<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A NO. 4
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
December 31, 1996
---------------------------------
Date of Report
(Date of Earliest Event Reported)
TOPRO, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Colorado 84-1042227
- ------------------------------- ----------------------------
(State or other jurisdiction of I.R.S. Employer I. D. Number
incorporation or organization)
2525 West Evans Avenue, Denver, Colorado 80219
- ---------------------------------------- -----
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (303) 935-1221
--------------
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 31, 1996, Topro, Inc. ("Registrant"), entered into an
Agreement of Merger pursuant to which a newly formed subsidiary will merge
into, and the Registrant will acquire all the outstanding capital stock of All
Control Systems, Inc.("ACSI") and ProMeta Consulting, Inc. ("ProMeta")
(combined collective company "ACS") independent control systems integrators
located in West Chester, PA organized as Subchapter S corporations under the
federal tax code. ACS's operations are carried out through two affiliated
companies ACS and ProMeta under common ownership. On the effective date of the
merger the Registrant's subsidiary will merge with ACSI and ProMeta leaving ACS
as a wholly owned subsidiary of the Registrant. ACS's core business parallels
that of the Registrant's, with emphasis on some different/additional markets
and a generally more technically sophisticated product offering in the food and
pharmaceutical industries. ACS is focused on the following vertical markets:
food processing, pharmaceutical, and discrete manufacturing. In accordance with
an Agreement of Merger, the Registrant will acquire all of the outstanding
capital stock of ACS in exchange for 1,800,000 restricted shares of the
Registrant's Common Stock. The
1
<PAGE> 2
shares issued under the Agreement of Merger will be held in escrow pending the
effective date of the Registrants Form S-3 currently being reviewed by the SEC
at which time the shares will be released to the ACS shareholders. The
Agreement of Merger will result in ACS's termination of its Subchapter S
classification creating a deferred tax liability relating to capitalized
software costs deductions previously received by the shareholders. It is
estimated that the deferred tax liability relating to the capitalized software
assumed by the Registrant will total no more than $340,000. The Agreement of
Merger provides for future tax liability to be borne one-half by the Registrant
and one-half by the ACS shareholders pro rata according to their respective
pre-merger interest in ACS. Shares will be held in escrow to satisfy any
incurred tax liability based on a value of $2.25 per share or 151,111 shares.
Such shares will be released in annual installments to former ACS shareholders
at the rate of one share for each $4.50 total reduction (through amortization
of the software costs to earnings) in the capitalized software deferred tax
reflected on the June 30, 1997 audited financial statements of the Registrant.
Such amortization and escrow period shall not exceed five years. During the
term of this escrow period the ACS shareholders shall have the option to
replace the escrowed shares valued at $2.25 per share with cash or other
collateral acceptable to the Registrant. Any replacement collateral shall be
released at the same rate as escrowed shares would be released.
ACS operates from a modern 35,000 square foot facility in West
Chester, PA. ACS staff currently numbers 65, with over 49 engineers and 4 sales
personnel and 12 corporate personnel. The Registrant intends to continue the
business of ACS, having effected the transaction in order to establish a market
presence for its Control Systems Integration operations in the regions served
by ACS.
In connection with the Merger, the past President of ACS, Kevin Fallon
will enter into an employment agreement with the Registrant.
The transaction described above closed on February 7, 1997. Prior to
this transaction, there was no material relationship between ACS and the
Registrant or any of its affiliates, any director or officer of the registrant,
or any associate of such director or officer.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED - Audited financial
statements of ACS for the 12 months ending December 31, 1995 and 1994 and
unaudited financial statements of ACS as of and for the nine months ended
September 30, 1996 and September 30, 1995 are filed herein.
(b) PRO FORMA FINANCIAL INFORMATION - The pro forma financial
statements reflect the acquisition of ACSI and ProMeta, (combined company
"ACS") accounted for as a purchase. ACS's previous fiscal year end is December
31. The pro forma balance sheet set forth the financial position as of
September 30, 1996. The pro forma income statements as of September 30, 1996
reflect the 3 months of operation of ACS for the periods ending September 30,
1996. The unaudited pro forma income statement for the year ending June 30,
1996. This pro forma information has been restated
2
<PAGE> 3
to reflect the 12 months of operations of ACS, the six months of operation for
Advanced Control Technology, Inc. ("ACT"), and the 10 months of operation of
Visioneering Holding Corp ("VHC"). ACT was acquired on January 1, 1996
resulting in 6 months of operation consolidated in the Registrant's financial
results and VHC was acquired on May 1, 1996 resulting in 2 months of operations
consolidated in the Registrant financial results. The combined pro forma income
statement was consolidated to show the cumulative effect of 12 months of
operation for the acquisitions of ACS, ACT and VHC. The June 30, 1996 and
September 30, 1996 pro forma balance sheet reflects the consolidated position
of the Registrant, MDCS, Inc., ACT and VHC and ACS.
(c) Exhibits
2.1 Agreement of Merger dated December 31, 1996 previously
filed.
2.2 Amendment to Agreement of Merger previously filed.
99.1 Press Release dated February 12, 1997 previously filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Topro, Inc.
Date: March 5, 1997 By: /s/ John Jenkins
----------------------
John P. Jenkins
President and CEO
3
<PAGE> 4
TOPRO, INC.
NOTES TO THE PRO FORMA FINANCIAL INFORMATION
Pursuant to an Agreement of Merger dated December 31, 1996, Topro,
Inc. ("Registrant"), through a merger undertaken by a newly formed subsidiary,
will acquire all the outstanding capital stock of ACSI and ProMeta
(collectively "ACS") independent control systems integrators located in West
Chester, PA. The Registrant agrees to acquire all of the outstanding capital
stock of ACS, in exchange for 1,800,000 restricted shares of the Registrant's
Common Stock. The effective date for accounting purposes will be December 1,
1996 for purposes of recording the acquisition of ACS.
The September 30, 1996 pro forma income statement of ACS, includes
goodwill amortization of $77,000 was recorded for the period. The June 30, 1996
income statement was restated to reflect goodwill amortization of $310,000.
The accompanying condensed combined pro forma balance sheet presents
the financial position of the Registrant as if the merger between the
Registrant's subsidiary and ACS had occurred on September 30, 1996. The pro
forma balance sheet was prepared utilizing the September 30, 1996 balance sheet
of ACS The pro forma statement of operations combined the statements of
operations of the Registrant for the years ended June 30, 1996 and interim
period ending September 30, 1996. The ACS financial statements were recast to
reflect three months of operations for the period ending September 30, 1996.
The combined consolidated income statement for the period ending June 30, 1996
reflects the recast operating results of ACS for the twelve months ending June,
30, 1996. The Registrant's September 30, 1996 consolidated income statements
reflects the 3 months of operation of ACT, MDCS, Inc, VHC. Additionally, 6
months of operations for ACT ending 12/31/96 was included to reflect 12 months
of operations ended June 30, 1996 for the acquisition of ACT included in
previous 8-K filings. The combined consolidated income statements for June 30,
1996 and September 30, 1996 reflect the combined acquisitions of MDCS, Inc
(pooling of interest), Advanced Control Technology, Inc. (purchase method),
Visioneering Holding Corporation (purchase method), and ACS (purchase method)
for the respective periods.
These statements are not necessarily indicative of future operations
or the actual results that would have occurred had the transactions been
consummated at the beginning of the periods indicated. The pro forma condensed
combined financial statements should be read in conjunction with the notes
thereto of the Registrant's financial statements included in it annual report
on Form 10-K and notes to financials of ACS included elsewhere in this 8-K.
4
<PAGE> 5
TOPRO INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
PURCHASE OF ACS
(UNAUDITED)
<TABLE>
<CAPTION>
TOPRO, INC. TOPRO, INC.
CONSOLIDATED ACS PRO FORMA CONSOLIDATED
09/30/96 09/30/96 ADJUST PRO FORMA
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 156,000 $ 129,786 $ 285,786
Receivables:
Trade, net of allowance for doubtful 5,234,000 3,380,816 8,614,816
accounts
Other 1,000 10,401 11,401
Cost and estimated earnings in excess of
billings on uncompleted contracts 2,866,000 700,449 3,566,449
Inventories 151,000 0 151,000
Prepaid expense 244,000 24,161 268,161
Assets of discontinued operations 581,000 581,000
Refundable income taxes 222,000 222,000
------------ ------------ ------------ ------------
Total current assets 9,455,000 4,245,613 0 13,700,613
PROPERTY AND EQUIPMENT, at cost:
Building and land 850,000 0 850,000
Equipment, fixture & equipment 2,497,000 1,478,243 (1,322,876) 2,652,367
Leasehold improvements 784,000 24,262 808,262
4,131,000 1,502,505 (1,322,876) 4,310,629
Less accumulated depreciation (1,370,700) (1,322,876) 1,322,876 (1,370,700)
------------ ------------ ------------ ------------
Net property and equipment 2,760,300 179,629 0 2,939,929
CAPITALIZED SOFTWARE DEVELOPMENT COSTS,
net of amortization 680,700 671,192 1,351,892
OTHER ASSETS
Goodwill, net of amortization - 5,024,000 0 4,565,917 9,589,917
Debt issuance costs, net of amortization 333,000 0 0 333,000
Other assets 145,000 44,818 0 189,818
------------ ------------ ------------ ------------
TOTAL ASSETS $ 18,398,000 $ 5,141,252 $ 4,565,917 $ 28,105,169
============ ============ ============ ============
</TABLE>
5
<PAGE> 6
TOPRO INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
PURCHASE OF ACS
(UNAUDITED)
<TABLE>
<CAPTION>
TOPRO, INC. TOPRO, INC.
CONSOLIDATED ACS PRO FORMA CONSOLIDATED
09/30/96 09/30/96 ADJUST PRO FORMA
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line-of-credit $ 927,000 $ 1,237,000 $ 2,164,000
Current portion of long-term debt:
Related parties 230,000 230,000
Financial institutions and other 1,422,000 1,422,000
Capital Lease obligation 41,000 16,729 57,729
Accounts payable 5,770,000 1,853,012 7,623,012
Billings in excess of costs and estimated earnings
on uncompleted contracts 988,000 2,135,545 3,123,545
Accrued expenses 1,362,000 479,093 1,841,093
Deferred gain & expense 24,000 10,737 34,737
------------ ------------ ------------ ------------
Total current liabilities 10,764,000 5,732,116 0 16,496,116
LONG-TERM DEBT, NET OF CURRENT PORTION:
Renaissance 3,500,000 0 3,500,000
Financial institutions and other 861,000 0 861,000
Capital Lease Obligations 146,000 2,441 148,441
------------ ------------ ------------ ------------
Total long-term debt 4,507,000 2,441 0 4,509,441
DEFERRED GAIN
Sale of bldg 39,000 39,000
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00 per share;
authorized 10,000,000 shares, no shares issued -- -- --
Common stock, par value $.0001 per share;
authorized 200,000,000 shares, 6,639,403 shares
issued and outstanding 9/30/96 1,000 1,375 (1,195) 1,180
Additional paid-in capital 7,775,000 626,101 3,423,719 11,824,820
Accumulated deficit (4,688,000) (1,220,781) 1,143,393 (4,765,388)
------------ ------------ ------------ ------------
Total stockholders' equity 3,088,000 (593,305) 4,565,917 7,060,612
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 18,398,000 $ 5,141,252 $ 4,565,917 $ 28,105,169
============ ============ ============ ============
</TABLE>
6
<PAGE> 7
TOPRO INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
PURCHASE OF ACS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1996
---------------------------------------------------------------------------------
TOPRO, INC. VISIONEERING TOPRO, INC.
CONSOLIDATED ACT, INC. CORPORATION ACS PRO FORMA CONSOLIDATED
06/30/96 12/31/95 04/30/96 6/30/96 ADJUST PRO FORMA
------------ ------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Control systems integration $ 19,726,000 $ 2,605,129 $ 8,165,012 $ 7,939,321 $ 38,435,462
Distributorship 907,000 907,000
------------ ------------ ------------ ------------ ----------- ------------
20,633,000 2,605,129 8,165,012 7,939,321 39,342,462
COST OF SALES:
Control systems integration 14,025,000 2,228,112 5,370,899 5,262,505 26,886,516
Distributorship 652,000 652,000
------------ ------------ ------------ ------------ ----------- ------------
14,677,000 2,228,112 5,370,899 5,262,505 27,538,516
------------ ------------ ------------ ------------ ----------- ------------
GROSS PROFIT 5,956,000 377,017 2,794,113 2,676,816 11,803,946
EXPENSES:
Sales expense 1,168,000 498,541 1,666,541
General and admin expense 3,921,000 582,220 5,224,510 3,762,273 13,490,003
Distributorship selling & other 871,000 0 0 871,000
------------ ------------ ------------ ------------ ------------
5,960,000 1,080,761 5,224,510 3,762,273 16,027,544
------------ ------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES)
Gain (loss) on sales of assets 435,000 10,436 0 445,436
Other (expenses) income 79,000 73 (6,583) 72,490
Interest expense (380,000) (172,057) (116,674) (131,306) 0 (800,037)
Goodwill amortization (114,000) (74,165) (188,512) (309,554) (686,231)
------------ ------------ ------------ ------------ ----------- ------------
20,000 (235,713) (311,769) (131,306) (309,554) (968,342)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INC TAXES 16,000 (939,457) (2,742,166) (1,216,763) (309,554) (5,191,940)
INCOME TAX BENEFIT (PROVISION):
Current 0 (7,831) 69,315 0 0 61,484
------------ ------------ ------------ ------------ ----------- ------------
Total income tax benefit (provision) 0 (7,831) 69,315 0 0 61,484
INCOME (LOSS) FROM CONTINUING
OPERATIONS $ 16,000 (947,288) (2,672,850) (1,216,763) (309,554) (5,130,455)
============ ============ ============ ============ =========== ============
NET INCOME (LOSS) PER SHARE:
Continuing operations $ 0.00 ($0.61)
------------
SHARES OUTSTANDING 6/30/96 6,639,403 1,800,000 8,439,403
============ ============ ============ ============ =========== ============
NOT REPORTED AS A WEIGHTED AVERAGE PER GAAP
</TABLE>
7
<PAGE> 8
TOPRO INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
PURCHASE OF ACS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------------------------
TOPRO, INC. TOPRO, INC.
CONSOLIDATED ACS PRO FORMA CONSOLIDATED
9/30/96 09/30/96 ADJUST PRO FORMA
---------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Control systems integration $ 7,967,000 $ 3,307,203 $11,274,203
---------------------------------------------------------------------------------
7,967,000 3,307,203 11,274,203
COST OF SALES:
Control systems integration 5,082,000 2,484,543 7,566,543
---------------------------------------------------------------------------------
5,082,000 2,484,543 7,566,543
---------------------------------------------------------------------------------
GROSS PROFIT 2,885,000 822,660 3,707,660
EXPENSES:
Sales expense 598,000 0 598,000
General and administrative expense 1,948,000 475,302 2,423,302
---------------------------------------------------------------------------------
2,546,000 475,302 3,021,302
INCOME FROM SYSTEMS INTEGRATION 339,000 347,358 686,358
OTHER INCOME (EXPENSE)
Gain on sale of assets (3,000) 0 (3,000)
Other (expense) income 4,000 0 4,000
Interest expense (172,000) (32,073) (204,073)
Goodwill amortization (87,000) 0 (77,388) (164,388)
---------------------------------------------------------------------------------
(258,000) (32,073) (77,388) (367,461)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 81,000 315,285 (77,388) 318,897
INCOME TAX BENEFIT (PROVISION):
Current 0 0 0
---------------------------------------------------------------------------------
Total income tax benefit (provision) 0 0 0
INCOME (LOSS) FROM CONTINUING 81,000 315,285 (77,388) 318,897
OPERATIONS
=================================================================================
NET INCOME (LOSS) PER SHARE:
Continuing operations $0.01 $0.04
SHARES OUTSTANDING 6/30/96 6,639,403 1,800,000 8,439,403
=================================================================================
NOT REPORTED AS A WEIGHTED AVERAGE PER GAAP
</TABLE>
8
<PAGE> 9
TOPRO INC., AND SUBSIDIARIES
ASSUMPTIONS
PURCHASE OF ACS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INCOME STATEMENT ADJUSTMENTS - 9/30/96
Goodwill amortization 77,388
INCOME STATEMENT ADJUSTMENTS - 06/30/96
Goodwill amortization - yearly 15 Years 309,554
STOCK EXCHANGED & GOODWILL
Assets 5,141,252
Liability (5,734,557)
-----------------
Net assets purchased (593,305)
Total Shares 1,800,000 2.25 4,050,000
-----------------
Total goodwill 09/30/96 4,643,305
=================
EQUITY
Common stock, par value $.0001 per share;
ACS common stock 1,375
ACS shares issued 1,800,000 0.0001 (180)
1,195
=================
ADDITIONAL PAID-IN CAPITAL
ACS additional paid in capital (626,101)
ACS shares issued 1,800,000 2.25 4,050,000
ACS shares issued 1,800,000 .0001 (180)
-----------------
3,423,719
=================
RETAINED EARNINGS RECONCILIATION
ACS Common Stock (1,375)
ACS additional paid in capital (626,101)
ACS retained earnings 1,220,781
Registrant's common stock 4,050,000
Goodwill Adjustment (77,388)
-----------------
Adjustment to equity 4,565,917
=================
</TABLE>
9
<PAGE> 10
All-Control Systems,
Inc. and Affiliate
(S Corporations)
================================================================================
Combined Financial Statements
Years Ended December 31, 1995 and 1994
<PAGE> 11
All-Control Systems, Inc. and Affiliate
(S Corporations)
Contents
================================================================================
<TABLE>
<S> <C>
Independent Auditors' Report 3
Combined financial statements
Balance sheets 4-5
Statements of operations 6
Statements of stockholders' equity 7
Statements of cash flows 8-9
Notes to combined financial statements 10-17
</TABLE>
2
<PAGE> 12
[BDO SEIDMAN, LLP LETTERHEAD]
Independent Auditors' Report
All-Control Systems, Inc.
and Affiliate
West Chester, Pennsylvania
We have audited the accompanying combined balance sheets of All-Control
Systems, Inc. and affiliate (Pennsylvania S corporations) as of December 31,
1995 and 1994, and the related combined statements of operations, stockholders'
equity, and cash flows for the years then ended. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined 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.
As discussed in Note 11, the 1995 financial statements have been revised to
correct the accounting for the forgiveness of certain officers/shareholders
indebtedness.
In our opinion, the combined financial statements referred to above present
fairly, as revised as described above, in all material respects, the financial
position of All-Control Systems, Inc. and affiliate as of December 31, 1995 and
1994, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
December 18, 1996 (except
for Note 3, for which
the date is December 31,
1996 and Note 6, for
which the date is
February 10, 1997)
3
<PAGE> 13
All-Control Systems, Inc. and Affiliate
(S Corporations)
Combined Balance Sheets
================================================================================
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
December 31, 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash $ 60,602 $ 42,360
Contracts receivable, net 2,509,357 2,756,889
Costs and estimated earnings in excess of
billings on uncompleted contracts 374,462 494,667
Loan receivable, stockholder 2,901 16,705
Prepaid expenses and other 60,944 67,941
- -------------------------------------------------------------------------------------------------------------
Total current assets 3,008,266 3,378,562
- -------------------------------------------------------------------------------------------------------------
Property and equipment
Leasehold improvements 24,262 24,262
Shop equipment 302,885 302,885
Office furniture and equipment 831,588 754,468
Office furniture and equipment under capital leases 324,713 324,713
Automobiles 16,593 16,593
- -------------------------------------------------------------------------------------------------------------
1,500,041 1,422,921
Less accumulated depreciation and amortization 1,186,227 1,012,157
- -------------------------------------------------------------------------------------------------------------
313,814 410,764
- -------------------------------------------------------------------------------------------------------------
Capitalized software costs 732,419 318,860
Deposits 34,365 30,512
- -------------------------------------------------------------------------------------------------------------
$ 4,088,864 $ 4,138,698
=============================================================================================================
</TABLE>
See accompanying notes to combined financial statements.
4
<PAGE> 14
All-Control Systems, Inc. and Affiliate
(S Corporations)
Combined Balance Sheets
================================================================================
<TABLE>
<CAPTION>
December 31, 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities
Note payable, bank $ 1,240,000 $ 1,090,000
Current maturities of obligations under capital leases 35,139 70,835
Accounts payable 1,140,291 731,029
Billings in excess of costs and estimated
earnings on uncompleted contracts 920,016 1,049,694
Accrued payroll and payroll taxes 77,657 92,179
Accrued expenses 100,991 131,628
Deferred rent 13,356 13,362
Other 104,996 264,375
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 3,632,446 3,443,102
- -------------------------------------------------------------------------------------------------------------
Long-term liabilities
Obligation under capital leases, net of current maturities 7,395 38,168
Deferred rent 7,969 19,727
Deferred compensation - 500,000
- -------------------------------------------------------------------------------------------------------------
Total long-term liabilities 15,364 557,895
- -------------------------------------------------------------------------------------------------------------
Contingencies
Stockholders' equity
Common stock 1,375 1,375
Additional paid-in capital 626,101 126,101
Retained earnings (deficit) (186,422) 10,225
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 441,054 137,701
- -------------------------------------------------------------------------------------------------------------
$ 4,088,864 $ 4,138,698
=============================================================================================================
</TABLE>
See accompanying notes to combined financial statements.
5
<PAGE> 15
All-Control Systems, Inc. and Affiliate
(S Corporations)
Combined Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994
- -------------------------------------------------------------------------------------------------------------
(as restated)
<S> <C> <C>
Contract revenue $ 9,574,289 $ 9,559,402
Direct contract costs 6,202,194 6,555,796
- -------------------------------------------------------------------------------------------------------------
Gross profit 3,372,095 3,003,606
Selling, general and administrative expenses 3,420,318 3,004,053
- -------------------------------------------------------------------------------------------------------------
Loss from operations (48,223) (447)
- -------------------------------------------------------------------------------------------------------------
Other expenses
Interest expense, net of interest income of $338
and $7,853 in 1995 and 1994, respectively 148,424 123,938
- -------------------------------------------------------------------------------------------------------------
Net loss $ (196,647) $ (124,385)
=============================================================================================================
</TABLE>
See accompanying notes to combined financial statements.
6
<PAGE> 16
All-Control Systems, Inc. and Affiliate
(S Corporations)
Combined Statement of Stockholders' Equity
================================================================================
<TABLE>
<CAPTION>
Years ended December 31, 1994 and 1995
- -------------------------------------------------------------------------------------------------------------
Additional Retained
Common Paid-In Earnings
Stock Capital (Deficit)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1994 $ 125 $ 126,101 $ 205,610
Issuance of common stock - ProMeta 1,250 - -
Distributions to stockholders - - (71,000)
Net loss - - (124,385)
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,375 126,101 10,225
Forgiveness of
officers/shareholders indebtedness - 500,000 -
Net loss - - (196,647)
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $ 1,375 $ 626,101 $ (186,422)
=============================================================================================================
</TABLE>
See accompanying notes to combined financial statements.
7
<PAGE> 17
All-Control Systems, Inc. and Affiliate
(S Corporations)
Combined Statement of Cash Flows
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (196,647) $ (124,385)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 175,860 177,176
Decrease in deferred rent (11,764) (2,187)
Provision for losses on accounts receivable 217,710 (8,984)
Change in operating assets and liabilities
Contracts receivable and retainage 29,822 (1,131,714)
Costs and estimated earnings in excess of billings
on uncompleted contracts 120,205 103,142
Prepaid expenses, other and deposits 3,145 56,835
Accounts payable 409,262 372,676
Billings in excess of costs and estimated earnings
on uncompleted contracts (129,678) 501,172
Accrued payroll and payroll taxes (14,522) (2,708)
Accrued expenses and other (190,016) 278,355
- -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 413,377 219,378
- -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Capitalized software costs (413,559) (298,643)
Purchases of equipment (78,911) (42,948)
- -------------------------------------------------------------------------------------------------------------
Net cash (used) in investing activities (492,470) (341,591)
- -------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net borrowings under line of credit agreement 150,000 332,790
Payments under capital lease obligations (66,469) (70,277)
Proceeds from repayment of loans by a stockholder 13,804 -
Proceeds from issuance of common stock - 1,250
Dividends paid - (71,000)
Repayments of notes payable, bank - (34,040)
- -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 97,335 158,723
=============================================================================================================
</TABLE>
8
<PAGE> 18
All-Control Systems, Inc. and Affiliate
(S Corporations)
Combined Statement of Cash Flows
================================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net increase in cash $ 18,242 $ 36,510
Cash, at beginning of year 42,360 5,850
- -------------------------------------------------------------------------------------------------------------
Cash, at end of year $ 60,602 $ 42,360
=============================================================================================================
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 137,593 $ 100,632
=============================================================================================================
Supplemental schedule of noncash investing activities
Forgiveness of officers/shareholders indebtedness $ 500,000 $ -
=============================================================================================================
</TABLE>
See accompanying notes to combined financial statements.
9
<PAGE> 19
All-Control Systems, Inc. and Affiliate
(S Corporations)
Notes to Combined Financial Statements
================================================================================
1. Description Principles of Combination
of the
Business and The combined financial statements include the
Summary of accounts of All-Control Systems, Inc. ("ACS") and
Significant its affiliate, ProMeta Consulting, Inc.
Accounting ("ProMeta"), together (the "Company"). Both
Policies entities are affiliated through common ownership.
All significant intercompany accounts and
transactions have been eliminated.
Nature of Operations and Significant Customers
The Company is a national organization
specializing in electrical, control and
instrumentation software and information systems
engineering and consulting. During 1995, sales to
one customer accounted for 16% of contract
revenue. One customer accounted for 22% of
contracts receivable as of December 31, 1995.
Such amount is in dispute. The Company feels its
reserves are adequate and will continue to monitor
them as facts and circumstances change. During
1994, sales to three customers accounted for 42%
of contract revenue and two customers accounted
for 27% of contracts receivable as of December 31,
1994.
Revenue Recognition
Revenues earned from fixed price or modified fixed
price automation systems contracts are recognized
on the percentage-of-completion method, measured
by the costs incurred to date as a percentage of
estimated total costs for each contract. Revenues
from cost plus fee contracts are recognized on the
basis of costs incurred during the period plus the
fee earned.
Cost of revenues earned includes all direct
material, labor and subcontract costs related to
the contract performance. Indirect costs, such as
supplies, insurance, depreciation, etc. are
allocated to direct contract costs as incurred,
depending on the prevailing circumstances.
Selling, general and administrative costs are
charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made
in the period in which such losses are determined.
10
<PAGE> 20
All-Control Systems, Inc. and Affiliate
(S Corporations)
Notes to Combined Financial Statements
================================================================================
Concentration of Credit Risk
Financial instruments which potentially subject
the Company to concentrations of credit risk
consist principally of contracts receivable.
Billed contracts receivable result primarily from
contracts with large manufacturing firms. The
Company reviews a customer's credit history and
obtains an approved contract before commencing
work. The Company generally does not require
collateral from its customers. The Company
reviews engagement status on an ongoing basis and
bills only amounts it believes are realizable
under the terms of the applicable contract.
Property and Equipment
Property and equipment are stated at cost.
Depreciation is provided on the straight-line
method over the estimated economic lives of the
assets which range from 3 to 7 years. Assets
acquired under capital leases are recorded at the
lesser of the fair market value or the net present
value of the minimum lease commitments measured at
the inception of the lease. Amortization is
provided on the straight-line method over the
lease terms which range from 2 to 5 years.
Fair Value of Financial Instruments
The carrying amounts reported in the balance
sheets for cash, contracts receivable, accounts
payable, and accrued liabilities approximate fair
value because of the immediate or short-term
maturity of these financial instruments.
Income Taxes
ACS and ProMeta each have elected to be taxed as a
corporation according to the provisions of
Subchapter S of the Internal Revenue Code and the
Income Tax Code of the Commonwealth of
Pennsylvania, and the stockholders have consented
to include their pro rata share of income or loss
in their individual Federal and state income tax
returns. Accordingly, no provision has been made
for Federal or Pennsylvania income taxes.
11
<PAGE> 21
All-Control Systems, Inc. and Affiliate
(S Corporations)
Notes to Combined Financial Statements
================================================================================
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.
Capitalized Software Costs
The Company incurs expenses related to the
development of software products. These costs
have been capitalized and will be amortized by
using the greater of the ratio of actual current
revenue recognized over the total estimated
revenue or the straight-line method over the
estimated useful life of the software, not to
exceed five years. For the years ended December
31, 1995 and 1994, the Company capitalized
software costs of $413,559 and $298,643.
Amortization of software costs began in 1996 when
the products became commercially viable.
2. Contingencies The Company is party to various legal proceedings
and are subject to various claims arising in the
ordinary course of business. Management believes
that the disposition of these matters will not
have a material effect on the financial position
of the Company.
3. Proposed On December 31, 1996, the Company entered into an
Merger agreement of sale and merger with a wholly-owned
subsidiary of a publicly traded Company to be
effective as of November 30, 1996. The Company's
stockholders will exchange all of their common
stock for 1,800,000 shares of that publicly traded
Company's common stock.
12
<PAGE> 22
All-Control Systems, Inc. and Affiliate
(S Corporations)
Notes to Combined Financial Statements
================================================================================
<TABLE>
<S> <C>
4. Contracts Contracts receivable include the following:
Receivable
December 31, 1995 1994
--------------------------------------------------------------------------------
Currently due $ 2,734,357 $ 2,007,177
Retainage - 757,002
--------------------------------------------------------------------------------
2,734,357 2,764,179
Less allowance for
doubtful accounts 225,000 48,000
--------------------------------------------------------------------------------
$ 2,509,357 $ 2,716,179
================================================================================
5. Costs and Costs and estimated earnings on uncompleted contracts consist of the following:
Estimated
Earnings on December 31, 1995 1994
Uncompleted --------------------------------------------------------------------------------
Contracts Cumulative costs incurred
on uncompleted contracts $ 7,588,432 $ 9,264,395
Estimated cumulative earnings 3,273,831 3,461,494
--------------------------------------------------------------------------------
10,862,263 12,725,889
Less billings cumulative to date 11,407,817 13,280,916
--------------------------------------------------------------------------------
$ (545,554) $ (555,027)
================================================================================
</TABLE>
13
<PAGE> 23
All-Control Systems, Inc. and Affiliate
(S Corporations)
Notes to Combined Financial Statements
================================================================================
The following are included in the accompanying balance sheet:
<TABLE>
<CAPTION>
December 31, 1995 1994
--------------------------------------------------------------------------------
<S> <C> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 374,462 $ 494,667
Billings in excess of costs and estimated
earnings on uncompleted contracts 920,016 1,049,694
--------------------------------------------------------------------------------
$ (545,554) $ (555,027)
================================================================================
</TABLE>
6. Debt Note Payable, Bank
Note payable, bank, represents borrowings against a
$1,600,000 line of credit and is due on demand.
Eligible borrowings are limited to 75% of qualified
receivables, as defined in the loan agreement.
Interest is payable monthly at prime plus 1.25%
(9.75% as of December 31, 1995).
Substantially all of ACS's assets are pledged as
collateral on the note payable, bank. In addition,
the note is personally guaranteed by the majority
stockholder of the Company.
The terms of the Company's financing agreement
contains, among other provisions, requirements for
maintaining defined levels of working capital, net
worth and other financial ratios. At December 31,
1995, the Company was in violation of certain loan
covenants. On February 10, 1997, the financing
agreement was amended. In connection with this
amendment, the bank agreed to waive all loan
covenant violations through the amendment date,
subject to the proposed merger as described in Note
3. The amended financing agreement includes, among
other provisions, an increase in the interest rate
to prime plus 3% and a reduction in the line of
credit to $1,000,000.
14
<PAGE> 24
All-Control Systems, Inc. and Affiliate
(S Corporations)
Notes to Combined Financial Statements
================================================================================
<TABLE>
<CAPTION>
7. Capital Stock Capital stock and additional paid-in capital are comprised of:
and Additional
Paid-In Capital Additional
Capital Paid-In
Stock Capital
--------------------------------------------------------------------------------
<S> <C> <C>
ACS
Common stock, $.10 par value
Authorized 10,000 shares
Issued and outstanding 1,250 shares $ 125 $ 626,101
ProMeta
Common stock, no par value
Authorized 1,250 shares
Issued and outstanding 1,250 shares 1,250 -
--------------------------------------------------------------------------------
$ 1,375 $ 626,101
================================================================================
</TABLE>
8. Leasing ACS leases its principal operating facility under
Activities an operating lease which expires in 1997. The
agreement also contains an option to extend the
lease for an additional four years. In addition to
base rent, ACS is required to pay its pro rata
share of building operating expenses. Effective
interest rates on capital lease obligations range
from 10.8% to 24.5%. The accumulated amortization
of assets capitalized under capital leases at
December 31, 1995 and 1994 was $294,092 and
$238,065, respectively.
15
<PAGE> 25
All-Control Systems, Inc. and Affiliate
(S Corporations)
Notes to Combined Financial Statements
================================================================================
Future minimum lease payments subsequent to December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Operating Capital
Year ended December 31, Leases Leases
--------------------------------------------------------------------------------
<S> <C> <C>
1996 $ 287,664 $ 37,876
1997 47,944 7,572
--------------------------------------------------------------------------------
$ 335,608 45,448
==============================================================
Less amount representing interest 2,914
--------------------------------------------------------------------------------
42,534
Less current maturities 35,139
--------------------------------------------------------------------------------
$ 7,395
================================================================================
</TABLE>
Certain capital lease obligations are personally
guaranteed by the majority stockholders of ACS.
Rent expense for the years ended December 31, 1995
and 1994 was $273,544 and $270,393, respectively.
Deferred rent represents lease concessions for the
term of the rental agreement and is being amortized
over the remaining term of the lease.
9. Employee ACS sponsors a 401(k) plan for the benefit of its
Benefit Plan Employees. ACS matches employee contributions at a
rate of 50% up to 6% of qualified compensation.
Employer contributions to this plan were $59,402
and $66,008 for the years ended December 31, 1995
and 1994, respectively.
16
<PAGE> 26
All-Control Systems, Inc. and Affiliate
(S Corporations)
Notes to Combined Financial Statements
================================================================================
10. Related Party The Company performed subcontractor work for
Transactions Precision Dispensing, Inc. ("PDI"), a related
party. Billings to PDI amounted to $1,009,849 and
$449,232 in 1995 and 1994, respectively.
11. Restatement During 1995, certain officers/shareholders agreed
of Prior Year to forgive all of their deferred compensation due
from the Company. This amount, totaling $500,000
was originally recorded as a reduction of operating
expenses. The 1995 financial statements have been
restated to record such forgiveness as an addition
to paid-in capital.
17
<PAGE> 27
ACS/PROMETA
Financial Statements
For the Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
Total
ACS ProMeta Eliminations ACS/ProMeta
<S> <C> <C> <C> <C>
INCOME STATEMENT:
Revenues $6,483,773 $396,204 $0 $6,879,977
-------------------------------------------------------
Cost of Revenues:
Direct Labor $1,078,548 $57,943 $0 $1,136,491
Direct Fringe Benefits 97,571 4,238 0 101,809
Direct Overhead 494,670 11,418 0 506,088
Direct Travel 177,085 33,602 0 210,687
Direct Materials 2,205,037 0 0 2,205,037
Other Direct Costs 66,453 1,176 0 67,629
Subcontractors 751,085 253,210 0 1,004,295
Direct Jobshoppers 0 0 0 0
-------------------------------------------------------
Total Cost of Revenues $4,870,449 $361,586 $0 $5,232,036
Gross Profit $1,613,323 $34,618 $0 $1,647,941
-------------------------------------------------------
Indirect Expenses:
NPT Salaries $139,167 $0 $0 $139,167
Leave Salaries 138,049 0 0 138,049
Selling Salaries 0 0 0 0
Payroll Taxes 145,551 0 0 145,551
Employee Benefit Plan 82,309 0 0 82,309
Indirect Outside Services 2,511 0 0 2,511
Equipment Rental 26 0 0 26
Travel & Living 10,207 0 0 10,207
Training & Education 3,580 0 0 3,580
Dues & Subscriptions 2,832 0 0 2,832
Relocation & Recruiting 29,677 0 0 29,677
Office Supplies & Expense 4,290 0 0 4,290
Miscellaneous Expenses 2,105 0 0 2,105
General Admin Allocation 446,181 0 0 446,181
Indirect FB & OH Allocation (689,057) 0 0 (689,057)
-------------------------------------------------------
Total Indirect Expenses $317,427 $0 $0 $317,427
Operating Profit $1,295,896 $34,618 $0 $1,330,514
S.G.& A. Expenses:
Admin Salaries $433,315 $16,450 $0 $449,765
Selling Salaries 377,273 10,603 0 387,876
Leave Salaries 59,890 11,196 0 71,086
</TABLE>
Unaudited
<PAGE> 28
ACS/PROMETA
Financial Statements
For the Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
Total
ACS ProMeta Eliminations ACS/ProMeta
<S> <C> <C> <C> <C>
Payroll Taxes 62,767 10,283 0 73,050
Employee Benefit Plan 52,404 6,081 0 58,485
Accounting & Legal Fees 51,705 0 0 51,705
Indirect Outside Services 64,911 24,527 0 89,438
Equipment Rental 25,247 0 0 25,247
Maintenance & Repairs 2,345 0 0 2,345
Travel & Living 84,551 434 0 84,985
Training & Education 5,377 1,056 0 6,433
Dues & Subscriptions 5,007 803 0 5,810
Utilities 26,523 0 0 26,523
Rent 241,414 0 0 241,414
Advertising 2,026 0 0 2,026
Depreciation 81,418 0 0 81,418
Amortization 74,840 0 0 74,840
Insurance 43,454 0 0 43,454
Relocation & Recruiting 42,983 16,642 0 59,625
Office Supplies & Expense 33,512 110 0 33,622
Telecommunications 56,505 2,178 0 58,683
Miscellaneous Expenses 30,820 1,470 0 32,290
Miscellaneous Taxes 0 0 0 0
Bad Debt Expense 0 0 0 0
General Admin Allocation (513,681) 67,500 0 (446,181)
Indirect FB & OH Allocation 73,133 (15,699) 0 57,434
-------------------------------------------------------
Total S.G.& A. Expenses $1,417,739 $153,634 $0 $1,571,373
-------------------------------------------------------
-------------------------------------------------------
Income (Loss) Before Interest & Taxes ($121,843) ($119,016) $0 ($240,859)
-------------------------------------------------------
Interest Expense $97,026 $0 $0 $97,026
-------------------------------------------------------
Net Income Before Taxes ($218,869) ($119,016) $0 ($337,885)
=======================================================
% Income/Revenues (3.4%) (30.0%) (4.9%)
</TABLE>
Unaudited
<PAGE> 29
ACS/PROMETA
Financial Statements
For the Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
December Total
1995 ACS ProMeta Eliminations ACS/ProMeta
<S> <C> <C> <C> <C> <C>
BALANCE SHEET:
Current Assets:
Cash and cash equivalents $60,602 ($35,432) $69,548 $0 $34,116
Accounts receivable, trade 2,509,356 3,901,101 90,247 0 3,991,348
Accounts receivable, intercompany 950 428,599 0 0 428,599
Retainage 0 14,468 0 0 14,468
Costs and estimated earnings
in excess of billings on
uncompleted contracts 374,462 682,400 18,049 0 700,449
Loans receivable, shareholder 2,901 10,401 0 0 10,401
Prepaid expenses 62,199 44,161 0 0 44,161
Other (2,205) 10,453 0 0 10,453
-------------------------------------------------------------------
Total Current Assets $3,008,265 $5,056,151 $177,844 $0 $5,233,995
-------------------------------------------------------------------
Property and equipment:
Leashold improvements $24,262 $24,262 $0 $0 $24,262
Shop equipment 302,884 302,884 0 0 302,884
Office furniture and equipment 831,589 834,053 0 0 834,053
Office furniture and equipment 0
under capital leases 324,713 324,713 0 0 324,713
Automobiles 16,593 16,593 0 0 16,593
-------------------------------------------------------------------
Subtotal $1,500,041 $1,502,505 $0 $0 $1,502,505
Less: accumulated depreciation and
amortization 1,186,227 1,296,732 0 0 1,296,732
-------------------------------------------------------------------
Subtotal $313,815 $205,773 $0 $0 $205,773
-------------------------------------------------------------------
Other Assets:
Software Development costs, net of $732,419 $756,192 $0 $0 $756,192
accumulated amortization
Goodwill, net of accumulated
amortization 0 0 0 0
Deposits 34,365 34,365 0 0 34,365
-------------------------------------------------------------------
Subtotal $766,784 $790,557 $0 $0 $790,557
-------------------------------------------------------------------
Total Assets $4,088,864 $6,052,482 $177,844 $0 $6,230,325
===================================================================
</TABLE>
Unaudited
<PAGE> 30
ACS/PROMETA
Financial Statements
For the Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
December Total
1995 ACS ProMeta Eliminations ACS/ProMeta
<S> <C> <C> <C> <C> <C>
BALANCE SHEET:
Current Liabilities:
Note payable, bank $1,240,000 $1,237,000 $0 $0 $1,237,000
Current portion of:
Long-term debt 0 0 0 0 0
Obligations under capital leases 35,139 16,729 0 0 16,729
Accounts Payable 1,140,291 2,163,538 118,073 0 2,281,611
Billings in excess of costs and
estimated earnings on
uncompleted contracts 920,016 1,668,536 431,009 0 2,099,545
Accrued payroll and payroll taxes 77,657 219,996 0 0 219,996
Accrued expenses 100,991 138,916 6,349 0 145,265
Other 104,996 113,832 0 0 113,832
-------------------------------------------------------------------
Total Current Liabilities $3,619,090 $5,558,547 $555,431 $0 $6,113,978
-------------------------------------------------------------------
Long-term debt $0 $0 $0 $0 $0
-------------------------------------------------------------------
Obligation under capital leases, net
of current portion $7,395 $2,441 $0 $0 $2,441
-------------------------------------------------------------------
Deferred rent $21,324 $10,737 $0 $0 $10,737
-------------------------------------------------------------------
Deferred compensation $0 $0 $0 $0 $0
-------------------------------------------------------------------
Shareholders' Equity:
Capital Stock $1,375 $125 $1,250 $0 $1,375
Additional Paid-in Capital 626,101 626,101 0 0 626,101
Retained Earnings (186,422) (145,469) (378,837) 0 (524,307)
-------------------------------------------------------------------
Total Shareholders' Equity $441,054 $480,757 ($377,587) $0 $103,169
-------------------------------------------------------------------
-------------------------------------------------------------------
Total Liabilities & Shareholders'
Equity $4,088,864 $6,052,482 $177,844 $0 $6,230,325
===================================================================
</TABLE>
Unaudited
<PAGE> 31
ACS/PROMETA
Financial Statements
For the Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
Total
ACS/ProMeta
<S> <C>
STATEMENT OF CASH FLOWS:
Net Income/(Loss) ($337,885)
Add Non-Cash Items:
Depreciation 81,418
Amortization 74,840
-----------
Subtotal ($181,627)
-----------
Change in Current Assets ($2,244,716)
(Excluding Cash)
Change in Current Liabilities 2,516,298
(Excluding Debt)
Other - Change in L/T Assets 0
Other - Change in L/T Liabilities (10,587)
-----------
Net cash used in operating activities $79,367
-----------
Purchase of furniture & equipment ($2,464)
Proceeds from sale of equipment 0
Capitalized software costs (69,526)
-----------
Net cash used in investing activities ($71,990)
-----------
Borrowings/(repayments) of debt ($3,000)
Proceeds from reorganization 0
Proceeds from loan receivable,
stockholder (7,500)
Payments under capital lease
obligations (23,364)
Dividends paid 0
-----------
Net cash used in financing activities ($33,864)
-----------
-----------
Net Increase/(Decrease) in Cash ($26,486)
===========
</TABLE>
Unaudited
<PAGE> 32
ACS/PROMETA
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
9/30/95 9/30/95 9/30/95
ACS ProMeta ACS/ProMeta
<S> <C> <C> <C>
BALANCE SHEET:
Current Assets:
Cash and cash equivalents $ 130,667 $ 8,190 $ 138,857
Accounts receivable, trade 2,767,465 44,689 2,812,154
Accounts receivable, Intercompany 334,457 - 334,457
Retainage 167,371 - 167,371
Costs and estimated earnings
in excess of billings on
uncompleted contracts 360,860 37,901 398,761
Loans receivable, shareholder 2,901 - 2,901
Prepaid expenses 102,882 - 102,882
Other 3,693 - 3,693
----------------------------------------
Total Current Assets $3,870,296 $ 90,780 $3,961,076
----------------------------------------
Property and Equipment:
Leashold improvements $ 24,262 $ - $ 24,262
Shop equipment 302,884 - 302,884
Office furniture and equipment 830,315 - 830,315
Office furniture and equipment
under capital leases 324,713 - 324,713
Automobiles 16,593 - 16,593
----------------------------------------
Subtotal $1,498,767 $ - $1,498,767
Less: accumulated depreciation and
amortization 1,144,445 - 1,144,445
----------------------------------------
Subtotal $ 354,322 $ - $ 354,322
----------------------------------------
Other Assets:
Software Development costs, net of $ 629,029 $ - $ 629,029
accumulated amortization
Deposits 44,104 - 44,104
----------------------------------------
Subtotal 673,133 - 673,133
----------------------------------------
----------------------------------------
Total Assets $4,897,751 $ 90,780 $4,988,531
========================================
</TABLE>
<PAGE> 33
ACS/PROMETA
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
9/30/95 9/30/95 9/30/95
ACS ProMeta ACS/ProMeta
<S> <C> <C> <C>
BALANCE SHEET:
Current Liabilities:
Note payable, bank $1,300,000 $ - $1,300,000
Current portion of:
Long-term debt - - -
Obligations under capital leases 64,416 - 64,416
Accounts Payable 1,337,877 1,607 1,339,484
Billings in excess of costs and
estimated earnings on
uncompleted contracts 757,551 313,319 1,070,870
Accrued payroll and payroll taxes 152,914 (10,513) 142,401
Accrued expenses 245,383 6,349 251,712
Other 126,856 - 126,856
----------------------------------------
Total Current Liabilities $3,984,977 $ 310,762 $4,295,739
----------------------------------------
Long-term debt $ - $ - $ -
----------------------------------------
Obligation under capital leases, net
of current portion $ - $ - $ -
----------------------------------------
Deferred rent $ 24,853 $ - $ 24,853
----------------------------------------
Deferred compensation $ 500,000 $ - $ 500,000
----------------------------------------
Shareholders' Equity:
Capital Stock $ 1,250 $ 1,250 $ 2,500
Additional Paid-in Capital 124,976 - 124,976
Retained Earnings 261,695 (221,232) 40,463
----------------------------------------
Total Shareholders' Equity $ 387,921 $ (219,982) $ 167,939
----------------------------------------
Total Liabilities & Shareholders' ----------------------------------------
Equity $4,897,751 $ 90,780 $4,988,531
========================================
</TABLE>
<PAGE> 34
ACS/PROMETA
FINANCIAL STATEMENTS
FOR THE 9 MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
YTD 9/30/95 YTD 9/30/95 YTD 9/30/95
ACS ProMeta ACS/ProMeta
<S> <C> <C> <C>
INCOME STATEMENT:
Revenues $ 7,261,286 $ 437,628 $ 7,698,914
-------------------------------------
Cost of Revenues:
Direct Labor $ 1,170,587 $ 125,006 $ 1,295,593
Direct Fringe Benefits 133,217 10,873 144,090
Direct Overhead 713,336 21,719 735,055
Direct Travel 359,005 53,993 412,998
Direct Materials 1,392,394 - 1,392,394
Other Direct Costs 13,680 4,404 18,084
Subcontractors 1,235,733 105,702 1,341,435
Direct Jobshoppers - - -
-------------------------------------
Total Cost of Revenues $ 5,017,952 $ 321,697 $ 5,339,649
Gross Profit $ 2,243,334 $ 115,931 $ 2,359,265
-------------------------------------
Indirect Expenses:
NPT Salaries $ 254,839 $ - $ 254,839
Leave salaries 154,519 - 154,519
Selling Salaries - - -
Payroll Taxes 198,667 - 198,667
Employee Benefit Plan 41,535 - 41,535
Indirect Outside Services 3,869 - 3,869
Equipment Rental - - -
Travel & Living 5,591 - 5,591
Training & Education 16,885 - 16,885
Dues & Subscriptions 2,939 - 2,939
Relocation & Recruiting 3,328 - 3,328
Office Supplies & Expense 4,517 - 4,517
Miscellaneous Expenses (8,157) - (8,157)
General Admin Allocation 494,863 - 494,863
Indirect FB & OH Allocation (924,598) - (924,598)
-------------------------------------
Total Indirect Expenses $ 248,797 $ - $ 248,797
Operating Profit $ 1,994,537 $ 115,931 $ 2,110,468
S.G.& A. Expenses:
Admin Salaries $ 520,245 $ 83,147 $ 603,392
Selling Salaries 413,497 92,455 505,952
Leave Salaries 88,582 15,231 103,813
</TABLE>
<PAGE> 35
ACS/PROMETA
FINANCIAL STATEMENTS
FOR THE 9 MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
YTD 9/30/95 YTD 9/30/95 YTD 9/30/95
ACS ProMeta ACS/ProMeta
<S> <C> <C> <C>
Payroll Taxes 103,427 19,502 122,929
Employee Benefit Plan 129,055 2,413 131,468
Accounting & Legal Fees 19,742 - 19,742
Indirect Outside Services 68,042 19,050 87,092
Equipment Rental 5,007 - 5,007
Maintenance & Repairs 13,935 - 13,935
Travel & Living 99,125 14,361 113,486
Training & Education 8,053 - 8,053
Dues & Subscriptions 7,711 10,173 17,884
Utilities 29,951 - 29,951
Rent 230,571 - 230,571
Advertising 26,611 2,200 28,811
Depreciation 85,121 - 85,121
Amortization 47,169 - 47,169
Insurance 44,687 - 44,687
Relocation & Recruiting 129,564 2,569 132,133
Office Supplies & Expense 55,131 6,319 61,450
Telecommunications 45,501 4,256 49,757
Miscellaneous Expenses 7,581 2,204 9,785
Miscellaneous Taxes (17,359) - (17,359)
Bad Debt Expense - - -
General Admin Allocation (555,698) 37,500 (518,198)
Indirect FB & OH Allocation 79,408 (32,289) 47,119
--------------------------------------
Total S.G. & A. Expenses $1,684,658 $ 279,091 $1,963,749
--------------------------------------
--------------------------------------
Income (Loss) Before Interest & Taxes $ 309,879 $(163,160) $ 146,719
--------------------------------------
Interest Expense $ 116,478 $ - $ 116,478
--------------------------------------
Net Income Before Taxes $ 193,401 $(163,160) $ 30,241
======================================
% Income/Revenues 8.1% (102.0%) 0.4%
</TABLE>
