30,
1994, 1995 and 1996, respectively.
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1994 1995 1996
Customer A 11% 17% -
Customer B - 19% -
------- ------- -------
11% 36% -
====== ====== ======
At September 30, 1994, 1995 and 1996, 24.8%, 19.7% and 36.6% of accounts
receivable were due from one customer, respectively.
15. SUBSEQUENT EVENTS
CAPITALIZATION
On June 18, 1996, Securicor Communications entered into the Purchase
Agreement to effect the sale of the common stock of Radiocoms to INTEK in
exchange for 25 million shares of common stock ("Common Stock") of INTEK,
representing the purchase consideration, which would provide Securicor
Communications with approximately 60% of the INTEK Common Stock. The INTEK
shareholders approved the transaction at their Annual Meeting held in New
York on December 3, 1996. As part of the arrangements, the intercompany
loans of the Company were used as payment for the issue of both new
Preference and new Equity shares in the Company in order to recapitalize
its Balance Sheet.
Page 15
<PAGE>
SUMMARY OF UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
present pro forma results of operations for 12 months ended September 30, 1996
for both INTEK and Radiocoms. The fiscal year end for INTEK was changed as of
December 30, 1996 and is now September 30, which is consistent with Radiocoms'
fiscal year end. The twelve-month period ended September 30, 1996 for INTEK is
comprised of the company's fourth quarter of old fiscal 1995 and it's first
three quarters of old fiscal 1996. The pro forma statement of operations gives
effect to the consummation of the Securicor Transaction as if such Transaction
were consummated as of October 1, 1995. The pro forma balance sheet gives
effect to the Transactions as if they were consummated on September 30, 1996.
The pro forma financial statements have been prepared using the purchase method
of accounting. Securicor Communications is the acquiror for accounting
purposes because the shareholders of Securicor Communications held the majority
of outstanding Company Common Stock subsequent to the consummation of the
Transaction.
Securicor statements were translated in accordance with FASB 52 which provides
that assets and liabilities are translated at exchange rates in effect at the
balance sheet date and income and expenses are translated at the average rate
for the period presented.
The unaudited pro forma condensed combined financial statements and notes
thereto should be read in conjunction with the separate audited financial
statements and related notes thereto of Radiocoms included herein. The
following unaudited pro forma condensed combined financial statements do not
purport to be indicative of the results which actually would have occurred if
the Transaction had been consummated on the dates indicated or which may be
obtained in the future.
<PAGE>
NEW INTEK DIVERSIFIED CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 1996 (INTEK) AND
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 1996 (RADIOCOMS)
(U.S.$ IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS AND
ELIMINATIONS
------------
INTEK RADIOCOMS NEW INTEK
HISTORICAL HISTORICAL DEBIT CREDIT PROFORMA
---------- ---------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . $ 3,681 $ 23,899 $1,653(a) $ 25,927
Cost of Sales. . . . . . . . . . 3,165 20,084 $1,138(a) 22,111
---------- ---------- ----------
Gross profit . . . . . . . . . . 516 3,815 3,816
Operating expense. . . . . . . . 5,741 14,233 2,567(g) 12(d) 21,100
1,429(f)
---------- ---------- ----------
Operating loss . . . . . . . . . (5,225) (10,418) (17,284)
Other income (expense):
(Loss) gain on sale of
assets held for sale . . . . . (192) - (192)
Interest expense, net. . . . . (390) (1,715) 1,682(h) (423)
Financing costs. . . . . . . . (563) - (563)
Other, net . . . . . . . . . . 12 - 12
---------- ---------- ----------
Loss from continuing
operations before income
taxes. . . . . . . . . . . . . . (6,358) (12,133) (18,450)
Income tax provision
(benefit). . . . . . . . . . . . - (3,044) 3,044(i)
---------- ---------- ---------- ---------- ----------
Net loss . . . . . . . . . . . . $ (6,358) $ (9,089) $ 7,264 $ 4,261 $ (18,450)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Less preferred dividends . . . . 1,200(k) (1,200)
Loss applicable to Common
Shareholders . . . . . . . . . . $ (19,650)
Loss per share . . . . . . . . . $ (0.57) $ (0.51)
---------- -----------
---------- -----------
Weighted average shares
outstanding. . . . . . . . . . . 11,135,300 38,236,455
---------- -----------
---------- -----------
</TABLE>
<PAGE>
NEW INTEK DIVERSIFIED CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(U.S.$ IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
AND
ELIMINATIONS
------------
INTEK RADIOCOMS DEBIT CREDIT NEW INTEK
PROFORMA HISTORICAL PROFORMA
-------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash, cash equivalents . . . . . $1,576 $ 417 $ 1,993
Accounts receivable. . . . . . . 1,459 4,074 405(b) 5,128
Amounts due from related
parties. . . . . . . . . . . . . 5,587 5,587
Restricted cash. . . . . . . . . 127 - 127
Notes receivable,current
portion. . . . . . . . . . . . . 137 - 137
Inventories. . . . . . . . . . . 5,062 18,895 456(a) 23,501
Prepaid expenses and other
assets . . . . . . . . . . . . . 1,062 4,464 3,044(i) 2,482
Assets held for sale . . . . . . 1,555 - 1,555
---------- ---------- ----------
Total current assets . . . . . . 10,978 33,437 40,510
PROPERTY AND EQUIPMENT, AT
COST . . . . . . . . . . . . . . 9,019 8,084 59(a) 17,044
Less accumulated
depreciation . . . . . . . . . . (89) (3,541) 12(d) (3,618)
---------- ---------- ----------
Net property and equipment . . . 8,930 4,543 13,426
RENTAL EQUIPMENT . . . . . . . . 2,096 2,096
NOTE RECEIVABLE. . . . . . . . . 55 - 55
TRADEMARK AND GOODWILL . . . . . 10,284 - 10,284
DEFERRED FINANCING COSTS . . . . 215 - 215
INVESTMENTS IN EFJ AT COST . . . - 10,177 10,177
INVESTMENTS IN JOINT VENTURE . . 125 - 125
INTANGIBLES. . . . . . . . . . . - 37,075(e) 2,567(g) 35,937
1,429(f)
---------- ---------- ----------
TOTAL ASSETS . . . . . . . . . . $30,587 $50,253 $ 112,825
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
NEW INTEK DIVERSIFIED CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(U.S.$ IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS
ELIMINATIONS
------------
INTEK RADIOCOMS DEBIT CREDIT NEW INTEK
PROFORMA HISTORICAL PROFORMA
-------- ---------- --------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . $ 720 $ 3,051 6(c) $ 3,765
Amounts due to related
parties. . . . . . . . . . . . . . . . . . . 2,660 2,660
Accrued liabilities. . . . . . . . . . . . . 1,431 1,576 1,682(h) 1,200(k) 2,126
399(b)
Deferred income. . . . . . . . . . . . . . . 760 760
Related party payable. . . . . . . . . . . . 18 29,345 29,363(j) -
Notes payable. . . . . . . . . . . . . . . . 7,310 1,313 8,623
Letter of credit liability . . . . . . . . . 99 - 99
Licensee deposits. . . . . . . . . . . . . . 285 - 285
----- ----- -----
Total current liabilities. . . . . . . . . . 9,863 38,705 18,318
NOTES PAYABLE. . . . . . . . . . . . . . . . 4,500 4,500
RELATED PARTY PAYABLE. . . . . . . . . . . . 32,837 32,837(j) -
DEFERRED INCOME TAX. . . . . . . . . . . . . 634 634
MANDATORY REDEEMABLE
PREFERRED STOCK. . . . . . . . . . . . . . . 20,000(j) 20,000
SHAREHOLDERS' EQUITY
Common stock . . . . . . . . . . . . . . . . 142 150 150(m) 250(e) 392
Capital in excess of par
value. . . . . . . . . . . . . . . . . . . . 25,476 9,258(l) 36,825(e) 95,393
42,200(j)
150(m)
Treasury stock, at cost. . . . . . . . . . . (770) (770)
Retained earnings (deficit). . . . . . . . . (9,258) (21,611) 4,203(a) 9,258(l) (25,814)
Currency translation . . . . . . . . . . . . 172 172
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . 15,590 (21,289) 69,373
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY . . . . . . . . . . . . $30,587 $50,253 $ 112,825
------- ------- ---------
------- ------- ---------
</TABLE>
<PAGE>
INTEK DIVERSIFIED CORPORATION
PRO FORMA NOTES
FOR THE 12 MONTHS ENDED SEPTEMBER 30,1996
(US$ IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
(a) To eliminate sales and unrealized profit associated with mobile equipment
and repeater station equipment sold by Radiocoms to INTEK. This
equipment has been retained by INTEK for use in the network of 220 MHz
Systems it is developing or is pending delivery to end user customers.
These transactions were recorded in their respective historical financial
statements for the periods presented in the accompanying Pro Forma
Financial Statements.
(b)& To eliminate inter company receivables and payables as at September
(c) 30, 1996.
(d) To eliminate excess depreciation charged in INTEK's accounts as a result
of inter company transactions.
(e) To reflect INTEK's issuance of 25 million shares of Common Stock in
exchange for all the issued and outstanding shares of Radiocoms.
For the purposes of the accompanying pro forma financial statements, the
excess purchase price over tangible assets acquired have, in INTEK's
case, been assigned to the value of INTEK's management agreements
allowing it to utilize the 220 MHz licenses and the option agreements
relating to certain licenses which, if exercised and assigned pursuant to
the approval of the FCC, would allow INTEK to exercise all rights and
benefits with respect to such 220 MHz licenses. These management
agreements have terms of 5 years and are renewable indefinitely
thereafter. An estimated economic life of 15 years has been ascribed to
these intangibles. This estimated useful life is INTEK management's best
estimate based upon the likelihood of renewing the underlying 220 MHz
licenses with the FCC and the flexible utility provided by the 220 MHz.
This flexibility will mitigate the risk of spectrum obsolescence prior to
the end of the 15-year period.
For the purposes of these Pro Forma Financial Statements, a fair value of
$4.90 has been ascribed to Company Common Stock for the Securicor
Transaction. The fair value was calculated by taking the quoted market
price of Company Common Stock on December 3, 1996 and applying a 20%
discount. This discount is based upon the illiquidity of the large size
of the block of stock issued in the Transaction, the small public block
of Company Common Stock, comparison with similar transactions for other
companies and recent stock issuances by the Company.
The Securicor Transaction has been accounted for as a reverse acquisition
because Securicor Communications hold the majority of Company Common
Stock after completion of the Transaction. For accounting purposes,
INTEK is the accounting acquiree.
<PAGE>
The intangible related to the Transaction was calculated as follows:
Company Common Stock shares outstanding
at December 3, 1996 14,886,400
Fair market value per share x$ 4.90
----------
Fair market value of INTEK $ 72,943
Securicor ownership interest in INTEK
after the Transaction 65%
----------
Fair value of INTEK acquired $ 47,413
Historical value of INTEK continuing
shareholders 5,567
----------
Securicor investment in INTEK 52,980
Book value of INTEK at November 30, 1996 (15,905)
----------
INTEK intangible $ 37,075
----------
----------
(f) To reflect the capitalization of acquisition expenses incurred prior to
the Transactions.
(g) To record amortization of the intangibles mentioned above over an
estimated economic life of 15 years.
(h) To eliminate Radiocoms' interest on inter company debt which will be
contributed to capital.
(i) To eliminate Radiocoms' income tax benefit associated with it's tax
sharing agreement with its parents and affiliates.
(j) To record the conversion of $20 million of inter company balances between
Radiocoms' and Securicor into 20,000 shares of Radiocoms Preferred Shares
with a par value of $1 thousand per share. The inter company balance
between Radiocoms and Securicor in excess of the redemption value of the
Radiocoms Preferred Shares will be contributed to the capital account of
Radiocoms. These Preferred Shares will be issued to Securicor, are
mandatorily redeemable on June 30, 2006 and bear a dividend rate of 6%.
(k) To record the dividend on the Radiocoms Preferred Shares referred to
above.
(l) To eliminate INTEK's historical deficit.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, INTEK has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 18, 1996 INTEK Diversified Corporation
By: /s/ D. Gregg Marston
------------------------------
Name: D. Gregg Marston
Title: Interim Chief Financial Officer
