SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A1
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 19, 1997
COMPUTER OUTSOURCING SERVICES, INC.
(Exact name of registrant as specified in its charter)
Commission file number: 0-20824
New York 13-3252333
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
360 West 31st Street
New York, New York 10001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 564-3730
Item 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Unaudited Pro Forma Consolidated Financial Information
The accompanying unaudited Pro Forma Consolidated Financial Information
is presented to illustrate the effects of certain adjustments to the
historical financial statements of Computer Outsourcing Services, Inc.
(the "Company") that would result from the sale of the Payroll Division
(being composed of Daton Pay USA, Inc., Pay USA of NJ, Inc., NEDS,
Inc., and Key-ACA, Inc.) and is presented as if the sale had occurred
on the first day of the earliest period presented in the Pro Forma
Consolidated Operating Data and on the last day of the third quarter
of the current fiscal year for the Pro Forma Consolidated Balance Sheet
Data. The unaudited Pro Forma Consolidated Financial Data should be
read in conjunction with the respective notes thereto.
The unaudited Pro Forma Consolidated Financial Data is presented for
illustrational purposes only and does not purport to represent the
actual results and financial position of the Company had the sale
occurred on the dates described above, nor is it necessarily
indicative of the future operating results or financial position of
the Company after the sale.
COMPUTER OUTSOURCING SERVICES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET DATA
JULY 31, 1997
Net Book
Value of Proforma
Business Purchase Balance
Historic Sold Adjustment Sheet
----------- ----------- ----------- -----------
Cash (Note 1) $ 394,651 $ (143,519) $10,537,500 $10,788,633
Accounts receivable, net 4,424,040 (551,725) - 3,872,315
Other current assets 1,218,370 (242,968) - 975,402
----------- ----------- ----------- -----------
Total current assets 6,037,061 (938,211) 10,537,500 15,636,350
----------- ----------- ----------- -----------
Fixed assets, net 3,021,177 (903,995) - 2,117,182
----------- ----------- ----------- -----------
Deferred software, net 2,321,603 (694,438) - 1,627,165
Other intangibles, net 7,644,195 (4,864,108) - 2,780,087
Other long term assets
(Note 2) 782,713 - 750,000 1,532,713
----------- ----------- ----------- -----------
Total long term assets 10,748,511 (5,558,546) 750,000 5,939,965
----------- ----------- ----------- -----------
Total assets $19,806,749 $(7,400,752) $11,287,500 $23,693,497
=========== ============ =========== ===========
Accounts payable $ 1,545,412 $ (304,664) $ - $ 1,240,748
Current portion of loans
and capital leases
(Note 3) 1,516,079 (134,147) (875,000) 506,932
Other current liabilities
(Note 4) 1,839,943 (372,257) 3,396,000 4,863,586
----------- ------------ ------------ -----------
Total current liabilities 4,901,334 (811,068) 2,521,000 6,611,266
----------- ------------ ------------ -----------
Long term loans and
capital leases (Note 3) 1,416,525 (164,981) (687,500) 564,044
Deferred tax liabilities 1,014,495 (232,800) - 781,695
Other long term
liabilities (Note 5) 142,413 - 1,407,668 1,550,081
----------- ------------ ------------ -----------
Total long term
liabilities 2,573,433 (397,781) 720,168 2,895,820
----------- ------------ ------------ -----------
Equity 12,331,982 (6,191,903) 8,046,332 14,186,411
----------- ------------ ----------- -----------
Total liabilities and
equity $19,806,749 $(7,400,752) $11,287,500 $23,693,497
=========== ============ =========== ===========
See Notes to Pro Forma Consolidated Financial Data
COMPUTER OUTSOURCING SERVICES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED OPERATING DATA
NINE MONTHS ENDED JULY 31, 1997
Elimination
of Payroll Proforma Pro
Historic Operations Adjustments Forma
----------- ------------ ------------ -----------
REVENUES (Note 6) $24,289,530 $(6,522,071) $ 796,300 $18,563,759
COSTS AND EXPENSES
Data Processing Costs
(Note 7) 16,211,149 (3,741,467) 207,792 12,677,474
Selling and promotion
costs 1,937,622 (1,002,429) - 935,193
General and adminis-
trative expenses 5,074,895 (1,846,310) - 3,228,585
Interest expense, net
of interest income
(Note 8) 209,964 (24,781) (462,000) (276,817)
----------- ------------ ------------ ------------
23,433,630 (6,614,987) (254,208) 16,564,435
----------- ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 855,900 92,916 1,050,508 1,999,324
PROVISION FOR INCOME
TAXES (Note 9) 342,400 41,812 472,729 856,941
----------- ------------ ----------- -----------
NET INCOME $ 513,500 $ 51,104 $ 577,779 $ 1,142,383
=========== ============ =========== ===========
See Notes to Pro Forma Consolidated Financial Data
COMPUTER OUTSOURCING SERVICES, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED OPERATING DATA
YEAR ENDED OCTOBER 31, 1996
Elimination
of Payroll Proforma Pro
Historic Operations Adjustments Forma
---------- ----------- ----------- ----------
REVENUES (Note 6) $29,051,368 $(7,844,826) $1,061,733 $22,268,275
COSTS AND EXPENSES
Data Processing Costs
(Note 7) 18,134,577 (4,275,313) 277,056 14,136,320
Selling and promotion
costs 2,501,404 (988,137) 1,513,267
General and adminis-
trative expenses 7,462,721 (3,019,098) 4,443,623
Interest expense, net
of interest income
(Note 8) 339,191 (41,220) (674,000) (376,029)
---------- ----------- ----------- -----------
28,437,893 (8,323,768) (396,944) 19,717,181
---------- ----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 613,475 478,942 1,458,677 2,551,094
PROVISION FOR INCOME
TAXES (Note 9) 280,000 215,524 656,405 1,151,929
---------- ----------- --------- ---------
NET INCOME $ 333,475 $ 263,418 $ 802,272 $1,399,165
========== =========== ========= =========
See Notes to Pro Forma Consolidated Financial Data
NOTES TO PROFORMA CONSOLIDATED FINANCIAL DATA
The following notes relate to the amounts in the Proforma Adjustments.
1. Cash received on consummation of the sale, including prepayment for
a two-year support services agreement, net of cash used for repayment
of bank debt and payment of certain expenses related to the sale.
2. Note given by the buyer as part of the total sale amount.
3. Repayment of bank debt as noted above.
4. Includes $1,446,000 in income taxes due on the gain arising from the
sale, $1,000,000 of current portion of deferred income from the support
services agreement and a covenant not to compete for three years
following the sale, and the current portion of other accrued expenses
related to the sale.
5. Includes $1,000,000 of non-current portion of deferred income from the
support services agreement and the covenant not to compete, and the
non-current portion of expenses accrued.
6. Pro-rata income recognition from the support services agreement and the
covenant not to compete.
7. Expenses related to certain revenues retained at one of the companies
sold.
8. Interest income computed at 5% on unused cash proceeds, plus the re-
duction in interest expense arising from the repayment of the Company's
bank debt from the proceeds of the sale.
9. Estimated income tax effect of the transaction at the then-prevailing
rates.
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.
COMPUTER OUTSOURCING SERVICES, INC.
January 16, 1998 /s/
___________________________________
Zach Lonstein
Chief Executive Officer
