-----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, QmtHP68+wZETRUSHa6xOGTMcYJWn4S6BjtfH9fwUh8fcW39NVY1bLUXnq5QT42Nb FfaNZENXTkY4kFfVI7iwMg== 0000950130-02-008509.txt : 20021216 0000950130-02-008509.hdr.sgml : 20021216 20021216171525 ACCESSION NUMBER: 0000950130-02-008509 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20021001 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20021216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEGRAL SYSTEMS INC /MD/ CENTRAL INDEX KEY: 0000718130 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 521267968 STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18603 FILM NUMBER: 02859151 BUSINESS ADDRESS: STREET 1: 5000 PHILADELPHIA WAY CITY: LANHAM STATE: MD ZIP: 20706 BUSINESS PHONE: 3017314233 MAIL ADDRESS: STREET 1: 5000 PHILADELPHIA WAY CITY: LANHAM STATE: MD ZIP: 20706 8-K/A 1 d8ka.txt AMENDMENT 1 TO FORM 8K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------- FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): October 1, 2002 ------------------------------- INTEGRAL SYSTEMS, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Maryland 0-18603 52-1267968 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 5000 Philadelphia Way, Lanham, Maryland 20706-4417 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) Registrant's telephone number, including area code: (301) 731-4233 ---------------- - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 2. Acquisition or Disposition of Assets. On October 16, 2002, Integral Systems, Inc., a Maryland corporation ("Integral"), filed a Current Report on Form 8-K with the Securities and Exchange Commission with respect to its acquisition of Real Time Logic, Inc., a Colorado corporation ("RT Logic"), pursuant to an Agreement and Plan of Reorganization dated October 1, 2002, by and among Integral, RT Logic, ISI Merger Corp., a Colorado corporation and a wholly owned subsidiary of Integral ("ISI"), each of the individuals designated as a Major Shareholder on Exhibit 1 attached thereto and Randal E. Culver as Shareholders' Representative (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, RT Logic was merged with and into ISI, with ISI as the surviving corporation. In connection with the Merger, ISI changed its corporate name to Real Time Logic, Inc. This Amendment No. 1 to Current Report on Form 8-K is filed to include the financial information listed in Item 7 related to Integral's acquisition of RT Logic. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of Business Acquired. The audited balance sheets of RT Logic, including independent auditor's report thereon, as of March 29, 2002 and March 30, 2001 and the related statements of income, changes in stockholders' equity, and cash flows for the years ended March 29, 2002 and March 30, 2001, are attached hereto as Exhibit 99.2 and incorporated herein by reference. (b) Interim Financial Statements of Business Acquired. The unaudited balance sheet as of September 30, 2002 and the related unaudited statements of income and cash flows of RT Logic for the six months ended September 30, 2002 and September 30, 2001 and attached hereto as Exhibit 99.3 and incorporated herein by reference. (c) Pro Forma Financial Information. The unaudited pro forma condensed combined balance sheet as of September 30, 2002 and the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2002 are attached hereto as Exhibit 99.4 and incorporated herein by reference. (d) Exhibits. Exhibit 2.1 Agreement and Plan of Reorganization dated October 1, 2002, by and among Integral Systems, Inc., Real Time Logic, Inc., ISI Merger Corp., each of the individuals designated as a Major Shareholder on Exhibit 1 attached thereto and Randal E. Culver as Shareholders' Representative* Exhibit 23.1 Consent of BiggsKofford & Co., P.C. Exhibit 99.1 Press Release* Exhibit 99.2 Audited balance sheets of RT Logic as of March 29, 2002 and March 30, 2001 and the related statements of income, changes in stockholders' equity, and cash flows for the years ended March 29, 2002 and March 30, 2001. Exhibit 99.3 Unaudited balance sheet as of September 30, 2002 and the related unaudited statements of income and cash flows of RT Logic for the six months ended September 30, 2002 and September 30, 2001. Exhibit 99.4 Unaudited pro forma condensed combined balance sheet as of September 30, 2002 and the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2002. - ---------------- * Previously filed 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. INTEGRAL SYSTEMS, INC. By: /s/ Thomas L. Gough ------------------------------------- Thomas L. Gough President and Chief Operating Officer Date: December 16, 2002 EXHIBIT INDEX Exhibit Number Description - ------- ----------- 2.1 Agreement and Plan of Reorganization dated October 1, 2002, by and among Integral Systems, Inc., Real Time Logic, Inc., ISI Merger Corp., each of the individuals designated as a Major Shareholder on Exhibit 1 attached thereto and Randal E. Culver as Shareholders' Representative* 23.1 Consent of BiggsKofford & Co., P.C. 99.1 Press Release* 99.2 Audited balance sheets of RT Logic as of March 29, 2002 and March 30, 2001 and the related statements of income, changes in stockholders' equity, and cash flows for the years ended March 29, 2002 and March 30, 2001. 99.3 Unaudited balance sheet of RT Logic as of September 30, 2002 and the related unaudited statements of income and cash flows of RT Logic for the six months ended September 30, 2002 and September 30, 2001. 99.4 Unaudited pro forma condensed combined balance sheets as of September 30, 2002 and the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2002. - ---------------- * Previously filed EX-23.1 3 dex231.txt AUDITORS' CONSENT Exhibit 23.1 Consent of BiggsKofford & Co., P.C., Independent Auditors We consent to the incorporation by reference in the Registration Statements . Form S-3, No. 333-31306, . Form S-8, No. 333-41123, . Form S-3, No. 333-48790, . Form S-8, No. 333-61559, . Form S-8, No. 333-76360, . Form S-3, No. 333-82499, and . Form S-8, No. 333-87694 of our report dated May 20, 2002, with respect to the March 29, 2002 and March 30, 2001 financial statements of Real Time Logic, Inc., dba RT Logic! included in this Form 8-K/A of Integral Systems, Inc. and subsidiaries. /s/ BiggsKofford & Co., P.C. Colorado Springs, CO December 12, 2002 EX-99.2 4 dex992.txt FINANCIAL STATEMENTS OF RT LOGIC EXHIBIT 99.2 REAL TIME LOGIC, INC. dba RT Logic! [Logo Appears Here] FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION WITH INDEPENDENT AUDITOR'S REPORT MARCH 29, 2002 AND MARCH 30, 2001 [Logo of Biggs Kofford Appears Here] To the Board of Directors and Stockholders Real Time Logic, Inc., dba RT Logic! Colorado Springs, Colorado We have audited the accompanying balance sheets of Real Time Logic, Inc., dba RT Logic! (a Colorado corporation), as of March 29, 2002, and March 30, 2001, and the related statements of income, changes in stockholders' equity, and cash flows for the years then ended. 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Real Time Logic, Inc., dba RT Logic!, as of March 29, 2002, and March 30, 2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on page 20 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 auditing 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. /s/ Biggs, Kofford & Co., P.L. May 20, 2002 REAL TIME LOGIC, INC. dba RT LOGIC ! BALANCE SHEETS MARCH 29, 2002 AND MARCH 30, 2001
ASSETS 2002 2001 - ------ -------------------------------------------------- Current assets: Cash and cash equivalents $ 3,987,139 $ 2,178,417 - ----------------------------------------------------------------- Accounts receivable 1,202,162 1,710,766 - ----------------------------------------------------------------- Income taxes receivable 26,516 81,293 - ----------------------------------------------------------------- Costs and estimated earnings in excess of billings on uncompleted contracts 2,443,065 1,069,970 ---------------------------------------------------------------- Inventory 480,793 423,014 - ----------------------------------------------------------------- Prepaid expenses and other current assets 34,897 23,420 - ----------------------------------------------------------------- Deferred tax asset 264,000 244,000 - ------------------------------------------------------------------------------------------------------------------ Total current assets 8,438,572 5,730,880 ----------------------------------------------------------------------------------------------------------------- Property and equipment: Computers and related equipment 465,854 367,929 - ----------------------------------------------------------------- Office furniture and equipment 43,743 25,883 - ----------------------------------------------------------------- Leasehold improvements 446,890 155,392 - ------------------------------------------------------------------------------------------------------------------ 956,487 549,204 Less accumulated depreciation (320,437) (182,014) - ------------------------------------------------------------------------------------------------------------------ 636,050 367,190 -------------------------------------------------- Other assets: Goodwill, net of accumulated amortization of $530,247 and $477,222 respectively - 53,025 ---------------------------------------------------------------- Deferred tax asset 7,000 12,000 - ----------------------------------------------------------------- Due from related party - 9,380 - ------------------------------------------------------------------------------------------------------------------ 7,000 74,405 -------------------------------------------------- Total assets $ 9,081,622 $ 6,172,475 - ----------------------------------------------------------------==================================================
The accompanying notes and independent auditor's report should be read with this financial statement. 2
LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001 - ------------------------------------ -------------------- -------------------- Current liabilities: Accounts payable $ 671,029 $ 261,377 - --------------------------------------------------------------------- Accrued wages, benefits and payroll taxes 282,426 300,059 - --------------------------------------------------------------------- Commissions payable 132,433 113,103 - --------------------------------------------------------------------- Bonuses payable 787,000 - - --------------------------------------------------------------------- Other accrued liabilities 51,091 22,601 - --------------------------------------------------------------------- Warranty and extended maintenance liability 545,508 545,508 - --------------------------------------------------------------------- Income taxes payable - 18,379 - --------------------------------------------------------------------- Billings in excess of costs and estimated earnings on uncompleted contracts 1,208,357 1,141,674 ---------------------------------------------------------------- -------------------- -------------------- Total current liabilities 3,677,844 2,402,701 ---------------------------------------------------------------- -------------------- -------------------- Stockholders' equity: Common stock, no par value; 25,000,000 shares authorized; 1,056,640 and 1,055,000 shares ---------------------------------------------------------------- issued and outstanding, respectively 483,797 480,872 ---------------------------------------------------------------- Retained earnings 4,919,981 3,288,902 - --------------------------------------------------------------------- -------------------- -------------------- 5,403,778 3,769,774 -------------------- -------------------- Total liabilities and stockholders' equity $ 9,081,622 $ 6,172,475 - --------------------------------------------------------------------- ==================== ====================
The accompanying notes and independent auditor's report should be read with this financial statement. 3 REAL TIME LOGIC, INC. dba RT LOGIC ! STATEMENTS OF INCOME YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2001
2002 2001 ---------------------------------------------- Contract revenue $ 12,586,254 $ 10,563,124 - --------------------------------------------------------------------- Cost of contract revenue 6,432,614 5,493,070 - ------------------------------------------------------------------------------------------------------------------- Gross profit 6,153,640 5,070,054 - --------------------------------------------------------------------- Operating expenses: Selling, general and administrative expenses 1,974,662 1,650,370 -------------------------------------------------------------------- Research and development costs 1,168,863 1,065,055 -------------------------------------------------------------------- Special bonus 525,000 525,000 ------------------------------------------------------------------------------------------------------------------ Income from operations 2,485,115 1,829,629 - ------------------------------------------------------------------------------------------------------------------- Other income (expense): Amortization of goodwill (53,025) (79,537) -------------------------------------------------------------------- Other income 715 3,981 -------------------------------------------------------------------- Loss on disposal of assets (3,163) (3,572) -------------------------------------------------------------------- Interest & dividend income 105,650 84,833 ------------------------------------------------------------------------------------------------------------------ 50,177 5,705 ----------------------------------------------- Income before income tax provision 2,535,292 1,835,334 - --------------------------------------------------------------------- Income tax provision (884,276) (613,572) - ------------------------------------------------------------------------------------------------------------------- Net income $ 1,651,016 $ 1,221,762 - --------------------------------------------------------------------===============================================
The accompanying notes and independent auditor's report should be read with this financial statement. 4 REAL TIME LOGIC, INC. dba RT LOGIC ! STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2001
Common Stock ----------------------------------- Retained Shares Amount Earnings Total ----------------- ----------------- ------------------- --------------------- Balance, March 31, 2000 1,050,000 $ 472,747 $ 2,067,140 $ 2,539,887 - ------------------------------------- Issuance of common stock 5,000 8,125 - 8,125 - ------------------------------------- Net income - - 1,221,762 1,221,762 - ------------------------------------- ---------------- ----------------- ------------------- --------------------- Balance, March 30, 2001 1,055,000 480,872 3,288,902 3,769,774 - ------------------------------------- Issuance of common stock 7,140 9,800 - 9,800 - ------------------------------------- Repurchase of common stock (5,500) (6,875) (19,937) (26,812) - ------------------------------------- Net income - - 1,651,016 1,651,016 - ------------------------------------- ---------------- ----------------- ------------------- --------------------- Balance, March 29, 2002 1,056,640 $ 483,797 $ 4,919,981 $ 5,403,778 - ------------------------------------- ================ ================= =================== =====================
The accompanying notes and independent auditor's report should be read with this financial statement. 5 REAL TIME LOGIC, INC. dba RT LOGIC ! STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2001
CASH FLOWS FROM OPERATING ACTIVITIES 2002 2001 - ------------------------------------ -------------------------------------------------- Net income $ 1,651,016 $ 1,221,762 - --------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 204,712 167,211 ------------------------------------------------------------- Deferred income taxes (15,000) (79,000) ------------------------------------------------------------- Loss on disposal of assets 3,163 3,572 ------------------------------------------------------------- Decrease (increase) in operating assets: Accounts receivable 508,604 (973,053) ------------------------------------------------------------- Income tax receivable 54,777 (81,293) ------------------------------------------------------------- Costs and estimated earnings in excess of billings on uncompleted contracts (1,373,095) 246,428 ------------------------------------------------------------- Inventory (57,779) (220,554) ------------------------------------------------------------- Prepaid expenses and other current assets (11,477) 1,634 ------------------------------------------------------------- Increase (decrease) in operating liabilities: Accounts payable 409,652 (11,315) ------------------------------------------------------------- Accrued wages, benefits and payroll taxes (17,633) 181,905 ------------------------------------------------------------- Accrued commissions and bonuses 806,330 (83,060) ------------------------------------------------------------- Other accrued liabilities 28,490 9,987 ------------------------------------------------------------- Warranty and extended maintenance liability - 129,182 ------------------------------------------------------------- Income taxes payable (18,379) (269,266) ------------------------------------------------------------- Billings in excess of costs and estimated earnings on uncompleted contracts 66,683 569,510 --------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 2,240,064 813,650 - ----------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES - ------------------------------------ Acquisition of property and equipment (423,710) (108,420) - --------------------------------------------------------------- Repayments from related party 9,380 6,000 - ----------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (414,330) (203,988) - -----------------------------------------------------------------------------------------------------------------
The accompanying notes and independent auditor's report should be read with this financial statement. 6
CASH FLOWS FROM FINANCING ACTIVITIES 2002 2001 - ------------------------------------ -------------------- -------------------- Issuance of common stock $ 9,800 $ 8,125 - --------------------------------------------------------------------- -------------------- -------------------- Repurchase of common stock (26,812) - - --------------------------------------------------------------------- -------------------- -------------------- Net cash provided by (used in) financing activities (17,012) 8,125 - --------------------------------------------------------------------- -------------------- -------------------- Net increase in cash and cash equivalents 1,808,722 617,787 - --------------------------------------------------------------------- Cash and cash equivalents, beginning of year 2,178,417 1,560,630 - --------------------------------------------------------------------- -------------------- -------------------- Cash and cash equivalents, end of year $ 3,987,139 $ 2,178,417 - --------------------------------------------------------------------- ==================== ==================== SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION - ------------------------------------------- Interest paid during the period $ - $ - - --------------------------------------------------------------------- ==================== ==================== Income taxes paid during the period $ 862,437 $ 1,043,134 - --------------------------------------------------------------------- ==================== ====================
The accompanying notes and independent auditor's report should be read with this financial statement. 7 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of business and organization - ----------------------------------- Real Time Logic, Inc., dba RT Logic!, (Company) was incorporated on March 26, 1997 and began doing business on April 1, 1997, in the State of Colorado. The Company was formed through the tax-free divestiture of the Colorado Springs operations of Advanced Processing Laboratories, Inc. (AP Labs), a California company. The Company's fiscal year ends on the last Friday in March. The Company specializes in the real-time satellite, ground and test computing market. Services and products, provided under signed contracts, include software driver products, hardware/firmware-based interface controllers, engineering services, integrated development platforms, and complete turn-key systems. The Company's customer base primarily consists of government contractors located in Colorado and California; the Company grants credit to all of its customers. The Company operates out of offices located in Colorado Springs and Denver, Colorado and in San Diego, California. Major customers - --------------- During the years ended March 29, 2002, and March 30, 2001, approximately 49% and 46%, respectively, of the Company's revenues were generated from major customers located in Colorado and California as follows: 2002 2001 ------------------- ------------------ Customer A 21% 13% Customer B 2% 10% Customer C 12% 12% Customer D 14% 11% ------------------- ------------------ Totals 49% 46% =================== ================== In addition, approximately 38% of accounts receivable were from three of these customers as of March 29, 2002, and approximately 41% of accounts receivable were from three of these customers as of March 30, 2001. 8 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Use of estimates - ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the of the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash equivalents - ---------------- For purposes of the statements of cash flows, the Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents in bank deposits which, at times, may exceed federally insured limits. The company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. Accounts receivable - ------------------- It is management's opinion that all accounts receivable as of March 29, 2002, and March 30, 2001, are collectible. Therefore, an allowance for doubtful accounts has not been recorded. Inventory - --------- Inventory consists of service parts and materials and is stated at the lower of cost or market using the first-in, first-out (FIFO) method of accounting. Property and equipment - ---------------------- Property and equipment are recorded at cost and are being depreciated over their estimated useful lives using straight-line methods as follows: Computers and related equipment 3 - 5 years Office furniture and equipment 5 - 7 years Leasehold improvements 3 - 5 years 9 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and equipment (continued) - ---------------------------------- Depreciation expense for the years ended March 29, 2002 and March 30, 2001, was $151,687 and $87,674, respectively; of which $130,156 and $78,957, respectively, is included in cost of contract sales. Goodwill - -------- Goodwill is being amortized on an accelerated basis over five years. This method has been selected as it approximates the goodwill on the contracts purchased. Amortization expense for the years ended March 29, 2002 and March 30, 2001, was $53,025 and $79,537, respectively. Goodwill was fully amortized as of March 29, 2002. Warranty and extended maintenance liability - ------------------------------------------- The Company offers a minimum of a ninety-day warranty on materials and labor for most of its products. However, in many instances, the Company elects to extend its responsibility for its products to include a period of time substantially longer than the warranty period. In certain instances, products delivered to customers may not be utilized or implemented by the customer for a number of months or years. Management has established an estimate of such warranty costs to be covered by the Company to include normal defects and claims, as well as for any major breakdowns that could occur on products or systems delivered to customers. The amount of warranty accrual for these estimated costs for the years ended March 29, 2002 and March 30, 2001, was $280,751 and $349,121 respectively. Actual warranty costs incurred for the years ended March 29, 2002 and March 30, 2001, was $94,601 and $93,037 respectively. The Company also offers extended maintenance contracts in one, two, or three year terms. Revenue on these extended maintenance contracts is deferred and recognized ratably over the period of the contract. Deferred revenue for extended maintenance contracts for the years ended March 29, 2002 and March 30, 2001, was $264,757 and $196,387 respectively. 10 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenue and cost recognition - ---------------------------- Revenues from substantially all long-term cost plus fixed fee and fixed price contracts are recognized on the percentage-of-completion method, measured by the percentage of total contract costs incurred to date to estimated total contract costs for each contract. This method is used because management considers total contract costs to be the best available measure of progress on these contracts. Initial cost estimates supporting the Company's contracts are necessarily based on facts and circumstances known at the time the estimates are made. Estimates of projected contract costs are continuously updated over the period of contract performance and change order negotiations may affect overall job profitability. Considerable judgment must be applied to reasonably evaluate the potential outcomes of issues that arise during the contract performance period and the effect their resolution will have on the ultimate margins or losses that may be realized by the Company. Consequently, the estimates that support the Company's revenue recognition decisions have a very significant impact on the results of operations reported by the Company. Contract costs include all direct materials, labor, subcontract costs and those indirect costs related to contract performance such as indirect labor, supplies and general and administrative costs allocable to direct labor. All other general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to income, which are recognized in the period in which revisions are determined. The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts" represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts" represents billings in excess of revenues recognized. Income taxes - ------------ The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. Income taxes are provided for the tax effects of transactions reported in the financial statements. Deferred tax assets are recognized on all deductible temporary differences. 11 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income taxes (continued) - ------------------------ Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Investment tax credits are recognized as a reduction of income taxes in the period in which the credits are recognized. Reclassifications - ----------------- Certain prior year amounts have been reclassified to conform with current year presentation. 2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs and estimated earnings on uncompleted contracts consist of the following:
2002 2001 ------------- ------------- Costs incurred on uncompleted contracts $ 19,307,399 $ 12,336,401 Estimated earnings 9,887,291 6,120,978 ------------- ------------- 29,194,690 18,457,379 Less billings to date (27,959,982) (18,529,083) ------------- ------------- $ 1,234,708 $ (71,704) ============= =============
12 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (CONTINUED) These amounts have been included in the accompanying balance sheets under the following captions:
2002 2001 ------------- ----------- Costs and estimated earnings in excess of billings on uncompleted contracts $ 2,443,065 $ 1,069,970 Billings in excess of costs and estimated earnings on uncompleted contracts (1,208,357) (1,141,674) ------------- ------------ $ 1,234,708 $ (71,704) ============= ============
3. BACKLOG (UNAUDITED) Backlog represents the amount of revenue the Company expects to realize from work to be performed on uncompleted contracts in progress at year-end and from contractual agreements on which work has not yet begun. Backlog balance at March 30, 2001 $ 7,715,642 New contracts during the year 15,270,528 ------------ 22,986,170 Less contract revenue earned during the year 12,586,254 ------------ Backlog balance at March 29, 2002 $ 10,399,916 ============ The Company also entered into additional contracts with estimated revenues of approximately $3,399,148 between April 1, 2002 and May 15, 2002. 13 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 4. COMMITMENTS AND CONTINGENCIES Line-of-credit - -------------- The Company has an unsecured revolving line of credit for $350,000 bearing interest at 6.75% per annum and expiring on July 30, 2002. As of March 29, 2002 and March 30, 2001, there were no advances on the line of credit. The line-of-credit is subject to provisions that require the Company to meet certain financial ratios and other operating minimums and restrictions. As of March 29, 2002, and March 30, 2001, the Company was in compliance with these provisions. Operating lease agreements - -------------------------- The Company rents office space from unrelated parties under two operating leases expiring January 31, 2004 and December 31, 2005, for the Denver and Colorado Springs offices, respectively. As of March 29, 2002, the Colorado Springs lease payments total $14,041 per month plus maintenance fees related to this lease. These payments increase to $14,743 in January 2003 per the lease agreement. For the Denver lease, monthly lease payments total $3,600 per month. A new Denver lease became effective on July 1, 2001 and expires on January 31, 2004, replacing the previous Denver lease which expired on January 31, 2002. Payments under the previous lease were $1,884 per month. The increase is due to an increase in square footage being leased by the Company. Total rent expense under these operating leases was $163,670 and $111,661 for the years ended March 29, 2002, and March 31, 2000, respectively. Minimum lease payments under these lease arrangements are as follows: Years Ending March, --------------------- 2003 $ 206,593 2004 179,118 2005 188,044 2006 146,223 2007 - ----------- $ 719,978 =========== 14 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 4. COMMITMENTS AND CONTINGENCIES (CONTINUED) Profit sharing plan - ------------------- The Company has a discretionary 401(k) profit sharing plan (Plan), covering employees over 21 years of age that meet the specific service and eligibility requirements as defined by the Plan. The Plan provides for Company contributions up to the maximum amount allowed by regulation. The Company contributed $199,282 and $213,387 for the years ended March 29, 2002, and March 30, 2001, respectively. 5. RELATED PARTY TRANSACTIONS Also during the fiscal year ended March 31, 2000, the Company advanced $20,000 to a stockholder. As of March 30, 2001, this receivable had a balance of $9,380 and was repaid as of March 29, 2002. 6. INCOME TAXES As of March 29, 2002, and March 30, 2001, the Company has a deferred tax asset of $271,000 and $256,000, respectively, resulting from future deductible temporary differences related primarily to the warranty and extended maintenance liability. Components of the provision for income taxes for the years ending March 29, 2002, and March 30, 2001, is as follows: 2002 2001 ---------- ---------- Current tax expense $ 899,276 $ 692,572 Deferred tax benefit (15,000) (79,000) ---------- ---------- $ 884,276 $ 613,572 ========== ========== Included in current income tax expense for the year ended March 29, 2002 is the recognition of federal and state income tax credits of approximately $116,886 and $14,264, respectively. Included in current income tax expense for the year ended March 30, 2001 is the recognition of federal and state income tax credits of approximately $106,500 and $13,855, respectively. 15 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 7. STOCK OPTION PLAN In 1999, the Company adopted a nonqualified stock option plan. The Company's stock option plan provides for the granting of nonqualified stock options to directors, key employees and independent contractors for the purchase of shares of the Company's common stock at a price determined by the Board of Directors at the date the option is granted. The options vest 20% each year and expire within twenty years from the date of grant. A summary of stock option activity follows: Weighted Average Number of Exercise Shares Price --------- -------- Outstanding at beginning of year 1,304,500 $ 0.85 Granted 111,000 2.13 Exercised (1,640) 1.02 Cancelled (5,500) 1.25 --------- ------- Outstanding at end of year 1,408,360 $ 0.94 ========= ======= Exercisable at end of year 826,444 $ 0.72 ========= ======= In accordance with SFAS No. 123, Accounting for Stock-Based Compensation, the Company applied APB Opinion 25 and related interpretations in accounting for its stock option plan, and accordingly does not record compensation costs on grants to associates. The effect of compensation cost based on the fair value of the option granted at the grant date as prescribed by SFAS No. 123 is not considered material. 16 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 8. SPECIAL BONUS PLAN The Company has a discretionary bonus plan which covers substantially all employees of the Company and provides for the distribution of the Company's income before bonuses and certain other adjustments to all eligible employees. For the years ended March 29, 2002 and March 30, 2001, the Company paid a special bonus to eligible employees totaling $525,000 each year. This special bonus had the following effect on the Company's statement of income for the years ended March 29, 2002 and March 30, 2001.
2002 ---------------------------- With Special Without Bonus Special Bonus ------------ ------------- Contract revenue $12,586,254 $12,586,254 Cost of contract revenue 6,432,614 6,432,614 ----------- ----------- Gross profit 6,153,640 6,153,640 Operating expenses 3,668,525 3,143,525 ----------- ----------- Income from operations 2,485,115 3,010,115 Other income 50,177 50,177 ----------- ----------- Income before income tax provision 2,535,292 3,060,292 Income tax provision (884,276) (1,067,389) ----------- ----------- Net income $ 1,651,016 $ 1,992,903 =========== =========== 2001 ---------------------------- With Special Without Bonus Special Bonus ----------- ------------- Contract revenue $10,563,124 $10,563,124 Cost of contract revenue 5,493,070 5,493,070 ----------- ----------- Gross profit 5,070,054 5,070,054 Operating expenses 3,240,425 2,715,425 ----------- ----------- Income from operations 1,829,629 2,354,629 Other income 5,705 5,705 ----------- ----------- Income before income tax provision 1,835,334 2,360,334 Income tax provision (613,572) (789,085) ----------- ----------- Net income $ 1,221,762 $ 1,571,249 =========== ===========
17 REAL TIME LOGIC, INC. dba RT LOGIC! NOTES TO FINANCIAL STATEMENTS MARCH 29, 2002, AND MARCH 30, 2001 8. SPECIAL BONUS PLAN (CONTINUED) With Special Without Bonus Special Bonus ------------ ------------- Key ratios for 2002 (as a percent of sales): Operating expenses 29.15% 24.98% Income from operations 19.74% 23.92% Income before interest and taxes (EBIT) 20.14% 24.31% Net income 13.12% 15.83% 18 SUPPLEMENTARY INFORMATION REAL TIME LOGIC, INC. dba RT LOGIC! SCHEDULE I - SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES YEARS ENDED MARCH 29, 2002 AND MARCH 30, 2001
2002 2001 -------------------------- ---------------------------- Percent of Percent of Revenues Revenues ----------- ---------- Advertising $ 46,839 0.37% $ 20,268 0.19% - ------------------------------------------- Allocated rent, utilities, telephone, and insurance 74,660 0.59% 42,162 0.40% - ------------------------------------------- Bank charges 979 0.01% 928 0.01% - ------------------------------------------- Bonuses 380,250 3.02% 252,898 2.39% - ------------------------------------------- Bids and proposals 118,223 0.94% 82,439 0.78% - ------------------------------------------- Depreciation 21,531 0.17% 8,717 0.08% - ------------------------------------------- Donations 7,000 0.06% - 0.00% - ------------------------------------------- Dues, fees, and subscriptions 1,054 0.01% 1,551 0.01% - ------------------------------------------- Employee benefits 116,979 0.93% 100,263 0.95% - ------------------------------------------- Entertainment and promotion 3,978 0.03% 4,021 0.04% - ------------------------------------------- Equipment rental 491 0.00% 428 0.00% - ------------------------------------------- Insurance 70,055 0.56% 62,947 0.60% - ------------------------------------------- Miscellaneous 628 0.00% 585 0.01% - ------------------------------------------- Outside services 52 0.00% 357 0.00% - ------------------------------------------- Payroll taxes 43,627 0.35% 60,144 0.57% - ------------------------------------------- Printing 8,106 0.06% 4,768 0.05% - ------------------------------------------- Professional services 18,146 0.14% 17,181 0.16% - ------------------------------------------- Recruitment 1,961 0.02% 520 0.00% - ------------------------------------------- Sales representative services 333,527 2.65% 369,361 3.50% - ------------------------------------------- Salaries 603,835 4.80% 511,201 4.84% - ------------------------------------------- Supplies 50,380 0.40% 41,007 0.39% - ------------------------------------------- Travel, conference & trade shows 70,146 0.56% 66,717 0.63% - ------------------------------------------- Taxes and licenses 2,215 0.02% 1,907 0.02% - ------------------------------------------- ---------- ------ ---------- ------ $1,974,662 15.69% $1,650,370 15.62% ========== ====== ========== ======
20 EX-99.3 5 dex993.txt UNAUDITED BALANCE SHEET EXHIBIT 99.3 REAL TIME LOGIC, INC. dba RT Logic! [GRAPHIC] INTERIM FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001 REAL TIME LOGIC, INC. dba RT LOGIC! BALANCE SHEET AS OF SEPTEMBER 30, 2002 (Unaudited)
September 30, 2002 - ---------------------------------------------------------------------------------------- Assets: Current Assets Cash and cash equivalents $582,932 Accounts receivable 5,511,259 Tax receivable 3,169,350 Other current assets 634,925 - ---------------------------------------------------------------------------------------- Total current assets 9,898,466 - ---------------------------------------------------------------------------------------- Property, plant and equipment 614,518 - ---------------------------------------------------------------------------------------- $10,512,984 - ---------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity: Current liabilities Accounts payable $1,072,561 Accrued expenses 1,426,131 Billings in excess of revenue 1,946,096 Line of credit 802,190 - ---------------------------------------------------------------------------------------- Total current liabilities 5,246,978 - ---------------------------------------------------------------------------------------- Shareholders' equity Common stock 465,247 Paid in capital 4,572,838 Retained earnings 5,352,501 Notes receivable - shareholders' (5,124,580) - ---------------------------------------------------------------------------------------- 5,266,006 - ---------------------------------------------------------------------------------------- $10,512,984 - ----------------------------------------------------------------------------------------
The accompanying notes should be read with this financial statement. REAL TIME LOGIC, INC. dba RT LOGIC! STATEMENTS OF INCOME SIX MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001 (Unaudited)
2002 2001 ----------------- ----------------- Contract revenue $8,782,443 $6,000,964 Cost of contract revenue 6,108,380 2,874,741 ----------------- ----------------- Gross profit 2,674,063 3,126,223 Operating expenses: Selling, general and administrative expenses 1,401,183 922,020 Research and development costs 531,311 500,534 ----------------- ----------------- Income from operations 741,569 1,703,669 ----------------- ----------------- Other income 32,912 39,094 ----------------- ----------------- Income before income tax provision 774,481 1,742,763 Income tax provision (271,068) (609,967) ----------------- ----------------- Net income $503,413 $1,132,796 ================= =================
The accompanying notes should be read with this financial statement. Real Time Logic, inc. dba RTLOGIC! STATEMENTS OF CASH FLOWS SIX MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001 (Unaudited)
2002 2001 -------------------- ------------------- Cash Flows from Operating Activities: Net income $ 503,413 $ 1,132,796 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 94,091 99,882 Changes in operating assets and liabilities: Accounts receivable (1,866,033) (965,672) Other assets 107,391 (214,295) Accounts payable 401,532 (58,241) Accrued expenses (372,327) 336,891 Billings in excess of revenue 737,739 (44,910) -------------------- ------------------- Net cash (used in) provided by operating activities (394,194) 286,451 -------------------- ------------------- Cash Flows from Investing Activities: Issuance of notes receivable-shareholders (5,124,580) - Purchases of property and equipment (72,559) (226,114) -------------------- ------------------- Net cash used in investing activities (5,197,139) (226,114) -------------------- ------------------- Cash Flows from Financing Activities: Proceeds from the issuance of common stock 1,403,488 9,000 Repurchase of common stock (18,550) (26,812) Proceeds received on line of credit 802,190 - -------------------- ------------------- Net cash used in financing activities 2,187,128 (17,812) -------------------- ------------------- Net (decrease) increase in Cash and Cash Equivalents (3,404,205) 42,525 Cash and Cash Equivalents, beginning of period 3,987,137 2,178,417 -------------------- ------------------- Cash and Cash Equivalents, end of period $ 582,932 $ 2,220,942 ==================== ===================
The accompanying notes should be read with this financial statement. REAL TIME LOGIC, INC. dba RT LOGIC! Notes to Unaudited Interim Financial Statements In the opinion of management, these interim financial statements reflect all adjustments consisting only of normal recurring accruals necessary for a fair presentation of results for such periods. The financial statements, which are condensed and do not include all disclosures included in the annual financial statements, should be read in conjunction with the consolidated financial statements of the Company for the fiscal year ended March 29, 2002 and March 30, 2001. The results of operations for any interim period are not necessarily indicative of results for the full year. In August 2002 the company loaned employees a total of $5.1 million to exercise 1,441,360 non-qualified stock options and to pay related withholding taxes. As a result of this transaction the Company will realize an income tax deduction equal to the difference in the exercise price of the options and the fair value of the Company's common stock on the date of exercise. The related income tax benefit of $3.2 million is recorded as an asset in the accompanying balance sheet as of September 30, 2002. The tax benefit is offset by a direct credit to shareholders' equity. EX-99.4 6 dex994.txt UNAUDITIED PRO FORMA FINANCIALS EXHIBIT 99.4 PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The accompanying unaudited pro forma condensed consolidated financial statements give effect to the acquisition of Real Time Logic, Inc., a Colorado corporation ("RT Logic"), by Integral Systems, Inc., a Maryland corporation ("Integral"), as described below. On October 1, 2002, Integral completed the acquisition of RT Logic. Pursuant to an Agreement and Plan of Reorganization dated October 1, 2002, by and among Integral, RT Logic, ISI Merger Corp., a Colorado corporation and a wholly owned subsidiary of Integral ("ISI"), each of the individuals designated as a Major Shareholder on Exhibit 1 attached thereto and Randal E. Culver, as Shareholders' Representative (the "Reorganization Agreement"), RT Logic was merged with and into ISI, with ISI as the surviving corporation. Under the Reorganization Agreement, the base purchase price payable to the shareholders of RT Logic by Integral consisted of $13.25 million in cash and 683,870 shares of Integral common stock, par value $.01 per share (the "Integral Common Stock"), of which approximately $1.5 million in cash and 77,447 shares of Integral Common Stock were placed in escrow to secure certain indemnification obligations of the RT Logic shareholders contained in the Reorganization Agreement. Pursuant to the terms of the Reorganization Agreement, the shareholders of RT Logic subsequently received additional aggregate consideration equal to $500,000 in cash and 25,806 shares of Integral Common Stock. The Reorganization Agreement provides that the shareholders of RT Logic may be entitled to receive additional consideration in the form of contingent purchase price, which will be payable in the event that RT Logic's business meets certain earnings performance targets during a period of up to four (4) years following the acquisition of RT Logic. Fifty percent (50%) of any contingent purchase price will be payable in cash and fifty percent (50%) thereof will be payable in shares of Integral Common Stock (valued based on a 30-trading-day average leading up to the end of each applicable earnout period). The contingent purchase price is subject to claims by Integral under the indemnification provisions of the Reorganization Agreement. The acquisition of RT Logic by Integral has been accounted for as a purchase, and accordingly, a portion of the purchase price has been allocated to assets acquired and liabilities assumed and other identified intangible assets based on estimated fair values on the acquisition date. The excess of the net assets assumed and the purchase price over the identified intangible assets acquired was allocated to goodwill. The identified intangible assets relating to contracts and technology will be amortized on a straight-line basis over an estimated useful life of 5 years. The customer related identified intangible assets will be amortized on a straight-line basis over an estimated useful life of 18 months. Goodwill is not being amortized but will be reviewed annually for impairment in accordance with FAS 142. The allocation of the aggregate purchase price reflected in the Pro Forma Financial Information is preliminary. The final allocation of the purchase price is subject to change, however, that allocation is not expected to differ materially from the preliminary allocation. The unaudited pro forma condensed combined balance sheet as of September 30, 2002 has been prepared to reflect the acquisition of RT Logic by Integral as if it had occurred on September 30, 2002 by combining the consolidated balance sheet of Integral as of September 30, 2002 with the balance sheet of RT Logic as of September 30, 2002. The unaudited pro forma condensed consolidated statement of operations for the year ended September 30, 2002, with appropriate adjustments, has been prepared by combining the consolidated statements of operations of Integral for the period ended September 30, 2002 with the unaudited statements of income of RT Logic for the three months ended December 31, 2001, March 31, 2002, June 30, 2002 and September 30, 2002, to reflect the acquisition of RT Logic as if it had occurred at the beginning of the period presented. The unaudited pro forma condensed consolidated financial statements have been prepared by Integral's management and should be read in conjunction with, and are qualified in their entirety by reference to, the historical financial statements of Integral and RT Logic and the related notes thereto. The unaudited pro forma condensed consolidated statements of operations are not necessarily indicative of the results of operations that may have actually occurred had the acquisition occurred on the dates specified, or of the future results of the combined companies. The pro forma adjustments are based upon available information and certain adjustments that the management of Integral believes are reasonable. In the opinion of Integral's management, all adjustments have been made that are necessary to present fairly the unaudited pro forma condensed consolidated financial statements. Unaudited Pro Forma Condensed Combined Balance Sheet September 30, 2002
Pro Forma -------------------------------------- Integral RT Systems Logic Adjustments Combined - ------------------------------------------------------------------------------------------------------------- Assets: Current Assets Cash and cash equivalents $16,064,363 $582,932 $16,647,295 Marketable securities 46,885,581 - (13,750,000) (a) 33,135,581 Accounts receivable 17,001,393 5,511,259 22,512,652 Tax receivable - 3,169,350 3,169,350 Other current assets 3,033,517 634,925 3,668,442 - ------------------------------------------------------------------------------------------------------------- Total current assets 82,984,854 9,898,466 (13,750,000) 79,133,320 - ------------------------------------------------------------------------------------------------------------- Property, plant and equipment 3,467,907 614,518 4,082,425 Other assets Notes receivable 288,500 - 288,500 Goodwill and Intangibles 3,047,680 - 17,334,414 (a) 20,382,094 Software development costs 6,490,640 - 6,490,640 Other assets 337,274 - (225,000)(a) 112,274 - ------------------------------------------------------------------------------------------------------------- Total Long-Term Assets 13,632,001 614,518 17,109,414 31,355,933 - ------------------------------------------------------------------------------------------------------------- Total Assets $96,616,855 $10,512,984 $ 3,359,414 $110,489,253 - ------------------------------------------------------------------------------------------------------------- Liabilities and Stockholder' Equity: Current liabilities Accounts payable $5,916,194 $1,072,561 $6,988,755 Accrued expenses 3,278,976 1,426,131 4,705,107 Billings in excess of revenue 2,625,602 1,946,096 4,571,698 - ------------------------------------------------------------------------------------------------------------- Total current liabilities 11,820,772 4,444,788 16,265,560 - ------------------------------------------------------------------------------------------------------------- Long term liabilities 2,539,903 802,190 3,342,093 Stockholders' equity Common stock 93,228 465,247 (465,247) (a) 100,325 7,097 (a) Paid in capital 65,070,787 4,572,838 (4,572,838) (a) 78,813,690 13,742,903 (a) Retained earnings 17,599,042 5,352,501 (5,352,501) (a) 17,599,042 Notes receivable - stockholders' (5,124,580) (5,124,580) Accumulated other comprehensive loss (506,877) - (506,877) - ------------------------------------------------------------------------------------------------------------- Total Stockholders' Equity 82,256,180 5,266,006 3,359,414 90,881,600 - ------------------------------------------------------------------------------------------------------------- Total Liabilities $96,616,855 $10,512,984 $3,359,414 $110,489,253 - -------------------------------------------------------------------------------------------------------------
Unaudited Pro Forma Condensed Combined Statement of Income Year Ended September 30, 2002
Pro Forma -------------------------------------- Integral RT Systems Logic Adjustments Combined - --------------------------------------------------------------------------------------------------------------- Revenue $50,922,741 $15,367,734 ($184,940) (c) $66,105,535 Cost of revenue Direct labor 13,229,088 2,140,433 (38,556) (c) 15,330,965 Direct materials and other direct costs 14,850,278 5,627,149 (55,809) (c) 20,421,618 Applied overhead 9,552,535 1,898,671 (30,845) (c) 11,420,361 - --------------------------------------------------------------------------------------------------------------- Total cost of revenue 37,631,901 9,666,253 (125,210) 47,172,944 - --------------------------------------------------------------------------------------------------------------- Gross margin 13,290,840 5,701,481 (59,730) 18,932,591 - --------------------------------------------------------------------------------------------------------------- Selling, general and administrative 8,928,938 2,977,595 1,164,000 (b) 13,070,533 expenses Research and development costs 361,921 1,199,641 1,561,562 Product amortization 2,182,910 - 2,182,910 - --------------------------------------------------------------------------------------------------------------- Income from operations 1,817,071 1,524,245 (1,223,730) 2,117,586 - --------------------------------------------------------------------------------------------------------------- Other income 1,953,132 42,732 1,995,864 - --------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 3,770,203 1,566,977 (1,223,730) 4,113,450 - --------------------------------------------------------------------------------------------------------------- Provision for income taxes 1,146,788 548,000 1,694,788 - --------------------------------------------------------------------------------------------------------------- Net income $2,623,415 $1,018,977 ($1,223,730) $2,418,662 - --------------------------------------------------------------------------------------------------------------- Weighted average number of common shares: Basic 9,174,831 709,676 9,884,507 Diluted 9,232,619 709,676 9,942,295 Basic earnings per share: Continuing operations $0.29 $0.24 Diluted earnings per share: Continuing operations $0.28 $0.24
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited) (a) Adjustments to (i) record issuance of common stock, (ii) eliminate the equity of RT Logic, (iii) record the new financing of the RT Logic acquisition and the additional acquisition related costs and (iv) record assignment of the purchase price to assets and liabilities in conformance with Integral Systems accounting policies based upon the preliminary estimates of their respective fair values. (b) Adjustment to amortize the preliminary estimate of other purchased intangible assets arising out of the acquisition of RT Logic. The identified intangible assets relating to contracts and technology are amortized on a straight-line basis over an estimated useful life of 5 years. The customer related identified intangible assets are be amortized on a straight-line basis over an estimated useful life of 18 months. (c) Adjustment to eliminate intercompany sales and cost of sales transactions between Integral Systems and RT Logic. -----END PRIVACY-ENHANCED MESSAGE-----