-----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, HoaDOxdFosDogtuUfMfAOMkqe0oVDRqyyr8/gA2fISTNGACdtpU4Lu6DLODz7uPr KQ0zfjmGxn/yMq+MUBbBMQ== 0000355199-03-000013.txt : 20030417 0000355199-03-000013.hdr.sgml : 20030417 20030417165041 ACCESSION NUMBER: 0000355199-03-000013 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030417 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESSEX CORPORATION CENTRAL INDEX KEY: 0000355199 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 540846569 STATE OF INCORPORATION: VA FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10772 FILM NUMBER: 03654644 BUSINESS ADDRESS: STREET 1: 9150 GILFORD RD CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 3019397000 MAIL ADDRESS: STREET 1: 9150 GUILFORD ROAD CITY: COLUMBIA STATE: MD ZIP: 21046 8-K 1 form8kproforma.txt FORM 8-K PRO FORMA SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report: February 28, 2003 ESSEX CORPORATION (Exact name of Registrant as specified in its charter) Commission File No. 0-10772 Virginia 54-0846569 (State or other jurisdiction of (IRS Employer ID No.) incorporation or organization) 9150 Guilford Road Columbia, Maryland 21046-2306 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (301) 939-7000 ESSEX CORPORATION Item 2. Acquisition or Disposition of Assets Pursuant to an Agreement and Plan of Merger dated as of February 21, 2003 (the "Agreement") by and among the Registrant, its wholly-owned subsidiary ("Merger Sub"), Sensys Development Laboratories, Inc., a Maryland corporation ("SDL"), and the principal shareholders of SDL, Merger Sub was merged with and into SDL with SDL as the surviving corporation (the "Merger"). The Merger became effective as of February 28, 2003. Pursuant to the terms of the Agreement, SDL shareholders received a total of $309,000 in cash and a maximum number of 1,104,907 shares and a maximum number of 194,769 options exercisable for shares of Registrant's common stock in exchange for the outstanding common stock and options held by SDL shareholders. The terms of the Merger are contained in the Agreement, which was previously filed as an Exhibit to Registrant's report on Form 8-K filed with the Commission on March 7, 2003. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired (1) Sensys Development Laboratories, Inc. Financial Statements as of September 30, 2002 and 2001, together with Auditors' Report are attached hereto as Exhibit 99.1 and are incorporated herein by reference. (2) Sensys Development Laboratories, Inc. Unaudited Financial Statements for the Quarters ended December 31, 2002 and 2001 are attached hereto as Exhibit 99.2 and are incorporated herein by reference. (b) Pro Forma Financial Information (unaudited) presenting the effect of the Merger as if it had been completed on December 31, 2001 are attached hereto as Exhibit 99.3 and are incorporated herein by reference. (c) Exhibits 2.1 Agreement and Plan of Merger among Essex Corporation, SDL Acquisition, Inc., Sensys Development Laboratories, Inc. and the Principal Shareholders, dated February 21, 2003 (excluding Exhibits and Schedules) (incorporated by reference from Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed March 7, 2003). 23.1 Consent of Independent Accountants 99.1 Sensys Development Laboratories, Inc. Financial Statements as of September 30, 2002 and 2001, together with Auditors' Report 99.2 Sensys Development Laboratories, Inc. Unaudited Financial Statements for the Quarters ended December 31, 2002 and 2001 99.3 Pro Forma Financial Information (unaudited) SIGNATURES 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. ESSEX CORPORATION (Registrant) DATE: April 17, 2003 /s/ Joseph R. Kurry, Jr. --------------------------------------------------------- Joseph R. Kurry, Jr. Sr. Vice President, Treasurer and Chief Financial Officer EXHIBIT INDEX Exhibit NUMBER DESCRIPTION - ------ ----------- 2.1 Agreement and Plan of Merger among Essex Corporation, SDL Acquisition, Inc., Sensys Development Laboratories, Inc. and the Principal Shareholders, dated February 21, 2003 (excluding Exhibits and Schedules)(incorporated by reference from Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed March 7, 2003). 23.1 Consent of Independent Accountants 99.1 Sensys Development Laboratories, Inc. Financial Statements as of September 30, 2002 and 2001, together with Auditors' Report 99.2 Sensys Development Laboratories, Inc. Unaudited Financial Statements for the Quarters ended December 31, 2002 and 2001 99.3 Pro Forma Financial Information (unaudited) EX-23 3 ex231consent.txt EX-23.1 CONSENTS OF INDEPENTS ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors Essex Corporation We hereby consent to the inclusion as an exhibit to Form 8-K Current Report of our report dated January 10, 2003 relating to the balance sheet of Sensys Development Laboratories, Inc. as of September 30, 2002 and the related statements of operations, changes in stockholders' equity and cash flows for the years ended September 30, 2002 and 2001. STEGMAN & COMPANY Baltimore, Maryland April 17, 2003 EX-99 4 ex991finst.txt EX-99.1 SDL FINANCIALS SEPT EXHIBIT 99.1 SENSYS DEVELOPMENT LABORATORIES, INC. REPORT ON AUDITS OF FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001 NO EXTRACTS FROM THIS REPORT MAY BE PUBLISHED WITHOUT OUR WRITTEN CONSENT. STEGMAN & COMPANY TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT FINANCIAL STATEMENTS PAGE ---- Balance Sheet 1 - 2 Statements of Operations 3 Statement of Stockholders' Equity 4 Statements of Cash Flows 5 NOTES TO FINANCIAL STATEMENTS 6 - 9 SUPPLEMENTARY INFORMATION Contract Costs 10 Operating Expenses 11 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Sensys Development Laboratories, Inc. Annapolis Junction, Maryland We have audited the accompanying balance sheet of Sensys Development Laboratories, Inc. as of September 30, 2002 and the related statements of operations, changes in stockholders' equity and cash flows for the years ended September 30, 2002 and 2001. Theses financial statements are the responsibility of the management of Sensys Development Laboratories, Inc. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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 Sensys Development Laboratories, Inc. as of September 30, 2002 and the results of their operations, changes in stockholders' equity and cash flows for the years ended September 30, 2002 and 2001 in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of expressing an opinion on the basic financial statements taken as a whole. The supplementary information for the years ended September 30, 2002 and 2001 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Baltimore, Maryland January 10, 2003 SENSYS DEVELOPMENT LABORATORIES, INC. BALANCE SHEET SEPTEMBER 30, 2002
ASSETS CURRENT ASSETS: Cash $ 198 Accounts receivable - trade 738,749 Prepaid expenses 14,284 Other current assets 1,335 ----------- Total current assets 754,566 ----------- PROPERTY AND EQUIPMENT - at cost: Office furniture and equipment 61,825 Leasehold improvements 124,392 ----------- 186,217 Less accumulated depreciation and amortization 144,031 ----------- Net value of property and equipment 42,186 ----------- OTHER ASSETS - Deposits 6,011 ----------- TOTAL ASSETS $ 802,763 =========== See accompanying notes.
1
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 11,311 Note payable 85,000 Accrued vacation 69,830 Retirement plan contribution payable 127,475 Deferred income taxes 197,879 Other current liabilities 12,348 --------- Total current liabilities 503,843 --------- STOCKHOLDERS' EQUITY: Common stock - par value $.001 per share; 1,000,000 shares authorized, 773,800 shares issued and outstanding 774 Paid-in capital 3,323 Retained earnings 294,823 --------- Total stockholders' equity 298,920 --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 802,763 ========= See accompanying notes.
2 SENSYS DEVELOPMENT LABORATORIES, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001 ---------- ---------- REVENUES $3,100,754 $2,717,614 CONTRACT COSTS 2,667,679 2,621,990 ---------- ---------- GROSS PROFIT ON CONTRACTS 433,075 95,624 OPERATING EXPENSES 374,652 306,205 ---------- ---------- INCOME (LOSS) FROM OPERATIONS 58,423 (210,581) OTHER INCOME 58,489 56,418 INTEREST EXPENSE (160) (737) ---------- ---------- INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES 116,752 (154,900) PROVISION (BENEFIT) FOR INCOME TAXES 46,175 (61,263) ---------- ---------- NET INCOME (LOSS) $ 70,577 $ (93,637) ========== ========== See accompanying notes.
3 SENSYS DEVELOPMENT LABORATORIES, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS ------ ------- -------- Balances at September 30, 2000 $773 $1,523 $316,082 Stock options exercised 1 1,800 1,801 Net loss - - (93,637) ---- ------ -------- Balances at September 30, 2001 774 3,323 224,246 Net income - - 70,577 ---- ------ -------- Balances at September 30, 2002 $774 $3,323 $294,823 ==== ====== ======== See accompanying notes.
4 SENSYS DEVELOPMENT LABORATORIES, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 70,577 $(93,637) Noncash items included in net income (loss): Depreciation and amortization 38,444 41,446 Proceeds from sale of equipment - 9,200 Gain on disposal of equipment - (2,430) Deferred income taxes 46,175 (61,263) Net changes in: Accounts receivable - trade (103,494) 14,426 Prepaid expenses (506) (242) Other current assets 7,865 (8,792) Accounts payable - trade (9,204) (9,975) Accrued vacation 17,942 (6,416) Accrued rent (3,573) (4,675) Retirement plan contribution payable (57,523) 39,688 Other current liabilities 929 280 -------- -------- Net cash provided (used) by operating activities 7,632 (82,390) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES - Purchase of property and equipment (2,738) - -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in line of credit note payable (5,000) 77,500 Exercise of common stock - 1,800 -------- -------- Net cash (used) provided by financing activities (5,000) 79,300 -------- -------- NET DECREASE IN CASH (106) (3,090) CASH AT BEGINNING OF THE YEAR 304 3,394 -------- -------- CASH AT END OF THE YEAR $ 198 $ 304 ======== ======== Supplemental disclosures of cash flows information: Cash paid during the year for: Interest $ 160 $ 737 ======== ======== Income taxes $ - $ - ======== ======== See accompanying notes.
5 SENSYS DEVELOPMENT LABORATORIES, INC. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Sensys Development Laboratories, Inc. (the "Company") was founded in 1996 and provides both system and software engineering technical support to U. S. Government customers and prime contractors supporting government programs. Core competencies include signal intelligence (SIGINT) systems engineering, SIGINT processing, content-based filtering and selection and world-wide web technologies. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE Accounts receivables arise from U. S. Government prime contracts and subcontracts. Retainages (which are not material) will be collected upon job completion or settlement of audits performed by cognizant U. S. Government audit agencies. Company cost records have been audited through 2000. In the year an audit is settled, the difference between audit adjustments and previously established reserves is reflected in income. CONTRACT ACCOUNTING Revenue on time and materials contracts (approximately 95% and 96% of total revenues in 2002 and 2001, respectively) is recognized to the extent of billable rates multiplied by hours delivered, plus other direct costs. Revenues consist of services rendered primarily on time and materials contracts. Revenue on fixed-price and other contracts (approximately 5% and 4% of total revenues in 2002 and 2001, respectively) is recognized on the percentage-of-completion method of accounting based on costs incurred in relation to the total estimates costs. Anticipated losses are recognized as soon as they become known. Furthermore, while such contracts are fully funded by appropriations, they may be subject to other risks inherent in government contracts, such as termination for the convenience of the government. 6 INCOME TAXES The Company files its income tax returns on the cash basis. Deferred income taxes are recorded under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences, measured by enacted tax rates, attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the rate change becomes effective. Valuation allowances are recorded for deferred tax assets when it is more likely than not that such deferred tax assets will not be realized. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is calculated using straight-line methods based on useful lives as follows: Leasehold improvements Remaining life of lease Furniture and equipment 3 to 7 years Expenditures for repairs and maintenance are charged to expense as incurred. When assets are retired or otherwise disposed of, the asset and related allowance for depreciation are eliminated from the accounts and any resulting gain or loss is reflected in income. Depreciation expense for the years ended September 30, 2002 and 2001 was $38,444 and $41,446, respectively. 2. LINE-OF-CREDIT The Company has a line-of-credit loan with a commercial bank for $150,000. This loan has an interest rate of 5.25% and matures on May 15, 2003. This loan is personally guaranteed by three officers of the Company and has an outstanding balance of $85,000 as of September 30, 2002. 3. FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK The Company grants credit to subcontractors in the state of Maryland. Accounts receivable from these subcontractors totaled $738,749 at September 30, 2002. The Company has two major customers and sales to these customers comprise approximately 65% and 73% of total sales for the years ended September 30, 2002 and 2001, respectively. 7 4. COMMITMENTS AND CONTINGENCIES The Company leases office space under a long-term lease which expires in December 2003. The lease contains provisions to pay for proportionate increases in operating costs and property taxes. As of September 30, 2002, the Company is committed to pay aggregate rentals under these leases as follows:
2003 $174,123 2004 43,850
Rental expense charged to operations, including payments made under short-term leases, amounted to $164,248 and $166,181 in 2002 and 2001, respectively. 5. RETIREMENT PLAN The Company has a qualified defined contribution retirement plan, the Sensys Development Laboratories, Inc. Employee Benefit Plan, which includes a salary reduction 401(k) feature for its employees. The Plan provides for a mandatory contribution of 8% of covered compensation. The Company may make additional contributions at the discretion of the Board of Directors. Total contributions under the Plan were $219,510 and $278,070 for the years ended September 30, 2002 and 2001, respectively. 6. INCOME TAXES The components of the provision (benefit) for income taxes are as follows:
2002 2001 -------- -------- Current tax expense $ - $ - Deferred tax expense (benefit) 46,175 (61,263) -------- -------- Total provision (benefit) for income taxes $ 46,175 $(61,263)
======== ======== A reconciliation of the differences between the statutory federal income tax rate and the effective tax rate for the Company is as follows:
2002 2001 ------ ------ Federal income tax rate 35.0% 35.0% Increase (decrease) resulting from - State income taxes, net of federal income tax benefits 4.5 4.5 ------ ------ Effective tax rate 39.5% 39.5%
====== ====== The deferred income tax provision arises from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. The principal sources of these timing differences are deferrals related to cash basis income tax reporting, depreciation expense and accrued vacation. 8 The deferred tax liability at September 30, 2002 consists of the following:
Cash basis tax reporting $289,870 Accrued vacation (27,618) Depreciation (31,483) Net operating loss (32,890) -------- Total deferred tax liability $197,879
======== The Company has a net operating loss ("NOL") carryforward of approximately $53,000 that is available, subject to certain limitations, to offset future income and taxes payable. The NOL begins to expire in 2019. The evaluation of the realizability of such deferred tax assets in future periods is made based upon a variety of factors for generating future taxable income, such as intent and ability to sell assets and historical and projected operating performance. At this time, the Company has not established a valuation reserve for any of its deferred tax assets. 7. STOCK OPTIONS As of September 30, 2002, there were 131,100 incentive stock options outstanding with exercise prices per share, as follows:
NUMBER OF EXERCISE OPTIONS PRICE --------- -------- 28,300 $.004 102,800 $3.00 ------- 131,100 =======
9 SUPPLEMENTARY INFORMATION SENSYS DEVELOPMENT LABORATORIES, INC. CONTRACT COSTS FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001 ---------- ---------- Consultants $ 20,072 $ 108,680 Depreciation 4,634 36,305 Education and training 3,482 10,155 Employee welfare 375,981 425,294 Insurance - 2,800 Miscellaneous 7,018 5,043 Office equipment and supplies 16,980 35,072 Other direct costs 30,520 5,744 Payroll taxes 134,996 120,862 Recruitment and relocation 2,595 4,755 Rent and utilities 177,038 180,416 Repairs and maintenance 5,703 2,074 Salaries - direct 1,107,284 847,613 Salaries - indirect 448,090 509,133 Salaries - bonus 263,169 220,748 Subcontractors 8,553 - Taxes and licenses 100 100 Travel 25,679 71,145 USS components 35,785 36,051 ---------- ---------- $2,667,679 $2,621,990 ========== ==========
10 SENSYS DEVELOPMENT LABORATORIES, INC. OPERATING EXPENSES FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
2002 2001 ---------- ---------- Computer $ - $ 453 Depreciation 33,810 5,141 Education and training 305 1,085 Entertainment 4,192 6,696 Insurance 10,846 9,031 Marketing 7,348 3,565 Miscellaneous expense 4,061 4,986 Office equipment and supplies 2,051 17,609 Organizational costs 10,301 - Professional fees 50,636 11,468 Rent 5,051 24,936 Repairs and maintenance 65 - Salaries 242,266 217,472 Security 2,347 2,619 Taxes and licenses - 426 Travel 1,373 718 ---------- ---------- $ 374,652 $ 306,205 ========== ==========
11 EX-99 5 ex992finstdec.txt EX-99.2 SDL FINANCIALS DEC EXHIBIT 99.2 SENSYS DEVELOPMENT LABORATORIES, INC. UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTERS ENDED DECEMBER 31, 2002 AND 2001
SENSYS DEVELOPMENT LABORATORIES, INC. UNAUDITED BALANCE SHEETS AS OF DECEMBER 31, 2002 2001 ------------ ------------ ASSETS CURRENT ASSETS Cash $ 138,449 $ 340,314 Accounts receivable 899,300 340,381 Inventory 46,000 -- Prepaid expenses 25,347 39,141 ------------ ------------ 1,109,096 719,836 ------------ ------------ PROPERTY AND EQUIPMENT - AT COST: Office furniture and equipment 61,825 59,088 Leasehold improvements 124,392 124,392 ------------ ------------ 186,217 183,480 Less accumulated depreciation and amortization (153,631) (115,189) ------------ ------------ Net value of property and equipment 32,586 68,291 ------------ ------------ OTHER ASSETS - DEPOSITS 6,011 6,011 - ----------------------- ------------ ------------ TOTAL ASSETS $ 1,147,693 $ 794,138 - ------------ ============ ============ The accompanying notes are an integral part of these statements.
SENSYS DEVELOPMENT LABORATORIES, INC. UNAUDITED BALANCE SHEETS AS OF DECEMBER 31, 2002 2001 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 116,183 $ 2,081 Accrued wages and vacation 345,431 219,854 Retirement plan contribution payable 65,170 168,909 Deferred income taxes 228,704 153,704 Other current liabilities 12,870 17,598 ------------ ------------ Total current liabilities 768,358 562,146 ------------ ------------ STOCKHOLDERS' EQUITY Common stock, par value $.001 per share; 1 million shares authorized; 783,800 and 773,800 shares issued and outstanding, respectively 784 774 Paid-in capital 33,313 3,323 Retained earnings 345,238 227,895 ------------ ------------ Total stockholders' equity 379,335 231,992 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,147,693 $ 794,138 ============ ============ The accompanying notes are an integral part of these statements.
SENSYS DEVELOPMENT LABORATORIES, INC. STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED DECEMBER 31, 2002 2001 ------------- ------------- unaudited) (unaudited) Revenues $ 1,100,078 $ 599,522 Contract Costs (679,897) (330,961) ------------- ------------- Gross Profit on Contracts 420,181 268,561 Operating Expenses (339,334) (263,953) ------------- ------------- Income From Operations 80,847 4,608 Interest Income 393 1,041 ------------- ------------- Income Before Provision For Income Taxes 81,240 5,649 Provision For Income Taxes (32,500) (2,000) ------------- ------------- Net Income $ 48,740 $ 3,649 ============= ============= The accompanying notes are an integral part of these statements.
SENSYS DEVELOPMENT LABORATORIES, INC. STATEMENTS OF CASH FLOWS FOR THE QUARTERLY PERIODS ENDED DECEMBER 31, 2002 2001 ------------ ------------ (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 48,740 $ 3,649 Adjustments to reconcile Net Loss to Net Cash Provided By Operating Activities: Depreciation and amortization 9,600 9,601 Deferred income taxes 30,825 2,000 Stock compensation expense 30,000 -- Change in Assets and Liabilities: Accounts receivable (160,551) 295,479 Inventory (46,000) -- Prepaid expenses and other (9,728) (16,768) Accounts payable 104,872 (17,887) Accrued wages and vacation 275,601 167,966 Retirement plan contribution payable (62,305) (16,089) Other current liabilities 2,197 2,059 ------------ ------------ Net Cash Provided By Operating Activities 223,251 430,010 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net change in line of credit note payable (85,000) (90,000) ------------ ------------ Net Cash Used In Financing Activities (85,000) (90,000) ------------ ------------ CASH AND CASH EQUIVALENTS Net increase 138,251 340,010 Balance - beginning of period 198 304 ------------ ------------ Balance - end of period $ 138,449 $ 340,314 ============ ============ Supplement disclosures of cash flows information: Cash paid during the period for: Interest $ 167 $ 73 ============ ============ Income taxes $ -- $ -- ============ ============ The accompanying notes are an integral part of these statements.
SENSYS DEVELOPMENT LABORATORIES, INC. NOTES TO INTERIM UNAUDITED FINANCIAL INFORMATION 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Sensys Development Laboratories, Inc. (the "Company") was founded in 1996 and provides both system and software engineering technical support to U.S. Government customers and prime contractors supporting government programs. Core competencies include signal intelligence (SIGINT) systems engineering, SIGINT processing, content-based filtering and selection and world-wide web technologies. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments for a fair presentation of results for such period. The results of operations for any interim period are not necessarily indicative of results for the full year. ACCOUNTS RECEIVABLE Accounts receivables arise from U.S. Government prime contracts and subcontracts. Retainages (which are not material) will be collected upon job completion or settlement of audits performed by cognizant U.S. Government audit agencies. Company cost records have been audited through 2000. In the year an audit is settled, the difference between audit adjustments and previously established reserves is reflected in income. CONTRACT ACCOUNTING Approximately all of the Company's revenue are on time and materials contracts which are recognized to the extent of billable rates multiplied by hours delivered, plus other direct costs. Revenues are from prime contracts with departments or agencies of the U.S. Government or under subcontracts where the prime customer is the U.S. Government. While such contracts are fully funded by appropriations, they may be subject to other risks inherent in government contracts, such as termination for the convenience of the government. INCOME TAXES The Company files its income tax returns on the cash basis. Deferred income taxes are recorded under the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences, measured by enacted tax rates, attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the rate change becomes effective. Valuation allowances are recorded for deferred tax assets when it is more likely than not that such deferred tax assets will not be realized. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is calculated using straight-line methods based on useful lives as follows: Leasehold improvements Remaining life of lease Furniture and equipment 3 to 7 years Expenditures for repairs and maintenance are charged to expense as incurred. When assets are retired or otherwise disposed of, the asset and related allowance for depreciation are eliminated from the accounts and any resulting gain or loss is reflected in income. 2. LINE-OF-CREDIT The Company has a line-of-credit loan with a commercial bank for $150,000. This loan has an interest rate of 5.25% and matures on May 15, 2003. This loan is personally guaranteed by three officers of the Company and has no outstanding balance as of December 31, 2002. 3. INCOME TAXES The Company has a net operating loss ("NOL") carryforward of approximately $53,000 that is available, subject to certain limitations, to offset future income and taxes payable. The NOL begins to expire in 2019. The Company estimates its effective tax rate is approximately 40%. The evaluation of the realizability of such deferred tax assets in future periods is made based upon a variety of factors for generating future taxable income, such as intent and ability to sell assets and historical and projected operating performance. At this time, the Company has not established a valuation reserve for any of its deferred tax assets. EX-99 6 ex993consolfin.txt EX-99.3 CONSOLIDATED FINANCIALS EXHIBIT 99.3 ESSEX CORPORATION AND SENSYS DEVELOPMENT LABORATORIES, INC. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) INTRODUCTION Pursuant to an Agreement and Plan of Merger dated as of February 21, 2003 by and among Essex Corporation, its wholly-owned subsidiary ("Merger Sub"), Sensys Development Laboratories, Inc., a Maryland Corporation ("SDL"), and the principal shareholders of SDL, Merger Sub was merged with and into SDL with SDL as the surviving corporation (the "Merger"). The merger became effective February 28, 2003. Pro forma financial information, prepared as if the transaction was consummated on December 31, 2001 (the beginning of the Company's 52-week fiscal year), is presented as follows. 1. Pro Forma Consolidated Balance Sheet as of December 29, 2002 2. Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended December 29, 2002 3. Notes to Pro Forma Financial Information ESSEX CORPORATION AND SENSYS DEVELOPMENT LABORATORIES, INC. PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 29, 2002 UNAUDITED
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ESSEX SDL TOTAL & ELIMINATIONS ADJUSTED TOTAL ------------- ------------- ----------- -------------- -------------- ASSETS AUDITED UNAUDITED ------ CURRENT ASSETS Cash $ 1,030,247 $ 138,449 $ 1,168,696 $ (309,000) D1 $ 859,696 Accounts receivable, net 565,626 899,300 1,464,926 - 1,464,926 Inventory 46,000 46,000 46,000 Prepayments and other 106,987 25,347 132,334 428,573 D2 560,907 ------------- ------------- ----------- ------------- ----------- 1,702,860 1,109,096 2,811,956 119,573 2,931,529 ------------- ------------- ----------- ------------- ----------- PROPERTY AND EQUIPMENT Computers and special equipment 948,455 61,825 1,010,280 - 1,010,280 Furniture, equipment and other 219,112 124,392 343,504 - 343,504 ------------- ------------- ----------- ------------- ----------- 1,167,567 186,217 1,353,784 - 1,353,784 Accumulated depreciation and amortization (845,360) (153,631) (998,991) - (998,991) ------------- ------------- ----------- ------------- ----------- 322,207 32,586 354,793 - 354,793 ------------- ------------- ----------- ------------- ----------- OTHER ASSETS Patents, net 296,407 - 296,407 - 296,407 Goodwill - - 3,014,749 D1 3,014,749 Other intangibles 430.000 D1 (430,000) E1 Investment in SDL 4,404,361 D1 (4,404,361) D2 Other 21,725 6,011 27,736 27,736 ------------- ------------- ----------- ------------- ----------- 318,132 6,011 324,143 3,014,749 3,338,892 ------------- ------------- ----------- ------------- ----------- TOTAL ASSETS $ 2,343,199 $ 1,147,693 $ 3,490,892 $ 3,134,322 $ 6,625,214 ============= ============= =========== ============= ===========
ESSEX CORPORATION AND SENSYS DEVELOPMENT LABORATORIES, INC. PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 29, 2002 UNAUDITED
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ESSEX SDL TOTAL & ELIMINATIONS ADJUSTED TOTAL ------------- ------------- ----------- -------------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY AUDITED UNAUDITED CURRENT LIABILITIES Advance from accounts receivable financing $ 169,432 $ - $ 169,432 $ - $ 169,432 Accounts payable 659,977 116,183 776,160 - 776,160 Accrued wages and vacation 233,940 345,431 579,371 - 579,371 Capital leases 71,261 - 71,261 - 71,261 Accrued retirement 65,000 65,170 130,170 - 130,170 Billings in excess of costs 135,000 - 135,000 - 135,000 Deferred income taxes - 228,704 228,704 (151,704) D2 - (77,000) E2 Other accrued expenses 146,041 12,870 158,911 75,000 D1 233,911 ------------- ------------- ----------- -------------- -------------- 1,480,651 768,358 2,249,009 (153,704) 2,095,305 LONG-TERM DEBT Convertible note payable 500,000 - 500,000 - 500,000 Capital leases, net of current portion 4,390 - 4,390 - 4,390 ------------- ------------- ----------- -------------- -------------- Total Liabilities 1,985,041 768,358 2,753,399 (153,704) 2,599,695 ------------- ------------- ----------- -------------- -------------- STOCKHOLDERS' EQUITY Common stock (Note C) 12,706,520 784 12,707,304 4,020,361 D1 16,726,881 (784) D2 Additional paid-in capital 2,000,000 33,313 2,033,313 (33,313) D2 2,000,000 3,444,749 D1 (3,444,749) D2 Prepaid warrant 50,000 - 50,000 - 50,000 Accumulated (deficit) Retained earnings (14,398,362) 345,238 (14,053,124) (353,000) D3 (14,751,362) (345,238) D2 ------------- ------------- ----------- -------------- -------------- Total Stockholders' Equity 358,158 379,335 737,493 3,288,026 4,025,519 ------------- ------------- ----------- -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,343,199 $ 1,147,693 $ 3,490,892 $ 3,134,322 $ 6,625,214 ============= ============= =========== ============== ============== The accompanying notes are an integral part of this statement.
ESSEX CORPORATION and SENSYS DEVELOPMENT LABORATORIES, INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FIFTY-TWO WEEK FISCAL YEAR ENDED DECEMBER 29, 2002 UNAUDITED
Pro Forma HISTORICAL Adjustments Pro Forma ESSEX SDL TOTAL & Eliminations Adjusted Total -------------- ------------- ------------- --------------- -------------- Revenues $ 4,506,419 $ 3,601,311 $ 8,107,730 $ - $ 8,107,730 Cost of goods sold and services provided (2,593,677) (2,078,997) (4,672,674) - (4,672,674) Research and development (1,394,784) - (1,394,784) - (1,394,784) Selling, general and administrative expenses (2,668,117) (1,329,243) (3,997,360) (430,000) E1 (4,427,360) ------------- ------------- ------------- ------------- ------------- Operating Profit (Loss) (2,150,159) 193,071 (1,957,088) (430,000) (2,387,088) Interest (expense) income, net (23,458) (729) (24,187) - (24,187) ------------- ------------- ------------- ------------- ------------- Income (Loss) Before Income Taxes (2,173,617) 192,342 (1,981,275) (430,000) (2,411,275) Provision for income taxes - (77,000) (77,000) 77,000 E2 - ------------- ------------- ------------- ------------- ------------- Net Income (Loss) $ (2,173,617) $ 115,342 $ (2,058,275) (353,000) D3 $ (2,411,275) ============= ============= ============= ============= ============= Weighted Average Number of Essex Shares Outstanding 7,410,647 1,104,907 8,515,554 - 8,515,554 ============= ============= ============= ============= ============= Basic Loss Per Common Share $ (0.28) ============= Diluted Loss Per Common Share $ (0.28) ============= The accompanying notes are an integral part of these statements.
ESSEX CORPORATION AND SENSYS DEVELOPMENT LABORATORIES, INC. NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED) Note A: Historical Information The financial information shown for Essex represents the information from the Company's 2002 Form 10-KSB for the fiscal year ended December 29, 2002. The financial information for Sensys Development Laboratories, Inc. (SDL) was derived from its audited information for its fiscal year ended September 30, 2002 as well as unaudited internal financial information for the three-month periods ended December 31, 2002 and 2001. Note B: Agreement to acquire Sensys Development Laboratories, Inc. (SDL) Effective as of February 28, 2003, under an Agreement and Plan of Merger, dated as of February 21, 2003 (the "Agreement"), by and among Essex, its wholly-owned subsidiary ("Merger Sub"), SDL, and the principal shareholders of SDL, Merger Sub was merged with and into SDL with SDL as the surviving corporation (the "Merger"). Under the terms of the Agreement, the Company paid $309,000 in cash and issued approximately 683,000 shares of common stock. The Agreement further provided that an additional number of shares up to 422,000 may be released from escrow on the first anniversary of closing based upon certain factors. The Company also issued approximately 195,000 non-qualified fully vested options for its common stock at below market exercise prices in exchange for SDL fully vested outstanding options. Note C: Common Stock Essex common stock is no par value with 25 million shares authorized. For historical purposes, there were 7,790,398 shares issued and outstanding at December 29, 2002 and 5,155,605 at December 30, 2001. There were 7,410,647 weighted average common shares outstanding during fiscal 2002. For pro forma purposes, 1,104,907 additional common shares, the maximum number of shares issuable under the acquisition, are considered outstanding during fiscal 2002. Note D: Pro Forma Consolidated Balance Sheet The pro forma consolidated balance sheet has been prepared on the basis of the following assumptions: (1) Essex issued 1,104,907 shares of its common stock with a fair value of approximately $3,502,555 based upon the weighted average market price per share at the measurement date (the effective date of the transaction). The Company also paid $309,000 in cash. The Company issued options exercisable for 194,769 shares of its common stock in exchange for the cancellation of existing SDL options and subject to adjustment in the case of options issued to the principal stockholders of SDL. The options were valued at $542,806 using the Black-Scholes model. In addition, the Company incurred approximately $50,000 of capitalizable expenses in connection with this transaction and estimates that $25,000 of additional expenses will be necessary to register the common stock issued in connection with the transaction. Since the transaction is accounted for as a purchase, the combined entities recognized intangible assets of approximately $3,445,000. Of this amount, approximately $430,749 was assigned to amortizing items such as 2003 contracts backlog. The remaining amount of approximately $3,014,000 is goodwill. Such intangible assets and goodwill are recognized as adjustments on the balance sheet. ESSEX CORPORATION AND SENSYS DEVELOPMENT LABORATORIES, INC. NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED) (2) In the stockholders' equity section, recognition is given to the shares and stock option consideration issued in connection with the acquisition. The SDL equity balances as of the date of acquisition have been eliminated. (3) The pro forma consolidated statement of operations adjustment result for the fiscal year ended December 29, 2002 is carried forward as an adjustment to retained deficit. Note E: Pro Forma Consolidated Statement of Operations The Pro Forma Consolidated Statement of Operations has been prepared on the basis of the following assumptions: (1) The amortizable intangible assets of approximately $430,000 were primarily related to contract backlog which has a short (less than one year) life and were completely amortized in 2002. This is based on the assumptions that the client base and backlog were consistent at the beginning of the pro forma 2002 year with the amounts recorded in connection with the acquisition. (2) Income tax benefit has been recognized on the basis that the entities will file a consolidated return. Essex has net operating loss carryforwards which are expected to be available to offset taxable operating income generated from this transaction. (3) No reductions in certain labor cost areas were estimated for calendar 2002, although certain cost savings are expected to be realized from the merger. -----END PRIVACY-ENHANCED MESSAGE-----