UNITED STATES
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 (Date of earliest event reported) May 28, 1997
Commission file number: 1-11782
ESQUIRE COMMUNICATIONS LTD.
(Exact name of Small Business issuer as specified in its charter)
DELAWARE 13-3703760
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
216 EAST 45TH STREET, NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (212) 687-8010
- ----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed from last
report)
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
ESQUIRE COMMUNICATIONS LTD.
AND
WOLFE, ROSENBERG & ASSOCIATES, INC.
PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
BASIS OF COMBINATION-PROFORMA
The accompanying pro forma combined statements of operations have been
derived from Esquire Communications Ltd.'s ("ESQ.COM") statements of operations
for year ended December 31, 1996 and the six-month period ended June 30, 1997.
Adjustments have been made to such information to give effect to the following
transactions and events as if each had occurred as of the beginning of the
period covered by these pro forma combined statements of operations:
A. ESQ.COM's acquisition of Wolfe, Rosenberg & Associates, Inc. and its
wholly owned subsidiary M&M Computrans ("WRA") on May 28, 1997.
B. ESQ.COM's assumed borrowing of $6.0 million under it's revolving loan
agreement with Antares Leveraged Capital Corp. used for the above acquisition.
The pro forma combined statements of operations have been adjusted on a
proforma basis for the above transactions and assumptions (pro forma
adjustments) discussed in the accompanying notes.
The accompanying pro forma financial information does not purport to
represent what ESQ.COM's results of operations or financial condition would have
been had such transactions in fact occurred at beginning of the periods
presented or to project ESQ.COM's results of operations or financial position in
or for any future periods.
<PAGE>
ESQUIRE COMMUNICATIONS LTD.
AND
WOLFE, ROSENBERG & ASSOCIATES, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 1996
BASIS OF COMBINATION OF HISTORICAL FINANCIAL INFORMATION
ESQ.COM's operating results represent historical results of operations for
the year ended December 31, 1996. See ESQ.COM's 1996 financial statements
previously filed with its annual report on form 10-KSB. WRA includes historical
results of operations for the year ended December 31, 1996.
PROFORMA ADJUSTMENTS
(1) EXPENSES
OPERATING EXPENSES:
To record the elimination of certain direct costs of WRA that were
unrelated to the business acquired by ESQ.COM.
GENERAL AND ADMINISTRATIVE:
To record the estimated salary reduction to be realized with respect to the
negotiated employment agreement entered into with the principals of WRA and to
eliminate certain expenses of WRA that were unrelated to the business acquired
by ESQ.COM.
DEPRECIATION AND AMORTIZATION:
To record amortization of goodwill arising from the acquisition.
INTEREST EXPENSE:
To record the additional interest cost as a result of the assumed debt
increase with the proceeds of the revolving loan agreement to finance the WRA
acquisition.
OTHER INCOME:
To adjust WRA's income from assets that were not acquired by ESQ.COM.
PROVISION FOR TAXES:
To record income tax on the pro forma income at effective statutory rates
with assumed termination of Subchapter S Corporation status of WRA.
<PAGE>
<TABLE>
<CAPTION>
ESQUIRE COMMUNICATIONS LTD.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED December 31, 1996
(In Thousands Except Per Share Data)
Historical Pro Forma
ESQ.COM WRA Adjustments Combined
<S> <C> <C> <C> <C>
Revenues $24,583 $5,180 $29,763
Costs and expenses:
Operating expenses 13,925 2,658 (1) (94) 16,489
General and administrative expenses 8,443 2,646 (1) (1,145) 9,944
Depreciation and amortization 1,158 64 (1) 265 1,487
--------- --------- -------- ----------
23,526 5,368 (974) 27,920
--------- --------- -------- ----------
Income from operations 1,057 (188) 974 1,843
Other income (expense)
Interest expense (1,163) 0 (1) (570) (1,733)
Interest and other income 9 29 (1) (21) 17
---------- --------- ---------- ----------
(1,154) 29 (591) (1,716)
(Loss) income before provision for
income taxes and extraordinary item (97) (159) 383 127
Income Taxes provision 212 (1) 94 306
----------- ---------- ---------- ----------
(Loss) income before extraordinary item (309) (159) 289 (179)
Extraordinary item-loss on early
extinguishment of debt, net of
tax benefit of $104 (157) (157)
----------- ------------ ---------- -----------
Net (loss) income (466) (159) 289 (336)
Dividends on preferred stock (75) 0 (75)
----------- ------------- ----------- ------------
Net (loss) income applicable to
common stockholders ($541) ($159) $289 ($411)
=========== ============= =========== ============
Pro forma loss per share:
Loss before extraordinary item ($0.06)
Extraordinary item (0.04)
------------
Net loss ($0.10)
============
Pro forma weighted average common
shares outstanding 4,104,680
==============
</TABLE>
ESQUIRE COMMUNICATIONS LTD.
AND
WOLFE, ROSENBERG & ASSOCIATES, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
For the Six Months Ended June 30, 1997
BASIS OF COMBINATION OF HISTORICAL FINANCIAL INFORMATION
ESQ.COM's operating results represent historical results of operations
for the six months ended June 30, 1997. See ESQ.COM's June 30, 1997 financial
statements previously filed with its form 10-QSB. WRA includes historical
results of operations for the period January 1, 1997 to May 28, 1997, the date
of acquisition by ESQ.COM.
PROFORMA ADJUSTMENTS
(2) EXPENSES
OPERATING EXPENSES:
To record the elimination of certain direct costs of WRA that were
unrelated to the business acquired by ESQ.COM.
GENERAL AND ADMINISTRATIVE:
To record the estimated salary reduction to be realized with respect to the
negotiated employment agreement entered into with the principals of WRA and to
eliminate certain expenses of WRA that were unrelated to the business acquired
by ESQ.COM.
DEPRECIATION AND AMORTIZATION:
To record amortization of goodwill arising from the acquisition.
INTEREST EXPENSE:
To record the additional interest cost as a result of the assumed debt
increase with the proceeds of the revolving loan agreement to finance the WRA
acquisition.
OTHER INCOME:
To adjust WRA's income from assets that were not acquired by ESQ.COM.
ESQUIRE COMMUNICATIONS LTD.
AND
WOLFE, ROSENBERG & ASSOCIATES, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
For the Six Months Ended June 30, 1997
PROVISION FOR TAXES:
To record income tax on the pro forma income at effective statutory rates
with assumed termination of Subchapter S Corporation status of WRA.
<PAGE>
<TABLE>
<CAPTION>
ESQUIRE COMMUNICATIONS LTD.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED June 30, 1997
(In Thousands Except Per Share Data)
Historical Pro Forma
ESQ.COM WRA Adjustments Combined
<S> <C> <C> <C> <C>
Revenues $18,955 $1,924 $20,879
Costs and expenses:
Operating expenses 11,057 1,020 (2) ($39) 12,038
General and administrative expenses 7,356 1,001 (2) (427) 7,930
Depreciation and amortization 981 25 (2) 111 1,117
----------- ---------- --------- ---------
19,394 2,046 (355) 21,085
----------- ---------- --------- ---------
Income from operations (439) (122) 355 (206)
Other income (expense)
Interest expense (893) 0 (2) (238) (1,131)
Interest and other income 14 18 (2) (9) 23
----------- --------- --------- ---------
(879) 18 (247) (1,108)
----------- --------- --------- ---------
(Loss) income before provision for income taxes (1,318) (104) 109 (1,313)
Income Taxes (benefit) provision (424) (2) 2 (422)
----------- --------- --------- ---------
Net (loss) income (894) (104) 107 (891)
Dividends on preferred stock (240) 0 (240)
----------- -------- --------- ---------
Net (loss) income applicable to
common stockholders ($1,134) ($104) $107 ($1,131)
=========== ========= ========= =========
Pro forma loss per share:
Net loss ($0.27)
=========
Pro forma weighted average common
shares outstanding 4,168,755
==========
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
October 16, 1997
By: /S/ David A. Higson
David A. Higson
Senior Vice President,
Chief Financial Officer
WOLFE, ROSENBERG & ASSOCIATES, INC. AND SUBSIDIARY
Unaudited Financial Statements
April 30, 1997 and 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
<PAGE>
<TABLE>
<CAPTION>
WOLFE, ROSENBERG & ASSOCIATES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
April 30, April 30,
1997 1996
========= =========
ASSETS
Current assets:
<S> <C> <C>
Accounts receivable, less allowance $627,684 $652,859
--------- ---------
Total current assets 627,684 652,859
Property and equipment, net 183,241 207,016
--------- ----------
$810,925 $859,875
========= ==========
LIABILITIES AND BUSINESS EQUITY
Current liabilities:
Accounts payable and accrued expenses $304,177 $282,623
Current portion of capital leases 13,200 0
---------- -----------
Total current liabilities 317,377 282,623
Notes payable to principals 111,313 37,968
Capital leases - noncurrent 22,859 0
Business equity 359,376 539,284
---------- -----------
$810,925 $859,875
========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
WOLFE, ROSENBERG & ASSOCIATES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
For the Four Months Ended
April 30, April 30,
1997 1996
========= ==========
<S> <C> <C>
Fees income $1,562,123 $1,726,037
Costs and expenses:
Direct costs 833,017 885,320
General and administrative expenses 804,766 911,201
Depreciation and amortization 18,066 20,488
------------ -----------
1,655,849 1,817,009
Income from operations (93,726) (90,972)
Other income:
Interest and other income 11,096 41,051
------------- ------------
Net loss ($82,630) ($49,921)
============= ============
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
WOLFE, ROSENBERG & ASSOCIATES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
For the Four Months Ended
April 30, April 30,
1997 1996
=========== ===========
Cash flows from operating activities
<S> <C> <C>
Net loss ($82,630) ($49,921)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 18,066 20,488
Provision for doubtful accounts 15,621 17,260
(Increase) decrease in assets:
Accounts receivable 115,187 (46,310)
Other current assets 329 25,145
(Decrease) increase in liabilities:
Accounts payable and accrued expenses 69,869 51,449
Capital leases (4,233) 0
------------- -----------
Net cash provided by operating activities 132,209 18,111
------------- -----------
Cash flows from investing activities
Purchase of property and equipment (46,232) (62,655)
------------- -----------
Cash flows from financing activities
Contributions from (distributions to)
parent, net (85,977) 44,544
------------- ----------
Net change in cash 0 0
============= ==========
Cash at beginning and end of period $0 $0
============== ===========
See notes to condensed consolidated financial statements.
</TABLE>
WOLFE, ROSENBERG & ASSOCIATES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
April 30, 1997
NOTE A-- BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310(b) to Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. The results of operations for the interim
periods are not necessarily indicative of the results that may be attained for
an entire year. For further information, refer to the Company's Financial
Statements and footnotes for the fiscal year ended December 31, 1996 filed with
Esquire Communications Ltd.'s Form 8-K/A.
The condensed combined financial statements include the accounts of the
Company and a subsidiary under common control. All significant intercompany
transactions and accounts have been eliminated.
NOTE B-- SUBSEQUENT EVENTS
Subsequent to April 30, 1997 the Company sold substantially all of its
assets and operations, subject to assumptions of certain liabilities, to a
publicly traded court reporting company. The Company ceased operations effective
May 28, 1997 with operations being conducted by the successor corporation.
<PAGE>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES, INC.
AND M&M COMPUTRANS
Combined Financial Statements
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Wolfe, Rosenberg & Associates, Inc.
and M&M Computrans:
We have audited the accompanying combined balance sheets of the Court Reporter
Business of Wolfe, Rosenberg & Associates, Inc. and M&M Computrans (the
Business) as of December 31, 1996 and 1995 and the related combined statements
of operations and business equity and cash flows for the years then ended. These
combined financial statements are the responsibility of management of the
Business. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Court Reporter
Business of Wolfe, Rosenberg & Associates, Inc. and M&M Computrans as of
December 31, 1996 and 1995, and the results of their operations and business
equity and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
August 29, 1997
<PAGE>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES
AND M&M COMPUTRANS
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES, INC.
AND M&M COMPUTRANS
Combined Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
Current assets:
<S> <C> <C>
Accounts receivable, net of allowance for
doubtful accounts of $106,695 in 1996
and $54,881 in 1995 $ 758,492 623,809
Other 329 25,145
------------ ----------
Total current assets 758,821 648,954
------------ -----------
Fixed assets 1,106,002 1,052,040
Less accumulated depreciation (950,927) (887,191)
------------- -------------
Fixed assets, net 155,075 164,849
------------- -------------
Total assets $ 913,896 813,803
============= ==============
Liabilities and Business Equity
Current liabilities:
Accounts payable to court reporters 169,308 166,174
Other accounts payable and accrued liabilities 65,000 65,000
Capital leases - current 13,200 -
------------- --------------
Total current liabilities 247,508 231,174
Notes payable to principals 111,313 37,968
Capital leases - noncurrent 27,092 -
------------- -------------
Total liabilities 385,913 269,142
------------- -------------
Business equity 527,983 544,661
------------- -------------
Total liabilities and business equity $ 913,896 813,803
============= ==============
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES, INC.
AND M&M COMPUTRANS
Combined Statements of Operations and Business Equity
Years ended December 31, 1996 and 1995
1996 1995
<S> <C> <C>
Revenues $ 5,184,439 5,506,516
Less refunds and discounts (4,735) (17,726)
------------- ----------
Net revenues 5,179,704 5,488,790
Costs and expenses related to revenues:
Transcribers and reporters (2,658,248) (2,913,340)
Other operating expenses (2,710,135) (2,889,747)
--------------- -------------
Operating deficit (188,679) (314,297)
--------------- -------------
Other income (expense):
Rental income (loss) (4,736) 14,076
Interest and dividends, net 32,089 15,441
Gain (loss) on sale of asset (6,815) (1,014)
Miscellaneous 8,883 29,846
--------------- ------------
Total other income 29,421 58,349
--------------- ------------
Net loss (159,258) (255,948)
Business equity at beginning of year 544,661 715,437
Contributions from Parent, net 142,580 85,172
--------------- ------------
Business equity at end of year $ 527,983 544,661
=============== =============
See accompanying notes to combined financial statements.
</TABLE>
<TABLE>
<CAPTION>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES, INC.
AND M&M COMPUTRANS
Combined Statements of Cash Flows
Years ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (159,258) (255,948)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation 63,736 50,555
Provision for doubtful accounts 51,814 54,881
Change in assets and liabilities:
Other assets 24,816 (21,775)
Accounts receivable (186,497) 146,271
Accounts payable 3,134 (1,567)
Accrued expenses - 18,332
Capital leases 40,292 -
-------------- ----------
Net cash provided by operating activities (161,963) (9,251)
Cash flows from investing activities -
capital expenditures (53,962) (113,889)
--------------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable to principals 73,345 37,968
Contributions from Parent, net 142,580 85,172
--------------- ------------
Net cash provided by (used in) financing activities 215,925 123,140
--------------- ------------
Cash at beginning and end of year $ - -
=============== ============
See accompanying notes to combined financial statements.
</TABLE>
<PAGE>
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
Wolfe, Rosenberg & Associates, Inc. (WRA) was formed during 1972 by
its principals, Seymour Wolfe and Fred Rosenberg. WRA provides court
reporting services for the legal and business communities. WRA has two
offices in the Chicagoland area: one in Chicago and the other in
Wheaton. WRA provides a variance of reporting services to its clients,
including depositions, trials, hearings and arbitrations, conventions
and meetings, and referrals.
WRA's clients include approximately 2,000 service requesters of which
over 1,400 are from the city of Chicago, 200 from the Midwest region
outside of Chicago, and the remaining 400 from outside the Midwest,
with California, New York and Washington, DC representing the largest
shares. WRA's service requesters include mainly attorneys, court
officials, public entities, businesses and community groups.
The combined financial statements of the Business, as defined below,
also include the operations of M&M Computrans, a company formed in
1982 that provides computer consulting services solely to WRA.
(b) BASIS OF PRESENTATION
The accompanying combined financial statements reflect the activity of
Wolfe, Rosenberg & Associates (WRA) which exist as of December 31,
1996 and for which ownership interests are to be transferred to a
third party under an agreement in principle described in note 5. The
assets and liabilities of WRA to be acquired by the purchaser relate
to the operations of its court reporting business including accounts
receivable, property, plant and equipment, accounts payable, notes and
interest payable in an amount not to exceed $122,899 due by the
Business to the principals, certain accruals in an amount not to
exceed $65,000, licenses, and lease obligations. Assets and
liabilities excluded from WRA's assets and liabilities include cash
and cash equivalents, bonds and marketable securities and borrowings
under line of credit. The assets and liabilities of M&M Computrans to
be acquired by the purchaser, which are also included in the
accompanying combined financial statements, include property, plant,
and equipment and current liabilities in relation to its computer
consulting business. The statements of operations include the revenues
derived and costs related to both the WRA and M&M Computrans
businesses to be acquired by the purchaser (collectively, the
Business). Transactions between WRA and M&M Computrans have been
eliminated in the combined financial statements.
The Business does not maintain its own cash receipts and
disbursements. Cash activities are managed by the principals, who
represent the WRA parent organization (Parent), and are reflected as a
change in the business equity account.
(c) REVENUE RECOGNITION
Revenues and the related direct costs of court reporters and
transcribers are recognized when services rendered are billed, which
generally occurs at the time the final documents are transcribed and
completed.
<PAGE>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES, INC.
AND M&M COMPUTRANS
Notes to Combined Financial Statements
(d) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed
using both accelerated and straight-line methods over the estimated
useful lives of the assets as noted below. Leasehold improvements are
amortized over the shorter of the estimated useful lives of the assets
or the lease terms. Maintenance and repairs are charged to expense as
incurred, improvements are capitalized.
Equipment 5 - 7 Years
Office furniture 7 Years
Leasehold improvements 7 Years
(e) INCOME TAXES
Wolfe, Rosenberg & Associates, Inc., a Sub-S corporation and M&M
Computrans, an Illinois general partnership, have elected S
corporation status under the Internal Revenue Code. All income,
deductions, and credits are passed through to the principals of these
companies for Federal income tax purposes. Certain state and local tax
jurisdictions do not uniformly recognize a company's S corporation
status. Accordingly, the companies will continue to be liable for
state and local income taxes in these jurisdictions and such taxes are
provided for in the accompanying consolidated financial statements.
(f) CREDIT CONCENTRATIONS AND FINANCIAL INSTRUMENTS
Financial instruments which potentially expose the Business to
concentrations of credit risk, as defined by Statement of Financial
Accounting Standards No. 105, "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentrations of Credit Risk," consist primarily of
trade accounts receivable and other assets. The Business' customers
are mostly law firms within the Midwest region.
(g) USE OF ESTIMATES
Management of the Business has made certain estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue
and expenses during the period. Actual results could differ from those
estimates.
(Continued)
<PAGE>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES, INC.
AND M&M COMPUTRANS
Notes to Combined Financial Statements
(2) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December
31, 1996 and 1995:
1996 1995
Equipment $ 1,050,574 996,612
Office furniture 22,153 22,153
Leasehold improvements 33,275 33,275
Total property, plant and equipment 1,106,002 1,052,040
Less accumulated depreciation 950,927 887,191
$ 155,075 164,849
(3) PENSION BENEFIT
The Business had a defined benefit plan (the Plan) that covered
substantially all employees who met defined age and length of service
requirements. Benefits were based on years of service and compensation
levels.
The Plan was terminated in 1995, and assets were distributed in May
1996.
No assets reversed back to the Business as a result of the termination
of the Plan.
(4) COMMITMENTS
(a) LEASE COMMITMENTS
The Business entered into a capital lease for video equipment during
1996. Leased equipment capitalized and included on the combined
balance sheet at December 31, 1996 was $43,411.
The Business is obligated under an operating lease for its office
facility which expires on May 31, 2000. The lease provides, among
other things, that the Business is responsible for its share of
increases in certain utilities, maintenance, and property taxes over a
base amount. The Business is also obligated under various equipment
and vehicle leases which expire through January 31, 2000. Total lease
expense for 1996 and 1995 is $261,857 and $264,141, respectively.
(Continued)
<PAGE>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES, INC.
AND M&M COMPUTRANS
Notes to Combined Financial Statements
The anticipated future annual lease payments under capital and
operating leases as December 31, 1996, inclusive of the base utility,
maintenance and property tax charges for the office facilities, to be
purchased by the third party as described in note 5, are as follows:
Year ending December 31 Capital Operating
1997 $ 17,175 243,593
1998 17,175 232,712
1999 12,881 210,725
2000 - 81,249
2001 and thereafter - -
47,231 768,279
Less amount representing interest 6,939
Present value of minimum lease payments 40,292
Less current maturities 13,200
$27,092
(5) ASSET SALE AGREEMENT
In May 1997, WRA and M&M Computrans entered into an agreement in
principle with Esquire Communications Ltd. (Esquire) to transfer
ownership of certain assets and liabilities related to the court
reporting operations of the Business, in exchange for a monetary
consideration.
The assets to be purchased by Esquire of the Business include: all
accounts receivable, all office supplies, office machines, office
furniture, machinery, equipment, fixtures, inventory, leasehold
improvements (to the extent owned) and computer hardware and software
systems. The liabilities to be assumed by Esquire include: accounts
payable and accruals (not to exceed $65,000, exclusive of court
reporter liabilities), up to $122,899 of outstanding principal and
interest due by the Business to the principals, office lease,
equipment leases, automobile leases, and computer software licenses,
accrued vacation and sick pay, and all liabilities relating to the
work in process of the Business.
The assets to be excluded from the purchase include: cash and cash
equivalents, bonds and marketable securities, stock certificates,
partnership certificates, minute books, any notes of indebtedness of
the Business to any principal to the extent in excess of the maximum
amount ($122,899) to be assumed, specific items of personal property
and WRA's existing line of credit with American National Bank.
(Continued)
<PAGE>
THE COURT REPORTER BUSINESS OF
WOLFE, ROSENBERG & ASSOCIATES, INC.
AND M&M COMPUTRANS
Notes to Combined Financial Statements
(6) RELATED PARTY TRANSACTIONS
The Business has outstanding notes payable as of December 31, 1996 and
1995 in relation to loans granted by its principals to the Business.
Interest expense in relation to the notes is also included within the
Business's consolidated financial statements. All notes outstanding
are to be paid back to the principals on a monthly basis based upon a
13% effective interest rate. All notes outstanding are due to the
principals on or before July 31, 1998.
During 1996, the Business sold three vehicles to its principals and
incurred a loss of $39,761. The vehicles had an original basis of
$103,560 and accumulated depreciation of $35,799. The Business
received $28,000 in cash as proceeds from the sale of the vehicles.
