SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
----------------------------------------------
Date of Report (Date of earliest event reported: October 27, 1997
-----------------------------------------------
AREMISSOFT CORPORATION
[formerly Juno Acquistions, Inc.]
(exact name of registrant as specified in its charter)
State of
Nevada 33-81666 13-3690905
- --------- ----------- -------------
(State or other (Commission File Number) (IRS Employer Identification
of Incorporation or No)
organization)
3323 Watt Avenue, Suite 150, Sacramento, California 95821
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (916) 442-0400
-------------------------------------------------------------
<PAGE>2
Item 7. FINANCIAL STATMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS AQUIRED.
(1) Financial statements of LK GLobal Information Systems
BV and Subsidiaries are attached hereto.
<PAGE>3
LK GLOBAL INFORMATION SYSTEMS BV
AND SUBSIDIARIES
Consolidated Financial Statements
for years ended
December 31, 1996 and December 31, 1995
<PAGE>4
Index to Consolidated Financial Statements
Independent Auditors' Report 1
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Changes in
Stockholders' Equity (Deficit) 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
<PAGE>5
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of LK Global
Information Systems BV and Subsidiaries as of December 31, 1996 and 1995, and
the consolidated statement of operations, changes in stockholders' equity
(deficit) and cash flows for the years ended December 31, 1996 and December 31,
1995 which have been prepared in accordance with accounting principles
generally accepted in the United States and are expressed in U.S. Dollars.
These financial statements are the responsibility of the Group's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with UK auditing standards, which do not
differ materially from auditing standards generally accepted in the United
States. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of LK Global
Information Systems BV and Subsidiaries at December 31, 1996 and 1995 and the
results of its operations and its cash flows for the years ended December 31,
1996 and December 31, 1995, in conformity with accounting principles generally
accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Group will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, the Group has neither established a trend of
profitable operations nor has it generated a sufficient cash flow without
outside financing in the form of equity or debt. Such financing has continued
to be available to date. These matters raise substantial doubt about the
Group's ability to continue as a going concern. Management's plans in regard
to these matters are also described in note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
London PANNELL KERR FORSTER
February 4, 1998 Chartered Accountants
<PAGE>6
LK GLOBAL INFORMATION SYSTEMS BV
AND SUBSIDIARIES
Consolidated Balance Sheet
Assets
December 31
1996 1995
------ ------
Current assets
Cash and cash equivalents $ 866,635 $ 254,991
Accounts receivable - net 13,255,127 10,458,351
Other receivables 711,251 911,901
Inventory (note 1) 1,283,309 694,293
Prepaid expenses 1,019,421 1,929,445
Property held for sale 136,904 147,250
------------ -----------
Total current assets 17,272,647 14,396,231
Property and equipment - net (notes 1 and 2) 2,385,602 2,273,988
Purchased and developed software - net of
accumulated amortization of $5,694,040
and $3,043,275 at December 31, 1996 and
1995, respectively (notes 1 and 3) 3,689,475 3,116,587
Intangible assets - net of accumulated
amortization of $12,319,621 and $6,380,270
at December 31, 1996 and 1995,
respectively (notes 1 and 3) 1,944,818 3,946,900
------------ ----------
Total assets $ 25,292,542 $ 23,733,706
------------ -----------
Liabilities and Stockholders' Equity (Deficit)
Current liabilities
Accounts payable $ 1,786,496 $ 2,851,636
Accrued taxes payable 3,827,949 1,806,719
Other accrued expenses 11,018,899 8,645,021
Bank loans and overdrafts
(notes 4 and 5) 6,490,068 4,320,876
Deferred maintenance revenue
(note 1) 4,374,885 3,593,515
----------- ------------
Total current liabilities 27,498,297 21,217,767
Long-term debt (note 5) 13,408,097 12,453,645
Total liabilities 40,906,394 33,671,412
----------- ------------
<PAGE>7
Stockholders' equity
Ordinary shares, NLG100 par value,
authorized 200,000 shares,
issued and outstanding 84,500 6,068,307 6,068,307
Additional paid-in capital 5,305,030 -
Accumulated (deficit) (25,125,636) (16,024,721)
Foreign currency translation
adjustment (note 1b) (1,861,553) 18,708
------------ ----------
Total stockholders' equity (deficit) (15,613,852) (9,937,706)
$ 25,292,542 $ 23,733,706
============== ==========
See notes to consolidated financial statements
<PAGE>8
LK GLOBAL INFORMATION SYSTEMS BV
AND SUBSIDIARIES
Consolidated Statement of Operations
For Year Ended
December 31
1996 1995
Revenue (note 1) $ 35,015,853 $ 22,955,830
Cost of revenue (note 1g) 13,076,760 10,924,456
------------- ----------
Gross profit 21,939,093 12,031,374
------------- ----------
Expenses
General and
administrative 23,889,939 19,444,575
Distribution costs 485,339 232,610
Amortization of intangible
assets (note 1i) 4,808,982 3,175,121
------------ ----------
Total expenses 29,184,260 22,852,306
Loss from operations (7,245,167) (10,820,932)
Interest income (expense)
Interest expense
(notes 4 and 5) (1,916,873) (1,289,501)
Interest income 11,079 5,425
----------- ----------
Loss before income tax (9,150,961) (12,105,008)
Income tax (benefit ) expense
(notes 1 and 7) (50,046) 36,782
================ ===========
Net loss $ (9,100,915) $ (12,141,790)
See notes to consolidated financial statements.
<PAGE>9
LK GLOBAL INFORMATION SYSTEMS BV
AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Ordinary Shares
Foreign Total
Currency Stockholders'
Additional Accumulated Translation Equity
Shares Amount Capital (Deficit) Adjustment (Deficit)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 (note 1) 84,500 $ 6,068,307 $ - $ ( 3,882,931) $ - $ 2,185,376
Net (loss) for the year ended
December 31, 1995 - - - (12,141,790) - (12,141,790)
Foreign currency translation
adjustment - - - - 18,708 18,708
Balance, December 31, 1995 84,500 6,068,307 - (16,024,721) 18,708 ( 9,937,706)
Shareholder contribution - - 5,305,030 - - 5,305,030
Net (loss) for the year ended
December 31, 1996 - - - ( 9,100,915) - ( 9,100,915)
Foreign currency translation
adjustment - - - - ( 1,880,261) ( 1,880,261)
Balance, December 31, 1996 84,500 $ 6,068,307 $ 5,305,030 $ (25,125,636) $ ( 1,861,553) $ (15,613,852)
</TABLE>
See notes to consolidated financial statements
<PAGE>10
LK GLOBAL INFORMATION SYSTEMS BV
AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For Year Ended
December 31
1996 1995
------ -----
Cash flows from operating activities
Net (loss) $(9,100,915) $ (12,141,790)
Adjustments to reconcile net (loss)
to net cash provided (used) by
operating activities
Depreciation and amortization 958,448 344,624
Amortization and write-off of
capitalized software and
intangible assets 6,936,690 5,548,614
Changes in assets and liabilities,
net of acquisitions
Accounts receivable (1,461,937) (5,090,779)
Other receivables 534,199 (30,278)
Inventory (477,482) 74,409
Prepaid expenses 950,873 (365,081)
Accounts payable and
accrued expenses 3,185,349 4,470,780
Deferred maintenance revenue 315,463 2,564,834
Accrued taxes payable 1,679,021 753,886
Other accrued expenses (3,249,284) (1,286,150)
-------------- -----------
Net cash provided (used) by
operating activities 270,425 (5,156,931)
Cash flows from investing activities
Purchases of property and equipment (1,130,066) (494,828)
Capitalized software and development costs (2,251,066) (1,518,095)
Payments for acquisitions, net of
cash acquired (3,256,163) (7,526,733)
Disposals of equipment and motor
vehicles 549,339 166,774
---------- ----------
Net cash used in investing activities (6,087,956) (9,372,882)
Cash flows from financing activities - -
Proceeds from issuance of common
stock/shareholder contribution 5,305,030 23,307
Long-term borrowings 1,936,336 13,474,538
Payments on long-term borrowings (1,732,243) (268,021)
Principal payments on capital
lease obligations (353,214) (245,647)
Bank overdraft 1,301,430 1,817,900
=========== ==========
<PAGE>12
Net cash provided by financing activities 6,457,339 14,802,077
--------- ----------
Net increase in cash and cash equivalents 639,808 272,264
Exchange adjustment (28,164) (17,273)
Cash and cash equivalents, at start
of year 254,991 -
---------- ----------
Cash and cash equivalents, at end of year $ 866,635 $ 254,991
---------- ----------
Supplemental disclosure
Cash paid during the year for interest $ 1,886,422 $ 974,676
========== =========
See notes to consolidated financial statements
<PAGE>13
LK GLOBAL INFORMATION SYSTEMS BV
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996 and December 31, 1995
Note 1 - Description of company and summary of significant accounting policies
a. The Company
The principal activity of LK Global Information Systems BV (the Company) and
its Subsidiaries (collectively "The Group") is the development of computer
software and the supply of software and services, which when combined with
third party hardware, provide complete computer solutions to the Group's
customer base across a number of discrete market sectors principally within the
United Kingdom.
In connection with the formation of LK Global Information Systems BV in March
1995, the shareholder of LK Global Information Systems (UK) Plc exchanged all
of the ordinary shares of the latter for 84,000 NLG100 par value ordinary
shares of LK Global Information Systems BV. This exchange between LK Global
Information Systems BV and LK Global Information Systems (UK) Plc was accounted
for at book value since the exchange of shares was between enterprises under
common control and the financial statements have been stated in a manner
similar to a pooling of interests.
b. Basis of presentation
The consolidated financial statements include the accounts of LK Global
Information Systems BV and its wholly-owned subsidiaries. Where subsidiaries
are acquired or disposed of during the year, results are included from the date
of acquisition or to the date of sale. All intercompany accounts and
transactions were eliminated in consolidation.
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States and have been
prepared in U.S. dollars. These consolidated financial statements have been
translated from the functional currency (British pound) to U.S. dollars in
accordance with Statement of Financial Accounting Standards No. 52 - "Foreign
Currency Translation". Under this statement assets and liabilities are
translated at year end rates and income and expenses are translated at average
rates.
c. Going concern
The Group's financial statements have been prepared on the basis that it is a
going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Group has
neither established a trend of profitable operations nor a sufficient cash flow
without outside financing. Furthermore, the Group has working capital
deficiencies.
The Group is looking to raise new finance in order to be able to generate
additional sales volume with the consequent anticipated growth in
profitability.
There is no assurance that profitable operations will be achieved or that
additional financing, if needed, will be obtained. The financial statements do
<PAGE>14
not reflect any adjustments that might be necessary should the Group be unable
to continue in existence.
d. Revenue recognition
The Group recognizes revenue from the sale of software and hardware systems at
the time of the installation of the system, provided no significant obligations
remain and collection of the resulting receivable is deemed probable. Revenue
from add-on hardware sales is recognized when the hardware is shipped to the
customer. Revenue related to service contracts is recognized ratably over the
lives of the contracts. Consulting and specialized software development
revenue is recognized in accordance with the terms of the contract.
e. Cash and cash equivalents
Cash and cash equivalents consist of highly liquid investments with
insignificant interest rate risk and original maturities of three months or
less. They are carried at cost which approximates market value.
<PAGE>15
f. Inventory
Inventory comprises principally goods held for resale and engineering spares.
Goods for resale are stated at the lower of cost and net realizable value.
Cost is determined on a first-in first-out basis, and includes all direct costs
incurred and attributable production overheads. Net realizable value is based
on estimated selling price allowing for all further costs of completion and
disposal. Engineering spares are valued at cost and are depreciated over a
three year period.
The balance in inventory at December 31, 1996 and 1995 is summarized as
follows:
1996 1995
Finished goods held for resale $ 498,389 $ 404,576
Engineering spares 784,920 289,717
----------- ---------
$ 1,283,309 $ 694,293
----------- ---------
g. Capitalized software development costs
The Group capitalizes the qualifying costs of developing its software products.
Capitalization of costs requires that technological feasibility has been
established. Development costs incurred prior to the establishment of
technological feasibility are expensed as incurred. When the software is fully
documented and available for unrestricted sale, capitalization of development
costs ceases, and amortization commences and is computed on a product-by-
product basis, based on either a straight-line basis over the economic life of
the product or the ratio of current gross revenues to the total current and
anticipated future gross revenues, whichever is greater. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs require considerable judgment by
management with respect to certain external factors, including, but not limited
to, technological feasibility, anticipated future gross revenues, estimated
economic life and changes in software and hardware technologies.
Realization of capitalized software costs is subject to the Group's ability to
market its software products in the future and generate cash flows sufficient
to support future operations. Capitalized software costs totalled $3,499,316
and $1,130,596 at December 31, 1996 and 1995, respectively. Amortization of
capitalized software costs totalled $113,790 and $0 during the years ended
December 31, 1996 and 1995, respectively, and is included in cost of revenue in
the accompanying consolidated statement of operations.
<PAGE>16
h. Purchased software
The Group capitalizes as Purchased Software the costs associated with software
products either purchased from other companies for resale or developed by other
companies under contract with the Group. The cost of the software is amortized
on the same basis as capitalized software development costs. The amortization
period is re-evaluated quarterly with respect to certain external factors,
including, but not limited to, technological feasibility, anticipated future
gross revenues, estimated economic life and changes in software and hardware
technologies. Purchased software costs totalled $5,884,199 and $5,029,266 at
December 31, 1996 and 1995, respectively. Amortization of purchased software
costs totalled $2,013,918 and $2,373,493 during the years ended December 31,
1996 and 1995, respectively, and is included in cost of revenue in the
accompanying consolidated statement of operations.
<PAGE>17
i. Intangible assets
Intangible assets have been derived from the excess of cost over the fair value
of net assets acquired and is being amortized over the period from which it is
considered a benefit will be obtained from the business acquired. Such excess
amounts have been attributed to customer lists which is amortized over 1 to 3
years depending on the circumstances of the company acquired and to the
management team acquired whereby amortization is estimated by the directors to
be over 4 to 5 years.
j. Property and equipment
Depreciation is provided so as to write down the cost of property and equipment
to their estimated residual value over their expected useful lives. The
principal annual depreciation rates and methods of calculation are as follows:
Leasehold improvements - over the lease term
Fixtures and equipment - 20% - 33% per annum on cost
Motor vehicles - 25% per annum on cost
k. Impairment of long lived assets
In the event that facts and circumstances indicate that the cost of an asset
may be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset would be compared to the asset's carrying amount to determine if
a write-down to market or discounted cash flow value is required. The Group
made certain acquisitions in 1995 on the assumption that further funding would
be made available by the bankers. This was not forthcoming and consequently
the Group was unable to develop the Financial arm of the business as originally
anticipated. All purchased and developed software relating to this business
has therefore been written off. Accordingly, during 1995 the company wrote
off $387,500 of purchased and developed software. Additionally in 1996 the
Group were forced to replace the management team in the Healthcare business and
hence the related intangible asset was written off. The Group therefore wrote
off an additional $505,194 of intangible assets in 1996 over and above the
normal amortization that would have been charged had this event not occurred.
Such amounts are included in cost of revenue and amortization of intangible
assets.
l. Income taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under the asset
and liability method of Statement No. 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to carryforward
losses and differences between the financial statement carrying amounts of
existing assets and liabilities, and their respective tax bases. Deferred tax
<PAGE>18
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. Deferred tax assets are recorded at their
likely realizable amount.
m. Foreign currency translation
Although the Group's functional currency is the British pound, some
transactions are made in different currencies. Foreign currency transactions
are converted into local currency at the rate of exchange prevailing at the
date of the transactions.
n. Use of estimates
The preparation of financial statements 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.
<PAGE>19
Note 2 - Property and equipment
Property and equipment is summarized as follows:
December 31
1996 1995
Fixtures and equipment $ 4,778,995 $ 2,178,926
Motor vehicles 604,960 1,233,808
Leasehold improvements 293,765 265,069
----------- -------------
5,677,720 3,677,803
Less accumulated depreciation and amortization 3,292,118 1,403,815
----------- -------------
$ 2,385,602 $ 2,273,988
=========== ===========
Depreciation and amortization expense amounted to $958,448 and $344,624 for the
years ended December 31, 1996 and December 31, 1995, respectively.
The Group leases equipment under long-term lease agreements which are
classified as capital leases, Equipment and motor vehicles includes the
following leased property:
December 31
1996 1995
Equipment and motor vehicles $ 110,819 $ 1,047,800
Less accumulated amortization 59,557 417,799
----------- ------------
$ 51,262 $ 630,001
=========== ===========
Note 3 - Business combinations
The principal acquisitions and their effective dates were as follows:
- - during the year ended December 31, 1995
LK Global Information Systems (UK) Plc March 31, 1995*
LK Global Manufacturing Systems (UK) Limited March 31, 1995
Timemaster Systems Limited September 12, 1995
<PAGE>20
Briter Computer Systems Limited October 3, 1995
Advanced Medical Computer Systems Limited October 16, 1995
LK Global Information Systems (India) Pte Limited December 31,1995
- during the year ended December 31, 1996
LK Global Information Systems (Cyprus) Limited and
its subsidiaries September 30, 1996
Online Applications Inc October 23, 1996
In all cases the Group acquired all of the outstanding stock of the company.
All of the companies are involved with the development of computer software and
the supply of software and services.
* Note 1a
<PAGE>21
Note 3 - Business Combinations (continued)
The estimated fair values of assets and liabilities of these acquisitions and
the consideration paid are summarized as follows:
1996 1995
------ -----
Current assets
(including cash of $88,539
in 1996 and $503,786
in 1995) $ 423,796 $ 3,078,114
Property and equipment 345,652 1,417,002
Software development costs
and intellectual property 331,564 3,971,985
Accounts payable and accruals (581,366) (3,777,133)
Intangible assets 2,862,581 4,322,507
--------------- -------------
$ 3,382,227 $ 9,012,475
=============== ===============
The consideration paid consists of the following:
Cash consideration $ 3,302,660 $ 7,997,969
Deferred consideration 37,525 981,956
Related acquisition costs 42,042 32,550
--------------- ----------------
3,382,227 9,012,475
=============== ================
The operating results of these acquisitions are included in the Group's
consolidated statement of operations from the dates of acquisition. No pro
forma data reflecting the Group's results of operations as if these
acquisitions occurred at the beginning of each period has been provided as the
directors consider that this would be meaningless in light of the write down of
purchased software and intangible assets.
Note 4 - Bank loans and overdrafts
The Group's bank loans and overdrafts are due on demand with interest payable
at a rate varying with LIBOR.
Note 5 - Long-term debt
The Group's bank loans mature on March 31, 2002 and bear interest at a rate
varying with LIBOR. Future minimum principal payments due are as follows:
December
1996 1995
1996 $ - $ 1,526,139
1997 2,103,067 1,546,193
1998 3,777,721 2,903,728
1999 3,279,090 2,599,831
2000 2,820,561 2,170,000
2001 1,799,110 1,550,000
------------ ------------
Thereafter 1,711,300 1,550,000
$ 15,490,849 $ 13,845,891
Various capital lease obligations with interest rates varying from 9.4% to
21.3% at December 31, 1996 maturities through June 1998, repayable in monthly
instalments and secured by the related equipment:
<PAGE 22>
88,765 400,320
-------- ---------
$ 15,579,614 $ 14,246,211
Current portion of long term
debt 2,171,517 1,792,566
$ 13,408,097 $ 12,453,645
<PAGE> 23
Note 6 - Commitments
Operating leases
- ----------------
The Group leases equipment and motor vehicles under non-cancellable operating
leases which expire on various dates through 2002. Required future minimum
rents to be paid are as follows:
1997 $ 237,681
1998 764,142
1999 333,519
2000 151,707
2001 and thereafter 200,515
---------------
$ 1,687,564
===============
Rent expense for the years ended December 31, 1996 and December 31, 1995
amounted to $1,629,113 and $802,630, respectively.
Guarantees
The Company and its UK subsidiaries are subject to two cross guarantees, one
guaranteeing the liabilities of the UK trading subsidiaries and the other, the
liabilities of the Company. Both guarantees place fixed and floating charges
over substantially the whole of the Company's and subsidiaries' assets and
undertakings, the priority of the security granted being regulated by an
Intercreditor Deed.
Employee benefit plans
- -----------------------
The Group has various defined contribution retirement plans for qualified
employees. Contributions made under the plans totalled $298,273 and $191,716
in 1996 and 1995, respectively.
Note 7 - Income tax
- -------------------
The income tax (benefit of) expense is summarized as follows:
1996 1995
Current $ (50,046) $ 36,782
The Group's subsidiaries are not resident in the United States for tax
purposes. The Group made acquisitions during both 1996 and 1995 and the income
<PAGE>24
tax (benefit of) expense has principally arisen in relation to adjustments for
prior periods.
1996 1995
Statutory tax (at 31%) $ (2,837,000) $ (3,753,000)
Non deductible expenses 2,007,000 2,831,000
Valuation allowance on operating loss 830,000 922,000
Other prior period adjustments (50,046) 36,782
------------ --------------
Income tax (benefit) expense $ (50,046) $ 36,782
============= ===============
At December 31, 1996 the Group had approximately $1,700,000 of net operating
loss carryforwards. These losses will not expire at any particular time
provided the Group does not change its principal activity or cease trading.
The Group has fully reserved the tax benefits of these operating losses because
the likelihood of realization cannot be determined.
<PAGE>25
SIGNATURE
Pursuant to teh requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: March 6, 1998 AREMISSOFT CORPORATION
[Formerly Juno Acquistion, Inc.]
DR. LYCOURGOS K. KYPRIANOU
Dr. Lycourgos K. Kyprianou
President
