SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 3, 1996
Symetrics Industries, Inc.
(Exact Name of Registrant as specified in its charter)
Florida 0-4025 59-0954868
(State of Incorporation) (Commission File No.) (IRS Employer ID Number)
557 N. Harbor City Boulevard, Melbourne, Florida 32935
(Address of Principal Executive Offices)
Registrant's telephone number: (407) 254-1500
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
American Digital Switching, Inc. and Subsidiary:
Report of Independent Certified Public Accountants:
Pricher And Company
Bray, Beck & Koetter
Consolidated Balance Sheet- March 31, 1996
Consolidated Statement of Operations and Accumulated Deficit- Three
Months Ended March 31, 1996 and the Years Ended December 31, 1995,
1994 and 1993
Consolidated Statement of Cash Flows - Three Months Ended March
31, 1996 and the Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(b) Pro forma financial information.
Pro Forma Condensed Combined Financial Statements:
Pro Forma Condensed Combined Balance Sheet- March 31, 1996 (unaudited)
Pro Forma Condensed Combined Statements of Income- Years Ended
March 31, 1996, 1995 and 1994 (unaudited)
Notes To Pro Forma Condensed Combined Financial Statements
<PAGE>
PRICHER AND COMPANY
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
American Digital Switching, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of American
Digital Switching, Inc. and Subsidiary as of March 31, 1996 and the related
consolidated statements of operations and accumulated deficit and cash flows for
the three months then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Digital
Switching, Inc. and Subsidiary as of March 31, 1996, and the results of its
operations and its cash flows for the three months then ended in conformity with
generally accepted accounting principles.
/s/Pricher and Company
Orlando, Florida
June 13, 1996
608 E. Central Boulevard Orlando, Florida 32801-2966 (407) 648-0858
<PAGE>
Bray, Beck & Koetter
CERTIFIED PUBLIC ACCOUNTANTS P.A.
1901 South Harbor City Blvd
One Harbor Place Suite 500A
Post Office Box 249
Melbourne, Florida 32902-0249
(407) 676-1440
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
American Digital Switching, Inc. and Subsidiary
Melbourne, Florida
We have audited the accompanying consolidated balance sheets of American Digital
Switching, Inc. and Subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of operations and accumulated deficit and cash flows for
the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Digital Switching,
Inc. and Subsidiary as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
/s/Bray, Beck & Koetter
Melbourne, Florida
January 22, 1996
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
March 31, --------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS (Note 8)
---------------
Current assets:
Cash and cash equivalents $ 175,823 $ 233,085 $ 191,938
Accounts receivable (Notes 9 and 10) 241,896 328,018 568,131
Inventories (Notes 2, 4 and 9) 560,757 545,724 841,603
Other current assets (Notes 2 and 14) 13,763 11,410 60,979
----------- ----------- -----------
Total current assets 992,239 1,118,237 1,662,651
----------- ----------- -----------
Property and equipment, net (Notes 6 and 9) 196,878 274,322 266,666
----------- ----------- -----------
Other assets:
Deferred income taxes (Notes 2 and 14) 241,225 89,988 23,004
Deposits 18,655 12,169 12,169
Intangible assets, net (Note 7) 202,650 211,547 247,134
----------- ----------- -----------
462,530 313,704 282,307
----------- ----------- -----------
$ 1,651,647 $ 1,706,263 $ 2,211,624
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 160,762 $ 134,593 $ 645,177
Current portion of long-term debt (Note 9) 25,436 24,959 24,115
Short-term line of credit (Note 8) 300,000
Accrued expenses (Note 13) 30,511 31,686 121,950
Advanced billings (Note 10) 307,260 330,585 139,750
----------- ----------- -----------
Total current liabilities 523,969 521,823 1,230,992
----------- ----------- -----------
Long-term debt, net of current maturities (Note 9) 568,363 374,903 99,863
----------- ----------- -----------
Commitments and contingencies (Notes 11, 15, 16 and 18)
Stockholders' equity:
Common stock. $.01 par value; authorized
5,000,000 shares, issued and outstanding
983,334 shares 9,833 9,833 9,833
Additional paid-in capital 1,071,403 1,071,403 1,071,403
Accumulated deficit (521,921) (271,699) (200,467)
----------- ----------- -----------
Total stockholders' equity 559,315 809,537 880,769
----------- ----------- -----------
$ 1,651,647 $ 1,706,263 $ 2,211,624
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Three Months Years Ended December 31,
Ended -----------------------------------------
March 31, 1996 1995 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales and services (Note 10) $ 330,440 $ 4,069,175 $ 5,942,647 $ 2,535,281
Cost of goods sold 126,278 1,467,616 2,723,571 696,727
----------- ----------- ----------- -----------
Gross profit 204,162 2,601,559 3,219,076 1,838,554
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative 548,891 2,399,380 2,329,821 1,586,935
Research and development 57,840 299,104 397,997 25,687
----------- ----------- ----------- -----------
606,731 2,698,484 2,727,818 1,612,622
----------- ----------- ----------- -----------
Operating profit (loss) (402,569) (96,925) 491,258 225,932
----------- ----------- ----------- -----------
Other income (expense):
Interest and other income 8,396 28,381 7,731 5,794
Interest expense (7,763) (27,003) (67,681) (65,247)
Loss on disposal of property and equipment (14,151)
----------- ----------- ----------- -----------
633 (12,773) (59,950) (59,453)
----------- ----------- ----------- -----------
Income (loss) before income tax benefit (401,936) (109,698) 431,308 166,479
Income tax benefit (Note 14) 151,714 38,466 1,050 39,591
----------- ----------- ----------- -----------
Income (loss) from continuing operations (250,222) (71,232) 432,358 206,070
Discontinued operations (Note 5):
Loss on disposal of discontinued line of
business (net of $12,727 income tax benefit) (48,138)
----------- ----------- ----------- -----------
Net income (loss) (250,222) (71,232) 384,220 206,070
Accumulated deficit, beginning (271,699) (200,467) (584,687) (790,757)
----------- ----------- ----------- -----------
Accumulated deficit, ending $ (521,921) $ (271,699) $ (200,467) $ (584,687)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Years Ended December 31,
Ended -----------------------------------------
March 31, 1996 1995 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Reconciliation of net income (loss) to net cash
provided (used) by operating activities:
Net income (loss) $ (250,222) $ (71,232) $ 384,220 $ 206,070
Items not requiring (providing) cash:
Loss on disposal of discontinued
line of business 60,865
Loss on disposal of property and equipment 14,151
Depreciation 24,106 91,552 119,273 116,813
Amortization 8,897 35,587 23,004 5,784
Deferred income tax benefit (151,714) (38,466) (16,425) (39,591)
Changes in assets and liabilities:
Accounts receivable 86,122 240,113 (41,641) 358,115
Other current assets (1,876) 21,051 (2,040) (13,377)
Inventories 42,823 238,023 (210,031) (75,456)
Accounts payable 26,169 (510,584) 502,656 (242,497)
Accrued expenses (1,175) (90,264) 88,535 (21,147)
Advanced billings (23,325) 190,835 (81,084) 19,652
----------- ----------- ----------- -----------
Net cash provided (used) by operating activities (240,195) 120,766 827,332 314,366
----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (4,517) (55,504) (93,514) (67,332)
Proceeds from disposal of discontinued
line of business 4,041
Deposits and other (6,486) 5,200 6,851
----------- ----------- ----------- -----------
Net cash used by investing activities (11,003) (55,504) (84,273) (60,481)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Draws on short-term line of credit 200,000 300,000
Repayment of short-term line of credit (500,000)
Proceeds from issuance of long term debt 200,000 300,000 16,667
Payments on long-term debt (6,064) (24,115) (1,060,619) (75,250)
----------- ----------- ----------- -----------
Net cash provided (used) by financing activities 193,936 (24,115) (743,952) (75,250)
----------- ----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents (57,262) 41,147 (893) 178,635
Cash and cash equivalents, beginning 233,085 191,938 192,831 14,196
----------- ----------- ----------- -----------
Cash and cash equivalents, ending $ 175,823 $ 233,085 $ 191,938 $ 192,831
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of American Digital Switching, Inc. (the "Company" or
"ADS") and its wholly owned subsidiary, Innovative Engineering Services, Inc.
("IES"). Intercompany transactions and balances have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash
flows, the Company considers all highly liquid investments with original
maturities of one year or less to be cash equivalents.
INVENTORIES - Inventories are valued at the lower of cost (determined
by an average cost method) or market.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation and amortization of property and equipment is computed principally
on the straight-line method over the estimated useful lives of the property
which range from 5 to 7 years.
AMORTIZATION - Intangible assets are being amortized on the
straight-line method over 2 to 5 years. The excess of the cost over the fair
value of the net assets of IES represents an intangible asset which is being
amortized over 40 years using the straight-line method.
INCOME TAXES - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
payable plus deferred taxes. Deferred taxes are recognized for differences
between the basis of certain assets and liabilities for financial statement and
income tax purposes. These differences relate primarily to depreciation methods
and advance billings reported differently for financial reporting and tax
purposes. The deferred taxes represent the future tax consequences of those
differences which will either be taxable or deductible when the assets and
liabilities are recovered or settled. A valuation allowance is provided for
those deferred tax assets which are subject to uncertainty as to the ultimate
realization of the income tax benefit of the related deductible amounts.
2 RISKS AND UNCERTAINTIES
NATURE OF OPERATIONS - The Company develops, manufactures and repairs
telephone switching equipment. Its principal customers are rural telephone
companies throughout the U.S. and Canada.
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
2 RISKS AND UNCERTAINTIES (Continued)
FUTURE OPERATIONS - A significant portion of the Company's projected
sales and future profitability are dependent upon successful completion of its
ongoing development project ("Centura"), an updated hardware design for the ITS
4/5 central office telephone switch. In connection with this effort, the Company
has signed contracts for outside parties to provide engineering and design
services (see Note 14) and has incurred substantial in-house research and
development expenditures in recent years. The anticipated costs of completing
this project are such that the Company will need to obtain additional capital in
the ensuing year, either from existing shareholders or outside investors, in
order to avoid a delay in the project development schedule. If the Company is
unable to obtain additional capital, it will become necessary to significantly
curtail its operations and reduce its work force. Management's plans in this
case would reduce operations to service activities currently estimated at
approximately $1.5 million in revenues for 1996 (compared to approximately $4.0
million in 1995) with a corresponding drop in payroll related costs. The Centura
project would continue, although the development schedule would be stretched-out
over a number of years. (See Note 19 for discussion of subsequent events)
USE OF ESTIMATES - The process of preparing financial statements in
conformity with generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates relate primarily to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts. Following is
a description of significant estimates used in preparation of the accompanying
financial statements:
INVENTORIES - Included in the accompanying balance sheet are
inventories at carrying values of $560,757, $545,724 and $841,603 at
March 31, 1996, December 31, 1995 and 1994, which represent
management's estimate of their net realizable value. Such values are
determined based upon expected sales and usage in the ordinary course
of business. The rural telephone industry is characterized by
governmental mandates and regulations, as well as the cost-benefit
relationship of the technology available to comply with those mandates.
Should demand for the Company's products and services prove to be
significantly less than anticipated, the ultimate realizable value of
these inventories could be substantially less than the amount shown on
the balance sheet.
DEFERRED TAX ASSETS - Included in the accompanying balance
sheet are net deferred tax assets of $246,196, $94,482 and $56,016 at
March 31, 1996, December 31, 1995 and 1994. Realization of these assets
is dependent upon the Company generating sufficient future taxable
income against which its loss and tax credit carryforwards can be
offset. A valuation allowance has been recorded to reduce the deferred
tax assets to the amount that is expected to be ultimately realized.
This expectation could change if estimates of future taxable income
during the carryforward period are reduced.
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
3 CASH FLOWS
<TABLE>
<CAPTION>
Supplemental disclosures related to cash flows are summarized as follows:
Three Months
Ended
March 31, YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994 1993
------------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Cash paid for interest and income taxes:
Interest $ 7,764 $ 27,003 $ 63,014 $ 79,908
============ ============ ============ ============
Income taxes $ $ 2,648 $ $
============ ============ ============
Non-cash investing and financing activities:
Note payable to bank issued
to acquire equipment $ 22,594
============
Note payable issued to former
corporate officer for promises
and covenants capitalized as
intangible assets $ 88,000
============
Inventory capitalized as
equipment $ 57,856 $ 68,578
============ ============
Inventory parts and materials
related to discontinued line
of business reclassified to
other current assets $ 64,906
============
</TABLE>
4 INVENTORIES
Inventories consist of the following: December 31,
March 31, -----------------------
1996 1995 1994
-------- -------- --------
Finished goods $310,028 $312,786 $379,278
Work-in-process 104,276
Parts and raw materials 250,729 232,938 358,049
-------- -------- --------
Total $560,757 $545,724 $841,603
======== ======== ========
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
5 DISCONTINUED OPERATIONS
Certain parts and materials inventory items related to a discontinued line
of business were disposed through bulk sale during 1994, resulting in a loss of
$48,138, net of $12,727 income tax benefit.
6 PROPERTY AND EQUIPMENT
Property and equipment include the following: December 31,
March 31, -----------------------
1996 1995 1994
Leasehold improvements $ 40,243 $ 40,243 $ 36,457
Software 42,581 42,581 100,009
Machinery and equipment 510,868 559,459 727,545
Office furniture and equipment 34,790 34,790 42,208
Construction in progress 57,856
-------- -------- --------
628,482 734,929 906,219
Less: Accumulated depreciation 431,604 460,607 639,553
-------- -------- --------
$196,878 $274,322 $266,666
======== ======== ========
Depreciation expense for the three months ended March 31, 1996 and the
years ended 1995, 1994 and 1993 was $24,106, $91,552, $119,273 and $116,813,
respectively.
7 INTANGIBLE ASSETS
In 1991, the Company acquired 100% of the outstanding common stock of
Innovative Engineering Services, Inc. ("Subsidiary"). The purchase price of
$280,500 exceeded the fair market value of the net assets of the subsidiary at
the date of acquisition by $191,461, which represents the cost of intangibles
and is being amortized over 40 years.
Intangible assets are summarized as follows:
December 31,
March 31, ---------------------
1996 1995 1994
-------- -------- --------
Excess of cost over net assets $191,461 $191,461 $191,461
Organization costs 4,904
Covenant not to compete 44,000 44,000 44,000
Covenant not to solicit customers 44,000 44,000 44,000
-------- -------- --------
279,461 279,461 284,365
Less accumulated amortization 76,811 67,914 37,231
-------- -------- --------
$202,650 $211,547 $247,134
======== ======== ========
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
7 INTANGIBLE ASSETS (Continued)
Amortization expense for the three months ended March 31, 1996 and the
years ended December 31, 1995, 1994 and 1993 was $8,897, $35,587, $23,004 and
$5,784, respectively.
8 SHORT-TERM LINE OF CREDIT
The Company had available at December 31, 1994 a $1,300,000 line of credit
under the terms of a promissory note and loan and security agreement with the
Rural Telephone Finance Cooperative. The note, which matured on May 2, 1995, was
secured by all existing and after acquired real and personal property, tangible
and intangible.
Interest on outstanding advances was payable quarterly at a variable rate
adjusted periodically by the lender which is not to exceed 1.5% above prime
(6.155% at December 31, 1994).
Outstanding advances on the line of credit at December 31, 1994 totaled
$300,000.
The loan and security agreement required that the Company maintain a current
ratio of 1.1 and a debt service coverage ratio of 1.1, as defined in the
agreement. For the year ended December 31, 1994, the Company met or exceeded
this requirement. The agreement also provides for lender approval on certain
additional indebtedness.
9 LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
March 31, ---------------------
1996 1995 1994
-------- -------- --------
Note payable to Rural Telephone Finance
Cooperative (RTFC) under revolving
line of credit; maximum principal
outstanding not to exceed $2,000,000;
secured by inventory, receivables and
equipment; interest payable quarterly
at 1.5% above prime (8.25% at March
31, 1996); matures June 26, 2000. $ 500,000 $ 300,000 $
Unsecured note payable to former corporate
officer; due $2,122 monthly, including
interest at 8%, beginning January 1,
1995 until maturity on December 1, 1999. 82,272 86,931 104,667
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
9 LONG-TERM DEBT (Continued)
December 31,
March 31, ---------------------
1996 1995 1994
-------- -------- --------
Note payable to bank; secured by
equipment; due $533 monthly, including
interest at 6.217%; until maturity on
February 21, 1998. 11,527 12,931 18,338
Note payable to bank; secured by
equipment; due $1,488 monthly, including
interest at 11.024%, matured on January
5, 1995. 973
-------- -------- --------
Total 593,799 399,862 123,978
Less current portion 25,436 24,959 24,115
-------- -------- --------
Long-term portion $ 568,363 $ 374,903 $ 99,863
========= ========= =========
The Company may draw advances on the revolving line of credit up to the
maximum principal amount of $2,000,000; however, unpaid advances may not exceed
65% of the sum of the Company's inventory and non-delinquent trade accounts
receivable. The loan and security agreement requires that the Company obtain the
RTFC's written approval prior to incurring certain additional indebtedness.
Prior approval is also required before the Company may make payment of any cash
dividends to its owners or make any other cash distribution beyond that in the
ordinary course of business.
Annual maturities of long-term debt outstanding at March 31, 1996 are
summarized as follows:
1997 $ 25,436
1998 $ 26,903
1999 $ 22,981
2000 $ 18,479
2001 $ 500,000
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
10 RELATED PARTY TRANSACTIONS
Following is a summary of related party transactions and balances:
<TABLE>
<CAPTION>
1996 1995 1994 1993
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Transactions:
Sales and services to
stockholders $ 29,748 $ 786,312 $ 813,764 $ 715,763
Purchase of materials
from director 51,900
Note payable issued to former
officer 104,667
Outstanding balances:
Accounts receivable from
stockholders 4,855 142,616 73,317 245,064
Advanced billings from
stockholders 298,386 317,586 129,750 183,513
Accounts payable to officers
and directors 59,033 56,700
</TABLE>
11 LEASES
The Company leases its facilities under long-term agreements with terms
ranging from 2 to 5 years. All are classified as operating leases and expire in
various years through 2001. These leases require the Company to pay all
executory costs (such as property taxes, maintenance and utilities). Rental
payments include minimum rentals and executory costs.
The following is a schedule of future minimum lease payments for operating
leases (with initial or remaining terms in excess of one year) as of March 31,
1996:
Year ending
MARCH 31,
1997 $ 90,504
1998 91,131
1999 85,349
2000 85,349
2001 85,349
-------------
Total minimum lease payments $ 437,682
=============
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
11 LEASES (Continued)
Rental expense for all operating leases, including applicable sales tax,
amounted to $43,031, $176,384, $180,909 and $173,739 during the three months
ended March 31, 1996 and the years ended December 31, 1995, 1994 and 1993,
respectively.
12 DEFERRED COMPENSATION AND PROFIT SHARING PLAN
The Company maintains a deferred compensation and profit sharing plan for
substantially all of its employees. Contributions to the plan include 1% of
compensation, up to $200,000 of compensation per participant, and a matching
contribution of half of the participant's contribution up to 2% of compensation.
Matching contributions paid by the Company amounted to $5,783, $28,855, $16,730
and $14,285 for the three months ended March 31, 1996 and the years ended
December 31, 1995, 1994 and 1993, respectively.
13 PRODUCT WARRANTY COSTS
The terms of certain sales contracts include repair or replacement
warranties covering defective products. The accompanying financial statements
include an accrual of $750, $6,500 and $48,375 as of March 31, 1996, December
31, 1995 and 1994, respectively, for estimated warranty claims based upon the
Company's experience of the amount of claims actually made.
14 INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
December 31,
March 31, ------------------------------------------------
1996 1995 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Currently payable $ $ $ 15,375 $
Deferred 22,994 6,118 64,493 20,091
Tax benefit of loss carryforward (160,603) (100,220) 128,811
Change in valuation allowance (14,105) 55,636 (209,729) (59,682)
-------------- ------------- ------------- -------------
Total income tax benefit $ (151,714) $ (38,466) $ (1,050) $ (39,591)
============= ============ ============ ============
</TABLE>
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
14 INCOME TAXES (Continued)
Deferred income taxes consist of the following:
<TABLE>
<CAPTION>
December 31,
March 31, -------------------------------
1996 1995 1994
-------------- ------------- -------------
<S> <C> <C> <C>
Current:
Deferred tax asset $ 6,578 $ 7,710 $ 56,506
Valuation allowance (1,608) (3,216) (23,494)
-------------- ------------- -------------
Net current deferred tax asset $ 4,970 $ 4,494 $ 33,012
============ ============ ============
Noncurrent:
Deferred tax asset $ 341,282 $ 195,638 $ 53,051
Deferred tax liability (14,736) (7,831) (8,142)
Valuation allowance (85,321) (97,819) (21,905)
-------------- ------------- -------------
Net noncurrent deferred tax asset$ $ 241,225 $ 89,988 $ 23,004
============== ============== =============
</TABLE>
The Company has available at March 31, 1996 an unused operating loss
carry-forwards of $700,099, expiring in years 2007 through 2010, which may be
applied against future taxable income and a research and development tax credit
carryforward of $71,220 expiring in 2009 and 2010, which may be applied against
future tax liabilities, subject to certain limitations.
15 COMMITMENTS AND CONTINGENCIES
The Company is currently developing a "4 Channel SS7 Link I/O Mix Module".
The Company has a contract with an outside company of $106,061 for the
development of this new product. At March 31, 1996 the remaining commitment
under this contract was $15,417.
The Company has received six research and development contracts related to
this product for a total of $187,200. Amounts received under the contracts are
non-refundable as long as they are spent on research and development. In return
the customers received a preferred purchase price. Research and development
costs in excess of $187,200 has been incurred, accordingly this amount has been
recognized as income.
The Company has entered into a joint agreement for the development of an
updated hardware design for the ITS 4/5 subscriber switch. Under the terms of
the agreement, the Company will pay its development partner $400,000 for
engineering and design services, due at various stages of project completion.
The agreement also provides that as much as one-half of these payments may be
credited back to the Company should the Company eventually purchase sufficient
quantities of the resulting product from its joint partner. As of March 31,
1996, $315,930 has been paid on the contract.
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
16 CONCENTRATION OF CREDIT RISK
At March 31, 1996, the Company had $75,573 on deposit in excess of the
federally insured limit.
17 ECONOMIC DEPENDENCY
During the years ended December 31, 1995 and 1994 the Company sold a
substantial portion of its product under one contract. Sales under that contract
aggregated approximately $1,400,000 and $2,800,000 during 1995 and 1994,
respectively. At December 31, 1994 amounts due under that contract included in
accounts receivable were $442,735, which were fully collected in 1995.
18 STOCK OPTIONS
The Company has granted 91,000 options to purchase Company Common Stock at
exercise prices ranging from $.75 to $3.00 per share, and is authorized to grant
options for an additional 59,000 shares under its 1995 Stock Option Plan.
19 SUBSEQUENT EVENTS
Effective April 1, 1996, Symetrics Industries, Inc. ("Symetrics"), of
Melbourne, Florida, a manufacturer of electronic assemblies, systems and
software acquired approximately 95% of the outstanding capital stock of the
Company.
The acquisition was accomplished by the exchange of one share of Symetrics'
common stock for every 4.5 shares of ADS common stock (the "Exchange"). Pursuant
to the Exchange, Symetrics exchanged 207,399 shares of Symetrics' common stock,
or approximately 13% of the outstanding capital stock of Symetrics after the
Exchange, for 983,334 shares after the Exchange. Symetrics intends to complete
the acquisition of the remaining outstanding shares of ADS in the near future.
<PAGE>
SYMETRICS INDUSTRIES, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma condensed combined balance sheet as of March 31,
1996, and the pro forma condensed combined statements of income for the years
ended March 31, 1996, 1995 and 1994 give effect to the acquisition of 100% of
the outstanding common shares of American Digital Switching, Inc. ("ADS") by
Symetrics Industries, Inc. ("Symetrics"). The pro forma information is based on
the historical financial statements of Symetrics and ADS giving effect to the
transaction under the pooling-of-interests method of accounting and the
assumptions and adjustments in the accompanying notes to the pro forma financial
statements.
The pro forma statements have been prepared by Symetrics' management based
upon the audited financial statements of ADS included elsewhere herein and
unaudited interim financial statements which were used to restate ADS'
operations from fiscal years ended December 31 1995, 1994 and 1993 to years
ended March 31, 1996, 1995 and 1994. These pro forma statements may not be
indicative of the results that actually would have occurred if the combination
had been in effect on the dates indicated or which may be obtained in the
future. The proforma financial statements should be read in conjunction with the
audited financial statements and notes of Symetrics and the audited financial
statements and notes of ADS contained elsewhere herein.
<PAGE>
AMERICAN DIGITAL SWITCHING, INC. AND SUBSIDIARY
March 31, 1996
<TABLE>
<CAPTION>
Historical
----------------------------------
Symetrics American Digital Pro Forma Pro Forma
Industries, Inc. Switching, Inc. Adjustments Combined
---------------------------------- ---------------- --------------
<S> <C> <C> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 1,482,082 $ 175,823 $ $ 1,657,905
Contract and accounts receivable 1,339,532 241,896 1,581,428
Inventories 75,136 560,757 635,893
Costs and estimated earnings in excess of billings 2,931,069 2,931,069
Mortgage receivable 450,000 450,000
Other current assets 52,135 13,763 65,898
------------ ------------ ------------ ------------
Total current assets 6,329,954 992,239 7,322,193
------------ ------------ ------------ ------------
Property and equipment, net 1,566,613 196,878 1,763,491
------------ ------------ ------------ ------------
Other assets:
Deferred income taxes 84,228 241,225 325,453
Other 76,129 18,655 94,784
Intangible assets, net 377,927 202,650 580,577
------------ ------------ ------------ ------------
538,284 462,530 1,000,814
------------ ------------ ------------ ------------
$ 8,434,851 $ 1,651,647 $ $ 10,086,498
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 1,600,255 $ 498,533 $ $ 2,098,788
Notes payable and current portion of long-term debt 1,000 25,436 26,436
Income taxes payable 452,239 452,239
Billings in excess of costs and estimated earnings 7,869 7,869
------------ ------------ ------------ ------------
Total current liabilities 2,061,363 523,969 2,585,332
------------ ------------ ------------ ------------
Long-term debt 479,439 568,363 1,047,802
------------ ------------ ------------ ------------
Stockholders' equity:
Common stock 346,975 9,833 42,016 (a) 398,824
Additional paid-in capital 1,090,638 1,071,403 (42,016)(a) 2,120,025
Accumulated deficit 4,456,436 (521,921) 3,934,515
------------ ------------ ------------ ------------
Total stockholders' equity 5,894,049 559,315 6,453,364
------------ ------------ ------------ ------------
$ 8,434,851 $ 1,651,647 $ $ 10,086,498
============ ============ ============ ============
</TABLE>
See notes to pro forma condensed combined financial statements
<PAGE>
PROFORMA CONDENSED COMBINED STATEMENT OF INCOME
Year Ended March 31, 1996
<TABLE>
<CAPTION>
Historical (c)
----------------------------------
Symetrics American Digital Pro Forma Pro Forma
Industries, Inc. Switching, Inc. Adjustments Combined
-------------- ------------------ --------------- --------------
<S> <C> <C> <C> <C>
Sales and revenues $ 19,692,320 $ 2,404,269 $ $ 22,096,589
-------------- --------------- ------------- --------------
Costs and expenses:
Cost of sales and revenues 15,212,737 883,881 16,096,618
Research and development 137,000 228,568 365,568
Selling, general and administrative 1,557,563 2,212,263 3,769,826
Loss on disposition of property and equipment
and other expense 43,388 43,388
Interest 26,587 24,225 50,812
-------------- --------------- ------------- --------------
16,933,887 3,392,325 20,326,212
-------------- --------------- ------------- --------------
Interest and other income, net 139,676 139,676
-------------- --------------- ------------- --------------
Income (loss) before income taxes 2,898,109 (988,056) 1,910,053
Income tax expense (benefit) 1,051,632 (192,964) 858,668
-------------- --------------- ------------- --------------
Net income (loss) $ 1,846,477 $ (795,092) $ $ 1,051,385
============== =============== ============= ==============
Earnings per common share:
Weighted average shares outstanding 1,382,697 1,590,096 (b)
============== ==============
Net income per common share $ 1.34 $ 0.66
============== ==============
</TABLE>
PROFORMA CONDENSED COMBINED STATEMENT OF INCOME
Year Ended March 31, 1995
<TABLE>
<CAPTION>
Historical (c)
----------------------------------
Symetrics American Digital Pro Forma Pro Forma
Industries, Inc. Switching, Inc. Adjustments Combined
-------------- ------------------ --------------- --------------
<S> <C> <C> <C> <C>
Sales and revenues $ 21,341,695 $ 7,356,416 $ $ 28,698,111
-------------- --------------- ------------- --------------
Costs and expenses:
Cost of sales and revenues 18,111,889 3,233,161 21,345,050
Research and development 70,852 463,719 534,571
Selling, general and administrative 916,294 2,540,562 3,456,856
Interest 13,071 63,974 77,045
-------------- --------------- ------------- --------------
19,112,106 6,301,416 25,413,522
-------------- --------------- ------------- --------------
Interest and other income, net 67,291 70,429 137,720
-------------- --------------- ------------- --------------
Income before income taxes 2,296,880 1,125,429 3,422,309
Income taxes 827,073 1,734 828,807
-------------- --------------- ------------- --------------
Income from continuing operations $ 1,469,807 $ 1,123,695 $ $ 2,593,502
============== =============== ============= ==============
Earnings per common share:
Weighted average shares outstanding 1,250,609 1,458,008 (b)
============== ==============
Income from continuing operations per common
share $ 1.18 $ 1.78
============== ==============
</TABLE>
See notes to pro forma condensed combined financial statements
<PAGE>
PROFORMA CONDENSED COMBINED STATEMENT OF INCOME
Year Ended March 31, 1994
<TABLE>
<CAPTION>
Historical (c)
----------------------------------
Symetrics American Digital Pro Forma Pro Forma
Industries, Inc. Switching, Inc. Adjustments Combined
-------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Sales and revenues $ 8,602,562 $ 2,582,523 $ $ 11,185,085
-------------- --------------- ------------- --------------
Costs and expenses:
Cost of sales and revenues 7,250,114 811,006 8,061,120
Research and development 9,304 84,229 93,533
Selling, general and administrative 675,318 1,720,315 2,395,633
Interest 7,849 62,118 69,967
-------------- --------------- ------------- --------------
7,942,585 2,677,668 10,620,253
-------------- --------------- ------------- --------------
Interest and other income, net 42,890 6,037 48,927
-------------- --------------- ------------- --------------
Income (loss) before income taxes and
cumulative effect adjustment 702,867 (89,108) 613,759
Income taxes (benefit) 227,222 (39,591) 187,631
-------------- --------------- ------------- --------------
Income (loss) before cumulative effect adjustment 475,645 (49,517) 426,128
Cumulative effect of change in accounting principle 74,514 74,514
-------------- --------------- ------------- --------------
Net income (loss) $ 550,159 $ (49,517) $ $ 500,642
============== =============== ============= ==============
Earnings per common share:
Weighted average shares outstanding 1,192,326 1,399,725 (b)
============== ==============
Income before cumulative effect adjustment $ 0.40 $ 0.30
Cumulative effect of change in
accounting principle 0.06 0.05
-------------- --------------
Net income $ 0.46 $ 0.36
============== ==============
</TABLE>
See notes to pro forma condensed combined financial statements
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Effective April 1, 1996, Symetrics acquired 933,334 (approximately 95%) of
the outstanding common stock of ADS in exchange for 207,399 shares of Symetrics
or approximately 13% of the outstanding capital stock of Symetrics after the
exchange. The pro forma financial statements combine the assets and liabilities
of the two companies at March 31, 1996 and their results of operations for the
years ended March 31, 1996, 1995 and 1994. In combining the entities, the
following pro forma adjustments have been made.
(a) Reflects the issuance of 207,399 shares of Symetrics' $.25 par
value common stock to the ADS stockholders and the elimination of ADS'
common stock.
(b) Reflects an increase in the weighted average number of common
shares outstanding of Symetrics as if the combination had occurred at
the beginning of the fiscal year ended March 31, 1994.
(c) The historical financial statements of ADS used in the combined
statements of income have been restated to fiscal years ended March 31,
1996, 1995 and 1994 to coincide with the historical financial
statements of Symetrics.
<PAGE>
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.
Symetrics Industries, Inc.
Date: July 3, 1996 By: /s/ Dudley E. Garner, Jr.
--------------------------
Dudley E. Garner, Jr. President
