<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 Act of 1934
Date of Report: October 1, 1997
COLORADO MEDTECH, INC.
----------------------
(Exact name of registrant as specified in its charter)
Colorado 0-12471 84-0731006
-------- ------- ----------
(State or other jurisdiction (Commission File (I.R.S Employer
of incorporation) Number) Identification No.)
6175 Longbow Drive
Boulder, Colorado 80301
-----------------------
(Address, including zip code, of principal executive offices)
(303) 530-2660
--------------
(Registrant's telephone number,
including area code)
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
ERBTEC ENGINEERING, INC.
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
Erbtec Engineering, Inc.:
We have audited the accompanying balance sheet of ERBTEC ENGINEERING, INC. as
of September 30, 1997, and the related statement of income, shareholder's
equity and cash flows for the nine months then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Erbtec Engineering, Inc. as
of September 30, 1997, and the results of its operations and its cash flows
for the nine months then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
October 28, 1997.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Erbtec Engineering, Inc.:
We have audited the accompanying balance sheet of Erbtec Engineering, Inc.
(the "Company") as of December 31, 1996, and the related statements of
income, shareholder's equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Erbtec Engineering, Inc. as
of December 31, 1996, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Boulder, Colorado
April 4, 1997
<PAGE>
Page 1 of 2
ERBTEC ENGINEERING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,882 $ 1,456,703
Accounts receivable, less allowance of $25,000
in 1997 and 1996 for doubtful accounts 2,186,816 785,900
Notes receivable -- 8,583
Inventories (Note 2) 2,210,114 1,863,777
Prepaid expenses 10,257 16,912
------------- -------------
Total current assets 4,416,069 4,131,875
PROPERTY and EQUIPMENT:
Airplane 57,450 57,450
Furniture and fixtures 57,850 42,893
Leasehold improvements 193,168 182,843
Equipment 934,471 911,489
Computer equipment and software 463,843 419,666
Vehicles 41,262 41,262
------------- -------------
1,748,044 1,655,603
Less accumulated depreciation and amortization (1,347,640) (1,235,085)
------------- -------------
Property and equipment, net 400,404 420,518
OTHER ASSESTS:
Cash surrender value of life insurance 99,819 87,743
Investment (Note 4) 2,500 2,500
------------- -------------
Total other assets 102,319 90,243
------------- -------------
Total assets $ 4,918,792 $ 4,642,636
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
<PAGE>
Page 2 of 2
ERBTEC ENGINEERING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
LIABILITIES:
Accounts payable $ 312,936 $ 181,335
Accrued payroll and payroll taxes 248,052 247,469
Accrued warranty 65,000 90,000
Other accrued liabilities 35,742 78,731
------------- -------------
Total liabilities 661,730 597,535
COMMITMENTS (Notes 4 and 6)
SHAREHOLDER'S EQUITY:
Common stock - no par value, 100,000 shares authorized,
30,000 shares issued and outstanding 34,871 34,871
Additional paid-in capital 136,939 136,939
Retained earnings 4,085,252 3,873,291
------------- -------------
Total shareholder's equity 4,257,062 4,045,101
------------- -------------
Total liabilities and shareholder's equity $4,918,792 $4,642,636
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
<PAGE>
ERBTEC ENGINEERING, INC.
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
------------- --------------
<S> <C> <C>
NET SALES $9,616,904 $14,565,885
COST OF GOODS SOLD 5,807,680 9,685,178
------------- --------------
Gross profit 3,809,224 4,880,707
OPERATING EXPENSES:
Research and development 1,049,059 1,874,056
General and administrative 966,101 1,251,999
Sales and marketing 160,077 169,712
------------- --------------
Total operating expenses 2,175,237 3,295,767
------------- --------------
Operating income 1,633,987 1,584,940
OTHER INCOME:
Interest income 9,421 4,807
Other 31,275 31,566
------------- --------------
Total other income 40,696 36,373
------------ --------------
NET INCOME $1,674,683 $ 1,621,313
------------- --------------
------------- --------------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
ERBTEC ENGINEERING, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Shareholder's
Stock Capital Earnings Equity
--------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCES, at December 31, 1995 $34,871 $136,939 $ 3,037,798 $ 3,209,608
Distribution to shareholder -- -- (785,820) (785,820)
Net income -- -- 1,621,313 1,621,313
--------- ---------- ------------- -------------
BALANCES, at December 31, 1996 34,871 136,939 3,873,291 4,045,101
Distribution to shareholder -- -- (1,462,722) (1,462,722)
Net income -- -- 1,674,683 1,674,683
--------- ---------- ------------- -------------
BALANCES, at September 30, 1997 $34,871 $136,939 $ 4,085,252 $ 4,257,062
--------- ---------- ------------- -------------
--------- ---------- ------------- -------------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
ERBTEC ENGINEERING, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,674,683 $1,621,313
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 112,555 126,946
Change in operating assets and liabilities-
Accounts receivable, net (1,400,916) 282,303
Inventories (346,337) (24,826)
Prepaid expenses 6,655 12,501
Accounts payable 131,601 (50,438)
Accrued payroll and payroll taxes 583 90,012
Accrued warranty (25,000) 90,000
Accrued profit sharing - (65,000)
Other accrued liabilities (42,989) 52,822
------------- -------------
Net cash provided by operating activities 110,835 2,135,633
------------- -------------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchases of property and equipment (92,441) (215,546)
Increase in cash surrender value of insurance (12,076) (17,500)
Notes receivable 8,583 (8,583)
------------- -------------
Net cash used by investing activities (95,934) (241,629)
------------- -------------
CASH FLOWS USED BY FINANCING ACTIVITIES-
Distributions to shareholder (1,462,722) (785,820)
------------- -------------
Net (decrease) increase in cash and cash
equivalents (1,447,821) 1,108,184
CASH AND CASH EQUIVALENTS, at beginning of period 1,456,703 348,519
------------- -------------
CASH AND CASH EQUIVALENTS, at end of period $ 8,882 $1,456,703
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
ERBTEC ENGINEERING, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(1) NATURE OF BUSINESS
Erbtec Engineering, Inc. (the "Company" or "Erbtec") was organized in
Colorado in 1979. The Company engages in the development, manufacture and
sale of electronic products to OEM system manufacturers in both the United
States and Asia. The Company's main products are high field radio frequency
amplifiers and cabinetry systems for Magnetic Resonance Imaging (MRI)
equipment. The Company also has product offerings in low field radio
frequency amplifiers as well as solid state amplifiers.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories are recorded at the lower of cost (first-in, first-out) or
market. The components of inventories are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
Raw materials $1,373,384 $ 799,592
Work in process 309,980 511,820
Finished goods 526,750 552,365
------------- -------------
$2,210,114 $1,863,777
------------- -------------
------------- -------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives (three to ten years) primarily using the straight-line
method.
<PAGE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable from future undiscounted cash flows. Impairment losses
are recorded for the difference between the carrying value and fair value of
the long-lived asset.
INCOME TAXES
The Company's shareholder elected S corporation status effective May 1, 1989.
Earnings and losses after that date are included in the personal income tax
returns of the shareholder. Accordingly, the accompanying financial
statements do not include a provision for income taxes.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed when incurred.
REVENUE RECOGNITION
Revenue is recognized when title and risk of ownership transfers to the
customer which generally is upon shipment of goods.
ESTIMATES AND UNCERTAINTIES
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 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 these estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 financial statements to
conform to the 1997 presentation.
(3) DEFINED CONTRIBUTION PLAN
The Company sponsors a defined contribution 401(k) profit-sharing plan (the
"Plan") covering substantially all of its employees. Employees become
eligible for participation in the Plan after attaining the age of 21 and
after completing six months of service, as defined, with the Company. Under
the Plan, employees may contribute up to 10% of their compensation in any
Plan year subject to the Internal Revenue Code maximum. Company contributions
to the Plan consist of an employer match, which is determined each year by the
Board of Directors, and discretionary contributions, if any. For 1997 and 1996,
the Company expensed $61,955 and $64,680, respectively, related to the Plan.
<PAGE>
(4) RELATED PARTY TRANSACTIONS
LEASE
The Company leases its office and manufacturing facility from the sole
stockholder under a noncancellable operating lease through November 30, 1998.
A five-year renewal option is also available. During 1997, payments under
the lease were $12,000 per month and the Company is also responsible for
property taxes, insurance, repairs and maintenance.
Effective October 1, 1997, the Company assigned the lease to Colorado MEDtech
("MEDtech") as part of the Asset Purchase Agreement between the Company and
MEDtech (see Note 8). In conjunction with the assignment, payments were
increased to $12,920 per month, with two optional one-year extensions
beginning December 1, 1998. Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
<S> <C>
Three months ending December 31, 1997 $ 38,760
Year ending December 31, 1998 142,100
----------
$ 180,860
----------
----------
</TABLE>
Rent expense was $108,000 and $144,000 for the nine months ended September
30, 1997 and the year ended December 31, 1996, respectively.
EMPLOYMENT AGREEMENT
In July 1995, the Company entered into an employment agreement with the
Company's Executive Vice President and Chief Operating Officer. The
agreement guarantees that one year of salary will be paid in the event of
involuntary termination during the first three years of employment. In the
event the Company is sold, the agreement guarantees salary continuance for
one year after sales date or three years from hire date, whichever is longer.
MEDtech agreed to assume this agreement as part of the Asset Purchase
Agreement (see Note 8).
SALES TRANSACTION
During 1996 and 1997, Erbtec provided manufacturing services to a company in
which Erbtec has a minority equity investment. This investment is recorded
under Other Assets on the accompanying balance sheets. During the nine
months ended September 30, 1997 and the year ended December 31, 1996, the
Company recognized revenue related to these services of $226,768 and
$207,308, respectively. As of September 30, 1997 and December 31, 1996, the
amounts due Erbtec related to these services were $28,450 and $27,788,
respectively.
CONSULTING FEES
The Company paid a director approximately $80,000 in consulting fees in 1997;
no such fees were paid in 1996.
<PAGE>
(5) BANK LINE OF CREDIT
During 1997, the Company had a line of credit agreement with a bank, which
was terminated on September 29, 1997. The maximum amount available was the
lesser of $500,000 or 70% of eligible accounts receivable, as defined.
Borrowings under the credit agreement bear interest at the bank's prime rate
plus .50% and were secured by inventory, accounts receivable, intangibles and
equipment.
(6) MAJOR CUSTOMER
The Company is dependent upon one customer, the loss of which would have a
materially adverse effect on the Company. During the nine months ended
September 30, 1997 and the year ended December 31, 1996, this customer
accounted for approximately 94% and 98%, respectively, of the Company's
sales. Accounts receivable at September 30, 1997 and December 31, 1996
includes $2,123,265 and $756,378 due from this customer, respectively. The
Company has an exclusive supplier agreement with this customer which is
binding through February 28, 2000 with provisions for a two-year extension.
The agreement includes price commitments and technical specifications, but
has no quantity commitments.
The Company is in the process of developing new technology related to the
production of the cabinetry systems for MRI equipment. This change in
technology is being required by the major customer of the Company, which
could affect the Company's ability to obtain an extension on the exclusive
agreement with this customer. The Company's ability to achieve continued
profitability is subject to risks and uncertainties related to the Company's
ability to successfully develop these new technological innovations.
The Company is also dependent on one supplier for radio frequency tubes.
(7) RESEARCH AND DEVELOPMENT ARRANGEMENT
During 1994, the Company entered into an agreement with a customer to provide
research, design and development services using certain technologies. The
customer paid the Company $60,000 in 1996 for such services. During 1996,
the Company expensed approximately $360,000 of inventory related to this
arrangement to research and development expense in anticipation of
terminating the arrangement. During July 1997, the research and development
arrangement was terminated.
(8) SUBSEQUENT EVENT
Effective October 1, 1997, the Company entered into an Asset Purchase
Agreement (the "Agreement") with MEDtech. Under the Agreement, MEDtech
purchased substantially all of the Company's operating assets from the
Company's sole shareholder and assumed certain commitments of the Company.
<PAGE>
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information.
COLORADO MEDTECH, INC.
PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INTRODUCTION
The following unaudited pro forma condensed combined financial statements
have been prepared from the historical consolidated financial statements of
Colorado MEDtech, Inc. (the "Company"). The "Erbtec Acquisition" column in
the following unaudited pro forma condensed combined financial statements
reflects the historical financial statements of Erbtec Engineering, Inc.
("Erbtec") restated to be consistent with the reporting periods of the
Company.
The unaudited pro forma condensed combined financial statements have been
adjusted to reflect the Erbtec Acquisition under the terms described in Item
2 of Form 8-K dated October 1, 1997, previously filed by the Company and
incorporated herein by reference.
The unaudited pro forma condensed combined financial statements assume that
the Erbtec Acquisition occurred as of July 1, 1996 for the unaudited pro
forma condensed combined statements of operations and as of September 30,
1997 for the unaudited pro forma condensed combined balance sheet.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the Company's historical consolidated financial
statements and related notes to such statements in the June 30, 1997 Annual
Report on Form 10-KSB and the September 30, 1997 Quarterly Report on Form
10-Q, both previously filed by the Company; and Erbtec Engineering, Inc.
historical financial statements and notes thereto included herein. The
unaudited pro forma condensed combined financial statements are not
necessarily indicative of the financial position or results of operations had
the Erbtec Acquisition occurred on the indicated dates nor do they purport to
indicate the results of future operations of the Company.
The pro forma financial information has been prepared by the Company and all
calculations have been made based upon assumptions deemed appropriate by the
Company. In the opinion of management, all adjustments necessary to present
fairly the unaudited pro forma condensed combined financial statements have
been made.
<PAGE>
COLORADO MEDTECH, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Colorado Pro Forma Colorado
MEDtech, Inc. Erbtec Acquisition MEDtech, Inc.
as Reported Acquisition Adjustments Pro Forma
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,339,365 $ 8,882 $(5,350,000)(a) $ 998,247
Short-term investments 3,413,594 -- -- 3,413,594
Accounts receivable, net 7,558,875 2,186,816 -- 9,745,691
Inventories, net 3,754,954 2,210,114 -- 5,965,068
Deferred income taxes and
other current assets 925,447 10,257 -- 935,704
-------------- -------------- -------------- --------------
Total current assets 21,992,235 4,416,069 (5,350,000) 21,058,304
-------------- -------------- -------------- --------------
EQUIPMENT AND FURNITURE, NET 911,348 400,404 (27,177)(c) 1,284,575
-------------- -------------- -------------- --------------
GOODWILL, NET 1,611,711 - 1,230,772 (e) 2,842,483
-------------- -------------- -------------- --------------
LAND, DEFERRED INCOME TAXES
AND OTHER ASSETS 965,560 102,319 (99,819)(c) 968,060
-------------- -------------- -------------- --------------
Total assets $25,480,854 $ 4,918,792 $ (4,246,224) $26,153,422
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,708,687 $ 312,936 $ (312,936)(d) $ 2,708,687
Accrued salaries and wages 1,240,921 248,052 (248,052)(d) 1,240,921
Accrued product service costs 389,436 65,000 (65,000)(d) 389,436
Customer deposits 3,449,183 -- -- 3,449,183
Other accrued expenses 1,140,418 35,742 51,612 (b) 1,192,030
(35,742)(d)
-------------- -------------- -------------- --------------
Total current liabilities 8,928,645 661,730 (610,118) 8,980,257
-------------- -------------- -------------- --------------
SHAREHOLDERS' EQUITY
Current stock 10,572,472 171,810 620,956 (a) 11,193,428
(171,810)(e)
Retained earnings 5,979,737 4,085,252 (4,085,252)(e) 5,979,737
-------------- -------------- -------------- --------------
Total shareholders' equity 16,552,209 4,257,062 (3,636,106) 17,173,165
-------------- -------------- -------------- --------------
Total liabilities and
shareholders' equity $25,480,854 $ 4,918,792 $ (4,246,224) $ 26,153,422
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
<PAGE>
COLORADO MEDTECH, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Colorado Pro Forma Colorado
MEDtech, Inc. Erbtec Acquisition MEDtech, Inc.
as Reported Acquisition Adjustments Pro Forma
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES AND SERVICES $ 7,260,230 $ 3,452,157 $ -- $10,712,387
COST OF SALES AND SERVICES 4,621,058 2,108,942 -- 6,730,000
-------------- -------------- -------------- --------------
GROSS PROFITS 2,639,172 1,343,215 -- 3,982,387
-------------- -------------- -------------- --------------
COST AND EXPENSES:
Marketing and selling 332,358 51,268 -- 383,626
Operating, general and
administrative 1,380,337 336,310 61,539 (f) 1,691,117
(13,537)(g)
(16,750)(h)
(66,382)(j)
9,600 (k)
Research and development 45,624 380,170 -- 425,794
-------------- -------------- -------------- --------------
Total operating expenses 1,758,319 767,748 (25,530) 2,500,537
-------------- -------------- -------------- --------------
INCOME FROM OPERATIONS 880,853 575,467 25,530 1,481,850
OTHER INCOME, NET 193,856 11,450 (61,539)(j) 143,767
-------------- -------------- -------------- --------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 1,074,709 586,917 (36,009) 1,625,617
PROVISION FOR INCOME TAXES 411,000 -- 210,000 (l) 571,000
(50,000)(l)
-------------- -------------- -------------- --------------
Net income $ 663,709 $ 586,917 $ (196,009) $ 1,054,617
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
EARNINGS PER SHARE:
Primary $ .09 (m)
----------
----------
Fully diluted $ .09 (m)
----------
----------
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENTS
SHARES OUTSTANDING:
Primary 11,960,107 (m)
-----------
-----------
Fully diluted 12,141,282 (m)
-----------
-----------
</TABLE>
<PAGE>
COLORADO MEDTECH, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Colorado Pro Forma Colorado
MEDtech, Inc. Erbtec Acquisition MEDtech, Inc.
as Reported Acquisition Adjustments Pro Forma
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES AND SERVICES $28,243,185 $12,822,248 $ -- $41,065,433
COST OF SALES AND SERVICES 18,456,764 8,190,369 -- 26,647,133
-------------- -------------- -------------- --------------
GROSS PROFITS 9,786,421 4,631,879 -- 14,418,300
-------------- -------------- -------------- --------------
COST AND EXPENSES:
Marketing and selling 1,287,091 204,826 -- 1,491,917
Operating, general and
administrative 4,619,447 1,273,617 246,155 (f) 5,952,705
(36,510) (g)
(67,000) (h)
(121,404) (i)
38,400 (k)
Research and development 304,180 1,455,817 -- 1,759,997
-------------- -------------- -------------- --------------
Total operating expenses 6,210,718 2,934,260 59,641 9,204,619
-------------- -------------- -------------- --------------
INCOME FROM OPERATIONS 3,575,703 1,697,619 (59,641) 5,213,681
OTHER INCOME, NET 288,914 50,083 (267,500) (j) 71,497
-------------- -------------- -------------- --------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 3,864,617 1,747,702 (327,141) 5,285,178
PROVISION FOR INCOME TAXES 1,385,000 -- 540,000 (l) 1,385,000
(540,000) (l)
-------------- -------------- -------------- --------------
Net income $ 2,479,617 $ 1,747,702 $ (327,141) $ 3,900,178
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
EARNINGS PER SHARE:
Primary $ .36 (m)
-------
-------
Fully diluted $ .35 (m)
-------
-------
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENTS
SHARES OUTSTANDING:
Primary 11,402,975 (m)
-----------
-----------
Fully diluted 11,402,975 (m)
-----------
-----------
</TABLE>
<PAGE>
COLORADO MEDTECH, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997
(Unaudited)
PRO FORMA BALANCE SHEET
(a) This entry adjusts assets and shareholders equity for the effect of the
purchase price, which consisted of cash and 88,708 shares of the
Company's stock valued using quoted market price on the date the asset
purchase was completed.
<TABLE>
<CAPTION>
<S> <C>
Cash $5,350,000
Common Stock 620,956
------------
$5,970,956
------------
------------
</TABLE>
(b) This entry adjusts for liabilities incurred in connection with the
acquisition (legal, audit and other).
(c) This entry eliminates the assets that were not acquired as part of the
acquisition and the depreciation related to these assets.
(d) This entry eliminates all Erbtec liabilities that were excluded from
the Erbtec asset acquisition.
(e) This entry records goodwill acquired as part of the asset acquisition
and eliminates Erbtec's equity at the date of acquisition.
PRO FORMA STATEMENT OF OPERATIONS
(f) This adjustment reflects the amortization of goodwill using a five year
life that would have occurred during the pro forma periods: $246,155
during the year ended June 30, 1997 and $61,539 during the three month
period ended September 30, 1997.
(g) This adjustment eliminates the depreciation and other expenses related
to assets that were not acquired as part of the asset acquisition.
These expenses totaled $36,510 during the year ended June 30, 1997 and
$13,537 for the three months ended September 30, 1997.
(h) This adjustment reflects the decrease in salary that the president of
Erbtec agreed to as part of his new employment agreement. This would
reduce the payroll expense by $67,000 for the year ended June 30, 1997
and $16,750 for the three month period ended September 30, 1997.
(i) This adjustment eliminates the expenses that Erbtec incurred during the
last fifteen months associated with selling its business. These
expenses would not have been incurred if Erbtec was acquired on July 1,
1996. The decrease in expenses for the year ended June 30, 1997 is
$121,404 and the decrease in expenses for the three months ended
September 30, 1997 is $66,382.
(j) This adjustment eliminates the interest income that the Company earned
on the $5,350,000 of cash used in the acquisition, $267,500 for the
year ended June 30, 1997 and $61,539 for the three month period ended
September 30, 1997.
<PAGE>
(k) This entry adjusts for depreciation expense to conform Erbtec's to the
Company's depreciation periods. The increase in the expense for the
year ended June 30, 1997 is $38,400 and $9,600 for the three month
period ended September 30, 1997.
(l) This entry reflects the provision for income taxes on Erbtec's
operating results, net of net operating loss utilization from a net
operating loss carry forward that the Company had as of June 30, 1996.
The provision for income taxes was reduced $540,000 for the year ended
June 30, 1997 and $50,000 for the three months ended September 30,
1997.
(m) Earnings per share are computed on the basis of the weighted average
shares outstanding during each period and dilutive common equivalent
shares for stock options and warrants. Included in this calculation
are 88,708 shares of the Company's common stock granted as part of the
purchase price and 100,000 options, that were granted to the president
of Erbtec as part of his employment agreement, with an assumed exercise
price which was the fair market value of the Company's common stock on
July 1, 1996. For this calculation these shares and options were
considered granted on July 1, 1996. Primary and fully diluted earnings
per share for the year ended June 30, 1997 and the three month period
ended September 30, 1997 are computed under the treasury stock method.
For the year ended June 30, 1997, net income is increased by
approximately $227,000 (primary) and $99,000 (fully diluted) of
interest income, net of income taxes, from the investment of proceeds
from assumed exercise of options/warrants in excess of proceeds used to
repurchase outstanding shares. No such adjustment is required for the
three months ended September 30, 1997.
<PAGE>
Item 7. Financial Statements and Exhibits
(c) Exhibits
See Index to Exhibits
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated, this 9th day of December, 1997
COLORADO MEDTECH, INC.
By: /s/ BRUCE L. ARFMANN
-----------------------
Bruce L. Arfmann
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
<S> <C> <C>
2.1* Asset Purchase Agreement by and among Colorado MEDtech,
Inc., Erbtec Engineering, Inc. and Lee Erb, dated October 1, 1997.
3.1 Articles of Incorporation; Complete Copy, as Amended. (A)
3.2 Bylaws, as Amended. (B)
4.2 Specimen of Common Stock Certificate. (C)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG Peat Marwick LLP
</TABLE>
* Previously Filed
(A) Filed as an exhibit to the Company's Current Report on Form 8-K,
dated May 14, 1993.
(B) Filed with Registration Statement (No. 2-83841-D) on Form S-18 on
May 17, 1993, with amendment field as exhibit to the Company's Annual
Report on Form 10-K for the year ended October 31, 1984.
(C) Filed with Registration Statement (No. 2-834841-D) on Form S-18 on
May 17, 1983.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made part of the Form 8-K
filing.
ARTHUR ANDERSEN LLP
Denver, Colorado,
December 9, 1997.
<PAGE>
EXHIBIT 23.2
The Board of Directors
Erbtec Engineering, Inc.
We consent to the inclusion of our report dated April 4, 1997, with respect to
the balance sheet of Erbtec Engineering, Inc. as of December 31, 1996, and the
related statements of income, shareholder's equity, and cash flows for the year
then ended, which report appears in the Form 8-K of Colorado MEDtech, Inc. to
be filed with the Securities and Exchange Commission on or before December 9,
1997.
KPMG PEAT MARWICK LLP
Boulder, Colorado
December 4, 1997
