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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report: June 7, 1996
ENCON SYSTEMS, INC.
-------------------
(Exact name of registrant as specified in its charter)
Delaware 1-11065 04-3069270
-------- ------- ----------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
86 South Street, Hopkinton, Massachusetts 01748
-----------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code: (508) 435-7700
--------------
AMENDMENT NO. 2
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Form 8-K dated September 20, 1995
as set forth in the pages attached hereto:
(List all such items, financial statements, exhibits or other portions
amended.)
1. Item 7 - Financial Statements and Exhibits - Amended to
provide (i) the unaudited financial statements for Kemper
Management Services, Inc. ("Kemper") for the nine months ended
September 30, 1995 and 1994, and (ii) the revised pro forma
financial information for Kemper and the registrant.
TABLE OF CONTENTS
FORM 8-K/A
June 7, 1996
Item Page
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS 1
SIGNATURE 2
EXHIBITS E-1
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Listed below are the financial statements, pro forma financial
information and exhibits, if any, filed as a part of this amendment:
a. Unaudited Financial Statements for Kemper Management Services,
Inc. for the nine months ended September 30, 1995 and 1994.
b. Pro forma Financial Information for the Registrant and Kemper
Management Services, Inc.
c. Exhibits. The following exhibit is filed herewith:
Exhibit
No. Title
--- -----
23a Consent of Coopers & Lybrand L.L.P.
-1-
Kemper Management Services, Inc.
Balance Sheet
<TABLE>
<CAPTION>
As of September 30,
1995 1994
---- ----
ASSETS
(unaudited)
<S> <C> <C>
Current Assets
Cash 15,800 14,420
Accounts Receivable 1,796,715 2,908,925
Loan Receivable - Short Term 3,956 41,110
Inventory 159,497 378,844
Prepaid Expenses 11,815 14,632
-------------- ------------
Total Current Assets 1,987,783 3,357,931
Property & Equipment
Computer Equipment 426,146 481,486
Office Equipment 141,830 135,946
Furniture & Fixtures 94,691 95,972
Leasehold Improvements 65,093 65,089
Computer Software 30,812 30,477
Vehicles 32,188 40,461
-------------- ------------
790,760 849,431
Less Accumulated Depreciation (475,776) (348,438)
-------------- ------------
314,984 500,993
Other Assets
Deposits 26,018 19,321
-------------- ------------
Total Assets 2,328,785 3,878,245
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Borrowings under Line of Credit 931,242 1,461,373
Accounts Payable 503,260 852,467
Accrued Expenses 170,271 317,086
-------------- ------------
Total Current Liabilities 1,604,773 2,630,926
Long Term Liabilities
Note Payable - Stockholders less current portion above 1,047,113 800,739
-------------- ------------
Total Long Term Liabilities 1,047,113 800,739
Stockholders Equity
Common Stock - No par value; 15,000 shares
authorized; 10,242 and 10,247 issued and
outstanding, respectively 72,244 72,244
Retained Earnings (395,345) 374,336
-------------- ------------
Total Stockholders Equity (323,101) 446,580
-------------- ------------
Total Liabilities & Stockholders' Equity 2,328,785 3,878,245
============= =============
</TABLE>
Kemper Management Services, Inc.
Statement of Income and Retained Earnings
<TABLE>
<CAPTION>
For the Period Ended September 30,
1995 1994
---- ----
(unaudited)
<S> <C> <C>
Sales 7,575,884 12,464,688
Cost of Sales 6,386,703 9,826,335
-------------- ------------
Gross Profit 1,189,181 2,638,353
S, G & A Expenses 1,022,594 1,625,435
-------------- ------------
Operating Income before Principals' Compensation,
Interest and Income Taxes 166,587 1,012,918
Principals' Compensation 91,664 241,060
-------------- ------------
Operating Income before Interest and Income Taxes 74,923 771,858
Gain (Loss) on Sale of Assets 6,168 (5,505)
Interest Expense, net (49,449) (149,539)
-------------- ------------
Net Income Before Tax 31,642 616,814
Income Tax 856 933
-------------- ------------
Net Income 30,786 615,881
Retained Earnings - Beginning of Period (426,131) (241,438)
Retirement of Common Stock 0 (107)
-------------- ------------
Retained Earnings - End of Period (395,345) 374,336
============= =============
</TABLE>
Kemper Management Services, Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
For the Period Ended September 30,
1995 1994
---- ----
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income 30,786 615,881
Adjustments to reconcile net income to net cash
used for operating activities
Depreciation 84,459 83,824
Loss (Gain) on sale of assets (6,168) 5,505
Changes in operating assets & liabilities
Decrease (Increase) in accounts receivable 558,578 (230,942)
Decrease in inventory 98,679 49,184
Decrease (Increase) in prepaid expenses (1,158) 61,739
Decrease in accounts payable (913,501) (259,857)
Decrease in accrued expenses (420,271) (758,896)
-------------- ------------
Net cash used in operating activities (568,596) (433,562)
-------------- ------------
Cash Flows from Investing Activities
Acquisitions of Property & Equipment 5,700 (141,123)
Sale of Property & Equipment 6,168 (5,505)
Loan Disbursement 0 (10,000)
Repayment of loan and interest 27,154 18,890
Increase in deposits 770 (555)
-------------- ------------
Net cash used in investing activities 39,792 (138,293)
-------------- ------------
Cash Flows from Financing Activities
Net borrowings under line of credit 462,783 632,510
Repayments to stockholders (558,448) (65,500)
Retirement of stock 0 (779)
-------------- ------------
Net cash provided by financing activities (95,665) 566,231
-------------- ------------
Net Decrease in Cash (624,469) (5,624)
Cash, Beginning of Period 640,269 20,044
-------------- ------------
Cash, Beginning of Period 15,800 14,420
============= =============
</TABLE>
ANALYSIS OF ENCON SYSTEMS, INC. ACQUISITION OF KEMPER MANAGEMENT
YEAR ENDED DECEMBER 31, 1994 STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PROFORMA EFFECTS
ENCON KEMPER ENCON-KEMPER OF ACQUISITION ENCON-KEMPER
SYSTEMS MANAGEMENT COMBINED AND PRIVATE COMBINED
STATEMENT OF OPERATIONS 31-DEC-94 31-DEC-94 31-DEC-94 PLACEMENT 31-DEC-94
- ----------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales and revenue $18,325,281 $16,927,579 $35,252,860 $0 $35,252,860
Cost of sales $11,933,785 $13,421,165 $25,354,950 $0 $25,354,950
------------ ------------ ------------ --- -----------
Gross profit $6,391,496 $3,506,414 $9,897,910 $0 $9,897,910
Selling, general & administrative $5,349,111 $2,518,928 $7,868,039 ($29,000) $7,839,039
----------- ----------- ----------- --------- ----------
Income from operations $1,042,385 $987,486 $2,029,871 $29,000 $2,058,871
----------- --------- ----------- -------- ----------
Other income (expense):
Interest expense ($98,835) ($207,440) ($306,275) $0 ($306,275)
Interest income $10,343 $0 $10,343 $0 $10,343
Foreign currency exchange loss ($124,505) $0 ($124,505) $0 ($124,505)
Other items $9,468 ($5,505) $3,963 $0 $3,963
------- -------- ------- --- ------
Net other items ($203,529) ($212,945) ($416,474) $0 ($416,474)
Income (loss) before tax $838,856 $774,541 $1,613,397 $29,000 $1,642,397
Income tax expense (benefit) ($178,197) $310,749 $132,552 $0 $132,552
---------- --------- --------- --- --------
Net income (loss) $1,017,053 $463,792 $1,480,845 $29,000 $1,509,845
Pro forma data:
Salaries and benefits - net of tax $91,133 $91,133 $91,133
-------- -------- -------
Pro forma net income $1,108,186 $463,792 $1,571,978 $1,600,978
=========== ========= =========== ==========
Pro forma net income per share $0.43 $0.69 $0.35
====== ====== =====
Weighted average number of common
shares outstanding 2,580,694 675,000 1,266,000 4,521,694
========== ======== =========
Days Stock Outstanding 365 365 365
ADDITIONAL SHARES OUTSTANDING PROFORMA SAVINGS
- ----------------------------- ----------------
Kemper acquisition $675,000 Synergy savings ($114,000)
Private placement $1,266,000 Goodwill $85,000
-------
January private placement $667,000 ($29,000)
--------- =========
$2,608,000
</TABLE>
Proforma Kemper financial statements to give effect to income tax and
contractural executive compensation.
ANALYSIS OF ENCON SYSTEMS, INC. ACQUISITION OF KEMPER MANAGEMENT
NINE MONTHS ENDED SEPTEMBER 30, 1995 STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PROFORMA EFFECTS
ENCON KEMPER ENCON-KEMPER OF ACQUISITION ENCON-KEMPER
SYSTEMS MANAGEMENT COMBINED AND PRIVATE COMBINED
STATEMENT OF OPERATIONS 30-SEP-95 30-SEP-95 30-SEP-95 PLACEMENT 30-SEP-95
- ----------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales and revenue $14,092,734 $7,575,884 $21,668,618 $0 $21,668,618
Cost of sales $9,710,167 $6,386,703 $16,096,870 $0 $16,096,870
----------- ----------- ------------ --- -----------
Gross profit $4,382,567 $1,189,181 $5,571,748 $0 $5,571,748
Selling, general & administrative $4,464,255 $1,114,258 $5,578,513 ($21,750) $5,556,763
----------- ----------- ----------- --------- ----------
Income from operations ($81,688) $74,923 ($6,765) $21,750 $14,985
--------- -------- -------- -------- -------
Other income (expense):
Interest expense ($248,195) ($49,449) ($297,644) $97,500 ($200,144)
Interest income $1,994 $0 $1,994 $0 $1,994
Other items - net ($87,207) $6,168 ($81,039) $0 ($81,039)
--------- ------- --------- --- ---------
Net other items ($333,408) ($43,281) ($376,689) $97,500 ($279,189)
Income (loss) before tax ($415,096) $31,642 ($383,454) $119,250 ($264,204)
Income tax expense (benefit) $22,730 $856 $23,586 $47,700 $71,286
-------- ----- -------- -------- -------
Net income (loss) ($437,826) $30,786 ($407,040) $71,550 ($335,490)
========== ======== ========== ======== ==========
Net income per share ($0.17) $0.05 ($0.07)
======= ====== =======
Weighted average number of common
shares outstanding 2,580,993 675,000 1,266,000 4,521,993
========== ======== ========== =========
Days Stock Outstanding 365 365 365
ADDITIONAL SHARES OUTSTANDING: PROFORMA SAVINGS
- ------------------------------ ----------------
Kemper acquisition 675,000 Synergy savings ($85,500)
Private placement 1,266,000 Goodwill $63,750
---------- -------
1,941,000 ($21,750)
========== =========
INTEREST EXPENSE
----------------
Shareholder loans $97,500
</TABLE>
ANALYSIS OF ENCON SYSTEMS, INC. ACQUISITION OF KEMPER MANAGEMENT
SEPTEMBER 30, 1995 BALANCE SHEET
<TABLE>
<CAPTION>
PROFORMA EFFECTS
ENCON KEMPER ENCON-KEMPER OF ACQUISITION ENCON-KEMPER
SYSTEMS MANAGEMENT COMBINED AND PRIVATE COMBINED
BALANCE SHEET 30-SEP-95 30-SEP-95 30-SEP-95 PLACEMENT 30-SEP-95
- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash $289,134 $15,800 $304,934 $304,934
Accounts receivable $8,282,640 $1,796,715 $10,079,355 $10,079,355
Inventories $2,120,930 $159,497 $2,280,427 $2,280,427
Prepaid expense $1,116,943 $11,815 $1,128,758 $1,128,758
Notes receivable $214,287 $3,956 $218,243 $218,243
Refundable income tax credits $272,651 $0 $272,651 $272,651
--------- --- ---------- --------
Total current assets $12,296,585 $1,987,783 $14,284,368 $0 $14,284,368
Property and equipment, net $361,883 $314,984 $676,867 $0 $676,867
--------- --------- --------- --- --------
Long-term accounts receivable $2,145,286 $0 $2,145,286 $0 $2,145,286
Long-term lease receivable $41,735 $0 $41,735 $0 $41,735
Notes receivable $0 $0 $0 $0 $0
Organization expense $46,453 $0 $46,453 $0 $46,453
Other assets $218,676 $26,018 $244,694 $0 $244,694
Goodwill $2,429,840 $0 $2,429,840 $1,700,000 $4,129,840
----------- --- ----------- ----------- ----------
Total other assets $4,881,990 $26,018 $4,908,008 $1,700,000 $6,608,008
----------- -------- ----------- ----------- ----------
Total assets $17,540,458 $2,328,785 $19,869,243 $1,700,000 $21,569,243
------------ ----------- ------------ ----------- -----------
CALCULATION OF GOODWILL
Deficit in Kemper retained earnings $395,345
Value of Kemper Common Stock ($72,244)
675,000 Encon common shares issued at $1.50 per share with a 30% discount $708,760
Restructuring costs incurred, estimated $400,000
Closing expenses - estimated $240,000
Other - estimated $28,139
-------
Total $1,700,000
----------
</TABLE>
ANALYSIS OF ENCON SYSTEMS, INC. ACQUISITION OF KEMPER MANAGEMENT
SEPTEMBER 30, 1995 BALANCE SHEET
<TABLE>
<CAPTION>
PROFORMA EFFECTS
ENCON KEMPER ENCON-KEMPER OF ACQUISITION ENCON-KEMPER
SYSTEMS MANAGEMENT COMBINED AND PRIVATE COMBINED
BALANCE SHEET 30-SEP-95 30-SEP-95 30-SEP-95 PLACEMENT 30-SEP-95
- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current Liabilities:
Note payable, current $3,825,753 $931,242 $4,756,995 ($840,000) $3,916,995
Current portion of notes payable $183,047 $0 $183,047 $183,047
Current portion of long term debt $496,368 $0 $496,368 $496,368
Current portion of GEPP financing $418,540 $0 $418,540 $418,540
Deferred revenue $1,068,046 $0 $1,068,046 $1,068,046
Accounts payable $3,511,794 $503,260 $4,015,054 $268,139 $4,283,193
Accrued expenses $864,466 $170,271 $1,034,737 $400,000 $1,434,737
--------- --------- ----------- --------- ----------
Total current liabilities $10,368,014 $1,604,773 $11,972,787 ($171,861) $11,800,926
Long term GEPP financing $737,706 $0 $737,706 $0 $737,706
Notes payable former stockholders $17,697 $1,047,113 $1,064,810 ($760,000) $304,810
Notes payable stockholders $0 $0 $0 $0
Long term debt $520,874 $0 $520,874 $0 $520,874
--------- --- --------- --- --------
Total liabilities $11,644,291 $2,651,886 $14,296,177 ($931,861) $13,364,316
Minority Interest $896,980 $0 $896,980 $0 $896,980
Stockholder's equity:
Common stock $23,401 $72,244 $95,645 ($72,244) $23,401
Paid in capital $5,452,175 $0 $5,452,175 $2,308,760 $7,760,935
Retained earnings (deficit) ($467,438) ($395,345) ($862,783) $395,345 ($467,438)
Cumulative translation adjustment ($8,951) $0 ($8,951) $0 ($8,951)
-------- --- -------- ---
Total stockholder's equity $4,999,187 ($323,101) $4,676,086 $2,631,861 $7,307,947
----------- ---------- ----------- ----------- ----------
Total liabilities and equity $17,540,458 $2,328,785 $19,869,243 $1,700,000 $21,569,243
============ =========== ============ =========== ===========
CALCULATION OF COMMON STOCK
Private placement net proceeds $1,600,000
Used for: Reduction of Stockholder Loan - Long-term $760,000
Reduction of Notes Payable Bank - Current $840,000
675,000 shares issued to acquire Kemper $708,760
Total $2,308,760
CALCULATION OF RETAINED EARNINGS
Kemper deficit capitalized to goodwill $395,345
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENCON SYSTEMS, INC.
Date: June 7, 1996 By:/s/ Alan L. Freidman
--------------------
Alan L. Freidman
Chief Executive Officer
-2-
EXHIBIT 23a
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Form 8-K/A dated January 24, 1996 of our
audits of the financial statements of Kemper Management Services, Inc. as of
December 31, 1994 and 1993, and for the years ended December 31, 1994 and 1993.
We also consent to the incorporation by reference in the registration
statements of ENCON Systems, Inc. on Form S-3 (File Nos. 33-81756 and 33-88118)
and on Form S-8 (File No. 33-93262) of our report dated April 15, 1995, on our
audits of the financial statements of Kemper Management Services, Inc. as of
December 31, 1994 and 1993, and for the years ended December 31, 1994 and 1993.
/s/ Coopers & Lybrand L.L.P.
Hartford, Connecticut
June 3, 1996
E-1
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