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Previous: AMPEX CORP /DE/, 424B3, 1996-11-27 |
Next: PRUDENTIAL INSTITUTIONAL FUND, 24F-2NT, 1996-11-27 |
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 30, 1996
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Maryland 0- 52-1261113
(State of other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
</TABLE>
2021 Research Drive, Annapolis, Maryland 21401
(Address of principal executive offices, including Zip Code)
(410) 224-8770
(Registrant's telephone number, including area code)
<PAGE>
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. Audited financial statements of Teklicon, Inc.,
for the year ended March 31, 1996.
(b) Pro Forma Financial Information. Pro Forma Balance Sheet and Pro Forma
Statement of Income combining Forensic Technologies International Corporation
and Teklicon, Inc. for the year ended December 31, 1995, and the nine months
ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
(Registrant)
By: /s/ Gary Sindler
-------------------------------------
Gary Sindler
Executive Vice President and Chief
Financial Officer
DATED: November 27, 1996
<PAGE>
YOUNG,
CRAIG
+ COMPANY
----------------
CERTIFIED PUBLIC
ACCOUNTANTS
================
TEKLICON, INC.
Audited Financial Statements
For The Year Ended March 31, 1996
5150 El Camino Real, Suite C-10 Los Altos, California 94022 (415)988-7300
--------------------------------------------------------------------------
Fax (415)988-8852
------------------
MEMBER OF ASSOCIATED REGIONAL ACCOUNTING FIRMS
<PAGE>
TABLE OF CONTENTS
Page No.
--------
INDEPENDENT AUDITORS REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations and Retained Eamings 4
Statement of Cash Flows 5
Notes to Financial Statements 6
SUPPLEMENTARY INFORMATION 10
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
YOUNG,
CRAIG
+ COMPANY
----------------
CERTIFIED PUBLIC
ACCOUNTANTS
================
INDEPENDENT AUDITOR'S REPORT
----------------------------
Dennis A. Young, CPA
Janet L. Craig, CPA
Teklicon,Inc. Raymond H. Skitt, CPA
Mountain View, California Robert D. Galen, CPA
David L. Heacock, CPA
We have audited the accompanying balance sheet of Teklicon (a corporation) as of
March 31, 1996 and the related statements of operations, retained earnings, 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 exarnining, 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 represent fairly, in
all material respects, the financial position of Teklicon, Inc. as of March 31,
1996, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Young Craig + Company
July 25, 1996
5150 El Camino Real, Suite C-10 Los Altos, California 94022 (415) 988-7300
---------------------------------------------------------------------------
Fax (415) 988-8852
------------------
MEMBER OF ASSOCIATED REGIONAL ACCOUNTING FIRMS
<PAGE>
TEIAICON, INC.
BALANCE SHEET
March 31, 1996
CURRENT ASSETS
Cash in bank $ 25,326
Money market 60,568
Certificates of deposit 149,421
Accounts receivable-trade 546,663
Accounts receivable-other 20,680
Notereceivable-employee 3,075
Prepaid expenses 12,753
------------
TOTAL CURRENT ASSETS 818,486
------------
PROPERTY AND EQUIPMENT
Machinery and equipment 240,361
Accumulated depreciation (189,856)
------------
50,505
------------
OTHER ASSETS
Investment in insurance contract 72,997
------------
$ 941,988
============
See accompanying notes and Independent Auditor's Report.
2
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TEIAICON, INC.
BALANCE SHEET
March 31, 1996
CURRENT LIABILITIES
Accounts payable 169,279
Accrued expenses 85,180
Payroll taxes payable 113,095
Unearned income-deposits 112,500
Deferred taxes 79,831
---------
TOTAL CURRENT LIABILITIES 559,885
---------
STOCKHOLDER'S EQLTITY
Common stock, no par value, 15,000,000 shares authorized
7,500,000 shares issued and outstanding 5,000
Retained earnings 377,103
---------
382,103
---------
941,988
=========
See accompanying notes and Independent Auditor's Report.
3
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TEKLICON, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Year Ended March 31, 1996
REVENUE $ 3,099,288
Less Sales Allowances 45,724
----------
3,053,564
----------
COST OF SERVICES
Consultant fees 1,621,193
Client expenses paid 35,523
---------
1,656,716
---------
GROSS PROFIT 1,396,848
GENERAL AND ADMINISTRATIVE EXPENSES 866,098
---------
INCOME FROM OPERATIONS BEFORE
OFFICER COMPENSATION 530,750
OFFICER COMPENSATION
Salary 530,000
Pension plan 23,631
Life insurance 14,035
---------
LOSS FROM OPERATIONS (36,916)
---------
OTHER INCOME (EXPENSES)
Interest income 16,481
Other income 15,025
Interest expense (1,040)
---------
LOSS BEFORE TAX PROVISION (6,450)
PROVISION FOR INCOME TAXES 2,183
---------
NET LOSS (8,633)
---------
BEGINNING RETAINED EARNINGS 466,022
Prior period adjustment, net of tax (80,286)
---------
BEGINNING RETAINED EARNINGS RESTATED 385,736
---------
ENDING RETAINED EARNINGS $377,103
=========
See accompanying notes and Independent Auditor's Report.
4
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TEKLICON, INC.
STATEMENT OF CASH FLOWS
Year Ended March 31, 1996
CASH FLOWS FROM OPERATING ACTIVITES
Net loss $ (8,633)
Prior period adjustment, net of tax (80,286)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Deprectiation and amortization 28,771
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable - trade (87,670)
Accounts receivable - other (15,025)
Note receivable - employee (3,075)
Prepaid expenses (12,753)
Increase (decrease) in:
Accounts payable 114,604
Accrued payroll taxes 63,366
Accrued expenses 85,179
Income taxes payable (16,796)
Unearned income - deposits 11,000
Deferred taxes (37,615)
----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 41,067
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment purchases (15,105)
Investment in insurance contract (35,965)
----------
NET CASH USED BY
INVESTING ACTIVITIES (51,070)
----------
NET DECREASE IN CASH (10,003)
CASH AT BEGINNING OF YEAR 245,318
----------
CASH AT END OF YEAR $235,315
==========
See accompanying notes and Independent Auditor's Report.
5
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TEKLICON., INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
- - ------------------
Teklicon, Inc. provides technical consulting and expert witness testimony to
attorney's and businesses.
Management Estimates
- - --------------------
The use of management estimates is required in order to prepare any financial
statements in accordance with generally accepted accounting principles.
Property and equipment
- - ----------------------
Property and equipment are stated at cost. Depreciation is computed using the
accelerated and straight-line methods over the estimated useful lives of the
assets, which range from three to seven years.
Bad debt expense
- - ----------------
During fiscal year ended March 31, 1996, the Company determined that some
accounts receivables had become uncollectable and they were written off at the
end of the year.
Allowance for doubtful accounts
- - -------------------------------
The Company considers the remaining accounts receivable fully collectable;
accordingly, no allowance for doubtful accounts is required.
Cash Equivalents
- - ----------------
For purposes of reporting cash flows, cash equivalents include money market
accounts and any highly liquid debt instruments purchased with a maturity of
three months or less.
See accompanying notes and Independent Auditor's Report.
6
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TEKLICON, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE B - SUPPLEMENTARY INFORMATION FOR STATEMENT OF CASH FLOWS
The following accounts are a summation of the cash accounts on the statement of
cash flows:
Cash in bank $ 25,326
Money market 60,568
Certificates of deposit 149,421
--------
$ 235,315
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 1,040
========
Income taxes $ 44,154
========
NOTE C - INCOMIE TAXES
The components of the provision for income taxes for the fiscal year ended March
31, 1996 is as follows:
Tax liability per tax returns:
Federal income tax $ 13,112
California Franchise tax 3,273
Tax effect of depreciation and other
temporary differences (14,202)
--------
$ 2,183
========
The Company uses the cash basis of accounting for tax reporting purposes.
Temporary differences giving rise to the deferred tax liability consist
primarily of accrued income and expenses recognized in the current period for
financial reporting, but deferred for tax purposes and the excess of
depreciation for tax purposes over the amount for financial reporting.
See accompanying notes and Independent Auditor's Report.
7
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TEKLICON, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE D - LEASE COMMITMENTS
The Company leases an office facility in Mountain View under an operating lease
agreement effective March 1, 1990. This lease expired on April 30, 1996. The
Company entered into a new lease for less office space effective May 1, 1996
through April 30, 1999. The agreement requires payment of a share of real
property taxes, operating expenses and property insurance during the term of the
lease.
The Company sublet a portion of this office facility under an operating lease
effective June 15, 1994, and expiring April 30, 1996. The income received from
this sublease was used to offset rent expense.
Future minimum lease payments, without regard for sublease offset, real property
taxes, and operating expenses and property insurance, are as follows:
1997 $ 56,486
1998 55,085
1999 56,465
2000 4,715
---- -----------
$ 172,751
===========
NOTE E - RELATED PARTY TRANSACTIONS
The Company has an account receivable due of $20,680 for reimbursable expenses
from Pat, Inc. This entity is owned 75% by the principal stockholder of the
Company.
NOTE F - CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the company to concentrations of
credit risk consist principally of cash investments. At March 31, 1996, the
Company had a cash investment with one financial institution which exceeded the
federally insured limit by $109,989.
See accompanying notes and Independent Auditor's Report.
8
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TEKLICON, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
NOTE G - PROFIT SHARING PLAN
The Company has a profit sharing plan that covers all employees. Contributions
to the plan are at the discretion of the Board of Directors. Contributions to
the plan for the year ended March 31, 1996 totaled $71,584.
NOTE H - MAJOR VENDORS AND CUSTOMERS
For the year ended March 31, 1996, the Company had four consultants from whom
14%, 12%, 11%,and 10% of consulting services were purchased.
Sales to two customers comprised greater than 10% of the Company's sales during
the year ended March 31, 1996. Sales to these customers approximated $841,527.
Accounts receivable from these customers totaled $321,565.
NOTE I - PRIOR PERIOD ADJUSTMENT
Retained Earnings at the beginning of the year has been adjusted to correct an
error in accrued expenses for the prior year. Had the error not occurred, net
income for the year ending March 31, 1995 would have been decreased by $80,286,
net of income taxes of $34,551.
See accompanying notes and Independent Auditor's Report.
9
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
TEKLICON, INC.
GENERAL AND ADMINISTRATIVE EXPENSES
Year Ended March 31, 1996
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries-office $ 375,826
Advertising and marketing 73,945
Auto expense 58,115
Rent 56,181
Pension plan 47,953
Accounting and legal fees 46,610
Office supplies 40,332
Payroll taxes 34,687
Travel expense 33,651
Depreciation 28,771
Meals and entertainment-client 24,445
Insurance (employee benefits) 18,426
Telephone 12,085
Dues and subscriptions 5,150
Postage 4,040
Bad debt expense 1,763
Meals and entertainment 1,716
Other expenses 1,411
Property tax 991
---------
866,098
=========
See accompanying notes and Independent Auditor's Report.
10
YOUNG, CRAIG + COMPANY
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
Forensic Technologies International Corporation
Pro Forma Balance Sheet (unaudited)
December 31, 1995
<TABLE>
<CAPTION>
FTI/
Teklicon
Pro Forma Pro Forma
FTI Teklicon Adjustments Combined
--- -------- ----------- --------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents 9,610 $ 235,315 244,925
Accounts receivable, net 4,063,432 570,418 4,633,850
Unbilled accounts receivable, net 2,230,674 2,230,674
Deferred income taxes 499,141 499,141
Other current assets 133,052 12,753 145,805
---------------------------------------------------------------
Total current assets 6,935,909 818,486 7,754,395
Property and equipment:
Buildings 411,241 411,241
Furniture and equipment 6,335,898 240,361 6,576,259
Leasehold improvements 677,348 677,348
---------------------------------------------------------------
7,424,487 240,361 7,664,848
Accumulated depreciation and amortization (4,594,318) (189,856) (4,784,174)
---------------------------------------------------------------
Property, net 2,830,169 50,505 2,880,674
Other assets 127,755 72,997 200,752
===============================================================
Total assets $ 9,893,833 $ 941,988 $ 10,835,821
===============================================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 916,742 $ 254,459 $ 1,171,201
Borrowings under line of credit 2,110,391 2,110,391
Accrued compensation expense 820,746 113,095 933,841
Incomes tax payable 208,296 79,831 288,127
Current portion of deferred revenue 138,889 138,889
Current portion of capital lease obligations 63,463 63,463
Accrued loss on disposal of discontinued operations 478,828 478,828
Other current liabilities 198,054 112,500 310,554
---------------------------------------------------------------
Total current liabilities 4,935,409 559,885 5,495,294
Long-term debt and capital lease obligations, less current portion 206,747 206,747
8% Convertible Subordinated Debentures, due to stockholders 1,800,000 1,800,000
Series A Redeemable Convertible Preferred Stock 1,560,000 1,560,000
Common Stock Subject to Repurchase 310,930 310,930
Stockholders' equity:
Common stock - Class A 15,741 4,150 19,891
Common stock - Class B 15,246 15,246
Additional paid-in capital 850 850
Retained earnings 1,049,760 377,103 1,426,863
---------------------------------------------------------------
Total stockholders' equity 1,080,747 382,103 1,462,850
===============================================================
Total liabilities and stockholders' equity $ 9,893,833 $ 941,988 $ 10,835,821
===============================================================
</TABLE>
<PAGE>
Forensic Technologies International Corporation
Pro Forma Statement of Income (Unaudited)
For Year ended December 31, 1995
<TABLE>
<CAPTION>
FTI/
Teklicon
Pro Forma Pro Forma
FTI Teklicon Adjustments Combined
--- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 20,327,739 $ 3,053,564 $ 23,381,303
Direct cost of revenues 9,492,533 1,873,716 11,366,249
Selling, general and administrative expenses 8,670,027 1,216,764 (370,000) 9,516,791
---------------------------------------------------------------------
Total costs and expenses 18,162,560 3,090,480 (370,000) 20,883,040
---------------------------------------------------------------------
Income from operations 2,165,179 (36,916) 370,000 2,498,263
Other income (expenses):
Interest and other income 10,163 32,706 42,869
Interest expense (262,784) (1,040) (263,824)
---------------------------------------------------------------------
(252,621) 31,666 (220,955)
Income (loss) from continuing operations before income taxes 1,912,558 (5,250) 370,000 2,277,308
Income taxes 776,482 24,183 152,000 952,665
---------------------------------------------------------------------
Income (loss) from continuing operations 1,136,076 (29,433) 218,000 1,324,643
Discontinued operations:
Loss from discontinued operations (net of
income tax benefit of $44,460) (65,074) (65,074)
Loss on disposal of discontinued operations
(net of income tax benefit of $248,520) (365,109) (365,109)
=====================================================================
Net income (loss) $ 705,893 $ (29,433) $ 218,000 $ 894,460
=====================================================================
Per common and common equivalent share:
Income from continuing operations $ 0.61 $ 0.58
=================== ==================
Net income $ 0.38 $ 0.39
=================== ==================
Per common share, assuming full dilution:
Income from continuing operations $ 0.42 $ 0.42
=================== ==================
Net income $ 0.27 $ 0.29
=================== ==================
Common and common equivalent shares
used in calculation of earnings per
share:
Primary 1,867,836 2,282,836
=================== ==================
Fully diluted 2,942,879 3,357,879
=================== ==================
</TABLE>
In connection with the merger, the Company entered into an employment agreement
with the sole stockholder and executive officer of Teklicon. The future amount
of compensation to be paid the officer, who will have substantially the same
duties, will be less than the amounts paid in periods prior to the merger. The
pro forma adjustment, presented above, assumes that the officer had received the
reduced amount of compensation in the periods presented.
<PAGE>
Forensic Technologies International Corporation
Pro Forma Balance Sheet (unaudited)
September 30, 1996
<TABLE>
<CAPTION>
FTI/
Teklicon
Pro Forma Pro Forma
FTI Teklicon Adjustments Combined
--- -------- ----------- --------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents 6,699,791 $ 237,166 $ 6,936,957
Accounts receivable, net 6,318,424 520,314 6,838,738
Unbilled receivable, net 2,896,332 2,896,332
Deferred income taxes 499,141 499,141
Prepaid expenses 657,952 11,409 669,361
-------------------------------------------------------------
Total current assets 17,071,640 768,889 17,840,529
Property and equipment:
Buildings 411,241 411,241
Furniture and equipment 7,539,228 238,906 7,778,134
Leasehold improvements 781,161 781,161
-------------------------------------------------------------
8,731,630 238,906 8,970,536
Accumulated depreciation and amortization (5,176,499) (191,721) (5,368,220)
-------------------------------------------------------------
Property, net 3,555,131 47,185 3,602,316
Other assets 96,880 131,484 228,364
-------------------------------------------------------------
Total assets $ 20,723,651 $ 947,558 $ 21,671,209
=============================================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable 1,064,424 $ 296,439 $ 1,360,863
Borrowings under line of credit 699,443 13,632 713,075
Accrued compensation expense 820,330 24,291 844,621
Incomes tax payable 532,071 90,184 622,255
Current portion of capital lease obligations 56,443 56,443
Other current liabilities 456,380 121,500 577,880
-------------------------------------------------------------
Total current liabilities 3,629,091 546,046 4,175,137
Long-term debt and capital lease obligations, less current portion 182,931 182,931
Stockholders' equity:
Common stock - Class A 40,920 4,150 45,070
Additional paid-in capital 14,384,750 850 14,385,600
Retained earnings 2,485,959 396,512 2,882,471
-------------------------------------------------------------
Total stockholders' equity 16,911,629 401,512 17,313,141
-------------------------------------------------------------
Total liabilities and stockholders' equity $ 20,723,651 $ 947,558 $ 21,671,209
=============================================================
</TABLE>
<PAGE>
Forensic Technologies International Corporation
Pro Forma Statement of Income (Unaudited)
For Nine Months ended September 30, 1996
<TABLE>
<CAPTION>
FTI/
Teklicon
Pro Forma Pro Forma
FTI Teklicon Adjustments Combined
--- -------- ----------- --------
<S> <C> <C> <C>
Revenues $ 20,338,661 $ 2,208,523 $ 22,547,184
Direct cost of revenues 10,923,870 1,413,771 (100,000) 12,237,641
Selling, general and administrative expenses 6,893,470 864,633 7,758,103
--------------------------------------------------------------------------
Total costs and expenses 17,817,340 2,278,404 (100,000) 19,995,744
---------------------------------------------------------------------------
Income from operations 2,521,321 (69,881) 100,000 2,551,440
Other income (expenses):
Interest and other income 163,057 29,914 192,971
Interest expense (155,982) (155,982)
---------------------------------------------------------------------------
7,075 36,989
Income from continuing operations before income taxes 2,528,396 (39,967) 100,000 2,588,429
Income taxes 1,033,599 12,537 41,000 1,087,136
===========================================================================
Net income $ 1,494,797 $ (52,504) $ 59,000 $ 1,501,293
===========================================================================
Per common and common equivalent share:
Net income $ 0.49 $ 0.43
================= ===================
Per common share, assuming full dilution:
Net income $ 0.42 $ 0.38
================= ===================
Common and common equivalent shares
used in calculation of earnings per
share:
Primary 3,074,275 3,489,275
================= ===================
Fully diluted 3,607,126 4,022,126
================= ===================
</TABLE>
In connection with the merger, the Company entered into an employment agreement
with the sole stockholder and executive officer of Teklicon. The future amount
of compensation to be paid the officer, who will have substantially the same
duties, will be less than the amounts paid in periods prior to the merger. The
pro forma adjustment, presented above, assumes that the officer had received the
reduced amount of compensation in the periods presented.
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