SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 17, 1996
Commission File Number 0-20666
MICROTEST, INC.
(exact name of registrant as specified in its charter)
Delaware 86-0485884
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4747 North 22nd Street, Phoenix, Arizona 85016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 952-6400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value Nasdaq National Market
1
<PAGE>
The undersigned registrant hereby amends its Current Report on Form 8-K dated
December 17, 1996, which was filed on December 30, 1996, solely to add the
financial information and pro forma financial information required by Item 7 of
Form 8-K.
Item 7. Financial Statements and Exhibits
Financial Statements of Business Acquired - The required
financial statements for Logicraft are set forth below:
2
<PAGE>
LOGICRAFT INFORMATION SYSTEMS, INC.
(A Majority-Owned Subsidiary of Information Handling
Services, Inc., A Wholly-Owned Subsidiary of TBG
Services, Inc.) AND SUBSIDIARIES
Consolidated Financial Statements
Year Ended November 30, 1996, and
Independent Auditors' Report
<PAGE>
Deloitte &
Touche LLP
- ------------ -----------------------------------------------------
Suite 1200 Telephone:(602)234-5100
2901 North Central Avenue Facsimile:(602)234-5186
Phoenix, Arizona 85012-2799
INDEPENDENT AUDITORS' REPORT
Board of Directors
Logicraft Information Systems, Inc.
Phoenix, Arizona
We have audited the accompanying consolidated balance sheet of Logicraft
Information Systems, Inc. (a majority owned subsidiary of Information Handling
Services, Inc., a wholly-owned subsidiary of TBG Services, Inc.) and
subsidiaries as of November 30, 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Logicraft Information Systems, Inc.
and subsidiaries at November 30, 1996, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
January 28, 1997
<PAGE>
LOGICRAFT INFORMATION SYSTEMS, INC.
(A Majority-Owned Subsidiary of Information Handling Services, Inc.,
A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1996
(Amounts in Thousands, Except Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 307
Accounts receivable - less allowance for doubtful accounts of $262 3,136
Inventories - less reserve for obsolescence of $1,991 (Note 2) 790
Prepaid expenses 171
Deferred income taxes (Note 4) 1,361
--------
Total current assets 5,765
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Net (Note 3) 485
INTANGIBLES AND OTHER ASSETS - Net (Note 3) 3,357
--------
TOTAL $ 9,607
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,203
Accrued liabilities 648
Accrued payroll and employee benefits 207
Related party accounts payable (Note 5) 3,478
Short-term debt - related party (Note 5) 249
Deferred revenue 1,289
Income taxes payable 25
--------
Total current liabilities 8,099
DEFERRED TAX LIABILITY (Note 4) 198
--------
Total liabilities 8,297
--------
COMMITMENTS AND CONTINGENCIES (Note 6)
MINORITY INTEREST (Note 10) 216
--------
STOCKHOLDERS' EQUITY (Notes 8 and 11):
Common stock, $.0001 par value - authorized and issued, 10,000,000 shares 1
Additional paid-in capital 5,430
Retained deficit (4,337)
--------
Total stockholders' equity 1,094
--------
TOTAL $ 9,607
========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
LOGICRAFT INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Information Handling Services, Inc.,
A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996
(Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
REVENUES:
Product and system sales (Note 9) $ 11,492
Product services 2,813
---------
Total revenues 14,305
COST OF SALES AND SERVICES 8,260
---------
Gross profit 6,045
---------
OPERATING EXPENSES:
Sales and marketing 4,806
Research and development 1,358
General and administrative 4,154
---------
Total operating expenses 10,318
---------
LOSS FROM OPERATIONS (4,273)
INTEREST EXPENSE - Net 289
OTHER INCOME - Net 53
---------
LOSS BEFORE INCOME TAXES (4,509)
NET INCOME TAX BENEFIT (Note 4) 1,050
---------
NET LOSS BEFORE MINORITY INTEREST (3,459)
MINORITY INTEREST (Note 1) 8
---------
NET LOSS $ (3,467)
=========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
LOGICRAFT INFORMATION SYSTEMS, INC.
(A Majority-Owned Subsidiary of Information Handling Services, Inc.,
A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED NOVEMBER 30, 1996
(Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Total
-------------------- Paid-In Stockholders'
Shares Amount Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 1, 1995 (Unaudited) 10,000 $ 1 $ 5,430 $ (870) $ 4,561
Net loss (3,467) (3,467)
------ ---- ------- ------- -------
BALANCE, NOVEMBER 30, 1996 10,000 $ 1 $ 5,430 $ (4,337) $ 1,094
====== ==== ======= ======== =======
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
LOGICRAFT INFORMATION SYSTEMS, INC.
(A Majority-Owned Subsidiary of Information Handling Services, Inc.,
A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED NOVEMBER 30, 1996
(Amounts in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net loss $(3,467)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 421
Deferred provision for income taxes (1,163)
Provision for doubtful accounts 214
Provision for inventory obsolescence 1,342
Loss on sale of property, plant and equipment 1
Minority interest 8
Change in operating assets and liabilities:
Accounts receivable 871
Inventories 857
Prepaid expenses (40)
Intangibles and other assets (163)
Accounts payable (525)
Accrued liabilities (180)
Accrued payroll and employee benefits 200
Deferred revenue 278
Income taxes payable (46)
--------
Net cash used in operating activities (1,392)
--------
INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (494)
Proceeds from sale of marketable securities 6
--------
Net cash used in investing activities (488)
--------
FINANCING ACTIVITIES:
Related party accounts payable 1,648
Short-term debt - related party 249
--------
Net cash provided by financing activities 1,897
--------
INCREASE IN CASH AND CASH EQUIVALENTS 17
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR (Unaudited) 290
--------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 307
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 289
========
Income taxes $ 113
========
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
LOGICRAFT INFORMATION SYSTEMS, INC.
(A Majority-Owned Subsidiary of Information Handling Services, Inc.,
A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED NOVEMBER 30, 1996
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Logicraft
Information Systems, Inc., its wholly-owned subsidiary, Logicraft
Information Systems, Europe Corp.("LIS Europe"), and its majority-owned
subsidiary, H+H Zentrum ("H+H") (collectively, the "Company"). All
intercompany transactions are eliminated. The Company is a majority-owned
subsidiary of Information Handling Services, Inc. ("IHS"), a wholly-owned
subsidiary of TBG Services, Inc. The Company develops, markets and
supports products that make it easier to manage and service local area
networks.
The following are the significant accounting policies of the Company:
a. Inventories are stated at the lower of cost (first-in, first-out
("FIFO") basis) or market.
b. Equipment and leasehold improvements are stated at cost.
Depreciation and amortization are computed utilizing the
straight-line method based on the estimated useful lives of the
related assets or, for leasehold improvements, the lease term, if
shorter. Estimated useful lives are as follows:
Useful Life
Equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements 5 years
c Income taxes are provided based upon the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, which among other things, requires that recognition of
deferred income taxes be measured by the provisions of enacted tax
laws in effect at the date of the consolidated financial statements.
d. Research and Development Expenses - Costs and expenses which can be
clearly identified as research and development are charged to
research and development expense as incurred. Costs which relate to
products that have reached technological feasibility are capitalized
and are then amortized into costs of sales.
e. Revenue Recognition - The Company recognizes revenue from product
sales upon shipment. Sales to distributors in the United States
represent approximately 53% of the Company's net sales. The Company
also has direct sales to the end user which accounts for
approximately 36% of the Company's net sales. The remaining 11% of
sales is comprised of international sales which includes Europe and
the Far East. The amount of potential product returns, including
returns under the Company's warranty program, is estimated and
provided for in the period of sale.
-6-
<PAGE>
Revenue from product services including installation services and
maintenance contracts, is recognized upon performance of the
installation or service or over the time period covered by the
maintenance contract. During 1996, sales were made of systems for
which the Company has retained a significant performance obligation
in the form of delivery of a significantly enhanced version of the
software which was sold as part of the systems. The Company orally
guaranteed delivery of the new version of the software or in its
absence the right of return. Accordingly, the Company has deferred
revenue recognition related to these sales.
f. Cash and Cash Equivalents - The Company considers all highly liquid
investments with an initial maturity of three months or less to be
cash equivalents.
g Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles necessarily
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 these
estimates.
h Product Concentration - The market for the Company's products is
characterized by rapidly changing technology, short product life
cycles and evolving industry standards. The Company has derived
substantially all of its revenues from the development and sales of
a limited number of CD-ROM management and CD-ROM network solutions.
i. Minority Interest - In May 1995, Logicraft acquired an 80% interest
in H+H, a networked CD ROM system integration company based in
Germany. Accordingly, 20% of the earnings for H+H is allocated to
the minority interest account annually.
j. New Accounting Pronouncement - In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 121, Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. This Statement
establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to
those assets to be held and used and long-lived assets and certain
identifiable intangibles to be disposed of. The Company does not
expect the adoption of this accounting standard to materially impact
its results of operations or financial position.
2. INVENTORIES
Inventories consisted of the following at November 30, 1996:
(000's)
Finished goods $ 2,781
Less reserve for obsolescence (1,991)
------
Inventories - net $ 790
=======
-7-
<PAGE>
3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS AND INTANGIBLES
Equipment and leasehold improvements consisted of the following at
November 30, 1996:
(000's)
Equipment $ 1,745
Furniture and fixtures 187
Leasehold improvements 23
--------
Total 1,955
Less accumulated depreciation and amortization (1,470)
--------
Equipment and leasehold improvements - net $ 485
========
Intangibles consisted of the following at November 30, 1996:
(000's)
Goodwill $ 2,708
Software rights 1,051
Other intangibles 299
--------
Intangibles - gross 4,058
Less accumulated amortization (701)
--------
Intangibles - net $ 3,357
========
Goodwill and other intangibles are amortized over their estimated useful
lives of 15 years. Software rights is amortized over its estimated useful
life of seven years.
4. INCOME TAXES
The components of the (benefit) provision for income taxes for the year
ended November 30, 1996 are as follows:
(000's)
Current:
State $ 46
Foreign 67
--------
Total current provision 113
Deferred benefit (1,163)
--------
Net benefit for income taxes $(1,050)
========
-8-
<PAGE>
A reconciliation of the difference between the (benefit) provision for
income taxes and income taxes at the statutory United States federal
income tax rate is as follows for the year ended November 30, 1996:
(000's)
Income taxes at statutory United States federal income tax rate $(1,502)
Increase (decrease) in taxes:
State taxes - net (331)
Change in valuation allowance 706
Other - net 77
--------
Total $(1,050)
========
The components of deferred income taxes at November 30, 1996 are as
follows:
(000's)
Current:
Nondeductible accruals and reserves $ 1,282
Net operating loss carryforward 1,371
Inventory costs capitalized for income tax purposes 63
--------
Total current 2,716
Noncurrent - Excess of tax over book depreciation (198)
--------
Total deferred income taxes 2,518
Less valuation allowance (1,355)
--------
Net deferred tax asset $ 1,163
========
Net operating loss ("NOL") carryforwards for income tax purposes totaled
approximately $3,427,000 as of November 30, 1996. The NOL carryforwards
must be used within five to 15 years of the date of their origination and
expire from 2000 through 2011.
5. RELATED PARTY TRANSACTIONS
At November 30, 1996, the Company owed Information Handling Services,
Inc., its parent company, a total of $3,478,000. The European subsidiary,
LIS Europe, owed a total of $249,000 in the form of short-term debt to a
company which is an affiliate of IHS. In addition, the German subsidiary,
H+H, owed $32,000 to an affiliate of IHS at November 30, 1996. Sales
during 1996 to IHS which were made on substantially the same terms as
sales to third parties amounted to approximately $2,100,000.
-9-
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments due under the Company's office operating
lease at November 30 are as follows:
(000's)
1997 $ 262
1998 241
1999 232
2000 206
2001 148
2002 12
-------
Total minimum rental payments $1,101
=======
Rent expense for 1996 was approximately $287,000.
7. EMPLOYEE BENEFIT PLAN
401(k) Plan - Under the Company's 401(k) Plan, full-time employees may
contribute to the Plan between 2% and 16% of their total covered
compensation, in lieu of receiving such amounts as taxable salary or
wages. For employees whose compensation exceeds $66,000 annually, their
individual contribution is limited to 8%. The Company may, in its
discretion, make matching contributions equal to a percentage of an
employee's covered compensation contributed to the 401(k) Plan for the
year, or in a fixed dollar amount, as determined each year by the Board of
Directors. The Company's contribution to the Plan was approximately
$52,500 during 1996.
8. EXPORT SALES
Export sales, primarily to customers in Europe and the Far East, were
approximately $1,235,000 in 1996.
9. OTHER
Major customers accounting for more than 10% of total revenues in the year
are summarized below.
Customer 1996
Information Handling Services, Inc. 16%
10. MINORITY INTEREST
The minority interest in the Company's subsidiary, H+H, is subject to a
put option under which the minority shareholders have the option to put
the shares to the Company beginning May 1, 1999, and under certain
conditions, prior to that date. The Company also has the right to purchase
the shares held by the minority shareholders under the same terms and
conditions as the put option. The purchase price of the shares subject to
this agreement is the greater of DM 320,000 or a price adjusted according
to a formula based on the average net income of H+H. At November 30, 1996,
the minimum purchase price according to the terms of the agreement of
approximately $208,000 is included in minority interest.
-10-
<PAGE>
11. SUBSEQUENT EVENT
On December 17, 1996, Information Handling Services, Inc. and the minority
shareholders of the Company, entered into an agreement of purchase and
sale of stock with Microtest, Inc. ("Microtest"), in which all of the
common stock of the Company was sold to Microtest for a purchase price of
approximately $12,500,000.
* * * * * *
<PAGE>
b) Pro Forma Financial Information -The required pro forma financial
information is set forth below:
The unaudited pro forma consolidated balance sheet at September 28, 1996
combines historical financial information as if the acquisition had occurred on
September 28, 1996. The unaudited pro forma consolidated statement of earnings
for the year ended December 31, 1995 and the nine months ended September 28,
1996 combine historical statements of earnings/(losses) for Microtest, Inc. (the
"Company") and the acquired company, Logicraft Information Systems, Inc.
("Logicraft"), as if the acquisition had occurred on January 1, 1995.
The unaudited pro forma consolidated balance sheet at September 28, 1996
combines historical financial information of the Company at September 28, 1996
and Logicraft at August 31, 1996. The unaudited pro forma consolidated statement
of earnings for the nine months ended September 28, 1996 combines historical
financial information of the Company for the nine months ended September 28,
1996 and Logicraft for the nine months ended August 31, 1996. The unaudited pro
forma consolidated statement of earnings for the year ended December 31, 1995
combines historical financial information of the Company for the year ended
December 31, 1995 and Logicraft for the year ended November 30, 1995. As the
most recent fiscal year end of Logicraft differs from the Company's fiscal year
end by less than 93 days, no adjustment was made to Logicraft's income statement
for the purpose of the pro forma presentation.
The detailed assumptions used to prepare the unaudited pro forma consolidated
financial information are contained in the accompanying Unaudited Pro Forma
Consolidated Financial Information. The unaudited pro forma consolidated
statement of earnings reflects the use of the purchase method of accounting for
the acquisition.
In connection with the allocation of the purchase price, the Company recorded an
expense of $15.7 million to record the value of software research it acquired
from Logicraft for products for which technological feasibility has not been
established and for which no alternative future use existed. The non-recurring
charge is not included in the pro forma consolidated statement of earnings for
the year ended December 31, 1995, however, it is reflected as a reduction of
retained earnings in the pro forma consolidated balance sheet at September 28,
1996.
The unaudited pro forma consolidated financial information assumes the
acquisition was funded from currently available cash. The unaudited pro forma
consolidated financial information does not purport to represent the results of
operation of the Company that actually would have resulted had the acquisition
occurred on January 1, 1995, nor should it be taken as indicative of the future
results of operations. The unaudited pro forma consolidated financial
information should be read in conjunction with the notes to Unaudited Pro Forma
Consolidated Financial Information and the separate financial statements and
notes thereto of the Company and Logicraft.
15
<PAGE>
Microtest, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
September 28, 1996
(in thousands)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA CONSOLIDATED
MICROTEST LOGICRAFT ADJUSTMENTS BALANCE
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 28,291 $ 197 $ 17,000)(a) $ 11,488
Accounts receivable 16,830 1,523 18,353
Inventories 4,774 1,712 6,486
Other current assets 2,353 1,275 (269)(b) 3,359
--------------- --------------- --------------- ---------------
Total current assets 52,248 4,707 (17,269) 39,686
PROPERTY AND EQUIPMENT 3,158 540 (75)(b) 3,623
OTHER ASSETS 442 3,347 (2,605)(b) 1,184
--------------- --------------- --------------- ---------------
Total assets $ 55,848 $ 8,594 $ (19,949) $ 44,493
=============== =============== =============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,954 $ 4,639 $ (4,483)(a) $ 5,110
Accrued employee expenses 990 38 1,028
Accrued expenses 3,201 289 893 (b)(c) 4,383
Current portion of long-term debt 0 0 0
Deferred revenue 0 1,099 1,099
--------------- --------------- --------------- ---------------
Total current liabilities 9,145 6,065 (3,590) 11,620
LONG-TERM DEBT 0 (63) (63)
--------------- --------------- --------------- ---------------
Total liabilities 9,145 6,002 (3,590) 11,557
MINORITY INTERESTS 0 203 0 203
--------------- --------------- --------------- ---------------
SHAREHOLDERS' EQUITY:
Common stock 8 1 (1)(d) 8
Additonal paid-in capital 32,589 5,430 (5,430)(d) 32,589
Retained earnings/(deficit) 14,594 (3,042) 4,769 (b) 624
(15,697)(b)
Treasury stock (488) 0 0 (488)
--------------- --------------- --------------- ---------------
Total shareholders' equity 46,703 2,389 (16,359) 32,733
--------------- --------------- --------------- ---------------
Total liabilities and shareholders'
equity $ 55,848 $ 8,594 $ (19,949) $ 44,493
=============== =============== =============== ===============
</TABLE>
16
<PAGE>
PRO FORMA ADJUSTMENT LEGEND:
a.Reflects cash payments at the time of acquisition for the stock of
Logicraft and the repayments of intercompany debt in the amount of
$4,483,000.
b.Reflects a pro forma adjustment to allocate the purchase price as
follows:
(in thousands)
Current Assets $ 5,147
Fixed Assets 476
Other Intangibles 148
Purchased Software 594
Purchased Research
and Development 15,698
Current Liabilities (9,546)
Intercompany Debt 4,483
Cash Purchase Price,
and Repayment of
Intercompany Debt (17,000)
-----------
$ 0
===========
Purchased Research and Development representing incomplete
technology for which no alternative future use exists was
immediately expensed. The non-recurring charge is reflected as a
reduction of retained earnings.
c.Reflects a pro forma adjustment to record the liabilities resulting
from the acquisition.
d.Reflects eliminating entries for consolidating purposes.
17
<PAGE>
Microtest, Inc.
Unaudited Pro Forma Consolidated Statement of Earnings
Nine Month Period ended September 28, 1996
(in thousands)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA CONSOLIDATED
MICROTEST LOGICRAFT ADJUSTMENTS BALANCE
-------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 38,287 $ 9,777 $ $ 48,064
COST OF SALES 15,736 5,610 192 (a) 21,538
-------------- -------------- -------------- ----------------
Gross Profit 22,551 4,167 (192) 26,526
OPERATING EXPENSES:
Sales and marketing 10,150 3,935 14,085
Research and development 4,642 1,070 5,712
General and administrative 2,982 2,557 (306)(b) 5,233
-------------- -------------- -------------- ----------------
Total operating expenses 17,774 7,562 (306) 25,030
-------------- -------------- -------------- ----------------
UNUSUAL ITEM - Purchased R & D 0 0
-------------- -------------- -------------- ----------------
INCOME/(LOSS) FROM OPERATIONS 4,777 (3,395) 114 1,496
OTHER INCOME/(EXPENSE) - net 586 (180) (644)(c) (238)
-------------- -------------- -------------- ----------------
INCOME/(LOSS) BEFORE INCOME TAXES 5,363 (3,575) (530) 1,258
INCOME TAX PROVISION/(BENEFIT) 1,906 131 (191)(d) 1,846
-------------- -------------- -------------- ----------------
NET INCOME/(LOSS) BEFORE MINORITY
INTERESTS 3,457 (3,706) (340) (589)
MINORITY INTERESTS 0 7 7
-------------- -------------- -------------- ----------------
NET INCOME/(LOSS) $ 3,457 $ (3,699) $ (340) $ (582)
============== ============== ============== ================
NET INCOME/(LOSS) PER COMMON
AND EQUIVALENT SHARE $ 0.42 $ (0.45) $ (0.04) $ (0.07)
============== ============== ============== ================
SHARES USED IN PER SHARE
CALCULATION 8,255 8,255 8,255 8,255
============== ============== ============== ================
</TABLE>
PRO FORMA ADJUSTMENT LEGEND:
a. Reflects pro forma increase in amortization expense associated with the
capitalization of purchased software of $594,000 and other intangible
assets of $148,000 over their estimated useful lives of 2 to 3 years
resulting from the application of purchase accounting principles.
b. Reflects pro forma decrease in depreciation and amortization expense
associated with the revaluation of fixed assets and intangibles resulting
from the application of purchase accounting principles.
c. Reflects pro forma decrease in interest income computed on the
consideration for the acquisition.
d. To reflect the tax effect for the adjustments above using an effective
tax rate of 36%.
18
<PAGE>
Microtest, Inc.
Unaudited Pro Forma Consolidated Statement of Earnings
Year ended December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA CONSOLIDATED
MICROTEST LOGICRAFT ADJUSTMENTS BALANCE
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 52,537 $ 14,229 $ 0 $ 66,766
COST OF SALES 21,961 8,337 401(a) 30,699
--------------- --------------- --------------- ----------------
Gross Profit 30,576 5,892 (401) 36,067
OPERATING EXPENSES:
Sales and marketing 12,585 4,484 17,069
Research and development 5,913 1,039 6,952
General and administrative 3,694 2,269 (409)(b) 5,554
--------------- --------------- --------------- ----------------
Total operating expenses 22,192 7,792 (409) 29,575
--------------- --------------- --------------- ----------------
UNUSUAL ITEM - Purchased R & D 8,776 0 8,776
--------------- --------------- --------------- ----------------
INCOME FROM OPERATIONS (392) (1,900) 8 (2,284)
OTHER INCOME/(EXPENSE) - net 1,232 (199) (813)(c) 220
--------------- --------------- --------------- ----------------
INCOME/(LOSS) BEFORE INCOME TAXES 840 (2,099) (805) (2,064)
INCOME TAX PROVISION/(BENEFIT) (305) (164) (258)(d) (727)
--------------- --------------- --------------- ----------------
NET INCOME/(LOSS) BEFORE MINORITY INTERESTS 1,145 (1,935) (547) (1,337)
MINORITY INTERESTS 0 (42) (42)
--------------- --------------- --------------- ----------------
NET INCOME/(LOSS) $ 1,145 $ (1,977) $ (547) $ (1,379)
=============== =============== =============== ================
NET INCOME/(LOSS) PER COMMON AND
EQUIVALENT SHARE $ 0.13 $ (0.23) $ (0.06) $ (0.16)
=============== =============== =============== ================
SHARES USED IN PER SHARE
CALCULATION 8,534 8,534 8,534 8,534
=============== =============== =============== ================
</TABLE>
PRO FORMA ADJUSTMENT LEGEND:
a. Reflects pro forma increase in amortization expense associated with the
capitalization of purchased software of $594,000 and other intangible
assets of $148,000 over their estimated useful lives of 2 to 3 years
resulting from the application of purchase accounting principles.
b. Reflects pro forma decrease in depreciation and amortization expense
associated with the revaluation of fixed assets and intangibles resulting
from the application of purchase accounting principles.
c. Reflects pro forma decrease in interest income computed on the
consideration for the acquisition.
d. To reflect the tax effect for the adjustments above using an effective
tax rate of 32%.
19
<PAGE>
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.
MICROTEST, INC.
/s/ Richard R. Douglas
----------------------------
Date: February 27, 1997 Richard R. Douglas
Vice President of Operations
20
<PAGE>
c) Exhibits
Exhibit 2 - Agreement of Purchase and Sales of stock
Dated December 17, 1996 Previously filed
Exhibit 23 - Consent of Deloitte & Touche LLP Page 22
Exhibit 99 - Press Release dated December 17, 1996 Previously filed
21
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos.
33-53922, 33-53924, 33-53926, 33-67946, 33-67948, 33-68120, 33-79070, 33-81668
of Microtest, Inc. on Forms S-8 of our report dated January 28, 1997, appearing
in this Form 8-K/A of Microtest, Inc.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 3, 1997
