<PAGE>
UNITED STATES
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
September 10, 1999 ( June 30, 1999)
-----------------------------------
Date of Report (Date of earliest event reported)
ALPNET, Inc.
------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Utah 0-15512 87-0356708
---- ------- ----------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer Identification
of Incorporation) No.)
</TABLE>
4460 South Highland Drive,
Suite #100
Salt Lake City, Utah 84124-3543
-------------------------------
(Address of principal executive offices including zip code)
(801) 273-6600
--------------
(Registrant's telephone number,
including area code)
Not applicable
--------------
(Former name or former address if changed since last report)
<PAGE>
The Current Report on Form 8-K/A amends and supplements the Current Report on
Form 8-K dated July 14, 1999.
ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS.
On June 30, 1999, the Registrant acquired all of the outstanding share capital
of EP Publishing Partners GmbH ("EP"), a German corporation based in Nuremberg,
Germany. In connection therewith, Registrant hereby files (i) EP's audited
financial statements and notes thereto for the years ended December 31, 1998 and
1997, and (ii) Registrant's unaudited pro forma consolidated statements of
operations for the year ended December 31, 1998; and for the six months ended
June 30, 1999.
ITEM 7: FINANCIAL STATEMENTS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
(i) EP audited financial statements and notes thereto for the years ended
December 31, 1998 and 1997.
(b) PRO FORMA CONSOLIDATED FINANCIAL INFORMATION.
(i) ALPNET, Inc. unaudited pro forma consolidated statements of operations
for the year ended December 31, 1998; and
(ii) ALPNET, Inc. unaudited pro forma consolidated statements of operations
for the six months ended June 30, 1999;
(iii) Notes to the unaudited pro forma consolidated financial information.
(c) EXHIBITS.
The following Exhibits are filed with this Current Report on Form 8-K:
Exhibit No: Description
----------- -----------
2.1 Stock Purchase Agreement, dated June 30, 1999 (previously
filed).
99.1 EP audited financial statements and notes thereto for the
years ended December 31, 1998 and 1997.
99.2 ALPNET, Inc. unaudited pro forma consolidated statements of
operations and notes thereto for the year ended December 31,
1998 and for the six months ended June 30, 1999.
<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.
ALPNET, Inc.
By: /s/ John W. Wittwer
-------------------
Name: John W. Wittwer
Title: Chief Financial Officer
Date: September 10, 1999
<PAGE>
EXHIBIT 99.1
Report of Independent Auditors
To the Shareholders,
EP Electronic Publishing Partners GmbH
We have audited the accompanying balance sheets of EP Electronic Publishing
Partners GmbH (EPP GmbH) as of December 31, 1998 and 1997, and the related
statements of income, shareholders' equity 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 auditing standards generally accepted
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 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 EPP GmbH at December 31, 1998
and 1997, and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.
Nurnberg, April 23, 1999
Federal Republic of Germany
Schitag Ernst & Young Deutsche Allgemeine Treuhand AG
Wirtschaftsprufungsgesellschaft
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
BALANCE SHEETS
<TABLE>
<CAPTION>
Thousands of dollars December 31
1998 1997
---------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 30 $ 29
Trade accounts receivable, less allowance of
$6 in 1998 and $3 in 1997 319 89
Costs of uncompleted contracts in excess of related billings
(Note 3) - 59
Due from shareholders (Note 10) 120 112
Prepaid expenses and other 28 49
---------------------------
Total current assets 497 338
Property, equipment and leasehold improvements:
Furniture and fixtures 152 140
Purchased software 99 89
---------------------------
251 229
Less accumulated depreciation and amortization 228 175
---------------------------
Net property, equipment and leasehold improvements 23 54
Capitalized software, less accumulated amortization of
$ 0 in 1998 (Note 2) 142 -
---------------------------
Total assets $ 662 $ 392
===========================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
BALANCE SHEETS
<TABLE>
<CAPTION>
Thousands of dollars December 31
1998 1997
---------------------------
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Notes payable to banks (Note 4) $ 197 $ 179
Accounts payable 141 142
Billings on uncompleted contracts in excess of related costs 31 -
Accrued payroll and related benefits 138 99
Other accrued expenses 131 125
Current portion of long-term notes payable to shareholders 432 221
---------------------------
Total current liabilities 1,070 766
Long-term notes payable to shareholders, less current portion
(Note 5) 242 -
Silent partnership debt (Note 6) 23 22
Shareholders' equity:
Registered capital 173 146
Accumulated deficit -851 -590
Accumulated other comprehensive income 5 48
---------------------------
Total shareholders' equity -673 -396
---------------------------
Total liabilities and shareholders' equity $ 662 $ 392
===========================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Thousands of dollars Year Ended
December 31
1998 1997
---------------------------
<S> <C> <C>
Sales of services $ 1,226 $ 610
Operating expenses:
Cost of services sold 503 145
Selling, general and administrative expenses 235 255
Development costs 693 384
---------------------------
Total operating expenses 1,431 784
---------------------------
Operating loss -205 -174
Interest expense, net 56 29
---------------------------
Loss before income taxes -261 -203
Income tax expense - -
---------------------------
Net loss $ -261 $ -203
===========================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Thousands of dollars
Cumulative
Other
Registered Accumulated Comprehensive
Capital Deficit Income Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1996 $146 $-387 $ 8 $-233
Net loss -203 -203
Foreign currency translation
adjustment 40 40
----------------------------------------------------------------------------
Balances at December 31, 1997 146 -590 48 -396
Net loss -261 -261
Foreign currency translation
adjustment -43 -43
Forgiveness of shareholder debt 27 27
----------------------------------------------------------------------------
Balances at December 31, 1998 $173 $-851 $ 5 $-673
============================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Thousands of dollars Year Ended
December 31
1998 1997
------------------------------
<S> <C> <C>
Operating activities:
Net loss $-261 $-203
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property, equipment
and leasehold improvemnts 30 68
Loss on disposal of assets 10 -
Changes in operating assets and liabilities:
Trade accounts receivable -213 13
Uncompleted contracts 90 199
Accounts payable and other current liabilities 16 -78
Other -112 -96
------------------------------
Net cash provided (used) by operating activities -440 -97
Investing activities:
Purchase of property, equipment and leasehold improvements -6 -65
------------------------------
Net cash used in investing activities -6 -65
Financing activities:
Increase (decrease) in notes payable to banks 5 -18
Principal payments on long-term shareholder debt -14 -
Proceeds from long-term shareholder debt 455 179
------------------------------
Net cash provided by financing activities 446 161
Effect of exchange rate changes on cash 1 -5
------------------------------
Net (decrease) increase in cash and cash equivalents 1 -6
Cash and cash equivalents at beginning of year 29 35
------------------------------
Cash and cash equivalents at end of year $ 30 $ 29
==============================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
Notes to Financial Statements December 31, 1998 and 1997
1. Description of Company
EP Electronic Publishing Partners GmbH (the Company) develops and sells software
products principally for the translation and publishing industries. The
principal market for the Company's services is Europe. The Company is a limited
liability company in the Federal Republic of Germany.
Although the Company has incurred operating losses in recent years and has a
deficit in Shareholders' equity of $ 673 at December 31, 1998, the purchasing
parent company has agreed to fund working capital requirements as needed through
January 1, 2000 to avoid any going concern issues under German law.
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP"). The
Company maintains its financial records in accordance with the German Commercial
Code, which represents generally accepted accounting principles in Germany
("German GAAP"). Generally accepted accounting principles in Germany vary in
certain significant respects from U.S. GAAP. Accordingly, the Company has
recorded certain adjustments in order that these financial statements be in
accordance with U.S. GAAP.
All amounts in the footnotes are reported in thousands of dollars.
2. Significant Accounting Policies
Cash and Cash Equivalents
The Company considers cash equivalents to be all highly liquid investments with
a maturity of three months or less when purchased. Cash equivalents are stated
at cost, which approximates fair value.
Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements are recorded at cost.
Depreciation and amortisation are calculated using the straight-line method over
estimated useful lives of 3 to 5 years.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
Notes to Financial Statements December 31, 1998 and 1997
2. Significant Accounting Policies (Continued)
Capitalized Software
Certain computer software costs are capitalized in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," and are reported at the lower of unamortized cost or net realizable
value.
Revenue Recognition
Revenue from services is recognised as work is performed. Clients are billed
according to the terms of purchase orders and contracts. Uncompleted contracts
represent costs on incomplete and unbilled projects as well as revenues
recognised in excess of amounts billed. Provisions for estimated losses on
contracts are recorded when such losses become evident.
Concentration of Credit Risk
Sales to a single customer accounted for 53% in 1998 and 71% in 1997 of net
sales. Accounts receivable from this customer represent 85% and 0% of the
accounts receivable balance as of December 31, 1998 and 1997, respectively. No
other customer accounted for more than 10% of revenue in any year.
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, the disclosure of
contingent liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
Notes to Financial Statements December 31, 1998 and 1997
3. Uncompleted Contracts
A summary of uncompleted contracts at December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------
<S> <C> <C>
Contract costs $ 24 $ 427
Billings 55 203
--------------------------------
Net contract costs -31 224
Provision for losses on open contracts - 165
--------------------------------
Uncompleted contracts $ -31 $ 59
================================
</TABLE>
4. Notes Payable to Banks
Credit facilities with financial institutions consisted of the following:
<TABLE>
<CAPTION>
December 31
1998 1997
--------------------------------
<S> <C> <C>
Credit facilities with financial institutions
Revolving credit facility A, interest at 9.50%
on borrowings up to $87 and $59 as of December
31, 1998 and 1997, respectively, 13,50% on
borrowings exceeding above limits $ 96 $ 66
Revolving credit facility B, interest at 8.75%
on borrowings up to $90 and $184 as of December
31, 1998 and 1997, respectively, 12.75% on
borrowings exceeding above limits 101 113
-------------------------------
$ 197 $ 179
================================
</TABLE>
To provide a portion of the financing of operating activities, the Company
entered into two revolving credit facilities with separate financial
institutions.
The revolving credit facility A expires in June 1999. The Company had $ 0
available borrowing under revolving credit facility A at December 31, 1998. The
balance of trade accounts receivable has been pledged as collateral under
revolving credit facility A.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
Notes to Financial Statements December 31, 1998 and 1997
4. Notes Payable to Banks (Continued)
The revolving credit facility B expires in April 1999. The Company had $ 0
available borrowing under revolving credit facility B at December 31, 1998. The
revolving credit facility B requires the company to maintain certain cash
balances. As of December 31, 1998 and 1997 cash balances have been pledged as
collateral.
5. Notes Payable to Shareholders
Notes payable to shareholders consist of the following:
<TABLE>
<CAPTION>
December 31
1998 1997
--------------------------
<S> <C> <C>
Notes payable to shareholders
Interest at 8.00%, payable upon demand $ 28 $ 28
Interest at 8.00%, payable in full at May 31, 1999 63 84
Interest at 8.00%, payable upon demand 27 25
Interest at 8.00%, payable in full at June 30, 1999 18 -
Interest at 8.00%, payable in full at March 30, 1999 120 -
Interest at 8.00%, payable in full at May 31, 1999 30 -
Interest at 8.00%, payable upon demand 9 -
Interest at 7.50%, payable in thirty-six monthly
instalments beginning June 1999 300 -
Interest at 8.00%, payable in full at June 30, 1999 75 84
Interest at 8.00%, payable upon demand 4 -
---------------------------------
674 221
Less current portion 432 221
---------------------------------
$ 242 $ -
=================================
</TABLE>
The Company has entered into various financing agreements with shareholders of
the Company. Interest expense on related party notes amounted to $ 30 and $ 9 in
fiscal 1998 and 1997, respectively.
The note payable in full at May 31, 1999 is due to a former shareholder who sold
his interest in the Company on October 8, 1998.
The Company paid interest of $ 29 and $ 20 in fiscal 1998 and 1997,
respectively.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
Notes to Financial Statements December 31, 1998 and 1997
5. Notes Payable to Shareholders (Continued)
Aggregate principal payments due on notes payable to shareholders are as
follows:
1999 $432
2000 100
2001 100
2002 42
----------------
$674
================
6. Silent Partnership Debt
On August 2, 1993 the Company entered into a silent partnership agreement with
three employees of the Company. The employees provided funds to the Company in
the amount of $ 23 in exchange for a combined 7.79 % share in profits earned.
The silent partners do not share in losses of the Company. The Company may
cancel the agreement with a six-month-advance notice rendered six months prior
to year end. The employees may cancel the agreement based upon various
contractual restrictions.
7. Registered Capital
The Company is a limited liability company (hereafter "GmbH") under German law.
Shareholders are generally not liable for the Company's obligations except to
the extent of their capital investment. Registered capital of a GmbH is not in
the form of shares and does not represent negotiable securities. The minimum
registered capital requirement for a GmbH is TDM 50.
During 1998, approximately $ 27 of debt was forgiven by Verlag Beleke
Kommanditgesellschaft in exchange for an equity stake in the Company.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
Notes to Financial Statements December 31, 1998 and 1997
8. Income Taxes
There were no income taxes paid by the Company in 1998 or 1997.
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 as of December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 532 $ 222
Valuation differences between U.S. and German GAAP 60 70
Other 30 23
----------------------------------
Total deferred tax assets 622 315
Deferred tax liabilities:
Other 2 -
----------------------------------
Total deferred tax liability 2 -
----------------------------------
Valuation allowance -620 -315
----------------------------------
Net deferred taxes $ - $ -
==================================
</TABLE>
The Company files tax returns in the Federal Republic of Germany which includes
all domestic operations. At December 31, 1998, the Company had net operating
loss carryforwards of approximately $ 1,270. Under German law net operating
losses do not expire.
Due to the historical losses experienced by the Company, a full valuation
allowance has been established against the Company's net deferred tax assets at
December 31, 1998 and 1997.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
Notes to Financial Statements December 31, 1998 and 1997
9. Commitments and Contingencies
The Company has commitments under operating leases for office space and
equipment which extend to 2003. The lease for the office building contains
renewal options and rent escalations. Total rental expense charged to
operations in 1998 and 1997 was approximately $ 36 and $ 30, respectively.
Aggregate future minimum lease payments related to operating lease commitments
with initial or remaining noncancelable lease terms in excess of one year at
December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 41
2000 42
2001 43
2002 29
2003 1
-----------
Future minimum lease payments $ 156
===========
</TABLE>
10. Other Related Party Transactions
The Company received a grant from the German government in fiscal 1997 which was
used to fund research and development activities. The utilization of the grant
funds for research and development is shown as a reduction of development costs
in the amount of $ 50 in 1998 and $ 392 in 1997.
The German government required a guarantee for the term of the grant project
which was given by a shareholder of the Company. The shareholder in turn
required a security deposit from the Company of $ 120 and $ 112 at December 31,
1998 and 1997, respectively.
The Company recognised interest income on these amounts due from this
shareholder of $ 3 in 1998 and $ 1 in 1997.
<PAGE>
EP ELECTRONIC PUBLISHING PARTNERS GMBH
Notes to Financial Statements December 31, 1998 and 1997
11. Year 2000 (Unaudited)
The Year 2000 issue is the result of computer programs written using two digits
rather than four to define the applicable year. Any of the Company's programs
that have date-sensitive software may recognise a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruption of operation, including, among other things, a
temporary inability to process transactions, send invoices, or engage in similar
normal business activities.
Based on a preliminary assessment, the Company believes that the Year 2000 issue
will not have a material impact on the operations of the Company. The Company
will upgrade all hardware and software before the Year 2000 that is not Year
2000 compliant. The cost to upgrade the hardware or software is not expected to
be material.
The Year 2000 issue may also affect the systems and applications of the
Company's customers or suppliers. Although the Company does not anticipate any
material impact on its operations as a result of Year 2000 issues of its
customers or suppliers, at this stage, no assurance can be given that the
failure by one or more of its major suppliers or customers to become Year 2000
compliant will not have a material adverse impact on its operations.
The Company does not have a contingency plan and has not estimated a worst case
scenario.
<PAGE>
EXHIBIT 99.2
ALPNET, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statements of Operations for the Year Ended December 31,
1998 (Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Thousands of dollars and shares ALPNET, Adjustments Pro Forma
Inc. EP (Note 2) Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales of services $ 48,545 $1,226 $ $ 49,771
Operating expenses:
Cost of services sold 38,058 503 38,561
Selling, general, and administrative expenses 8,060 235 105 (a) 8,400
Development costs 730 693 1,423
Amortization of goodwill 391 - 26 (b) 417
Restructuring expenses 1,291 - 1,291
---------------------------------------------------------------
Total operating expenses 48,530 1,431 131 50,092
---------------------------------------------------------------
Operating income (loss) 15 (205) (131) (321)
Interest expense, net 287 56 343
---------------------------------------------------------------
Loss before income taxes (272) (261) (131) (664)
Income taxes 546 - 546
---------------------------------------------------------------
Net loss $ (818) $ (261) $ (131) $ (1,210)
===============================================================
Loss per share - basic $ (0.03) $ (0.05)
===============================================================
Loss per share - assuming dilution $ (0.03) $ (0.05)
===============================================================
Shares used in loss per share calculations:
Basic 23,838 50 23,888
===============================================================
Assuming Dilution 23,838 50 23,888
===============================================================
</TABLE>
See accompanying notes.
<PAGE>
ALPNET, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statements of Operations for the Six Months Ended June
30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Pro Forma
ALPNET, Adjustments Pro Forma
Thousands of dollars and shares Inc. EP (Note 2) Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales of services $ 24,978 $ 388 $ $ 25,366
Operating expenses:
Cost of services sold 19,392 161 19,553
Selling, general, and administrative expenses 4,452 120 53 (a) 4,625
Development costs 78 233 311
Amortization of goodwill 191 - 13 (b) 204
-------------------------------------------------------------------
Total operating expenses 24,113 514 66 24,693
-------------------------------------------------------------------
Operating income (loss) 865 (126) (66) 673
Interest expense, net 188 25 213
------------------------------------------------------------------
Income (loss) before income taxes 677 (151) (66) 460
Income taxes 216 - 216
------------------------------------------------------------------
Net income (loss) $ 461 $ (151) $ (66) $ 244
==================================================================
Income per share - basic $ 0.02 $ 0.01
==================================================================
Income per share - assuming dilution $ 0.02 $ 0.01
==================================================================
Shares used in income per share calculations:
Basic 24,372 50 24,422
==================================================================
Assuming dilution 26,029 127 26,156
==================================================================
</TABLE>
See accompanying notes
<PAGE>
ALPNET, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Consolidated Statements of Operations
1. Basis of Presentation
On June 30, 1999, the Registrant entered into a Stock Purchase Agreement to
acquire the entire outstanding share capital of EP Publishing Partners GmbH
("EP"), a German corporation based in Nuremburg, Germany. The purchase price
approximated $937,000.
The pro forma consolidated statements of operations assume that the acquisition
took place as of the beginning of 1998 and then carried forward into fiscal
1999. They combine:
1. ALPNET's consolidated statement of operations for the year ended December
31, 1998 and EP's statement of operations for the year ended December 31,
1998, and
2. ALPNET's consolidated statement of operations for the six months ended June
30, 1999 and EP's statement of operations for the six months ended June 30,
1999.
A pro forma consolidated balance sheet has not been included in this filing as
the acquisition became effective June 30, 1999 and EP accounts were included in
the 10Q filed for the period ended June 30, 1999.
There were no material transactions between ALPNET and EP during the periods
presented.
There are no material differences between the accounting policies of ALPNET and
EP.
The pro forma consolidated provision for income taxes may not represent the
amounts that would have resulted had ALPNET and EP filed consolidated income tax
returns during the periods presented.
2. Pro Forma Adjustments
The pro forma adjustments are based on ALPNET management's estimates. In
addition, management is in the process of assessing and formulating its
integration plans and does not foresee any material charges or credits against
income during the 12 months succeeding the acquisition.
The purchase price of approximately $937,000, including assumption of net
liabilities and acquisition costs, was allocated to software ($630,000) and
goodwill ($307,000).
<PAGE>
2. Pro Forma Adjustments (continued)
(a) The annual amortization charge to income related to purchased software is
$105,000. This charge is reflected in the pro forma consolidated statement
of operations and is recalculated below:
<TABLE>
<CAPTION>
Estimated Calculated Calculated
Useful Amortization Amortization
Life for the year ended for the six months
Amount in years December 31, 1998 ended June 30, 1999
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchased Software $ 630,000 6 $ 105,000 $ 53,000
</TABLE>
(b) The annual amortization charge to income related to goodwill approximates
$26,000. This charge is reflected in the pro forma consolidated statement
of operations and is recalculated below:
<TABLE>
<CAPTION>
Estimated Calculated Calculated
Useful Amortization Amortization
Life for the year ended for the six months
Amount in years December 31, 1998 ended June 30, 1999
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Goodwill $ 307,000 12 $ 26,000 $ 13,000
</TABLE>
3. Pro Forma Income (Loss) Per Common Share
Pro forma income (loss) per share - basic was calculated based on the issuance
of approximately 50,000 shares of ALPNET common stock. Pro forma loss per
share-assuming dilution at December 31, 1998 does not include any common stock
equivalents as their effect would be anti-dilutive. Pro forma income per
share-assuming dilution at June 30, 1999 includes 127,000 ALPNET common shares
of which approximately 77,000 are attributable to shares of ALPNET common stock
issuable upon the conversion of Convertible Notes which were issued to former EP
shareholders as part of the acquisition.
