<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 6, 1996
(Date of Earliest Event Reported)
ELCOM INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-27376 04-3175156
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
10 Oceana Way, Norwood, Massachusetts 02062
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (617) 440-3333
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
Audited Financial statements for Prophet Group Limited and Subsidiary
are set forth of pages F-1 through F-18 hereof.
(b) Pro Forma Financial Information
The following unaudited pro forma condensed combined financial
statements are filed with this report:
- Elcom International, Inc. and Subsidiaries and Prophet Group
Limited and Subsidiary - Pro Forma Condensed Combined
Financial Statements (Unaudited) - Overview - Page F-19
- Unaudited Pro Forma Condensed Combined Balance Sheet of Elcom
International, Inc. and Subsidiaries and Prophet Group Limited
and Subsidiary as of September 30, 1996 - Page F-20
- Unaudited Pro Forma Condensed Combined Statements of Operations
of Elcom International, Inc. and Subsidiaries and Prophet Group
Limited and Subsidiary for the year ended December 31, 1995 and
the nine-month interim period ended September 30, 1996 -
Pages F-21 and F-22
(c) Exhibits
Exhibit No.
2.1 Agreement for the sale and purchase of shares in the capital of
Prophet Group Limited dated December 6, 1996, by and among
Lantec (Management) Limited and the Vendors (as defined
therein)*
23.1 Consent of Deloitte & Touche
_____________
* Previously filed
2
<PAGE> 3
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 thereunto duly authorized.
ELCOM INTERNATIONAL, INC.
/s/ Laurence F. Mulhern
___________________________
Laurence F. Mulhern
Chief Financial Officer and Treasurer
DATE: February 13, 1997
3
<PAGE> 1
PROPHET GROUP LIMITED
CONSOLIDATED BALANCE SHEET 30 APRIL 1996 AND 1995
CONSOLIDATED PROFIT AND LOSS ACCOUNT
AND CASHFLOW STATEMENT
30 APRIL 1996, 1995 AND 1994
DELOITTE & TOUCHE
HILL HOUSE
1 LITTLE NEW STREET
LONDON EC4A 3TR
F-1
<PAGE> 2
PROPHET GROUP LIMITED
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 1996
CONTENTS PAGE
STATEMENT OF DIRECTORS' RESPONSIBILITIES F-3
AUDITORS' REPORT F-4
CONSOLIDATED PROFIT AND LOSS ACCOUNTS F-5
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS F-6
CONSOLIDATED BALANCE SHEETS F-7
CONSOLIDATED CASH FLOW STATEMENTS F-8
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTS F-9
NOTES TO THE FINANCIAL STATEMENTS F-11
F-2
<PAGE> 3
PROPHET GROUP LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES
UK company law requires the directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
group as at the end of the financial year and of the profit or loss of the
group for that period. In preparing those financial statements, the directors
are required to:
- - select suitable accounting policies and then apply them consistently;
- - make judgements and estimates that are reasonable and prudent;
- - state whether applicable accounting standards have been followed;
- - prepare the financial statements on a going concern basis unless it is
inappropriate to presume that the group will continue in business.
The directors are responsible for maintaining adequate accounting records, for
safeguarding the assets of the group and for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
F-3
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS TO THE DIRECTORS OF
ELCOM INTERNATIONAL, INC.
We have audited the accompanying consolidated balance sheets of Prophet Group
Limited and subsidiary as at 30 April 1996 and 1995 and the related consolidated
profit and loss accounts, reconciliation of movements in shareholders' funds and
consolidated cash flow statements for the years ended 30 April 1996, 1995 and
1994, all expressed in pounds sterling, which have been prepared under the
historical cost convention and the accounting policies set out in the notes to
the consolidated financial statements.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 1 these financial statements are the responsibility of the
Company's directors. It is our responsibility to form an independent opinion,
based on our audits, on these financial statements and to report our opinion to
you.
BASIS OF OPINION
We conducted our audit in accordance with generally accepted auditing standards
in the United Kingdom. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether caused by fraud or other irregularity or
error. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosure in the financial statements. An audit also includes an
assessment of significant estimates made by the directors and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
OPINION
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of Prophet Group
Limited and subsidiary as at 30 April 1996 and 30 April 1995 and the results of
their operations and cash flows for the three years ended 30 April 1996 in
conformity with generally accepted accounting principles in the United Kingdom
(which differ in certain respects from generally accepted accounting principles
in the United States of America - see note 17).
Deloitte & Touche
Chartered Accountants
Hill House
1 Little New Street
London EC4A 3TR
United Kingdom
28 January 1997
F-4
<PAGE> 5
PROPHET GROUP LIMITED
<TABLE>
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
<CAPTION>
NOTE YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 30 APRIL 30 APRIL
1996 1995 1994
[POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C> <C>
TURNOVER 3 24,145 13,693 11,809
Cost of sales (21,695) (11,983) (10,396)
------- ------- -------
Gross profit 2,450 1,710 1,413
Distribution costs (521) (309) (236)
Administrative expenses (960) (928) (800)
Other operating income - - 1
------- ------- -------
OPERATING PROFIT 5 969 473 378
Income from other fixed asset investments - 2 -
Interest receivable and similar income 55 34 25
Interest payable and similar charges 6 (22) (1) (1)
------- ------- -------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 1,002 508 402
TAX ON PROFIT ON ORDINARY ACTIVITIES 7 (342) (194) (122)
------- ------- -------
RETAINED PROFIT 660 314 280
======= ======= =======
</TABLE>
All activities are derived from continuing operations.
There are no recognised gains or losses for the current and prior years other
than as stated above.
F-5
<PAGE> 6
PROPHET GROUP LIMITED
<TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE THREE YEARS ENDED 30 APRIL 1996
<CAPTION>
CALLED UP PROFIT AND
SHARE LOSS
CAPITAL ACCOUNT TOTAL
[POUND]'000 [POUND]'000 [POUND]'000
<C> <C> <C>
1 May 1993 opening shareholders' funds 100 320 420
Profit for the year - 280 280
--- ----- -----
1 May 1994 opening shareholders' funds 100 600 700
Profit for the year - 314 314
--- ----- -----
1 May 1995 opening shareholders' funds 100 914 1,014
Profit for the year - 660 660
--- ----- -----
30 April 1996 closing shareholders' funds 100 1,574 1,674
=== ===== =====
</TABLE>
F-6
<PAGE> 7
PROPHET GROUP LIMITED
<TABLE>
CONSOLIDATED BALANCE SHEETS
30 APRIL 1996 AND 1995
<CAPTION>
NOTE 1996 1995
[POUND]'000 [POUND]'000
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 8 692 66
----- -----
CURRENT ASSETS
Stocks 9 1,363 621
Debtors 10 4,319 2,488
Cash at bank and in hand 404 665
----- -----
6,086 3,774
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR 11 4,844 2,826
----- -----
NET CURRENT ASSETS 1,242 948
----- -----
TOTAL ASSETS LESS CURRENT LIABILITIES 1,934 1,014
CREDITORS: AMOUNTS FALLING DUE AFTER
MORE THAN ONE YEAR 12 (260) -
----- -----
TOTAL NET ASSETS 1,674 1,014
===== =====
CAPITAL AND RESERVES
Called up share capital 13 100 100
Profit and loss account 1,574 914
----- -----
EQUITY SHAREHOLDERS' FUNDS 1,674 1,014
===== =====
</TABLE>
F-7
<PAGE> 8
PROPHET GROUP LIMITED
<TABLE>
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 30 APRIL 30 APRIL
1996 1995 1994
NOTE [POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C> <C>
NET CASH INFLOW/(OUTFLOW) FROM OPERATING
ACTIVITIES 1 297 (342) 40
---- ---- ---
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 55 34 25
Interest paid (22) - -
Interest paid on hire purchase agreements - (1) (1)
Income from listed investments - 2 -
---- ---- ---
NET CASH INFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE 33 35 24
---- ---- ---
TAXATION
UK corporation tax paid (200) (82) (84)
---- ---- ---
TAX PAID (200) (82) (84)
---- ---- ---
INVESTING ACTIVITIES
Payments to acquire tangible fixed assets (681) (151) (55)
Receipts from sales of tangible fixed assets 2 118 -
Receipts from sale of fixed asset investment - 30 15
---- ---- ---
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (679) (3) (40)
---- ---- ---
NET CASH OUTFLOW BEFORE FINANCING (549) (392) (60)
---- ---- ---
FINANCING
New secured loan 389 - -
Loan repayments (101) - -
Capital element of hire purchase repayments - - (1)
---- ---- ---
NET CASH INFLOW/(OUTFLOW) FROM FINANCING 4 288 - (1)
---- ---- ---
DECREASE IN CASH AND CASH EQUIVALENTS 2 (261) (392) (61)
==== ==== ===
</TABLE>
F-8
<PAGE> 9
PROPHET GROUP LIMITED
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
<TABLE>
1. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 1996 30 APRIL 1995 30 APRIL 1994
[POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C>
Operating profit 969 473 378
Depreciation and other amounts written
off fixed assets 46 123 54
Loss on sale of tangible fixed assets 6 5 2
Profit on sale of investment - (29) -
(Increase)/decrease in stocks (742) 4 (68)
Increase in debtors (1,838) (707) (771)
Increase/(decrease) in creditors 1,856 (211) 445
------ ---- ----
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 297 (342) 40
====== ==== ====
<CAPTION>
2. ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS DURING THE PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 1996 30 APRIL 1995 30 APRIL 1994
[POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C>
Opening balance 665 1,057 1,118
Net cash outflow (261) (392) (61)
---- ----- -----
Closing balance 404 665 1,057
==== ===== =====
<CAPTION>
3. ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS AS SHOWN IN THE
BALANCE SHEET
YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 1996 30 APRIL 1995 30 APRIL 1994
[POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C>
Cash at bank and in hand 404 665 1,057
=== ===== =====
</TABLE>
F-9
<PAGE> 10
PROPHET GROUP LIMITED
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
<TABLE>
4. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
<CAPTION>
FINANCE LEASE
LOANS OBLIGATIONS
[POUND]'000 [POUND]'000
<S> <C> <C>
1 May 1993 - 1
Capital element of hire purchase repayments - (1)
---- --
1 May 1994 and 1 May 1995 - -
Cash inflows from financing 389 -
Capital element of loan repayments (101) -
---- --
30 April 1996 288 -
==== ==
</TABLE>
F-10
<PAGE> 11
PROPHET GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
1. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements are prepared in conformity with
generally accepted accounting principles in the United Kingdom ("UK GAAP"),
which differ in certain material respects from generally accepted
accounting principles in the United States of America ("US GAAP") - see
Note 17.
The accompanying financial statements do not represent the UK statutory
financial statements of the company. The statutory accounts for the year
ended 30 April 1996, on which the auditors' report was unqualified and
which did not contain statements under Sections 237(2) or (3) of the UK
Companies Act, were delivered to the Register of Companies. The statutory
accounts for each of the three years ended 30 April 1996 show dividends
being paid. These dividends have since been repaid in full. Accordingly, in
the accompanying financial statements, these dividends are not shown and
Other debtors (Note 10) have been increased to reflect the amount
repayable.
The preparation of financial statements in conformity with generally
accepted accounting principles 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 those
estimates.
The group's financial statements consolidate the financial statements of
the company and its trading subsidiary, Portable Computers Limited, but
exclude a dormant subsidiary, IT Mandate Limited, the investment in which
was written off in 1995. The trading subsidiary's principal activity is
computer dealership and consultancy.
2. ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable
accounting standards. The particular accounting policies adopted are
described below.
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention.
TANGIBLE FIXED ASSETS
Depreciation is provided on all tangible fixed assets on cost or valuation
in equal annual instalments over the estimated useful lives of the assets.
The rates of depreciation are as follows:
Freehold buildings 2% per annum
Fixtures and fittings, tools and equipment 20% per annum
Motor vehicles 33.33% per annum
STOCKS
Stocks are stated at the lower of cost and net realisable value. Net
realisable value is based on estimated selling price less further costs
expected to be incurred on completion and disposal.
LEASES AND HIRE PURCHASE AGREEMENTS
Assets held under finance leases and hire purchase contracts are
capitalised in the balance sheet and are depreciated over their useful
lives. The interest element of the rental obligations is charged to the
profit and loss account over the period of the contract and represents a
constant proportion of the balance of capital repayments outstanding.
Rentals paid under operating leases are charged to income on a straight
line basis.
F-11
<PAGE> 12
PROPHET GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
2. ACCOUNTING POLICIES (CONTINUED)
PENSION COSTS
The group operates a defined contribution pension scheme and contributions
payable for the year are charged to the profit and loss account as they are
incurred.
DEFERRED TAXATION
Deferred taxation is provided at the anticipated tax rates on timing
differences arising from the inclusion of items of income and expenditure
in taxation computations, in periods different from those in which they are
included in financial statements to the extent that is probable that a
liability or asset will crystallise in the future.
FOREIGN EXCHANGE
Assets and liabilities denominated in foreign currencies are translated at
the rate of exchange ruling at the balance sheet date. Transactions in
foreign currencies are recorded at the rate ruling at the date of the
transaction. All differences on exchange are taken to the profit and loss
account.
3. TURNOVER
Turnover represents amounts derived from the provision of goods and
services in the United Kingdom which fall within the group's principal
activity after deduction of trade discounts and value added tax.
<TABLE>
4. EMPLOYEES
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 1996 30 APRIL 1995 30 APRIL 1994
NO NO NO
<S> <C> <C> <C>
AVERAGE MONTHLY NUMBER OF PERSONS EMPLOYED
Office management 33 24 18
Technical 12 7 7
--- --- ---
45 31 25
=== === ===
<CAPTION>
[POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C>
STAFF COSTS DURING THE PERIOD (INCLUDING DIRECTORS)
Wages and salaries 702 417 336
Social security costs 27 16 14
Pension costs 5 - 5
--- --- ---
734 433 355
=== === ===
</TABLE>
F-12
<PAGE> 13
PROPHET GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
<TABLE>
5. OPERATING PROFIT
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 1996 30 APRIL 1995 30 APRIL 1994
[POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C>
OPERATING PROFIT IS AFTER CHARGING:
Goodwill written off - 25 -
Loss on disposal of fixed assets 6 5 1
Depreciation
Tangible assets 46 48 17
Amortisation of software development - - 13
Rentals under operating leases
Hire of plant and machinery 52 62 84
Other assets - 34 29
Investment in dormant subsidiary
written off - 50 -
Auditors' remuneration
Audit fees 9 8 9
Other services 2 3 4
== == ==
<CAPTION>
6. INTEREST PAYABLE AND SIMILAR CHARGES
YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 1996 30 APRIL 1995 30 APRIL 1994
[POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C>
On bank loans and overdrafts 22 - -
Hire purchase - 1 1
-- -- --
22 1 1
== == ==
</TABLE>
F-13
<PAGE> 14
PROPHET GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
<TABLE>
7. TAX ON PROFIT ON ORDINARY ACTIVITIES
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
30 APRIL 1996 30 APRIL 1995 30 APRIL 1994
[POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C>
United Kingdom corporation tax at 33%
(1995 - 33%) based on the profit for
the year 342 194 122
=== === ===
<CAPTION>
8. TANGIBLE FIXED ASSETS
FREEHOLD FIXTURES,
LAND AND FITTINGS AND MOTOR
BUILDINGS EQUIPMENT VEHICLES TOTAL
[POUND]'000 [POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C> <C>
COST
At 1 May 1995 8 127 - 135
Additions 582 85 13 680
Disposals (8) (12) - (20)
--- --- -- ---
At 30 April 1996 582 200 13 795
--- --- -- ---
ACCUMULATED DEPRECIATION
At 1 May 1995 8 61 - 69
Charge for the period 11 31 4 46
Disposals (8) (4) - (12)
--- --- -- ---
At 30 April 1996 11 88 4 103
--- --- -- ---
NET BOOK VALUE
At 30 April 1996 571 112 9 692
=== === == ===
At 30 April 1995 - 66 - 66
=== === == ===
<CAPTION>
9. STOCKS
1996 1995
[POUND]'000 [POUND]'000
<S> <C> <C>
Goods for resale 1,363 621
===== ===
</TABLE>
F-14
<PAGE> 15
PROPHET GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
<TABLE>
<CAPTION>
10. DEBTORS
1996 1995
[POUND]'000 [POUND]'000
<S> <C> <C>
Trade debtors 3,284 1,717
Other debtors 1,001 698
Prepayments and accrued income 34 73
----- -----
4,319 2,488
===== =====
Included in other debtors is an amount of [pound]79,000 (1995:[pound]86,000) in respect
of ACT recoverable.
<CAPTION>
11. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
1996 1995
[POUND]'000 [POUND]'000
<S> <C> <C>
Bank loans and overdrafts 37 -
Trade creditors 3,964 2,244
Other creditors - 144
Taxation and social security 619 358
Accruals and deferred income 224 80
----- -----
4,844 2,826
===== =====
<CAPTION>
12. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1996 1995
[POUND]'000 [POUND]'000
<S> <C> <C>
Other creditors 260 -
=== =
Other creditors consist of a long term mortgage which is repayable by monthly instalments
of [pound]3,923.
<CAPTION>
1996
[POUND]'000
<S> <C>
Amount repayable within one year 28
Amount repayable between two and five years 114
Amount repayable after five years 146
288
===
The mortgage is secured on the freehold land and buildings and bears interest at a rate
of 3% above Allied Irish Bank's base rate. The minimum rate charged is fixed at 8.75%.
</TABLE>
F-15
<PAGE> 16
PROPHET GROUP LIMITED
<TABLE>
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
<CAPTION>
13. DEFERRED TAXATION
The amounts of the deferred taxation asset provided and unprovided in the accounts are as follows:
PROVIDED UNPROVIDED
1996 1995 1996 1995
[POUND]'000 [POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C> <C>
Capital allowances in excess of depreciation 3 4 - -
Rent provision - (9) - -
Other timing differences (3) 5 - -
-- -- -- --
- - - -
== == == ==
<CAPTION>
14. CALLED UP SHARE CAPITAL
1996 1995
[POUND]'000 [POUND]'000
<S> <C> <C>
Authorised:
500,000 ordinary shares of[pound]1 each 500 500
=== ===
Allotted, called up and fully paid:
100,001 ordinary shares of[pound]1 each 100 100
=== ===
<CAPTION>
15. FINANCIAL COMMITMENTS
OPERATING LEASE COMMITMENTS
OTHER
1996 1995
[POUND]'000 [POUND]'000
<S> <C> <C>
Leases which expire:
Within one year 18 -
Between two to five years 22 35
-- --
40 35
== ==
</TABLE>
16. PENSION SCHEME
The group operates a defined contribution pension scheme. The assets of
the scheme are held separately from those of the group in an
independently administered fund. The pension cost charge represents
contributions payable by the group to the funds and amounted to
[pound]5,500 (1995 - [pound]nil; 1994 - [pound]5,603).
F-16
<PAGE> 17
PROPHET GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
17. SUMMARY OF DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
IN THE UNITED KINGDOM AND THE UNITED STATES
The financial statements are prepared in accordance with generally
accepted accounting principles in the United Kingdom (UK GAAP), which
differ in certain respects from those generally accepted in the United
States (US GAAP).
The differences that are material to the group relate to the issue of
share options to the directors of Portable Computers Limited as described
below. The necessary adjustments are shown in the tables that follow:
COMPENSATION EXPENSE
Under UK GAAP, on the granting of share options, no amounts are normally
attributed to employee remuneration. Under US GAAP, upon granting of
share options to employees, the employer recognises as employee
compensation the difference between the market value of the shares and
the total amount the employees are required to pay.
<TABLE>
The approximate effects of the differences between UK GAAP and US GAAP on net income,
shareholders' equity and total assets are as follows:
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
30 APRIL 30 APRIL 30 APRIL
1994 1995 1996
NET INCOME [POUND]'000 [POUND]'000 [POUND]'000
<S> <C> <C> <C>
Profit on ordinary activities after taxation as
reported in accordance with UK GAAP 280 314 660
Items decreasing net income:
Compensation expense (106) (71) -
---- --- ---
Net income in accordance with US GAAP 174 243 660
==== === ===
<CAPTION>
30 APRIL
1995 1996
SHAREHOLDERS' EQUITY [POUND]'000 [POUND]'000
<S> <C> <C>
Equity shareholders' funds as reported in accordance
with UK GAAP 1,014 1,674
Items decreasing shareholders' equity:
Compensation expense (220) (220)
----- -----
Equity shareholders' funds in accordance with US GAAP 794 1,454
===== =====
</TABLE>
TOTAL ASSETS
There are no material differences between total assets as reported under
UK GAAP and total assets as reported under US GAAP.
F-17
<PAGE> 18
PROPHET GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED 30 APRIL 1996, 1995 AND 1994
18. RELATED PARTY TRANSACTIONS
LOANS TO DIRECTORS
<TABLE>
During the year ended 30 April, T M Roots had a loan account with
Portable Computers Limited as follows:
<CAPTION>
1996 1995
[POUND]'000 [POUND]'000
<S> <C> <C>
Amount outstanding at the end of the
year 910 594
Maximum outstanding during the year 920 594
Amount outstanding at the beginning of
the year 594 247
</TABLE>
DIRECTORS' INTEREST IN CONTRACTS
During the year ended 30 April 1995, T M Roots acquired a motor vehicle
from the group at a market value of [pound]26,500.
E M Freer holds options to purchase 1,250 ordinary shares in Portable
Computers Limited, at a price of [pound]1 and which had a market value of
[pound]175 at 30 April 1996 (1995-[pound]96), exercisable within seven
years.
19. POST BALANCE SHEET EVENT
On 22 November 1996 Prophet Group Limited, formerly registered as a
public company, was re-registered under the Companies Act 1985 as a
private limited company.
F-18
<PAGE> 19
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
ELCOM INTERNATIONAL, INC. AND SUBSIDIARIES
AND
PROPHET GROUP LIMITED AND SUBSIDIARY
(UNAUDITED)
OVERVIEW
On December 6, 1996 Elcom International, Inc. (the "Company") acquired Prophet
Group Limited ("Prophet Group") a corporation organized under the laws of the
United Kingdom. As consideration for the acquisition of the entire share capital
of Prophet Group, the Company paid (pound)5,000,000 (British pounds) to the
Prophet Group Shareholders. The Company also has agreed to make an additional
purchase price payment of up to (pound)3,000,000 (British pounds), depending on
the extent to which Prophet Group's pre-tax profits (as defined) for the fiscal
year ending April 30, 1997 exceed (pound)1,000,000 (British pounds). The first
(pound)2,000,000 (British pounds) of any such payment shall bear interest at the
base rate of National Westminster Bank PLC (6% as of December 6, 1996) from the
closing date until payment. For purposes of the pro forma condensed combined
financial statements management has used an aggregate estimated purchase price
of (pound)7,000,000 (British pounds). The transaction will be accounted for
under the purchase method of accounting.
The pro forma condensed combined financial statements have been prepared by the
Company's management based upon the financial statements of Prophet Group,
certain of which are included elsewhere herein, and the Company's financial
statements. The unaudited pro forma condensed combined financial statements
presented herein are shown for illustrative purposes only and are not
necessarily indicative of the future financial position or results of operations
of the Company, or of the financial position or results of operations of the
Company that would have actually occurred had the transaction been in effect as
of the date or for the periods presented. The Company's results included in the
pro forma condensed combined statement of operations for the year ended December
31, 1995 have been retroactively restated to reflect the February 29, 1996
acquisition of AMA (UK) Limited, which transaction has been accounted for under
the pooling of interests method of accounting. The pro forma condensed combined
financial statements should be read in conjunction with the Company's audited
financial statements as filed with the Securities and Exchange Commission in its
Annual Report on Form 10-K for the year ended December 31, 1995, the Company's
reports on Form 8-K dated February 29, 1996 concerning the acquisition of AMA
(UK) Limited (including the audited financial statements of AMA (UK) Limited
filed therein), and the audited financial statements of Prophet Group contained
elsewhere herein.
The pro forma condensed combined balance sheet as of September 30, 1996 gives
effect to the transaction as though it had been consummated on that date. The
pro forma condensed combined statements of operations for the year ended
December 31, 1995, and the nine-month interim period ended September 30, 1996
give effect to the transaction as though it had occurred at the beginning of the
earliest period presented. Prophet Group has historically presented its
financial results based on an April 30 fiscal year end. Accordingly, the pro
forma condensed combined balance sheet as of September 30, 1996 is based on the
Company's September 30, 1996 balance sheet and the October 31, 1996 (end of
fiscal second quarter) balance sheet of Prophet Group. In addition, the pro
forma condensed combined statement of operations for 1995 includes the Company's
calendar year results and the results of Prophet Group for the twelve month
period ended January 31, 1996, and the nine month interim pro forma condensed
combined statement of operations includes the Company's results for the nine
months ended September 30, 1996 and Prophet Group's results for the nine month
period ended October 31, 1996. Pro forma adjustments reflected in the pro forma
condensed combined balance sheet generally account for the expenditure of cash
and purchase note payable incurred in connection with the acquisition, as well
as estimated goodwill and acquisition costs. Pro forma adjustments reflected in
the pro forma condensed combined statements of operations generally reflect the
amortization of estimated goodwill, interest expense relative to the purchase
note payable, and the tax benefit related to such interest expense. Certain pro
forma adjustments relative to U.K./U.S. GAAP differences and classifications
(balance sheet and statement of operations) were deemed to be immaterial and are
not reflected in the pro forma condensed combined financial statements.
F-19
<PAGE> 20
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ELCOM PROPHET PRO FORMA
INTERNATIONAL GROUP ADJUSTMENTS
INC. LIMITED (A) (B) COMBINED
------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 20,106 $ 379 $ (8,136) $ 12,349
Accounts receivable 127,637 6,867 134,504
Inventory 24,469 2,293 26,762
Prepaids and other current assets 1,186 1,186
--------- --------- --------- ---------
Total current assets 173,398 9,539 (8,137) 174,801
--------- --------- --------- ---------
Property, equipment and software, net 11,023 1,520 12,543
Goodwill 26,756 8,511 35,267
Other assets and deferred costs 809 809
--------- --------- --------- ---------
$ 211,986 $ 11,059 $ 375 $ 223,420
========= ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Lines of credit $ 63,999 $ $ $ 63,999
Accounts payable 41,932 7,300 49,232
Accrued expenses and
other current liabilities 10,349 3,734 14,083
Current portion of capital
lease obligations 102 102
--------- --------- --------- ---------
Total current liabilities 116,382 7,300 3,734 127,416
--------- --------- --------- ---------
Other deferred liabilities and
non-current capital lease obligations 182 400 582
--------- --------- --------- ---------
Total Stockholders' Equity 95,422 3,359 (3,359) 95,422
--------- --------- --------- ---------
$ 211,986 $ 11,059 $ 375 $ 223,420
========= ========= ========= =========
</TABLE>
(A) Represents the balance sheet of Prophet Group Limited as of October 31,
1996, translated at the exchange rate of approximately 1.63 U.S. dollars
per British pound.
(B) The Pro Forma adjustments consist of:
(a) Reduction of cash relative to the cash portion of the purchase
price;
(b) Recognition of acquired intangible assets, consisting primarily of
goodwill;
(c) Recognition of estimated acquisition costs and estimated additional
purchase price due; and
(d) Elimination of Prophet Group Limited Stockholders' Equity.
The pro forma adjustments are translated at a rate of approximately 1.63
U.S. dollars per British pound. The amount of intangible and other
assets acquired is subject to revision upon completion of the Company's
detailed analysis of the fair value of assets acquired and liabilities
assumed in connection with the acquisition of Prophet Group. Management
does not believe the impact of such potential revisions would be material
to the balance sheet or statements of operations presented herein.
F-20
<PAGE> 21
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ELCOM PROPHET PRO FORMA
INTERNATIONAL, GROUP ADJUSTMENTS
INC. LIMITED (A) (B) COMBINED
-------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales $ 311,423 $ 33,170 $ $ 344,593
Cost of sales 272,041 29,758 301,799
--------- --------- --------- ---------
Gross profit 39,382 3,412 42,794
Selling, general and administrative 36,016 2,116 613 38,745
Research and development 1,122 1,122
--------- --------- --------- ---------
Operating profit 2,244 1,296 (613) 2,927
Interest expense (2,164) (2) (189) (2,355)
Interest income and other, net 255 74 329
--------- --------- --------- ---------
Income before income taxes 335 1,368 (802) 901
Tax provision 1,239 474 (62) 1,651
--------- --------- --------- ---------
Net income (loss) $ (904) $ 894 $ (740) $ (750)
========= ========= ========= =========
Pro forma net income
per share $ (0.05) $ (C) $ (C) $ (0.04)
========= ========= ========= =========
Pro forma weighted average
shares outstanding 20,001 (C) (C) 20,001
========= ========= ========= =========
</TABLE>
(A) Represents the results of Prophet Group Limited for the twelve months
ended January 31, 1996, translated at an average exchange rate of
approximately 1.57 U.S. dollars per British pound.
(B) The pro forma adjustments consist of:
(a) Amortization of intangible assets acquired over estimated lives of
fifteen or five years;
(b) Recognition of interest expense relative to the Company's note
payable incurred in connection with the acquisition (annual rate of
6%); and
(c) Recognition of a reduction in the tax provision relative to pro
forma interest expense recognized.
These pro forma adjustments assume the acquisition was effected at the
beginning of the period presented, and are translated at an average rate
of approximately 1.57 U.S. dollars per British pound.
(C) Not presented as the data is not meaningful.
F-21
<PAGE> 22
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ELCOM PROPHET PRO FORMA
INTERNATIONAL, GROUP ADJUSTMENTS
INC. LIMITED (A) (B) COMBINED
-------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Sales $ 444,572 $ 30,613 $ $ 475,185
Cost of sales 393,855 27,112 420,967
--------- --------- --------- ---------
Gross profit 50,717 3,501 54,218
Selling, general and administrative 42,392 1,811 451 44,654
Research and development 835 835
--------- --------- --------- ---------
Operating profit 7,490 1,690 (451) 8,729
Interest expense (2,705) (54) (139) (2,898)
Interest income and other, net 1,265 66 1,331
--------- --------- --------- ---------
Income before income taxes 6,050 1,702 (590) 7,162
Tax provision 2,464 534 (46) 2,952
--------- --------- --------- ---------
Net income $ 3,586 $ 1,168 $ (544) $ 4,210
========= ========= ========= =========
Pro forma net income per share $ 0.12 $ (C) $ (C) $ 0.14
========= ========= ========= =========
Pro forma weighted average
shares outstanding 29,604 (C) (C) 29,604
========= ========= ========= =========
</TABLE>
(A) Represents the results of Prophet Group Limited for the nine months ended
October 31, 1996, translated at an average exchange rate of approximately
1.54 U.S. dollars per British pound.
(B) The pro forma adjustments consist of:
(a) Amortization of intangible assets acquired over estimated lives of
fifteen or five years;
(b) Recognition of interest expense relative to the Company's note
payable incurred in connection with the acquisition (annual rate of
6%); and
(c) Recognition of a reduction in the tax provision relative to pro
forma interest expense recognized.
These pro forma adjustments assume the acquisition was in effect for the
entire period presented, and are translated at an average rate of
approximately 1.54 U.S. dollars per British pound.
(C) Not presented as the data is not meaningful.
F-22
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-00362 of Elcom International, Inc. on Form S-8 of our report dated January
28, 1997 (relating to the financial statements of Prophet Group Limited),
appearing in the Current Report on Form 8-K, as amended, of Elcom International,
Inc., dated December 6, 1996.
Deloitte & Touche
Chartered Accountants
London, England
February 12, 1997
