<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): October 2, 1997
Date of Amendment: December 10, 1997
COMTREX SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-13732 22-2353604
- ---------------------------- ------------ ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
102 Executive Drive
Moorestown, NJ 08057-4224
----------------------------------------------------------
(Address of principal executive offices) ((Zip Code)
Registrant's telephone number, including area code: (609) 778-0090
<PAGE>
The Registrant has previously filed a Report on Form 8-K, dated as of
October 2, 1997, in connection with the Registrant's acquisition of all of the
shares of outstanding capital stock of Data Systems Terminals Limited, a
corporation formed and existing under the laws of England. The Registrant is
hereby amending such report on Form 8-K to (a) confirm that the 400,000 shares
of the Registrant's Common Stock issued in connection with such acquisition
were not registered under the Securities Act of 1933, as amended, in reliance
upon Regulation S promulgated thereunder, and (b) include the financial
statements required by Item 7 of Form 8-K.
Item 7. Financial Statements and Exhibits.
<TABLE>
<CAPTION>
<S> <C>
(a) Financial Statements of Business Acquired.
Index to Financial Statements for Data Systems Terminals Limited
Letter from Independent Auditors - Rothman Pantall & Co to Registrant F-1
Report of Independent Auditors - Rothman Pantall & Co F-2
Balance Sheets - June 30, 1997 and 1996 F-3 and F-4
Statements of Operation - June 30, 1997 and 1996 F-5
Statements of Shareholders' Equity - June 30, 1997 and 1996 F-6
Statements of Cash Flows - June 30, 1997 and 1996 F-7
Notes to the Financial Statements F-8 through F-12
(b) Pro Forma Financial Information
Index to Unaudited Pro Forma Combined Financial Statements
Basis of Presentation F-13
Unaudited Pro Forma Combined Statement of Operations -
as of September 30, 1997 F-14
Unaudited Pro Forma Combined Statement of Operations -
as of March 31, 1997 F-15
Unaudited Pro Forma Combined Balance Sheet -
as of September 30, 1997 F-16 and F-17
Notes to the Unaudited Pro Forma Combined Financial Statements F-18
</TABLE>
(c) Exhibits
Exhibit 2 Stock Purchase Agreement (This exhibit was filed as
part of the original Form 8-K filing made by the registrant on October 14, 1997,
with respect to this transaction.)
Exhibit 23 Consent of Rothman Pantall & Co. (See page F-1).
Item 9. Sales of Equity Securities Pursuant to Regulation S
As described above in Item 2, in connection with the acquisition,
400,000 restricted shares of the Common Stock of the Registrant, par value
$.001 per share, were delivered by the Registrant to Steven, and the Debenture
was delivered by the Registrant to Norman and Shirley. The Common Stock and
the Debenture were not registered under the Securities Act of 1933, as
amended, in reliance on the exemption from registration provided by Regulation
S promulgated thereunder.
<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 thereunto duly authorized.
December 10, 1997 COMTREX SYSTEMS CORPORATION
By: /s/ Jeffrey C. Rice
-----------------------------------------
Name: Jeffrey C. Rice
Title: President & Chief Executive Officer
By: /s/ Lisa J. Mudrick
-----------------------------------------
Name: Lisa J. Mudrick
Title: Chief Financial &
Chief Accounting Officer
<PAGE>
Our Ref: SBR/MG/GJR/G
10 December 1997
Comtrex Systems Corporation
102 Executive Drive, Suite 1
Moorestown, NJ 08057
USA
Dear Sir
DATA SYSTEMS TERMINALS LIMITED
Our audit of the financial statements for Data Systems Terminals Limited for
the years ended June 30, 1997 and 1996 was conducted in accordance with
auditing Standards issued by the United Kingdom's Auditing Practices Board.
Such Auditing Standards are similar, in all material respects, to Statements
on Auditing Standards as promulgated by the American Institute of Certified
Public Accountants through its Auditing Standards Board.
We hereby consent to (a) the inclusion of our report, dated September 30,
1997, appearing on page F-2 of this Current Report on Form 8-K pertaining to
the acquisition of all of the outstanding capital stock of Data Systems
Terminals Limited by Comtrex Systems Corporation, and (b) the incorporation by
reference of such report in the Registration Statement on Form S-8, bearing
Registration Statement No. 33-32994, the Registration Statement on Form S-3,
bearing Registration No. 33-38529, and the Registration Statement on Form S-8,
bearing Registration No. 33-93560, each filed by Comtrex Systems Corporation
with the United States Securities and Exchange Commission.
Yours faithfully
Rothman Pantall & Co
Chartered Accountants
F-1
<PAGE>
AUDITORS' REPORT TO THE MEMBERS OF
DATA SYSTEMS TERMINAL LIMITED
FOR THE YEARS ENDED 30 JUNE 1997 AND 30 JUNE 1996
We have audited the financial statements of Data Systems Terminals Limited a
company incorporated in England, set out on pages 2 to 11 which have been
prepared under the historical cost convention and on the basis of the
accounting policies set out on pages 7 and 8.
RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of these financial
statements. It is our responsibility to form an independent opinion, based on
our audit, on these statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Boards. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements
made by the directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance as to whether the financial
statements are free from material misstatement, whether caused by fraud or
other irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial
statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the company as at 30 June 1996 and 1997 and of its profit and
cash flows for each of the years then ended and have been properly prepared in
accordance with United States generally accepted accounting principles.
Date: 30 September 1997 ROTHMAN PANTALL & CO
Chartered Accountants &
Registered Auditors
Clareville House
26/27 Oxendon Street
London SW1Y 4EP
F-2
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
BALANCE SHEETS
AS AT JUNE 30, 1997 AND 1996
ASSETS
June 30,
-------------------------------
1997 1996
----------- -----------
Current assets:
Cash and cash equivalents $ 10,340 $ 850
Accounts receivable, net of reserve of
$12,304 in 1997 and $3,014 in 1996 749,542 594,490
Due from officers 11,184 0
Other receivable 19,996 7,584
Inventories 263,799 207,029
Prepaid expenses 36,646 71,656
----------- -----------
Total current assets 1,091,507 881,609
----------- -----------
Property and equipment:
Motor vehicles 70,813 147,590
Office furniture and equipment 302,490 202,646
Land and buildings 440,596 314,561
----------- -----------
813,899 664,797
Less: accumulated depreciation (235,880) (299,506)
----------- -----------
Net property and equipment 578,019 365,291
----------- -----------
Total assets $ 1,669,526 $ 1,246,900
=========== ===========
See notes to the financial statements.
F-3
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
BALANCE SHEETS
AS AT JUNE 30, 1997 AND 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30,
----------------------------
1997 1996
----------- -----------
Current liabilities:
Cash overdraft $ 0 $ 77,484
Accounts payable 789,307 585,142
Current portion of long-term debt 29,361 18,824
Current portion of notes 51,401 228,119
Deferred income 171,350 151,778
Accrued expenses:
Payroll 0 22,190
Corporation tax 36,006 0
Payroll taxes 69,838 49,566
Due to officers 0 22,190
Other 25,063 34,754
----------- -----------
Total current liabilities 1,172,326 1,190,047
----------- -----------
Long-term debt, less current portion 35,378 8,339
Long-term notes, less current portion 289,942 0
Deferred income taxes 9,846 6,284
----------- -----------
Total liabilities 1,507,492 1,204,670
----------- -----------
Shareholders' equity:
Common stock, (pound)1 par value, 10,000
authorised, 6,000 issued and outstanding 9,984 9,324
Accumulated surplus 147,698 33,603
Currency translation differences 4,352 (697)
----------- -----------
Total shareholders' equity 162,034 42,230
----------- -----------
Total liabilities and shareholders' equity $ 1,669,526 $ 1,246,900
=========== ===========
See notes to the financial statements.
F-4
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
STATEMENT OF OPERATIONS
YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
----------- -----------
Net sales $ 3,058,662 $ 2,385,016
----------- -----------
Costs, expenses and other
Cost of sales 1,882,191 1,505,510
Administrative 844,465 607,262
Sales and marketing 116,397 130,041
Depreciation 35,702 41,659
(Profit)/Loss on sale of fixed assets (10,533) 26,200
Interest 30,635 28,443
----------- -----------
2,898,857 2,339,115
----------- -----------
Income before income taxes 159,805 45,901
Provision for income taxes (45,710) (21,938)
----------- -----------
Net income $ 114,095 $ 23,963
=========== ===========
Earnings per common share $ 19.02 $ 3.99
=========== ===========
Weighted average stock outstanding 6,000 6,000
=========== ===========
See notes to the financial statements.
F-5
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
STATEMENT OF SHAREHOLDERS' EQUITY
AS AT JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock
---------------------------- Total
Shares Translation Accum shareholders'
issued Amount adjustment surplus equity
------ ------ ---------- ------- ------
<S> <C> <C> <C> <C> <C>
Bal., 30 June 1995 6,000 $ 9,546 $ (597) $ 9,640 $ 18,589
Net income 23,963 23,963
Translation adj (100) (100)
Translation adj (222) (222)
--------- --------- --------- --------- ---------
Bal., 30 June 1996 6,000 9,324 (697) 33,603 42,230
Net income 114,095 114,095
Translation adj 5,049 5,049
Translation adj 660 660
--------- --------- --------- --------- ---------
Bal., 30 June 1997 6,000 $ 9,984 $ 4,352 $ 147,698 $ 162,034
========= ========= ========= ========= =========
</TABLE>
See notes to the financial statements.
F-6
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 114,095 $ 23,963
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 35,702 41,659
Deferred income tax 3,044 8,917
Provisions for losses on accounts
receivable 8,865 0
Profit on sale of assets (10,533) 26,200
Currency translation difference 5,709 (322)
Changes in assets and liabilities:
Accounts receivable (152,503) (280,333)
Inventories (56,770) (56,500)
Accounts payable 226,462 290,171
--------- ---------
Net cash provided by operating activities 174,071 53,755
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (366,328) (133,851)
Purchase of motor vehicles 0 (9,417)
Proceeds from disposals of property,
plant and equipment 186,345 215,533
--------- ---------
Net cash provided by (used in)
investing activities (179,983) 72,265
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings under line of credit 316,160 298,368
Payments on notes and other loans (202,936) (224,588)
Payments on long-term debt (20,338) (36,194)
--------- ---------
Net cash provided by financing activities 92,886 37,586
--------- ---------
Net increase in cash 86,974 163,606
Cash / (overdraft), beginning of period (76,634) (240,240)
--------- ---------
Cash / (overdraft), end of period $ 10,340 $ (76,634)
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 30,635 $ 28,443
========= =========
</TABLE>
See notes to the financial statements.
F-7
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1997 AND 1996
1. Nature of business and summary of significant accounting policies:
Nature of business:
Data Systems Terminals Limited ("Company") is a UK company. The
Company markets electronic terminals, specialised computer software
and associated stationery which provides retailers with transaction
processing, in-store controls and management information. The Company
also provides warranty cover and maintenance contracts on its
products.
Inventories:
Inventories include the cost of equipment for resale and are valued at
the lower of cost (first-in, first-out) or market.
Property and equipment:
Property and equipment are stated at cost. Maintenance and repairs are
expensed, while betterments are capitalised. When an asset is disposed
of, the related costs and accumulated depreciation are removed from
the accounts, and any gain or loss is charged to operations.
Separately priced extended warranty and product maintenance contracts:
Revenue is recognised from sales of warranty and maintenance contracts
on a straight line basis over the contract period. Costs of services
performed under the contract are charged to expenditure as incurred.
Depreciation:
Depreciation is computed by accelerated methods over the useful lives
of the assets which are one to fifty years.
Cash equivalents:
The Company considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents.
F-8
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
1. Nature of business and summary of significant accounting policies
(continued):
Concentrations of credit risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and
temporary cash investments and accounts receivable.
The Company places its cash and temporary cash investments with high
quality financial institutions. The Company has not incurred losses
related to these financial instruments. Accounts receivable are
primarily sales of the Company's equipment and maintenance contracts.
The Company minimises credit risk by obtaining bank and trade
references. The Company factors its accounts receivable under a
recourse agreement. See Note 4.
2. Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles require 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.
3. Inventories:
1997 1996
---------- ----------
Finished goods $ 263,799 $ 207,029
========== ==========
4. Significant customers:
One customer accounted for a substantial portion of sales and
receivables:
<TABLE>
<CAPTION>
Approximate % of Sales % of Receivables
Fiscal Year Ended as of June 30,
-------------------------- ---------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Customer "A" 37% 29% 55% 47%
</TABLE>
F-9
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
5. Long-term debt:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note payable to a financing company, due in the
period to 1998, payable in monthly installments
of $616 including interest at 10% $ 1,816 $ 8,064
Note payable to a financing company, due in the
periods to 1998, payable in monthly installments
of $1,216 including interest at 8.5% 7,115 19,099
Note payable to a financing company, due in the
periods to 2000, payable in monthly installments
of $1,015 including interest at 11.5% 27,520 -
Note payable to a financing company, due in the
periods to 2000, payable in monthly installments
of $957 including interest at 7.5% 28,288 -
-------- --------
64,739 27,163
Less current portion 29,361 18,824
-------- --------
$ 35,378 $ 8,339
======== ========
</TABLE>
Long-term debt is collaterallized on leased equipment.
Long-term debt is re-payable as follows:
1998 $ 29,361
1999 20,115
2000 15,263
--------
$ 64,739
========
F-10
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
6. Notes payable:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note payable, bank $298,368, due in the periods to 1999, payable in
monthly installments of $1,442 which includes interest. The interest
is the base rate plus 2%. The base rate was 6.5% at June 30, 1997. $ 28,230 $228,119
Note payable, bank $316,160, due in the periods to 2016, being paid in
monthly installments of $2,842 which includes interest. The interest
is the base rate plus 2%. The base rate was 6.5% at June 30, 1997.
Substantially all assets serve as collateral. 313,113 --
-------- --------
341,343 228,119
Less current portion 51,401 228,119
-------- --------
$289,942 $ --
======== ========
Notes payable debt is re-payable as follows:
1998 $ 51,401
1999 45,097
2000 34,102
2001 34,102
2002 34,102
After 2002 142,539
-------
$341,343
========
</TABLE>
7. Income taxes:
The statement of operations reflects a provision for income taxes at
the rate of 25, 24, and 21 percent, which represents the various
income tax rates during the respective periods. This also provides for
movement on the deferred income tax. Deferred income tax charges of
$3,044 and $8,917 were included in 1997 and 1996.
F-11
<PAGE>
DATA SYSTEMS TERMINALS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JUNE 30, 1997 AND 1996
8. Capital leases:
The Company holds certain plant and equipment and motor vehicles under
capital leases.
Motor vehicles with a gross value of $23,427 and an accumulated
amortisation of $9,427 are held. Amortisation charges for $3,530 and
$5,512 were included in June 30, 1997 and 1996, respectively.
Plant and equipment with a gross value of $91,100 and an accumulated
amortisation of $12,163 are held. Amortisation charges for $5,126 and
$3,946 were included in June 30, 1997 and 1996, respectively.
9. Commitments and contingency:
The Company leases certain plant and equipment and motor vehicles
under operating leases which expire in the period to July 2002.
Operating lease expense was $119,481 and $81,204 for the years ended
June 30, 1997 and 1996, respectively.
Rental commitments under noncancelable operating leases for the years
ending June 30, are as follows: 1998, $138,868; 1999, $104,537;
2000, $75,117; 2001, $17,938.
F-12
<PAGE>
Unaudited Pro Forma Combined Financial Statements
Basis of Presentation
The accompanying unaudited pro forma combined financial statements
give effect to the acquisition of all of the outstanding capital stock of Data
Systems Terminals Limited ("DSTL") by Comtrex Systems Corporation ("Comtrex")
as described in Note 1 of the Notes to the Unaudited Pro Forma Combined
Financial Statements. The unaudited pro forma combined financial statements
have been prepared assuming that the acquisition had occurred as of September
30, 1997, in the case of the unaudited pro forma combined balance sheet, or as
of April 1, 1996, in the case of the unaudited pro forma combined statement of
operations. DSTL and Comtrex, on a combined basis, are referred to herein as
the "Company".
The unaudited pro forma combined financial statements have been
prepared by management and should be read in conjunction with the historical
financial statements of DSTL and Comtrex. These statements are based on
certain assumptions and preliminary estimates which are subject to change.
They do not purport to be indicative of the financial positions or results of
operations that might have occurred, and do not purport to be indicative of
future results.
Management believes additional synergies and operational
improvements, not reflected in the accompanying unaudited pro forma combined
financial statements, will be realized by the acquisition. However, such
amounts cannot be reasonably quantified and, therefore, are not reflected in
the unaudited pro forma combined financial statements.
F-13
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
For the six months ended September 30, 1997
<TABLE>
<CAPTION>
Comtrex D S T L Pro forma Pro forma
Historical (1) Historical(2) Adjustments (3) Consolidated
-------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Net sales $2,619,804 $1,529,331 $ (315,095) (7) $3,834,040
---------- ---------- ---------- ----------
Cost of sales 1,647,113 941,096 (281,475) (7) 2,306,734
Administrative 308,585 416,966 0 725,551
Research and development 109,711 0 0 109,711
Sales and marketing 258,606 58,199 0 316,805
Customer support 135,733 0 0 135,733
Depreciation and amortization 61,056 17,851 13,606 (4) 92,513
---------- ---------- ---------- ----------
2,520,804 1,434,112 (267,869) 3,687,047
---------- ---------- ---------- ----------
Income (loss) from operations 99,000 95,219 (47,226) 146,993
Interest income (expense) (2,612) (15,318) (13,950) (5) (31,880)
--------- --------- ---------- ----------
Income before income taxes and credit 96,388 79,901 (61,176) 115,113
Provision for income taxes 38,555 22,855 0 61,410
---------- ---------- ---------- ----------
Income before extraordinary credit 57,833 57,046 (61,176) 53,703
Extraordinary credit 38,555 0 0 38,555
---------- ---------- ---------- ----------
Net income (loss) $ 96,388 $ 57,046 $ (61,176) $ 92,258
========== ========== ---------- ==========
Weighted average shares outstanding 3,181,762 3,581,762 (6)
========== ==========
Net income (loss) per common share $ 0.03 $ 0.03
========== ==========
</TABLE>
(1) Per Comtrex's Form 10-Q, September 30, 1997
(2) Per DSTL's six month operations
(3) Adjustments made to present results of operation on a pro forma basis, as
if the acquisition of DSTL had occurred effective as of April 1, 1996
(4) Amortization of goodwill and depreciation on increase of building and
improvements (to appraised value)
(5) Interest on Note Payable and Convertible Debentures
(6) Adjusted for 400,000 shares issued
(7) To eliminate intercompany sales and cost of sales
F-14
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
For the year ended March 31, 1997
<TABLE>
<CAPTION>
Comtrex D S T L Pro forma Pro forma
Historical (1) Historical(2) Adjustments (3) Consolidated
-------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Net sales $5,430,221 $3,058,662 $ (637,635) (7) $7,851,248
---------- ---------- ----------- ----------
Cost of sales 3,366,509 1,882,191 (619,170) (7) 4,629,530
Administrative 681,859 833,932 1,515,791
Research and development 131,258 0 131,258
Sales and marketing 744,075 116,397 860,472
Customer support 463,840 0 463,840
Depreciation and amortization 139,801 35,702 27,211 (4) 202,714
---------- ---------- ----------- ----------
5,527,342 2,868,222 (591,959) 7,803,605
---------- ---------- ----------- ----------
Income (loss) from operations (97,121) 190,440 (45,676) 47,643
Interest income (expense) 8,104 (30,635) (27,900) (5) (50,431)
---------- ---------- ----------- ---------
Income before income taxes and credit (89,017) 159,805 (73,576) (2,788)
Provision for income taxes 0 45,710 0 45,710
---------- ---------- ----------- ---------
Income before extraordinary credit (89,017) 114,095 (73,576) (48,498)
Extraordinary credit 0 0 0 0
---------- ---------- ----------- ---------
Net income (loss) $ (89,017) $ 114,095 $ (73,576) $ (48,498)
========== ========== =========== =========
Weighted average shares outstanding 3,164,022 3,564,022 (6)
========== =========
Net income (loss) per common share $ (0.03) $ (0.01)
========== ==========
</TABLE>
(1) Per Comtrex's Form 10-KSB, March 31, 1997
(2) Per DSTL's June 30, 1997 financial statements
(3) Adjustments made to present results of operation on a pro forma basis, as
if the acquisition of DSTL had occurred effective as of April 1, 1996
(4) Amortization of goodwill and depreciation on increase of building and
improvements (to appraised value)
(5) Interest on Note Payable and Convertible Debentures
(6) Adjusted for 400,000 shares issued
(7) To eliminate intercompany sales and cost of sales
F-15
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
as of September 30, 1997
<TABLE>
<CAPTION>
Comtrex D S T L Pro forma Pro forma
Historical (1) Historical(2) Adjustments Consolidated
-------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 320,494 $ 10,340 $ 330,834
Certificate of deposit 100,000 100,000
Accounts receivable, net 1,073,866 749,542 (315,753) (12) 1,507,655
Note receivable 16,340 19,996 36,336
Inventories 909,879 263,799 (75,600) (7) 1,098,078
Due from officers 0 11,184 11,184
Other current assets 109,831 36,646 (32,054) (8) 114,423
----------- ----------- ----------- -----------
Total current assets 2,530,410 1,091,507 (423,407) 3,198,510
----------- ----------- ----------- -----------
Fixed assets 1,063,663 813,899 128,000 (3) 2,005,562
Less accumulated depreciation (935,689) (235,880) 0 (1,171,569)
----------- ----------- ----------- -----------
Net fixed assets 127,974 578,019 128,000 833,993
----------- ----------- ----------- -----------
Software 1,031,442 1,031,442
Less accumulated amortization (724,305) 0 0 (724,305)
----------- ----------- ----------- -----------
Net software 307,137 0 0 307,137
----------- ----------- ----------- -----------
Goodwill 0 0 416,220 (4) 416,220
----------- ----------- ----------- -----------
$ 2,965,521 $ 1,669,526 $ 120,813 $ 4,755,860
=========== =========== =========== ===========
Accounts payable $ 520,216 $ 789,307 $ (315,753) (12) $ 993,770
Accrued expenses 98,694 130,907 229,601
Note payable 0 0 65,000 (5) 65,000
Customer deposits 6,403 0 6,403
Current portion, debt and notes payable 0 80,762 80,762
Deferred revenue 0 171,350 0 171,350
----------- ----------- ----------- -----------
Total current liabilities 625,313 1,172,326 (250,753) 1,546,886
----------- ----------- ----------- -----------
Long term debt, net of current 0 325,320 0 325,320
Convertible debentures payable 0 0 300,000 (6) 300,000
----------- ----------- ----------- -----------
Total long term liabilities 0 325,320 300,000 625,320
----------- ----------- ----------- -----------
Deferred income taxes 0 9,846 0 9,846
----------- ----------- ----------- -----------
Capital stock 3,182 9,984 400 (11)
(9,984) (9) 3,582
Additional paid-in capital 5,322,603 233,200 (10) 5,555,803
Accumulated deficit (2,985,577) 152,050 (152,050) (9) (2,985,577)
----------- ----------- ----------- -----------
2,340,208 162,034 71,566 2,573,808
----------- ----------- ----------- -----------
$ 2,965,521 $ 1,669,526 $ 120,813 $ 4,755,860
=========== =========== =========== ===========
</TABLE>
F-16
<PAGE>
(1) Per Comtrex's Form 10-Q, September 30, 1997
(2) Per DSTL's June 30, 1997 financial statements
(3) Adjustment to building and improvements (to appraised value)
(4) Goodwill acquired
(5) Issuance of note payable
(6) Issuance of convertible debentures
(7) Elimination of intercompany profit in ending inventory
(8) Reclassification of professional fees related to acquisition
(9) Elimination of DSTL's equity at acquisition
(10) Additional paid-in capital on 400,000 shares issued
(11) Issuance of 400,000 shares at par value of $0.001
(12) Elimination of intercompany receivables
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NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Stock Purchase Transaction
On October 2, 1997, the Registrant acquired from Norman Roberts ("Norman"),
Shirley Roberts ("Shirley"), and Steven Roberts ("Steven" together, with
Norman and Shirley, the "Sellers") all the issued and outstanding capital
stock (the "Stock") of Data Systems Terminals Limited, a corporation formed
and existing under the laws of England ("DSTL"). DSTL is a distributor of the
Registrant's products in the United Kingdom, which business the Registrant
intends to continue.
The following consideration was paid by the Registrant for such acquisition of
the Stock:
(a) 400,000 restricted shares of the Common Stock of the Registrant,
par value $.001 per share, were delivered by the Registrant to Steven. These
shares of the Registrant's Common Stock are not transferrable by Steven on or
before October 2, 1999.
(b) A Subordinated Convertible Debenture, in the original principal
amount of $300,000 (the "Debenture"), was delivered by the Registrant to
Norman and Shirley. The Debenture accrues interest at the rate of eight
percent (8%) per annum, which is payable monthly. No principal is payable
pursuant to the terms of the Debenture for the first three (3) years following
its delivery. The Debenture is convertible into shares of the Registrant's
Common Stock (in blocks of 20,000 shares), at any time on or before October 2,
2000, at the rate of $1.00 per share. The Registrant may prepay all amounts
outstanding under the Debenture at any time on or before October 2, 2000 if
(i) the shares of the Registrant's Common Stock have closed at $1.50, or
higher, for each trading day for a thirty (30) day period, and (ii) the
Registrant has provided the holders of the Debenture with at least sixty (60)
days prior written notice of the prepayment. Any principal outstanding of the
Debenture on October 2, 2000 shall be paid by the Registrant in twelve (12)
equal quarterly installments. The Registrant anticipates that internal funds
will be utilized to make all interest and principal payments due under the
Debenture.
(c) A promissory note, in the original principal amount of $65,000
(the "Note"), was delivered to Norman and Shirley. The Note bears interest at
the rate of six percent (6%) per annum. The outstanding principal balance of
the Note, and all interest accrued thereon, is repayable in twelve (12) equal
monthly installments, commencing on November 1, 1997. The Registrant
anticipates that internal funds will be utilized to make such payments due
under the Note.
The business combination will be accounted for using the purchase method. The
results of operations for DSTL are included in the pro forma statements of
operations for the year ended March 31, 1997 and the six month period ended
September 30, 1997.
The cost of the acquired enterprise is $630,600, which represents 400,000
shares of Comtrex Common Stock with an assigned value of $233,600, the
$300,000 Debenture, the $65,000 Note and legal and accounting fees associated
with the transaction of $32,000.
Acquired goodwill will be amortized over twenty (20) years, using the
straight-line method.
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