SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K - Amendment 2
CURRENT REPORT
Pursuant to Section 13 and 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 1, 1996
HALIFAX CORPORATION
(Exact name of registrant as specified in charter)
Virginia 2-84160-W 54-0829246
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5250 Cherokee Avenue, Alexandria, Virginia 22312
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 750-2202
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The following Audited Financial Statements of CMS Automation, Inc. (CMSA) are
filed to be included as Exhibit 99 (a) of the Current Report on Form 8-K and
Amendments thereto in substitution of the Audited Financial Statments
previously submitted as Exhibits 99 (a) and (b) in Amendment 1:
Audited Financial Statements dated December 31, 1995 including
Independent Auditor's Report
Balance Sheet
Statement of Income
Statement of Cash Flows
Notes to Financial Statements
(b) Pro Forma Financial Information
Previously submitted in Form 8-K Amendment 1.
<PAGE>
CMS AUTOMATION, INC.
Financial Statements
December 31, 1995
<PAGE>
CMS AUTOMATION, INC.
Table of Contents
Page
Independent Auditors' Report 2
Exhibit
A Balance Sheet 3-4
B Statement of Income 5
C Statement of Changes in Stockholders' Equity 6
D Statement of Cash Flows 7-8
Notes to Financial Statements 9-14
Independent Auditors' Report on Additional Information 15
Schedule
1 Schedule of Operating Expenses 16
INDEPENDENT AUDITORS' REPORT
To the Stockholders
CMS Automation, Inc.
Richmond, Virginia:
We have audited the accompanying balance sheet of CMS Automation, Inc. as
of December 31, 1995, and the related statements of income, changes in
stockholders' 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. These 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 CMS Automation, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Keiter, Stephens, Hurst, Gary & Shreaves, P.C.
March 23, 1996
Exhibit A
<TABLE>
CMS AUTOMATION, INC.
Balance Sheet
December 31, 1995
Assets
Current assets:
<S> <C>
Cash $ 97 954
Accounts receivable, net of allowance for
uncollectible accounts of $50,000 3 212 001
Inventory 2 176 089
Loans to employees 16 875
Loans to officers 26 028
Prepaid expenses 13 621
Total current assets 5 542 568
Fixed assets 2 824 461
Less accumulated depreciation 1 411 842
Net fixed assets 1 412 619
Software, net of amortization 61 791
Organization costs, net of amortization 22 080
Franchise fee, net of amortization 3 042
Deposits 23 756
Client lists 49 500
Investment 24 664
Total other assets 184 833
$7 140 020
</TABLE>
See accompanying notes to financial statements. 3
<PAGE>
Exhibit A
<TABLE>
CMS AUTOMATION, INC.
Balance Sheet
December 31, 1995
Liabilities and Stockholders' Equity
<S> <C>
Current liabilities:
Short-term debt$ 4 203 658
Notes payable, current portion 117 743
Capital lease obligation, current portion 4 674
Accounts payable 1 422 351
Unearned revenues 320 183
Accrued expenses 78 161
Customer deposits 3 112
Income taxes payable 1 000
Total current liabilities 6 150 882
Notes payable, less current portion 450 000
Deferred credit 12 618
Total liabilities 6 613 500
Commitments
Stockholders' equity:
Common stock, $.20 par value; 750,000 shares
authorized; 484,226 shares issued and outstanding 96 845
Additional paid-in capital 705 758
Retained earnings (deficit) (276 083)
Total stockholders' equity 526 520
$7 140 020
</TABLE>
See accompanying notes to financial statements. 4
<PAGE>
Exhibit B
<TABLE>
CMS AUTOMATION, INC.
Statement of Income
For the Year ended December 31, 1995
<S> <C>
Sales $21 248 701
Cost of sales 14 582 334
Gross profit 6 666 367
Operating expenses 6 299 738
Operating income 366 629
Other income (expense):
Miscellaneous income 139 333
Interest income 3 872
Interest expense (543 231)
Loss from investment ( 29 496)
Litigation settlement ( 45 000)
Total other expense (474 522)
Loss before provision for income tax (107 893)
Provision for income taxes 1 000
Net loss $(108 893)
</TABLE>
See accompanying notes to financial statements. 5
<PAGE>
Exhibit C
<TABLE>
CMS AUTOMATION, INC.
Statement of Changes in Stockholders' Equity
For the Year ended December 31, 1995
<CAPTION>
Additional Retained
Total
Common Stock Paid-In Earnings
Stockholders'
Shares Amount Capital
(Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance, December
31, 1994 467399 $ 93480 $ 658123 $( 167190)$ 584 413
Stock issued 16 827 3 365 47 635 - 51 000
Net loss - - - (108893) (108 893)
Balance, December
31, 1995 484 226 $96 845 $705 758 $(276 083)$526 520
</TABLE>
See accompanying notes to financial statements. 6
<PAGE>
Exhibit D
<TABLE>
CMS AUTOMATION, INC.
Statement of Cash Flows
For the Year ended December 31, 1995
<S> <C>
Cash flows from operating activities:
Net loss $( 108 893)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 432 260
Loss from investment 29 496
(Increase) decrease in:
Accounts receivable 370 463
Inventory 132 572
Prepaid expenses ( 7 130)
Refundable income taxes 71 255
(Decrease) increase in:
Accounts payable (1 815 293)
Unearned revenues ( 125 593)
Income taxes payable 1 000
Accrued expenses ( 61 439)
Customer deposits ( 50 752)
Deferred credit ( 328)
Net cash used in operating activities (1 132 382)
Cash flows from investing activities:
Acquisition of fixed assets ( 556 308)
Acquisition of intangible assets ( 69 232)
Decrease in deposits 5 074
Investment advances ( 54 160)
Net cash used in investing activities ( 674 626)
Cash flows from financing activities:
Proceeds from short-term debt, net of repayments 2 021 685
Repayment of long-term debt ( 169 831)
Repayment of capital lease obligations ( 20 365)
Proceeds from stock issued 51 000
Net cash provided by financing activities 1 882 489
</TABLE>
See accompanying notes to financial statements. 7
<PAGE>
Exhibit D
<TABLE>
CMS AUTOMATION, INC.
Statement of Cash Flows, Continued
For the Year ended December 31, 1995
<S> <C>
Net increase in cash $75 481
Cash at beginning of period 22 473
Cash at end of period $97 954
Supplemental disclosures of cash flow information:
Interest $571 154
Income taxes -
</TABLE>
See accompanying notes to financial statements. 8
<PAGE>
CMS AUTOMATION, INC.
Notes to Financial Statements
(1) Accounting policies:
The accounting and reporting policies of CMS Automation, Inc., conform to
generally accepted accounting principles. The following describe the more
significant of those policies:
(a) Organization:
The Company was incorporated in January, 1990, for the primary
purpose of sales and service of computer hardware, software and
networking. The Company has locations in the Eastern part of the
United States.
(b) Inventories:
Inventories are valued at the lower of cost or market, with cost
being determined by the average cost method.
(c) Fixed assets:
Fixed assets are stated at cost. Depreciation is computed by the
use of accelerated and straight-line methods and is based on the
estimated useful life of the asset.
(d) Other assets:
Software and organization costs are being amortized over periods
of thirty-six to sixty months. Franchise fees are being amortized
over 10 years.
(e) Unearned revenues:
Unearned revenues result from customer contract prepayments.
This results in a large amount of revenue being received prior to its
realization. These unearned revenues are shown as current liabilities
on the balance sheet and are amortized monthly over the terms of the
contracts.
9
<PAGE>
CMS AUTOMATION, INC.
Notes to Financial Statements, Continued
(1) Accounting policies, continued:
(f) Credit risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and
receivables.
The Company maintains its cash balances in several financial
institutions. The balances are insured by the Federal Deposit
Insurance Corporation up to $100,000 in each institution. The Company
has funds in excess of $100,000 in a financial institution.
Receivables consist principally of trade accounts receivable
resulting from sales to customers primarily in the Eastern part of the
United States. Credit is extended to customers after an evaluation
for credit worthiness.
(g) 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 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.
(2) Loans to Officers:
Loans to officers are unsecured advances to the officers of the
Corporation. No interest is currently being charged on these advances.
(3) Fixed assets:
The following comprise the Corporation's fixed assets at December 31, 1995:
<TABLE>
<S> <C>
Support equipment $2 073 115
Furniture and fixtures 616 448
Vehicles 20 396
Leasehold improvements 114 502
$2 824 461
</TABLE>
10
<PAGE>
CMS AUTOMATION, INC.
Notes to Financial Statements, Continued
(4) Investment:
In 1995, the Company advanced $54,160 to an entity that is expected to be
accounted for under the equity investment rules. This entity had a loss in
1995, of which CMS Automation reduced its investment by $29,496, its share
of the total loss.
(5) Short-term debt:
During 1995, the Company entered into an agreement with IBM Credit
Corporation for wholesale financing. This agreement allows the Company to
borrow funds up to $7,000,000, based upon eligible accounts receivable, and
inventory. Interest is charged on the outstanding balance at prime plus
3.25%. This agreement is secured by accounts receivable, inventory, fixed
assets and intangibles. It is guaranteed by the shareholders of the
Company.
(6) Notes payable:
The following comprise the Company's notes payable at December 31, 1995:
Term note payable to Signet Bank, due in monthly
installments of $10,000 plus interest at 9.25%,
through May, 1996. Secured by accounts
receivable, inventory, equipment, general
intangibles and subordination agreement.
Guaranteed by stockholders. $ 70 000
Unsecured term note payable to G. Nolde, due in
monthly installments of $4,951 including
interest at 8%, through October, 1996. 47 743
Unsecured subordinated demand note to G. Nolde
with interest at 8%. 285 000
Unsecured subordinated demand note to I. Cox with
interest at 8%. 165 000
Total long-term debt 567 743
Less current maturities 117 743
$ 450 000
11
<PAGE>
CMS AUTOMATION, INC.
Notes to Financial Statements, Continued
(6) Notes payable, continued:
The future maturities of long-term debt at December 31, 1995 are as
follows:
Thereafter $450 000
$450 000
(7) Capital leases:
The Corporation has acquired equipment under the provisions of long-term
leases. For financial reporting purposes, minimum lease rentals relating
to these leases have been capitalized.
Equipment costs $ 57 752
Less accumulated depreciation 26 224
$ 31 528
The following is a schedule by years of future minimum lease payments under
capital leases together with the present value of the net minimum lease
payments as of December 31, 1995:
Year ended December 31:
1996 $4 736
Total minimum lease payments 4 736
Less amount representing interest 62
Present value of net minimum
lease payments $4 674
Current portion $4 674
12
<PAGE>
CMS AUTOMATION, INC.
Notes to Financial Statements, Continued
(8) Income taxes:
The provision (benefit) for income taxes consists of the following:
Current $3 300
Deferred (2 300)
Total $ 1 000
Deferred income taxes are provided for differences in timing, in reporting
income for financial statement and tax purposes, arising from differences
in the methods of accounting for bad debts, inventory, and litigation
settlements.
For tax purposes, bad debts are expensed as incurred, while the allowance
method is used for financial purposes. Inventory for income tax purposes
includes Section 263A costs which are not included for financial statement
purposes. For financial statement purposes litigation settlements are
expensed as incurred, while for tax purposes they are deductible when paid.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the
tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.
Net deferred tax assets are composed of the following:
Deferred tax assets arising from:
Temporary differences $24 565
AMT credits 15 101
Valuation allowance (39 666)
Net deferred tax asset $-
The Company has alternative minimum tax credit carryforwards of
approximately $15,000 which are available to offset future federal income
tax liability. The Company also has contribution carryforwards of
approximately $8,000 which expire in 1999.
13
<PAGE>
CMS AUTOMATION, INC.
Notes to Financial Statements, Continued
(9) Commitments:
The Corporation leases its facilities in Virginia, Georgia and South
Carolina. Total net rent expense under facility leases for 1995 was
$293,624. The Corporation was also obligated under a lease for an
automobile. Lease expense under this agreement was $4,193 for 1995.
Future obligations under these leases as of December 31, 1995 are as
follows:
Minimum Minimum
Rental Sublease
Payments Receipts
1996 $257 755 $21 467
1997 240 520 -
1998 207 589 -
1999 35 552 -
(10) Profit sharing plan:
The Corporation has a qualified contributory profit-sharing plan covering
substantially all of its employees. Annual contributions are at the
discretion of the Board of Directors but may not exceed the maximum amount
allowable under applicable provisions of the Internal Revenue Code. No
contribution was made for 1995.
(11) Subsequent event:
Effective April 1, 1996, CMS Automation, Inc. merged into CMSA Acquisition
Corporation, a wholly-owned subsidiary of Halifax Corporation.
14
INDEPENDENT AUDITORS' REPORT ON ADDITIONAL INFORMATION
To the Stockholders
CMS Automation, Inc.
Richmond, Virginia:
Our report on our audit of the basic financial statements of CMS
Automation, Inc., for the year ended December 31, 1995 appears on page 2. That
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules of operating expenses are presented
for purposes of additional analysis and are not a required part of the basic
financial statements. Such information has not been subjected to the auditing
procedures applied in the audit to the basic financial statements, and
accordingly, we express no opinion on it.
Keiter, Stephens, Hurst, Gary & Shreaves, P.C.
March 23, 1996
Schedule 1
<TABLE>
CMS AUTOMATION, INC.
Schedule of Operating Expenses
For the Year ended December 31, 1995
<S> <C>
Operating expenses:
Advertising $ 43 330
Amortization 44 464
Auto expenses 109 643
Bad debts 58 763
Commissions 378 218
Contributions 1 150
Depreciation 387 795
Dues and subscriptions 17 473
Employee benefit programs 190 246
Freight 150 435
Insurance 45 807
Miscellaneous 18 339
Office expense 64 193
Outside services 71 506
Payroll taxes 296 952
Penalties 36 430
Printing services 18 513
Professional fees 63 431
Recruitment 24 632
Rent 333 103
Repairs and maintenance 20 639
Salaries 3 353 877
Small equipment and tools 5 189
Supplies 34 172
Taxes and licenses 48 249
Telephone 217 793
Training 48 756
Travel and entertainment 152 147
Utilities 64 493
Total operating expenses $6 299 738
See independent auditors' report on additional information. 16
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 thereunto duly authorized.
HALIFAX CORPORATION
(Registrant)
Date: April 29, 1997 By: s/ Howard C. Mills
Howard C. Mills, President
& Chief Executive Officer
Date: April 29, 1997 By: s/ John D. D'Amore
John D. D'Amore
Vice President Finance &
Accounting
</TABLE>
