SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
AMENDMENT No. 2
ON
FORM 8-K/A
CURRENT REPORT
----------------------------
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
December 22, 1994
Lasergate Systems, Inc.
------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Florida 0-15873 59-2543206
- ---------------------------- --------- ------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File No.) Identification No.)
28050 U.S. 19 North, Suite 502, Clearwater, Florida 34621
- ----------------------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
(813) 725-0882
--------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
----------------------------------
(Former Name or Former Address, if Changed Since Last Report)
-1-
<PAGE>
Item 7. Financial Statements and Pro Forma Financial Information
(a) Audited financial statements of Delta Information Services, Inc.
Auditor's report
Balance sheets - September 30, 1994 and 1993
Statement of retained earnings for the year ended September 30,
1994
Statement of income for the years ended September 30, 1994 and
1993
Statement of changes in financial position for the years
ended September 30, 1994 and 1993
Notes to financial statements
(b) Pro forma financial information
Unaudited Interim Condensed Pro Forma Combined Balance Sheet as
of September 30, 1994
Unaudited Interim Condensed Pro Forma Combined Statement of
Operations for the nine months ended September 30, 1994
Unaudited Condensed Pro Forma Combined Statement of Operations
for the year ended December 31, 1993
Note - Interim condensed financial statements of Delta as of September 30, 1994
are not presented due to Delta's year end being September 30, 1994.
-2-
<PAGE>
[LETTERHEAD OF HATHERELL CAREY CHARTERED ACCOUTANTS]
Hatherell Carey 400 - 1151 Florence Street,
CHARTERED ACCOUNTANTS London, Ontario N5W 2M7
(519) 659-2340
(519) 659-2342 - FACSIMILE
AUDITORS' REPORT
To the Shareholders of
Delta Information Services Inc.:
We have audited the balance sheet of Delta Information Services Inc. as at
September 30, 1993 and September 30, 1994 and the statements of retained
earnings, income and changes in financial position for the years then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. our audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these financial statements present fairly, in all material
respects the financial position of the company as at September 30, 1993 and
September 30, 1994 and the results of its operations and changes in financial
position for the years then ended in accordance with Canadian generally accepted
accounting principles.
London, Canada /s/ Hatherell Carey
December 5, 1994 Chartered Accountants
F-1
<PAGE>
<TABLE>
<CAPTION>
DELTA INFORMATION SERVICES INC.
(incorporated under the laws of Ontario)
BALANCE SHEET - SEPTEMBER 30, 1994
(In Canadian Dollars)
1994 1993
ASSETS ---- ----
CURRENT ASSETS
<S> <C> <C>
Cash $ 54,831 $128,003
Income taxes recoverable 15,738 851
Accounts receivable 45,761 52,714
Inventory 20,500 27,500
--------- --------
136,830 209,068
--------- --------
CAPITAL ASSETS (note 2) 24,414 30,388
--------- --------
OTHER ASSET
Goodwill 1 1
--------- --------
$161,245 $239,457
========= ========
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 17,997 $ 88,391
Deferred revenue 31,018 33,739
--------- --------
49,015 122,130
--------- --------
PAYABLE TO SHAREHOLDERS, without
fixed interest rate or due date 30,503 5,503
--------- --------
TOTAL LIABILITIES 79,518 127,633
--------- --------
SHAREHOLDERS' EQUITY
STATED CAPITAL
Authorized -
Unlimited number of common shares
Issued -
182 common shares 60,100 60,100
RETAINED EARNINGS 21,627 51,724
--------- --------
81,727 111,824
--------- --------
$161,245 $239,457
========= ========
</TABLE>
See accompanying notes.
ON BEHALF OF THE BOARD:
- ---------------------
Director
- ---------------------
Director
F-2
<PAGE>
<TABLE>
<CAPTION>
DELTA INFORMATION SERVICES INC.
STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1994
(In Canadian Dollars)
1994 1993
---------------------- ---------------------
$ % $ %
- - - -
<S> <C> <C> <C> <C>
REVENUE
Sales 1,041,309 100.0 1,548,923 100.0
--------- ----- --------- -----
COST OF SALES
Inventory-beginning of year 27,500 2.6 17,000 1.1
Purchases 456,304 43.8 803,198 51.9
------- ---- ------- ----
483,804 46.4 820,198 53.0
Inventory - end of year 20,500 1.9 27,500 1.8
-------- ----- -------- -----
463,304 44.5 792,698 51.2
------- ---- ------- ----
GROSS PROFIT 578,005 55.5 756,225 48.8
------- ---- ------- ----
EXPENSES
Salaries and employee
benefits 310,118 29.8 314,539 20.4
Travel and promotion 75,356 7.2 80,140 5.2
Sales commissions 58,895 5.7 100,226 6.5
Telephone 18,454 1.8 19,213 1.2
Rent 15,959 1.5 15,538 1.0
Advertising 15,111 1.5 23,955 1.6
Consulting fees 15,093 1.4 19,270 1.2
Professional fees 10,000 1.0 3,392 .2
Insurance 9,485 .9 11,523 .7
Amortization 8,048 .8 10,745 .7
Office supplies 5,838 .6 3,241 .2
Freight 4,157 .4 6,191 .4
Dues and subscriptions 1,608 .1 2,780 .2
Business taxes 1,453 .1 764 -
Bank charges and interest 1,438 .1 3,724 .2
Vehicle expense 1,389 .1 498 -
Bad debt expense - - 15,189 1.0
Miscellaneous - - 66 -
------- ---- ------- -----
552,402 53.0 630,994 40.7
------- ---- ------- -----
Income Before Income Taxes 25,603 2.5 125,231 8.1
Income taxes 5,700 .6 24,000 1.6
-------- ---- ------- ----
NET INCOME FOR THE YEAR 19,903 1.9 101,231 6.5
======== ==== ======= ====
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
DELTA INFORMATION SERVICES INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
YEAR ENDED SEPTEMBER 30, 1994
(In Canadian Dollars)
1994 1993
---- ----
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
(A) OPERATIONS $(46,098) $150,335
(B) INVESTMENTS 25,000 (2,499)
(C) FINANCING (52,074) (50,000)
-------- --------
INCREASE (DECREASE) IN CASH (73,172) 97,836
CASH - BEGINNING OF YEAR 128,003 30,167
-------- --------
CASH - END OF YEAR $ 54,831 $128,003
======== ========
(A) OPERATIONS:
Net income for the year $ 19,903 $101,231
Add charge to income not representing
an outlay of working capital
- Amortization 8,048 10,745
Working capital provided from operations 27,951 111,976
-------- --------
Add (deduct) cash provided by
(used for) changes in other
current assets and liabilities
- Accounts receivable 6,953 (18,996)
- Income taxes recoverable (14,887) 13,548
- Inventory 7,000 (10,500)
- Accounts payable and accrued liabilities (70,394) 28,857
- Deferred revenue (2,721) 25,450
-------- --------
(74,049) 38,359
-------- --------
$(46,098) $150,335
======== =======
(B) INVESTMENTS:
Increase (decrease) in
payable to shareholders $ 25,000 $ (2,499)
======== ========
(C) FINANCING:
Purchase of capital assets $ (2,074) $ -
Dividend paid (50,000) (50,000)
-------- --------
$(52,074) $(50,000)
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
DELTA INFORMATION SERVICES INC.
STATEMENT OF RETAINED EARNINGS
YEAR ENDED SEPTEMBER 30, 1994
(In Canadian Dollars)
1994 1993
------ ------
<S> <C> <C>
BALANCE - BEGINNING OF YEAR
-As Previously Reported $ 51,724 $ 17,993
Adjustment for revised estimate
of opening inventory - 17,500
-------- -------
Balance - Beginning Of Year (Restated) 51,724 493
Net income for the year 19,903 101,231
-------- -------
71,627 101,724
Dividend paid 50,000 50,000
-------- -------
BALANCE - END OF YEAR $21,627 $ 51,724
======== =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
DELTA INFORMATION SERVICES INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1994
(In Canadian Dollars)
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Revenue Recognition
The company recognizes revenue using the percentage of completion
method. Revenues are recognized as the hardware costs are incurred and the
steps to install the software system are completed.
(b) Software Development
Software development expenditures are charged to operations as incurred.
(c) Inventory
Inventory is stated at the lower of cost and net realizable value.
(d) Capital Assets
Capital assets are recorded at cost. Amortization is provided by the
declining-balance method using the following annual rates:
Automotive equipment 30%
Furniture and fixtures 20%
2. CAPITAL ASSETS
<TABLE>
<CAPTION>
1994 1993
----------------------------------- -------
Accumulated Net Book Net Book
Cost Amortization Value Value
---- ------------ ------- -------
<S> <C> <C> <C> <C>
Automotive equipment $ 29,624 $ 17,286 $ 12,338 $ 17,626
Furniture and fixtures 34,886 22,810 12,076 12,762
--------- --------- --------- ---------
$ 64,510 $40,096 $24,414 $30,388
======== ======= ======= =======
</TABLE>
F-6
<PAGE>
DELTA INFORMATION SERVICES INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
YEAR ENDED SEPTEMBER 30, 1994
(In Canadian Dollars)
3. BANK SECURITY
The company has provided a general security agreement and two of the
shareholders have provided lodgement of title over their personal residence
for bank operating line facilities which are not currently being used.
4. OPERATING LEASE OBLIGATION
The company is committed to an annual lease payment of $7,534 for
1995.
F-7
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED CONDENSED PRO FORMA COMBINED BALANCE SHEET
September 30, 1994
The following unaudited condensed pro forma combined balance sheet is based on
the individual interim unaudited balance sheet of Lasergate Systems, Inc. and
Subsidiaries ("Lasergate") as contained in Form 10-QSB filed for the nine months
ended September 30, 1994 and the audited balance sheet of Delta Information
Services, Inc. ("Delta") for the year ended September 30, 1994 (converted to
U.S. dollars - see Note 1), and has been prepared to reflect the acquisition of
Delta by Lasergate as of September 30, 1994 after giving effect to the pro forma
adjustments described in Note 2 as if the acquisition has occurred on September
30, 1994. In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma information. This statement should be
read in conjunction with the aforementioned Lasergate 10-QSB, as recently filed,
and the Delta financial statements and notes thereto, the latter included
elsewhere in this Filing.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pro Froma
Historical (unaudited)
-------------------------- --------------------------
Lasergate Delta Adjustments
(unaudited) Note 1 Note 2 Combined
----------- ------ ----------- --------
ASSETS
Current assets:
Cash: $ 65,533 $ 40,860 $ (40,860)(a) $ 65,533
500,000 (b)
(500,000)(b)
Other current assets 484,597 61,106 (61,106)(a) 484,597
--------- ---------- --------- ---------
Total current assets 550,130 101,966 (101,966) 550,130
--------- ---------- --------- ---------
Property and equipment, net 20,166 18,193 (18,193)(a) 20,166
Investment in joint venture 3,456 3,456
Other assets, net 259,619
Intangible Assets 1 (1)(a) 1,228,976
1,200,000 (c)
--------- ---------- --------- ---------
Total assets $ 862,347 $120,160 $1,079,840 $2,062,347
========= ========== ========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities $ 978,088 $ 36,526 $ (36,526)(a) $ 978,088
--------- ---------- --------- --------
Total current liabilities 978,088 36,526 (36,526) 978,088
--------- ---------- --------- --------
Long-term liabilities 1,346,770 22,730 (22,730)(a) 1,346,770
Common stock subject to put
options 210,000 (d) 210,000
Stockholders' equity
(deficit) (1,462,511) 60,904 (60,904)(a) (477,511)
500,000 (c)
700,000 (c)
(210,000)(d)
--------- ---------- --------- --------
Total liabilities and
stockholders' (deficit) $ 862,347 $120,160 $1,079,840 $2,062,347
========== ======== ========== ==========
</TABLE>
PF-1
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED CONDENSED PRO FORMA COMBINED
BALANCE SHEET
September 30, 1994
NOTE 1. - FOREIGN CURRENCY TRANSLATION
The audited balance sheet of Delta as of September 30, 1994 has been converted
from Canadian dollars to U.S. dollars based on the exchange rate in effect on
that date.
NOTE 2. - PRO FORMA ADJUSTMENTS
Introduction
- ------------
On December 22, 1994, Lasergate acquired the stock of Delta for total
consideration of $1.2 million. The purchase price consisted of cash of $500,000
(see (b)) and a promissory note for $700,000, convertible into 100,000 shares of
Lasergate's common stock. Such promissory note was immediately converted into
common stock. The value of the common stock ($7 per share) was determined by
Lasergate's Board of Directors based upon the current bid/ask price as adjusted
to reflect that these shares represent a large block of Lasergate's common
stock, the shares are restricted as to resale, and other factors.
(a) Reflects adjustment to eliminate assets and liabilities of Delta not
acquired by Lasergate, along with the balance in stockholders' equity
immediately prior to the acquisition.
(b) Cash of $500,000 to fund that portion of the Delta acquisition was
obtained as a result of Lasergate's public offering which closed October
25, 1994. Net proceeds from the sale of 920,000 units was $4,554,000. Only
the aforementioned $500,000 has been presented as a pro forma adjustment,
along with the equivalent number of shares of common stock.
(c) The purchase price of Delta was allocated based on the excess of the
purchase price over the fair value of net tangible assets acquired (no
tangible assets acquired). Such excess was allocated on a preliminary
basis to the following components based on their individual estimated fair
values:
<TABLE>
<CAPTION>
Estimated Amortization
Allocation useful life Method
---------- ----------- -------------
<S> <C> <C> <C>
Computer software $ 600,000 5-7 years Straight line
Non-competition agreement 85,000 3 years Straight line
Customer list 75,000 3 years Straight line
Customer support contracts 50,000 1 year Straight line
Goodwill 390,000 15 years Straight line
---------
$1,200,000
=========
</TABLE>
PF-2
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED CONDENSED PRO FORMA
COMBINED BALANCE SHEET
September 30, 1994
(d) In connection with the acquisition, the sellers were granted a put option
to sell to the Company up to 10,000 shares of the Company's common stock
at $7 per share each year for the next three years. The put option has an
aggregate value of $210,000 and represents the amount the Company would be
required to pay if all the put options were exercised.
(e) Delta is a corporation organized under the laws of Ontario, Canada. For
Canadian income tax purposes, the acquisition is treated as a taxable
purchase of Delta stock which results in a carryover basis in its assets
and liabilities. Accordingly, the potential tax benefits associated with
the allocation of the purchase price discussed in Note 2(c) will not be
realized for Canadian income tax purposes.
Management's tentative assessment of the tax posture of the transaction is
that the difference between financial reporting and Canadian tax bases of
the assets and liabilities is permanent in nature. Accordingly, no
deferred taxes have been provided.
For U.S. income tax purposes, Lasergate will elect under Internal Revenue
Code Sec.338 to treat the transaction as a deemed purchase of assets for
an amount equal to their fair market value. This will result in a step-up
of the assets and liabilities of Delta to fair market value. After the
step-up under Sec.338, no difference between financial reporting and U.S.
income tax bases of the assets and liabilities will exist.
At September 30, 1994 Lasergate has a net operating loss (NOL)
carryforward of approximately $5,000,000 for U.S. income tax purposes. A
deferred tax benefit has been determined based on the difference between
the financial reporting and tax bases of assets and liabilities as
measured by the enacted tax rate which will be in effect when these
differences are realized. Neither Lasergate nor Delta can reasonably
predict when they can utilize the NOL carryforward and, therefore, an
equivalent valuation allowance has been recognized against the deferred
tax benefit (i.e., no income tax asset or liability presented).
PF-3
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
INTERIM UNAUDITED CONDENSED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
Nine months ended September 30, 1994
The following unaudited condensed combined pro forma statement of operations is
based on the individual unaudited statement of operations of Lasergate Systems,
Inc. and Subsidiaries ("Lasergate") as contained in Form 10-QSB for the nine
months ended September 30, 1994 and the audited statement of income of Delta
Information Services, Inc. ("Delta") for the year ended September 30, 1994
(converted to U.S. dollars - see Note 1 and conformed to Lasergate's accounting
period - see Note 2), after giving effect to the pro forma adjustments described
in Note 3 as if the acquisition had occurred on January 1, 1993. In the opinion
of management, all adjustments have been made that are necessary to present
fairly the pro forma information. This statement should be read in conjunction
with the aforementioned Lasergate 10-QSB and Delta financial statements and
notes thereto, the latter included elsewhere in this Filing.
<TABLE>
<CAPTION>
Historical Pro Forma (Unaudited)
--------------------------------------------- --------------------
Conforming
Lasergate Delta Adjustments Delta, Adjustments
(unaudited) Note 1 Note 2 as Conformed Note 3 Combined
--------- ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 865,499 $778,274 $(499,836) $ 278,438 $ 1,143,937
Cost of goods sold 401,317 346,273 (200,973) 145,300 546,617
---------- ---------- ------- ------- ------------
Gross profit 464,182 432,001 (298,863) 133,138 597,320
Seller, general and 110,300 (a)
administrative (179,841)(b)
1,208,396 412,865 (118,848) 294,017 187,000 (c) 1,619,872
---------- ---------- ------- ------- -------- ------------
Operating income
(loss) (744,214) 19,136 (180,015) (160,879) (117,459) (1,022,552)
Other expense
Interest expense 68,170 - - - - 68,170
---------- ---------- ------- ------- ------- ------------
Income (loss) before
taxes (812,384) 19,136 (180,015) (160,879) (117,459) (1,090,722)
Income taxes(benefit) - 4,260 (37,282) (33,022) 33,022(d)(1) -
---------- ---------- ------- ------- ------- ------------
Net income (loss) $ (812,384) $ 14,876 $(142,733) $(127,857)$(150,481) $(1,090,722)
========== =========== ======== ======= ======= ============
Loss per common
share $ (.73) $ (.84)
========== ============
Weighted average
common shares
outstanding
(Note 4) 1,107,248 190,909 1,298,157
========== ======= ============
</TABLE>
PF-4
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED CONDENSED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
September 30, 1994
NOTE 1. - Reflects Delta statement of income converted from Canadian dollars
to U.S. dollars based on the average exchange rate for the period. It
should be noted that there are no significant adjustments between
Canadian generally accepted accounting principles (GAAP) and U. S.
GAAP. Accordingly, no adjustments are necessary.
NOTE 2. - Reflects adjustments necessary to conform the Delta statement of
income for the year ended September 30, 1994 to Lasergate's accounting
period (nine months ended September 30, 1994). These adjustments have
been derived from unaudited financial information for Delta.
NOTE 3. - Reflects adjustments for the consummation of the acquisition as if
it had occurred at January 1, 1993, as follows:
(a)Consulting agreements entered into between Lasergate and two (2)
former Delta employees.
(b)Reduction in Delta expenses, which would not have been incurred
subsequent to the acquisition due to the elimination of duplicate
and/or redundant costs as follows:
<TABLE>
<S> <C>
Salaries and benefits (i) $161,000
Consulting expense 9,749
Rent 9,092
--------
$179,841
========
</TABLE>
(a)No personnel were transferred over except these two former
employees who entered into consulting agreements at (a).
(c)Incremental amortization based upon the preliminary allocation of
the total purchase price and amortization periods as follows:
<TABLE>
<CAPTION>
Preliminary
Estimated Incremental
Allocation useful life Amortization
---------- ----------- ------------
<S> <C> <C> <C>
Computer software $ 600,000 5-7 years $ 90,000
Non-competition agreement 85,000 3 years 21,250
Customer list 75,000 3 years 18,750
Customer support contracts 50,000 1 year 37,500
Goodwill 390,000 15 years 19,500
--------- -------
$1,200,000 $187,000
========= =======
</TABLE>
PF-5
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED CONDENSED PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
September 30, 1994
(d)1. Reflects adjustment necessary for presentation of combined statement of
operations. There is no income tax expense or benefit on a combined basis
(see Note 3 (d)(2)).
(d)2. Delta is a corporation organized under the laws of Ontario, Canada. For
Canadian income tax purposes, the acquisition is treated as a taxable
purchase of Delta stock which results in a carryover basis in its assets
and liabilities. Accordingly, the potential tax benefits associated with
the allocation of the purchase price discussed in Note 2(c) will not be
realized for Canadian income tax purposes.
Management's tentative assessment of the tax posture of the transaction is
that the difference between financial reporting and Canadian tax bases of
the assets and liabilities is permanent in nature. Accordingly, no
deferred taxes have been provided.
For U.S. income tax purposes, Lasergate will elect under Internal Revenue
Code Sec. 338 to treat the transaction as a deemed purchase of assets for
an amount equal to their fair market value. This will result in a step-up
of the assets and liabilities of Delta to fair market value. After the
step-up under Sec.338, no difference between financial reporting and U.S.
income tax bases of the assets and liabilities will exist.
At September 30, 1994, Lasergate has a net operating loss (NOL)
carryforward of approximately $5,000,000 for U.S. income tax purposes. A
deferred tax benefit has been determined based on the difference between
the financial reporting and tax bases of assets and liabilities as
measured by the enacted tax rate which will be in effect when these
differences are realized. Neither Lasergate nor Delta can reasonably
predict when they can utilize the NOL carryforward and, therefore, an
equivalent valuation allowance has been recognized against the deferred
tax benefit (i.e., no income tax provision presented).
NOTE 4. - Lasergate's public offering, which closed October 25, 1994, for the
sale of 920,000 units (each consisting of one share of common
stock and two warrants, each to purchase one share of common stock)
has been reflected in the computation of weighted average shares
outstanding to the extent of the $500,000 of cash utilized in the
acquisition of Delta ($500,000 cash / $5.50 per unit offering price
equals 90,909 shares accounted for as being issued and outstanding as
of the beginning of the period). The computation of weighted average
shares outstanding also reflects the 100,000 shares issued in
connection with the Delta acquisition as being issued and outstanding
as of the beginning of the period.
PF-6
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1993
The following unaudited condensed combined pro forma statement of operations is
based on the individual audited statement of operations of Lasergate Systems,
Inc. and Subsidiaries ("Lasergate") as contained in Form 10-KSB for the year
ended December 31, 1993 and the audited income statement of Delta Information
Services, Inc. ("Delta") for the year ended September 30, 1993 (converted to
U.S. dollars - see Note 1 and conformed to Lasergate's accounting period - see
Note 2), after giving effect to the pro forma adjustments described in Note 3 as
if the acquisition had occurred on January 1, 1993. In the opinion of
management, all adjustments have been made that are necessary to present fairly
the pro forma information. This statement should be read in conjunction with the
aforementioned Lasergate 10-KSB and Delta financial statements and notes
thereto, the latter included elsewhere in this Filing.
<TABLE>
<CAPTION>
Historical Pro Forma (Unaudited)
------------------------------------------- --------------------
Conforming
Lasergate Delta Adjustments Delta, Adjustments
(unaudited) Note 1 Note 2 as Conformed Note 3 Combined
--------- ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 1,557,819 $1,171,760 $(22,162) $1,149,598 $ 2,707,417
Cost of goods sold 1,226,144 599,676 (5,712) 593,964 1,820,108
----------- ---------- ----------- ------- -----------
Gross profit 331,675 572,084 (16,450) 555,634 887,309
Seller, general and 145,400 (a)
administrative (299,591)(b)
2,037,067 477,347 11,582) 488,929 249,333 (c) 2,621,138
----------- ---------- ----------- ------- -------- -----------
Operating income
(loss) (1,705,392) 94,737 (28,032) 66,705 (95,142) (1,733,829)
Other expense
Interest expense 47,580 - - - - 47,580
----------- ---------- ----------- ------- -------- -----------
Income (loss) before
income taxes (1,752,972) 94,737 (28,032) 66,705 (95,142) (1,781,409)
Income taxes
(benefit) - 18,156 (2,720) (15,436) (15,436)(d)(1) -
----------- ---------- ----------- ------- -------- -----------
Net income (loss) $(1,752,972) $76,581 $(25,312) $(51,269) $(79,706) $(1,781,409)
=========== ========== ========== ======= ========= ===========
Loss per common
share $ (4.69) $ (3.16)
========== ============
Weighted average
common shares
outstanding (Note 4) 373,655 190,909 564,564
======= ======= ============
</TABLE>
PF-7
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
December 31, 1993
NOTE 1. - Reflects Delta statement of income converted from Canadian dollars
to U.S. dollars based on the average exchange rate for the period.
NOTE 2. - Reflects adjustments necessary to conform the Delta statement of
income for the year ended September 30, 1993 to Lasergate's accounting
period (year ended December 31, 1993). These adjustments have been
derived from unaudited financial information for Delta.
NOTE 3. - Reflects adjustments for the consummation of the acquisition as if it
had occurred at January 1, 1993, as follows:
(a)Consulting agreements entered into between Lasergate and two (2)
former Delta employees.
(b)Reduction in Delta selling, general and administrative expenses
which would not have been incurred subsequent to the acquisition
due to the elimination of duplicate and/or redundant costs.
(c)Incremental amortization based upon the preliminary allocation of
the total purchase price and amortization periods as follows:
<TABLE>
<CAPTION>
Preliminary
Estimated Incremental
Allocation useful life Amortization
---------- ----------- ------------
<S> <C> <C> <C>
Computer software $ 600,000 5-7 years $120,000
Non-competition agreement 85,000 3 years 28,333
Customer list 75,000 3 years 25,000
Customer support contracts 50,000 1 year 50,000
Goodwill 390,000 15 years 26,000
----------- ----------
$1,200,000 $249,333
========= =======
</TABLE>
(d)1. Reflects adjustment necessary for combined statement of operations
presentation. There is no income tax expense or benefit on a
combined basis (see Note 3 d(2)).
PF-8
<PAGE>
LASERGATE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
December 31, 1993
(d)2. Delta is a corporation organized under the laws of Ontario, Canada. For
Canadian income tax purposes, the acquisition is treated as a taxable
purchase of Delta stock which results in a carryover basis in its assets
and liabilities. Accordingly, the potential tax benefits associated with
the allocation of the purchase price discussed in Note 2(c) will not be
realized for Canadian income tax purposes.
Management's tentative assessment of the tax posture of the transaction is
that the difference between financial reporting and Canadian tax bases of
the assets and liabilities is permanent in nature. Accordingly, no
deferred taxes have been provided.
For U.S. income tax purposes, Lasergate will elect under Internal Revenue
Code Sec. 338 to treat the transaction as a deemed purchase of assets for
an amount equal to their fair market value. This will result in a step-up
of the assets and liabilities of Delta to fair market value. After the
step-up under Sec.338, no difference between financial reporting and U.S.
income tax bases of the assets and liabilities will exist.
At December 31, 1993, Lasergate has a net operating loss (NOL)
carryforward of approximately $4,100,000 for U.S. income tax purposes. A
deferred tax benefit has been determined based on the difference between
the financial reporting and tax bases of assets and liabilities as
measured by the enacted tax rate which will be in effect when these
differences are realized. Neither Lasergate nor Delta can reasonably
predict when they can utilize the NOL carryforward and, therefore, an
equivalent valuation allowance has been recognized against the deferred
tax benefit (i.e., no income tax provision presented).
NOTE 4. - Lasergate's public offering, which closed October 25, 1994, for the
sale of 920,000 units (each consisting of one share of common
stock and two warrants, each to purchase one share of common stock)
has been reflected in the computation of weighted average shares
outstanding to the extent of the $500,000 of cash utilized in the
acquisition of Delta ($500,000 cash / $5.50 per unit offering price
equals 90,909 shares accounted for as being issued and outstanding as
of the beginning of the period). The computation of weighted average
shares outstanding also reflects the 100,000 shares issued in
connection with the Delta acquisition as being issued and outstanding
as of the beginning of the period.
PF-9
<PAGE>
(c) Exhibits
Exhibit
Number Description
------ --------------
2.1* Stock Purchase Agreement by and among 1103065 Ontario Inc.,
Delta Information Services, Inc., James Potter, Marion
Audrey Potter and Derek Betty dated December 12, 1994
2.2* Closing Escrow Agreement by and among 1103065 Ontario Inc.,
Delta Information Services, Inc., James Potter, Marion
Audrey Potter, Derek Betty and the Registrant dated December
12, 1994
10.1* Registration Rights and Put Agreement by and among James
Potter, Marion Audrey Potter, Derek Betty and the Registrant
dated December 12, 1994
10.2* Consulting Agreement between James Potter, 1103065 Ontario
Inc. and the Registrant dated December 12, 1994
- -------------------------
*Previously filed.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LASERGATE SYSTEMS, INC.
Dated: November 16, 1995 By: /s/ Jacqueline E. Soechtig
----------------------------
Jacqueline E. Soechtig
President and Chief Executive Officer
-4-
<PAGE>
/TEXT>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000797324
<NAME> Lasergate Systems, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 65,533
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 550,130
<PP&E> 150,897
<DEPRECIATION> 130,730
<TOTAL-ASSETS> 2,062,347
<CURRENT-LIABILITIES> 978,088
<BONDS> 0
<COMMON> (267,511)
0
0
<OTHER-SE> (477,511)
<TOTAL-LIABILITY-AND-EQUITY> 2,062,347
<SALES> 1,143,937
<TOTAL-REVENUES> 1,143,937
<CGS> 546,617
<TOTAL-COSTS> 2,166,489
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,170
<INCOME-PRETAX> (1,090,722)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,090,722)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,090,722)
<EPS-PRIMARY> (.84)
<EPS-DILUTED> 0
</TABLE>
