<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Natural MicroSystems Corporation
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State of Incorporation or Organization)
0-23282 04-2814586
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(Commission File Number) (I.R.S. Employer Identification No.)
8 Erie Rd., Natick, Massachusetts 01760
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508)650-1300
-------------
<PAGE>
This Form 8-K/A is being filed by the Registrant to amend and restate the
Registrant's current report on Form 8-K filed on June 28, 1996 by amending and
restating Item 7 to include the required historical and pro forma financial
statements omitted therefrom as permitted by the provisions thereof.
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
On June 14, 1996, the Registrant acquired two Illinois corporations, Tek-
Nique, Inc. ("Tek") and PSR Systems, Inc. ("PSR"). Tek was acquired by
merger for $3.55 million in cash plus up to an additional $2.5 million in
cash to be paid at later dates subject to certain performance conditions.
PSR was acquired for 41,479 shares of the Registrant's common stock plus up
to an additional $500,000 in value of such stock at a later date subject to
certain performance conditions. Tek and PSR were under common ownership,
consisting principally of Herbert L. Pavey and Julius Rothschild, the
founders, and also including certain other employees. Tek and PSR have
operated a single business ("TEKnique") of designing, marketing and
maintaining certain networking software programs, which business the
Registrant intends to continue.
Item 7. Financial Statements and Exhibits.
----------------------------------
(A) Historical Combined Financial Statements of PSR Systems, Inc. and Tek-
Nique, Inc. (TEKnique)
(1) Audited Combined Financial Statements of TEKnique:
Report of KPMG Peat Marwick LLP, Independent Auditors
Combined Balance Sheets as of January 31, 1995 and 1996
Combined Statements of Operations for the years ended
January 31, 1995 and 1996
Combined Statements of Stockholders' Equity for the years
ended January 31, 1995 and 1996
Combined Statements of Cash Flows for the years ended
January 31, 1995 and 1996
Notes to Combined Financial Statements
(2) Unaudited Combined Financial Statements of TEKnique:
Combined Balance Sheet as of April 30, 1996
Combined Statements of Operations for the three months ended
April 30, 1995 and 1996
Combined Statements of Stockholders' Equity for the three months
ended April 30, 1995 and 1996
Combined Statements of Cash Flows for the three months ended
April 30, 1995 and 1996
Notes to Combined Financial Statements
2
<PAGE>
(B) Pro Forma Financial Information (Unaudited)
Pro Forma Condensed Consolidated Balance Sheet as of March 31,
1996
Pro Forma Condensed Consolidated Statement of Operations for
the three months ended March 31, 1996
Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1995
Notes to Pro Forma Combined Financial Statements
(C) Exhibits
Exhibit No. Title
----------- -----
2.1* Merger Agreement and Plan of Reorganization dated as of June
14, 1996 among Natural MicroSystems Corporation, NMS
Acquisition Corp., Tek-Nique, Inc. and certain of the
stockholders of Tek-Nique, Inc. dated as of June 14, 1996.
2.2* Stock Purchase Agreement among Natural MicroSystems
Corporation and the stockholders of PSR Systems, Inc. dated as
of June 14, 1996.
23.1 Consent of KPMG Peat Marwick LLP
* Filed with Form 8-K filed on June 28, 1996.
3
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
PSR Systems, Inc. and TEKnique, Inc.:
We have audited the accompanying combined balance sheets of PSR Systems, Inc.
and TEKnique, Inc. (together "PSR/TEKnique") as of January 31, 1995 and 1996,
and the related combined statements of operations, stockholders' equity and cash
flows for the years then ended. These combined financial statements are the
responsibility of the Company's management. 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 combined 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 combined financial position of
PSR/TEKnique at January 31, 1995 and 1996, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
June 14, 1996
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Combined Balance Sheets
January 31, 1995 and 1996
<TABLE>
<CAPTION>
January 31, January 31,
Assets 1995 1996
------ ---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 243,686 203,376
Accounts receivable 188,847 287,896
Prepaid expenses 3,862 12,348
Inventory - 175,210
------- ---------
Total current assets 436,395 678,830
------- ---------
Property and equipment, net of
accumulated depreciation
and amortization 291,620 222,770
Cash value of officers' life insurance 160,961 231,819
------- ---------
Total assets $ 888,976 1,133,419
======= =========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Accounts payable $ 176,938 180,706
Accrued compensation 100,762 105,992
Deferred revenues 167,529 233,072
Current portion of long-term debt 68,232 122,119
--------- ---------
Total current liabilities 513,461 641,889
------- ---------
Long-term debt, less current portion 8,628 -
Commitments and contingencies
Stockholders' equity:
Common stock, at stated value 13,000 13,000
Retained earnings 509,087 633,730
Notes receivable - officers (70,000) (70,000)
Treasury stock (85,200) (85,200)
-------- ---------
Total stockholders' equity 366,887 491,530
------- ---------
Total liabilities and
stockholders' equity $ 888,976 1,133,419
======= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Combined Statements of Operations
Years ended January 31, 1995 and 1996
<TABLE>
<CAPTION>
January 31, January 31,
1995 1996
---- ----
<S> <C> <C>
Revenues $ 2,853,544 2,790,549
Cost of revenues 1,131,279 1,167,540
--------- ---------
Gross profit 1,722,265 1,623,009
--------- ---------
Operating expenses:
Research and development 495,706 416,585
Sales and marketing 105,458 108,231
General and administrative 956,807 897,681
--------- ---------
Total operating expenses 1,557,971 1,422,497
Operating income 164,294 200,512
Interest expense 6,974 21,768
--------- ---------
Income before income taxes 157,320 178,744
--------- ---------
Income taxes 39,739 54,101
--------- ---------
Net income $ 117,581 124,643
========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Combined Statements of Stockholders' Equity
Years ended January 31, 1995 and 1996
<TABLE>
<CAPTION>
Common Stock Notes Total
---------------- Treasury Retained receivable- stockholders'
Shares Amount stock earnings officers equity
------ ------ ----- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 31, 1994 305,000 $ 13,000 (85,200) 391,506 (70,000) 249,306
Net income - - - 117,581 - 117,581
------- ------- -------- ------- -------- -------
Balances at January 31, 1995 305,000 13,000 (85,200) 509,087 (70,000) 366,887
Net income - - - 124,643 - 124,643
------- ------- -------- ------- -------- -------
Balances at January 31, 1996 305,000 $ 13,000 (85,200) 633,730 (70,000) 491,530
======= ======= ======== ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Combined Statements of Cash Flows
Years ended January 31, 1995 and 1996
<TABLE>
<CAPTION>
January 31, January 31,
1995 1996
---- ----
<S> <C> <C>
Cash flows from operations:
Net income $ 117,581 124,643
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 197,124 156,346
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 13,947 (99,049)
Increase in prepaid expenses (1,612) (8,486)
Increase in inventory - (175,210)
(Decrease) increase in accounts payable (82,659) 3,768
(Decrease) increase in accrued expenses (67,529) 5,230
(Decrease) increase in deferred revenue (83,179) 65,543
-------- --------
Cash provided by operating activities 93,673 72,785
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (119,596) (87,496)
Increase in cash value of officers' life insurance (24,478) (70,858)
-------- --------
Cash used in investing activities (144,074) (158,354)
-------- --------
Cash flows from financing activities:
Proceeds from indebtedness 524,000 858,755
Payments on indebtedness (516,805) (813,496)
-------- --------
Cash provided by financing activities 7,195 45,259
-------- --------
Net decrease in cash and cash equivalents (43,206) (40,310)
Cash and cash equivalents at beginning of period 286,892 243,686
-------- --------
Cash and cash equivalents at end of period $ 243,686 203,376
======== ========
Supplemental disclosures:
Cash paid for interest $ 2,322 7,706
======== ========
Cash paid for income taxes $ 16,000 14,020
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Notes to Combined Financial Statements
January 31, 1995 and 1996
(1) Summary of Significant Accounting Policies
The Company
PSR Systems, Inc. ("PSR") and TEKnique, Inc. ("TEKnique") (together the
"Company") designs, manufactures and markets high-value data
communications hardware and software.
These combined financial statements include the accounts of both PSR and
TEKnique. Both companies are under common ownership and management. All
intercompany transactions and balances have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost, net of accumulated amortization
and depreciation. Property and equipment are depreciated using
accelerated methods over the estimated useful lives of the assets (three
to five years). Leasehold improvements are amortized using accelerated
methods over the lesser of the estimated useful life of the asset (10
years) or the lease term. Management reviews the recoverability of
property and equipment periodically, and adjusts the carrying value when
impairment, if any, is identified.
Financial Instruments
The recorded cost of financial instruments approximate their fair market
values.
Revenue Recognition
Revenue from the sale of hardware and software is recognized when the
products are shipped to customers. Revenue derived from engineering and
software development services is recognized as the services are
performed. Maintenance contract revenue is recognized ratably over the
life of the contracts, usually 12 months.
Inventory
Inventories, substantially all finished goods, are stated at the lower of
cost or market. Cost is determined on a first-in, first-out basis.
Research and Development
Research and development expenditures are charged to operations as
incurred. Software development costs are required to be capitalized when
a product's technological feasibility has been established by completion
of a working model of the product and ending when a product is available
for general release to customers. To date, completion of a working model
of the Company's products and general release have substantially
coincided. As a result, the Company has not capitalized any software
development costs since such costs have not been significant.
(Continued)
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Notes to Combined Financial Statements
Income Taxes
The Company records income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Use of Estimates
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.
Deferred Revenue
Deferred revenue is comprised of billings in excess of earnings on
maintenance contracts.
(2) Property and Equipment
Property and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
January 31, January 31,
1995 1996
<S> <C> <C>
Computers and equipment $ 1,183,768 1,263,857
Furniture and fixtures 211,292 211,292
Leasehold improvements 84,251 91,658
--------- ---------
1,479,311 1,566,807
Less accumulated depreciation
and amortization 1,187,691 1,344,037
--------- ---------
$ 291,620 222,770
========= =========
</TABLE>
(3) Business and Credit Concentration
Two customers accounted for 35% and 50% of the Company's revenues and 27%
and 56% of accounts receivable for and as of the years ended January 31,
1995 and 1996, respectively. As is customary in its industry, the Company
does not require collateral on accounts receivable. The Company's credit
losses have not been material for any periods presented.
(4) Indebtedness
The Company has an available bank line of credit of $300,000. Borrowings
are secured by all of the Company's assets, and bear interest at the
bank's prime rate (8.5% at January 31, 1996). The line matures on July 1,
1996. As of January 31, 1996, availability under the credit facility was
$190,000. The Company also has an equipment loan in the original amount
of $50,000. The loan bears interest at the bank's prime rate (8.5% at
January 31, 1996). The outstanding balance on the equipment loan at
January 31, 1996 was approximately $9,000. The loan matures on June 1,
1996 and is secured by substantially all of the Company's assets.
(Continued)
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Notes to Combined Financial Statements
The line of credit has debt covenants requiring that the Company maintain
certain financial ratios. The Company was not in compliance with the
financial ratios at January 31, 1996 and, as a result, all of the
Company's debt is due on demand. In June 1996, the Company paid down the
then outstanding balance on both the bank line of credit and the
equipment loan.
(5) Commitments and Contingencies
Leases
The Company leases its facilities from a related party (note 9) under an
operating lease which expires in September 2000. Future minimum lease
payments as of January 31, 1996 under these leases for each fiscal year
end are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 132,458
1998 132,458
1999 132,458
2000 99,343
-------
$ 496,717
=======
</TABLE>
The Company has the option of terminating the lease in 1996 for a payment
of $10,000. Rent expense for each of the years ended January 31, 1995 and
1996 was $132,000.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
effect the financial position or operating results of the Company.
(6) Stockholders' Equity
Stock Options
PSR adopted the PSR Systems, Inc. Incentive Option Plan in February 1985 to
grant options to certain key employees. PSR has issued stock options to
two key employees who may purchase a total of 6,000 shares of PSR stock
at an exercise price of $5.00 per share, the deemed fair market value of
the stock at the dates of grant. Twenty-five percent of the options
become exercisable in each of April and May of 1996, and April and May of
1997. The options expire in May 1998.
Common Stock
Common stock accounts for each of the combining companies is as follows at
January 31, 1995 and 1996:
<TABLE>
<CAPTION>
PSR TEKnique
<S> <C> <C>
Common stock, without par value, 1,000,000 shares
authorized, 302,000 shares issued and
outstanding, includes shares in treasury $ 12,000
Common stock, without par value, 1,000,000 shares
authorized, 3,000 shares issued and outstanding 1,000
Less PSR common stock in treasury, at cost,
133,333 shares (85,200) -
-------- -------
Total $ (73,200) 1,000
======== =======
</TABLE>
Prior to fiscal year 1995, PSR Systems, Inc. had purchased an aggregate of
133,333 shares of common stock from former shareholders for an aggregate
price of $85,200.
(Continued)
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Notes to Combined Financial Statements
(7) Income Taxes
The components of income tax expense consist of the following:
<TABLE>
<CAPTION>
Year ended
January 31,
-------------------
1995 1996
---- ----
<S> <C> <C>
Current income tax expense:
Federal $ 32,143 45,523
State 7,596 8,578
------ ------
Total current income tax expense 39,739 54,101
Deferred income tax expense - -
------ ------
Total income tax expense $ 39,739 54,101
====== ======
</TABLE>
The difference between total expected income tax expense from operations
computed by applying the U.S. Federal statutory income tax rate of 34% to
income before taxes and the reported income tax expense is as follows:
<TABLE>
<CAPTION>
Year ended
January 31,
-------------------
1995 1996
---- ----
<S> <C> <C>
Computed expected tax expense $ 53,488 60,773
State income taxes (net of U.S. Federal tax benefit) 5,012 5,684
Benefit of graduated tax rate (8,884) (7,813)
Other (9,877) (4,543)
------ ------
$ 39,739 54,101
====== ======
</TABLE>
(8) Segment Information
The Company conducts its business within one industry segment, primarily in
North America.
(Continued)
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Notes to Combined Financial Statements
(9) Related Party Transactions
As of January 31, 1996, the Companies had notes receivable which totaled
$70,000 from their two stockholders. The loans are interest free and are
payable on demand (see note 11).
The Company leases their only facility from a corporation which is 50%
owned by the Company's two stockholders. Total rent payments to the
corporation amounted to $131,539 and $132,458 for the years ended January
31, 1995 and 1996, respectively. Management believes that the lease
rental rate was at fair market value on the date of execution.
(10) Dependence on Contract Assembly Manufacturer
The Company relies on a single source for its contract manufacturing.
Although a number of such contract manufacturers exist, the interruption
or termination of the Company's current manufacturing relationship could
have a short-term adverse effect on the Company's business.
(11) Subsequent Events (Unaudited)
In June 1996, TEKnique entered into a Merger Agreement and Plan of
Reorganization among National MicroSystems Corporation, NMS Acquisition
Corporation, TEKnique, Inc. and certain of the stockholders of TEKnique,
Inc. (the "Agreement") pursuant to which all of the outstanding shares of
common stock of TEKnique will be converted into and exchanged for shares
of Natural MicroSystems Corporation upon consummation of the Agreement.
Concurrently, PSR entered into a Stock Purchase Agreement among Natural
MicroSystems Corporation and the stockholders of PSR Systems, Inc. (the
"Stock Purchase Agreement") pursuant to which all of the outstanding
capital stock of PSR will be sold to Natural MicroSystems Corporation in
return for cash.
Pursuant to both the Agreement and the Stock Purchase Agreement (together
the "Agreements"), immediately prior to the closing of the Agreements
certain employees were granted shares in the Companies in return for a
relinquishment of any equity claim that may have existed at that time,
including pursuant to stock options described in note 6. Such granting of
shares resulted in a charge to earnings and a contribution of capital of
approximately $500,000.
In addition, the Agreement and Stock Purchase Agreement provided for the
distribution of the cash value of officers' life insurance and
cancellation of notes receivable from officers as additional compensation
to the officers.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Combined Balance Sheet
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Current assets:
Cash and cash equivalents $ 219,413
Accounts receivable 384,103
Prepaid expenses 12,348
Inventory 196,341
---------
Total current assets 812,205
Property and equipment, net of accumulated depreciation
and amortization 229,274
Cash value of officers' life insurance 248,016
---------
$ 1,289,495
=========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 160,929
Accrued compensation 107,083
Accrued income taxes 97,646
Deferred revenues 151,445
Current portion of long-term debt 4,119
---------
Total current liabilities 521,222
---------
Commitments and contingencies
Stockholders' equity:
Common stock, at stated value 13,000
Retained earnings 910,473
Notes receivable - officers (70,000)
Treasury stock (85,200)
---------
Total stockholders' equity 768,273
---------
Total liabilities and stockholders' equity $ 1,289,495
=========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Combined Statements of Operations
Three months ended April 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
April 30, April 30,
1995 1996
---- ----
<S> <C> <C>
Revenues $ 733,643 1,067,623
Cost of revenues 268,781 361,111
------- ----------
Gross profit 464,862 706,512
------- ----------
Operating expenses:
Research and development 104,756 117,055
Sales and marketing 25,287 20,931
General and administrative 236,631 203,158
------- ----------
Total operating expenses 366,674 341,144
Operating income 98,188 365,368
Interest expense 5,488 2,426
------- ----------
Income before income taxes 92,700 362,942
Income taxes 24,114 86,199
------- ----------
Net income $ 68,586 276,743
======= ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Combined Statements of Stockholders' Equity
Three months ended April 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Notes Total
--------------------- Treasury Retained receivable- stockholders'
Shares Amount stock earnings officers equity
------ ------ ----- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 31, 1995 305,000 $ 13,000 (85,200) 509,087 (70,000) 366,887
Net income - - - 68,586 - 68,586
------- ------- ------- ------- -------- -------
Balances at April 30, 1995 305,000 13,000 (85,200) 577,673 (70,000) 435,473
======= ======= ======= ======= ======== =======
Balances at January 31, 1996 305,000 13,000 (85,200) 633,730 (70,000) 491,530
Net income - - - 276,743 - 276,743
------- ------- ------- ------- -------- -------
Balances at April 30, 1996 305,000 $ 13,000 (85,200) 910,473 (70,000) 768,273
======= ======= ======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Combined Statements of Cash Flows
Three months ended April 30, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
April 30, April 30,
1995 1996
---- ----
<S> <C> <C>
Cash flows from operations:
Net income $ 68,586 276,743
Adjustments to reconcile net income to cash (used in)
provided by operating activities:
Depreciation and amortization 31,175 22,678
Changes in assets and liabilities:
Increase in accounts receivable (154,902) (96,207)
Decrease in prepaid expenses 1,612 -
Increase in inventory (142,749) (21,131)
(Decrease) increase in accounts payable (43,895) 1,471
Increase in accrued compensation 6,650 1,091
Increase in accrued income taxes 30,723 76,398
Decrease in deferred revenue - (81,627)
-------- --------
Cash (used in) provided by operating activities (202,800) 179,416
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (9,852) (29,182)
Increase in cash value of officers' life insurance (13,663) (16,197)
-------- --------
Cash used in investing activities (23,515) (45,379)
-------- --------
Cash flows from financing activities:
Proceeds from indebtedness 173,755 -
Payments on indebtedness (19,184) (118,000)
-------- --------
Cash provided by (used in) financing activities 154,571 (118,000)
-------- --------
Net (decrease) increase in cash and cash equivalents (71,744) 16,037
Cash and cash equivalents at beginning of period 243,686 203,376
-------- --------
Cash and cash equivalents at end of period $ 171,942 219,413
======== ========
Supplemental disclosures:
Cash paid for interest $ 5,534 2,486
======== ========
Cash paid for income taxes $ 10,675 9,802
======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
<PAGE>
PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Notes to Combined Financial Statements
April 30, 1996
(In thousands except per share data)
1) Basis of Presentation
The unaudited financial statements as of April 30, 1996 and for the three month
periods ended April 30, 1995 and 1996 have been prepared in accordance with
generally accepted accounting principles and include all adjustments, which in
the opinion of management, are necessary to present fairly the results of
operations for the period then ended.
2) Acquisition
In June 1996, Teknique and PSR (together "Tekniqus") entered into agreements
with Natural MicroSystems Corporation ("NMS") whereby NMS acquired all the
Common Stock of Teknique for a purchase price of $5,389. The effective date of
the sale of stock was June 14, 1996.
<PAGE>
PROFORMA FINANCIAL STATEMENTS OF
NATURAL MICROSYSTEMS CORPORATION
The following unaudited Pro Forma Condensed Consolidated Financial Statements
set forth the combined results of operations of Natural MicroSystems Corporation
("NMS") and PSR Systems, Inc. and Teknique, Inc. (together "Teknique") based
upon accounting for the acquisition as a purchase and assuming as if the
acquisition was consummated as of the beginning of the year ended December 31,
1995.
The unaudited pro forma consolidated financial information combines the
historical statements of operations of NMS and Teknique for the year ended
December 31, 1995 and the three months ended March 31, 1996. The unaudited pro
forma consolidated balance sheet combined the historical balance sheets of NMS
and Teknique as of March 31, 1996.
The Pro Forma Consolidated Financial Statements which follow should be read in
conjunction with the historical Financial Statements of NMS and Teknique.
<PAGE>
NATURAL MICROSYSTEMS CORPORATION AND
COMBINED PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Proforma Condensed Consolidated Balance Sheet
March 31, 1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Pro forma
Natural PSR Systems, Inc. Adjustments
Microsystems & TEKnique, Inc. Increase Pro forma
Assets Corporation Combined (Decrease) Combined
------ ----------- -------- ---------- --------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 10,719 219 (3,550) (a) 7,388
Marketable securities 26,852 - - 26,852
Accounts receivable, net of allowance for
uncollectible accounts 10,598 384 - 10,982
Inventories 4,538 196 - 4,734
Prepaid expenses and other assets 1,270 13 - 1,283
Deferred tax assets, net of valuation allowance 534 - - 534
------- ------ ------ -------
Total current assets 54,511 812 (3,550) 51,773
------- ------ ------ -------
Property and equipment, net of accumulated depreciation 2,542 229 186 (b) 2,957
License agreements, net of accumulated amortization 1,329 - - 1,329
Goodwill - - 293 (b) 293
Other assets 199 248 (248) (b) 199
Deferred tax asset, net of valuation allowance 328 - - 328
------- ------ ------ -------
$ 58,909 1,289 (3,319) 56,879
======= ====== ====== =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Bank line of credit $ 221 4 - 225
Accounts payable 5,506 161 - 5,667
Accrued expenses and other liabilities 2,976 356 500 (a)
284 (a) 4,116
------- ------ ------ -------
Total current liabilities 8,703 521 784 10,008
------- ------ ------ -------
Deferred tax liability - - - -
Capital lease obligations, less current portion 1 - - 1
Long-term debt, less current portion 9 - - 9
Refundable advance 338 - - 338
Stockholders' equity:
Common stock 49 13 (13) (b) 49
Additional paid-in capital 51,384 - 1,339 (a) 52,723
Retained earnings (deficit) (1,703) 910 (910) (b)
(4,426) (b)
(248) (b) (6,377)
Other equity 19 (155) 155 (b) 19
Foreign currency translation adjustment 109 - - 109
------- ------ ------ -------
Total stockholders' equity 49,858 768 (4,103) 46,523
------- ------ ------ -------
Total liabilities and stockholders' equity $ 58,909 1,289 (3,319) 56,879
======= ====== ====== =======
</TABLE>
<PAGE>
NATURAL MICROSYSTEMS CORPORATION AND
COMBINED PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Proforma Condensed Consolidated Statement of Operations
Three months ended March 31, 1996
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Natural PSR Systems, Inc.
Microsystems & TEKnique, Inc. Pro forma Pro forma
Corporation Combined Adjustments Combined
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 10,350 1,068 - 11,418
Cost of revenues 3,992 361 - 4,353
------- ------ ----- -------
Gross profit 6,358 707 - 7,065
Operating expenses:
Selling, general and administrative 3,064 117 27 (d.2)
9 (d.3) 3,217
Research and development 2,089 224 - 2,313
------- ------ ----- -------
Total operating expenses 5,153 341 36 5,530
------- ------ ----- -------
Operating income (loss) 1,205 366 (36) 1,535
Interest income 84 - (44) (d.1) 40
Interest expense (8) (3) - (11)
Other 2 - - 2
------- ------ ----- -------
Other income (expense), net 78 (3) (44) 31
Income (loss) before income taxes 1,283 363 (80) 1,566
Income tax expense (benefit) 430 86 (28) (d.7) 488
------- ------ ----- -------
Net income $ 853 277 (52) 1,078
======= ====== ===== =======
Primary net income per common share $ .20 .25
======= =======
Primary weighted average shares outstanding 4,320 4,361
======= =======
Fully diluted net income per common share $ .20 .24
======= =======
Fully diluted weighted average shares outstanding 4,360 4,402
======= =======
</TABLE>
<PAGE>
NATURAL MICROSYSTEMS CORPORATION AND
COMBINED PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Proforma Condensed Consolidated Statement of Operations
Year ended December 31, 1995
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Natural PSR Systems, Inc.
Microsystems & TEKnique, Inc. Pro forma Pro forma
Corporation Combined Adjustments Combined
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 32,835 2,791 - 35,626
Cost of revenues 11,485 1,168 - 12,653
------- ------ ------ -------
Gross profit 21,350 1,623 - 22,973
Operating expenses:
Selling, general and administrative 10,294 1,006 35 (d.5)
41 (d.4)
124 (d.6)
108 (d.2)
37 (d.3) 11,645
Research and development 6,856 416 35 (d.5)
551 (d.4)
124 (d.6) 7,982
------- ------ ------ -------
Total operating expenses 17,150 1,422 1,055 19,627
------- ------ ------ -------
Operating income (loss) 4,200 201 (1,055) 3,346
Merger costs (1,911) - (1,911)
Interest income 363 - (178) (d.1) 185
Interest expense (31) (22) (53)
Other 4 - 4
------- ------ ------ -------
Other income (expense), net (1,575) (22) (178) (1,775)
Income (loss) before income taxes 2,625 179 (1,233) 1,571
Income tax expense (benefit) 1,350 54 (414) (d.7) 990
------- ------ ------ -------
Net income $ 1,275 125 (819) 581
======= ====== ====== =======
Primary net income per common share $ .34 .15
======= =======
Primary weighted average shares outstanding 3,772 3,813
======= =======
Fully diluted net income per common share $ .33 .15
======= =======
Fully diluted weighted average shares outstanding 3,848 3,890
======= =======
</TABLE>
<PAGE>
NATURAL MICROSYSTEMS CORPORATION AND
COMBINED PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Notes to Pro Forma Condensed
Consolidated Financial Statements
March 31, 1996
(Unaudited)
(In thousands except per share data)
(a) The following pro forma adjustments reflect Natural MicroSystems
Corporation's ("NMS") purchase of 100% of the outstanding common stock of
PSR Systems, Inc. and TEKnique, Inc. (together "TEKnique") and the
consolidation by NMS of this acquisition.
<TABLE>
<CAPTION>
<S> <C>
Cash paid by NMS $ 3,550
Restricted common stock issued by NMS 1,339
Contingent purchase liability 500
Transaction expenses 284
------
Investment in TEKnique $ 5,673
======
</TABLE>
(b) The following pro forma adjustments are made to reflect estimated fair value
adjustments at March 31, 1996 to eliminate NMS' investment in TEKnique:
<TABLE>
<CAPTION>
<S> <C>
TEKnique net assets as reported:
Common stock $ 13
Other equity (155)
Retained earnings 910
------
768
Fair value adjustments:
Increase carrying amount of fixed assets 186
Goodwill 293
Purchased in process research and development 4,426
------
$ 5,673
======
</TABLE>
(c) The pro forma condensed combined balance sheet at March 31, 1996 reflects
the purchased research and development as a charge directly to retained
earnings (deficit).
<PAGE>
NATURAL MICROSYSTEMS CORPORATION AND
COMBINED PSR SYSTEMS, INC. AND TEKNIQUE, INC.
Notes to Pro Forma Condensed
Consolidated Financial Statements
March 31, 1996
(Unaudited)
(In thousands except per share data)
(d) The following pro forma adjustments are incorporated in the pro forma
condensed combined statements of operations:
<TABLE>
<CAPTION>
Three
Year Months
Ended Ended
December 31, March 31,
1995 1996
---- ----
<S> <C> <C>
1. Decrease in interest income resulting from the reduction of cash
and cash equivalents, based upon average interest rates for
the periods $ (178) (44)
2. Increase in amortization resulting from recording of goodwill (108) (27)
3. Increase in depreciation resulting from adjustments to carrying
amounts of goodwill and other intangible assets (37) (9)
4. Increase in compensation expense for the effects of issuing
common stock to employees immediately prior to the
acquisition (551)
5. Increase in compensation expense related to forgiveness of
notes receivable - officers (70)
6. Increase in compensation expense related to distribution of
cash value of officers' life insurance (248)
7. Decrease in tax expense resulting from the above adjustments (414) (28)
</TABLE>
(e) Not included in the pro forma condensed combined statements of operations is
the purchased in-process research and development. This charge of
approximately $4,426 will be expensed in the second quarter of 1996.
(f) The pro forma condensed combined statements included herein include the
financial statements of TEKnique as of and for the three months ended
April 30, 1996 and the year ended January 31, 1996 and NMS as of and for the
three months ended March 31, 1996 and the year ended December 31, 1995.
<PAGE>
SIGNATURE
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.
NATURAL MICROSYSTEMS CORPORATION
Date: August 9, 1996 By: /s/ John F. Kennedy
Name: John F. Kennedy
Title: Chief Financial Officer
<PAGE>
Exhibit 23.1
------------
AUDITORS' CONSENT
The Board of Directors
PSR Systems, Inc. and TEKnique, Inc.:
We consent to incorporation by reference in the registration statements (Nos.
33-76324 and 333-09135) on Form S-8 of Natural MicroSystems Corporation of our
report dated June 14, 1996, relating to the combined balance sheets of PSR
Systems, Inc. and TEKnique, Inc. as of January 31, 1996 and 1995, and the
related combined statements of operations, stockholders' equity, and cash flows
for each of the years in the two-year period ended January 31, 1996, which
report appears in the amendment to Form 8-K of Natural MicroSystems Corporation
dated June 28, 1996.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
August 8, 1996
