<PAGE>
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
AMENDMENT NO. 1
TO
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
------------------
Date of Report (Date of earliest
event reported): October 31, 1996
------------------
ELTRAX SYSTEMS, INC.
--------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-22190 41-1484525
--------- ------- ----------
(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification No.)
10901 Red Circle Drive, Minnetonka, MN 55343
- -------------------------------------- -----
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: 612/945-0833
------------
<PAGE>
The undersigned registrant, Eltrax Systems, Inc. ("Eltrax"), hereby amends
the following items, financial statements, exhibits or other portions of its
Current Report on Form 8-K, initially filed with the Securities and Exchange
Commission (the "Commission") on November 12, 1996, as set forth herein. The
November 12, 1996 original filing of the Form 8-K described the registrant's
acquisition of Atlantic Network Systems, Inc ("ANS").
Item 7 of the registrant's Current Report on Form 8-K dated October 31, 1996 and
filed with the Commission on November 12, 1996, is hereby amended to include the
financial statements, the pro forma financial information and the exhibits
indicated in Item 7 below.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Combined Business
Report of Independent Accountants
Balance Sheets of ANS as of December 31, 1995 and October 31, 1996.
Statements of Income of ANS for the year ended December 31, 1995 and
the ten-month period ended October 31, 1996.
Statements of Stockholders' Equity of ANS for the year ended December
31, 1995 and the ten-month period ended October 31, 1996.
Statements of Cash Flows of ANS for the year ended December 31, 1995
and for the ten-month period ended October 31, 1996.
Notes to Combined Financial Statements.
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Balance Sheets of Eltrax as
of March 31, 1996 and September 30, 1996.
Notes to Pro Forma Combined Balance Sheets.
Unaudited Pro Forma Combined Statements of Operations of
Eltrax for the fiscal year ended March 31, 1996 and the six-months
ended September 30, 1996.
Notes to Pro Forma Combined Statements of Operations.
(c) Exhibits
27 Financial Data Schedule.
2
<PAGE>
ATLANTIC NETWORK SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report Of Independent Accountants 4
Balance Sheets As Of December 31, 1995 And October 31, 1996 5
Statements Of Income For The Year Ended December 31, 1995 And For The
Ten-Month Period Ended October 31, 1996 6
Statements Of Stockholder Equity For The Year Ended December 31, 1995 And
For The Ten-Month Period Ended October 31, 1996 7
Statements Of Cash Flows For The Year Ended December 31, 1995 And For The
Ten-Month Period Ended October 31, 1996 8
Notes To Financial Statements 9
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Atlantic Network Systems, Inc.
We have audited the accompanying balance sheets of Atlantic Network Systems,
Inc. as of October 31, 1996 and December 31, 1995, and the related statements
of income, stockholder's equity and cash flows for the ten months ended
October 31, 1996 and the year ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Atlantic Network Systems,
Inc. as of October 31, 1996 and December 31, 1995, and the results of its
operations and its cash flows for the ten months ended October 31, 1996 and
the year ended December 31, 1995, in conformity with generally accepted
accounting principles.
Raleigh, North Carolina Coopers & Lybrand L.L.P.
December 23, 1996
4
<PAGE>
ATLANTIC NETWORK SYSTEMS, INC.
BALANCE SHEETS
AS OF AS OF
DECEMBER 31, OCTOBER 31,
1995 1996
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $66,717 $143,872
Accounts receivable, net of allowances 1,962,776 1,792,231
Inventories 2,374,530 1,853,624
-------------- --------------
Total current assets 4,404,023 3,789,727
Property and equipment, net 98,605 107,935
Other assets 23,499 38,222
-------------- --------------
TOTAL ASSETS $4,526,127 $3,935,884
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Note payable - bank line of credit 1,083,576 606,636
Trade accounts payable 2,534,061 2,406,434
Accrued liabilities 150,418 188,749
-------------- --------------
Total current liabilities 3,768,055 3,201,819
-------------- --------------
Commitments and contingencies (Note 6)
Stockholder's equity:
Common stock no par value, 1,000
shares authorized, issued and outstanding 1,000 1,000
Additional paid in capital 25,807 25,807
Retained earnings 731,265 707,258
-------------- --------------
Total stockholder's equity 758,072 734,065
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $4,526,127 $3,935,884
-------------- --------------
-------------- --------------
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ATLANTIC NETWORK SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE TEN-MONTH
OR THE YEAR ENDED PERIOD ENDED
DECEMBER 31, OCTOBER 31,
1 9 9 5 1 9 9 6
------------------- -------------------
Sales, net $14,621,554 $14,865,061
Cost of sales 12,193,954 12,492,262
------------------- -------------------
Gross profit 2,427,600 2,372,799
Costs and expenses:
General and administrative 2,042,803 2,220,610
------------------- -------------------
Operating income 384,797 152,189
Interest income, net 17,488 23,804
------------------- -------------------
Net income $402,285 $175,993
------------------- -------------------
------------------- -------------------
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC NETWORK SYSTEMS, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1994 1,000 $1,000 $25,807 $690,451 $717,258
Net income -- -- -- 402,285 402,285
Dividends -- -- -- (361,471) (361,471)
------------ ------------ ------------ ------------ ------------
Balances, December 31, 1995 1,000 1,000 25,807 731,265 758,072
Net income -- -- -- 175,993 175,993
Dividends -- -- -- (200,000) (200,000)
------------ ------------ ------------ ------------ ------------
Balances, October 31, 1996
1,000 $1,000 $25,807 $707,258 $734,065
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
ATLANTIC NETWORK SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE TEN-MONTH
FOR THE YEAR ENDED PERIOD ENDED
DECEMBER 31, OCTOBER 31,
1 9 9 5 1 9 9 6
------------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $402,285 $175,993
Add (deduct) items not providing or requiring cash:
Depreciation and amortization 49,850 53,444
Provision for doubtful accounts 10,000 20,000
-
Changes in operating balance sheet accounts:
Account receivable (496,401) 150,545
Inventories (852,896) 520,906
Other assets (16,153) (14,723)
Accounts payable 1,167,983 (127,626)
Other current liabilities 79,188 38,331
----------- -----------
Net cash provided by operating
activities 343,856 816,870
Cash flows from investing activities:
Purchases of property and equipment (98,668) (62,775)
----------- -----------
Net cash used in investing (98,668) (62,775)
Cash flows from financing activities:
Change in bank line of credit 68,246 (476,940)
Dividends (361,471) (200,000)
----------- -----------
Net increase (decrease) in cash and cash equivalents (48,037) 77,155
Cash and cash equivalents, beginning of period 114,754 66,717
----------- -----------
Cash and cash equivalents, end of period $66,717 $143,872
----------- -----------
----------- -----------
Supplemental disclosure of cash flow Information:
Cash paid during the period for interest $80,170 $80,193
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. The Company:
Atlantic Network Systems, Inc. (ANS or the Company) is a North Carolina
corporation formed in February 1989 to engage in the distribution of
modems, multiplexers and other peripheral communications devices.
On October 31, 1996, 100 percent of the outstanding shares of ANS were
exchanged by the Company's shareholders for 950,000 shares of Eltrax
Systems, Inc. (Eltrax) common stock, a Minnesota corporation.
2. Summary Of Significant Accounting Policies:
Revenue Recognition:
Hardware sales and related cost of goods sold are recognized when goods are
shipped to customers. The Company records, at the time of sale, an
allowance for estimated returns of product based on historical experience.
Service revenues and related costs of services are recognized when earned.
Cash And Cash Equivalents:
Cash and cash equivalents consist of cash in banks and certificates of
deposit with maturities of three months or less. The carrying amount of
cash and cash equivalents approximates market value.
Inventories:
Inventories, consisting of equipment and peripherals held for resale, are
stated at the lower of cost or market with cost determined on an average
cost basis.
Property and Equipment:
Property and equipment are stated at cost. Depreciation is calculated
principally using methods and useful lives allowable for income tax
purposes which approximate generally accepted accounting principles. The
principal estimated useful lives used in computing depreciation provisions
are as follows:
Automobiles and trucks 5 years
Leasehold improvements 7 to 31 years
Machinery and equipment 5 to 7 years
Repairs and maintenance costs are expensed as incurred while renewals or
betterments are capitalized. Upon the sale or retirement of property and
equipment, the accounts are relieved of the cost and the related
accumulated depreciation and amortization, and any resulting gain or loss
is included in operations.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Income Taxes:
Through October 31, 1996, the Company has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue code. Under those
provisions, the Company does not pay federal or state income taxes.
Instead, the stockholders are liable for individual income taxes on their
respective shares of income from the Company. The Company files composite
income tax returns in states other than North Carolina. In these states,
the Company pays the income tax on behalf of the non-resident shareholders.
Estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from those
estimates.
3. Accounts Receivable:
Accounts receivable consist of the following:
December 31, 1995 October 31, 1996
----------------- -----------------
Trade accounts receivable $ 2,065,741 $ 1,908,364
Estimated customer credits (62,965) (56,133)
Allowance for doubtful accounts (40,000) (60,000)
------------- ------------
$ 1,962,776 $ 1,792,231
------------- ------------
------------- ------------
Certain accounts receivable are pledged as collateral (Note 9).
4. Property And Equipment:
Property and equipment consist of the following:
December 31, 1995 October 31, 1996
----------------- -----------------
Furniture, fixtures and
equipment $ 23,748 $ 25,841
Vehicles 181,639 242,320
Leasehold improvements 35,628 35,628
------------- ------------
241,015 303,789
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Accumulated depreciation and
amortization (142,410) (195,854)
------------- ------------
$ 98,605 $107,935
------------- ------------
------------- ------------
Certain equipment is pledged as collateral (Note 9).
5. Accrued Liabilities:
Accrued liabilities consist of the following:
December 31, 1995 October 31, 1996
----------------- -----------------
Accrued payroll $ 12,256 $ 11,740
Accrued commissions 63,275 73,240
Accrued Interest 10,291 10,751
Deferred Revenue 63,116 81,362
Other 1,480 11,656
------------- ------------
$150,418 $188,749
------------- ------------
------------- ------------
6. Commitments And Contingencies:
Leases:
The Company has entered into noncancellable operating leases for vehicles,
office and warehouse space. Effective May 1996, the Company began leasing
office and warehouse space from two majority shareholders (Note 8).
At December 31, 1995, including the related party lease entered into in May
1996, minimum annual rental commitments under noncancellable leases are as
follows:
Operating
Year Leases
----- -------
1997 $ 174,469
1998 121,482
1999 90,000
2000 90,000
2001 52,500
Thereafter $ 23,950
-----------
Total minimum lease
payments $ 552,401
-----------
-----------
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Total lease expense for cancelable and noncancellable operating leases in
1996 and 1995 was $139,836 and $115,747, respectively.
7. Concentrations and Credit Risk:
The Company's customers are primarily in the southeastern United States.
The two largest customers accounted for approximately 13% and 10% of
accounts receivable at December 31, 1995 and October 31, 1996,
respectively. The Company reviews a customer's credit history before
extending credit. The Company establishes allowances for doubtful accounts
based upon factors surrounding the credit risk of a specific customer.
The Company currently acquires a majority of its product from four U.S.
equipment manufacturers. For the year ended December 31, 1995
and the ten months ended October 31, 1996, approximately 77% and 67% of
sales, respectively, were comprised of product acquired from these
suppliers.
8. Related Party Transactions:
The Company entered into a lease with the two principal shareholders for an
office and warehouse facility in May 1996. The lease provides for
monthly rent in the amount of $7,500 for 60 months. The minimum annual
noncancellable lease payments shown in Note 6 include commitments
under this lease.
9. Note Payable - Bank Line of Credit:
Note payable to bank represents a revolving line of credit. Interest is
at prime plus one and one-half percent and the amount outstanding under
the note is repaid as payments are collected on outstanding accounts
receivable. The note is collateralized by accounts receivable, inventories
and equipment owned by the Company. Prior to the merger with Eltrax, the
note was personally guaranteed by the President of the Company. Further,
subsequent to the merger with Eltrax the note was paid and the line of
credit was terminated.
Stockholder salary limits imposed by bank loan covenants were exceeded by
the stockholders. The bank, however, agreed to waive the covenant
violations for the year ended 1995 related to stockholders'
compensation.
Interest expenses incurred during 1996 and 1995 $83,968 and $80,171,
respectively.
12
<PAGE>
ELTRAX SYSTEMS AND ATLANTIC NETWORK SYSTEMS, INC.
PRO FORMA FINANCIAL INFORMATION - NARRATIVE OVERVIEW
(UNAUDITED)
The following unaudited pro forma combined balance sheets as of March 31, 1996
and September 30, 1996 and statements of operations for the year ended March
31, 1996 and the six months ended September 30, 1996, combine the historical
balance sheet and statement of operations of Atlantic Network Systems, Inc.
(ANS), the historical combined balance sheet and statement of operations of
Nordata, Inc. and Rudata, Inc., dba Datatech and the historical balance sheet
and statement of operations of Eltrax Systems, Inc. (Eltrax) (collectively "the
Entities"). The unaudited pro forma balance sheets as of March 31, 1996 and
September 30, 1996 assume the Entities were combined as of the respective dates
of such balance sheets. The unaudited pro forma statements of operations for
the year ended March 31, 1996 and the six months ended September 30, 1996,
assume the Entities were combined effective April 1, 1995.
The unaudited proforma combined financial statements give effect to (i) the
acquisition of Datatech, (ii) the issuance of 1,968,000 common shares of Eltrax
common stock in connection with the acquisition of Datatech (which reflects an
adjustment to the consideration paid pursuant to an amendment to the Merger
Agreement among Eltrax and the Datatech Shareholders), (iii) the issuance of
950,000 common shares of Eltrax common stock in connection with the merger with
ANS, and (iv) other adjustments described in the accompanying notes.
The unaudited pro forma combined financial statements are not necessarily
indicative of the financial position or results of operations Eltrax as they may
be in the future or as they might have been for the periods presented had the
entities actually been combined effective April 1, 1995 or as of the dates of
the unaudited pro forma balance sheets. The unaudited pro forma combined
financial statements and accompanying notes should be read in conjunction with
the historical financial statements of Eltrax, as filed on Form 10-KSB for the
year ended March 31, 1996, and the historical financial statements of Datatech,
including the notes to such financial statements as set forth in Eltrax's Form
8-K/A dated August 12, 1996, and the historical combined financial statements of
ANS set forth elsewhere in this Form 8-K/A, respectively. The pro forma
adjustments are based upon available information and upon certain assumptions
that Eltrax management believes are reasonable in the circumstances.
The unaudited pro forma statement of operations for the six months ended
September 30, 1996, includes expenses of approximately $20,000 related to
transaction costs incurred in connection with the merger between Eltrax and ANS.
In addition, subsequent to September 30, 1996, the combined entities have
incurred or expected to incur additional transaction costs of approximately
$141,000 which will be expensed in the period incurred.
13
<PAGE>
ELTRAX SYSTEMS, INC.
PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ELTRAX DATATECH PRO FORMA PRO FORMA
HISTORICAL (1) HISTORICAL (2) ADJUSTMENTS SUBTOTAL
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 480,523 $ 972,992 $ -- $ 1,453,515
Short-term investments 1,384,886 -- (990,000) (3) 394,886
Accounts receivable, net 223,991 3,130,132 -- 3,354,123
Inventories 57,091 1,707,375 -- 1,764,466
Prepaid expenses 26,510 1,340 -- 27,850
Note receivable - current 81,832 -- -- 81,832
------------- ------------- ----------- ------------
Total current assets 2,254,833 5,811,839 (990,000) 7,076,672
Furniture, equipment and property, net 42,514 30,035 -- 72,549
Note receivable - non current 198,658 -- -- 198,658
Lease contracts receivable -- 157,890 -- 157,890
Other assets -- 10,637 -- 10,637
Deferred Income Taxes -- -- 1,342,368 (4) 1,342,368
Intangible Assets -- -- 5,377,813 (5) 5,377,813
------------- ------------- ----------- ------------
TOTAL ASSETS $ 2,496,005 $ 6,010,401 $ 5,730,181 $ 14,236,587
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable 65,537 -- -- 65,537
Accounts payable 145,006 3,542,467 701,000 (6) 4,388,473
Accrued expenses -- 312,158 -- 312,158
Deferred Income Taxes -- 444,398 -- 444,398
Income Taxes Payable -- 415,322 -- 415,322
Other current liabilities -- 13,731 -- 13,731
------------- ------------- ----------- ------------
Total current liabilities 210,543 4,728,076 701,000 5,639,619
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
Shareholders' Equity:
Series A convertible preferred stock 29,163 -- -- 29,163
Common stock 44,971 50,000 (50,000) (7) 65,651
20,680 (8)
Additional paid-in capital 7,622,100 -- 6,183,320 (8) 13,805,420
Note receivable from shareholder -- (214,433) 214,433 (7) --
Accumulated deficit (5,410,772) 1,446,758 (1,339,252) (7) (5,303,266)
------------- ------------- ----------- ------------
Total shareholders' equity 2,285,462 1,282,325 5,029,181 8,596,968
------------- ------------- ----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,496,005 $ 6,010,401 $ 5,730,181 $ 14,236,587
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
<CAPTION>
ELTRAX
ANS PRO FORMA PRO FORMA
HISTORICAL (9) ADJUSTMENTS COMBINED
------------- ----------- ------------
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ -- $ -- $ 1,453,515
Short-term investments -- -- 394,886
Accounts receivable, net 1,738,751 -- 5,092,874
Inventories 2,178,431 -- 3,942,897
Prepaid expenses -- -- 27,850
Note receivable - current -- -- 81,832
------------- ----------- ------------
Total current assets 3,917,182 0 10,993,854
Furniture, equipment and property, net 97,125 -- 169,674
Note receivable - non current -- -- 198,658
Lease contracts receivable -- -- 157,890
Other assets 27,499 -- 38,136
Deferred Income Taxes -- (82,000) (10) 1,260,368
Intangible Assets -- -- 5,377,813
------------- ----------- ------------
TOTAL ASSETS $ 4,041,806 $ (82,000) 18,196,393
------------- ----------- ------------
------------- ----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable 1,687,675 -- 1,753,212
Accounts payable 1,399,309 -- 5,787,782
Accrued expenses -- -- 312,158
Deferred Income Taxes -- -- 444,398
Income Taxes Payable -- -- 415,322
Other current liabilities 124,447 -- 138,178
------------- ----------- ------------
Total current liabilities 3,211,431 0 8,851,050
Shareholders' Equity:
Series A convertible preferred stock -- -- 29,163
Common stock 1,000 8,900 (11) 75,551
Additional paid-in capital 25,807 (8,900) (11) 13,822,327
Note receivable from shareholder -- -- --
Accumulated deficit 803,568 (82,000) (10) 4,581,698
------------- ----------- ------------
Total shareholders' equity 830,375 (82,000) 9,345,343
------------- ----------- ------------
------------- ----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,041,806 $ (82,000) $ 18,196,393
------------- ----------- ------------
------------- ----------- ------------
</TABLE>
See accompanying notes to pro forma combined balance sheet.
14
<PAGE>
ELTRAX SYSTEMS, INC.
NOTES TO PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1996
(UNAUDITED)
1. Represents the historical balance sheet of Eltrax as derived from the
Company's audited financial statements filed on Form 10-KSB for the year
ended March 31, 1996.
2. Represents the historical unaudited balance sheet of Datatech as of March
31, 1996.
3. Represents cash portion of consideration paid as part of the purchase price
of Datatech.
4. Represents the reduction of Eltrax's valuation allowance on its net
deferred tax assets since, with the addition of Datatech's taxable income,
management believes it is more likely than not that Eltrax will generate
sufficient future taxable income to realize the majority of its deferred
tax assets.
5. Represents the excess of Eltrax's purchase price over Datatech's book value
and the reduction in Eltrax's deferred tax valuation allowance (see Note 4
above) on the acquisition date. The components of the intangible assets,
which consist principally of goodwill, have been determined by Eltrax on a
preliminary basis.
6. To reflect transaction costs paid, or to be paid, by Eltrax in connection
with the Datatech acquisition.
7. To eliminate the components of shareholders' equity of Datatech acquired by
Eltrax.
8. Represents issuance of 1,968,000 share of Eltrax common stock issued in
connection with the acquisition of Datatech (which reflects an
adjustment to the consideration paid pursuant to an amendment to the
Merger Agreement among Eltrax and the Datatech Shareholders).
9. Represents the historical unaudited balance sheet of ANS as of March 31,
1996. ANS is expected to be combined with Eltrax utilizing the pooling of
interests method of accounting.
10. Represents an adjustment to reflect reduction in deferred tax associated
with tax expense related to ANS.
11. Represents an adjustment to reflect pro-rata exchange of ANS stock for
Eltrax common stock.
15
<PAGE>
ELTRAX SYSTEMS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ELTRAX DATATECH PRO FORMA PRO FORMA
HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS SUBTOTAL
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 880,304 $ 17,961,431 $ -- $ 18,841,735
Cost of sales 293,954 14,334,184 -- 14,628,138
------------- ------------- ----------- -------------
Gross Profit 586,350 3,627,247 -- 4,213,597
Operating Expenses:
Selling, general and administrative 967,607 2,713,860 -- 3,681,467
Amortization of intangible assets -- -- 325,628 (3) 325,628
Product development 103,170 -- -- 103,170
------------- ------------- ----------- -------------
Operating income (loss) (484,427) 913,387 (325,628) 103,332
Investment income (loss), net 114,135 39,429 (49,500) (4) 104,064
Gain on settlement related to past
investment losses 100,000 -- -- 100,000
------------- ------------- ----------- -------------
Income (loss) from continuing operations (270,292) 952,816 (375,128) 307,396
Discontinued digital imaging archiving operations:
Income from discontinued operations 242,013 -- -- 242,013
Gain on disposal of discontinued operations 133,214 -- -- 133,214
------------- ------------- ----------- -------------
Income before income taxes 104,935 952,816 (375,128) 682,623
Income tax expense -- 441,029 (31,360) (5) 390,469
(19,200) (6)
Net income (loss) $ 104,935 $ 511,787 $ (324,568) $ 292,154
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
Income (loss) per common share and common share equivalent:
Continuing operations ($0.04) $0.13 ($0.05) $0.04
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
Discontinued operations $0.05 $0.00 $0.00 $0.05
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
Net income (loss) per share $0.01 $0.07 ($0.05) $0.04
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
Weighted average shares outstanding (8) 7,611,473 7,611,473 7,611,473 7,611,473
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
<CAPTION>
ELTRAX
ANS PRO FORMA PRO FORMA
HISTORICAL (7) ADJUSTMENTS COMBINED
--------------- ----------- -------------
<S> <C> <C> <C>
Net Sales $ 15,235,250 $ -- $ 34,076,985
Cost of sales 12,793,198 -- 27,421,336
--------------- ----------- -------------
Gross Profit 2,442,052 -- 6,655,649
Operating Expenses:
Selling, general and administrative 2,257,629 -- 5,939,096
Amortization of intangible assets -- -- 325,628
Product development -- -- 103,170
--------------- ----------- -------------
Operating income (loss) 184,423 0 287,755
Investment income (loss), net 21,703 -- 125,767
Gain on settlement related to past
investment losses -- -- 100,000
--------------- ----------- -------------
Income (loss) from continuing operations 206,126 0 513,522
Discontinued digital imaging archiving operations:
Income from discontinued operations -- 0 242,013
Gain on disposal of discontinued operations -- -- 133,214
--------------- ----------- -------------
Income before income taxes 206,126 0 888,749
Income tax expense -- 82,000 (9) 472,469
Net income (loss) $ 206,126 $ 82,000 $ 416,280
--------------- ----------- -------------
--------------- ----------- -------------
Income (loss) per common share and common share equivalent:
Continuing operations $0.03 $0.00 $0.07
--------------- ----------- -------------
--------------- ----------- -------------
Discontinued operations $0.00 $0.00 $0.05
--------------- ----------- -------------
--------------- ----------- -------------
Net income (loss) per share $0.03 ($0.01) $0.05
--------------- ----------- -------------
--------------- ----------- -------------
Weighted average shares outstanding (8) 7,611,473 7,611,473 7,611,473
--------------- ----------- -------------
--------------- ----------- -------------
</TABLE>
See accompanying notes to pro forma combined statement of operations.
16
<PAGE>
ELTRAX SYSTEMS, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1996
1. Represents the historical results of operations of Eltrax as derived from
the Company's audited financial statements filed on Form 10-KSB for the
year ended March 31, 1996.
2. Represents the historical unaudited operating results of Datatech for the
year ended March 31, 1996.
3. Represents amortization of the excess of Eltrax's purchase price over
Datatech's net book value on the acquisition date. The allocation of the
purchase price to intangible assets has been made by Eltrax on a
preliminary basis. The excess pruchase price is being amortized on a
straight line basis over 15 years.
4. Represents a reduction of interest income, related to the $990,000 of cash
consideration paid by Eltrax in connection with the acquisition of
Datatech.
5. Represents the tax benefit related to the estimated deductible portion of
goodwill resulting from the Datatech acquisition. Approximately $1
million of goodwill is estimated to be deductible.
6. Represents the tax benefit associated with reduction of interest income.
7. Represents the historical operating results of ANS for the year ended
March 31, 1996.
8. Includes 1,968,000 shares of Eltrax common stock issued in connection with
the acquisition of Datatech (included from date of issuance and reflects
an adjustment to the consideration paid pursuant to an amendment to the
Merger Agreement among Eltrax and the Datatech Shareholders) and 950,000
shares of Eltrax common stock issued in connection with the merger with
ANS (included as if outstanding for the entire period), and 40,000 shares
expected to be issued to acquire additional assets (included as if
outstanding for the entire period).
9. Represents the tax expense associated with ANS income before income taxes.
17
<PAGE>
ELTRAX SYSTEMS, INC.
PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ELTRAX
ELTRAX ANS PRO FORMA PRO FORMA
HISTORICAL (1) HISTORICAL (2) ADJUSTMENTS COMBINED
-------------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 632,331 $ 289,182 $ -- $ 921,513
Accounts receivable, net 4,177,775 2,170,839 -- 6,348,614
Inventories 1,511,987 1,674,996 -- 3,186,983
Prepaid expenses 45,595 -- -- 45,595
Note receivable - current 98,223 -- -- 98,223
------------- ------------- ---------- ------------
Total current assets 6,465,911 4,135,017 -- 10,600,928
Furniture, equipment and property, net 91,098 127,195 637,000 (3) 855,293
Note receivable - non current 146,483 -- -- 146,483
Lease contracts receivable 34,072 -- -- 34,072
Other assets 14,185 34,999 -- 49,184
Deferred Income Taxes 1,342,368 -- (69,000) 1,273,368
Intangible Assets, net of amortization 4,407,183 -- -- 4,407,183
------------- ------------- ----------- -------------
TOTAL ASSETS $ 12,501,300 $ 4,297,211 $ 568,000 $ 17,366,511
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable -- 1,283,263 -- 1,283,263
Accounts payable 3,425,050 1,891,734 -- 5,316,784
Accrued expenses 514,030 -- -- 514,030
Unearned revenue 67,584 -- -- 67,584
Deferred Income Taxes 444,398 -- -- 444,398
Income Taxes Payable 130,669 -- -- 130,669
Other current liabilities -- 250,904 -- 250,904
------------- ------------- ----------- -------------
Total current liabilities 4,581,731 3,425,901 0 8,007,632
Noncurrent liabilites -- -- 475,000 (3) 475,000
Shareholders' Equity:
Series A convertible preferred stock -- -- -- --
Common stock 65,863 1,000 8,900 (4) 75,763
Additional paid-in capital 13,321,039 25,807 130,000 (3) 13,467,946
(8,900) (4)
Note receivable from shareholder -- -- -- --
Accumulated deficit (5,467,333) 844,503 (37,000) (6) (4,659,830)
------------- ------------- ----------- ------------
Total shareholders' equity 7,919,569 871,310 93,000 8,883,879
------------- ------------- ----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,501,300 $ 4,297,211 $ 568,000 $ 17,366,511
------------- ------------- ----------- ------------
------------- ------------- ----------- ------------
</TABLE>
See accompanying notes to pro forma combined balance sheet.
18
<PAGE>
ELTRAX SYSTEMS, INC.
NOTES TO PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
1. Represents the historical balance sheet of Eltrax as derived from the
Company's unaudited financial statements filed on Form 10-QSB for the six
months ended September 30, 1996.
2. Represents the historical unaudited balance sheet of ANS as of September
30, 1996.
3. Reflects the expected acquisition of additional assets (real estate used
in the business and a related mortgage) through the issuance of common
stock.
4. Represents an adjustment to reflect pro-rata exchange of ANS stock for
Eltrax common stock.
5. Represents an adjustment to reflect the reduction of deferred taxes
resulting from the utilization of net operating loss carryforwards.
6. Represents an adjustment to reflect pro forma adjustments to net income
set forth in the pro forma combined statement of operations for the six
months ended September 30, 1996.
19
<PAGE>
ELTRAX SYSTEMS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ELTRAX DATATECH PRO FORMA PRO FORMA
HISTORICAL (1) HISTORICAL (2) ADJUSTMENTS SUBTOTAL
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 9,145,776 $ 3,009,721 $ -- $ 12,155,497
Cost of sales 7,173,402 2,454,760 -- 9,628,162
-------------- -------------- -------------- --------------
Gross Profit 1,972,374 554,961 -- 2,527,335
Operating Expenses:
Selling, general and administrative 1,938,472 474,373 -- 2,412,845
Amortization of intangible assets 122,110 -- 40,704 (4) 162,814
-------------- -------------- -------------- --------------
Operating income (loss) (88,208) 80,588 (40,704) (48,324)
Investment income (loss), net 31,647 4,601 (3,188)(5) 33,060
-- -- -- --
-------------- -------------- -------------- --------------
Income (loss) from continuing operations (56,561) 85,189 (43,892) (15,264)
Discontinued digital imaging archiving operations:
Income from discontinued operations -- -- -- --
Gain on disposal of discontinued operations -- -- -- --
-------------- -------------- -------------- --------------
Income before income taxes (56,561) 85,189 (43,892) (15,264)
Income tax expense -- -- -- --
Net income (loss) $ (56,561) $ 85,189 $ (43,892) $ (15,264)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Income (loss) per common share and
common share equivalent:
Continuing operations ($0.01) $0.01 ($0.01) ($0.00)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Discontinued operations $0.00 $0.00 $0.00 $0.00
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income (loss) per share ($0.01) $0.01 ($0.01) ($0.00)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Weighted average shares outstanding (7) 8,461,513 8,461,513 8,461,513 8,461,513
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See accompanying notes to pro forma combined statement of operations.
<TABLE>
<CAPTION>
ELTRAX
ANS PRO FORMA PRO FORMA
HISTORICAL (3) ADJUSTMENTS COMBINED
-------------- -------------- --------------
<S> <C> <C> <C>
Net Sales $ 9,228,974 $ -- $ 21,384,471
Cost of sales 7,775,891 -- 17,404,053
-------------- -------------- --------------
Gross Profit 1,453,083 -- 3,980,418
Operating Expenses:
Selling, general and administrative 1,323,154 (32,000)(6) 3,703,999
Amortization of intangible assets -- -- 162,814
-------------- -------------- --------------
Operating income (loss) 129,929 (32,000) 113,605
Investment income (loss), net 11,006 -- 44,066
-- -- --
-------------- -------------- --------------
Income (loss) from continuing operations 140,935 (32,000) 157,671
Discontinued digital imaging archiving operations:
Income from discontinued operations -- -- --
Gain on disposal of discontinued operations -- -- --
Income before income taxes 140,935 (32,000) 157,671
Income tax expense -- 69,000 (7) 69,000
Net income (loss) $ 140,935 $ (37,000) $ 88,671
-------------- -------------- --------------
-------------- -------------- --------------
Income (loss) per common share and
common share equivalent:
Continuing operations $0.02 $0.00 $0.02
-------------- -------------- --------------
-------------- -------------- --------------
Discontinued operations $0.00 $0.00 $0.00
-------------- -------------- --------------
-------------- -------------- --------------
Net income (loss) per share $0.02 ($0.00) $0.01
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average shares outstanding (7) 8,461,513 8,461,513 8,461,513
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
See accompanying notes to pro forma combined statement of operations.
20
<PAGE>
ELTRAX SYSTEMS, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,1996
(UNAUDITED)
1. Represents the historical results of operations of Eltrax, including the
results of operations of Datatech subsequent to May 17, 1996, the date of
acquisition by Eltrax, as derived from the Company's unaudited statement
of operations included in its Form 10-QSB for the six months ended
September 30, 1996.
2. To reflect the unaudited results of operations of Datatech for the period
beginning April 1, 1996, through May 17, 1996.
3. Represents the historical unaudited results of operations of ANS for the
six months ended September 30, 1996.
4. Represents amortization of the excess of Eltrax's purchase price over
Datatech's net book value on the acquisition date. The allocation of the
purchase price to intangible assets has been made by Eltrax on a
preliminary basis. The excess purchase price is being amortized on a
straight line basis over 15 years.
5. Represents a reduction of interest income related to the $990,000 of cash
consideration paid by Eltrax in connection with the acquisition of
Datatech.
6. Represents an adjustment related to deprecation, net of a reduction in
lease expenses which would have resulted had the merger between Eltrax and
ANS been completed effective April 1, 1995.
7. Represents the tax expense associated with ANS operations for the six month
period.
8. Includes 1,968,000 shares of Eltrax common stock issued in connection with
the acquisition of Datatech (include from date of issuance and reflects
an adjustment to the consideration paid pursuant to an amendment to the
Merger Agreement among Eltrax and the Datatech Shareholders) and 950,000
shares of Eltrax common stock issued in connection with the merger with
ANS, and 40,000 shares expected to be issued to acquire additional assets
(included as if outstanding for the entire period).
21
<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.
ELTRAX SYSTEMS, INC.
/s/ Mack V. Traynor, III
----------------------------------------
Mack V. Traynor, III
President and Chief Executive Officer
Dated: January 13, 1997
22
<PAGE>
INDEX TO EXHIBITS
- -----------------
Exhibit Page
- ------- ----
27.0 Financial Data Schedule........................................... 24
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 143872
<SECURITIES> 0
<RECEIVABLES> 1792231
<ALLOWANCES> 0
<INVENTORY> 1853624
<CURRENT-ASSETS> 3789727
<PP&E> 107935
<DEPRECIATION> 0
<TOTAL-ASSETS> 3935884
<CURRENT-LIABILITIES> 3201819
<BONDS> 0
0
0
<COMMON> 1000
<OTHER-SE> 733065
<TOTAL-LIABILITY-AND-EQUITY> 3935884
<SALES> 14865061
<TOTAL-REVENUES> 14865061
<CGS> 12492262
<TOTAL-COSTS> 12492262
<OTHER-EXPENSES> 2220610
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 175993
<INCOME-TAX> 0
<INCOME-CONTINUING> 175993
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175993
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
