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% ========== ====== ========== ======
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