-----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, CBmNcwpFiPW/QKZFUJyAwd/0f12lNuI53DV5PNswLqjTvveW3b3MBb+//V5D2rIW zVlfOWwOChOFLRpO4LT6Lg== 0000074818-08-000005.txt : 20080307 0000074818-08-000005.hdr.sgml : 20080307 20080307172434 ACCESSION NUMBER: 0000074818-08-000005 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20071219 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080307 DATE AS OF CHANGE: 20080307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORBIT INTERNATIONAL CORP CENTRAL INDEX KEY: 0000074818 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 111826363 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-03936 FILM NUMBER: 08675200 BUSINESS ADDRESS: STREET 1: 80 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 7136675601 MAIL ADDRESS: STREET 1: 80 CABOT COURT CITY: HAUPPAUGE STATE: NY ZIP: 11788 FORMER COMPANY: FORMER CONFORMED NAME: ORBIT INSTRUMENT CORP DATE OF NAME CHANGE: 19911015 8-K/A 1 form8-ka.txt FORM 8-K/A-12192007 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 AMENDMENT NO. 1 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): DECEMBER 19, 2007 ORBIT INTERNATIONAL CORP. (Exact name of registrant as specified in its charter) DELAWARE 0-3936 11-1826363 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 80 CABOT COURT HAUPPAUGE, NEW YORK 11788 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 631-435-8300 NOT APPLICABLE -------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230-425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS This Form 8-K/A amends the Current Report on Form 8-K of Orbit International Corp. ("Orbit") dated December 19, 2007, regarding Orbit's acquisition of all of the issued and outstanding capital stock of Integrated Consulting Services, Inc. The sole purpose of this amendment is to provide the audited historical financial statements of the business acquired as required by Item 9.01(a) and the unaudited pro forma financial information required by Item 9.01(b), which financial statements and information were not included in the original filing. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED (i) The audited balance sheet of Integrated Consulting Services, Inc. as of December 31, 2007 and the related statements of operations, stockholders' equity and cash flows for the year ended December 31, 2007 are attached hereto as Exhibit 99.1. The audited balance sheet of Integrated Consulting Services, Inc. as of December 31, 2006 and the related statements of income, stockholders' equity and cash flows for the year ended December 31, 2006 are attached hereto as Exhibit 99.2. (B) PRO FORMA FINANCIAL INFORMATION (i) Orbit International Corp. and Subsidiaries unaudited pro forma combined balance sheet as of December 31, 2007 and the unaudited pro forma combined statement of operations for the year ended December 31, 2007 are attached hereto as Exhibit 99.3. (C) EXHIBITS. Listed below are all exhibits to this Current Report on Form 8-K. Exhibit Number Description - -------------- ----------- 99.1 Integrated Consulting Services, Inc. Financial Statements - December 31, 2007 99.2 Integrated Consulting Services, Inc. Financial Statements - December 31, 2006 99.3 Orbit International Corp. and Subsidiaries Unaudited Pro Forma Combined Financial Information - December 31, 2007 SIGNATURE 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. Dated: March 7, 2008 Orbit International Corp. By: /s/ Dennis Sunshine -------------------- Dennis Sunshine Chief Executive Officer /s/ Mitchell Binder ------------------- Mitchell Binder Chief Financial Officer EX-99.1 2 exhibit991.txt EXHIBIT 99.1 EXHIBIT 99.1 INTEGRATED CONSULTING SERVICES, INC. FINANCIAL STATEMENTS DECEMBER 31, 2007 INTEGRATED CONSULTING SERVICES, INC. INDEX TO FINANCIAL STATEMENTS ----------------------------- INDEPENDENT AUDITOR'S REPORT 3 FINANCIAL STATEMENTS: Balance Sheet as of December 31, 2007 4 Statement of Operations for the Year Ended December 31, 2007 5 Statement of Stockholders' Equity for the Year Ended December 31, 2007 6 Statement of Cash Flows for the Year Ended December 31, 2007 7 Notes to Financial Statements 8 - 10 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Integrated Consulting Services, Inc. We have audited the accompanying balance sheet of Integrated Consulting Services, Inc. as of December 31, 2007, and the related statements of operations, stockholders' equity and cash flows for the year 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Integrated Consulting Services, Inc. as of December 31, 2007, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. McGladrey & Pullen, LLP New York, New York March 7, 2008
INTEGRATED CONSULTING SERVICES, INC. BALANCE SHEET - ------------------------------------------------------ DECEMBER 31, 2007 - ------------------------------------------------------ ASSETS Current Assets: Cash and cash equivalents $1,942,000 Account receivable 579,000 Inventory 352,000 Cost and estimated earnings in excess of billings on uncompleted contracts 136,000 Prepaid expenses 34,000 ---------- TOTAL CURRENT ASSETS 3,043,000 Property and equipment Office equipment 230,000 Computer equipment 222,000 Leasehold improvements 53,000 Vehicles 171,000 --------- 676,000 Less - accumulated depreciation and amortization (416,000) --------- 260,000 Other assets 11,000 -------- TOTAL ASSETS $3,314,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Note payable -bank $1,997,000 Accounts payable 111,000 Payroll taxes and withholdings payable 20,000 Accrued liabilities 53,000 Deferred warranty income 247,000 --------- TOTAL CURRENT LIABILITIES 2,428,000 Stockholders' Equity: Common stock, no par value; 1,000 shares authorized 100 shares issued and outstanding 1,000 Retained earnings 885,000 ---------- STOCKHOLDERS' EQUITY 3,314,000
See Notes to Financial Statements
INTEGRATED CONSULTING SERVICES, INC. STATEMENT OF OPERATIONS - ---------------------------------------------- YEAR ENDED DECEMBER 31, 2007 - ---------------------------------------------- Revenue $5,865,000 Cost of revenue 2,914,000 ------------ Gross profit 2,951,000 Operating expenses 1,546,000 ------------ Income from operations 1,405,000 Interest income (55,000) Interest expense 151,000 ------------ Income before provision for state income taxes 1,309,000 Provision for state income taxes 12,000 ---------- Net income $1,297,000 ========== Pro forma information (Unaudited): Net income as above $1,297,000 Pro forma adjustments 444,000 ----------- Pro forma net income $ 853,000
See Notes to Financial Statements
INTEGRATED CONSULTING SERVICES, INC. STATEMENT OF STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31, 2007 - --------------------------------------------------------------------------------------- COMMON STOCK RETAINED SHARES AMOUNT EARNINGS TOTAL Balance at January 1, 2007 100 $ 1,000 $ 1,360,000 $ 1,361,000 Distributions to stockholders - - (1,772,000) (1,772,000) Net income - - 1,297,000 1,297,000 -------- --------- --------------- ------------ Balance at December 31, 2007 100 $ 1,000 $ 885,000 $ 886,000 ====================================================================
See Notes to Financial Statements
INTEGRATED CONSULTING SERVICES, INC. STATEMENT OF CASH FLOWS - ---------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2007 - ---------------------------------------------------------------------- Cash flows from operating activities: Net income $1,297,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 79,000 Write off of goodwill 12,000 Write off of fixed assets 3,000 Changes in operating assets and liabilities: Decrease in accounts receivable 168,000 Increase in inventory (225,000) Decrease in cost and estimated earnings in excess of billings on uncompleted contracts 927,000 Increase in prepaid expenses (1,000) Decrease in accounts payable (224,000) Decrease in accrued and withheld taxes (7,000) Decrease in income taxes payable (18,000) Decrease in billings in excess of cost and estimated earnings on uncompleted contracts (32,000) Increase in accrued liabilities 22,000 Increase in deferred warranty income 104,000 ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 2,105,000 Cash flows used in investing activity - Purchase of fixed assets (74,000) Cash flows from financing activities: Net proceeds from note payable - bank 497,000 Repayment of stockholder loan 5,000 Distributions to stockholders (1,772,000) ----------- NET CASH USED IN FINANCING ACTIVITIES (1,270,000) Net increase in cash and cash equivalents 761,000 Cash and cash equivalents at beginning of year 1,181,000 ------------- Cash and cash equivalents at end of year $1,942,000 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 163,000 Income taxes $ 24,000
See Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPAL BUSINESS ACTIVITY: NATURE OF BUSINESS - Integrated Consulting Services, Inc. (the "Company") designs and manufactures combat systems and gun weapon systems, provides systems integration, production engineering, integrated logistics support and documentation control for leading defense industry prime contractors, as well as a number of U.S. Department of Defense Procurement Agencies. The Company services the Continental United States. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. ACCOUNTS RECEIVABLE - Exposure to credit risk on accounts receivable is controlled through credit approval, limits, and monetary procedures. The Company's customers are primarily large, well established, defense industry prime contractors or the United States Government. Therefore, since the Company has not experienced any significant losses over the years, it has deemed that an allowance for doubtful accounts is not necessary at this time. INVENTORY - Inventory consists of finished goods and is stated at the lower of cost or market using the first-in, first-out (FIFO) method. PRODUCTION CONTRACT INCOME - Production contract earnings are reported on the percentage-of-completion method. For projects where materials have been purchased but have not been placed in production, the costs of such materials are excluded from costs incurred for the purpose of measuring the extent of progress toward completion. The amount of earnings recognized at the financial statement date is based on an efforts expended method, which measures the degree of completion on a contract based on the amount of labor dollars incurred compared to the total labor dollars expected to complete the contract. When an ultimate loss is indicated on a contract, the entire estimated loss is recorded in the current period Assets related to these contracts are included in current assets in the accompanying balance sheet, as they will be liquidated in the normal course of contract completion, although this may require more than one year. (See Note 2) PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost. Depreciation and amortization of the respective assets are computed using the straight-line method over their estimated useful lives ranging from 3 to 10 years. Leasehold improvements are amortized using the straight-line method over the expected term of the lease or estimated useful life of the improvement, whichever is less. DEFERRED WARRANTY INCOME - The Company generally warrants its production contracts for one year from date of delivery. The deferred warranty income is calculated as part of the total contract amount. INCOME TAXES - The Company has elected to be treated as a small business corporation (S-corporation) under federal and state regulations. Under these provisions, the Company generally does not pay income taxes on its taxable income. Instead, the stockholders report on their personal income tax returns, their proportionate share of the Company's taxable income and tax credits. For the year ended December 31, 2007, the Commonwealth of Kentucky's tax law was changed back to the pass-through system whereby the Company would report the state taxable income and the taxes would be paid on the stockholders' individual income tax returns. However, the Company is still responsible for the lesser of a gross receipts tax or a gross profits tax. Accordingly, currently due state income taxes will be recorded by the Company, when appropriate. On January 1, 2007, the Company adopted Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109"("FIN 48"). This interpretation provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A tax benefit from an uncertain position may be recognized only if it is "more likely that not" that the position is sustainable based on its technical merits. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. There was no impact upon the adoption of FIN 48 to the Company's financial position, results of operations or cash flows for the year ended December 31, 2007. USE OF ESTIMATES - Financial statements prepared in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. ADVERTISING COSTS - Advertising costs are charged to operations as incurred. Advertising expense for the year ended December 31, 2007 was $20,000. SHIPPING AND HANDLING COSTS - Shipping and handling costs for the year ended December 31, 2007 were $17,000. NEW ACCOUNTING PRONOUNCEMENTS - Management does not believe that any recently issued, but not yet effective accounting standards if currently adopted would have a material effect on the accompanying financial statements. 2.COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS: Uncompleted contracts as of December 31, 2007 consist of the following: Costs incurred on uncompleted contracts $ 1,146,000 Estimated earnings 384,000 ------- 1,530,000 Less: billings to date 1,394,000 --------- Cost and estimated earnings in excess of billings on uncompleted contracts $ 136,000 ============== 3. NOTE PAYABLE BANK: The Company has available line of credit agreements with a bank up to a maximum of $2,000,000, which expire at various dates through January 2009. Borrowings bear interest at the bank's prime rate (7.25% at December 31, 2007) plus %. The lines of credit are secured by substantially all of the assets of the Company. Borrowings at December 31, 2007 amounted to $1,997,000. In connection with the sale of the Company this amount has been repaid. (See Note 8). 4. COMMITMENTS: The Company began leasing the Louisville, Kentucky office facility under a five-year non-cancelable operating lease beginning March 15, 2004. Rent expense for the year ended December 31, 2007 was $71,000. The Company began leasing the Louisville, Kentucky manufacturing facility under a five-year non-cancelable agreement beginning April 1, 2004. Rent expense for the year ended December 31, 2007 was $52,000. The Company began leasing the Virginia Beach, Virginia office facility under a three-year non-cancelable operating lease beginning January 1, 2006. Rent expense for the year ended December 31, 2007 was $13,000. Future minimum lease payments are as follows: Year Ended December 31 2009 136,000 2010 31,000 -------- TOTAL $167,000 ======== 5. CONCENTRATIONS OF CREDIT RISK: The Company maintains cash in bank accounts, 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. Sales to two significant customers accounted for approximately 95% of the Company's sales in 2007. 6. PROFIT SHARING PLAN: The Company maintains an employee benefit plan under which employees may defer a portion of their annual compensation, pursuant to Section 401(k) of the Internal Revenue Code. The amount of the Company's contribution is determined at the discretion of the Board of Directors. Substantially all employees age 21 and older are eligible to participate in the plan beginning on either January 1st, April 1st, July 1st, or October 1st, immediately following completion of one year of service. For the year ended December 31, 2007, profit sharing expense was $35,000. 7. PRO FORMA TAX DISCLOSURE: The pro forma net income in the accompanying statement of operations for the year ended December 31, 2007 includes a pro forma adjustment for income taxes on a C- Corporation basis as indicated below: Income before provision for income taxes before Pro forma adjustment for income taxes $1,309,000 Pro forma provision for income taxes: Federal 368,000 State 88,000 ------ Pro forma net income $ 853,000 ========= Pro forma net income reflects an income tax provision for the year ended December 31, 2007 as if the Company had not elected S-Corporation status. Pro forma net income for the year ended December 31, 2007 reflects an additional income tax provision of approximately $444,000. 8. SALE OF COMPANY: Effective December 31, 2007, the stockholders of the Company sold all of the issued and outstanding capital stock to Orbit International Corp. ("Orbit"). The total transaction value was approximately $6.4 million consisting of $5.4 million in cash, of which $4.5 million was funded by a term loan, and approximately 120,000 shares of Orbit stock valued at approximately $1.0 million. Additionally there is a contingent earn-out of $1.0 million payable over the next three years based on the Company's ability to attain certain revenue levels over the three years. Orbit plans to keep the Company's operations in Louisville, Kentucky and the Company has become part of Orbit's Electronics Segment. EX-99.2 3 exhibit992.txt EXHIBIT 99.2 EXHIBIT 99.2 INTEGRATED CONSULTING SERVICES, INC. FINANCIAL STATEMENTS DECEMBER 31, 2006 INTEGRATED CONSULTING SERVICES, INC. CONTENTS -------- INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS: Balance Sheet 2 Statement of Income 3 Statement of Stockholders' Equity 4 Statement of Cash Flows 5 Notes to Financial Statements 6 - 8 INDEPENDENT AUDITOR'S REPORT ---------------------------- BOARD OF DIRECTORS INTEGRATED CONSULTING SERVICES, INC. LOUISVILLE, KENTUCKY We have audited the accompanying balance sheet of lntegrated Consulting Services, Inc. (an S corporation) as of December 31, 2006, and the related statements of income, retained earnings, and cash flows for the year 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of lntegrated Consulting Services, Inc. as of December 31, 2006 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As described in Note 7 to the financial statements, the Company has restated its financial statements as of December 31, 2006 and for the year then ended. Louis T. Roth & Co. , PLLC Louisville, Kentucky February 22, 2007 except Note 7 as to which the date is February 29, 2008.
INTEGRATED CONSULTING SERVICES, INC. BALANCE SHEET - ------------------------------------------------------- (RESTATED) DECEMBER 31, 2006 - ------------------------------------------------------- ASSETS Current Assets: Cash $1,180,554 Account receivable 747,073 Inventory 126,612 Cost and estimated earnings in excess of billings on uncompleted contracts 1,063,255 Prepaid expenses 32,234 ----------- TOTAL CURRENT ASSETS 3,149,728 Property and equipment Office equipment 221,313 Computer equipment 172,322 Leasehold improvements 45,573 Vehicles 170,988 ----------- 610,196 Less - accumulated depreciation and amortization 340,885 ----------- 269,311 Other Assets Deposits 11,108 Due from stockholders 5,146 Goodwill 12,289 ----------- 28,543 TOTAL ASSETS $3,447,582 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable - bank $1,500,000 Account payable 335,803 Payroll taxes and withholdings payable 26,868 Income taxes payable 17,548 Billings in excess of cost and estimated earnings on uncompleted contracts 31,949 Deferred warranty income 143,111 Accrued liabilities 31,302 --------- TOTAL CURRENT LIABILITIES 2,086,581 Stockholders' equity: Common stock, no par value; 1,000 shares authorized 100 shares issued and outstanding 1,000 Retained earnings 1,360,001 ----------- STOCKHOLDERS' EQUITY 1,361,001 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,447,582
See Notes to Financial Statements
INTEGRATED CONSULTING SERVICES, INC. STATEMENT OF INCOME - ----------------------------------------------- (RESTATED) YEAR ENDED DECEMBER 31, 2006 - ----------------------------------------------- Revenue $7,916,696 Cost of revenue 5,335,196 ----------- Gross profit 2,581,500 Operating expenses 1,355,153 ----------- Income from operations 1,226,347 Other income (expense): Interest income 37,322 Interest expense (146,931) Loss on sale of property and equipment (2,613) ---------- (112,222) ----------- Income before provision for state income taxes 1,114,125 ------------ Provision for state income tax expenses 67,714 ------------- NET INCOME $1,046,411
See Notes to Financial Statements INTEGRATED CONSULTING SERVICES, INC. STATEMENT OF STOCKHOLDERS' EQUITY --------------------------------- (RESTATED) YEAR ENDED DECEMBER 31, 2006 - ---------------------------- COMMON STOCK RETAINED SHARES AMOUNT EARNINGS TOTAL Balance at January 1, 2006 1,000 $1,000 $873,410 $874,410 Distributions to stockholders (559,820) (559,820) Net income 1,046,411 1,046,411 -------- -------- --------- ---------- BALANCE AT DECEMBER 31, 2006 1,000 $1,000 $1,360,001 $1,361,001
See Notes to Financial Statements STATEMENT OF CASH FLOWS - -------------------------------------------------------------- (RESTATED) YEAR ENDED DECEMBER 31, 2006 - -------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,046,411 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 93,932 Loss on sale of equipment 2,613 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (502,988) Inventory 123,086 Cost and estimated earnings in excess of billings on uncompleted contracts (297,572) Prepaid expenses 12,898 Increase (decrease) in: Accounts payable 1,917 Accrued and withheld payroll taxes 8,481 Accrued interest 27,118 Billings in excess of cost and estimated earnings on uncompleted contracts 31,949 Other accrued expenses 17,721 Deferred warranty income (170,771) --------- Total adjustments (651,616) NET CASH PROVIDED BY OPERATING ACTIVITIES 394,795 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets (49,124) NET CASH USED IN INVESTING ACTIVITIES (49,124) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable-bank 1,500,000 Principal payments on note payable (850,000) Payment on stockholder loan 20,847 Distributions to stockholders (559,820) --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 111,027 Net increase in cash 456,698 Cash at beginning of year 723,856 ---------- Cash at end of year $1,180,554 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: CASH PAID FOR: Interest $139,733 Income taxes $70,518
See Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPAL BUSINESS ACTIVITY: NATURE OF BUSINESS - The Company produces cabinets for naval ships through government contracts and provides engineering and technical services for major commercial entities and the Department of Defense. The Company services the Continental United States, with locations in Kentucky and Virginia. ACCOUNTS RECEIVABLE - Exposure to credit risk on accounts receivable is controlled through credit approval, limits, and monetary procedures. The Company's customers are primarily large, well established, defense industry prime contractors or the United States Government. Therefore, since the Company has not experienced any significant losses over the years, it has deemed that an allowance is not necessary at this time. INVENTORY - Inventory consists of finished goods and is stated at the lower of cost or market using the first in, first-out (FIFO) method. PRODUCTION CONTRACT INCOME - Production contract earnings are reported on the percentage-of-completion method. On projects where the amount of progress is subject to physical measurement, the amount of earnings recognized at the statement date is that portion of the total contract price that the work completed bears to the total work required. On projects or elements of projects where a reliable physical measurement of progress is not available, the amount of earnings recognized at the statement date is that portion of the total contract price that the cost expended bears to the anticipated final cost, based on current estimates of cost to complete the project. When an ultimate loss is indicated on a contract, the entire estimated loss is recorded in the current period. Assets and liabilities related to these contracts are included in current assets and current liabilities in the accompanying balance sheets, as they will be liquidated in the normal course of contract completion, although this may require more than one year. (See Note 2) PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost. Depreciation and amortization of the respective assets are computed using the straight-line method over their estimated useful lives ranging from 3 to 10 years. Leasehold improvements are amortized using the straight-line method over the expected term of the lease or estimated useful life of the improvement, whichever is less. DEFERRED WARRANTY INCOME - The Company generally warrants its production contracts for one year. The deferred warranty income is calculated as part of the total contract amount. INCOME TAXES - The Company has elected to be treated as a small business (S-corporation) under federal and state regulations. Under these provisions, the Company generally does not pay income taxes on its taxable income. Instead, the stockholders report on their personal income tax returns, their proportionate share of the Company's taxable income and tax credits. During 2005, the Commonwealth of Kentucky enacted tax laws requiring all businesses to report state corporate taxable income and pay the taxes at the entity level instead of reporting this taxable income on the stockholders' individual income tax returns. As a result, currently due state income taxes will be recorded on the books of the Company, when appropriate. USE OF ESTIMATES - Financial statements prepared in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. ADVERTISING COSTS - Advertising costs are charged to operations as incurred. Advertising expense for the year ended December 31, 2006 was $444. SHIPPING AND HANDLING COSTS - Shipping and handling costs for the year ended December 31, 2006 was $21,552. 2. COSTS AND ESTIMATED EARNINGS OF UNCOMPLETE CONTRACTS: Uncompleted contracts as of December 31, 2006 consist of the following: Costs incurred on Uncompleted contracts $2,762,170 Estimated earnings 1,025,365 ---------- 3,787,535 Less: billings to date 2,756,229 ---------- 1,031,306 Included in accompanying balance sheets under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $1,063,255 Billings in excess of costs and estimated earnings on uncompleted contracts (31,949) -------- $1,031,306 3. NOTE PAYABLE BANK: The Company has available a line of credit agreement with a bank up to a maximum of $1,500,000 which expires in March 2008. Borrowings bear interest at the bank's prime rate (8.25% at December 31, 2006) plus %. The line of credit is secured by substantially all of the assets of the Company. Borrowings at December 31, 2006 amounted to $1,500,000. 4. LEASES: The Company began leasing the Louisville, Kentucky office facility under a five-year non-cancelable operating lease beginning March 15, 2004. Rent expense for the year ended December 31, 2006 was $71,000. The Company began leasing the Louisville, Kentucky manufacturing facility under a five-year non-cancelable agreement beginning April 1, 2004. Rent expense for the year ended December 31, 2006 was $52,000. The Company began leasing the Virginia Beach, Virginia office facility under a three-year non-cancelable operating lease beginning January 1, 2006. Rent expense for the year ended December 31, 2006 was $12,000. Future minimum lease payments are as follows: Year Ended December 31 2007 $135,291 2008 135,665 2009 30,675 -------- TOTAL $301,631 5. CONCENTRATIONS OF CREDIT RISK: The Company has extended unsecured credit to customers amounting to $747,073 at December 31, 2006. In addition, the Company maintains cash in bank deposit accounts, 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. Sales to two significant customers accounted for approximately 99% of the Company's sales in 2006. 6. PROFIT SHARING PLAN: The Company maintains an employee pension plan under which employees may defer a portion of their annual compensation, pursuant to Section 401(k) of the Internal Revenue Code. The amount of the Company's contribution is determined at the discretion of the Board of Directors. Substantially all employees age 21 and older are eligible to participate in the plan beginning on either January 1st, April 1st, July 1st, or October 1st, immediately following completion of one year of service. For the year ended December 31, 2006, profit sharing expense was $43,897. 7. RESTATEMENT: The current year financial statements have been restated to include inventory valued at $126,612 as of December 31, 2006. In addition, retained earnings as of December 31, 2005 have been restated to include an increase of $69,470 for the December 31, 2005 inventory balance. Net income for the year ended December 31, 2006 increased $57,142 from the amount previously reported. The total net cash flows provided by operating activities remained unchanged. EX-99.3 4 exhibit993.txt EXHIBIT 99.3 EXHIBIT 99.3 ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED) DECEMBER 31, 2007 - ------ INDEX TO COMBINED FINANCIAL INFORMATION --------------------------------------- COMBINED FINANCIAL STATEMENTS (UNAUDITED): Pro Forma Combined Balance Sheet as of December 31, 2007 3 Pro Forma Combined Statement of Operations for the year ended December 31, 2007 4 Notes to Pro Forma Combined Financial Statements 5-7
ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES PRO FORMA COMBINED BALANCE SHEET (UNAUDITED) DECEMBER 31, 2007 - ---------------------------------------- PRO FORMA ORBIT ORBIT ICS ADJUSTMENTS PRO FORMA (unaudited) ------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 1,634,000 $ 1,942,000 $ 3,576,000 Investments in marketable securities 3,997,000 3,997,000 Accounts receivable, net 3,982,000 579,000 4,561,000 Inventories 10,101,000 352,000 10,453,000 Cost and estimated earnings in excess of billings on uncompleted contracts 136,000 136,000 Other current assets 2,172,000 34,000 $145,000 (a) 331,000 (2,020,000)(b) Deferred tax asset 1,025,000 1,025,000 ----------- --------- ---------- -------------- TOTAL CURRENT ASSETS 22,911,000 3,043,000 (1,875,000) 24,079,000 Property & Equipment, net 431,000 260,000 691,000 Goodwill 6,135,000 3,499,000 (c) 9,634,000 Investment in Subs 6,598,000 (6,598,000)(d) Intangible assets, net 769,000 2,200,000 (c) 2,969,000 Other assets 623,000 11,000 634,000 Deferred tax asset 1,678,000 1,678,000 ------------ ---------- ----------- ------------ TOTAL ASSETS $ 39,145,000 $ 3,314,000 $(2,774,000) $39,685,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $1,777,000 $1,777,000 Note payable - bank $1,997,000 $(1,997,000) (b) Accounts payable 1,288,000 111,000 (15,000) (b) 1,384,000 Accrued expenses 1,330,000 73,000 (8,000) (b) 1,395,000 Income taxes payable 30,000 132,000 (e) 162,000 Deferred income 85,000 247,000 332,000 Notes payable 699,000 699,000 Customer advances 163,000 163,000 ---------- ---------- ------------ -------- TOTAL CURRENT LIABILITIES 5,372,000 2,428,000 (1,888,000) 5,912,000 Deferred income 342,000 342,000 Deferred tax liability 595,000 595,000 Long-term obligations, Less current portion 6,753,000 6,753,000 ---------- ----------- ----------- ----------- TOTAL LIABILITIES 13,062,000 2,428,000 (1,888,000) 13,602,000 Stockholders' Equity: Common stock 472,000 1,000 (1,000) (f) 472,000 Additional paid-in capital 20,766,000 20,766,000 Unearned compensation Accumulated other comprehensive loss (33,000) (33,000) Retained earnings 4,878,000 885,000 (885,000) (f) 4,878,000 ---------- --------- ------------ ---------- STOCKHOLDERS' EQUITY 26,083,000 886,000 (886,000) 26,083,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $39,145,000 $3,314,000 $(2,774,000) $39,685,000
See Notes to Unaudited Pro Forma Combined Financial Information ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES PRO FORMA COMBINED STATEMENT OF OPERATIONS (unaudited) YEAR ENDED DECEMBER 31, 2007 - ---------------------------------- PRO FORMA ORBIT ORBIT ICS ADJUSTMENTS PRO FORMA ------------ -------- ----------- ------------- (unaudited) Net sales $25,885,000 $ 5,865,000 $(490,000) (g) $31,260,000 Cost of sales 14,659,000 2,914,000 (490,000) (g) 17,083,000 ----------- ------------ ---------- ------------- Gross profit 11,226,000 2,951,000 14,177,000 Selling, general and administrative expenses 8,729,000 1,546,000 168,000 (h) 10,710,000 267,000 (j) ----------- --------- ----------- --------- Income from operations 2,497,000 1,405,000 (435,000) 3,467,000 Interest expense 332,000 151,000 283,000 (i) 615,000 (151,000) (l) Investment and other income, net (447,000) (55,000) (502,000) ------------ --------- ------------ ------------ Income before income tax provision 2,612,000 1,309,000 (567,000) 3,354,000 Income tax provision 30,000 12,000 132,000 (e) 250,000 76,000 (k) ----------- ----------- ---------- ------------ Net income $2,582,000 $1,297,000 $(775,000) $3,104,000 Net income per common share: Basic $ .59 $ .69 ========= ============= Diluted $ .55 $ .65 ========= ============= Weighted average number of shares outstanding: Basic 4,404,000 4,519,000 ========= ========== Diluted 4,680,000 4,795,000 ========= ===========
See Notes to Unaudited Pro Forma Combined Financial Information ORBIT INTERNATIONAL CORP. AND SUBSIDIARIES NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION ------------------------------------------------- (UNAUDITED) 1. BASIS OF PRESENTATION: On December 31, 2007, pursuant to a Stock Purchase Agreement ("SPA"), Orbit International Corp. ("Orbit") acquired all of the issued and outstanding capital stock of Integrated Consulting Services, Inc. ("ICS"). The purchase price was approximately $6.6 million consisting of $5.4 million in cash, of which $4.5 million was funded by a term loan, approximately 120,000 shares of Orbit stock valued at approximately $1.0 million and approximately $203,000 of direct costs related to the purchase of ICS, all of which are included in the historical Orbit column on the accompanying pro forma combined balance sheet. Additionally, there is a contingent earn out of $1.0 million payable over the next three years based on ICS's ability to attain certain revenue levels over the three years. Orbit plans to keep ICS's operations in Louisville, Kentucky and ICS has become part of Orbit's electronics segment. The unaudited pro forma combined balance sheet reflects the acquisition of ICS as of December 31, 2007. The unaudited pro forma combined statement of operations for the year ended December 31, 2007 reflects the acquisition of ICS as if it had taken place at the beginning of the fiscal period presented. The pro forma statement of operations is for illustrative purposes only and should be read in conjunction with the separate historical financial statements of Orbit(unaudited) and ICS, and the notes thereto and with the accompanying notes to the pro forma statements. The pro forma statement of operations may not be indicative of either future results of operations or the results that would have actually occurred if the acquisition had been consummated on January 1, 2007. The pro forma statements are based upon currently available information and upon certain assumptions that Orbit believes are reasonable under the circumstances. The acquisition was accounted for as a purchase pursuant to the provisions of SFAS No. 141, Business Combinations. Goodwill was recognized for the portion of the purchase price that exceeded the fair value of the net assets acquired and the liabilities assumed. 2. PROFORMA ADJUSTMENTS The following are brief descriptions of each of the pro forma adjustments included in the unaudited pro forma combined financial statements: Balance sheet adjustments: --------------------------- (a) To record amount due from ICS sellers to satisfy the $750,000 working capital requirement to be delivered by ICS per the stock purchase agreement. (b) To eliminate Orbit's intercompany receivable and ICS's intercompany payable due to Orbit's payment of ICS's note payable-bank. (c) To record intangible assets and goodwill resulting from the allocation of the purchase price to the fair value of assets acquired and liabilities assumed. The total purchase price of approximately $6,598,000 has been allocated as follows: Tangible assets and liabilities: Cash $1,942,000 Accounts receivable 579,000 Inventory 352,000 Other current assets 315,000 Property and equipment 260,000 Other long term assets 11,000 Accounts payable (111,000) Note payable (1,997,000) Accrued expenses (73,000) Income tax payable (132,000) Deferred income (247,000) ----------- Total net tangible assets and liabilities 899,000 Amortizable intangible assets: Customer relationships 2,000,000 Non-compete agreement 100,000 Contract Backlog 100,000 ----------- Total amortizable intangible assets 2,200,000 Goodwill 3,499,000 ----------- Total purchase price $6,598,000 ========== (d) To eliminate Orbit's investment in ICS at December 31, 2007. This acquisition was effective on December 31, 2007 but the accounts of ICS were not consolidated in the historical unaudited Orbit column of the pro forma combined balance sheet. (e) To record income tax payable and income tax expense to be paid by Orbit on capital gain tax resulting from the sale of ICS as per the stock purchase agreement. (f) To eliminate the pre-acquisition equity balances of ICS. Statement of operations adjustments: --------------------------------------- (g) To eliminate intercompany sales and purchases. (h) To adjust Orbit's officer bonus compensation for the addition of ICS pre-tax income and to record ICS officer bonus on ICS pre-tax income. (i) To record interest expense on the term loan to fund the acquisition of ICS. The acquisition was funded by a five year $4,500,000 term loan with principal payments based on a seven year amortization schedule. The interest rate on the loan is the one month London Inter-bank offer rate(LIBOR) plus an applicable percentage based on a ratio of funded debt to EBIDTA. The additional percentage ranges from 1.00% to 1.75%. A .125% variance in the interest rate would result in a change in pro forma interest expense of $5,000. (j) To record amortization expense related to intangible assets. The intangible assets, amounts and their economic lives are comprised of the following: Customer relationships-$2,000,000-15 years, Contract backlog $100,000-1 year, and Non-compete agreement-$100,000- 3 years. 2. PROFORMA ADJUSTMENTS: (k) To record additional state tax due for the change from S-Corp status to C- Corp status at the statutory tax rate. (l) To reverse interest expense incurred by ICS on note payable, as a result of Orbit payoff of note to ICS' lender on December 31, 2007. -----END PRIVACY-ENHANCED MESSAGE-----