<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 19, 1999
--------------
COPE, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9925 87-0427731
-------- ------ ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
Grundstrasse 14, 6343 Rotkreuz, Switzerland
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011 41 41 798 3333
----------------------
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
On April 19, 1999, the Registrant acquired Hicomp Software Systems GmbH
("Hicomp"), a German software company. Pursuant to a Sale and Assignment of
Business Shares entered into on December 21, 1998 between the Registrant and Mr.
Uwe Hinrichs, the president and sole shareholder of Hicomp, the Registrant
issued 420,000 shares of its common stock, $.001 par value per share ("Common
Stock") in exchange for all of the outstanding capital shares of Hicomp.
Hicomp, headquartered in Hamburg, Germany, develops back-up and retrieval
software products. Its leading products, Hiback and Hibars, are multi-platform
back-up solutions recognized for performance and flexibility. The Registrant
also granted Mr. Hinrichs certain securities registration rights pursuant to
which he is entitled to sell up to 200,000 shares of his Common Stock alongside
the Registrant within the framework of a secondary public offering on the
Frankfurt Stock Exchange, "Neuer Markt," at the earliest 90 days after the date
of the Registrant's acquisition of Hicomp. Mr. Hinrichs granted the Registrant
a purchase option, expiring June 30, 2000, to acquire all of the capital shares
of two U.S. corporations owned by Mr. Hinrichs which are engaged in the business
of distributing the Hiback and Hibars software in the U.S.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not applicable.
Item 5. Other Events.
Not applicable.
Item 6. Resignations of Registrant's Directors.
Not applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
--------------------
1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of COPE, Inc.
We have audited the accompanying balance sheets of Hicomp Software Systems
GmbH (formerly Hinrichs & Hinrichs GmbH) as of December 31, 1998 and December
31, 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 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 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 Hicomp Software Systems
GmbH at December 31, 1998 and December 31, 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Hamburg, July 9, 1999
Schitag Ernst & Young
Deutsche Allgemeine Treuhand AG
Wirtschaftsprufungsgesellschaft
R. Law P. Marshall
Chartered Accountant Certified Public Accountant
2
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
BALANCE SHEETS
(Amounts in U.S. Dollars)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents........................... 542 1,508
Trade accounts receivable, net...................... 145,341 250,585
Other current assets................................ 32,895 30,716
--------- ---------
Total current assets.................................. 178,778 282,809
--------- ---------
Property and equipment, net........................... 174,145 111,213
Deferred income taxes................................. 138,780 258,698
--------- ---------
312,925 369,911
--------- ---------
Total assets...................................... 491,703 652,720
========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Short-term borrowings............................... 185,412 4,043
Trade accounts payable.............................. 56,723 36,320
Deferred revenue on sales contracts................. 202,141 221,593
Accrued professional fees........................... 62,941 9,842
Accrued marketing fees.............................. 47,710 0
Other current liabilities........................... 210,887 143,734
--------- ---------
Total current liabilities............................. 765,814 415,532
--------- ---------
Long term debt........................................ 302,717 589,377
Other noncurrent liabilities.......................... 0 81,768
--------- ---------
Total liabilities................................. 1,068,531 1,086,677
--------- ---------
Shareholders' equity
Share capital......................................... 29,515 29,515
Retained deficit.................................... (659,203) (569,636)
Accumulated other comprehensive income.............. 52,860 106,164
--------- ---------
Total shareholders' equity........................ (576,828) (433,957)
--------- ---------
Total liabilities and shareholders' equity........ 491,703 652,720
========= =========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
STATEMENTS OF INCOME
(Amounts in U.S. Dollars)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Net revenue
User license fees................................... 1,182,295 1,093,783
Maintenance contract fees........................... 578,766 391,954
Consulting fees..................................... 159,946 517
---------- ----------
Total revenue......................................... 1,921,007 1,486,254
---------- ----------
Cost of sales......................................... (22,012) (45,468)
---------- ----------
Gross profit.......................................... 1,898,995 1,440,786
---------- ----------
Operating expenses
Selling, general and administrative expenses........ (1,579,302) (1,505,097)
Consultancy expenses................................ (96,401) (44,705)
Depreciation and amortization....................... (80,860) (57,502)
---------- ----------
Total operating expenses.............................. (1,756,563) (1,607,304)
---------- ----------
Operating income (loss)............................... 142,432 (166,518)
Other income (expenses)
Interest expense.................................... (11,498) (22,236)
Interest income..................................... 11,862 673
Other income........................................ 76,175 41,032
---------- ----------
Income (loss) before taxes............................ 218,971 (147,049)
---------- ----------
Deferred income taxes................................. (120,434) 80,877
---------- ----------
Net income (loss)..................................... 98,537 (66,172)
========== ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
STATEMENTS OF CASH FLOWS
(Amounts in U.S. Dollars)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income(loss)..................................... 98,537 (66,172)
Adjustments to reconcile net income to net cash
provided
by (used in) operating activities:
Depreciation and amortization...................... 80,860 57,502
Gain on sale of fixed assets....................... (1,915) 0
Deferred income taxes.............................. 120,434 (80,877)
Changes in operating assets & liabilities:
Accounts receivable.............................. 105,244 (72,079)
Other current assets............................. (2,179) (26,422)
Accounts payable & other current liabilities..... 148,510 (82,075)
Other long-term liabilities...................... (81,768) (13,712)
-------- --------
Total Adjustments................................ 369,186 (217,663)
-------- --------
Net cash provided by (used in) operating
activities.................................... 467,723 (283,835)
-------- --------
Cash flow from investing activities:
Proceeds from sale of fixed assets................. 13,881 0
Capital expenditures............................... (138,858) (109,555)
Other.............................................. (6,528) (328)
-------- --------
Net cash used in investing activities.......... (131,505) (109,883)
-------- --------
Cash flow from financing activities:
Increase in short term borrowings.................. 181,369 4,180
Change in note receivable/payable due from/to
shareholder....................................... (199,564) 13,653
Change in long term debt........................... (286,660) 357,418
-------- --------
Net cash (used in) provided by financing activities.. (304,855) 375,251
-------- --------
Effect of exchange rate changes on cash flows........ (32,329) (2,573)
Net decrease in cash................................. (966) (21,040)
Cash at beginning of year............................ 1,508 22,548
-------- --------
Cash at end of year.................................. 542 1,508
======== ========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
STATEMENT OF SHAREHOLDERS' EQUITY
(Amounts in U.S. Dollars, except share amounts)
<TABLE>
<CAPTION>
Accumulated other Total
Number Share Retained comprehensive shareholders'
of shares capital deficit income equity
--------- ------- -------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... 50,000 29,515 (514,924) (485,409)
Comprehensive income
Net loss............... (66,172) (66,172)
Foreign currency
translation
adjustments........... 106,164 106,164
--------
Comprehensive income 39,992
Note receivable/payable
to shareholder......... 11,460 11,460
------ ------ -------- ------- --------
Balance at December 31,
1997................... 50,000 29,515 (569,636) 106,164 (433,957)
------ ------ -------- ------- --------
Comprehensive income
Net income............. 98,537 98,537
Foreign currency
translation
adjustments........... (53,304) (53,304)
--------
Comprehensive income.... 45,233
Note receivable/payable
to shareholder......... (188,104) (188,104)
------ ------ -------- ------- --------
Balance at December 31,
1998................... 50,000 29,515 (659,203) 52,860 (576,828)
====== ====== ======== ======= ========
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
NOTES TO THE DECEMBER 31, 1998 AND 1997 FINANCIAL STATEMENTS
Note 1--Basis of Presentation
The accompanying financial statements present the operations of Hicomp
Software Systems GmbH formerly known as Hinrichs and Hinrichs GmbH -- the
"Company" or "Hicomp") and have been prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP").
Nature of operations
Hicomp, headquartered in Hamburg, Germany, develops back-up and retrieval
software products. Its leading products, Hiback and Hibars, are multi-platform
back-up solutions recognized for performance and flexibility. The Company
conducts business principally in western Europe and the United States.
Note 2--Summary of Significant Accounting Policies
Significant Estimates
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the period. Actual results could differ from these
estimates.
Revenue Recognition
Revenue is recognized when earned. The Company's revenue recognition
policies are in compliance with American Institute of Certified Public
Accountants Statements of Position 97-2 and 98-4, Software Revenue Recognition.
Revenue from license programs is recorded when the software has been delivered
and the customer is invoiced. Revenue from product sales to distributors and
resellers is recorded when related products are shipped. Consulting revenue is
recognized as services are provided. End users of products sold by the Company
generally contract with the Company for service and support, which includes
normal product maintenance. Revenue from these service and support contracts is
recognized in earnings pro rata temporis over the terms of the contracts and
the cost associated with these activities is expensed as incurred.
Cash
Cash includes cash deposited in demand deposits at banks.
Property and Equipment
Property and equipment is stated at cost and depreciated principally on a
straight-line basis over the estimated useful lives of the assets which
generally range from 2 to 5 years.
Impairment of Long-lived Assets
The Company reviews long-lived assets to be held and used or disposed of for
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. Where the undiscounted cash
flows is less than the carrying amount of the asset, the asset is written down
to its net realizable value measured on the basis of discounted expected cash
flows.
7
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
NOTES TO THE DECEMBER 31, 1998 AND 1997 FINANCIAL STATEMENTS--(Continued)
Foreign Currencies
The Company principally conducts its business and maintains the financial
records in German Marks ("DM," the functional currency).
Assets and liabilities denominated in the functional currency are translated
into United States Dollars ("USD" or "$") at the exchange rate as of the
balance sheet date. Income statement accounts denominated in the functional
currency are translated using the average exchange rate for the period.
Translation adjustments resulting from this process are recorded as a component
of other comprehensive income and are accumulated in a separate component of
shareholder's equity.
Foreign currency transaction gains and losses resulting from the settlement
of amounts receivable or payable denominated in a currency other than the
functional currency are credited or charged to income.
Income taxes
As a result of prior years operating losses the Company has net operating
loss carryforwards for income tax purposes. These loss carryforwards have been
capitalized following the requirements of Statement of Financial Accounting
Standards (SFAS) No. 109 "Accounting for Income Taxes".
Other Comprehensive Income
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income"
which requires presentation of comprehensive income and its components in the
financial statements. Comprehensive income consists of net income and foreign
currency translation adjustments and is presented in the Consolidated
Statements of Shareholder's Equity.
Fair Value
The carrying value of financial instruments such as cash, accounts
receivable and accounts payable approximate their fair value due to the short-
term maturities of these instruments.
Note 3--Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
USD USD
<S> <C> <C>
Computer software............................... 78,002 63,756
Office equipment................................ 313,950 196,373
Accumulated depreciation........................ (217,807) (148,916)
-------- --------
Total property and equipment, net............. 174,145 111,213
======== ========
</TABLE>
Note 4--Short-term Borrowings
As of December 31, 1998, the Company had short-term overdraft facilities.
Amounts drawn down under these facilities are due on demand. Amounts
outstanding at December 31, 1998 and 1997 total $185,412 and $4,043,
respectively. The interest rate on the amount outstanding was 11.25% at
December 31, 1998 and 1997. Interest paid in respect of short-term borrowings
for the years ending December 31, 1998 and 1997 amounted to $2,437 and $2,061,
respectively.
8
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
NOTES TO THE DECEMBER 31, 1998 AND 1997 FINANCIAL STATEMENTS--(Continued)
Note 5--Other Liabilities
Other liabilities consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
USD USD
<S> <C> <C>
Payroll and employee benefits................... 48,900 35,085
Sales tax payable (VAT)......................... 24.959 20,516
Accrued liability-Borsu......................... 101,388 55,600
Accrued liability-Deutsche Bank................. 0 69,662
Other........................................... 35,640 44,639
------- -------
Total other liabilities....................... 210,887 225,502
Portion classified as non-current............. 0 (81,768)
------- -------
Total other current liabilities............... 210,887 143,734
------- -------
</TABLE>
Note 6--Income Taxes
The Company accounts for income taxes using the liability method required
by FASB Statement No. 109, Accounting for Income Taxes.
At December 31, 1998 and 1997, the Company has net operating loss
carryforwards (NOL's) of approximately DM 449,000 and DM 764,000,
respectively, for corporate income tax purposes and approximately, DM 365,000
and DM 680,000, respectively, for local trade tax purposes. These NOL's
resulted from losses incurred during the first years of the Company's
operations. Under German tax law the NOL's are not currently subject to any
expiration limitations. For financial reporting purposes, no valuation
allowance has been recorded as the Company's management expects existing
service and support contracts and licensing programs to produce sufficient
taxable income to realize the deferred tax asset.
The deferred tax asset comprised solely the above net operating loss
carryforward calculated as follows: the local trade tax rate of 19% is first
applied to the NOL for trade tax purposes with the result reducing the NOL for
corporate income tax purposes; the remaining NOL for corporate income tax
purposes is multiplied by the German corporate tax rate of 40%, and the
solidarity tax rate of 5.5%.
Note 7--Long-term Debt
On May 22, 1998 the Company paid a long-term debt obligation in the amount
of $278,102. The original amount borrowed was $201,740 which was entered into
in February 1994. The related annual interest rate was 8%. The amount of
related interest paid in 1998 totaled $9,061.
At December 31, 1997 the outstanding balance totaled $263,116 including
accrued interest of $20,149.
In October 1997, the Company entered into an agreement with Commerzbank AG
(the "Commerz Agreement") in the amount of $341,520. The amount is not
interest bearing. The Commerz Agreement settles defaulted loans in the amounts
of $2,028,236 and $251,615 relating to companies previously owned by the
shareholder of Hicomp, Mr. Hinrichs. Under terms of the Commerz Agreement, the
Company is to make monthly payments in the amount of $3,757 beginning in
November 1997 through October 2004 followed by 12 monthly payments of $2.161
ending in October 2005. According to the Commerz Agreement, should monthly
payments become greater than 21 days overdue then Commerzbank AG has the right
to nullify the agreement and seek further restitution.
At December 31, 1998 and 1997 the outstanding balance under the Commerz
Agreement totaled $302,717 and $326,261, respectively.
9
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
NOTES TO THE DECEMBER 31, 1998 AND 1997 FINANCIAL STATEMENTS--(Continued)
Note 8--Related Party Transactions
At December 31, 1998 and 1997, the Company held notes receivable in the
amounts of $450,810 and $155,714, respectively, from the Hicomp shareholder,
Mr. Hinrichs. The notes accrue interest at a rate of 5% annually. The note as
of December 31, 1998, will be paid immediately upon the sole shareholder's sale
of COPE, Inc. (COPE) shares during COPE's secondary offering. (See Note 13
Subsequent Events)
In 1995, Hicomp entered into a licensing agreement (the Agreement) with
Hicomp USA, Inc., an entity wholly owned by the Company's shareholder, Mr.
Hinrichs. Under terms of the Agreement, the Company is to pay fees equal to
7.5% of license program revenues to Hicomp USA. As of December 31, 1998 and
1997 amounts totaling $262,706 and $167,174 had been accrued for license fees
payable to Hicomp USA. These amounts have been netted against the shareholder
receivable discussed above on the accompanying balance sheets as of December
31, 1998 and 1997.
Attorney fees totaling $89,455 and $23,735 as of December 31, 1998 and 1997,
respectively, were incurred by the Company. The fees were charged by an
attorney who is also a member of board of directors of Hicomp USA. Hicomp USA
is wholly owned by the Company's shareholder, Mr. Hinrichs.
See Note 7 "Long-term Debt" for disclosure relating to the Commerzbank
Agreement.
As of December 31, 1998 and 1997, the Company incurred expenses of $81,200
and $70,451, respectively, relating to companies previously owned by the
Company's shareholder, Mr. Hinrichs. $71,968 and $36,413 of these expenses
relate to a former line of credit entered into with Deutsche Bank AG and Hicomp
Storage, an entity which was wholly owned by the shareholder of the Company,
Mr. Hinrichs.
During 1998 and 1997, the Company made payments in the amount of $17,428 and
$5,173 for rent on the principal residence of Hicomp's shareholder, Mr.
Hinrichs. The payments were made in accordance with the terms of the
shareholder's former employment contract, but not in accordance with the
subsequent employment contract.
Note 9--Leases
The Company has operating leases primarily for office space, office
equipment and automobiles which expire at various dates through the year 2003
with, in some instances, renewal privileges. Operating lease costs are charged
to income as incurred.
The minimum annual rental commitments under long-term non-cancelable
operating leases were as follows:
<TABLE>
<CAPTION>
December 31, 1998
------------------
USD
<S> <C>
1999................................................... 162,575
2000................................................... 143,928
2001................................................... 140,985
2002................................................... 124,614
2003................................................... 104,579
-------
Total future minimum lease payments.................. 676,681
=======
</TABLE>
Total rent expense for operating leases was $169,525 and $159,497 for the
years ended December 31, 1998 and 1997, respectively.
10
<PAGE>
HICOMP SOFTWARE SYSTEMS GMBH
NOTES TO THE DECEMBER 31, 1998 AND 1997 FINANCIAL STATEMENTS--(Continued)
Note 10--Commitments and Contingent Liabilities
In 1995 the Company entered into a joint venture with Borsu Systema (Borsu)
to form Hicomp Borsu, to develop certain data technology. Subsequently, due to
a change of shareholders at Borsu, the joint venture was dissolved. As a
result, disagreements arose about amounts owed between the companies.
Subsequent to the balance sheet date, Hicomp received correspondence from
attorneys representing Aecis B.V. (formerly Borsu) notifying Hicomp of claims
approximating $119,000. As of the date of the opinion of these financial
statements no payment has been made nor have terms of settlement been formally
agreed upon. As of December 31, 1998, the Company has accrued $101,000 relating
to this issue and management believes the accrual to be adequate.
Management is not aware of any other matters that could give rise to any
liability to the Company that would have a material adverse effect on the
Company's business, financial condition or results of operations.
Note 11--Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash and accounts receivable. The Company's
cash is principally denominated in DM and is maintained principally with one
financial institution in Germany.
The Company provides credit in its normal course of business to a wide
variety of customers and, generally, requires no collateral from its customers.
There was no allowance for doubtful accounts in 1998 based on management's
expectations of collectibility. The Company performs ongoing credit evaluations
of its customers.
Note 12--Subsequent Event
On April 19, 1999, COPE, Inc., a U.S. holding corporation with principal
operations in Switzerland and Germany, and a provider of data storage,
consulting services and solutions, acquired Hicomp in a stock transaction
accounted for using the purchase method of accounting. COPE issued 420,000 new
shares in exchange for all outstanding Hicomp shares. Under terms of the
purchase agreement, any tax liabilities which arise in the future for Hicomp
but relate to the period before the purchase by COPE, are to be born wholly by
the seller.
11
<PAGE>
(b) Pro Forma Financial Statements
COPE, INC. AND HICOMP SOFTWARE SYSTEMS GMBH
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
(Unaudited)
To reflect COPE's acquisition of Hicomp
The following tables present summary historical information for COPE and
Hicomp derived from their financial statements. The acquisition of Hicomp will
be accounted for using the purchase method of accounting and, accordingly, the
assets acquired and the liabilities assumed will be recorded at their fair
values as of the date of the acquisition, which are not expected to differ
significantly from historical costs. The excess of the purchase price over the
fair value of the assets and the liabilities assumed will be recorded as
goodwill.
The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1998 and for the six months ended June 30, 1999 present the
results for COPE and Hicomp as if the acquisition of Hicomp had occurred on
January 1, 1998.
The unaudited pro forma financial information presented is based on the
assumptions and adjustments described in the accompanying notes. The unaudited
pro forma statement of operations does not purport to represent what our
results of operations would have been if the events described above had
occurred as of the dates indicated or what our results of operations would be
for any future periods. The unaudited pro forma statements of operations are
based on assumptions and adjustments that we believe are reasonable. The
unaudited pro forma statements of operations, and the accompanying notes,
should be read in conjunction with the historical financial statements and
related notes included elsewhere in this document.
This information is based on the historical financial statements of both
COPE and Hicomp as well as the unaudited interim condensed consolidated
financial statements and the related notes that are included elsewhere in this
current report.
12
<PAGE>
COPE, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in U.S. Dollars, except share amounts)
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Cope, Inc. Hicomp GmbH Pro Forma
------------ ----------- -----------------------------
Historical Adjustments Consolidated
------------------------- ----------- ------------
<S> <C> <C> <C> <C>
Net Revenue
Total revenue......... $ 29,059,150 $ 1,921,007 (39,775) (1) $ 30,892,672
(47,710) (2)
Cost of sales......... (20,281,131) (22,012) -- (20,303,143)
------------ ----------- ----------- ------------
Gross profit.......... 8,778,019 1,898,995 (87,485) 10,589,529
------------ ----------- ----------- ------------
Operating expenses
Selling, general and
administrative
expenses............. (6,992,971) (1,579,302) 47,710 (2) (8,524,563)
Consultancy expenses.. (292,689) (96,401) (389,090)
Depreciation and
amortization......... (336,936) (80,860) (3,042,912) (3) (3,460,708)
Impairment of
intangible assets.... (63,004) 0 0 (63,004)
------------ ----------- ----------- ------------
Total operating
expenses........... (7,685,600) (1,756,563) (2,995,202) (12,437,365)
------------ ----------- ----------- ------------
Operating income
(loss)................. 1,092,419 142,432 (3,082,687) (1,847,836)
Other income (expense):
Interest expense...... (127,028) (11,498) 100,000 (4) (38,526)
Interest income....... 26,698 11,862 38,560
Other................. 34,112 76,175 110,287
------------ ----------- ----------- ------------
(66,218) 76,539 100,000 110,321
------------ ----------- ----------- ------------
Earnings (loss) before
taxes.................. 1,026,201 218,971 (2,982,687) (1,737,515)
Current income taxes.... (158,141) 0 -- (158,141)
Deferred income taxes... 143,511 (120,434) -- 23,077
------------ ----------- ----------- ------------
Net income (loss)....... $ 1,011,571 $ 98,537 $(2,982,687) $ (1,872,579)
============ =========== =========== ============
Earnings (loss) per
share.................. $ 0.34 0 $ (0.56)
Weighted average shares
outstanding............ 2,936,589 3,356,589
</TABLE>
- --------
(1) Elimination of intercompany sales
(2) Elimination of intercompany management fees
(3) Amortization of goodwill
(4) Decrease in interest expense attributable to the assumed repayment of $2.5
million in borrowings from the proceeds of the offering.
13
<PAGE>
COPE, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in U.S. Dollars, except share amounts)
For the Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
COPE, Inc. Hicomp GmbH Pro Forma
------------ ----------- ---------------------------
Historical Adjustments Consolidated
------------------------- ----------- ------------
<S> <C> <C> <C> <C>
Net Revenue
Total revenue......... $ 16,563,976 $ 450,907 $ 17,014,883
Cost of sales......... (10,698,666) (915) (10,699,581)
------------ --------- ------------
Gross profit.......... 5,865,310 449,992 6,315,302
------------ --------- ------------
Operating expenses
Selling, general and
administrative
expenses............. (4,774,214) (349,775) (5,123,989)
Consultancy expenses.. (252,561) (14,402) (266,963)
Depreciation and
amortization......... (876,600) (40,075) (891,013)(1) (1,807,688)
------------ --------- --------- ------------
Total operating
expenses........... (5,903,375) (404,252) (891,013) (7,198,640)
------------ --------- --------- ------------
Operating income
(loss)................. (38,065) 45,740 (891,013) (883,338)
Other income (expense):
Interest expense...... (83,129) (30,562) 50,000 (2) (63,691)
Interest income....... 51,185 0 51,185
Other................. (199) 27,659 27,460
------------ --------- --------- ------------
(32,143) (2,903) 50,000 14,954
------------ --------- --------- ------------
Earnings (loss) before
taxes.................. (70,208) 42,837 (841,013) (868,384)
Current income taxes.... (37,454) 0 (37,454)
Deferred income taxes... (143,198) (23,560) (166,758)
------------ --------- --------- ------------
Net income (loss)....... $ (250,860) $ 19,277 $(841,013) $ (1,072,596)
============ ========= ========= ============
Earnings (loss) per
share.................. $ (0.08) 0 $ (0.30)
Weighted average shares
outstanding............ 3,327,979 3,580,907
</TABLE>
- --------
(1) Amortization of goodwill
(2) Decrease in interest expense attributable to the assumed repayment of $2.5
million in borrowings related of the net proceeds from the Offering
14
<PAGE>
(c) Exhibits.
--------
10.26 Sale and Transfer of Business Shares (HICOMP Software
Systems GmbH) dated December 21, 1998 between Registrant and Uwe Hinrichs*
* Filed as an exhibit to Report on Form 10-KSB for the year ended December 31,
1998, filed on May 7, 1999 (File No. 1-9925) incorporated herein by reference.
Item 8. Change in Fiscal Year.
Not applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
Not applicable.
15
<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 hereunto duly authorized.
COPE, Inc.
(Registrant)
Date: September 10, 1999 By: /s/ Markus Bernhard
----------------------------------------
Markus Bernhard, Chief Financial Officer
16
