<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
-------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-------------
June 30, 1999 (April 20, 1999)
Date of Report (Date of earliest event reported)
TYLER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-10485 75-2303920
--------------- ----------- ----------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
2800 W. Mockingbird Lane
Dallas, Texas 75235
----------------------------------------
(Address of principal executive offices)
(214) 902-5086
----------------------------------------------------
(Registrant's telephone number, including area code)
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<PAGE> 2
The undersigned hereby amends the following items, financial statements,
exhibits or other portions of its Current Report on Form 8-K filed May 4, 1999,
as set forth in the pages attached hereto:
Item 7(a). Amended to include audited financial statements of Process,
Incorporated d/b/a Computer Center Software and MUNIS for the
following periods:
Balance Sheets at September 30, 1998 and March 31, 1999 (unaudited)
Statements of Operations for the year ended September 30, 1998
and the six months ended March 31, 1998 and March 31, 1999
(unaudited)
Statements of Changes in Shareholders' Equity for the year ended
September 30, 1998 and the six months ended March 31, 1999
(unaudited)
Statements of Cash Flows for the year ended September 30, 1998 and
the six months ended March 31, 1998 (unaudited) and March 31,
1999 (unaudited)
Notes to Financial Statements.
Item 7(b). Amended to include unaudited pro forma condensed consolidated
financial statements.
Item 7(c). Exhibits
23.1 Consent of Marshall & Libby
<PAGE> 3
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.
TYLER TECHNOLOGIES, INC.
Date: June 30, 1999 By: /s/ Theodore L. Bathurst
------------------------------------------
Theodore L. Bathurst
Vice President and Chief Financial Officer
(principal financial officer)
Date: June 30, 1999 By: /s/ Terri L. Alford
------------------------------------------
Terri L. Alford
Controller
(principal accounting officer)
<PAGE> 4
ITEM 7(a)
<PAGE> 5
PROCESS, INC. D/B/A
MUNIS
FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1998 AND
THE SIX MONTHS ENDED MARCH 31,
1999 AND 1998
(UNAUDITED)
<PAGE> 6
PROCESS, INC. D/B/A MUNIS
FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1998 AND THE SIX MONTHS ENDED
MARCH 31, 1999 AND 1998
(UNAUDITED)
TABLE OF CONTENTS
Independent Auditors' Report 1
Financial Statements:
Balance Sheets 2-3
Statements of Operations 4
Statements of Changes in Shareholders' Equity 5
Statements of Cash Flows 6-7
Notes to Financial Statements 8-20
<PAGE> 7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Process, Inc. d/b/a MUNIS
Falmouth, Maine
We have audited the accompanying balance sheet of Process, Inc. d/b/a MUNIS as
of September 30, 1998, and the related statements of operations and changes in
shareholders' equity, and cash flows for the year 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 audit.
We conducted our audit 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 audit provides 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 Process, Inc. d/b/a MUNIS as of
September 30, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Marshall & Libby
Portland, ME
December 10, 1998, except for Note L, as to which the date is April 20, 1999,
and Note K, as to which the date is May 28, 1999
<PAGE> 8
PROCESS, INC. D/B/A MUNIS
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March
September 31, 1999
30, 1998 (Unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 0 $ 13,112
Accounts receivable (Note B) 7,139,931 7,562,423
Due from stockholders (Note E) 151,046 205,402
Inventories (Note A) 109,759 482,133
Prepaid expenses 63,607 19,522
------------ ------------
Total current assets 7,464,343 8,282,592
------------ ------------
FURNITURE AND EQUIPMENT (Notes B and D):
Furniture and fixtures 1,046,879 1,144,746
Equipment 881,178 983,563
------------ ------------
1,928,057 2,128,309
Less accumulated depreciation 1,065,572 1,193,572
------------ ------------
862,485 934,737
------------ ------------
OTHER ASSETS:
Federal tax deposit (Note H) 81,615 81,615
------------ ------------
$ 8,408,443 $ 9,298,944
============ ============
</TABLE>
2
<PAGE> 9
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March
September 31, 1999
30, 1998 (Unaudited)
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Demand notes payable (Note J) $ 592,146 $ 210,611
Current portion of long-term notes payable (Note C) 152,538 164,360
Current obligations under capital leases (Note D) 7,272 1,216
Accounts payable 775,452 1,312,335
Deferred revenue 3,069,886 2,585,067
Accrued expenses 1,627,608 1,238,760
Customer deposits 1,128,010 1,471,044
------------ ------------
Total current liabilities 7,352,912 6,983,393
------------ ------------
LONG-TERM LIABILITIES:
Notes payable (Note C) 292,267 199,247
COMMITMENTS AND CONTINGENCIES (Notes D and G)
SHAREHOLDERS' EQUITY:
Common stock, $100 par value, 800 shares authorized,
85 shares issued and outstanding 8,500 8,500
Additional paid-in capital 1,500 1,500
Retained earnings (Note I) 753,264 2,106,304
------------ ------------
763,264 2,116,304
------------ ------------
8,408,443 9,298,944
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 10
PROCESS, INC. D/B/A MUNIS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
Year Ended March 31,
September 1999 1998
30, 1998 (Unaudited) (Unaudited)
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES:
Software licenses $ 5,322,339 $ 3,667,723 $ 1,419,556
Professional services 3,145,550 2,678,673 1,025,385
Hardware 2,381,628 760,035 1,039,992
Maintenance and other 3,159,090 2,637,138 1,765,524
--------------- --------------- ---------------
Total revenues 14,008,607 9,743,569 5,250,457
--------------- --------------- ---------------
COST OF REVENUES:
Cost of third party licenses 1,195,358 756,771 348,628
Cost of hardware 2,016,507 667,687 893,099
Cost of services 4,000,762 2,097,397 1,847,195
Other 70,848 513,604 101,007
--------------- --------------- ---------------
Total cost of revenues 7,283,475 4,035,459 3,189,929
--------------- --------------- ---------------
OPERATING EXPENSES:
Employment expenses 3,189,084 2,452,133 1,252,300
Travel and entertainment 652,886 385,762 297,597
Telephone 231,509 170,969 103,095
Occupancy expense 497,190 267,480 236,251
Promotion 76,069 50,237 37,207
Operational expenses 899,643 319,965 364,413
Depreciation 226,650 128,000 102,000
--------------- --------------- ---------------
Total operating expenses 5,773,031 3,774,546 2,392,863
--------------- --------------- ---------------
Income (loss) from operations 952,101 1,933,564 (332,335)
OTHER INCOME (EXPENSE):
Interest expense (68,257) (26,237) (25,959)
State taxes (42,147) (38,361) (20,619)
--------------- --------------- ---------------
Total other income (expense) (110,404) (64,598) (46,578)
--------------- --------------- ---------------
Net income (loss) $ 841,697 $ 1,868,966 $ (378,913)
=============== =============== ===============
PRO FORMA INCOME DATA (UNAUDITED):
Net income (loss) as reported $ 841,697 $ 1,868,966 $ (378,913)
Pro forma adjustment to provide income (tax) benefit (354,879) (791,199) 105,616
--------------- --------------- ---------------
Pro forma net income (loss) $ 486,818 $ 1,077,767 $ (273,297)
Pro forma basic income (loss) per share $ 5,727 $ 12,680 $ (3,215)
Weighted average common shares outstanding
for basic income (loss) per share computation 85 85 85
</TABLE>
See accompanying notes.
4
<PAGE> 11
PROCESS, INC. D/B/A MUNIS
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED SEPTEMBER 30, 1998 AND THE SIX MONTHS ENDED
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Stock Paid In Retained
Shares Amount Capital Earnings Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1997,
As previously reported 85 $ 8,500 $ 1,500 $ 1,007,502 $ 1,017,502
Prior period adjustment (Note K) (601,629) (601,629)
----------- -----------
Balance at October 1, 1997,
As restated 405,873 415,873
----------- -----------
Net income 841,697 841,697
Less S Corporation distribution (494,306) (494,306)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1998 85 8,500 1,500 753,264 763,264
Net income (unaudited) 1,868,966 1,868,966
Less S Corporation distribution (515,926) (515,926)
(Unaudited)
----------- ----------- ----------- ----------- -----------
Balance at March 31, 1999 85 $ 8,500 $ 1,500 $ 2,106,304 $ 2,116,304
(Unaudited) =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 12
PROCESS, INC. D/B/A MUNIS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
Year Ended March 31,
September 1999 1998
30, 1998 (Unaudited) (Unaudited)
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 11,896,787 $ 9,716,175 $ 5,494,830
Cash paid to suppliers (7,219,685) (4,407,833) (3,393,221)
Cash paid for wages and other operating (4,413,203) (3,991,309) (2,249,427)
expenses
Interest paid (68,257) (26,237) (25,959)
Taxes paid (67,692) (38,361) (20,619)
------------ ------------ ------------
Net cash provided by (used in) operating
activities 127,950 1,252,435 (194,396)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (339,214) (200,252) (220,541)
Casualty gain 3,524 0 0
------------ ------------ ------------
Net cash (used in) investing activities (335,690) (200,252) (220,541)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 6,964,699 4,611,331 3,639,577
Proceeds from long-term debt 200,000 0 200,000
Payments on capital leases (13,680) (6,056) (6,655)
Payments on long-term debt (135,733) (81,198) (56,810)
Payments on short-term debt (6,455,369) (4,992,866) (3,323,507)
Stockholder distributions (494,306) (515,926) (211,206)
Stockholder loan (31,409) (54,356) 0
------------ ------------ ------------
Net cash provided by (used in)
financing activities 34,202 (1,039,071) 241,399
------------ ------------ ------------
Net increase (decrease) in cash (173,538) 13,112 (173,538)
CASH, beginning of period 173,538 0 173,538
------------ ------------ ------------
Cash, end of period $ 0 $ 13,112 $ 0
============ ============ ============
</TABLE>
6
<PAGE> 13
<TABLE>
<CAPTION>
Six Months Ended
Year Ended March 31
September 1999 1998
30, 1998 (Unaudited) (Unaudited)
---------------- -------------- --------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 841,697 $ 1,868,966 $ (378,913)
------------ ------------ ------------
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES:
Depreciation 226,651 128,000 102,000
Other (515) 0 0
Changes in operating assets and liabilities:
Accounts receivable (4,066,646) (422,492) (63,948)
Note receivable 32,360 0 32,360
Inventories 63,790 (372,374) 10,942
Prepaid expenses (44,431) 44,085 466
Federal tax deposit (40,851) 0 0
Accounts payable 112,254 536,883 (214,234)
Deferred revenue 1,594,553 (484,819) 193,033
Accrued expenses 1,035,891 (388,848) (61,979)
Customer deposits 373,197 343,034 185,877
------------ ------------ ------------
Total adjustments (713,747) (616,531) 184,517
------------ ------------ ------------
Net cash provided by (used in) operating
activities $ 127,950 $ 1,252,435 $ (194,396)
============ ============ ============
</TABLE>
7
<PAGE> 14
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The Company specializes in providing industry standard computer solutions,
principally to local and county governments, schools and nonprofit organizations
with its primary product known as MUNIS--Registered Trademark. The Company
offers a complete line of services which include computer hardware, software,
installation, training, support and programming. The Company grants credit to
customers and conducts its business primarily in the eastern states region.
Effective January 4, 1999, the Company changed its name from Process, Inc. d/b/a
Computer Center Software to Process, Inc. d/b/a MUNIS.
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Inventories - Inventories consist of computer equipment and supplies held for
resale and are valued at the lower of actual cost or market, on a first-in
first-out (FIFO) basis. Cost is determined by specific identification of each
unit.
Furniture and equipment - Furniture and equipment are carried at cost. Major
additions are charged to equipment accounts while repairs and maintenance which
do not improve or extend the life of the respective assets are expensed
currently.
Assets are depreciated over estimated useful lives of 3 to 10 years on both the
straight-line method and accelerated methods as allowable for tax purposes. The
differences in depreciation expense resulting from the use of these methods and
those allowable under generally accepted accounting principles are not material.
8
<PAGE> 15
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE A -SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
Impairment of Long-Lived Assets - The Company accounts for its long-lived assets
in accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of carrying amount or fair
value less costs to sell.
Software Development Costs - In accordance with the provisions of Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed," software development costs
are expensed prior to the establishment of technological feasibility of the
software development project. Costs incurred after that point are capitalized
until the product is available for general release. No such costs have been
capitalized at September 30, 1998.
Revenue recognition - The Company derives revenue from software licenses,
postcontract customer support ("PCS"), and services. Postcontract customer
support includes telephone support, bug fixes, and rights to upgrade on a
when-and-if available basis. Services range from installation, training, and
basic consulting to software modification and customization to meet specific
customer needs. In software arrangements that include rights to multiple
software products, specified upgrades, PCS, and/or other services, the Company
allocates the total arrangement fee among each deliverable based on the relative
fair value of each of the deliverables, determined based on vendor-specific
objective evidence.
9
<PAGE> 16
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE A -SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 97-2, Software Revenue
Recognition, which supersedes SOP 91-1. The Company was required to adopt SOP
97-2 for software transactions entered into beginning January 1, 1998.
The effects of adopting the provision of SOP 97-2 were not material.
The Company recognizes revenue in accordance with SOP 97-2 as follows:
Software Licenses - The Company recognizes the revenue allocable to software
licenses and specified upgrades upon delivery and installation of the software
product or upgrade to the end user, unless the fee is not fixed or determinable
or collectibility is not probable. If the fee is not fixed or determinable,
revenue is recognized as payments become due from the customer. The Company
provides a reserve for estimated returns, if any, under the standard acceptance
terms at the time the revenue is recorded. For those arrangements that include
acceptance terms beyond the Company's standard terms, revenue is not recognized
until acceptance has occurred. If collectibility is not considered probable,
revenue is recognized when the fee is collected. Arrangements that include
software services, such as training or installation, are evaluated to determine
whether those services are essential to the functionality of other elements of
the arrangement.
A majority of the Company's software arrangements involve off-the-shelf software
and the multiple elements are not considered essential to the functionality of
the software. For those software arrangements in which services are not
considered essential, the software license fee is recognized as revenue after
delivery and installation have occurred, customer acceptance is reasonably
assured, the license fee is substantially billable and remaining services other
than training are considered nominal.
10
<PAGE> 17
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE A -SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
Software Services - When software services are considered essential, revenue
under the entire arrangement is recognized as the services are performed using
the percentage-of-completion contract accounting method. When software services
are not considered essential, the fee allocable to the service element is
recognized as revenue as the services are performed.
Computer Hardware Equipment - Revenue allocated to equipment based on vendor
specific evidence of fair value is recognized when the equipment is delivered
and collection is probable.
Postcontract Customer Support (PCS) - Revenue allocated to PCS is recognized
on a straight-line basis over the period the PCS is provided (including free
maintenance periods.)
Contract Accounting - For arrangements that include customization or
modification of the software, or where software services are otherwise
considered essential, revenue is recognized using contract accounting. Revenue
from these software arrangements is recognized on a percentage-of-completion
method with progress-to-completion measured based primarily upon labor hours
incurred.
Deferred revenue consists primarily of payments received in advance of
revenue being earned under software licensing, software and hardware
installation, support and maintenance contracts.
Concentration of Credit Risk
Financial instruments which potentially expose the Company to concentrations of
credit risk include accounts receivable. The Company maintains reserves for
potential credit losses and such losses, in the aggregate, have not exceeded
management expectations. Concentrations of credit risk with respect to
receivables are limited due to the wide variety of customers and markets into
which the Company's products and services are provided, as well as their
dispersion across many different geographic areas. As a result, as of September
30, 1998, the Company does not consider itself to have any significant
concentrations of credit risk.
11
<PAGE> 18
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE A -SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
Financial Instruments
The carrying value of financial instruments such as cash equivalents, accounts
receivable, accounts payable and accrued expenses approximate their fair value
because of the short maturity of these instruments.
Based upon the borrowing rates available to the Company for bank loans with
similar terms and average maturities, the carrying value of the notes payable
and long-term debt was $1,044,223, which approximates its fair value at
September 30, 1998.
Research and Development and Advertising Costs
The Company expenses all research and development costs as incurred. The Company
incurred no significant research and development costs during the year ended
September 30, 1998. The Company expenses advertising as incurred. Advertising
expense for the year ended September 30, 1998 was approximately $54,000.
Comprehensive Income
The Company has adopted the provisions of SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in an annual financial statement that is
displayed with the same prominence as other annual financial statements.
Reclassification of financial statements for earlier periods, provided for
comparative purposes, is required. The statement also requires the accumulated
balance of other comprehensive income to be displayed separately from retained
earnings and additional paid-in capital in the equity section of the statement
of financial position.
12
<PAGE> 19
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE A -SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
Comprehensive Income (continued)
Comprehensive income (loss) for the year ended September 30, 1998 and the six
months ended March 31, 1999 and 1998 is the same as the Company's reported net
income (loss)for these periods and there is no other accumulated balance of
other comprehensive income as of September 30, 1998 and March 31, 1999 and 1998.
Earnings Per Share
Basic earnings (loss) per share has been computed by dividing income available
to common shareholders by the weighted-average number of shares of common stock
outstanding for the year. Diluted earnings (loss) per share is computed by
dividing earnings available for common shareholders by the weighted average
number of shares outstanding plus the number of additional shares that would
have been outstanding if potentially dilutive securities had been issued. No
dilutive securities were issued or outstanding for any periods presented.
Unaudited Interim Financial Information
Interim information for the six months ended March 31, 1999 and 1998, including
such information in the notes to the financial statements, is unaudited. This
information has been prepared on the same basis as the annual financial
statements and, in the opinion of the Company's management, reflects all
adjustments, consisting of normal recurring adjustments considered necessary for
a fair presentation of the results of such period. Financial results for the
interim period are not necessarily indicative of the results for a full year.
Income Taxes
The Company has elected to be treated as an S Corporation pursuant to the
provisions of the Internal Revenue Code. The Company's taxable income is
included with the taxable income of the shareholders; consequently, no provision
for federal income tax have been included in the historical financial
statements. The Company is subject to state income and franchise tax in various
states in which it does business.
13
<PAGE> 20
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE A -SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (continued)
Income Taxes (continued)
The unaudited pro forma provision for income taxes for the periods presented on
the statements of operations represents the estimated taxes that would have been
recorded had the Company been a C Corporation for income tax purposes for the
period.
Balance Sheet (Unaudited)
In connection with the acquisition of the Company by Tyler Corporation, the
Company terminated its S Corporation status (see Note K ).
The March 31, 1999 balance sheet (unaudited) has been adjusted to reflect the
payment of distributions to the Company's common stock shareholders in 1999 in
the estimated amount of $515,926 in respect of the remaining federal tax
liabilities attributable to the Company's Subchapter S earnings for the six
months ended March 31, 1999. The deferred income taxes that would have been
required if the Company had terminated its S Corporation status as of March 31,
1999 are immaterial, therefore a pro forma balance sheet has not been presented
for deferred taxes.
To determine pro forma deferred income tax, the Company used the asset and
liability method of accounting for deferred income taxes. Deferred tax assets
and liabilities are recognized with respect to tax consequences attributable to
the differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities. Deferred tax assets and liabilities
are measured using enacted tax rates expected to be in effect when such amounts
are realized or settled. The resulting deferred tax assets and liabilities if
material, would have been adjusted to reflect changes in tax laws or rates in
the period of enactment.
14
<PAGE> 21
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE B - ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
<TABLE>
<CAPTION>
March
September 31, 1999
30, 1998 (Unaudited)
-------------- ---------------
<S> <C> <C>
Billed $ 6,490,620 $ 6,873,073
Unbilled 724,311 764,350
--------------- ---------------
7,214,931 7,637,423
Less reserve for returns 75,000 75,000
--------------- ---------------
Net receivable $ 7,139,931 $ 7,562,423
=============== ===============
</TABLE>
Unbilled receivables represent licenses for software products delivered and
installed for which amounts are not currently billable pursuant to the retention
provisions regarding the completion of training (which is not considered
essential to the functionality of the product).
NOTE C - LONG-TERM DEBT
Current and long-term debt at September 30, 1998 consisted of the following:
<TABLE>
<CAPTION>
March
September 31, 1999
30, 1998 (Unaudited)
------------ ------------
<S> <C> <C>
8.76% note, payable in 48 monthly installments of
$4,957, including interest, secured by equipment $ 160,341 $ 132,546
9.5% note, payable in 48 monthly installments of $10,723, including
interest, secured by all business assets 284,464 231,061
------------ ------------
444,805 363,607
Less current portion 152,538 164,360
------------ ------------
$ 292,267 $ 199,247
============ ============
</TABLE>
15
<PAGE> 22
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE C - LONG-TERM DEBT (continued)
Approximate annual maturities for the remaining period of indebtedness:
<TABLE>
<CAPTION>
March
September 31, 1999
30, 1998 (Unaudited)
--------------- ---------------
<S> <C> <C>
1999 $ 152,538 $ 164,360
2000 167,886 144,000
2001 116,037 55,247
2002 8,344 0
--------------- ---------------
Total $ 444,805 $ 363,607
=============== ===============
</TABLE>
NOTE D - CAPITAL LEASES
The Company has a lease for a telephone system (five years beginning in 1994).
Based on the provisions of Statement No. 13, issued by the Financial Accounting
Standards Board, the lease meets the criteria of capital leases and,
accordingly, has been recorded as such. The assets are stated on the balance
sheet at September 30, 1998 at their capitalized cost of $73,522. Accumulated
amortization of $66,169 and $73,522 at September 30, 1998 and March 31, 1999 has
been recognized, respectively.
Future minimum lease payments under the remaining capital lease, together with
the present value of minimum lease payments are $7,272 and $1,216 at September
30, 1998 and March 31, 1999, respectively.
NOTE E - DUE FROM SHAREHOLDERS
The Company advances funds to shareholders from time to time on a non-interest
bearing basis. Balances owed to the Company were $151,046 at September 30, 1998
and $205,402 at March 31, 1999 .
16
<PAGE> 23
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE F - LEASING ARRANGEMENTS
The Company leases its office space from a realty company owned by a
shareholder. During the year ended September 30, 1998, rental under the lease
was approximately $388,000 and includes additional rent for occupancy expenses.
Total lease commitments for the next four years amount to $349,920 per year plus
additional rent for occupancy expenses. The Company also maintains other office
space, with varying terms.
NOTE G - RETIREMENT PLAN
The Company has adopted a 401(k) retirement savings plan whereby all employees
are eligible to participate in the plan after six months of service and the
attainment of age twenty-one.
A participant's right to receive benefits (vesting) in the employer
contributions occurs based on a vesting schedule wherein a participant is 20%
vested after two years of service and an additional 20% for each year
thereafter. Contributions and forfeitures are allocated based on the
participants' relative salaries. For the year ended September 30, 1998, the
Company contributed approximately $97,000 to the plan.
NOTE H - FEDERAL TAX DEPOSIT
The Company has federal tax deposits of $81,615 as of September 30, 1998 which
are related to the election of its S Corporation status and fiscal year end. In
general, such required deposits will fluctuate based on the Company's income
levels and are determined based on computations specified by the Internal
Revenue Service. Effective with the termination of its S Corporation status, the
Company is due a full refund.
17
<PAGE> 24
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE I - RETAINED EARNINGS
At September 30, 1998, retained earnings consisted of the following:
<TABLE>
<S> <C>
Accumulated earnings as a
C Corporation $ 94,052
Accumulated earnings as
an S Corporation 659,212
-------------
$ 753,264
=============
</TABLE>
NOTE J - DEMAND NOTES PAYABLE
The Company has a line of credit with a bank, bearing a variable interest rate.
At September 30, 1998 the credit line was $650,000 with an interest rate of 9%
and at March 31, 1999 was $1,300,000 with an interest rate of 8%. The note is
secured by the Company's accounts receivable, inventory, and equipment. At
September 30, 1998, the outstanding balance on the credit line was $506,958 and
at March 31, 1999 the balance was $137,923.
The Company has a $100,000 equipment line of credit with a bank, bearing a
variable interest rate, which was 9.5% at September 30, 1998. This note is
secured by the Company's accounts receivable, inventory, and equipment. At
September 30, 1998, the outstanding balance on the line of credit was $85,188
and at March 31, 1999 the balance was $72,688.
18
<PAGE> 25
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE K - PRIOR PERIOD ADJUSTMENT
In connection with the due diligence process conducted by the buyer, it came to
the attention of management that certain modifications were needed in the
application of generally accepted accounting principles in the preparation of
the previously distributed audited financial statements for the year ended
September 30, 1998. A special exemption is allowed for an initial public
distribution of financial statements in which a change is made to more
acceptable accounting principles. Accordingly, the financial statements have
been retroactively restated and the effects can be summarized as follows:
<TABLE>
<CAPTION>
Effect on
Effect on October 1, 1997
1998 Income Retained Earnings
Increase (decrease) Increase (decrease)
------------------- -------------------
<S> <C> <C>
Accounts receivable recorded in years
prior to 1998 and not yet collected and
not considered probable of collection
at the date the revenue was initially recorded ($179,019) ($225,952)
Implicit post contract customer support
(maintenance) offered and not initially
recorded as deferred revenue (69,641) (146,595)
Deposits received at the time of contract
not initially deferred (25,209) (45,835)
Other miscellaneous changes in accrued
liabilities, including employee bonuses 74,793 (183,247)
--------------- ---------------
($199,076) ($601,629)
=============== ===============
</TABLE>
19
<PAGE> 26
PROCESS, INC. D/B/A MUNIS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(INFORMATION AS OF MARCH 31, 1999 AND FOR THE
SIX MONTHS ENDED MARCH 31, 1999 AND 1998 IS UNAUDITED)
NOTE L - SUBSEQUENT EVENT
On April 20, 1999, the Company and its shareholders entered into an "Agreement
and Plan of Merger" in which the Company was acquired for cash and shares of
common stock of the acquiring company, Tyler Corporation.
20
<PAGE> 27
ITEM 7(b)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following sets forth unaudited pro forma condensed financial
information for Tyler Technologies, Inc. (the "Company") in connection with the
Company's acquisition of Process, Incorporated d/b/a Computer Center Software
and MUNIS (hereafter referred to as "MUNIS"). The unaudited pro forma condensed
consolidated income statements for the year ended December 31, 1998 and the
three months ended March 31, 1999, gives effect to the acquisition of MUNIS as
if it had occurred on January 1, 1998. The unaudited pro forma condensed
consolidated balance sheet as of March 31, 1999 has been prepared as if the
acquisition of MUNIS had occurred on March 31, 1999.
The purchase method of accounting has been used in the preparation of
the unaudited pro forma condensed consolidated financial statements. Under this
method of accounting, the aggregate purchase price is allocated to assets
acquired and liabilities assumed based on their estimated fair values. For
purposes of the unaudited pro forma condensed consolidated financial statements,
the purchase price of the company acquired have been allocated based primarily
on information furnished by management of the acquired company. The final
allocation of the purchase price of the company acquired will be determined in a
reasonable time after consummation and will be based on a complete evaluation of
the assets acquired and liabilities assumed, including the amounts allocable to
identifiable intangible assets and goodwill. Accordingly, the information
presented herein may differ from the final purchase price allocation.
In the opinion of the Company's management, all adjustments have been
made that are necessary to present fairly the pro forma data.
The unaudited pro forma condensed consolidated financial information
does not purport to present the actual results of operations or financial
position of the Company had the transactions and events assumed therein in fact
occurred on the dates indicated, nor is it necessarily indicative of the results
of operations that may be achieved in the future. The unaudited pro forma
condensed consolidated financial information is based on certain assumptions and
adjustments described in the notes thereto and should be read in conjunction
therewith. The unaudited pro forma condensed consolidated financial information
should also be read in conjunction with the historical consolidated financial
statements, including the notes thereto, of the Company and MUNIS.
<PAGE> 28
Tyler Technologies, Inc.
Pro Forma Condensed Consolidated Income Statement
For the Year Ended December 31, 1998
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL PRO FORMA COMBINED
COMPANY MUNIS(3) ADJUSTMENTS COMPANY
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 50,549 $ 15,907 $ -- $ 66,456
Costs and expenses:
Cost of revenues 24,749 7,708 -- 32,457
Selling, general and administrative expense 14,461 6,377 -- 20,838
Costs of a certain acquisition opportunity 3,146 -- -- 3,146
Amortization of intangibles 3,173 -- 1,422 (2) 4,595
Interest expense, net 1,831 66 1,188 (4) 3,085
------------ ------------ ------------ ------------
Income from continuing operations before income taxes 3,189 1,756 (2,610) 2,335
Income tax provision 2,033 62 (361) (5) 1,734
------------ ------------ ------------ ------------
Income from continuing operations $ 1,156 $ 1,694 $ (2,249) $ 601
============ ============
Income per diluted share from continuing operations $ 0.03 $ 0.02
============ ============
Weighted average number of diluted common
shares outstanding 34,400 2,703 37,103
============ ============
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
<PAGE> 29
Tyler Technologies, Inc.
Pro Forma Condensed Consolidated Income Statement
For the Three Months Ended March 31, 1999
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL PRO FORMA COMBINED
COMPANY MUNIS ADJUSTMENTS COMPANY
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 20,433 $ 5,442 $ -- $ 25,875
Costs and expenses:
Cost of revenues 9,827 1,975 -- 11,802
Selling, general and administrative expense 5,468 2,001 -- 7,469
Amortization of intangibles 1,096 -- 355 (2) 1,451
Interest expense, net 817 16 298 (4) 1,131
------------ ------------ ------------ ------------
Income from continuing operations before income taxes 3,225 1,450 (653) 4,022
Income tax provision 1,551 3 276 (5) 1,830
------------ ------------ ------------ ------------
Income from continuing operations $ 1,674 $ 1,447 $ (929) $ 2,192
============ ============
Income per diluted share from continuing operations $ 0.05 0.06
============ ============
Weighted average number of diluted common
shares outstanding 35,962 2,703 38,665
============ ============
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
<PAGE> 30
Tyler Technologies, Inc.
Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 1999
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Pro forma
Historical Historical Pro forma Combined
Company MUNIS Adjustments Company
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,821 $ 13 $ 1,834
Accounts receivable, net 15,536 7,562 23,098
Prepaids and other current assets 2,763 707 3,470
Current notes receivable 5,788 5,788
Deferred income taxes 1,028 1,028
------------- ------------- ------------- -------------
Total current assets 26,936 8,282 -- 35,218
Property and equipment, net 14,691 935 -- 15,626
Goodwill and other intangibles, net 107,653 28,431 (2) 136,084
Non-current notes receivable 5,171 5,171
Other receivables 3,612 3,612
Sundry assets 886 82 968
------------- ------------- ------------- -------------
Total assets $ 158,949 $ 9,299 $ 28,431 $ 196,679
============= ============= ============= =============
Current liabilities:
Demand notes payable $ -- $ 211 $ 211
Accounts payable and accrued expenses 9,141 2,552 11,693
Current portion of long-term debt 1,957 165 (165) (2) 1,957
Deferred revenue 10,073 4,056 14,129
Income tax payable 254 254
------------- ------------- ------------- -------------
Total current liabilities 21,425 6,984 (165) 28,244
Long-term debt, less current portion 36,633 199 (199) (2) 36,633
16,350 16,350
Other liabilities 6,792 6,792
Deferred income taxes 10,434 10,434
Shareholders' equity 83,665 2,116 (2,116) (2) 83,665
14,561 (2) 14,561
------------- ------------- ------------- -------------
Total liabilities and shareholders' equity $ 158,949 $ 9,299 $ 28,431 $ 196,679
============= ============= ============= =============
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
<PAGE> 31
TYLER TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands)
(Unaudited)
(1) On April 20, 1999, Tyler Technologies, Inc. (the "Company," "Tyler" or
"Parent") acquired Process, Incorporated d/b/a Computer Center Software
and MUNIS (hereafter referred to as "MUNIS"), a Maine Corporation. The
acquisition was consummated pursuant to the terms and conditions of an
Agreement and Plan of Merger, dated April 20, 1999, by and among the
Company, Computer Center Software, Inc., a Delaware corporation and
wholly-owned subsidiary of Parent ("Merger Sub"), MUNIS, and the
stockholders of MUNIS in which, among other things, Merger Sub was
merged with and into MUNIS. The stockholders of MUNIS received in the
merger aggregate consideration of $16,250,000 in cash (reduced for the
then outstanding balances of the term debt of MUNIS) and 2,702,703
shares of unregistered Tyler Common Stock. The Company financed the
cash portion of the consideration with borrowings under its senior
credit facility with Bank of America. MUNIS was a Subchapter S
Corporation and an election will be made under Section 338 for income
tax purposes.
(2) The acquisition of MUNIS has been accounted for using the purchase
method of accounting. The components of the purchase price and the
preliminary allocation of purchase price to the assets acquired and
liabilities assumed are summarized below:
<TABLE>
<S> <C>
Components of purchase price:
Cash paid from borrowings under the Company's credit facility $ 16,250
Fair value of common stock issued (a) 14,561
Estimated transaction costs 100
----------
Total purchase price 30,911
Allocation of purchase price:
MUNIS shareholders' equity (2,116)
MUNIS debt paid at closing by the seller (364)
----------
Cost in excess of estimated net assets acquired (b) $ 28,431
==========
</TABLE>
(a) Represents the issuance of 2,702,703 shares of common stock at an
average price of $5.3875 per share. The agreement was announced
and consummated on April 20, 1999, and the average price was
calculated using the average of the closing prices of the
Company's Common Stock for the five consecutive trading days
beginning two trading days prior to the public announcement by
the Company of this acquisition.
(b) Represents the excess purchase price over the estimated fair
value of the assets acquired. Goodwill is expected to be
amortized over 20 years, amounting to $1,422,000 annually and the
accompanying unaudited pro forma condensed consolidated income
statement for the three months ended March 31, 1999 reflects
$355,000 of such amortization. For purposes of the preliminary
allocation of the purchase
<PAGE> 32
price, the Company assumed that the historical balances of net property
and equipment to be acquired approximates fair value, as well as the
remaining historical net assets acquired of MUNIS.
(3) MUNIS's fiscal year-end is September 30. Accordingly, MUNIS's audited
statement of operations for the year ended September 30, 1998 has been
adjusted to conform to the Company's calendar year financial statements
as follows:
<TABLE>
<CAPTION>
AUDITED
12 MONTHS LESS ADD 12 MONTHS
ENDED 3 MONTHS 3 MONTHS ENDED
30-SEP-98 31-DEC-97 31-DEC-98 31-DEC-98
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $14,008 $ 2,403 $ 4,302 $15,907
Costs and expenses:
Cost of revenues 7,283 1,636 2,061 7,708
Selling, general and administrative expense 5,773 1,170 1,774 6,377
Interest expense, net 68 12 10 66
--------------------------------------------
Income (loss) from continuing operations before income taxes 884 (415) 457 1,756
Income tax provision (benefit) 42 15 35 62
--------------------------------------------
Net income (loss) $ 842 $ (430) $ 422 $ 1,694
============================================
</TABLE>
(4) To record interest expense at approximately 7.5% on average long-term
debt after giving effect to the acquisition and reduced for interest
expense recorded by MUNIS as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1998 MARCH 31, 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Additional bank borrowings $ 16, 350 $ 16,350
==========================================
Interest expense at 7.5% $ 1,226 $ 307
Less historical interest expense (66) (16)
Add historical interest expense on
demand notes payable 28 7
------------------------------------------
Net adjustment for net increase in interest expense $ 1,188 $ 298
==========================================
</TABLE>
A 1/8% change in interest rates would cause interest expense related to
the acquisition of MUNIS to increase or decrease by approximately
$21,000 per year.
(5) To adjust the portion of MUNIS's historical income taxes, which were
calculated on a basis applicable to a Subchapter S Corporation, to
taxes calculated on a basis applicable to a C Corporation using an
incremental effective income tax rate of 35%. The adjustment also takes
into consideration federal and state income taxes related to the
additional interest and deductible goodwill amortization.
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
23.1 Consent of Marshall & Libby
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
The Board of Directors
Process, Inc. d/b/a MUNIS:
We consent to the incorporation by reference in the registration statement (No.
33-34809) on Form S-8 of Tyler Technologies, Inc. of our report dated December
10, 1998, except as to Notes L and K, as to which the date is April 20 and May
28, 1999, respectively, with respect to the balance sheet of Process, Inc. d/b/a
MUNIS as of September 30, 1998, and the related statements of operations,
shareholders' equity, and cash flows for the fiscal year ended September 30,
1998, which report appears in the Form 8-K of Tyler Technologies, Inc. dated
June 30, 1999.
/s/ Marshall & Libby
----------------
Marshall & Libby
Portland, Maine
June 30, 1999
