<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 9, 1996
Commission File Number: 33-17856-C
INNOVATIVE TECH SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
ILLINOIS 65-0071222
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
444 JACKSONVILLE ROAD, SUITE 200
WARMINSTER, PENNSYLVANIA 18974
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 441-5600
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Report constitutes Amendment No. 1 to the Current Report on Form 8-K dated
August 9, 1996 (the "Form 8-K") of Innovative Tech Systems, Inc., a Illinois
corporation (the "Company"), relating to the purchase by the Company on July 26,
1996 of all of the issued and outstanding common stock of Facility Management
Systems, Inc., a Illinois corporation. This Report contains the financial
statements and pro forma financial information required to be provided under
Item 7 of the Form 8-K. Other than as set forth herein, there has been no change
in the information set forth in the Form 8-K.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following financial statements and pro forma financial
information are filed as part of this Report:
<TABLE>
<CAPTION>
(a) Financial Statements of Business Acquired:
Page(s)
------
<S> <C>
Report of Independent Accountants 5
Balance Sheets of Facility Management Systems, Inc. at January 31, 1995 6
and 1996 and July 31, 1996 (unaudited)
Statements of Operations of Facility Management Systems, Inc. for the years 7
ended January 31, 1994, 1995 and 1996 and the unaudited six months ended July 31, 1995
and 1996
Statements of Cash Flows of Facility Management Systems, Inc. for the years 8
ended January 31, 1994, 1995 and 1996 and the unaudited six months ended July 31, 1995
and 1996
Statements of Changes in Shareholders' (Deficiency) Equity of Facility Management Systems, 9
Inc. for the years ended January 31, 1994, 1995 and 1996 and the unaudited six
months ended July 31, 1996
Notes to Financial Statements 10-14
(b) Pro Forma Financial Information:
Pro Forma Consolidated Balance Sheet at January 31, 1996 16
Pro Forma Consolidated Statement of Operations for the year ended January 31, 1996 17
Pro Forma Consolidated Statement of Operations for the unaudited six months 18
ended July 31, 1996
</TABLE>
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated as of May 31, 1996,
between Innovative Tech Systems, Inc. and Facility Management
Systems, Inc. (PSI)
(PSI) Incorporated by reference to Company's Form 8-K dated
August 9, 1996
<PAGE> 4
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.
INNOVATIVE TECH SYSTEMS, INC.
Date: October 8, 1996 By: \s\ Louis J. Desiderio
---------------------------
Louis J. Desiderio
Vice President and
Chief Financial Officer
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To The Shareholders Facility Management Systems, Inc.:
We have audited the accompanying balance sheets of Facility Management
Systems, Inc. as of January 31, 1995 and 1996 and the related statements of
operations, changes in shareholders' (deficiency) equity and cash flows for
each of the three years in the period ended January 31, 1996. 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 Facility Management
Systems, Inc., as of January 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
January 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
July 26, 1996
<PAGE> 6
FACILITY MANAGEMENT SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
--------------------------- 1996
1995 1996 (UNAUDITED)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36,521 $ 33,121 $ 94,008
Accounts receivable, net 737,786 614,725 551,086
Inventory 410,847 262,573 222,187
----------- ----------- -----------
Total current assets 1,185,154 910,419 867,281
Property and equipment, net 150,410 215,720 251,084
Computer software, net of accumulated
amortization of $27,493, $30,725
and 32,675 at Janaury 31, 1995 and
1996 and July 31, 1996, respectively 105,232 173,128 216,790
Other assets 162,619 78,296 83,996
----------- ----------- -----------
Total assets $ 1,603,415 $ 1,377,563 $ 1,419,151
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY
Current liabilities:
Bank line of credit $ 270,000 $ 175,000 $ 400,000
Current portion of long-term debt 41,100 41,100 --
Accounts payable 182,918 171,046 114,765
Accrued liabilities 133,835 93,685 66,525
Deferred revenue 351,643 361,173 397,125
----------- ----------- -----------
Total current liabilities 979,496 842,004 978,415
----------- ----------- -----------
Long-term debt 956,900 922,353 --
Commitments and contingent liabilities
Shareholders' (deficiency) equity:
Common stock, par value $1.00;
authorized 100,000 shares; issued
and outstanding 13,133, 12,883 and
12,883 as of January 31, 1995, 1996
and July 31, 1996, respectively 13,133 12,883 12,883
Additional paid-in capital 909,708 909,708 1,909,299
Accumulated deficiency (1,255,822) (1,309,385) (1,481,446)
----------- ----------- -----------
Total shareholders' (deficiency) equity (332,981) (386,794) 440,736
----------- ----------- -----------
Total liabilities and shareholders'
(deficiency) equity $ 1,603,415 $ 1,377,563 $ 1,419,151
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 7
FACILITY MANAGEMENT SYSTEMS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JANUARY 31, 1994, 1995 AND 1996 AND THE UNAUDITED
SIX MONTHS ENDED JULY 31, 1995 AND 1996
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JANUARY 31, JULY 31, JULY 31,
------------------------------------------ 1995 1996
1994 1995 1996 (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 3,528,580 $ 4,607,370 $ 4,439,287 $ 2,115,160 $ 1,760,397
Cost of revenues 1,345,157 1,685,470 1,533,229 760,184 539,520
Selling, general and
administrative expenses 2,225,574 2,618,305 2,874,046 1,493,150 1,473,958
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations (42,151) 303,595 32,012 (138,174) (253,081)
Interest expense 58,868 60,617 85,575 44,880 48,619
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes (101,019) 242,978 (53,563) (183,054) (301,700)
Provision for income taxes -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (101,019) $ 242,978 $ (53,563) $ (183,054) $ (301,700)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 8
FACILITY MANAGEMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1994, 1995 AND 1996 AND THE UNAUDITED
SIX MONTHS ENDED JULY 31, 1995 AND 1996
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1995 1996
1994 1995 1996 (UNAUDITED) (UNAUDITED)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(101,019) $ 242,978 $ (53,563) $(183,054) $(301,700)
Adjustments to reconcile net income
(loss) to net cash provided by (used in
operating activities:
Depreciation and amortization 47,405 72,511 81,599 37,500 49,200
Changes in operating assets and
liabilities:
Accounts receivable (101,136) (158,250) 123,061 (15,530) 63,639
Inventory (43,433) (147,630) 148,274 109,141 40,386
Other assets (5,634) (89,870) 84,323 11,799 (5,700)
Accounts payable 57,929 (16,847) (11,872) 8,843 (56,281)
Accrued liabilities 48,945 39,644 (40,150) (7,183) (27,160)
Deferred revenue 25,653 6,669 9,530 30,584 35,952
--------- --------- --------- --------- ---------
Net cash (used in) provided by
operating activities (71,290) (50,795) 341,202 (7,900) (201,664)
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (46,401) (101,473) (143,677) (128,343) (82,614)
Capitalization of software development costs (38,797) (89,420) (71,128) (28,864) (45,612)
--------- --------- --------- --------- ---------
Net cash (used in)
investing activities (85,198) (190,893) (215,055) (157,207) (128,226)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Net borrowings (repayments) under
line of credit 281,337 (191,337) (95,000) 180,000 225,000
Borrowings under long-term debt 160,000 130,000 -- -- --
Repayment of long-term debt (12,000) (12,000) (34,547) (17,245) (603,116)
Purchase of Treasury Stock -- -- (250) -- --
Capital contribution -- -- -- -- 768,893
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities 429,337 (73,337) (129,547) 162,755 390,777
========= ========= ========= ========= =========
Net increase (decrease) in cash and cash
equivalents 272,849 (315,025) (3,400) (2,352) 60,887
Cash and cash equivalents, beginning of year 78,697 351,546 36,521 36,521 33,121
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of year $ 351,546 $ 36,521 $ 33,121 $ 34,169 $ 94,008
========= ========= ========= ========= =========
Cash paid during the period for:
Interest $ 58,200 $ 60,434 $ 85,575 $ 44,880 $ 46,904
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 9
FACILITY MANAGEMENT SYSTEMS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIENCY) EQUITY
FOR THE YEARS ENDED JANUARY 31, 1994, 1995 AND 1996 AND THE
UNAUDITED SIX MONTHS ENDED JULY 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------------- PAID-IN ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIENCY (DEFICIENCY) EQUITY
----------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1993 13,133 $ 13,133 $ 909,708 $(1,397,781) $ (474,940)
Net loss -- -- -- (101,019) (101,019)
----------- ----------- ----------- ----------- -----------
Balance, January 31, 1994 13,133 13,133 909,708 (1,498,800) (575,959)
Net income -- -- -- 242,978 242,978
----------- ----------- ----------- ----------- -----------
Balance, January 31, 1995 13,133 13,133 909,708 (1,255,822) (332,981)
Purchase of treasury stock (250) (250) -- -- (250)
Net loss -- -- -- (53,563) (53,563)
----------- ----------- ----------- ----------- -----------
Balance, January 31, 1996 12,883 12,883 909,708 (1,309,385) (386,794)
Capital contribution
(unaudited) -- -- 1,129,230 -- 1,129,230
Net loss
(unaudited) -- -- -- (301,700) (301,700)
----------- ----------- ----------- ----------- -----------
Balance, July 31, 1996
(unaudited) 12,883 $ 12,883 $ 2,038,938 $(1,611,085) $ 440,736
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
Facility Management Systems, Inc. (the "Company") is principally involved in the
business of designing, developing and marketing facilities management software
products. All design, development and marketing of the Company's products is
performed at its headquarters in Chicago, Illinois. The Company derives revenues
from selling and installing hardware and software for licensed use by clients in
diverse industries. The Company's revenues are predominantly generated through
sales to customers in the United States. The financial statements as of July 31,
1996 and for the six months ended July 31, 1995 and 1996 are unaudited, but in
the opinion of management reflect all adjustments, consisting of only normal
recurring items, necessary for a fair presentation. Interim results are not
necessarily indicative of annual results.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of temporary cash investments. The Company
restricts investment of temporary cash investments to financial institutions
with high credit ratings.
Inventory:
Inventory is stated at actual cost, but not in excess of net realizable value.
Inventory consists of hardware, accessories and repair parts that are
purchased and resold to customers.
Revenue Recognition and Accounts Receivable:
Sales and related costs under contracts to customers are recognized as units are
delivered, since there are no significant obligations after delivery. Accounts
receivable arising from sales are not collateralized and, as a result,
management monitors the financial condition of its customers to reduce the risk
of loss. Revenue from the licensing of computer software is recognized at the
time all significant contractual commitments are fulfilled. Revenue under
maintenance contracts is recognized ratably over the life of the contract.
Revenues from consulting and custom programming services are recognized as the
services are performed.
Property and Equipment:
Property and equipment are carried at cost. Expenditures for major renewals,
improvements and betterments are capitalized and minor repairs and maintenance
are charged to expense. When assets are sold, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss from such
disposition is included in operations. Property and equipment is depreciated
using accelerated depreciation methods, generally over a period of five to
seven years.
Computer Software:
The Company capitalizes purchased computer software. Internally developed
computer software costs and costs of product enhancements are capitalized
subsequent to the determination of technological feasibility; such
capitalization continues until the product becomes available for general
release. Research and development, including maintenance and general upgrades
are expensed as incurred. Capitalized software costs are written down to net
realizable value when the carrying amount is in excess thereof. Computer
software development and enhancements costs are amortized on a
product-by-product basis over a period of 3 years. Amortization, which is
included in cost of revenues, is the greater of the amount computed using (1)
the ratio of the current year's gross revenues to the total current and
anticipated future gross revenues for that product or (2) the straight-line
method over the estimated life of the product. Software amortization was
$2,993, $19,992, $3,232, $1,440 and $1,950 for the years ended January 31,
1994, 1995 and 1996 and for the unaudited six months ended July 31, 1995 and
1996, respectively.
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: - (CONTINUED)
Income Taxes:
The Company records deferred taxes under the liability method, in which
deferred income taxes are determined based on temporary differences between the
financial statement and tax bases of assets and liabilities, using enacted tax
rates in effect during the years in which the differences are expected to
reverse, and on available tax credits and carryforwards.
Use of Estimates:
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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. INVENTORY:
Inventory consists of the following:
<TABLE>
<CAPTION>
January 31,
----------------------- July 31,
1996
1995 1996 (unaudited)
------ ------ --------
<S> <C> <C> <C>
Hardware and accessories $380,160 $236,214 $186,462
Repair parts 30,687 26,359 35,725
-------- -------- --------
$410,847 $262,573 $222,187
======== ======== ========
</TABLE>
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
January 31, July 31, 1996
-----------------------
1995 1996 (unaudited)
--------- --------- ---------
<S> <C> <C> <C>
Computers and equipment $ 213,769 $ 250,286 $ 311,157
Furniture and fixtures 96,681 203,841 225,584
--------- --------- ---------
310,450 454,127 536,741
Less accumulated depreciation (160,040) (238,407) (285,657)
========= ========= =========
$ 150,410 $ 215,720 $ 251,084
========= ========= =========
</TABLE>
Depreciation expense was $44,412, $52,519, $78,367, $36,060 and $47,250 for the
years ended January 31, 1994, 1995 and 1996 and the unaudited six months ended
July 31, 1995 and 1996, respectively.
5. INCOME TAXES:
The reconciliation of income taxes at the U.S. statutory rate to the provision
for income taxes for the years ended January 31, 1994, 1995, 1996 and for the
unaudited six months ended July 31, 1996, is as follows:
<TABLE>
<CAPTION>
For the years ended January 31, July 31,
------------------------------------- 1996
1994 1995 1996 (unaudited)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income taxes at the U.S. Statutory rate (34)% 34% (34)% (34)%
Increase (reduction) in income taxes resulting from:
State Income taxes, net of federal benefit (7) 7 (7) (7)
Limitation on the utilization of tax benefits 41 41 41
Utilization of net operating loss carryforwards - (41) - -
--------- --------- --------- ---------
- - - -
========= ========= ========= =========
</TABLE>
The tax effects of temporary differences which compromise the deferred tax
assets and liabilities at January 31, 1995, January 31, 1996, and July 31, 1996
are as follows:
<TABLE>
<CAPTION>
January 31, January 31, July 31,
1996
1995 1996 (unaudited)
---------- --------- -----------
<S> <C> <C> <C>
Deferred tax debits:
Net operating loss carryforwards $ 283,800 $ 251,000 $ 552,700
Valuation allowance (283,800) (251,000) (552,700)
--------- --------- ---------
Net deferred taxes $ - $ - $ -
========= ========= =========
</TABLE>
There was no income tax expense or benefit recorded for the years ended January
31, 1994, 1995 and 1996 and the unaudited six months ended July 31, 1995 and
1996. The Company had available federal and state net operating loss
carryforwards of approximately $251,000 and $259,000 at January 31, 1996,
respectively.
6. COMMITMENTS:
The Company leases office facilities under operating leases. The future minimum
rental payments under noncancelable operating leases are as follows:
<TABLE>
<S> <C>
1997 $163,133
1998 163,184
1999 162,323
2000 165,687
========
$654,327
========
</TABLE>
Total rent expense for the years ended January 31, 1994, 1995 and 1996 and the
unaudited six months ended July 31, 1995 and 1996 was $100,660, $112,262,
$158,377, $79,889 and $80,730, respectively.
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
7. LONG-TERM DEBT AND BANK LINE OF CREDIT:
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
January 31, July 31, 1996
-----------------------
1995 1996 (unaudited)
--------- --------- -----------
<S> <C> <C> <C>
Term loan, 10%, due 1998 $ 75,000 $ 52,453 --
Shareholder loan, 7.85%, due 750,000 750,000 --
2009 (see note 8)
Shareholder loan, 9%, due 2003 73,000 61,000 --
(see note 8)
Shareholder loan, 7%, due 2002 100,000 100,000 --
(see note 8)
--------- --------- -----------
998,000 963,453 --
Less current portion (41,100) (41,100) --
========= ========= ===========
Long-term debt $ 956,900 $ 922,353 --
========= ========= ===========
</TABLE>
On January 26, 1995, the Company borrowed $75,000 under a term loan with a bank.
The proceeds were used to purchase computer equipment. The loan was payable in
monthly installments of principal and interest of $2,425. The loan was paid in
full on July 30, 1996.
The Company maintained a revolving line of credit with a financial institution
bearing interest at the rate of prime plus 1/2%. Borrowings under the line of
credit were based upon percentages of accounts receivable and inventory, with
the maximum borrowing base of $700,000. The agreement contained certain
financial covenants regarding dividends, additional debt and use of proceeds.
The line of credit expired on July 31, 1996, and was paid in full on August
16, 1996.
8. RELATED PARTY TRANSACTIONS:
The Company has had transactions in the normal course of business with certain
officers and shareholders of the Company. On March 31, 1992, the Company
borrowed $100,000 from its President, who is also a significant shareholder. The
loan was payable in monthly installments of interest only through March 31,
1997, with interest at 7%. Monthly principal and interest payments were to
commence on April 1, 1997. The loan was paid in full by the Company on July 30,
1996.
On March 31, 1992, the Company borrowed $100,000 from a shareholder. The loan
was payable in monthly installments of $1,000, with interest at 9%. The loan was
paid in full by the Company on July 30, 1996.
On April 8, 1992, the Company entered into a $375,000 loan and option agreement
with E. Tyden AB, Inc. ("Tyden"), a non-affiliated company. The agreement
included additional borrowings of up to an additional $375,000, as well as an
option to purchase a 40% interest in FMS. Interest only payments were made on a
quarterly basis at 4%. Between September 1992 and July 1994 the Company borrowed
an additional $375,000, bringing the total loan outstanding to $750,000. On
March 4, 1996 Tyden surrendered its option to purchase a 40% interest in FMS,
and on March 6, 1996 two officers of FMS, who are also significant shareholders,
purchased the loan from Tyden for $400,000, which was financed through a bank.
On May 24, 1996 the terms of the loan were amended to increase the interest rate
to 7.85% and revise the payment terms to require monthly payments of $7,089.54
through June 2009. In connection with the acquisition of FMS by Innovative Tech
Systems, Inc. (see note 10), the two shareholders agreed to forgive the portion
of the original loan balance that was in excess of their existing bank loan. On
July 30, 1996 the loan was retired for $332,410, with the balance of $360,337
recorded as a contribution to additional paid-in capital.
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
9. 401(K) PLAN:
Effective January 1, 1992, the Company instituted a 401(k) Plan to cover all
eligible employees. The Company does not make any matching contributions to the
plan.
10. SUBSEQUENT EVENT:
Effective July 26, 1996, the Company entered into an agreement and plan of
merger with Innovative Tech Systems, Inc. Under the terms of the agreement,
Innovative Tech acquired all of the outstanding common stock of the Company for
645,619 Shares of Innovative Tech Common Stock, valued at $1,371,940.
Innovative Tech Systems, Inc. recorded the acquisition using the purchase
method of accounting, and made preliminary allocations of the purchase price,
which is subject to final adjustment.
<PAGE> 15
PRO FORMA FINANCIAL INFORMATION
Effective July 26, 1996, Innovative Tech Systems, Inc. (the "Company") acquired
100% of the outstanding common stock of Facility Management Systems, Inc.
("FMS"). Under the terms of the agreement, FMS shareholders received 50.114
shares of Innovative Tech common stock in exchange for each share of FMS common
stock. This exchange ratio resulted in 645,619 shares of Innovative Tech common
stock being issued to FMS shareholders. The acquisition has been recorded using
the purchase method of accounting. The accompanying balance sheet as of July 31,
1996 includes preliminary allocations of the purchase price which is subject to
final adjustment.
BASIS OF PRESENTATION
The unaudited pro forma financial statement information combines the
consolidated results of operations as if the acquisition had occurred as of the
beginning of the periods presented. Pro forma adjustments include only the
effects of events directly attributed to a transaction that are factually
supportable and expected to have a continuing impact. Pro forma adjustments
include amortization of goodwill, legal fees relating to the acquisition and
elimination of interest expense on the retired debt. The weighted average
shares outstanding calculation is revised to reflect the 645,619 shares issued
in connection with the acquisition.
<PAGE> 16
INNOVATIVE TECH SYSTEM, INC. AND FACILITY MANAGEMENT SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
FACILITY
INNOVATIVE TECH MANAGEMENT PRO FORMA PRO FORMA
SYSTEMS, INC. SYSTEMS, INC. ADJUSTMENTS CONSOLIDATED
----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,815,742 $ 33,121 $ (1,347,791) $ 1,501,072
Accounts receivable, net 1,281,707 614,725 - 1,896,432
Officer advance 49,921 - - 49,921
Other current assets 25,812 - - 25,812
Inventory - 262,573 - 262,573
----------------- ----------------- ------------------ -----------------
Total current assets 4,173,182 910,419 (1,347,791) 3,735,810
Property and equipment, net 611,548 215,720 - 827,288
Restricted cash 700,000 - - 700,000
Computer software, net 369,693 173,128 - 542,821
Goodwill - - 1,303,797 1,303,797
Other assets - 78,296 - 778,296
----------------- ----------------- ------------------ -----------------
Total assets $ 5,854,423 $ 1,377,563 $ (43,994) $ 7,187,992
================= ================= ================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank line of credit - $ 175,000 $ (175,000) -
Current portion of long-term debt - 41,100 (41,100) -
Accounts payable $ 215,888 171,046 - 386,934
Accrued liabilities 173,433 93,685 - 267,118
Deferred revenue 74,881 361,173 - 436,054
----------------- ----------------- ------------------ -----------------
Total current liabilities 464,202 842,004 (216,100) 1,090,106
----------------- ----------------- ------------------ -----------------
Long-term debt - 922,353 (922,353) -
Commitments and contingent liabilities
Shareholders' equity:
Common stock 189,215 12,883 (939) 201,159
Additional paid-in-capital 6,475,501 909,708 89,951 7,475,160
Warrants 850,150 - - 850,150
Accumulated deficiency (2,124,645) (1,309,385) 1,005,447 (2,428,583)
----------------- ----------------- ------------------ -----------------
Total shareholders' equity 5,390,221 (386,794) 1,094,459 6,097,886
----------------- ----------------- ------------------ -----------------
Total liabilities and shareholders' equity $ 5,854,423 $ 1,377,563 $ (43,994) $ 7,187,992
================= ================= ================== =================
</TABLE>
<PAGE> 17
INNOVATIVE TECH SYSTEMS, INC. AND FACILITY MANAGEMENT SYSTEMS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
FACILITY
INNOVATIVE TECH MANAGEMENT PRO FORMA PRO FORMA
SYSTEMS, INC. SYSTEMS, INC. ADJUSTMENTS CONSOLIDATED
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 2,784,965 $ 4,439,287 -- $ 7,224,252
Cost of revenues 174,366 1,533,229 -- 1,707,595
Selling, general and
administrative expenses 3,836,793 2,874,046 335,950 7,046,789
------------ ------------ ------------ ------------
Income (loss) from
operations (1,226,194) 32,012 (335,950) (1,530,132)
Interest income 368,020 -- -- 368,020
Interest expense -- 85,575 (85,575) --
------------ ------------ ------------ ------------
Income (loss) before income
taxes (858,174) (53,563) (250,375) (1,162,112)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ (858,174) $ (53,563) $ (250,375) $ (1,162,112)
============ ============ ============ ============
Income (loss) per common share $ (0.06) $ (0.08)
============ ============
Weighted average shares outstanding 14,814,527 15,460,146
============ ============
</TABLE>
<PAGE> 18
INNOVATIVE TECH SYSTEMS, INC. AND FACILITY MANAGEMENT SYSTEMS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE UNAUDITED SIX MONTHS ENDED JULY 31, 1996
<TABLE>
<CAPTION>
FACILITY
INNOVATIVE TECH MANAGEMENT PRO FORMA PRO FORMA
SYSTEMS, INC. SYSTEMS, INC. ADJUSTMENTS CONSOLIDATED
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 2,359,296 $ 1,760,397 -- $ 4,119,693
Cost of revenues 98,840 539,520 -- 638,360
Selling, general and
administrative expenses 2,497,804 1,473,958 335,950 4,307,712
------------ ------------ ------------ ------------
Income (loss) from
operations (237,348) (253,081) (335,950) (826,379)
Interest income 69,272 -- -- 69,272
Interest expense -- 48,619 (48,619) --
------------ ------------ ------------ ------------
Income (loss) before income
taxes (168,076) (301,700) (287,331) (757,107)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net income (loss) $ (168,076) $ (301,700) $ (287,331) $ (757,107)
============ ============ ============ ============
Income (loss) per common share $ (0.01) $ (0.06)
============ ============
Weighted average shares outstanding 11,476,147 12,121,766
============ ============
</TABLE>
