<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1998
-----------------
OR
_______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to______________________
Commission file number 0-15671
UNICOMP, INC.
(Exact name of Registrant as Specified in its Charter)
COLORADO 84-1023666
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1850 PARKWAY PLACE, SUITE 925
MARIETTA, GA 30067
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (770) 424-3684
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
7,672,786 Common shares, $0.01 par value, as of January 15, 1999.
<PAGE>
UNICOMP, INC.
Index
PART I. FINANACIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of February 28, 1998
and November 30, 1998 3 - 4
Consolidated Statements of Operations for the
three months ended November 30, 1997 and 1998 5
Consolidated Statements of Operations for the
nine months ended November 30, 1997 and 1998 6
Consolidated Statements of Cash Flows for the
nine months ended November 30, 1997 and 1998 7
Notes to the Consolidated Financial Statements 8 - 10
Item 2. Management's Discussion and Analysis of Results
of Operations, Financial Conditions, and
Liquidity and Capital Resources 10 - 20
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 21 - 22
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 23
Exhibits
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
_____________________________
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
NOVEMBER 30, FEBRUARY 28,
1998 1998
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ($3 million restricted at February 28, 1998)........ $ 1,003 $ 3,904
Accounts and other receivables:
Trade, net of allowance of $347 and $1,613 at November 30, 1998 and February
28, 1998 respectively........................................................ 8,188 8,360
Other receivables............................................................. 957 371
Inventory...................................................................... 4,108 3,161
Prepaid expenses............................................................... 702 416
Other.......................................................................... 460 338
----------------- -----------------
Total current assets....................................................... 15,418 16,550
----------------- -----------------
Property and equipment, net................................................ 3,605 3,599
----------------- -----------------
Other assets:
Acquired and developed software, net of accumulated amortization of $6,776 and
$4,945 at November 30, 1998 and February 28, 1998, respectively............... 6,555 6,403
Goodwill, net of accumulated amortization of $269 and $163 at November 30, 1998
and February 28, 1998, respectively........................................... 2,153 1,755
Deferred income taxes.......................................................... 674 446
Prepaid pension................................................................ 754 754
Investment in joint ventures................................................... 425 488
Receivables from related parties............................................... 270 390
Other.......................................................................... 382 39
Net assets of discontinued operations.......................................... 3,937 4,182
----------------- -----------------
Total other assets......................................................... 15,150 14,457
----------------- -----------------
Total assets............................................................... $ 34,173 $ 34,606
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
NOVEMBER 30, FEBRUARY 28,
1998 1998
----------------- -----------------
<S> <C> <C>
Current liabilities:
Accounts payable............................................................... $ 2,883 $ 3,384
Accrued expenses............................................................... 1,942 1,978
Deferred revenue............................................................... 1,694 1,773
Taxes payable.................................................................. 1,133 1,064
Other.......................................................................... 127 200
Lines of credit................................................................ 5,078 6,358
Current portion of notes payable............................................... 261 1,358
----------------- -----------------
Total current liabilities.................................................. 13,118 16,115
----------------- -----------------
Long-term liabilities:
Notes payable.................................................................. 1,216 1,347
Deferred income taxes.......................................................... 1,067 741
Other long-term liabilities.................................................... 31 110
----------------- -----------------
Total long-term liabilities................................................ 2,314 2,198
----------------- -----------------
Total liabilities.......................................................... 15,432 18,313
----------------- -----------------
Stockholders' equity:
Preferred stock: $1 par value, authorized 5,000,000, 3,000 Series A
Convertible Preferred Stock issued at November 30, 1998 and none issued
and outstanding at February 28, 19998........................................ 3,000 -
Common stock: $.01 par value, authorized 25,000,000 issued and outstanding
7,793,786 and 7,965,423 at November 30, 1998 and February 28, 1998,
respectively................................................................... 80 80
Additional contributed capital................................................. 15,113 15,331
Retained earnings.............................................................. 950 1,192
----------------- -----------------
19,143 16,603
Less treasury stock............................................................ (467) (206)
Cumulative translation adjustment.............................................. 65 (104)
----------------- -----------------
Total stockholders' equity................................................. 18,741 16,293
----------------- -----------------
Total liabilities and stockholders' equity................................. $ 34,173 $ 34,606
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
-------------------------------------
NOVEMBER 30, NOVEMBER 30,
1998 1997
---------------- ----------------
<S> <C> <C>
Revenue:
Equipment.................................................. $ 2,450 $ 2,376
Services................................................... 3,742 2,642
Software................................................... 2,372 2,533
---------------- ----------------
Total revenue.......................................... 8,564 7,551
---------------- ----------------
Cost of sales:
Equipment.................................................. 1,627 2,001
Services................................................... 1,635 303
Software................................................... 513 913
---------------- ----------------
Total cost of sales.................................... 3,775 3,217
---------------- ----------------
Gross profit................................................ 4,789 4,334
---------------- ----------------
Selling, general and administrative expenses................ 4,294 4,187
---------------- ----------------
Operating income............................................ 495 147
---------------- ----------------
Other (expense):
Other, net................................................. (12) 9
Interest, net.............................................. (84) (91)
---------------- ----------------
Total other (expense)...................................... (96) (82)
---------------- ----------------
Income before provision for income taxes.................... 399 65
---------------- ----------------
Provision (Benefit) for income taxes........................ (41) (26)
---------------- ----------------
Net income from continuing
operations................................................. $ 358 $ 39
---------------- ----------------
Net income from discontinued operations..................... $ (340) 291
Net income.................................................. $ 18 330
================ ================
Basic earnings per share from continuing operations......... $ 0.05 0.00
================ ================
Basic earnings per share from discontinued operations ...... $ (0.05) $ 0.04
================ ================
Basic total earnings per.................................... $ 0.00 $ 0.04
================ ================
Diluted earnings per share from continuing operations....... $ 0.04 $ 0.00
================ ================
Diluted earnings per share from discontinued operations .... $ (0.04) $ 0.04
================ ================
Diluted total earnings per share............................ $ 0.00 $ 0.04
================ ================
Weighted average number of shares........................... 7,837 7,938
Weighted average number of shares assuming dilution......... 8,373 8,308
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
-------------------------------------
NOVEMBER 30, NOVEMBER 30,
1998 1997
---------------- ----------------
<S> <C> <C>
Revenue:
Equipment................................................. $ 7,441 $ 7,869
Services.................................................. 8,892 6,714
Software.................................................. 6,234 7,167
---------------- ----------------
Total revenue........................................... 22,567 21,750
---------------- ----------------
Cost of sales:
Equipment................................................. 5,402 6,261
Services.................................................. 1,883 768
Software.................................................. 2,438 2,654
---------------- ----------------
Total cost of sales..................................... 9,723 9,683
---------------- ----------------
Gross profit................................................ 12,844 12,067
---------------- ----------------
Selling, general and administrative expenses................ 12,435 10,403
---------------- ----------------
Operating income............................................ 409 1,664
Other (expense):
---------------- ----------------
Other, net................................................ (16) 9
Interest, net............................................. (379) (220)
---------------- ----------------
Total other (expense)................................... (395) (211)
---------------- ----------------
Income (loss) before provision for income taxes............. 14 1,453
---------------- ----------------
Provision for income taxes.................................. 0 494
---------------- ----------------
Net income from continuing operations....................... $ 14 $ 959
---------------- ----------------
Net income from discontinued operations..................... $ (256) $ 609
Net income.................................................. $ (242) $ 1,568
================ ================
Basic earnings per share from continuing operations......... $ 0.00 $ 0.12
================ ================
Basic earnings per share from discontinued operations ...... $ (0.03) 0.07
================ ================
Basic total earnings per share.............................. $ (0.03) $ 0.19
================ ================
Diluted earnings per share from continuing operations ...... $ 0.00 $ 0.12
================ ================
Diluted earnings per share from discontinued operations .... $ (0.03) $ 0.07
================ ================
Diluted total earnings per share............................ $ (0.03) $ 0.19
================ ================
Weighted average number of shares........................... 7,892 7,867
Weighted average number of shares assuming dilution......... 8,428 8,152
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
6
<PAGE>
UNICOMP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
NINE MONTHS ENDED
---------------------------------------------
NOVEMBER 30, NOVEMBER 30,
1998 1997
------------------- --------------------
<S> <C> <C>
Net cash (used) by operating activities:
Net income....................................................... $ 14 $ 959
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation and amortization................................... 2,430 2,375
Allowance for doubtful accounts................................. 136 237
Allowance for inventory......................................... 87 -
Deferred income taxes........................................... 99 281
Changes in assets and liabilities:
Accounts and other receivables................................ (622) (5,732)
Inventory..................................................... (1,033) (1,471)
Prepaid expenses.............................................. (409) (572)
Accounts payable.............................................. (502) 1,128
Accrued expenses.............................................. 8 (103)
Deferred revenue.............................................. (79) 586
Income taxes payable.......................................... (172) 167
Other......................................................... (745) (287)
------------------- --------------------
Net cash (used) by operating activities..................... (788) (2,432)
------------------- --------------------
Cash flow from investing activities:
Capital expenditures............................................. (888) (1,302)
Acquired and developed software.................................. (1,610) (1,876)
------------------- --------------------
Net cash (used) by investing activities..................... (2,498) (3,178)
------------------- --------------------
Cash flow from financing activities:
Borrowings, (payments) net....................................... (2,556) 2,396
Issuance of common stock, net.................................... - 1,828
Purchase of treasury stock....................................... (279)
Issuance of Series A Preferred Stock net......................... 2,800 -
Receivables from related parties................................. 120 (85)
------------------- --------------------
Net cash provided (used) by financing activities............ 85 4,139
------------------- --------------------
Net (decrease) in cash............................................. (3,201) (1,471)
Effect of exchange rate changes on cash............................ (169) 75
Cash from discontinued activities.................................. 469 1,098
Cash and cash equivalents at beginning of period................... 3,904 3,752
------------------- --------------------
Cash and cash equivalents at end of period......................... $ 1,003 $ 3,454
=================== ====================
Cash paid for interest, net........................................ $ 316 $ 239
=================== ====================
Cash paid for taxes................................................ $ 86 $ 86
=================== ====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements included the accounts of UniComp,
Inc. and its subsidiaries (the Company). All material intercompany balances and
transactions have been eliminated in consolidation. The preparation of the
financial statements requires management to make estimates and assumptions
underlying the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reported
period. Changes in the status of certain matters, facts or circumstances
underlying these estimates could result in material changes and actual results
could differ from these estimates. It is suggested that these quarterly
consolidated financial statements and notes be read in conjunction with the
financial statements and notes included in the Annual Report on Form 10-K for
the fiscal year ended February 28, 1998.
Certain amounts previously presented in the consolidated financial
statements have been reclassified to conform to current presentation.
2. DISCONTINUED OPERATIONS
On December 17, 1998, UniComp, Inc. (the "Company") completed the sale of
certain assets (the "Assets") of the Company's Northern Ireland subsidiary,
Aurora UniComp Limited, to Aurora SX3 Limited (the "Sale"). Aurora UniComp
Limited supplies and maintains computer hardware and software. The Assets
disposed of include, but are not limited to, the following: plant machinery and
motor vehicles, computer and office equipment, furniture, premises, tradename,
investments, and intellectual property rights. The Sale was consummated in
accordance with the terms of that certain Agreement for the Sale and Purchase of
Certain Assets and the Goodwill of Aurora UniComp Limited between Aurora UniComp
Limited, Aurora SX3 Limited, and UniComp, Inc., dated December 17, 1998 (the
"Sale Agreement").
The consideration paid to the Company in connection with the Sale was as
follows: (i) approximately 4.0 million pounds sterling (approximately $ 6.6
million U.S. as of December 17, 1998), of which 0.2 million pounds sterling
(approximately $ 0.3 million U.S. as of December 17, 1998) is being withheld
pending final calculation of certain completion accounts as set forth in detail
in the Sale Agreement; and (ii) assumption of debt of Aurora UniComp Limited
totaling approximately 3.3 million pounds sterling (approximately $ 5.5 million
U.S. as of December 17, 1998). In addition, Aurora SX3 Limited and UniComp
Holdings (UK) Limited executed and entered into a two-year loan whereby Aurora
SX3 Limited loaned 0.75 million pounds sterling (approximately $ 1.2 million
U.S. as of December 17, 1998) to UniComp Holdings (UK) Limited (the "Loan") and
agreed to loan an additional 0.25 million pounds sterling after UniComp Holdings
(UK) Limited timely meets the first twelve installment payments. The Loan bears
annual interest at the rate of .5% above the base lending rate of the Bank of
Ireland and the Loan shall be repaid in twenty-four equal monthly installment
payments of principle and Interest.
8
<PAGE>
Summary of Discontinued Operations
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- --------------------------
11/30/98 11/30/97 11/30/98 11/30/97
-------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Revenue*................................. $ 6,259 $ 5,992 $ 19,883 $ 18,387
Expenses................................. 3,067 2,114 8,161 6,387
Earnings................................. (380) 416 (256) 887
Tax...................................... 40 125 0 278
------------------------------------------------------------------
Net income............................... $ (340) $ 291 $ (256) $ 609
==================================================================
</TABLE>
*Revenue includes approximately 60% hardware sales, and all of the company's
education hardware sales, which are of generally low margin.
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1998 1998
(in thousands)
<S> <C> <C>
Current assets............................. $ 9,175 $ 7,994
Property and equipment net................. 1,252 1,147
Other assets............................... 2,800 2,940
Current liabilities........................ (3,794) (3,534)
Debt....................................... (5,496) (4,365)
----------------------------------------
Net assets disposed of..................... $ 3,937 $ 4,182
========================================
</TABLE>
Company results have been restated to exclude the above discontinued operations.
3. SERIES A CONVERTIBLE PREFERRED STOCK
On October 7, 1998, the Company issued 3,000 shares of Series A Convertible
Preferred Stock, par value $1.00 per share, and warrants for 102,127 shares of
the Company's Common Stock for an aggregate consideration of $3 million.
Transaction costs of $200 thousand were paid in connection with the offering.
Each share of Series A Convertible Preferred Stock may be converted into a
number of shares of the Company's Common Stock pursuant to the terms of the
Series A Convertible Preferred Stock Purchase Agreement; provided that, absent
shareholder approval, the maximum number of shares of Common Stock that may be
issued upon conversion of the Series A Convertible Preferred Stock is 1,576,000.
The warrants entitle the holders thereof to purchase an aggregate of 102,127
shares of the Company's Common Stock at an exercise price of $4.4063 per share.
See "Liquidity and Capital Resources." The holders of the Series A Convertible
Preferred Stock have certain registration rights.
In connection with the issuance of the Series A Convertible Preferred
Stock, the Company has certain mandatory redemption obligations if certain
events occur, such as upon conversion of the Series A Convertible Preferred
Stock if the shares of Common Stock of the Company to be issue would exceed
1,576,000 shares of Common Stock. The Company also has certain optional
redemption rights, including, but not limited to, the right to redeem the
outstanding shares of Series A Convertible Preferred Stock at a premium of 116%
of the issue price. Holders of the Series A Convertible Preferred Stock are not
entitled to vote on any matter.
9
<PAGE>
4. USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumption that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statement and the reported amounts or revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
consolidated financial statements include all adjustments that, in the opinion
of management, are necessary for a fair presentation of the results for the
periods indicated. All such adjustments are of a normal recurring nature,
except for the provisions for loss on discontinued operations. The amounts the
Company will ultimately realize could differ materially from the amounts assumed
in arriving at the loss anticipated on disposal of the discontinued operations.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS,
FINANCIAL CONDITIONS, AND LIQUIDITY AND CAPITAL RESOURCES:
The following discussion should be read in conjunction with the Company's
consolidated financial statements and notes thereto and with the Company's
annual report on Form 10-K for the fiscal year ended February 28, 1998. Except
for the historical information contained herein, this discussion contains
forward-looking statements that are subject to risks and uncertainties,
including economic, competitive and technological factors affecting the
Company's operations, markets, products, services and prices as well as other
factors discussed in the Notes to the Consolidated Financial Statements and the
Company's annual report on Form 10-K. These and other factors may cause actual
results to differ materially from those anticipated.
OVERVIEW
UniComp, Inc. ("UniComp" or the "Company") provides computer equipment
primarily to businesses in the United Kingdom and North America, vertical market
applications and professional services to businesses located primarily in the
United Kingdom and platform migration software and transaction-processing
systems to users worldwide. For the nine months ended November 30, 1998, the
Company generated $22.6 million in total revenue, of which $7.4 million was
derived from sales of computer equipment and $8.9 million was derived from
information technology services. The remaining $6.3 million in revenue was
derived from license and maintenance fees for the Company's platform-migration
software, transaction-processing systems and other vertical market software
products.
Cost of sales for computer equipment consists of the actual costs of the
products sold. Cost of sales for information technology services includes
supplies, parts, subcontractors and other direct costs of delivering the
services, except for salary costs, which are included in selling, general and
administrative costs. Cost of sales for software includes amortization of
capitalized software development costs, as well as royalties payable on embedded
technologies and any other direct costs of providing its software products and
support. The Company amortizes capitalized software development costs over the
estimated life of the product, generally three to four years.
Selling, general and administrative expenses include salaries and related
costs for all employees, travel, costs associated with internal equipment, sales
commissions, premises and marketing costs, as well as general office and
administrative costs, and the amortization of goodwill. Development grants
received from the government of Northern Ireland have been recorded as a
reduction in selling, general and administrative expenses, or a reduction in
capitalized development costs, and are anticipated to remain relatively constant
for the foreseeable future.
On November 30, 1997, the Company completed the acquisition of Novatek.
Novatek maintains, repairs, remanufactures and distributes a wide variety of
point-of-sale and transaction-processing equipment and supplies. The Company
issued 788,708 shares of its common stock for all the outstanding common
10
<PAGE>
stock of Novatek. This transaction has been accounted for as a pooling-of-
interest; therefore, the Company's historical statements have been restated to
reflect this merger.
In January 1998, the Company acquired for 107,453 shares of the Company's
Common Stock, Industrial Computing Machines Limited ("ICM"), an Irish company
that provides software products and services for the manufacturing industry
primarily in Ireland and the United Kingdom. The acquisition has been accounted
for by the purchase method. As such, ICM's results of operations have been
included since the date of acquisition.
On October 7, 1998, the Company issued 3,000 shares of Series A Convertible
Preferred Stock, par value $1.00 per share, and warrants for 102,127 shares of
the Company's Common Stock for an aggregate consideration of $3 million. Each
share of Series A Convertible Preferred Stock may be converted into a number of
shares of the Company's Common Stock pursuant to the terms of the Series A
Convertible Preferred Stock Purchase Agreement; provided that, absent
shareholder approval, the maximum number of shares of Common Stock that may be
issued upon conversion of the Series A Convertible Preferred Stock is 1,576,000.
The warrants entitle the holders thereof to purchase an aggregate of 102,127
shares of the Company's Common Stock at an exercise price of $4.4063 per share.
See "Liquidity and Capital Resources." The holders of the Series A Convertible
Preferred Stock have certain registration rights.
In connection with the issuance of the Series A Convertible Preferred
Stock, the Company has certain mandatory redemption obligations if certain
events occur, such as upon conversion of the Series A Convertible Preferred
Stock if the shares of Common Stock of the Company to be issue would exceed
1,576,000 shares of Common Stock. The Company also has certain optional
redemption rights, including, but not limited to, the right to redeem the
outstanding shares of Series A Convertible Preferred Stock at a premium of 116%
of the issue price.
Holders of the Series A Convertible Preferred Stock are not entitled to
vote on any matter.
SUBSEQUENT EVENTS
On December 17, 1998, UniComp completed the sale of certain assets (the
"Assets") of the Company's Northern Ireland subsidiary, Aurora UniComp Limited,
to Aurora SX3 Limited (the "Sale"). Aurora UniComp Limited supplies and
maintains computer hardware and software. The Assets disposed of include, but
are not limited to, the following: plant machinery and motor vehicles, computer
and office equipment, furniture, premises, tradename, investments, and
intellectual property rights. The Sale was consummated in accordance with the
terms of that certain Agreement for the Sale and Purchase of Certain Assets and
the Goodwill of Aurora UniComp Limited between Aurora UniComp Limited, Aurora
SX3 Limited, and UniComp, Inc., dated December 17, 1998 (the "Sale Agreement").
The consideration paid to the Company in connection with the Sale was as
follows: (i) approximately 4.0 million pounds sterling (approximately $ 6.6
million U.S. as of December 17, 1998), of which 0.2 million pounds sterling
(approximately $ 0.3 million U.S. as of December 17, 1998) is being withheld
pending final calculation of certain completion accounts as set forth in detail
in the Sale Agreement; and (ii) assumption of debt of Aurora UniComp Limited
totaling approximately 3.3 million pounds sterling (approximately $ 5.5 million
U.S. as of December 17, 1998). In addition, Aurora SX3 Limited and UniComp
Holdings (UK) Limited executed and entered into a two-year loan whereby Aurora
SX3 Limited loaned 0.75 million pounds sterling (approximately $ 1.2 million
U.S. as of December 17, 1998) to UniComp Holdings (UK) Limited (the "Loan") and
agreed to loan an additional 0.25 million pounds sterling after UniComp Holdings
(UK) Limited timely meets the first twelve installment payments. The Loan bears
annual interest at the rate of .5% above the base lending rate of the Bank of
Ireland and the Loan shall be repaid in twenty-four equal monthly installment
payments of principle and Interest.
11
<PAGE>
On December 18, 1998, the Company repurchased from certain shareholders
90,786 shares of the Company's Common Stock that were issued in connection with
the ICM acquisition for 456,875 Irish pounds sterling (approximately $679,000 as
of December 18, 1998.
On December 3, 1998, the Company repurchased from certain shareholders
38,857 shares of the Company's Common Stock that were issued in connection with
the Novatek acquisition for $126,285.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO THREE AND NINE
MONTHS ENDED NOVEMBER 30, 1997
The following table summarizes the Company's results of operations in
dollars and as a percentage of total revenue for the three and nine month
periods ended November 30, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------------------------------------------------------
11/30/98 11/30/97 11/30/98 11/30/97
-------- -------- -------- --------
(in thousands, except percentage data) (in thousands, except percentage data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenue $8,564 100.0% $7,551 100.0% $22,567 100.0% $21,750 100.0%
Cost of sales 3,775 44.1 3,217 42.6 9,723 43.1 9,683 44.5
------ ----- ------ ----- ------- ----- ------- -----
Gross profit 4,789 55.9 4,334 57.4 12,844 56.9 12,067 55.5
Selling, general and 4,294 50.1 4,187 55.4 12,435 55.1 10,403 47.8
administrative ------ ----- ------ ----- ------- ----- ------- -----
expenses
Operating income 495 5.8 147 2.0 409 1.8 1,664 7.7
Other expense 96 1.1 82 1.1 395 1.8 211 1.0
------ ----- ------ ----- ------- ----- ------- -----
Income before taxes 399 4.7 65 0.9 14 0.0 1,453 6.7
Provision for taxes 41 0.5 26 0.3 0 0.0 $ 494 2.3
------ ----- ------ ----- ------- ----- ------- -----
Net income $ 358 4.2 $ 39 0.6 $ 14 0.0 $ 959 4.4
====== ===== ====== ===== ======= ===== ======= =====
</TABLE>
Revenue. Revenue for the three months ended November 30, 1998 increased to
$8.6 million compared to $7.6 million for the three months ended November 30,
1997, an increase of $1.0 million, or 13.2%. The 13.2% increase in Revenue for
the three months ended November 30, 1998 is attributable to the acquisition of
ICM in January 1998, increases in the volume of goods and services sold, and the
introduction of new products and services offered by ICM. Revenue for the nine
months ended November 30, 1998 increased to $22.6 million compared to $21.7
million for the nine months ended November 30, 1997, an increase of $0.9
million, or 4.1%.
The following table summarizes the revenue generated from sales of computer
equipment for the three and nine months ended November 30, 1998 and the
comparable periods from the prior fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED INCREASE/(DECREASE)
------------------------------ -----------------------------
11/30/98 11/30/97 $ %
--------- --------- - -
(in thousands, except percentage data)
<S> <C> <C> <C> <C>
Transaction-processing Equipment........... $ 1,898 $ 1,886 $12 0.6
Other Equipment............................ 552 490 62 12.7
--------- --------- ---
Total Equipment Revenue.................... $ 2,450 $ 2,376 $74 3.1
========= ========= ===
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED INCREASE/(DECREASE)
------------------------- -----------------------------
11/30/98 11/30/97 $ %
--------- --------- - -
(in thousands, except percentage data)
<S> <C> <C> <C> <C>
Transaction-processing Equipment........... $ 6,087 $ 6,865 $(778) (11.3)
Other Equipment............................ 1,354 1,004 350 34.9
--------- --------- -----
Total Equipment Revenue.................... $ 7,441 $ 7,869 $(428) (5.4)
========= ========= =====
</TABLE>
In connection with the acquisition of Novatek, the Company became a
reseller of transaction-processing equipment which accounts for all the revenue
of sales of this hardware category. Transaction-processing sales are expected
to improve over subsequent quarters due to the recent reorganization of this
division; however, there can be no assurance that any improvements will occur
over subsequent quarters.
Other Equipment is generally supplied as an adjunct to software and
services customers. Sales of computer equipment can vary from quarter to
quarter based on customer needs. However, due to relatively low profit margin,
these quarterly variations generally do not significantly impact the overall
results of operations.
Revenue from information technology services increased to $3.7 million for
the three months ended November 30, 1998 from $2.6 million for the comparable
period in the prior fiscal year, an increase of $1.1 million or 42.3%. Revenues
from this segment also increased to $8.9 million from $6.7 million for the nine
months ended November 30, 1998, an increase of $2.2 million or 32.8%. This
increase is primarily attributable to revenues related to the acquisition of ICM
which accounted for $0.3 million and $1.4 million of revenue for the three
months and nine months ended November 30, 1998, respectively.
The following table summarizes the revenue from software licensing and
support.
<TABLE>
<CAPTION>
THREE MONTHS ENDED INCREASE/(DECREASE)
-------------------------- -----------------------------
11/30/98 11/30/97 $ %
--------- --------- ------------- -------------
(in thousands, except percentage data)
<S> <C> <C> <C> <C>
Initial License Fees:
Platform Migration...................... $ 575 $ 347 $ 228 65.7
Transaction-processing.................. (10) 826 (836) (101.2)
Other................................... 383 275 108 39.3
--------- --------- -----
Total Initial License Fees................. $ 948 $ 1,448 (500) (34.5)
--------- --------- -----
Software Support Fees:
Platform Migration...................... $ 228 $ 323 (95) (29.4)
Transaction-processing.................. 31 0 31
Other................................... 1,165 762 403 52.9
--------- --------- -----
Total Software Support Fees................ $ 1,424 $ 1,085 339 31.2
--------- --------- -----
Total Software Revenue..................... $ 2,372 $ 2,533 $(161) (6.4)
========= ========= =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED INCREASE/(DECREASE)
------------------------- ------------------------------
11/30/98 11/30/97 $ %
--------- --------- ------------- -------------
(in thousands, except percentage data)
<S> <C> <C> <C> <C>
Initial License Fees:
Platform Migration...................... $ 1,536 $ 1,495 $ 41 2.7
Transaction-processing.................. 73 1,912 (1,839) (96.2)
Other................................... 754 832 (78) (9.4)
--------- --------- -------
Total Initial License Fees................. $ 2,363 $ 4,239 (1,876) (44.3)
--------- --------- -------
Software Support Fees:
Platform Migration...................... $ 697 $ 974 $ (277) (28.4)
Transaction-processing.................. 63 0 63
Other................................... 3,111 1,954 1,157 59.2
--------- --------- -------
Total Software Support Fees................ $ 3,871 $ 2,928 943 32.2
--------- --------- -------
Total Software Revenue..................... $ 6,234 $ 7,167 $ (933) (13.0)
========= ========= =======
</TABLE>
Revenue generated from the initial license fees for platform migration
software was $0.6 million and $1.5 million for the three and nine months ended
November 30, 1998, respectively compared to $0.3
13
<PAGE>
million and $1.5 million for the comparable periods in the prior fiscal year,
respectively. Platform migration revenue by major product class is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED INCREASE/(DECREASE)
------------------------- ---------------------------
11/30/98 11/30/97 $ %
--------- --------- - -
(in thousands, except percentage data)
<S> <C> <C> <C> <C>
UNIBOL36................................... $ 562 $ 553 $ 9 1.6
UNIBOL400.................................. 241 117 124 106.0
--------- --------- ----
Total Platform Migration Revenue........... $ 803 $ 670 $133 19.9
========= ========= ==== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED INCREASE/(DECREASE)
------------------------- ---------------------------
11/30/98 11/30/97 $ %
--------- --------- - -
(in thousands, except percentage data)
<S> <C> <C> <C> <C>
UNIBOL36................................... $ 1,781 $ 1,674 $ 107 6.4
UNIBOL400.................................. 452 795 (343) (43.1)
--------- --------- -----
Total Platform Migration Revenue........... $ 2,233 $ 2,469 $(236) (9.6)
========= ========= ===== =====
</TABLE>
The UNIBOL36 product is in a declining market as users of the IBM System 36
update their computer systems to more modern technology. The Company has been
able to slow the decline in UNIBOL36 product sales through marketing the product
along with its year 2000 conversion tools and services and with the release of a
version of UNIBOL36 which supports Microsoft NT. Although there is a decline in
the market, revenue from this product is expected to continue for the next few
years, however, there may be fairly volatile revenue fluctuations from quarter
to quarter during this period.
Revenue generated by the UNIBOL400 product increased to $241 thousand and
decreased to $452 thousand for the three and nine months ended November 30,
1998, respectively from $117 thousand and $795 thousand for the comparable
periods in the prior fiscal year, respectively. The revenues related to the
UNIBOL400 product are expected to improve in future periods as the enhanced
versions of the product are released and the product begins to gain market
acceptance.
Revenue generated from transaction-processing systems decreased to $21
thousand and $136 thousand for the three and nine months ended November 30,
1998, respectively from $826 thousand and $1.9 million for the comparable
periods in the prior fiscal year, respectively. The Company began restructuring
the transaction-processing business unit during the quarter ended August 31,
1998. This included the termination of the president and certain other
employees of that subsidiary, the evaluation of the strategic direction of the
business unit, including product offerings, and its organizational structure.
Revenue generated from other software sales primarily consist of vertical
market software products such as the Company's Distributex product as well as
other third party software products. Revenue from the sale of other software
products increased to $1,548 thousand and $3,865 thousand for the three and nine
months ended November 30, 1998, respectively, from $1,037 thousand and $2,786
thousand for the comparable periods in the prior fiscal year, respectively.
International Revenue. Revenue from international operations, principally
in Northern Ireland, increased to $14.2 million for the nine months ended
November 30, 1998 from $11.6 million for the comparable period in the prior
fiscal year, an increase of $2.6 million or 22.4%. $1.7 million of this
increase is due to the acquisition of ICM in Ireland the remainder resulting
from internal growth of information technology services and software. Revenue
from domestic operations decreased to $8.4 million for the nine months ended
November 30, 1998 as compared to $10.2 million for the comparable period in the
prior fiscal year, due primarily to decreased revenues relating to platform
migration and transaction-processing software, as described above under
"Revenue."
14
<PAGE>
Gross Profit. The following tables summarizes the Company's gross profit
information in dollars and as a percentage of the associated revenues for the
three and nine months ended November 30, 1998 and the comparable periods for the
prior fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
11/30/98 11/30/97
-------- --------
(in thousands, except percentage data)
GROSS PROFIT GROSS PROFIT
------------ ------------
$ % $ %
- - - -
<S> <C> <C> <C> <C>
Information Technology Services.................... $ 2,107 56.3 $ 2,339 88.5
------- -------
Equipment:
Transaction-processing........................... 761 40.1 343 18.2
Other............................................ 62 11.2 32 6.5
------- -------
Total Equipment.................................... 823 33.6 375 15.8
------- -------
Software:
Platform Migration............................... 646 80.4 255 73.4
Transaction-processing........................... (15) (71.4) 678 82.1
Other............................................ 1,228 79.3 687 66.3
------- -------
Total Software..................................... 1,859 78.4 1,620 64.0
------- -------
Total Gross Profit................................. $ 4,789 55.9 $ 4,334 57.4
======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------------------------
11/30/98 11/30/97
-------- -------
(in thousands, except percentage data)
GROSS PROFIT GROSS PROFIT
------------ ------------
$ % $ %
- - - -
<S> <C> <C> <C> <C>
Information Technology Services.................... $ 7,009 78.8 $ 5,946 88.6
------- -------
Equipment:
Transaction-processing........................... 1,748 28.7 1,481 21.6
Other............................................ 291 21.5 127 12.6
------- -------
Total Equipment.................................... 2,039 27.4 1,608 20.4
------- -------
Software:
Platform Migration............................... 1,226 54.9 1,217 49.3
Transaction-processing........................... (171) (126.7) 1,535 80.3
Other............................................ 2,741 70.9 1,761 63.2
------- -------
Total Software..................................... $ 3,796 60.9 $ 4,513 63.0
------- -------
Total Gross Profit................................. $12,844 56.9 $12,067 55.5
======= =======
</TABLE>
Gross profit margins for services and equipment vary from quarter to
quarter depending on customer demands and product mix. The types of equipment
the Company sells are generally commodity products. Information technology
services gross profit margin, which does not include salary costs, increased for
the nine month period due primarily to increases in software related services
revenue for the nine months ended November 30, 1998 compared to the same period
in the prior fiscal year, which have higher gross profit margins than hardware
related services, which remained fairly constant for that same period.
Platform-migration profit margins changed to 80.4% and 54.9% for the three
and sixnine month periods ended November 30, 1998, respectively from 73.4% and
49.3% for the comparable periods in the prior fiscal year, respectively. These
changes are principally due to relatively fixed amortization expense related to
capitalized software development costs for the UNIBOL400 product. These margins
are expected to improve in future periods as the enhanced versions of the
UNIBOL400 product are released, the product begins to gain market acceptance and
licensing revenues increase.
Transaction-processing gross profit margins are expected to improve over
subsequent quarters due to reorganization of the UniPay facility; however, there
can be no assurance that any improvements will be achieved.
15
<PAGE>
Gross margins for other software products changed to 79.3% and 70.9% for
the three and nine months ended November 30, 1998, respectively, compared to
66.3% and 63.2% for the comparable periods in the prior fiscal year. Other
software primarily consist of vertical market software products such as the
Company's Distributex product as well as other third party software products.
Gross margins for these products have increased due to the increase in related
annual support fees and as more customers are added, as discussed earlier in
"Revenue".
Selling, General, & Administrative Expenses. Selling, general, and
administrative expenses increased to $4.3 million and $12.4 million for the
three and nine months ended November 30, 1998, respectively from $4.2 million
and $10.4 million for the comparable periods in the prior fiscal year,
respectively. The increase is related to increases in salary and related
expenses which are attributable to new employees hired since November 30, 1997
as well as in part to increased competition for qualified skilled workers in the
Northern Ireland market. This competition from new businesses in Northern
Ireland has caused increases in salary costs in order to retain key employees as
well as recruit new workers. $0.5 million and $1.5 million of this increase for
the three and nine month periods, respectively, is attributable to the
acquisition of ICM in January 1998. Operating expenses as a percentage of total
revenue were 50.1% and 55.1% for the three and nine months ended November 30,
1998, respectively, as compared to 55.4% and 47.8% for the comparable periods in
the prior fiscal year.
Other Expenses. Interest the primary component of other expenses was
$84,000 and $379,000 for the three and nine months ended November 30, 1998,
respectively from $91,000 and $220,000 for the comparable periods in the prior
fiscal year, respectively. The increase in interest expense is related to
additional borrowings on the Company's lines of credit and other short-term
borrowings to fund operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company has met its liquidity requirements primarily through
operations, placements of debt and equity securities, bank financing and grants
from the government of Northern Ireland. At November 30, 1998, the Company had
approximately $1.0 million in cash and equivalents as compared to $3.9 million
at February 28, 1998, $3.0 million of which was restricted as of February 28,
1998.
The Company generated negative operating cash flows of $0.8 million for the
nine months ended November 30, 1998. The Company maintains revolving credit
facilities which are its primary sources of liquidity. The facilities allow the
Company to borrow based on current levels of accounts receivable and inventory
and contain financial covenants including, but not limited to, requirements with
respect to minimum net worth and debt to net worth ratios. The Company has
minimum covenant requirements that must be met by February 28, 1999. The Company
maintains a series of working capital lines of credit with maximum borrowing
available of $7.2 million in the United Kingdom which are secured by certain
accounts receivables, inventories, and other assets of the Company. The lines of
credit are utilized for short-term borrowing for general corporate use. From
time to time, the bank in the United Kingdom allows the borrowing under such
lines to be in excess of the maximum to accommodate the Company's peaks in
spending. The total outstanding balance on the line of credit was fully utilized
at a variable rate based on the lending bank's base lending rate plus 1.75% as
of November 30, 1998. While there can be no assurance, the Company expects to be
able to meet these covenants as well as be able to renew or replace these
facilities in the ordinary course of business.
During the nine months ended November 30, 1998, the Company expended $0.9
million for capital improvements. Although the Company anticipates spending
comparable amounts in the future on capital expenditures, the Company does not
have any significant commitments to purchase capital equipment as of November
30, 1998.
On October 7, 1998, the Company obtained $3.0 million of financing through
the sale of 3,000 shares of Series A Convertible Preferred Stock, par value
$1.00 per share, and issued warrants for 102,127 shares of the Company's Common
Stock. See "Recent Sales of Unregistered Securities" and "Subsequent Events."
16
<PAGE>
On December 17, 1998, UniComp completed the sale of Assets of the Company's
Northern Ireland subsidiary, Aurora UniComp Limited, to Aurora SX3 Limited.
See "Subsequent Events." The consideration paid to the Company was as follows:
(i) approximately 4.0 million pounds sterling (approximately $ 6.6 million U.S.
as of December 17, 1998), of which 0.2 million pounds sterling (approximately $
0.3 million U.S. as of December 17, 1998) is being withheld pending final
calculation of certain completion accounts as set forth in detail in the Sale
Agreement; and (ii) assumption of debt of Aurora UniComp Limited totaling
approximately 3.3 million pounds sterling (approximately $ 5.5 million U.S. as
of December 17, 1998). In addition, Aurora SX3 Limited and UniComp Holdings
(UK) Limited executed and entered into a two-year loan whereby Aurora SX3
Limited loaned 0.75 million pounds sterling (approximately $ 1.2 million U.S. as
of December 17, 1998) to UniComp Holdings (UK) Limited (the "Loan") and agreed
to loan an additional 0.25 million pounds sterling after UniComp Holdings (UK)
Limited timely meets the first twelve installment payments. The Loan bears
annual interest at the rate of .5% above the base lending rate of the Bank of
Ireland and the Loan shall be repaid in twenty-four equal monthly installment
payments of principle and Interest. See "Subsequent Events."
On December 18, 1998, the Company repurchased from certain shareholders
90,786 shares of the Company's Common Stock that were issued in connection with
the ICM acquisition for 456,875 Irish pounds sterling (approximately $679,000 as
of December 18, 1998).
On December 3, 1998, the Company repurchased from certain shareholders
38,857 shares of the Company's Common Stock that were issued in connection with
the Novatek acquisition for $126,285.
The Company received grants to fund research and development from the
government of Northern Ireland of approximately $0.3 million for the nine months
ended November 30, 1998. These grants are subject to the legislative rules and
regulations of Northern Ireland and the United Kingdom. Management does not
anticipate that the receipt of grants will diminish significantly in the
foreseeable future; however, there can be no assurance that the Company will be
able to continue to receive such grants.
The Company believes available credit will be sufficient to meet its
working capital needs both on a short and a long-term basis. However, the
Company's capital needs will depend on many factors, including the Company's
ability to maintain profitable operations, the need to develop and improve
products, and various other factors. Depending on its working capital
requirements, the Company may seek additional financing through debt or equity
offerings in the private or public markets at any time. The Company's ability
to obtain additional financing will depend on its results of operations,
financial condition and business prospects, as well as conditions then
prevailing in the relevant capital markets. There can be no assurance that
financing will be available or, if available, will be on terms acceptable to the
Company.
YEAR 2000 COMPLIANCE
The Problem. The Year 2000 issue is the result of potential problems with
computer systems or any equipment with computer chips that store the year
portion of the date as just two digits (e.g. 98 for 1998). Systems using this
two-digit approach will not be able to determine whether "00" represents the
year 2000 or 1900. The problem, if not corrected, will make those systems fail
altogether or, even worse, allow them to generate incorrect calculations causing
a disruption of normal operations.
Readiness Efforts. In 1998, a comprehensive project plan to address the Year
2000 issue as it relates to the Company's operation was developed and
implemented. The scope of the plan includes seven phases including Awareness,
Identification, Impact Analysis, Risk Evaluation, Remediation, Testing and
Contingency Planning.
An assessment of the impact of the Year 2000 issue on the Company's computer
hardware systems has recently been completed. From the assessment, the Company
has identified and prioritized those systems deemed to be mission critical or
those that have a significant impact on normal operations. The Company is
currently in the process of assessing its computer hardware systems and will be
completed
17
<PAGE>
with such assessment by September 30, 1999.
The Company relies on third party vendors and service providers for certain data
processing capabilities. Formal communications with these providers to assess
the Year 2000 readiness of their products and services is currently in process.
The Company can give no guarantee that the systems of these service providers
and vendors on which the Company's systems rely will be timely Year 2000
compliant.
Additionally, the Company has implemented a plan to manage the potential risk
posed by the impact of the Year 2000 issue on its major customers and suppliers.
Formal communications and the assessment is moving forward on schedule.
Current Status. The Company estimates that its Year 2000 readiness project is
approximately 69% complete. The following table provides a summary of the
current status of the seven phases involved and a projected timetable for
completion.
<TABLE>
<CAPTION>
Project
Project Phase % Completed Completion Comments
- ---------------------- ------------ ------------------ -----------------------------
<S> <C> <C> <C>
Awareness 100% Completed
Identification 100% Completed
Impact Analysis 100% Completed
Risk Evaluation 60% April 30, 1999 Suppliers & service providers
are being evaluated.
Remediation 75% September 30, 1999 All critical systems are
completed.
Testing 50% September 30, 1999 Involves ongoing testing of
critical systems
Contingency Plan 60% September 30, 1999
Overall Completion
Estimate 69%
</TABLE>
Costs. The Company has thus far primarily used and expects to continue to
primarily use internal resources to implement its readiness plan and to upgrade
or replace and test systems affected by the Year 2000 issue. The total cost to
the Company of these Year 2000 compliance activities has not been and is not
anticipated to be material to its financial position or results of operations in
any given year. In total, the Company estimates that its costs, excluding
personnel expenses and expenses related to normal enhancements of the Company's
software products, for Year 2000 remediation and testing of its computer systems
will not be material in amount over the three-year period from 1997 through
1999. Not included in this estimate is the cost to replace fully depreciated
systems during this period, which occurs in the normal course of business and is
not directly attributable to the Year 2000 issue.
The costs and the timetable in which the Company plans to complete the Year 2000
readiness activities are based on management's estimates, which were derived
using numerous assumptions of future events including the continued availability
of certain resources, third party readiness plans and other factors. The Company
can make no guarantee that these estimates will be achieved, and actual results
could differ from such plans.
Risk Assessment. Given information known at this time about the Company's
systems that are non-compliant, coupled with the Company's ongoing, normal
course of business efforts to upgrade or replace critical systems, as necessary,
management does not expect Year 2000 compliance costs to have any material
adverse impact on the Company. No assurance can be given, however, that all of
the Company's systems, and those of significant customers and suppliers, will be
Year 2000 compliant or the failure to achieve substantial Year 2000 compliance
will not have a material adverse effect on the Company.
18
<PAGE>
Contingency Plan. Realizing that some disruption may occur despite its efforts,
the Company is in the process of developing contingency plans for each critical
system in the event that one or more of those systems fail. While this is an
ongoing process, the Company expects to have the contingency plan substantially
documented by September 30, 1999.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's operating results and financial condition can be impacted by
a number of factors, including but not limited to, any of the following which
could cause actual results to vary materially from the current and historical
results or the Company's anticipated future results.
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
disclosures of contingent assets and liabilities at the date of the financial
statements. In addition, these estimates and assumptions affect the reported
amounts of revenue and expenses during the reporting period as well. Amounts
affected by these estimates include, but are not limited to, the estimated
useful lives, related amortization expense and carrying value of the Company's
intangible assets and capitalized software development costs, accrued reserves
for contingencies and estimates to complete fixed price contracts. Changes in
the status of certain matters or facts or circumstances underlying these
estimates could result in material changes to these estimates, and actual
results could differ from these estimates.
The business of the Company is subject to national and worldwide economic
and political influences such as recession, political instability, the economic
strength of governments, and rapid change in technology. The Company's
operating results are dependent on its ability to rapidly develop, manufacture,
and market innovative products that meet customers demands. Inherent in this
process are a number of risks that the Company must manage in order to achieve
favorable operating results. The process of developing new high technology
products is complex and uncertain, requiring innovative designs and features
that anticipate customer needs and technological trends. The products, once
developed, must be manufactured and distributed in sufficient volumes at
acceptable costs to meet demand. The development of such products involve risks
and uncertainties, including but not limited to risk of product demand, market
acceptance, economic conditions, competitive products and pricing, difficulties
in product development, commercialization, technology, and other risks. The
Company's success will depend on the level of market acceptance and enhancements
to the market on a timely basis, and its ability to maintain a labor force
sufficiently skilled to compete in the current environment. Additionally, there
is increasing competition in the Company's current products or services
businesses, and there can be no assurance that the Company's current products
and services will remain competitive or that the Company's development efforts
will produce products with the cost and performance characteristics necessary to
remain competitive.
The timing and amount of the Company's revenues are subject to a number of
factors, including, but not limited to, the timing of customers' decisions to
enter into license agreements with the Company, which makes estimation of
operating results prior to the end of the quarter or year extremely uncertain.
While management believes that the Company's financing needs for the foreseeable
future will be satisfied from cash flows from operations, the Company's existing
credit facilities, and the ability to raise additional capital through the
equity markets, unforeseen events and adverse economic or business trends may
significantly increase cash demands beyond those currently anticipated that
affect the Company's ability to generate or raise cash to satisfy financing
needs.
The Company derives its revenue primarily from operations in Northern
Ireland. It is reasonably possible that this concentration of revenue makes the
Company vulnerable to the risk of a near-term severe impact due to unforeseen
political and economic forces, as well as exchange rate fluctuations.
Additionally, concentrations of credit risks with respect to trade accounts
receivable is generally diversified due to the large number of entities
comprising the Company's worldwide customer base. The Company performs ongoing
credit evaluations on certain of its customers' financial conditions, but
generally does not require collateral to support customer receivables. The
Company establishes an allowance for uncollectible accounts based on factors
surrounding the credit risk of specific customers,
19
<PAGE>
historical trends and other information. There can be no assurance, however,
that the Company's procedures will identify all potential uncollectible accounts
in a timely manner and significant adjustments to the Company's allowance for
uncollectible accounts may be necessary from time to time.
As a result of the above and other factors, the Company's operations and
financial position can vary significantly from quarter-to-quarter and year-to-
year. These variations may contribute to volatility in the market for the
Company's common stock.
FORWARD LOOKING STATEMENTS
This report contains both historical facts and forward-looking statements
which represent the Company's expectations or beliefs concerning future events,
including sufficiency of funds from operations and available borrowings to meet
the Company's working capital and capital expenditure needs, among others. Any
forward-looking statements involve risks and uncertainties, including but not
limited to risk of product demand, market acceptance, economic conditions,
competitive products and pricing, difficulties in product development,
commercialization, technology, and other risks detailed in this filing.
Although the Company believes it has the product offerings and resources for
continued success, future revenue and margin trends cannot be reliably
predicted. Factors external to the Company can result in volatility of the
Company's common stock price. Because of the forgoing factors, recent trends
are not necessarily reliable indicators of future stock prices or financial
performance.
20
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1, 3, 4 AND 5 ARE NOT APPLICABLE.
ITEMS 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) On October 6, 1998, the Company filed Articles of Amendment to the Articles
of Incorporation ("Articles of Amendment") of the Company designating 3,600
shares of Preferred Stock as Series A Convertible Preferred Stock, $1.00 par
value, of which 600 shares may be issued only as dividends on the outstanding
shares of Series A Convertible Preferred Stock issued on October 7, 1998. The
Series A Convertible Preferred Stock ranks (i) senior to the Common Stock, now
or hereafter issued, as to payment of dividends and distribution of assets upon
liquidation, dissolution, or winding upon the Company; (ii) senior to any
additional series of the class of Preferred Stock which series the Company's
Board of Directors may from time to time authorize, both as to payment of
dividends and as to distributions of assets upon liquidation, dissolution, or
winding up the Company; and (iii) senior to any additional class of preferred
stock (or series of preferred stock of such class) which the Board of Directors
or the stockholders may from time to time authorize in accordance with the
Articles of Amendment.
Holders of the Series A Convertible Preferred Stock are entitled to
receive, when, as, and if declared by the Board of Directors out of funds
legally available for such purpose, dividends at the rate of $50.00 per annum
per share, which are fully cumulative, shall accrue without interest (except for
dividends in arrears) from the date of original issuance of each share and are
payable quarterly on March 15, June 15, September 15, and December 15 of each
year commencing December 15, 1998. Dividends on the Series A Convertible
Preferred Stock may be paid in cash, or subject to certain limitations,
dividends of additional shares of Series A Convertible Preferred Stock.
In connection with the issuance of the Series A Convertible Preferred
Stock, the Company has certain mandatory redemption obligations if certain
events occur, such as upon conversion of the Series A Convertible Preferred
Stock if the shares of Common Stock of the Company to be issue would exceed
1,576,000 shares of Common Stock. The Company also has the certain optional
redemption rights, including, but not limited to, the right to redeem the
outstanding shares of Series A Convertible Preferred Stock at a premium of 116%
of the issue price.
Holders of the Series A Convertible Preferred Stock may at any time on or
after January 5, 1999 convert all or from time to time any part of such holder's
shares of Series A Convertible Preferred Stock into fully paid and nonassessable
shares of Common Stock of the Company and such other securities and property
pursuant to the conversion formula set forth in the Articles of Amendment.
However, absent shareholder approval, the maximum number of shares of Common
Stock that may be issued upon conversion of the Series A Convertible Preferred
Stock is 1,576,000.
Holders of the Series A Convertible Preferred Stock are not entitled to
vote on any matter.
(b) None.
(c) On September 30, 1998, the Company issued warrants for 25,000 shares of the
Company's Common Stock to an "accredited investor" as defined by Rule 501 of
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"). The warrants entitled the
holders thereof to, upon exercise, purchase an aggregate of 25,000 shares of the
Company's Common Stock at an exercise price of $3.00 per share. This transaction
was exempt from the registration provisions of the Act, pursuant to section 4(2)
of the Act for transactions not involving a public offering, based on the fact
that the securities were offered and sold to one investor who had access to
financial and other relevant data concerning the Company, its financial
condition, business, and assets.
On October 7, 1998, the Company issued 3,000 shares of Series A Convertible
Preferred Stock, par value $1.00 per share, and warrants for 102,127 shares of
the Company's Common Stock to an
21
<PAGE>
"accredited investor" as defined by Rule 501 of Regulation D promulgated by the
Securities and Exchange Commission under the Act for an aggregate consideration
of $3 million. This transaction was exempt from the registration provision of
the Act pursuant to Rule 506 of Regulation D as promulgated by the Securities
and Exchange Commission under the Act. Each share of Series A Convertible
Preferred Stock may be converted into a number of shares of the Company's Common
Stock pursuant to the terms of the Series A Convertible Preferred Stock Purchase
Agreement; provided that, the maximum number of shares of Common Stock that may
be issued upon conversion of the Series A Convertible Preferred Stock is
1,576,000. Absent the Company's certain redemption rights, the holders of the
Series A Convertible Preferred Stock may at any time on or after January 5, 1999
convert all or from time to time any part of their shares of Series A
Convertible Preferred Stock into fully paid and nonassessable shares of Common
Stock and such other securities and property as provided in the Articles of
Amendment. Each Series A Convertible Preferred Stock shall be converted pursuant
to the conversion terms of the Articles of Amendment; provided that absent
shareholder approval, the maximum number of shares of Common Stock that may be
issued upon conversion of the Series A Convertible Preferred Stock is 1,576,000.
See "Liquidity and Capital Resources" and "Subsequent Events." The holders of
the Series A Convertible Preferred Stock have certain registration rights.
(d) Not required.
22
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibits Description
<C> <S>
3.1 UniComp, Inc. Articles of Amendment to the Articles of Incorporation,
previously filed with the August 31, 1998 Form 10-Q and incorporated herein
by reference.
4.1 UniComp, Inc. Articles of Amendment to the Articles of Incorporation, filed
herewith as Exhibit 3.1, previously filed with the August 31, 1998 Form 10-Q
and incorporated herein by reference.
4.2 The Cruttenden Roth Bridge Fund, LLC Warrant, previously filed with the
August 31, 1998 Form 10-Q and incorporated herein by reference.
4.3 Advantage Fund II Ltd. Warrant , previously filed with the August 31, 1998
Form 10-Q and incorporated herein by reference.
4.4 Subscription Agreement dated as of October 7, 1998 by and between UniComp,
Inc. and Advantage Fund II Ltd., previously filed with the August 31, 1998
Form 10-Q and incorporated herein by reference.
4.5 Registration Rights Agreement dated as of October 7, 1998 by and between
UniComp, Inc. and Advantage Fund II Ltd., previously filed with the August
31, 1998 Form 10-Q and incorporated herein by reference.
10.1 Stock Repurchase Agreement by and among the Company, The Governor and
Company of the Bank of Ireland, DCC Business Expansion Fund Limited, DCC PLC,
Smurfit Venture Investments Limited, and Enterprise Ireland, dated December
18, 1998.
27.1 Financial Data Schedule
</TABLE>
(b) A report on Form 8-K was filed on January 4, 1999 in connection with the
sale of certain assets of Aurora UniComp Limited to Aurora SX3 Limited.
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.
UNICOMP, INC.
/s/ HUGH MOORE January 18, 1999
- ------------------------- -----------------
Hugh Moore Date
Vice President of Finance
Chief Accounting Officer
23
<PAGE>
STOCK REPURCHASE AGREEMENT
THIS STOCK REPURCHASE AGREEMENT ("AGREEMENT") is executed as of this 18th
day of December, 1998 by and among UNICOMP, INC. ("BUYER" or the "COMPANY"), a
Colorado corporation, and The Governor and Company of the Bank of Ireland, DCC
Business Expansion Fund Limited, DCC PLC, Smurfit Venture Investments Limited,
and Enterprise Ireland (Collectively, "SELLERS").
WHEREAS, the parties intend by this Agreement to provide for the
acquisition by Buyer of the shares of Common Stock of UniComp, Inc. held by the
Sellers as set forth on Schedule 1 attached hereto (the "SHARES"), which were
acquired pursuant to that certain Agreement For The Sale And Purchase Of The
Whole Of The Issued Share Capital Of Industrial Computing Machines Limited by
and between Ray Lawlor, John Corr, Maria Delaney, The Governor and Company of
the Bank of Ireland, DCC Business Expansion Fund Limited, DCC PLC, Smurfit
Venture Investments Limited, Forbairt, and UniComp, Inc., dated January 8, 1998
(the "SALES AGREEMENT").
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth herein, it is agreed as follows:
1. PURCHASE OF SHARES. Subject to the terms and conditions contained
herein, Buyer agrees to purchase and the undersigned Sellers agree to sell,
transfer, convey and assign to Buyer, for the consideration described in Section
2 below, all of the Shares.
2. CONSIDERATION. At the Closing, as defined in Section 5 below, Buyer
shall deliver and pay to the Sellers as set forth on Schedule 1,
IR(pounds)456,875 (the "PURCHASE PRICE"), in the form of a wire transfer to the
account of A&L Goodbody. Upon receipt of the Purchase Price by A&L Goodbody, the
Sellers will instruct A&L Goodbody to forward the certificates issued by the
Company evidencing the Shares to the Company or its nominee and the Purchase
Price shall forthwith be distributed to the Sellers in the proportions set forth
on Schedule 1.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. To induce Buyer to
enter into this Agreement, the Sellers represent and warrant to Buyer that the
following statements are true, correct and complete as of the date hereof, and
will be true, correct and complete as of the date of Closing:
(a) Ownership of Shares. Except for the Governor and Company of the
-------------------
Bank of Ireland, each of the Sellers owns, beneficially and of record, the
number of Shares to be sold by such Seller pursuant to Section 1 above and
as indicated on Schedule 1, free and clear of any lien, security interest,
pledge, claim, demand, or encumbrance or restriction of any kind or
character whatsoever. The Governor and Company of the Bank of Ireland
holds in trust the number of Shares to be sold by the Governor and Company
of the Bank of Ireland pursuant to Section 1 above and as indicated on
Schedule 1, free and clear of any lien, security interest, pledge, claim,
demand, or encumbrance or restriction of any kind or character whatsoever.
<PAGE>
(b) Authority. Each Seller now has and will have, at the Closing,
---------
full power, authority and legal right to sell the Shares to Buyer pursuant
to this Agreement. This Agreement has been duly and validly authorized,
executed and delivered by, and is the valid and binding obligation of, each
Seller.
(c) Compliance with Irish Law. The consummation by the Sellers of
-------------------------
the transactions contemplated hereby will be in compliance with all
applicable Irish laws, rules, regulations and requirements of all
applicable Irish, state and local governmental authorities without the
necessity for any license or permit or other action or permission in the
nature thereof, or any registration with, or consent of, any such
governmental authority.
(d) No Litigation. There are no suits or proceedings at law or in
-------------
equity, or before or by any governmental agency or arbitrator, pending, or
to the knowledge of the Sellers, threatened, anticipated or contemplated,
which in any way affect the consummation of the transactions contemplated
hereby or, if valid, would constitute or result in a breach of any
representation, warranty or agreement set forth herein.
(e) Solvency. None of the Sellers is bankrupt or insolvent or has
--------
assigned its estate for the benefit of creditors, entered into any
arrangement with creditors, or has any present intention to file a petition
in bankruptcy, assign its estate for the benefit of creditors, or enter
into any arrangement with creditors. None of the Sellers has knowledge of
any basis for the filing by any other person of an involuntary petition in
bankruptcy with respect to any Seller.
(f) No Material Misstatements. The Sellers have not made any
-------------------------
material misstatement of fact or omitted to state any material fact
reasonably necessary to make complete, accurate and not misleading every
representation, warranty and agreement set forth herein.
(g) Securities Laws Compliance.
--------------------------
(i) Sellers have been represented by such legal and tax
counsel and others, each of whom has been personally selected by
Sellers, as Sellers have found necessary to consult concerning this
transaction, and where appropriate such representation has included an
examination of applicable documents. Sellers, either alone or with its
"PURCHASER REPRESENTATIVES" as that term is defined in Rule 501(h) of
Regulation D under the U.S. Securities Act of 1933, as amended
("SECURITIES ACT"), if any, have sufficient knowledge and experience
in business and financial matters that it is capable of evaluating the
above information, and the merits and risks of the share disposition
contemplated by this Agreement, and to make an informed investment
decision with respect thereto.
(ii) The Company has made available to Sellers, and their
Purchaser Representatives, counsel and other advisors, prior to the
date hereof, the opportunity to ask questions of, and to receive
answers from, the Company and its representatives, concerning the
terms and conditions of the Agreement and access to
2
<PAGE>
obtain any information, documents, financial statements, records and
books (A) relative to the Company, the business, and investment in the
Company, (B) necessary to verify the accuracy of any information
furnished to the Company, and (C) information regarding the Potential
Asset Disposition. All materials and information requested by Sellers,
their counsel and advisors, or others representing Sellers, have been
made available and examined and the Company's report on Form 10-K for
the fiscal year ended February 28, 1998, proxy statement pursuant to
Section 14(a) of the Securities Exchange Act of 1934 for the Company's
Annual Meeting of Stockholders held on August 25, 1998, and reports on
Form 10-Q for the quarterly periods ended May 31, 1998 and August 31,
1998 have each been made available to the Sellers.
(iii) Sellers understand the Company is currently considering
disposing of one of its subsidiaries in Ireland, which may or may not
substantially improve the value of the Company and the capital stock
of the Company (the "POTENTIAL ASSET DISPOSITION").
(iv) Enterprise Ireland represents and warrants to Buyer that
all property and rights relating to the Shares issued to Forbairt
pursuant to the Sales Agreement have been transferred to Enterprise
Ireland pursuant to the Industrial Development (Enterprise Ireland )
Act, 1998.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF BUYER. Buyer represents
and warrants to and agrees with the Sellers that:
(a) Authority. Buyer now has and will have, at the Closing, full
---------
power, authority and legal right to acquire the Shares of Sellers pursuant
to this Agreement. This Agreement has been duly and validly authorized,
executed and delivered by, and is the valid and binding obligation of,
Buyer.
(b) Compliance with Clause 3.3.1 of the Sale Agreement. Buyer
--------------------------------------------------
acknowledges and represents that Sellers have complied in all material
respects with the provisions contained in clause 3.3.1 of the Sale
Agreement.
(c) Compliance with Law. The consummation of the transactions
-------------------
contemplated hereby will be in compliance with all applicable laws, rules,
regulations and requirements of all Federal (including the Securities Act
and the Securities Exchange Act of 1934, as amended), state and local
governmental authorities without the necessity for any license or permit or
other action or permission in the nature thereof, or any registration with,
or consent of, any such governmental authority.
(d) No Litigation. There are no suits or proceedings at law or in
-------------
equity, or before or by any governmental agency or arbitrator, pending, or
to the knowledge of Buyer, threatened, anticipated or contemplated, which
in any way affect the consummation of the transactions contemplated hereby
or, if valid, would constitute or result in a breach of any representation,
warranty or agreement set forth herein.
3
<PAGE>
(e) Solvency. Buyer is not bankrupt or insolvent and has not
--------
assigned its estate for the benefit of creditors, entered into any
arrangement with creditors, or has any present intention to file a petition
in bankruptcy, assign its estate for the benefit of creditors, or enter
into any arrangement with creditors. Buyer has no knowledge of any basis
for the filing by any other person of an involuntary petition in bankruptcy
with respect to Buyer.
(f) No Material Misstatements. Buyer has not made any material
-------------------------
misstatement of fact or omitted to state any material fact reasonably
necessary to make complete, accurate and not misleading every
representation, warranty and agreement set forth herein.
5. THE CLOSING. The closing of the purchase and sale of the Shares shall
take place at the offices of Matheson Ormsby Prentice, 3 Burlington Road, Dublin
4, Ireland on or before December 18, 1998 at 2:00 p.m. Dublin time, or at such
other time or place as shall be fixed by the mutual consent of the parties.
Said date of conveyance is herein called the "Closing."
6. ACTIONS PRIOR TO CLOSING. Prior to the Closing, the Sellers and Buyer
shall cause the following to occur:
(a) Share Certificates. A&L Goodbody shall be in possession of the
------------------
Share Certificates and shall have faxed a copy of each of the Share
Certificates to the Company's legal counsel.
7. ACTIONS SUBSEQUENT TO CLOSING
(a) Reimbursement of Expenses. The Company shall reimburse the
-------------------------
Sellers for their reasonable costs incurred in relation to expenses
(including legal fees and expenses) incurred by them during discussions
with Merrill Lynch for the sale of the Shares pursuant to the Sales
Agreement and the legal fees and expenses of the Sellers incurred in
connection with the preparation, execution, and performance of this
Agreement. The fees and costs under this Section 7(a) shall not exceed
IR(pounds)13,000 and shall be wired to the account of A&L Goodbody on or
before Closing, which shall be released to Sellers as Sellers may mutually
determine (the "SELLERS' REIMBURSED EXPENSES").
(b) Share Certificates. At Closing, Sellers shall have instructed
------------------
A&L Goodbody to dispatch the Share Certificates, endorsed in favor of the
Company, to the Company or its nominee.
4
<PAGE>
8. CONDITIONS OF BUYER'S AND SELLERS' PERFORMANCE.
(a) Buyer's Conditions. The obligation of Buyer to consummate this
------------------
Agreement is subject to the satisfaction at the Closing, or waiver by Buyer
in writing, of each of the following conditions:
(i) The Sellers shall have executed this Agreement.
(ii) At the Closing date, no governmental agency or body, or
other person or entity, shall have instituted or threatened any action
to restrain or prohibit any of the transactions contemplated by this
Agreement.
(iii) The representations and warranties of the Sellers
contained in this Agreement shall be deemed to have been made again at
the Closing and shall then be true in all material respects; Sellers
and the Company shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied
with by them prior to or at the Closing; and Sellers shall not be in
default under any of the material provisions of this Agreement.
(iv) Sellers shall have executed and delivered such other
documents, instruments, certificates or agreements as shall have been
reasonably requested to consummate this transaction.
(v) All proceedings taken in connection with the transactions
contemplated herein and all instruments and documents reasonably
required in connection therewith or incident thereto shall be
satisfactory in form to Snell & Wilmer L.L.P., legal counsel for
Buyer.
(vi) Sellers shall have delivered to the Company the Share
Certificates, endorsed in favor of the Company and guaranteed by a
firm which is a member of a registered national stock exchange, or by
a commercial bank or a trust company.
(b) Sellers' Conditions. The obligation of Sellers to consummate
-------------------
this Agreement is subject to the satisfaction at the Closing, or waiver by
Sellers in writing, of each of the following conditions:
(i) The representations and warranties of Buyer contained in
this Agreement shall be deemed to have been made again at the Closing
and shall then be true in all material respects; and Buyer shall have
performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at
the Closing.
(ii) The Buyer shall have executed this Agreement.
5
<PAGE>
(iii) At the Closing date, no governmental agency or body, or
other person or entity, shall have instituted or threatened any action
to restrain or prohibit any of the transactions contemplated by this
Agreement.
(iv) Buyer shall have executed and delivered such other
documents, instruments, certificates or agreements as shall be
reasonably necessary to consummate this transaction.
(v) All proceedings taken in connection with the transactions
contemplated herein and all instruments and documents reasonably
required in connection therewith or incident thereto shall be
satisfactory in form to A & L Goodbody, legal counsel for Sellers.
(vi) Buyer shall have delivered the Purchase Price and
Sellers' Reimbursed Expenses to A & L Goodbody.
9. MISCELLANEOUS.
(a) Attorney's Fees. In any action or proceeding arising out of or
---------------
related to this Agreement, the prevailing party shall be entitled to its
reasonable attorney fees and related costs, including fees and costs
incurred prior to formal initiation of an action or proceeding, and
including fees and costs incurred for collecting or attempting to collect
any judgment or award.
(b) Brokers and Finders. Except as otherwise provided herein, each
-------------------
of the parties hereto represents and warrants that it has dealt with no
broker or finder in connection with any of the transactions contemplated by
this Agreement (except for Merrill Lynch). In the event that any finder's
fee or broker's commission shall become payable by any party hereto as a
result of such party's misrepresentation or breach of warranty, such fee
and commission shall be the sole and exclusive responsibility and liability
of such party with no right of contribution by any other party. In the
event that any finder's fee or broker's commission shall become payable by
any party, other than as set forth herein, as a result of such party's
misrepresentation or breach of warranty, the breaching party shall
indemnify, defend and hold all other parties harmless in respect of all
claims, losses, expenses and obligations (including reasonable attorney's
fees) to the extent that the same arise or result from such finder's fee or
broker's commission.
(c) Survival. All parties agree that the representations,
--------
warranties and agreements contained in this Agreement shall survive the
Closing and shall thereafter remain in full force and effect.
(d) Severability. If any term or provision of this Agreement,
------------
including the exhibits hereto, or the application thereof to any person,
property or circumstances, shall to any extent be invalid or unenforceable,
the remainder of this Agreement, including the exhibits or the application
of such term or provision to persons, property or circumstances other than
those as to which it is invalid and unenforceable, shall not be affected
thereby, and
6
<PAGE>
each term and provision of this Agreement and the exhibits shall be valid
and enforced to the fullest extent permitted by law.
(e) Notices. Any notices, requests or consents hereunder shall be
-------
deemed given, and any instrument delivered, five days after they have been
mailed by first class mail, postage prepaid, or twelve hours after such
notice has been sent by facsimile, straight telegram, telegraphic charges
prepaid, or upon receipt if delivered personally, as follows:
To Sellers: At the addresses set forth in SCHEDULE 1 hereto
with a copy to:
A&L Goodbody
1, Earlsfort Centre
Hatch Street
Dublin 2, Ireland
Attn: Steven Rodgers
Fax: 353-1-6613278
To Buyer: UniComp, Inc.
1850 Parkway Place, Suite 925
Marietta, GA 30067
Attn: Stephen A. Hafer
Fax: (770) 420-5301
with simultaneous copy to:
Snell & Wilmer L.L.P.
111 E. Broadway, Ste 900
Salt Lake City, Utah 84111
Attn: John G. Weston
Fax: (801) 237-1950
except that any of the foregoing may from time to time by written notice to
the others designate another address which shall thereupon become its
effective address for the purposes of this Section.
(f) Entire Agreement. This Agreement, including the exhibits and
----------------
documents referred to herein which are a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein and may be amended only by a written instrument executed
by the Buyer and the Sellers. There are no restrictions, promises,
warranties, covenants, or undertakings other than those expressly set forth
or referred to herein. Any Section headings or table of contents contained
in this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
7
<PAGE>
(g) Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts (including by facsimile), each of which shall be
deemed an original but all of which together shall constitute one and the
same instrument.
(h) Binding Affect. This Agreement shall inure to the benefit of
--------------
and be binding upon the Sellers and Buyer and their respective successors,
but shall not inure to the benefit of anyone other than the parties signing
this Agreement and their respective successors.
(i) Governing Law. This Agreement shall be governed by the laws of
-------------
the State of Colorado.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
BUYER:
UNICOMP, INC.
A Colorado Corporation
By:
-----------------------------
Its:
-----------------------------
SELLERS:
THE GOVERNOR AND COMPANY OF DCC BUSINESS EXPANSION FUND LIMITED
THE BANK OF IRELAND
By: By:
----------------------------- -----------------------------
Its: Its:
----------------------------- -----------------------------
DCC PLC SMURFIT VENTURE INVESTMENTS LIMITED
By: By:
----------------------------- -----------------------------
Its: Its:
----------------------------- -----------------------------
ENTERPRISE IRELAND
By:
-----------------------------
Its:
-----------------------------
8
<PAGE>
SCHEDULE 1
SHARES OF
UNICOMP, INC.
--------------
SHAREHOLDER NAME & ADDRESS COMMON STOCK PURCHASE PRICE
-------------------------- -------------- --------------
The Governor & Company of the Bank of Ireland 27,695 IR(pounds)139,375
Baggot Street
Dublin 2
Fax: 353-1-661-5992 (F.A.O. Kim Lloyd)
DCC Business Expansion Fund Limited 9,936 IR(pounds)50,000
DCC House
Brewery Road
Stillorgan
County Dublin
Fax: 353-1-283-1017 (F.A.O. Gerard Whyte)
DCC plc 15,897 IR(pounds)80,000
DCC House
Brewery Road
Stillorgan
County Dublin
Fax: 353-1-283-1017 (F.A.O. Gerard Whyte)
Smurfit Venture Investments Limited 24,839 IR(pounds)125,000
Clanwilliam House
2 Clanwilliam Place
Dublin 2
Fax: 353-1-662-8700 (F.A.O. Frank Lowe)
Enterprise Ireland 12,419 IR(pounds)62,500
Wilton Park House
Wilton Place
Dublin 2
Fax: 353-1-808-2802 (F.A.O. Ann Goulding)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED NOVEMBER 30,
1998.
</LEGEND>
<CIK> 0000792341
<NAME> UNICOMP, INC.
<MULTIPLIER> 1,000
<CURRENCY> USA
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> NOV-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,003
<SECURITIES> 0
<RECEIVABLES> 9,492
<ALLOWANCES> 347
<INVENTORY> 4,108
<CURRENT-ASSETS> 15,418
<PP&E> 6,338
<DEPRECIATION> 2,733
<TOTAL-ASSETS> 34,173
<CURRENT-LIABILITIES> 13,118
<BONDS> 0
0
3,000
<COMMON> 80
<OTHER-SE> 15,113
<TOTAL-LIABILITY-AND-EQUITY> 34,173
<SALES> 7,441
<TOTAL-REVENUES> 22,567
<CGS> 9,723
<TOTAL-COSTS> 22,158
<OTHER-EXPENSES> 395
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 379
<INCOME-PRETAX> 14
<INCOME-TAX> 0
<INCOME-CONTINUING> 14
<DISCONTINUED> (256)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (242)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
