<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 31, 1995
Technical Communications Corporation
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Massachusetts 0-8588 04-2295040
--------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
100 Domino Drive
Concord, Massachusetts 01742-2892
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(508) 287-5100
N/A
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
---------------------------------------------
As of May 23, 1995, Technical Communications Corporation (the "Company"),
Datotek, Inc. ("Datotek") and AT&T Corp. ("AT&T") entered into an Asset Purchase
Agreement (the "Agreement"). The transactions contemplated by the Agreement
were completed at a closing held on May 31, 1995.
Pursuant to the Agreement, Datotek sold, licensed, transferred, conveyed
and assigned to TCC, and TCC purchased from Datotek, the assets used in
Datotek's secure communications business. These assets consist of inventory,
equipment, machinery, licenses of certain specified intellectual property, and
certain specified contracts, accounts receivable, trade accounts payable and
warranty reserves, etc. The purchase price was $4,069,000, subject to specified
adjustments which will be made on or before ninety (90) days after the closing
date. The purchase price roughly corresponds to the value of the Datotek
business and the values of certain items reflected on Datotek's financial
statements. The Company borrowed approximately $2,250,000 from the First
National Bank of Boston and the Wainwright Bank and Trust Company as part of the
consideration paid. The Company will dispose of certain surplus or obsolete
assets, and continue to use the remaining assets purchased in the transaction in
the secure communications business.
<PAGE>
<TABLE>
<CAPTION>
Item 7. Financial Statements and Exhibits
------------------------------------------
<S> <C>
Datotek Traditional Systems - Financial Statements and Notes
Report of Independent Account ............................. 1
Balance Sheets ............................................ 2
Statements of Operations .................................. 3
Statements of Changes in Equity Investment ................ 4
Statement of Cash Flows ................................... 5
Notes to Financial Statements ............................. 6
Technical Communications Corporation - Financial Statements and Notes
Pro Forma Condensed Consolidated Statements of Income
For the Year Ended October 1, 1994 ........................ 12
Pro Forma Condensed Consolidated Statements of Income
For the Six Month Ended April 1, 1995 for TCC and
For Three Month Ended March 31, 1995 for Datotek, Inc. .... 13
Notes to Financial Statements ............................. 14
</TABLE>
Item No. Name of Agreement
-------- -----------------
2 Asset Purchase Agreement by and among
Technical Communications Corporation,
Datotek, Inc. and AT&T Corp. *
* Previously filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to Form 8-K to be signed on its
behalf by the undersigned thereunto duly authorized.
Technical Communications Corporation
------------------------------------
(Registrant)
By: /s/ Graham R. Briggs
--------------------------------
Date: August 11, 1995 Graham R. Briggs, Vice Presi-dent,
Finance & Administration (Principal
Financial And Accounting Officer and
Duly Authorized Officer)
<PAGE>
COOPERS
& LYBRAND
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Datotek, Inc.:
We have audited the accompanying balance sheets of Datotek Traditional Systems
(the traditional business of Datotek, Inc.) as of December 31, 1993 and 1994,
and the related statements of operations, changes in equity investment and cash
flows for each of the years in the three years in the three-year period ended
December 31, 1994. These financial statements are the responsibility of
Datotek, Inc. management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amount 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 financial statements referred to above present fairly, in
all material respects, the financial position of Datotek Traditional Systems as
of December 31, 1993 and 1994, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1994 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Dallas, Texas
July 24, 1995
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
-------------------------
ASSETS 1993 1994 1995
----------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents $ 780,089 $ 1,013,323 $ 599,919
Accounts receivable:
Related parties 23,894 720,266 73,318
Trade, less allowance for
uncollectible accounts of
$0, $19,261 and $21,027 1,368,657 947,200 1,091,775
Inventory, net 4,966,162 2,993,924 2,641,818
Deferred income taxes 563,974 263,843 97,052
Prepaid expenses 116,511 70,179 110,166
------------- ------------ ------------
Total current assets 7,819,287 6,008,735 4,614,048
Property and equipment, net 1,525,470 907,606 803,283
Goodwill, net of accumulated 5,033,114 - -
amortization of $2,710,139
Receivable from parent 383,639 924,379 1,202,842
------------- ------------ ------------
Total assets $ 14,761,510 $ 7,840,720 $ 6,620,173
============= ============ ============
LIABILITIES AND EQUITY INVESTMENT
Current liabilities:
Accounts payable $ 136,611 $ 362,537 $ 169,549
Accrued expenses 1,850,189 852,146 792,842
------------- ------------ ------------
Total current liabilities 1,986,800 1,214,683 962,391
Taxes payable to parent 2,125,956 2,044,265 1,877,474
Equity investment 10,648,754 4,581,772 3,780,308
------------- ------------ ------------
Total liabilities and equity
investments $ 14,761,510 $ 7,840,720 $ 6,620,173
============= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31,
------------------------------------------------ -----------------------------
1992 1993 1994 1994 1995
------------ ------------ ------------ ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Sales $ 13,533,356 $ 5,660,900 $ 7,157,191 $ 1,148,842 $ 777,569
5,504,289 2,486,370 3,876,287 858,422 815,574
Cost of goods sold
Engineering 2,564,263 2,466,702 1,508,924 368,341 309,028
Marketing 3,712,710 1,860,110 1,610,025 348,647 297,642
General and
administrative 1,550,472 1,311,712 1,006,872 304,035 163,486
Goodwill amortization 774,325 774,325 580,744 193,581 -
Goodwill write-off - - 4,452,370 - -
------------ ------------ ------------ ----------- -----------
Operating loss (572,703) (3,238,319) (5,878,031) (924,184) (808,161)
Interest Income 146,428 33,618 29,489 2,561 6,697
------------ ------------ ------------ ----------- -----------
Loss before provision
(benefit) for income
taxes (426,275) (3,204,701) (5,848,542) (921,623) (801,464)
------------ ------------ ------------ ----------- -----------
Provision (benefit)
for income taxes:
Current 263,843 (649,915) (81,691) (158,073) (166,791)
Deferred (138,437) (169,613) 300,131 (87,761) 166,791
------------ ------------ ------------ ----------- -----------
125,406 (819,528) 218,440 (245,834) -
------------ ------------ ------------ ----------- -----------
Net loss $ (551,681) $ (2,385,173) $ (6,066,982) $ (675,789) $ (801,464)
============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
STATEMENTS OF CHANGES IN EQUITY INVESTMENT
for the years ended December 31, 1992, 1993 and 1994
<TABLE>
<S> <C>
Balance at January 1, 1992 $ 13,585,608
Net loss (551,681)
-------------
Balance at December 31, 1992 13,033,927
Net loss (2,385,173)
-------------
Balance at December 31, 1993 10,648,754
Net loss (6,066,982)
-------------
Balance at December 31, 1994 4,581,772
Net loss (audited) (801,464)
-------------
Balance at March 31, 1995 (unaudited) $ 3,780,308
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31, Three Months Ended March 31,
-------------------------------------------- ---------------------------------
1992 1993 1994 1994 1995
---------- ------------ -------------- ------------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (551,681) $(2,385,173) $(6,066,982) $ (675,789) $ (801,464)
----------- ----------- ----------- ----------- -----------
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Provision for uncollectible
receivables - - 19,261 - 1,766
Depreciation and amortization 547,287 635,408 623,735 157,209 139,228
Goodwill amortization 774,325 774,325 580,744 193,581 -
Goodwill write-off - - 4,452,370 - -
Provision for deferred taxes (138,437) (169,613) 300,131 (87,761) 166,791
Loss on sale or disposal of property
and equipment 14,594 115,435 63,138 960 221
Changes in certain assets and
liabilities:
Accounts receivable, related parties (141,834) 130,523 (696,372) (4,364) 646,948
Accounts receivable, trade 6,142,883 959,386 402,196 (401,341) (146,341)
Inventory, net 652,978 (1,206,094) 1,972,238 1,064,480 352,106
Prepaid expenses 107,501 (34,825) 46,332 55,560 (39,987)
Accounts payable (492,391) (42,690) 225,927 (10,151) (192,988)
Accrued expenses (4,040,736) 973,566 (998,043) (530,770) (59,304)
Taxes payable to parent 263,843 (649,915) (81,691) (158,073) (166,791)
----------- ----------- ----------- ----------- -----------
Total adjustments 3,690,013 1,485,506 6,909,966 279,330 701,649
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities 3,138,332 (899,667) 842,984 (396,459) (99,815)
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (501,542) (465,369) (69,010) (42,395) (35,126)
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities (501,542) (465,369) (69,010) (42,395) (35,126)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Transfers to parent, net (677,040) (1,545,077) (540,740) (341,235) (278,463)
----------- ----------- ----------- ----------- -----------
Net cash used in financing
activities (677,040) (1,545,077) (540,740) (341,235) (278,463)
----------- ----------- ----------- ----------- -----------
Net change in cash and cash equivalents 1,959,750 (2,910,113) 233,234 (780,089) 413,404
Cash and cash equivalents, beginning of
period 1,730,452 3,690,202 780,089 780,089 1,013,323
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of
period $ 3,690,202 $ 780,089 $ 1,013,323 $ - $ 599,919
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS
--------
Datotek, Inc. ("Datotek") is a Texas Corporation which manufacturers,
sells, and supports a line of secure cryptographic equipment and systems
for radio, telephone, data, video, facsimile and other operations (the
"Traditional Systems"). Datotek is a wholly-owned subsidiary of AT&T Corp.
("AT&T").
2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-----------------------------------------------------------
ORGANIZATION AND BASIS OF PRESENTATION
--------------------------------------
The financial statements include the accounts of the traditional systems
(collectively, "Datotek Traditional Systems"). During 1992, Datotek
established a separate division which included advanced cellular privacy
systems ("Cellular"). These financial statements exclude the accounts of
Cellular for all periods presented.
The quarterly statements for the periods presented do not contain all
information required by generally accepted accounting principles to be
included in a full set of financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary to present fairly Datotek Traditional Systems' financial position
as of March 31, 1995 and results of operations and cash flows for the
three-month periods ended March 31, 1994 and 1995 have been included. The
results of any interim period are not necessarily indicative of the results
of operations to be expected for the entire year.
On May 25, 1995, AT&T entered into a sales agreement (the "Agreement") to
sell Datotek Traditional Systems to Technical Communications Corporation,
Inc. ("TCC") for $4,250,000 in cash. The closing of the transaction, which
was subject to various conditions and approvals as defined in the
Agreement, occurred on May 31, 1995. These financial statements include
the historical basis of assets, liabilities and operations of Datotek
Traditional Systems on a pre-acquisition basis. Certain assets and
liabilities included in these financial statements such as cash and cash
equivalents, related party receivables, receivable from parent, deferred
income taxes, certain leasehold improvements, certain accounts payable and
accrued expenses and taxes payable to parent were not purchased or assumed
by TCC. Certain costs for severance, lease payout, and other costs
approximating $1,800,000 will be recorded at closing.
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
CASH AND CASH EQUIVALENTS:
-------------------------
Datotek Traditional Systems considers all current investments securities
and overnight interest-bearing deposits to be cash equivalents.
INVENTORIES
-----------
Inventories are stated at the lower of cost or market. Raw material
inventory costs are determined principally by the average cost method. The
work in process and finished goods inventory costs are determined by the
first-, first-out ("FIFO") method.
PROPERTY AND EQUIPMENT
----------------------
Property and equipment is stated at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the related assets
of five years for all assets, except leasehold improvements, which are
amortized over the remaining life of the related lease.
When assets are retired or otherwise disposed of, the related cost and
accumulated depreciation and amortization are removed from the accounts and
any resulting gain or loss is reflected in income during the period
incurred.
GOODWILL
--------
Goodwill from the original acquisition of the business in 1990 represents
the excess of cost over fair value of net assets acquired and was being
amortized over ten years using the straight-line method.
INCOME TAXES
------------
Datotek is a member of AT&T's consolidated United States federal income tax
group. The policy for intercompany allocation of federal income taxes
provides that Datotek compute the provision for federal income taxes on a
separate company basis. The separate company provisions and payments are
computed using the tax elections made by AT&T.
Datotek Traditional Systems uses the asset and liability approach to
account for income taxes. The asset and liability approach requires
recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between carrying amounts of
assets and liabilities from tax and financial reporting purposes.
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. PROPERTY AND EQUIPMENT:
----------------------
The aggregate costs for property and equipment are as follows:
<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Machinery $ 3,061,863 $ 2,695,197
Leasehold improvements 91,653 96,671
----------- ------------
Less accumulated depreciation and 3,153,516 2,791,868
amortization (1,628,046) (1,884,262)
----------- ------------
Property and equipment $ 1,525,470 $ 907,606
=========== ============
</TABLE>
4. GOODWILL:
--------
During the fourth quarter of 1994, Datotek Traditional Systems determined
its goodwill had been substantially impaired. Accordingly, Datotek
Traditional Systems wrote off the remaining goodwill of $4,452,370 in 1994.
5. INVENTORIES:
-----------
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
-------------------------------
1993 1994 1995
---------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
Raw materials $3,248,818 $2,896,994 $2,145,961
Work in process 1,336,390 773,919 978,031
Finished goods 2,434,617 1,664,691 1,995,430
Reserve for lower of
cost or market (2,053,663) (2,341,680) (2,477,604)
----------- ------------ -----------
$4,966,162 $ 2,993,924 $2,641,818
=========== ============ ===========
</TABLE>
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. INCOME TAXES:
-------------
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
1993 1994
----------- ------------
<S> <C> <C>
Deferred tax asset:
Inventory $ 698,245 $ 796,171
Property and equipment (158,819) (67,934)
Warranty reserve 24,547 24,491
----------- ------------
563,973 752,728
Valuation allowance - (488,885)
Net deferred tax asset $ 563,973 $ 263,843
============ ============
</TABLE>
The difference between the provision for income taxes attributable to income
before income taxes and the amounts that would be expected using the U.S.
federal statutory income tax rate of 34% is as follows:
<TABLE>
<CAPTION>
1992 1993 1994
---------- ------------ ------------
<S> <C> <C> <C>
Federal income tax
expense (benefit) at $(144,934) $(1,089,598) $(1,988,504)
the statutory rate
Valuation allowance 488,885
increase
Amortization/write-
off of nondeductible 263,271 263,271 1,711,259
intangibles
Other 7,069 6,799 6,800
--------- ----------- -----------
Provision for income
taxes
$ 125,406 $ (819,528) $ 218,440
========= =========== ===========
</TABLE>
7. EMPLOYEE BENEFIT PLANS:
----------------------
Datotek Traditional Systems employees are participants in the Datotek, Inc.
Thrifty Plan (the "Plan"). Plan benefits are based upon employee
contributions and vested portion of employer contributions. All eligible
employees are allowed to participate in the Plan. Amounts charged to
operations for employer contributions were $187,133, $122,782 and $104,211
for the years ended December 31, 1992, 1993 and 1994.
<PAGE>
DATOTEK TRADITIONAL SYSTEMS
(THE TRADITIONAL BUSINESS OF DATOTEK, INC.)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
8. RELATED PARTY TRANSACTIONS:
--------------------------
In the normal course of business, Datotek Traditional Systems made sales to
and purchases from various AT&T units. Purchases from AT&T were
$1,937,482, $2,750,498 and $1,111,657, respectively, for the years ended
December 31, 1992, 1993 and 1994. The aggregate amounts of sales and
related costs were as follows:
<TABLE>
<CAPTION>
1992 1993 1994
---------- --------- -----------
<S> <C> <C> <C>
Sales $ 264,684 $ 126,355 $ 1,607,495
Cost of goods sold 100,253 35,949 915,688
---------- -------- -----------
$ 164,431 $ 90,406 $ 691,807
========== ========== ===========
</TABLE>
9. CONCENTRATION OF CREDIT RISK
----------------------------
Concentration of credit risk with respect to trade receivables exists due
to the limited number of customers of Datotek Traditional Systems. In
particular, at December 31, 1994, Datotek Traditional Systems had
approximately $395,000 in receivables from the Director of
Telecommunications-Brunei. Generally, Datotek Traditional Systems does not
require collateral or other security to support customer receivables and
relies on experience and other fators to determine the amount of credit to
extend. Currently, Datotek Traditional Systems has no reserve for this
receivable and believes the amount will be collected.
<PAGE>
Technical Communications Corporation
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited condensed consolidated Pro Forma Statements of
income of Technical Communications Corporation (TCC), the Company, and Datotek,
Inc. for periods ending October 1, 1994 and April 1, 1995 (collectively, "the
Pro Forma Statements") were prepared to illustrate the estimated effects of the
Acquisition as if the transaction had occurred for income statement presentation
purposes as of October 2, 1993. The Pro Forma Statements do not purport to
represent what the Company's financial position or results of operations would
actually have been if such transactions in fact had occurred on such dates or at
the beginning of the periods indicated or to project the Company's financial
position or results of operations for any future date or period.
The acquisition of Datotek, Inc. has been accounted for as a purchase in
the Company's July 1, 1995 balance sheet, and the total cost has been allocated
to the tangible and intangible assets and liabilities of TCC based on their
estimated respective fair values. Such allocations are tentative and will be
finalized based on studies and valuations which have not yet been completed.
The Pro Forma Statements and accompanying notes should be read in
conjunction with the historical consolidated financial statements of the
Company, including the notes thereto, and other financial information pertaining
to the Company and Datotek, Inc.
<PAGE>
TECHNICAL COMMUNICATIONS CORPORATION ANS SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended October 1, 1994 For TCC
<TABLE>
<CAPTION>
TCC Datotek, Inc. Pro Forma
10/1/94 12/31/94 Adjustments Pro Forma
---------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C>
Net Sales $9,065,715 $7,157,191 $16,222,906
Cost of Sales 3,770,890 3,876,287 7,647,177
---------------- ----------------- -----------
Gross Profit $5,294,825 $3,280,904 $0 $8,575,729
---------------- ----------------- -------------- -----------
Operating Expenses:
Selling, general and
administrative expenses 4,045,176 2,616,897 (2,116,897) (a) 4,545,176
Product Development Costs 1,221,713 1,508,924 (1,358,924) (b) 1,371,713
Goodwill 5,033,114 (4,817,114) (c) 216,000
---------------- ----------------- --------------- ----------
Total Operating Expenses 5,266,889 9,158,935 (8,292,935) 6,132,889
---------------- ----------------- --------------- ----------
Operating Profit (Loss) 27,936 (5,878,031) 8,292,935 2,442,840
Other Income (Expense)
Investment Income 212,211 29,489 241,700
Interest Expense (114,115) (216,000) (d) (330,115)
Other 18,111 18,111
---------------- ----------------- -------------- ---------
116,207 29,489 (216,000) (70,304)
---------------- ----------------- -------------- ----------
Income (Loss) Before
Income Taxes 144,143 (5,848,542) 8,076,935 2,372,536
Income Taxes 28,097 218,440 465,224 (e) 711,761
---------------- ----------------- -------------- ---------
Net income $ 116,046 ($6,066,982) $7,611,711 $1,660,775
================ ================== ============= ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
TECHNICAL COMMUNICATIONS CORPORATION (TCC)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the sixth months ended April 1, 1995 for TCC
And Three Month Ended For March 31, 1995 For Datotek, Inc.
<TABLE>
<CAPTION>
TCC
(Unaudited) Datotek, Inc. Pro Forma
4/1/95 3/31/95 Adjustments Pro Forma
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $1,923,565 777,569 $2,701,134
Cost of Sales 1,337,615 815,574 2,153,189
---------- --------- --------- ------------
Gross Profits $585,950 ($38,005) $ 0 $547,945
---------- --------- --------- ------------
Operating Expenses:
Selling, general and
administrative expenses 1,460,675 461,128 (311,128) (a) 1,610,675
Product Development Costs 560,397 309,028 (234,028) (b) 635,397
Goodwill - 108,000) (f) 108,000
---------- -------- --------- ------------
Total Operating Expenses 2,021,072 770,156 (437,156) 2,354,072
---------- --------- --------- ------------
Operating Profit (Loss) (1,435,122) (808,161) 437,156 (1,806,127)
Other Income (Expense)
Investment income 150,053 6,697 (6,697) 150,053
Interest expense (45,322) (108,000) (d) (153,322)
Other 13,187 13,187
---------- --------- --------- ------------
117,918 6,697 (114,697) 9,918
---------- ----------- --------- -----------
Income (Loss) Before
Income Taxes (1,317,204) (801,464) 322,459 (1,796,209)
Income Taxes (329,306) (119,746) (e) (449,052)
---------- --------- ---------- -----------
Net income ($987,898) ($801,464) $ 442,205 ($1,347,157)
========== =========== ========= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
GENERAL NOTE: On May 31, 1995, the Company completed an asset purchase of the
secure communications business of Datotek, Inc., a subsidiary of
AT&T Corp. for approximately $4,069,000 subject to final price
adjustments. This acquisition was partly funded through loans
amounting to $2,250,000 from two Banks. These loans are payable
in equal installments of principal over a period of 5 years, plus
interest at The First National Bank of Boston's prime rate plus
1/2 of 1%.
No Pro Forma balance sheet was prepared because the asset
purchase is reflected in the Company's July 1, 1995 balance sheet
and latest 10-Q filing.
1) The accompanying Pro Forma Statements show a significant adjustment to
selling, general administrative costs (SG&A), product development costs and
goodwill because the Company has shut down the operations of Datotek, Inc. The
purchased assets are currently being transferred to the Company in
Massachusetts. The Company has retained certain Datotek, Inc. employees, and
their compensation and other related costs are reflected in this Pro Forma.
Also, it should be noted that the Company's unaudited 6 month ended April 1,
1995 statement of income is combined with Datotek, Inc.'s 3 month ended March
31, 1995 statement of income.
The accompanying Pro Form income statements reflect the following adjustments:
(a) Represents the reduction of SG&A expenses resulting from consolidating
operations to one location.
(b) Represents the reduction of product development costs resulting from
consolidating product development activities.
(c) Goodwill has been adjusted for:
1) Elimination of former Datotek, Inc. goodwill.
2) The Company's amortization of goodwill related to its Datotek, Inc.
purchase.
(d) Represents the additional interest expense incurred due to acquisition
loans described above.
(e) Reflects the tax effect of the above Pro Forma entries.
(f) Represents goodwill related to the Company's purchase of Datotek, Inc.
assets.
