-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FoMyA0Yj0NrlRD2DAGB5Fa4ZOMn3vG9YaWNRRgpC8VvWMnDPRt1lLEoGfWmwdU7h /quXH8KOV9beonE4IhqW+w== 0000950147-97-000103.txt : 19970304 0000950147-97-000103.hdr.sgml : 19970304 ACCESSION NUMBER: 0000950147-97-000103 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961217 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970303 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROTEST INC CENTRAL INDEX KEY: 0000891920 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 860485884 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20666 FILM NUMBER: 97549452 BUSINESS ADDRESS: STREET 1: 4747 N 22ND STREET CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 6029526400 MAIL ADDRESS: STREET 1: 4747 N 22ND STREET CITY: PHOENIX STATE: AZ ZIP: 85016 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) December 17, 1996 Commission File Number 0-20666 MICROTEST, INC. (exact name of registrant as specified in its charter) Delaware 86-0485884 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4747 North 22nd Street, Phoenix, Arizona 85016 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (602) 952-6400 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par value Nasdaq National Market 1 The undersigned registrant hereby amends its Current Report on Form 8-K dated December 17, 1996, which was filed on December 30, 1996, solely to add the financial information and pro forma financial information required by Item 7 of Form 8-K. Item 7. Financial Statements and Exhibits Financial Statements of Business Acquired - The required financial statements for Logicraft are set forth below: 2 LOGICRAFT INFORMATION SYSTEMS, INC. (A Majority-Owned Subsidiary of Information Handling Services, Inc., A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES Consolidated Financial Statements Year Ended November 30, 1996, and Independent Auditors' Report Deloitte & Touche LLP - ------------ ----------------------------------------------------- Suite 1200 Telephone:(602)234-5100 2901 North Central Avenue Facsimile:(602)234-5186 Phoenix, Arizona 85012-2799 INDEPENDENT AUDITORS' REPORT Board of Directors Logicraft Information Systems, Inc. Phoenix, Arizona We have audited the accompanying consolidated balance sheet of Logicraft Information Systems, Inc. (a majority owned subsidiary of Information Handling Services, Inc., a wholly-owned subsidiary of TBG Services, Inc.) and subsidiaries as of November 30, 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated 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, such consolidated financial statements present fairly, in all material respects, the financial position of Logicraft Information Systems, Inc. and subsidiaries at November 30, 1996, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. Deloitte & Touche LLP January 28, 1997 LOGICRAFT INFORMATION SYSTEMS, INC. (A Majority-Owned Subsidiary of Information Handling Services, Inc., A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET NOVEMBER 30, 1996 (Amounts in Thousands, Except Share Data) - --------------------------------------------------------------------------------
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 307 Accounts receivable - less allowance for doubtful accounts of $262 3,136 Inventories - less reserve for obsolescence of $1,991 (Note 2) 790 Prepaid expenses 171 Deferred income taxes (Note 4) 1,361 -------- Total current assets 5,765 EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Net (Note 3) 485 INTANGIBLES AND OTHER ASSETS - Net (Note 3) 3,357 -------- TOTAL $ 9,607 ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 2,203 Accrued liabilities 648 Accrued payroll and employee benefits 207 Related party accounts payable (Note 5) 3,478 Short-term debt - related party (Note 5) 249 Deferred revenue 1,289 Income taxes payable 25 -------- Total current liabilities 8,099 DEFERRED TAX LIABILITY (Note 4) 198 -------- Total liabilities 8,297 -------- COMMITMENTS AND CONTINGENCIES (Note 6) MINORITY INTEREST (Note 10) 216 -------- STOCKHOLDERS' EQUITY (Notes 8 and 11): Common stock, $.0001 par value - authorized and issued, 10,000,000 shares 1 Additional paid-in capital 5,430 Retained deficit (4,337) -------- Total stockholders' equity 1,094 -------- TOTAL $ 9,607 ========
See notes to consolidated financial statements. -2- LOGICRAFT INFORMATION SYSTEMS, INC. AND SUBSIDIARIES (A Majority-Owned Subsidiary of Information Handling Services, Inc., A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED NOVEMBER 30, 1996 (Amounts in Thousands) - --------------------------------------------------------------------------------
REVENUES: Product and system sales (Note 9) $ 11,492 Product services 2,813 --------- Total revenues 14,305 COST OF SALES AND SERVICES 8,260 --------- Gross profit 6,045 --------- OPERATING EXPENSES: Sales and marketing 4,806 Research and development 1,358 General and administrative 4,154 --------- Total operating expenses 10,318 --------- LOSS FROM OPERATIONS (4,273) INTEREST EXPENSE - Net 289 OTHER INCOME - Net 53 --------- LOSS BEFORE INCOME TAXES (4,509) NET INCOME TAX BENEFIT (Note 4) 1,050 --------- NET LOSS BEFORE MINORITY INTEREST (3,459) MINORITY INTEREST (Note 1) 8 --------- NET LOSS $ (3,467) =========
See notes to consolidated financial statements. -3- LOGICRAFT INFORMATION SYSTEMS, INC. (A Majority-Owned Subsidiary of Information Handling Services, Inc., A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY YEAR ENDED NOVEMBER 30, 1996 (Amounts in Thousands) - --------------------------------------------------------------------------------
Common Stock Additional Total -------------------- Paid-In Stockholders' Shares Amount Capital (Deficit) Equity BALANCE, DECEMBER 1, 1995 (Unaudited) 10,000 $ 1 $ 5,430 $ (870) $ 4,561 Net loss (3,467) (3,467) ------ ---- ------- ------- ------- BALANCE, NOVEMBER 30, 1996 10,000 $ 1 $ 5,430 $ (4,337) $ 1,094 ====== ==== ======= ======== =======
See notes to consolidated financial statements. -4- LOGICRAFT INFORMATION SYSTEMS, INC. (A Majority-Owned Subsidiary of Information Handling Services, Inc., A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED NOVEMBER 30, 1996 (Amounts in Thousands) - -------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net loss $(3,467) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 421 Deferred provision for income taxes (1,163) Provision for doubtful accounts 214 Provision for inventory obsolescence 1,342 Loss on sale of property, plant and equipment 1 Minority interest 8 Change in operating assets and liabilities: Accounts receivable 871 Inventories 857 Prepaid expenses (40) Intangibles and other assets (163) Accounts payable (525) Accrued liabilities (180) Accrued payroll and employee benefits 200 Deferred revenue 278 Income taxes payable (46) -------- Net cash used in operating activities (1,392) -------- INVESTING ACTIVITIES: Purchases of equipment and leasehold improvements (494) Proceeds from sale of marketable securities 6 -------- Net cash used in investing activities (488) -------- FINANCING ACTIVITIES: Related party accounts payable 1,648 Short-term debt - related party 249 -------- Net cash provided by financing activities 1,897 -------- INCREASE IN CASH AND CASH EQUIVALENTS 17 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR (Unaudited) 290 -------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 307 ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest $ 289 ======== Income taxes $ 113 ========
See notes to consolidated financial statements. -5- LOGICRAFT INFORMATION SYSTEMS, INC. (A Majority-Owned Subsidiary of Information Handling Services, Inc., A Wholly-Owned Subsidiary of TBG Services, Inc.) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED NOVEMBER 30, 1996 - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include the accounts of Logicraft Information Systems, Inc., its wholly-owned subsidiary, Logicraft Information Systems, Europe Corp.("LIS Europe"), and its majority-owned subsidiary, H+H Zentrum ("H+H") (collectively, the "Company"). All intercompany transactions are eliminated. The Company is a majority-owned subsidiary of Information Handling Services, Inc. ("IHS"), a wholly-owned subsidiary of TBG Services, Inc. The Company develops, markets and supports products that make it easier to manage and service local area networks. The following are the significant accounting policies of the Company: a. Inventories are stated at the lower of cost (first-in, first-out ("FIFO") basis) or market. b. Equipment and leasehold improvements are stated at cost. Depreciation and amortization are computed utilizing the straight-line method based on the estimated useful lives of the related assets or, for leasehold improvements, the lease term, if shorter. Estimated useful lives are as follows: Useful Life Equipment 5 years Furniture and fixtures 5 years Leasehold improvements 5 years c Income taxes are provided based upon the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes, which among other things, requires that recognition of deferred income taxes be measured by the provisions of enacted tax laws in effect at the date of the consolidated financial statements. d. Research and Development Expenses - Costs and expenses which can be clearly identified as research and development are charged to research and development expense as incurred. Costs which relate to products that have reached technological feasibility are capitalized and are then amortized into costs of sales. e. Revenue Recognition - The Company recognizes revenue from product sales upon shipment. Sales to distributors in the United States represent approximately 53% of the Company's net sales. The Company also has direct sales to the end user which accounts for approximately 36% of the Company's net sales. The remaining 11% of sales is comprised of international sales which includes Europe and the Far East. The amount of potential product returns, including returns under the Company's warranty program, is estimated and provided for in the period of sale. -6- Revenue from product services including installation services and maintenance contracts, is recognized upon performance of the installation or service or over the time period covered by the maintenance contract. During 1996, sales were made of systems for which the Company has retained a significant performance obligation in the form of delivery of a significantly enhanced version of the software which was sold as part of the systems. The Company orally guaranteed delivery of the new version of the software or in its absence the right of return. Accordingly, the Company has deferred revenue recognition related to these sales. f. Cash and Cash Equivalents - The Company considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents. g Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles necessarily 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 these estimates. h Product Concentration - The market for the Company's products is characterized by rapidly changing technology, short product life cycles and evolving industry standards. The Company has derived substantially all of its revenues from the development and sales of a limited number of CD-ROM management and CD-ROM network solutions. i. Minority Interest - In May 1995, Logicraft acquired an 80% interest in H+H, a networked CD ROM system integration company based in Germany. Accordingly, 20% of the earnings for H+H is allocated to the minority interest account annually. j. New Accounting Pronouncement - In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This Statement establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used and long-lived assets and certain identifiable intangibles to be disposed of. The Company does not expect the adoption of this accounting standard to materially impact its results of operations or financial position. 2. INVENTORIES Inventories consisted of the following at November 30, 1996: (000's) Finished goods $ 2,781 Less reserve for obsolescence (1,991) ------ Inventories - net $ 790 ======= -7- 3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS AND INTANGIBLES Equipment and leasehold improvements consisted of the following at November 30, 1996: (000's) Equipment $ 1,745 Furniture and fixtures 187 Leasehold improvements 23 -------- Total 1,955 Less accumulated depreciation and amortization (1,470) -------- Equipment and leasehold improvements - net $ 485 ======== Intangibles consisted of the following at November 30, 1996: (000's) Goodwill $ 2,708 Software rights 1,051 Other intangibles 299 -------- Intangibles - gross 4,058 Less accumulated amortization (701) -------- Intangibles - net $ 3,357 ======== Goodwill and other intangibles are amortized over their estimated useful lives of 15 years. Software rights is amortized over its estimated useful life of seven years. 4. INCOME TAXES The components of the (benefit) provision for income taxes for the year ended November 30, 1996 are as follows: (000's) Current: State $ 46 Foreign 67 -------- Total current provision 113 Deferred benefit (1,163) -------- Net benefit for income taxes $(1,050) ======== -8- A reconciliation of the difference between the (benefit) provision for income taxes and income taxes at the statutory United States federal income tax rate is as follows for the year ended November 30, 1996: (000's) Income taxes at statutory United States federal income tax rate $(1,502) Increase (decrease) in taxes: State taxes - net (331) Change in valuation allowance 706 Other - net 77 -------- Total $(1,050) ======== The components of deferred income taxes at November 30, 1996 are as follows: (000's) Current: Nondeductible accruals and reserves $ 1,282 Net operating loss carryforward 1,371 Inventory costs capitalized for income tax purposes 63 -------- Total current 2,716 Noncurrent - Excess of tax over book depreciation (198) -------- Total deferred income taxes 2,518 Less valuation allowance (1,355) -------- Net deferred tax asset $ 1,163 ======== Net operating loss ("NOL") carryforwards for income tax purposes totaled approximately $3,427,000 as of November 30, 1996. The NOL carryforwards must be used within five to 15 years of the date of their origination and expire from 2000 through 2011. 5. RELATED PARTY TRANSACTIONS At November 30, 1996, the Company owed Information Handling Services, Inc., its parent company, a total of $3,478,000. The European subsidiary, LIS Europe, owed a total of $249,000 in the form of short-term debt to a company which is an affiliate of IHS. In addition, the German subsidiary, H+H, owed $32,000 to an affiliate of IHS at November 30, 1996. Sales during 1996 to IHS which were made on substantially the same terms as sales to third parties amounted to approximately $2,100,000. -9- 6. COMMITMENTS AND CONTINGENCIES Future minimum rental payments due under the Company's office operating lease at November 30 are as follows: (000's) 1997 $ 262 1998 241 1999 232 2000 206 2001 148 2002 12 ------- Total minimum rental payments $1,101 ======= Rent expense for 1996 was approximately $287,000. 7. EMPLOYEE BENEFIT PLAN 401(k) Plan - Under the Company's 401(k) Plan, full-time employees may contribute to the Plan between 2% and 16% of their total covered compensation, in lieu of receiving such amounts as taxable salary or wages. For employees whose compensation exceeds $66,000 annually, their individual contribution is limited to 8%. The Company may, in its discretion, make matching contributions equal to a percentage of an employee's covered compensation contributed to the 401(k) Plan for the year, or in a fixed dollar amount, as determined each year by the Board of Directors. The Company's contribution to the Plan was approximately $52,500 during 1996. 8. EXPORT SALES Export sales, primarily to customers in Europe and the Far East, were approximately $1,235,000 in 1996. 9. OTHER Major customers accounting for more than 10% of total revenues in the year are summarized below. Customer 1996 Information Handling Services, Inc. 16% 10. MINORITY INTEREST The minority interest in the Company's subsidiary, H+H, is subject to a put option under which the minority shareholders have the option to put the shares to the Company beginning May 1, 1999, and under certain conditions, prior to that date. The Company also has the right to purchase the shares held by the minority shareholders under the same terms and conditions as the put option. The purchase price of the shares subject to this agreement is the greater of DM 320,000 or a price adjusted according to a formula based on the average net income of H+H. At November 30, 1996, the minimum purchase price according to the terms of the agreement of approximately $208,000 is included in minority interest. -10- 11. SUBSEQUENT EVENT On December 17, 1996, Information Handling Services, Inc. and the minority shareholders of the Company, entered into an agreement of purchase and sale of stock with Microtest, Inc. ("Microtest"), in which all of the common stock of the Company was sold to Microtest for a purchase price of approximately $12,500,000. * * * * * * b) Pro Forma Financial Information -The required pro forma financial information is set forth below: The unaudited pro forma consolidated balance sheet at September 28, 1996 combines historical financial information as if the acquisition had occurred on September 28, 1996. The unaudited pro forma consolidated statement of earnings for the year ended December 31, 1995 and the nine months ended September 28, 1996 combine historical statements of earnings/(losses) for Microtest, Inc. (the "Company") and the acquired company, Logicraft Information Systems, Inc. ("Logicraft"), as if the acquisition had occurred on January 1, 1995. The unaudited pro forma consolidated balance sheet at September 28, 1996 combines historical financial information of the Company at September 28, 1996 and Logicraft at August 31, 1996. The unaudited pro forma consolidated statement of earnings for the nine months ended September 28, 1996 combines historical financial information of the Company for the nine months ended September 28, 1996 and Logicraft for the nine months ended August 31, 1996. The unaudited pro forma consolidated statement of earnings for the year ended December 31, 1995 combines historical financial information of the Company for the year ended December 31, 1995 and Logicraft for the year ended November 30, 1995. As the most recent fiscal year end of Logicraft differs from the Company's fiscal year end by less than 93 days, no adjustment was made to Logicraft's income statement for the purpose of the pro forma presentation. The detailed assumptions used to prepare the unaudited pro forma consolidated financial information are contained in the accompanying Unaudited Pro Forma Consolidated Financial Information. The unaudited pro forma consolidated statement of earnings reflects the use of the purchase method of accounting for the acquisition. In connection with the allocation of the purchase price, the Company recorded an expense of $15.7 million to record the value of software research it acquired from Logicraft for products for which technological feasibility has not been established and for which no alternative future use existed. The non-recurring charge is not included in the pro forma consolidated statement of earnings for the year ended December 31, 1995, however, it is reflected as a reduction of retained earnings in the pro forma consolidated balance sheet at September 28, 1996. The unaudited pro forma consolidated financial information assumes the acquisition was funded from currently available cash. The unaudited pro forma consolidated financial information does not purport to represent the results of operation of the Company that actually would have resulted had the acquisition occurred on January 1, 1995, nor should it be taken as indicative of the future results of operations. The unaudited pro forma consolidated financial information should be read in conjunction with the notes to Unaudited Pro Forma Consolidated Financial Information and the separate financial statements and notes thereto of the Company and Logicraft. 15 Microtest, Inc. Unaudited Pro Forma Consolidated Balance Sheet September 28, 1996 (in thousands) ASSETS
PRO FORMA PRO FORMA CONSOLIDATED MICROTEST LOGICRAFT ADJUSTMENTS BALANCE --------------- --------------- --------------- --------------- CURRENT ASSETS: Cash $ 28,291 $ 197 $ 17,000)(a) $ 11,488 Accounts receivable 16,830 1,523 18,353 Inventories 4,774 1,712 6,486 Other current assets 2,353 1,275 (269)(b) 3,359 --------------- --------------- --------------- --------------- Total current assets 52,248 4,707 (17,269) 39,686 PROPERTY AND EQUIPMENT 3,158 540 (75)(b) 3,623 OTHER ASSETS 442 3,347 (2,605)(b) 1,184 --------------- --------------- --------------- --------------- Total assets $ 55,848 $ 8,594 $ (19,949) $ 44,493 =============== =============== =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 4,954 $ 4,639 $ (4,483)(a) $ 5,110 Accrued employee expenses 990 38 1,028 Accrued expenses 3,201 289 893 (b)(c) 4,383 Current portion of long-term debt 0 0 0 Deferred revenue 0 1,099 1,099 --------------- --------------- --------------- --------------- Total current liabilities 9,145 6,065 (3,590) 11,620 LONG-TERM DEBT 0 (63) (63) --------------- --------------- --------------- --------------- Total liabilities 9,145 6,002 (3,590) 11,557 MINORITY INTERESTS 0 203 0 203 --------------- --------------- --------------- --------------- SHAREHOLDERS' EQUITY: Common stock 8 1 (1)(d) 8 Additonal paid-in capital 32,589 5,430 (5,430)(d) 32,589 Retained earnings/(deficit) 14,594 (3,042) 4,769 (b) 624 (15,697)(b) Treasury stock (488) 0 0 (488) --------------- --------------- --------------- --------------- Total shareholders' equity 46,703 2,389 (16,359) 32,733 --------------- --------------- --------------- --------------- Total liabilities and shareholders' equity $ 55,848 $ 8,594 $ (19,949) $ 44,493 =============== =============== =============== ===============
16 PRO FORMA ADJUSTMENT LEGEND: a.Reflects cash payments at the time of acquisition for the stock of Logicraft and the repayments of intercompany debt in the amount of $4,483,000. b.Reflects a pro forma adjustment to allocate the purchase price as follows: (in thousands) Current Assets $ 5,147 Fixed Assets 476 Other Intangibles 148 Purchased Software 594 Purchased Research and Development 15,698 Current Liabilities (9,546) Intercompany Debt 4,483 Cash Purchase Price, and Repayment of Intercompany Debt (17,000) ----------- $ 0 =========== Purchased Research and Development representing incomplete technology for which no alternative future use exists was immediately expensed. The non-recurring charge is reflected as a reduction of retained earnings. c.Reflects a pro forma adjustment to record the liabilities resulting from the acquisition. d.Reflects eliminating entries for consolidating purposes. 17 Microtest, Inc. Unaudited Pro Forma Consolidated Statement of Earnings Nine Month Period ended September 28, 1996 (in thousands)
PRO FORMA PRO FORMA CONSOLIDATED MICROTEST LOGICRAFT ADJUSTMENTS BALANCE -------------- -------------- -------------- ---------------- REVENUES $ 38,287 $ 9,777 $ $ 48,064 COST OF SALES 15,736 5,610 192 (a) 21,538 -------------- -------------- -------------- ---------------- Gross Profit 22,551 4,167 (192) 26,526 OPERATING EXPENSES: Sales and marketing 10,150 3,935 14,085 Research and development 4,642 1,070 5,712 General and administrative 2,982 2,557 (306)(b) 5,233 -------------- -------------- -------------- ---------------- Total operating expenses 17,774 7,562 (306) 25,030 -------------- -------------- -------------- ---------------- UNUSUAL ITEM - Purchased R & D 0 0 -------------- -------------- -------------- ---------------- INCOME/(LOSS) FROM OPERATIONS 4,777 (3,395) 114 1,496 OTHER INCOME/(EXPENSE) - net 586 (180) (644)(c) (238) -------------- -------------- -------------- ---------------- INCOME/(LOSS) BEFORE INCOME TAXES 5,363 (3,575) (530) 1,258 INCOME TAX PROVISION/(BENEFIT) 1,906 131 (191)(d) 1,846 -------------- -------------- -------------- ---------------- NET INCOME/(LOSS) BEFORE MINORITY INTERESTS 3,457 (3,706) (340) (589) MINORITY INTERESTS 0 7 7 -------------- -------------- -------------- ---------------- NET INCOME/(LOSS) $ 3,457 $ (3,699) $ (340) $ (582) ============== ============== ============== ================ NET INCOME/(LOSS) PER COMMON AND EQUIVALENT SHARE $ 0.42 $ (0.45) $ (0.04) $ (0.07) ============== ============== ============== ================ SHARES USED IN PER SHARE CALCULATION 8,255 8,255 8,255 8,255 ============== ============== ============== ================
PRO FORMA ADJUSTMENT LEGEND: a. Reflects pro forma increase in amortization expense associated with the capitalization of purchased software of $594,000 and other intangible assets of $148,000 over their estimated useful lives of 2 to 3 years resulting from the application of purchase accounting principles. b. Reflects pro forma decrease in depreciation and amortization expense associated with the revaluation of fixed assets and intangibles resulting from the application of purchase accounting principles. c. Reflects pro forma decrease in interest income computed on the consideration for the acquisition. d. To reflect the tax effect for the adjustments above using an effective tax rate of 36%. 18 Microtest, Inc. Unaudited Pro Forma Consolidated Statement of Earnings Year ended December 31, 1995 (in thousands)
PRO FORMA PRO FORMA CONSOLIDATED MICROTEST LOGICRAFT ADJUSTMENTS BALANCE --------------- --------------- --------------- ---------------- REVENUES $ 52,537 $ 14,229 $ 0 $ 66,766 COST OF SALES 21,961 8,337 401(a) 30,699 --------------- --------------- --------------- ---------------- Gross Profit 30,576 5,892 (401) 36,067 OPERATING EXPENSES: Sales and marketing 12,585 4,484 17,069 Research and development 5,913 1,039 6,952 General and administrative 3,694 2,269 (409)(b) 5,554 --------------- --------------- --------------- ---------------- Total operating expenses 22,192 7,792 (409) 29,575 --------------- --------------- --------------- ---------------- UNUSUAL ITEM - Purchased R & D 8,776 0 8,776 --------------- --------------- --------------- ---------------- INCOME FROM OPERATIONS (392) (1,900) 8 (2,284) OTHER INCOME/(EXPENSE) - net 1,232 (199) (813)(c) 220 --------------- --------------- --------------- ---------------- INCOME/(LOSS) BEFORE INCOME TAXES 840 (2,099) (805) (2,064) INCOME TAX PROVISION/(BENEFIT) (305) (164) (258)(d) (727) --------------- --------------- --------------- ---------------- NET INCOME/(LOSS) BEFORE MINORITY INTERESTS 1,145 (1,935) (547) (1,337) MINORITY INTERESTS 0 (42) (42) --------------- --------------- --------------- ---------------- NET INCOME/(LOSS) $ 1,145 $ (1,977) $ (547) $ (1,379) =============== =============== =============== ================ NET INCOME/(LOSS) PER COMMON AND EQUIVALENT SHARE $ 0.13 $ (0.23) $ (0.06) $ (0.16) =============== =============== =============== ================ SHARES USED IN PER SHARE CALCULATION 8,534 8,534 8,534 8,534 =============== =============== =============== ================
PRO FORMA ADJUSTMENT LEGEND: a. Reflects pro forma increase in amortization expense associated with the capitalization of purchased software of $594,000 and other intangible assets of $148,000 over their estimated useful lives of 2 to 3 years resulting from the application of purchase accounting principles. b. Reflects pro forma decrease in depreciation and amortization expense associated with the revaluation of fixed assets and intangibles resulting from the application of purchase accounting principles. c. Reflects pro forma decrease in interest income computed on the consideration for the acquisition. d. To reflect the tax effect for the adjustments above using an effective tax rate of 32%. 19 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MICROTEST, INC. /s/ Richard R. Douglas ---------------------------- Date: February 27, 1997 Richard R. Douglas Vice President of Operations 20 c) Exhibits Exhibit 2 - Agreement of Purchase and Sales of stock Dated December 17, 1996 Previously filed Exhibit 23 - Consent of Deloitte & Touche LLP Page 22 Exhibit 99 - Press Release dated December 17, 1996 Previously filed 21 EX-23 2 INDEPENDENT AUDITORS' CONSENT INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements Nos. 33-53922, 33-53924, 33-53926, 33-67946, 33-67948, 33-68120, 33-79070, 33-81668 of Microtest, Inc. on Forms S-8 of our report dated January 28, 1997, appearing in this Form 8-K/A of Microtest, Inc. DELOITTE & TOUCHE LLP Phoenix, Arizona March 3, 1997 -----END PRIVACY-ENHANCED MESSAGE-----