-----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, UL6NYbFuqcFNFKA10dFcTN4mQJHVhcLRXsUyOHwH/4sz45z1x+W1m49Ihd8y8a3A OM/ZX6kfP4oqbjsA2uScnA== 0000926849-96-000007.txt : 19961202 0000926849-96-000007.hdr.sgml : 19961202 ACCESSION NUMBER: 0000926849-96-000007 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960812 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961126 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA SYSTEMS NETWORK CORP CENTRAL INDEX KEY: 0000926849 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 382649874 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13424 FILM NUMBER: 96672771 BUSINESS ADDRESS: STREET 1: 34705 W TWELVE MILE RD STREET 2: STE 300 CITY: FARMINGTON HILLS STATE: MI ZIP: 48331 BUSINESS PHONE: 8104897117 MAIL ADDRESS: STREET 2: 34705 W 12 MILE RD SUITE 300 CITY: FARMINGTON HILLS STATE: MI ZIP: 48331 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K/A CURRENT REPORT Pursuant to Section 13 of the Securities and Exchange Act of 1934 Date of Report: November 25, 1996 DATA SYSTEMS NETWORK CORPORATION (Exact Name of Registrant as Specified in Charter) MICHIGAN 1-13424 38-2649874 (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 34705 W. 12 Mile Rd., Suite 300 Farmington Hills, Michigan 48331 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, incl. area code: (810) 489-7117 Item 2. Acquisition of Assets. (a) Purchase of Assets. On September 12, 1996, Data Systems Network Corporation, a Michigan corporation ("DSNC") purchased certain tangible personal property, executory contracts and other assets (the "Acquired Assets") of Information Decisions, Incorporated, a Michigan corporation ("IDI") and System Constructs, Inc., a New York corporation ("SCI") (each a "Seller" and collectively, the "Sellers") used by the Sellers in the conduct of the business of the network systems integration division of SofTech, Inc., a Massachusetts corporation ("SofTech"), which is the sole shareholder of the Sellers (the "Acquisition"). The Acquisition was made pursuant to the terms and conditions of an Asset Purchase Agreement by and among DSNC, the Sellers and SofTech, dated as of September 12, 1996 (the "Agreement"). A copy of the Agreement is attached hereto as Exhibit 2.2. DSNC intends to continue to use the Acquired Assets in the network systems integration business. As consideration for the Acquired Assets, at the closing of the Agreement, DSNC paid $890,000, assumed certain liabilities of the Sellers and issued 540,000 shares of DSNC common stock to SofTech (collectively, the "Purchase Price"). The cash portion of the Purchase Price was financed through cash reserves on hand. The Purchase Price is subject to certain post- closing adjustments described in Section 2.2(c) and (d) of the Agreement. Pursuant to the Agreement, SofTech agrees not to sell or otherwise dispose of the shares of DSNC common stock received as part of the Purchase Price except as provided in the Registration Rights Agreement (defined below) and agrees to distribute such shares at the time and in the manner provided in the Registration Rights Agreement. After September 12, 1996 until the earlier of three years from that date or such time as SofTech shall have distributed or sold all such shares, SofTech agrees not to (i) acquire "beneficial ownership" (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")) of DSNC common stock other than from DSNC, (ii) participate in any "solicitation" of "proxies" (as such terms are used in the Exchange Act) to vote any voting securities of DSNC; (iii) form, join or participate in a "group" (as defined in the Exchange Act) or otherwise act, alone or in concert with others, to seek to control or influence the management, Board of Directors or policies of DSNC; (iv) vote such shares other than in the same manner and proportion (whether for, against or abstaining on any proposal) as the other shareholders of DSNC vote shares with respect to any matter submitted to the shareholders of DSNC (or, if the board of directors of SofTech determines in good faith that its fiduciary duties so require, not to vote such shares in any manner on such a proposal); or (v) transfer voting rights with respect to such shares. Item 7. Financial Statements and Exhibits. (a) Financial Statements of Business Acquired. Network Services Group (a division of SofTech, Inc.) Consolidated Balance Sheets As of May 31, 1996 1995 Assets: Current assets: Accounts receivable (less allowance of $241,868 in 1996, and $42,254 in 1995) $6,529,825 $8,912,185 Unbilled costs and fees 685,973 1,146,738 Inventory 1,602,737 1,518,672 Prepaid expenses and other assets 469,757 897,782 --------- ---------- Total current assets 9,288,292 12,475,377 Property and equipment, at cost: Data processing equipment 1,328,359 2,149,943 Office furniture 845,136 898,772 Leasehold improvements 69,290 179,906 Land and building 513,540 500,000 --------- -------- Total property and equipment 2,756,325 3,728,621 Less accumulated depreciation & amortization 1,397,210 2,218,309 --------- --------- 1,359,115 1,510,312 Goodwill, net 1,030,408 2,419,076 --------- --------- 11,677,815 16,404,765 ========== ========== Liabilities and Investment of Parent: Current liabilities: Accounts payable $1,799,283 $2,695,166 Accrued expenses 1,010,718 1,512,614 Deferred maintencance revenue 1,311,463 1,066,201 --------- --------- Total current liabilities 4,121,464 5,273,981 --------- --------- Commitments and contingencies Investment of parent 7,556,351 11,130,784 --------- ---------- $11,677,815 $16,404,765 ========== ========== Network Services Group (a division of SofTech, Inc.) Consolidated Statements Of Operations And Investment Of Parent For The Years Ended May 31, 1996 1995 1994 Revenue: Products $20,730,048 $29,960,153 $11,442,062 Services 9,600,106 9,360,739 5,880,855 ---------- ---------- ---------- 30,330,154 39,320,892 17,322,917 Cost of products sold 17,753,866 25,315,236 9,023,845 Cost of services provided 7,483,452 5,706,001 4,357,165 ---------- ---------- --------- 5,092,836 8,299,655 3,941,907 Selling, general and administrative 8,950,518 9,035,628 3,125,823 Loss on carrying value of goodwill 700,000 0 0 --------- --------- --------- Income (loss) before income taxes (4,557,682) (735,973) 816,084 Provision (benefit) for income taxes 24,869 (113,928) 205,652 ---------- ---------- -------- Net income (loss) (4,582,551) (622,045) 610,432 Investment of parent company 1,008,118 7,299,526 1,193,930 Parent company investment, beginning of year 11,130,784 4,453,303 2,648,941 ---------- --------- --------- Parent company investment, end of year $7,556,351 $11,130,784 $4,453,303 ========== ========== ========= Network Systems Group (a division of SofTech, Inc.) Consolidated Statements of Cash Flows For the Years ended May 31, 1996 1995 1994 Cash flows from operating activities: Net income (loss) $(4,582,551) $ (622,045) $ 610,432 Adjustments to reconcile net income (loss) to net cash used by operating activities: Depreciation and amortization 1,398,557 1,195,347 607,168 (Gain) loss on disposal of equipment 8,212 (24,773) 1,594 Loss on carrying value of goodwill 700,000 0 0 Change in current assets and liabilities: Accounts receivable and unbiled costs and fees 2,843,125 (5,664,144) (2,078,970) Inventory (313,841) (566,715) (715,805) Prepaid expenses and other assets 506,237 (660,286) (117,056) Accounts payable (895,883) 1,319,515 133,737 Accrued expenses (580,108) 603,913 349,230 Deferred maintenance revenue 245,262 329,221 328,007 --------- ---------- --------- Total adjustments 3,911,561 (3,467,922) (1,492,095) --------- ---------- --------- Net cash used by operating activities (670,990) (4,089,967) (881,663) --------- ---------- --------- Cash flow from investing activities: Capital expenditures (342,448) (711,246) (386,084) Proceeds from sale of capital equipment 5,320 21,569 73,817 Payments for the purchase of CCS and SCI 0 (2,519,882) 0 --------- ----------- --------- Net cash used by investing activities (337,128) (3,209,559) (312,267) --------- ----------- --------- Cash flows from financing activities: Cash provided by parent company 1,008,118 7,299,526 1,193,930 --------- ---------- --------- Net cash provided from financing activities 1,008,118 7,299,526 1,193,930 Net change in cash and cash equivalents $ -0- $ -0- $ -0- ========= ========== ========== REPORT OF INDEPENDANT ACCOUNTANTS To the Stockholders and Board of Directors of SofTech, Inc. We have audited the accompanying consolidated balance sheets of Network Systems Group, a division of SofTech, Inc. as of May 31, 1996 and May 31, 1995 and the statements of operations and investment of parent and cash flows for the three years in the period ended May 31, 1996. These financial statements are the responsibility of Network Systems Group and SofTech, Inc.'s 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 amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Notes A and E, certain corporate expenses presented in the financial statements represent allocations of the cost of services provided to Network Systems Group by SofTech, Inc. As a result, the financial statements presented may not be indicative of the financial position or results of operations that would have been achieved had the Network Systems Group operated as a nonaffiliated entity. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Network Systems Group, a division of SofTech, Inc., as of May 31, 1996 and May 31, 1995, and the results of operations and cash flows for the three years in the period ended May 31, 1996 in conformity with generally accepted accounting principles. As discussed in Note F, on September 12, 1996, certain assets and liabilities of the Network Systems Group were sold to Data Systems Network Corporation. /s/Coopers & Lybrand L.L.P. Boston, Massachusetts November 21, 1996 (b) Pro Forma Financial Information. The following unaudited pro forma financial statements were prepared to illustrate the effects of the acquisition as if it had occured on January 1, 1995. The pro forma adjustments are based on the available information and upon certain assumptions the Company believes are reasonable. The pro forma financial statements do not purport to represent what the Company's financial statements would actually have been if such transaction in fact had occured on January 1, 1995, or to project the Company's financial statements for any future period. The information below reflects the elimination of recorded goodwill as well as the elimination of certain administrative expenses which were deemed to be duplicative. Data Systems Network Corporation Proforma Balance Sheet Data as of December 31, 1996 (in thousands) Assets: Current assets $21,203 Other assets 7,372 ------ Total assets 28,575 ====== Liabilities: Current liabilities 16,948 Other liabilities 100 ------ Total liabilities 17,048 Equity 11,527 ------ Total liabilities & equity $28,575 Data Systems Network Corporation Proforma Income Statement (in thousands) Year ending Nine months ending December 31, 1995 September 30, 1996 Revenue $ 68,419 $40,331 Cost of revenue 58,919 34,437 ------- ------ Gross profit 9,500 5,894 Selling expense 7,827 5,846 General & administrative expense 1,306 1,463 Amortization of goodwill 133 89 ------- ------ Income (loss) from operations 367 (1,504) Other income(expense) (280) 188 -------- ------- Income(loss) before extraordinary item 87 (1,316) Extraordinary items 322 (89) -------- ------- Net income(loss) $ 409 $(1,405) ======== ======= Earnings(loss) per share $0.13 $(0.43) (c) Exhibits. 2.2 Asset Purchase Agreement, dated September 12, 1996, by and among DSNC, IDI, SCI and SofTech, previously provided with original current report on Form 8-K, filed September 27, 1996. Schedules to the Agreement, listed on pp iii-iv of the Table of Contents of the Agreement, were not filed, but will be provided to the Commission supplementally upon request. 10.17 Registration Rights Agreement, dated as of September 12, 1996, made and entered into by DSNC and SofTech, previously provided with original current report on Form 8-K filed september 27, 1996. SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DATA SYSTEMS NETWORK CORPORATION Date: November 25, 1996 /s/ Philip M. Goy By: Philip M. Goy Its: Chief Financial Officer EXHIBIT INDEX Exhibit Number Description 2.2 Asset Purchase Agreement, dated September 12, 1996, by and among DSNC, IDI, SCI and SofTech incorporated herein by reference. 10.17 Registration Rights Agreement, dated as of September 12, 1996, made and entered into by DSNC and SofTech incorporated herin by reference. -----END PRIVACY-ENHANCED MESSAGE-----