-----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, KgnZsD7e+D+n7pPpRGV47z0osonDeQEgCqw/kdg2GJAZJb99hxCvTpMwFGJnqLGt frF8wp7CRG92Yn1JMDCxcw== 0000927356-96-001124.txt : 19961118 0000927356-96-001124.hdr.sgml : 19961118 ACCESSION NUMBER: 0000927356-96-001124 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961024 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BI INC CENTRAL INDEX KEY: 0000716629 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS BUSINESS SERVICES [7380] IRS NUMBER: 840769926 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-12410 FILM NUMBER: 96665773 BUSINESS ADDRESS: STREET 1: 6400 LOOKOUT RD CITY: BOULDER STATE: CO ZIP: 80301 BUSINESS PHONE: 3035302911 MAIL ADDRESS: STREET 1: 6400 LOOKOUT RD CITY: BOULDER STATE: CO ZIP: 80301 8-K/A 1 FORM 8-K/A #1 - BI, INCORPORATED FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 AMENDMENT TO APPLICATION OR REPORT Filed Pursuant to Section 12, 13, 15 (d) of THE SECURITIES EXCHANGE ACT OF 1934 BI Incorporated ------------------------------------------------- (Exact name of registrant as specified in charter) AMENDMENT NO. 1 ----- The undersigned registrant hereby amends the following items, financial statements, exhibits, or other portions of its current report dated October 24, 1996 on Form 8K as set forth in the pages attached hereto: ---- (List all such items, financial statements, exhibits, or other portions amended) Item 7a. and b. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. BI Incorporated -------------------------------- (Registrant) Date: 11/12/96 By /s/ Jackie A. Chamberlin -------- -------------------------- Jackie A. Chamberlin Chief Financial Officer Item 7. Financial Statements and Proforma Financial Information Page No. - ---------------------------------------------------------------- -------- a. Financial Statements of Businesses Acquired: Report of Independent Accountants..................................... 2 Combined Balance Sheet at March 31, 1996.............................. 3 Combined Statement of Operations and Retained Earnings for the year ended March 31, 1996............................................... 4 Combined Statement of Cash Flows for the year ended March 31, 1996.... 5 Notes to the Financial Statements..................................... 6 b. Proforma financial information (unaudited):............................ 12 Condensed Combined Balance Sheet at June 30, 1996.................... 13 Condensed Combined Statement of Operations for the twelve months ended June 30, 1996............................................... 14 Explanatory Notes.................................................... 15 1 [LETTERHEAD OF PRICE WATERHOUSE APPEARS HERE] REPORT OF INDEPENDENT ACCOUNTANTS September 9, 1996 To the Board of Directors and Stockholders of Community Corrections Corporation, Tennessee Probation Services, Inc., Lifeline Therapeutics, Inc. and Justice Alternatives, Inc. In our opinion, the accompanying combined balance sheet and the related combined statements of operations and retained earnings, and of cash flows present fairly, in all material respects, the financial position of Community Corrections Corporation, Tennessee Probation Services, Inc., Lifeline Therapeutics, Inc. and Justice Alternatives, Inc. (combined, the Company) at March 31, 1996 and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. As discussed in Note 8, on July 5, 1996, the Company signed a letter of intent to merge with BI Incorporated. /s/ Price Waterhouse LLP 2 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. COMBINED BALANCE SHEET - ----------------------------------------------------------------------------- March 31, 1996 (in thousands) ASSETS Current assets Cash and cash equivalents $ 110 Accounts receivable, net of allowance for doubtful accounts of $1,475 329 Other assets 65 Deferred income taxes 26 --------- Total current assets 530 Property and equipment, net 284 --------- $ 814 --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ 39 Accounts payable 202 Deferred revenue 223 Accrued compensation and benefits 131 Income taxes payable 11 --------- Total current liabilities 606 Long-term debt 13 Deferred income taxes 28 --------- 647 --------- Stockholders' equity Common stock 2 Retained earnings 165 --------- 167 --------- $ 814 --------- The accompanying notes are an integral part of these combined financial statements. 3 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES INC., LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS - ----------------------------------------------------------------------------- Year ended March 31, 1996 (in thousands) Revenues Service income $ 8,407 -------- Costs and expenses Cost of service income 3,725 Selling, general and administrative expenses 1,995 Provision for uncollectible accounts 2,656 Depreciation and amortization 73 -------- 8,449 -------- Other income (expense) - net 9 -------- Loss before income tax benefit (33) Income tax benefit (21) -------- Net loss (12) Retained earnings, beginning of year 177 -------- Retained earnings, end of year $ 165 -------- The accompanying notes are an integral part of these combined financial statements. 4 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. COMBINED STATEMENT OF CASH FLOWS - --------------------------------------------------------------------------------
Year ended March 31, 1996 (in thousands) Cash flows from operating activities Net loss $ (12) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 73 Provision for uncollectible accounts 93 Deferred income taxes (34) Changes in assets and liabilities Accounts receivable (92) Other assets 39 Accounts payable 61 Accrued compensation and benefits 8 Deferred revenue 12 Income taxes payable 11 -------- Net cash provided by operating activities 159 Cash flows from investing activities Purchase of property and equipment (111) -------- Net cash used for investing activities (111) -------- Cash flows from financing activities Proceeds from issuances of debt 77 Payment of debt and capital lease obligations (109) -------- Net cash used for financing activities (32) -------- Net increase in cash and cash equivalents 16 Cash and cash equivalents at beginning of year 94 -------- Cash and cash equivalents at end of year $ 110 Supplemental disclosure of cash flow information: Interest paid $ 11 -------- Income taxes paid $ 7 -------- Assets acquired by incurring directly related liabilities $ 27 --------
The accompanying notes are an integral part of these combined financial statements. 5 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES, INC. LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The accompanying financial statements include the combined financial information of Community Corrections Corporation (CCC), Tennessee Probation Services, Inc. (TPS), Lifeline Therapeutics, Inc. (LTI), and Justice Alternatives, Inc. (JAI) (combined, the "Company"), which are commonly controlled through family ownership. All significant intercompany accounts and transactions have been eliminated in the combination. The revenues and expenses of TPS, LTI, and JAI are not material to the combined financial statements. Nature of business The Company provides probationary services such as monitoring, counseling, and training services to individuals under contracts with various court systems located throughout the State of Georgia and Tennessee, respectively. These contracts generally have terms of one year. In addition, CCC and TPS agree to collect fines and restitutions from probationers on behalf of the various courts. The Company remits these monies to the courts monthly. Revenue recognition Service income is recognized upon completion of the service provided to the probationer. The provision for uncollectible accounts arises as a result of (a) the Court suspending amounts due to the Company because of the inability of the probationer to pay; (b) the probationer being incarcerated for committing a different offense while under the supervision of the Company or; (c) the probationer absconding while under the supervision of the Company. CCC and TPS record an allowance for doubtful accounts for estimated probationer accounts deemed uncollectible. However, if probationers fail to meet the terms of their probation and a warrant is issued for their arrest, the related account receivable is written off. Any amounts subsequently recovered are recorded as revenue when received. Approximately $1,180,000 or 14% of the Company's service income for fiscal year 1996 was earned by providing services under a contract with one court located in Georgia. Use of estimates The presentation of financial statements in conformity with generally accepted accounting principles 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 those estimates. 6 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Cash and cash equivalents For purposes of the statement of cash flows, the Company considers all highly liquid monetary instruments purchased with an original maturity of three months or less to be cash equivalents. Property and equipment Property and equipment is recorded at cost and depreciated using the straight line method over the estimated useful lives of five years. Repair and maintenance expenses which do not extend the useful lives of the related assets are expensed as incurred. Deferred revenue A significant portion of the Company's accounts receivable are due from individuals who have been sentenced to probation by a court of law. The probationer may elect to pay a portion or all of their court-ordered fees in advance. The Company records payments made in advance as deferred revenue until earned. Deferred revenue at March 31, 1996 totaled $223,000. Fair value of financial instruments Recorded balances of financial instruments at March 31, 1996 approximate estimated fair market values. 2. AMOUNTS HELD IN ESCROW The Company collects certain court-ordered fines and restitution fees from probationers which are held in escrow for the respective courts to which the monies are due. These funds are remitted (usually monthly) to the courts in accordance with the contract terms. The Company's policy is to maintain these funds in separate bank accounts and not to record the cash and related liability on the balance sheet. At March 31, 1996 the Company had $665,000 in escrow to be remitted to certain courts. 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following at March 31, 1996 (in thousands): Computer equipment and software $ 195 Office furniture 134 Land 48 Vehicles 65 ----- 442 Less: accumulated depreciation (158) ----- $ 284 =====
7 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- At March 31, 1996, property and equipment includes $26,000 of equipment leased under capital lease obligations. 4. LONG-TERM DEBT AND LEASE OBLIGATIONS Long term debt consists of the following (in thousands): Revolving line of credit with bank due July 5, 1996, interest at prime plus 1% due monthly $ 30 Capital lease obligations for an automobile and telephone systems, interest rates from 10.25% to 14.0%, payments due monthly maturing at various dates through 1999 22 ------ 52 Less - current portion (39) ------ $ 13 ======
Scheduled maturities of long-term debt outstanding as of March 31, 1996 are as follows (in thousands):
Year Amount 1997 $ 39 1998 10 1999 3 ------ $ 52 ======
In July 1995, the Company entered into a $50,000 revolving line of credit agreement and a $100,000 Officer Guidance Loan, (term facility) with a bank. Borrowings from the term facility are to be used to open additional probation offices. Interest is payable under both facilities monthly at the prime rate plus 1%. This credit is secured by a blanket lien against all of CCC's assets, expires on July 5, 1996, and is jointly and severally guaranteed by CCC's stockholders. 8 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The Company leases office space and certain equipment under operating leases. Future minimum lease payments due under capital leases and noncancelable operating leases are as follows (in thousands):
Year Amount 1997 $ 357 1998 273 1999 120 2000 2 ------ $ 752
Rent expense was approximately $268,000 for the year ended March 31, 1996. 5. INCOME TAXES The Company elects to file its federal income tax returns under the cash method. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the financial reporting and income tax bases of property and equipment and the difference between accounting for transactions under the accrual method for financial reporting purposes and the cash method for income tax purposes. The deferred taxes represent the future tax return consequences of those differences, which will be taxable when the assets and liabilities are settled. The provision (benefit) for income taxes consists of the following (in thousands): Current: Federal $ 9 State 4 ----- 13 ----- Deferred: Federal (29) State (5) ----- (34) ----- $ (21) =====
9 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Significant components of the Company's deferred tax (liabilities) and assets at March 31, 1996 are as follows (in thousands): Current Accounts payable and accrued expenses $ 176 Accounts receivable (150) ----- Net current deferred tax asset 26 ----- Non-current Property and equipment (28) ----- Net deferred tax liability $ (2) =====
The difference between the Company's effective income tax rate and multiplying the Company's loss before income taxes by the federal statutory income tax rate is due primarily to the surtax exemption. 6. EMPLOYEE BENEFITS Effective April 1, 1995, the Company adopted a 401(k) savings plan. The plan is offered on a voluntary basis to full-time employees who have completed one year of service. With certain limitations, each participant may elect to contribute up to 15% of their salary. The Company matches $.25 for each $1.00 of employee contributions up to 4% of the employees' gross pay. Company contributions for the year ended March 31, 1996 were $19,000. Participants become fully vested in their share of the Company's contributions after six years of service. The Company also makes a discretionary bonus to all employees based upon the operating results of the Company, as well as a performance bonus to probation officers. Total disbursements made by the Company during the year ended March 31, 1996 for these amounts were approximately $350,000. 7. RELATED PARTY TRANSACTIONS In March 1995, the Company obtained loans from two of its shareholders totaling $64,000, which bore interest at 9%. During the year ended March 31, 1996, the Company repaid the entire principal amount of the loans plus interest of $6,000. 10 COMMUNITY CORRECTIONS CORPORATION, TENNESSEE PROBATION SERVICES, INC., LIFELINE THERAPEUTICS, INC. AND JUSTICE ALTERNATIVES, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 8. SUBSEQUENT EVENT On July 5, 1996, the Company and BI Incorporated (BI) of Boulder, Colorado signed a letter of intent to merge. The transaction, if consummated in accordance with the letter of intent, would result in the Company receiving a certain number of shares of BI common stock to be determined and approximately $3,000,000 in cash. The merger is expected to be completed by October 10, 1996, after the completion of due diligence and approvals of the respective board of directors. 11 Item 7.b. PROFORMA FINANCIAL INFORMATION The following unaudited proforma combined balance sheet and statements of operations are derived from the individual financial statements of BI Incorporated (BI) as shown in its annual report on Form 10K for the year ended June 30, 1996, and the financial statements of Community Corrections Corporation (CCC), Justice Alternatives, Inc. (JAI), Tennessee Probation Services (TPS) and Lifeline Therapeutics, Inc. (LTI) (together the New Businesses) as of and for the fiscal year ended March 31, 1996. The 100% acquisition of CCC, JAI and TPS by BI was accounted for as a purchase and the unaudited proforma combined financial information gives effect to the proforma adjustments described in Note 2. This unaudited proforma combined financial information should be read in conjunction with the other financial statements and notes thereto of CCC, JAI, LTI and TPS included elsewhere in this amendment to Form 8K and the financial statements and notes thereto of BI included in its annual report on Form 10K for the period indicated above. In the opinion of BI all adjustments neccessary to present fairly such unaudited proforma combined financial information have been made. The unaudited proforma combined financial statements are not necessarily indicative of what results of operations would have been if the entities had been combined during the periods presented and are not necessarily indicative of future operations. 12 BI INCORPORATED AND SUBSIDIARIES PROFORMA COMBINED BALANCE SHEET YEAR ENDED JUNE 30, 1996 (in thousands, unaudited)
HISTORICAL PROFORMA --------------------------------- -------------------------------------- NEW Adjustments BI BUSINESS (note 2) Combined --------------- -------------- ----------------- ----------------- ASSETS Current assets Cash and cash equivalents $4,263 $110 ($3,000) $1,373 Short-term investments 1,099 1,099 Receivables, net 9,043 329 9,372 Investment in sales-type leases, net 4,345 4,345 Inventories, net 3,020 3,020 Deferred income taxes 302 26 328 Prepaid and other assets 893 65 958 --------------- -------------- ----------------- ----------------- Total current assets 22,965 530 (3,000) 20,495 Investment in sales-type leases, net 3,446 3,446 Rental and monitoring equipment, net 4,088 4,088 Property and equipment, net 2,564 284 2,848 Software, net 1,906 1,906 Intangibles, net 7,232 5,358 12,590 Deferred income taxes 370 370 Other assets 249 249 --------------- -------------- ----------------- ----------------- Total assets $42,820 $814 $2,358 $45,992 =============== ============== ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt $39 $39 Accounts payable $1,486 202 $275 1,963 Accrued compensation and benefits 1,581 131 1,712 Accrued product warranty 193 193 Deferred revenue 1,086 223 1,309 Other liabilities 447 11 458 --------------- -------------- ----------------- ----------------- Total current liabilities 4,793 606 275 5,674 Deferred revenue and long-term debt 821 41 862 Stockholders' equity Common stock, no par value 30,879 2 (2) 33,129 2,250 Retained earnings 6,327 165 (165) 6,327 --------------- -------------- ----------------- ----------------- Total stockholders' equity 37,206 167 2,083 39,456 --------------- -------------- ----------------- ----------------- Total liabilities and stockholders' equity $42,820 $814 $2,358 45,992 =============== ============== ================= =================
See accompanying notes. 13 BI INCORPORATED AND SUBSIDIARIES PROFORMA COMBINED STATEMENT OF OPERATIONS YEAR ENDED JUNE 30, 1996 (in thousands, except per share amounts, unaudited)
HISTORICAL PROFORMA --------------------------------- -------------------------------------- NEW Adjustments BI BUSINESS (note 2) Combined --------------- --------------- ----------------- ----------------- REVENUE Service and monitoring income $21,357 $8,407 $29,764 Net sales 16,616 16,616 Rental income 832 832 Interest income 238 238 Other income 169 9 178 --------------- --------------- ----------------- Total revenue 39,212 8,416 47,628 COSTS AND EXPENSES Service and monitoring income 10,338 3,725 14,063 Net sales 8,570 8,570 Rental income 292 292 Selling, general and administrative expenses 11,144 4,651 15,795 Research and development expenses 2,661 2,661 Amortization and depreciation 1,395 73 357 1,825 --------------- --------------- ----------------- ----------------- Total costs and expenses 34,400 8,449 357 43,206 Income before income taxes 4,812 (33) (357) 4,422 Income tax (provision) benefit (1,949) 21 (1,928) --------------- --------------- ----------------- ----------------- Net income (loss) $2,863 ($12) ($357) $2,494 =============== =============== ================= ================= Net income per common and common equivalent shares $0.40 $0.33 =============== ================= Weighted average number of common and common equivalent shares outstanding 7,160 400 7,561 =============== ================= =================
See accompanying notes. 14 BI Incorporated and Subsidiaries Explanatory Notes to Proforma Combined Financial Statements (unaudited) Note 1 - Acquisition of Assets - ------------------------------ On October 10, 1996, the Company effected the purchase of 100% of the outstanding stock of Community Corrections Corporation (CCC), Justice Alternatives, Inc. (JAI) and Tennessee Probation Services (TPS). The total consideration paid was 400,000 shares of restricted common stock of the Company and $3,000,000 in cash. Note 2 - Proforma Adjustments - ----------------------------- The proforma adjustments give effect to recording the issuance of 400,000 shares of BI common stock; eliminating equity accounts of CCC, JAI and TPS; recording the related intangibles, including goodwill, and amortization thereof over a fifteen year period. Management has estimated and recorded as goodwill additional direct costs of the acquisition of $275,000 based on the most current information available. 15 -----END PRIVACY-ENHANCED MESSAGE-----