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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO FORM 8-K (DATED JUNE 11, 1996)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) April 12, 1996
INSCI CORP.
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(Exact name of Registrant as specified in it's Charter)
Delaware
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(State of other jurisdiction of incorporation)
1-12966 06-1302773
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Commission File No. I.R.S. Employer Identification
Two Westborough Business Park
Westborough, MA 01581
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Address of principal Zip Code
executive offices
(508) 870-4000
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Registrant's telephone number,
including area code
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7. FINANCIAL STATEMENT
The Registrant (the "Company") supplements its 8-K Report filed on
April 12, 1996, with respect to the aquisition of the assets of the Courtland
Group, Inc. by the Company.
The Company supplementally submits the financial statements of the
Courtland Group, Inc. for the period of May 1, 1995 through March 27, 1996, as
audited by Pannel Kerr Forster, PC.
EXHIBITS
Financial Statement - Courtland Group, Inc. for period May 1, 1995
through March 27, 1996.
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.
Dated: New York, New York
June 11, 1996
INSCI CORP.
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(Registrant)
/s/ E. TED PRINCE
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E.Ted Prince
Chief Executive Officer
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COURTLAND GROUP, INC.
Financial Statements
for the period
May 1, 1995 to March 27, 1996
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Independent Auditor's Report
To the Directors and
Stockholders
Courtland Group, Inc.
We have audited the accompanying balance sheet of Courtland Group, Inc. as of
March 27, 1996 and the related statements of operations, stockholder's equity
(deficit), and cash flows for the period May 1, 1995 to March 27, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Courtland Group, Inc. at March
27, 1996, and the results of its operations and its cash flows for the period
May 1, 1995 to March 27, 1996 in conformity with generally accepted accounting
principles.
As discussed in note 1 to the financial statements, Courtland Group, Inc.
completed the sale of certain net assets to a third party on March 28, 1996. The
accompanying balance sheet as of March 27, 1996 has been prepared as of a date
prior to the sale of net assets. The accompanying balance sheet does not include
any adjustments relating to the realization and classification of the recorded
net assets that might be necessary to reflect the intentions of the third party
purchaser.
May 1, 1996
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2
COURTLAND GROUP, INC.
Balance Sheet
March 27, 1996
Assets
Cash $ 6,814
Accounts and other receivables 30,885
Furniture, fixtures and equipment, net of accumulated
depreciation of $44,159 (note 2) 28,406
Capitalized software development costs, net of accumulated
amortization of $998,000 (note 2) 355,000
Deferred tax asset (note 5) 66,890
---------
Total assets $ 487,995
---------
Liabilities and Stockholders' Equity (Deficit)
Liabilities
Accounts payable $ 18,989
Advance payable (note 3) 40,000
Accrued and other liabilities 192,656
Unearned revenue (note 2) 57,947
Notes payable - related parties (note 4) 224,816
---------
Total liabilities 534,408
---------
Commitments (note 1 and 6)
Stockholders' equity (deficit)
Capital stock, $.01 par value: authorized 10,000,000
shares; issued and outstanding 56,797 568
Additional paid-in capital 364,485
Accumulated (deficit) (411,466)
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Total stockholders' equity (deficit) (46,413)
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Total liabilities and stockholders' equity (deficit) $ 487,995
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See notes to financial statements
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3
COURTLAND GROUP, INC.
Statement of Operations
For the Period May 1, 1995 to March 27, 1996
Revenue
Product $ 670,437
Services 96,210
---------
Total revenue 766,647
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Cost of revenue
Product 323,955
Services 82,994
---------
406,949
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Gross profit 359,698
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Expenses
General and administrative 356,769
Rent (note 6) 89,729
Professional fees 7,123
Interest 5,985
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Total expenses 459,606
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Loss before deferred tax benefit (99,908)
Deferred tax benefit (note 5) 35,760
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Net loss $ (64,148)
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See notes to financial statements
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4
COURTLAND GROUP, INC.
Statement of Stockholders' Equity (Deficit)
For the Period May 1, 1995 to March 27, 1996
Additional
Capital Paid-in Accumulated
Stock Capital (Deficit) Total
------- ---------- ----------- --------
Balance, April 30, 1995 $568 $364,485 $(347,318) $ 17,735
Net loss for the period - - (64,148) (64,148)
---- -------- --------- --------
Balance, March 27, 1996 $568 $364,485 $(411,466) $(46,413)
---- -------- --------- --------
See notes to financial statements
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5
COURTLAND GROUP, INC.
Statement of Cash Flows
For the Period May 1, 1995 to March 27, 1996
<TABLE>
<S> <C> <C>
Cash flows from operating activities
Net loss $ (64,148)
Adjustments to reconcile net loss to net cash
provided by operating activities
Deferred tax benefit $ (35,760)
Depreciation 7,643
Amortization of capitalized software development costs 239,000
Changes in certain other accounts
Accounts and other receivables (30,885)
Accounts payable (13,752)
Accrued and other liabilities 116,346
Unearned revenue (560)
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Total adjustments 282,032
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Net cash provided by operating activities 217,884
Cash flows from investing activities
Additions to furniture, fixtures and equipment (22,656)
Capitalized software development costs (275,000)
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Net cash (used) by investing activities (297,656)
Cash flows from financing activities
Proceeds from advance payable 40,000
Repayment of note payable (8,752)
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Net cash provided by financing activities 31,248
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(Decrease) in cash (48,524)
Cash at beginning of period 55,338
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Cash at end of period $ 6,814
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See notes to financial statements
</TABLE>
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6
COURTLAND GROUP, INC.
Notes to Financial Statements
March 27, 1996
Note 1 - Organization
Courtland Group, Inc. (the Company) was incorporated on May 1, 1987 in the State
of Maryland. The Company develops, markets and supports computer software that
utilizes optical disk storage technology to archive, index, store, retrieve,
print and fax documents.
On March 28, 1996, certain net assets of the Company were sold to INSCI Corp.
Note 2 - Summary of significant accounting policies
a. Estimates
The financial statements of the Company are prepared in conformity with
generally accepted accounting principles, which require 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.
b. Revenue recognition
Revenue from the sale of the Company's computer software is recognized upon
shipment and remaining insignificant obligations, are accrued. The Company's
software license agreement does not (i) entitle the buyer to any right of return
or exchange, or (ii) grant the customer any right to product upgrades or
enhancements.
Software maintenance revenue is recognized ratably over the contract period,
generally one year.
c. Depreciation
Furniture, fixtures and equipment are recorded at cost and are being depreciated
on an accelerated method over estimated useful lives of 5 and 7 years.
d. Income taxes
Deferred tax assets and liabilities are recognized for both the expected future
tax impact of differences between the financial statement and tax basis of
assets and liabilities, and for the expected future tax benefit to be derived
from tax loss carryforwards. Deferred tax assets are reflected at their likely
realizable amount.
e. Capitalized software development costs
The Company capitalizes the qualifying costs of developing its software
products. Capitalization of cost requires that technological feasibility has
been established. Development costs incurred prior to the establishment of
technological feasibility are expensed as incurred. When the software is fully
documented and available for unrestricted sale, capitalization of development
costs ceases, and amortization commences based on either a straight-line basis
or the ratio of current gross revenues to the total current and anticipated
future gross revenues, whichever is greater. The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized software
development costs require considerable judgment by management with respect to
certain external factors, including, but not limited to, technological
feasibility, anticipated future gross revenues, estimated economic life and
changes in software technologies.
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7
COURTLAND GROUP, INC.
Notes to Financial Statements (continued)
March 27, 1996
The Company evaluates the estimated net realizable value of each software
product at each balance sheet date and records write-downs to net realizable
value for any products for which the net book value is in excess of net
realizable value. No such write-downs were required at March 27, 1996.
Capitalized software development costs for the period May 1, 1995 to March 27,
1996 amounted to $275,000 while amortization of capitalized software development
costs amounted to $239,000 and is included in cost of revenue in the
accompanying Statement of Operations.
Note 3 - Advance payable
In March 1996 INSCI Corp. advanced $40,000 to the Company. Repayment of this
advance along with interest at 8% per annum was made upon the closing of the
sale of certain of the Company's net assets on March 28, 1996.
Note 4 - Notes payable - related parties
The notes payable at March 27, 1996 consists of a $25,000 note payable to an
individual related to a stockholder of the Company and $199,816 note payable to
a stockholder of the Company. Both notes were noninterest bearing and were
settled at the closing of the sale of certain of the Company's net assets on
March 28, 1996.
Note 5 - Income taxes
The deferred income tax (benefit) results from temporary differences in the
recognition of assets, liabilities, revenues and expenses for financial
accounting and tax purposes. Sources of such differences and related tax effects
are as follows:
Capitalized software development costs $ 12,240
Furniture, fixtures and equipment 5,621
Accounts payable and other liabilities (8,296)
Net operating loss carryforwards (45,776)
Other 451
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$(35,760)
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A summary of deferred tax assets and deferred tax liabilities by source included
in the balance sheet at March 27, 1996.
Deferred tax assets
Accounts payable and other liabilities $ 53,548
Net operating loss carryforwards 142,441
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195,989
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Deferred tax liabilities
Capitalized software development costs 120,700
Furniture, fixtures and equipment 6,125
Other 2,274
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129,099
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Net deferred tax asset $ 66,890
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8
COURTLAND GROUP, INC.
Notes to Financial Statements (continued)
March 27, 1996
At March 27, 1996 the Company has approximately $400,000 of net operating loss
carryforwards all of which is expected to be utilized in 1996.
Note 6 - Commitments
The Company leases office space under an operating lease which expires in March
1998. Under the provisions of the lease the Company is required to make monthly
payments of $3,292 through maturity. Subsequent to the sale of certain of the
Company's net assets, this lease agreement was assigned to INSCI Corp.
