-----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, O8gZ/gw28yqAGM9h0Nsy8Oanq6K16ALIWkVbsVhXGw5cNIyPLuZYnhws3jid6CwP ecQNR4vbo0L+3Q0QVKMnNg== 0000912057-01-531598.txt : 20010910 0000912057-01-531598.hdr.sgml : 20010910 ACCESSION NUMBER: 0000912057-01-531598 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010628 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20010907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL RECORDERS INC CENTRAL INDEX KEY: 0000853695 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 561362926 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13408 FILM NUMBER: 1732953 BUSINESS ADDRESS: STREET 1: 4018 PATRIOT DRIVE STREET 2: SUITE 100 CITY: DURHAM STATE: NC ZIP: 27703 BUSINESS PHONE: 9193612155 MAIL ADDRESS: STREET 1: 4018 PATRIOT DRIVE STREET 2: SUITE 100 CITY: DURHAM STATE: NC ZIP: 27703 8-K/A 1 a2058666z8-ka.txt 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 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): Commission File Number: JUNE 28, 2001 01-13408 -------------------- DIGITAL RECORDERS , INC. (Exact name of Registrant as specified in its charter) NORTH CAROLINA 56-1362926 (State of incorporation) (I.R.S. Employer Identification Number) 4018 PATRIOT DRIVE, SUITE 100 DURHAM, NORTH CAROLINA 27703 (919) 361-2155 (Address of principal executive offices and telephone number) -------------------- EXPLANATORY NOTE This Amendment on Form 8-K/A to Digital Recorders, Inc.'s Current Report on Form 8-K dated July 13, 2001 amends the original filing. Except as set forth in Item 2 and 7 below, no other changes are being made to the original Report dated July 13, 2001. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. As previously reported, on June 28, 2001, Digital Recorders, Inc. (the "Company") and its wholly-owned subsidiary, DRI Europa AB ("DRI Europa"), acquired all of the outstanding stock of Mobitec Holding AB ("Mobitec"), a corporation organized under the laws of Sweden, from the five shareholders of Mobitec. The purchase price for the Mobitec shares consisted of a combination of cash, notes, stock and warrants to purchase stock, subject to certain possible adjustments, which adjustments are more fully described below. Specifically, the total purchase price, including acquisition costs, was $8,458,183, consisting of (i) $5,368,958 in cash, (ii) promissory notes issued by DRI Europa to the sellers aggregating $2,111,325, (iii) 430,000 restricted shares of the Company's common stock (valued at $915,900 or $2.13 per share) issued to two of the sellers, and (iv) warrants to purchase in the aggregate of 100,000 shares of the Company's common stock at an exercise price of $4.00 per share for a period of five years (valued at a total of $62,000) issued to one of the sellers. As previously reported, certain possible adjustments to the purchase price were determined after the closing of the Mobitec acquisition pursuant to the Stock Purchase Agreement. The only purchase price adjustment made was an increase in the amount of the promissory note forming part of the purchase price from $2,000,000 to $2,111,325. The cash portion of the purchase price was provided by two separate sources: (1) the authorization and issuance of up to $3 million in convertible debentures by the Company to certain investment funds associated with Renaissance Capital Group, Inc. of Dallas, Texas (the "Convertible Debentures"); and, (2) a loan to DRI Europa from Svenska Handelsbanken AB of Goteborg, Sweden in the amount of SEK 22,000,000 ($2,020,629) (the "Acquisition Loan"). FORWARD-LOOKING STATEMENTS IN THIS REPORT. This report contains certain forward-looking statements. When used in this report, the words "may," "will," "expect," "anticipate," "continue," "estimate," "project," "intend," "believe" and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding events, conditions and financial trends including, without limitation, business conditions and growth in the markets in which the Company (including its subsidiaries) participates and the general economy; competitive factors, such as the entry of new competitors into any of the markets in which the Company participates; price pressures and increased competition in those markets; inventory risks due to shifts in market demand and/or price erosion of purchased components; changes in product mix; that the Company's working capital and existing credit arrangement will be adequate to fund its operations; and the risks and uncertainties listed from time to time in the Company's Securities and Exchange Commission reports and filings. Such statements are based on management's current expectations and are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the actual plan of operations, business strategy, operating results and financial position could differ materially from those expressed in, or implied by, such forward-looking statements. 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF THE BUSINESSES ACQUIRED. See Exhibit 99.1, Mobitec Holding AB and Subsidiaries Consolidated Financial Statements, December 31, 2000 and 1999 (Audited); and Mobitec Holding AB and Subsidiaries Consolidated Financial Statements, March 31, 2001 (Unaudited). (b) PRO FORMA FINANCIAL INFORMATION. See Exhibit 99.2, Digital Recorders, Inc. Pro Forma Combined Condensed Financial Statements, March 31, 2001 and December 31, 2000 (Unaudited). (c) EXHIBITS. The exhibits to this report are listed in the Exhibit Index. 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. DIGITAL RECORDERS, INC. Date: September 7, 2001 By: /s/ David L. Turney ------------------------------------ David L. Turney Chairman of the Board, President and Chief Executive Officer INDEX TO EXHIBITS
Exhibit No. Document - ----------- -------- 99.1 Mobitec Holding AB and Subsidiaries Consolidated Financial Statements, December 31, 2000 and 1999 (Audited); and Mobitec Holding AB and Subsidiaries Consolidated Financial Statements, March 31, 2001 (Unaudited). 99.2 Digital Recorders, Inc. Pro Forma Combined Condensed Financial Statements, March 31, 2001 and December 31, 2000 (Unaudited).
3 EX-99.1 3 a2058666zex-99_1.txt EXHIBIT 99.1 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 CONTENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS Consolidated balance sheets 2 Consolidated statements of operations 3 Consolidated statements of stockholders' equity 4 Consolidated statements of cash flows 5 - 6 Notes to consolidated financial statements 7 - 14 - --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT To the Board of Directors Mobitec Holding AB and Subsidiaries Herrrljunga, Sweden We have audited the accompanying consolidated balance sheets of Mobitec Holding AB and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, 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 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 audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mobitec Holding AB and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. McGLADREY & PULLEN, LLP Raleigh, North Carolina July 17, 2001 1 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999
(SEK AND DOLLAR AMOUNTS IN THOUSANDS) (EXCEPT FOR SHARE AND PER SHARE INFORMATION) December 31, ASSETS (NOTE 4) 2000 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents SEK 2,077 $ 221 SEK 6,222 Trade accounts receivable (Note 8) 19,494 2,071 13,028 Other receivables 2,694 286 2,048 Inventories (Note 2) 15,630 1,660 9,861 Prepaid expenses and other assets 487 52 408 ----------------------------------- ------------- TOTAL CURRENT ASSETS 40,382 4,290 31,567 Property and equipment, net of accumulated depreciation (Note 3) 4,094 435 3,622 Other assets (Note 7) 1,221 130 270 ----------------------------------- ------------- TOTAL ASSETS SEK 45,697 $ 4,855 SEK 35,459 =================================== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Lines of credit (Note 4) SEK 10,061 $ 1,069 SEK 4,531 Accounts payable 10,459 1,111 8,613 Accrued expenses 6,017 639 5,434 Income tax payable 646 69 135 Other current liabilities (Note 4) 2,522 269 2,028 ----------------------------------- ------------- TOTAL CURRENT LIABILITIES 29,705 3,157 20,741 ----------------------------------- ------------- Long Term Liabilities Deferred income taxes (Note 6) 145 15 334 Deferred compensation benefits (Note 7) 911 97 - ----------------------------------- ------------- TOTAL LONG TERM LIABILITIES 1,056 112 334 ----------------------------------- ------------- TOTAL LIABILITIES 30,761 3,269 21,075 ----------------------------------- ------------- Minority interest in consolidated subsidiary 1,819 193 1,009 ----------------------------------- ------------- Commitments and Contingencies (Notes 5 and 11) Stockholders' Equity Share capital, par value SEK 1.00 per share, 100,000 shares authorized and outstanding 100 12 100 Legal reserve 2,653 299 2,653 Accumulated other comprehensive income, foreign translation adjustments 564 41 112 Retained earnings 9,800 1,041 10,510 ----------------------------------- ------------- TOTAL STOCKHOLDERS' EQUITY 13,117 1,393 13,375 ----------------------------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY SEK 45,697 $ 4,855 SEK 35,459 =================================== =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 2 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2000 AND 1999
(SEK AND DOLLAR AMOUNTS IN THOUSANDS) (EXCEPT FOR SHARE AND PER SHARE INFORMATION) For the Years Ended December 31, 2000 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- Net sales (Note 8) SEK 114,031 $ 12,438 SEK 96,093 Cost of sales 67,961 7,413 65,747 -------------------------------- -------------- GROSS PROFIT 46,070 5,025 30,346 -------------------------------- -------------- Operating expenses: Selling, general and administrative 37,781 4,121 24,014 Research and development 6,821 744 4,742 Other 146 16 373 -------------------------------- -------------- Total operating expenses 44,748 4,881 29,129 -------------------------------- -------------- OPERATING INCOME 1,322 144 1,217 -------------------------------- -------------- Nonoperating income (expense): Other income (expense) 219 24 (288) Interest (expense) (434) (47) (243) -------------------------------- -------------- Total nonoperating income (expense) (215) (23) (531) -------------------------------- -------------- INCOME BEFORE INCOME TAXES 1,107 121 686 Income tax expense (Note 6) 491 54 274 -------------------------------- -------------- INCOME BEFORE MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARY 616 67 412 Minority interest in net income of consolidated subsidiary 807 88 175 -------------------------------- -------------- NET INCOME (LOSS) SEK (191) $ (21) SEK 237 ================================ ============== EARNINGS PER SHARE: Earnings (loss) per common share SEK (1.91) $ (0.21) SEK 2.37 ================================ ============== Weighted average shares outstanding 100,000 100,000 100,000 ================================ ==============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 3 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2000 AND 1999
(SEK AMOUNTS IN THOUSANDS) Accumulated Other Other Total Share Legal Retained Comprehensive Comprehensive Stockholders' Capital Reserve Earnings Income Income Equity - ---------------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 1999 100 2,653 10,273 - 13,026 Net income - - 237 - 237 237 Changes in cumulative translation adjustments - - - 112 112 112 ------------- Total comprehensive income 349 ---------------------------------------------------=============--------------- Balance, December 31, 1999 100 2,653 10,510 112 13,375 Net (loss) - - (191) - (191) (191) Changes in cumulative translation adjustments - - - 452 452 452 ------------- Total comprehensive income 261 ============= Dividends - - (519) - (519) --------------------------------------------------- ---------------- Balance, December 31, 2000 100 2,653 9,800 564 13,117 =================================================== ================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000 AND 1999
(SEK AMOUNTS IN THOUSANDS) For the Years Ended December 31, 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Cash Flows From Operating Activities Net income (loss) SEK (191) SEK 237 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Minority interest in net income of consolidated subsidiary 807 175 Depreciation and amortization 1,600 1,348 Deferred income taxes (189) 26 Gain on sale of property and equipment (183) - Deferred compensation expense 1,046 - Changes in operating assets and liabilities: (Increase) in trade accounts receivable (6,466) (5,643) (Increase) in other receivables (646) (663) (Increase) decrease in inventories (5,769) 814 (Increase) decrease in prepaid expenses and other current assets (79) 36 Increase in accounts payable 1,846 2,354 Increase in accrued expenses 583 2,267 (Decrease) increase in income tax payable 511 (156) Increase in other current liabilities 494 1,628 --------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6,636) 2,423 --------------------------------------------- Cash Flows From Investing Activities Proceeds from sales of property and equipment 461 - Purchases of property and equipment (2,254) (1,732) Purchase of insurance to fund deferred compensation (1,046) - Purchase of other assets (153) (338) --------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (2,992) (2,070) --------------------------------------------- Cash Flows From Financing Activities Dividends (519) - Net proceeds from bank borrowings 5,530 1,741 --------------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 5,011 1,741 --------------------------------------------- Effect of exchange rate change 472 105 --------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,145) 2,199 Cash and cash equivalents at beginning of year 6,222 4,023 ---------------- --------------- Cash and cash equivalents at end of year SEK 2,077 SEK 6,222 ================ =============== (Continued) 5 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 2000 AND 1999 (SEK AMOUNTS IN THOUSANDS) For the Years Ended December 31, 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Supplemental Disclosures of Cash Flow Information Cash payments for: Interest SEK 434 SEK 243 ================ =============== Income taxes SEK 169 SEK 93 ================ ===============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 6 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------- NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS: The Company develops, manufactures, and distributes information systems primarily for buses used in public transportation. Customers are primarily bus manufacturers located in Australia, Brazil, Germany, and Scandinavia. A summary of the Company's significant accounting policies follows: BASIS OF PRESENTATION: These consolidated financial statements have been prepared in Swedish Krona (SEK), the Company's functional currency. The 2000 consolidated balance sheet and statement of operations reflect amounts in US dollars in a "convenience translation" column. The consolidated financial statements have also been prepared in accordance with accounting principles generally accepted in the United States of America. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Mobitec AB. The consolidated financial statements also include the accounts of Mobitec AB's wholly owned subsidiaries (Mobitec GmbH, Mobitec Australia, Pty Ltd., Mobitec Klimat AB and Mobitec Hexair AB) and the accounts of its 50% owned subsidiary, Mobitec Brazil LTDA. Mobitec Hexair AB was sold during the year ended December 31, 2000; however, the results of its operations are included in the statements of income. All significant inter-company accounts and transactions have been eliminated in consolidation. INVENTORIES: Inventories are stated at the lower of cost (average cost) or market. PROPERTY AND EQUIPMENT: Property and equipment is stated at cost, less accumulated depreciation. If facts and circumstances suggest that the property and equipment will not be recoverable, as determined, based on the undiscounted cash flows over the remaining depreciable period, the Company will review for impairment. To the extent that there is an impairment, analysis is preformed based on several criteria, including but not limited to, revenue trends, discounted operation cash flows and other factors to determine the impairment amount. The Company computes depreciation on its equipment using the straight-line method over the following estimated useful lives:
Years ------- Buildings 50 Leasehold improvements 5 Machinery and equipment 3 to 10
ESTIMATES: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INCOME TAXES: The Company reports deferred tax assets and liabilities attributable to temporary differences between the book value of assets and liabilities and their tax value. The accumulated deferred tax liability is adjusted each year by applying the current tax rate in each country and is reported in the balance sheet as deferred income taxes. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of the Company's foreign subsidiaries are translated at exchange rates prevailing at the end of the year. Revenue and expense transactions are translated at the average of exchange rates in effect during the period. Translations gains and losses are recorded directly to stockholders' equity. Realized gains and losses on foreign currency transactions, if any, are included in operations. 7 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------- NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS: The following summarizes the major methods and assumptions used in estimating the fair value of financial instruments: Cash and cash equivalents - The carrying amount approximates fair value due to the relatively short-term period to maturity of these instruments. Short-term borrowings - The carrying amount approximates fair value due to the variable interest rate adjustments based upon market conditions. REVENUE RECOGNITION: The Company recognizes operating revenues upon shipment of goods to customers. RESEARCH AND DEVELOPMENT: The Company expenses all research and development costs at the time expenses are incurred. EARNINGS PER SHARE AMOUNTS: Earnings (loss) per share has been computed based upon the weighted average number of shares of share capital outstanding. NOTE 2. INVENTORIES The components of inventories consist of the following:
2000 1999 --------- -------- Raw materials SEK 13,479 SEK 7,194 Work-in-process 197 148 Finished goods 1,264 802 Supplies 690 1,717 --------- -------- SEK 15,630 SEK 9,861 ========= ========
NOTE 3. PROPERTY AND EQUIPMENT Property and equipment are as follows:
2000 1999 --------- -------- Land SEK - SEK 95 Buildings - 194 Machinery and equipment 8,454 6,373 Leasehold improvements 797 797 --------- -------- 9,251 7,459 Less accumulated depreciation 5,157 3,837 --------- -------- SEK 4,094 SEK 3,622 ========= ========
Depreciation expense was 1,504 SEK and 1,280 SEK for 2000 and 1999, respectively. 8 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------- NOTE 4. LOAN AGREEMENTS The Company has an agreement with a bank in which the Company may currently borrow up to a maximum of 4,500 SEK. At December 31, 2000 and 1999, 4,406 SEK and 4,531 SEK, respectively, was outstanding. Advances under the agreement are subject to a borrowing base of 75% of eligible accounts receivable. The line of credit bears interest at 5.1% and is collateralized by accounts receivable. This line of credit agreement expires on October 31, 2001. The Company also has an agreement with a bank in which it may borrow up to 6,000 SEK of which 5,655 SEK was outstanding at December 31, 2000. The terms of this agreement require the payment of an unused credit line fee equal to 0.5% of the unused portion and interest at 5% of the outstanding balance. This agreement is collateralized by a mortgage on substantially all assets of the Company. This agreement expires on October 31, 2001. The Company also has convertible loans of 99 SEK at December 31, 2000 from employees that can be converted into share capital of the Company. These loans are reflected in "other current liabilities" at December 31, 2000. These loans were repaid by the Company in June 2001. NOTE 5. LEASE COMMITMENTS The Company has lease commitments under operating leases for vehicles and office space. Rental expense for 2000 and 1999 was 1,800 SEK and 1,040 SEK, respectively. At December 31, 2000, the future minimum lease commitments under non-cancelable operating leases are as follows:
Year Ending Operating December 31, Leases - --------------------------------------------------------------------------------- 2001 SEK 1,320 2002 1,488 2003 1,382 2004 1,009 2005 916 Thereafter 192 ------------- Total minimum lease payments SEK 6,307 =============
9 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------- NOTE 6. INCOME TAXES The components of income tax expense for the years ended December 31, 2000 and 1999 consisted of the following:
2000 1999 ------------ ----------- Current expense SEK 680 SEK 248 Deferred expense (benefit) (189) 26 ------------ ----------- SEK 491 SEK 274 ============ ===========
At December 31, 2000 and 1999, the Company has net deferred tax liabilities that consist of the following:
2000 1999 ------------ ----------- Deferred tax assets: Property and equipment SEK 130 SEK 87 Inventories 6 - ------------ ----------- 136 87 ------------ ----------- Deferred tax liabilities: Untaxed reserves 281 281 Other - 140 ------------ ----------- 281 421 ------------ ----------- Net deferred tax liabilities SEK (145) SEK (334) ============ ===========
10 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------- NOTE 6. INCOME TAXES (CONTINUED) The deferred tax amounts above have been classified on the consolidated balance sheets as follows:
2000 1999 ---------------------------------- Current assets SEK - SEK - Noncurrent assets - - Noncurrent liabilities (145) (334) ------------- ------------ SEK (145) SEK (334) ============= ============
The income tax provision differs from the amount of income tax determined by applying the applicable Swedish income tax rate to pretax income for 2000 and 1999 due to the following:
2000 1999 ---------------------- -------------------- Amount Percent Amount % ---------------------- -------------------- Computed "expected" tax expense SEK 310 28.0% SEK 192 28.0% Increase in income taxes resulting from: Nondeductible items 173 15.6% 68 9.9% Other 8 0.8% 14 2.0% ---------------------- -------------------- SEK 491 44.4% SEK 274 39.9% ====================== ====================
NOTE 7. RETIREMENT PLAN During 2000, the Company entered into a deferred compensation plan agreement with a former key employee which permitted the employee to retire at age 60. In March 2000, the employee retired and the Company paid approximately 1,046 SEK to fund an insurance contract. The Company also recorded a corresponding liability to cover the estimated present value of the liability to be paid to the recipient. Each month, the recipient will receive approximately 17 SEK over a 60-month term. At December 31, 2000, the related asset and liability associated with this plan is 911 SEK and is included in the accompanying balance sheet as "other assets" and as "deferred compensation benefits." The amount of the expense associated with this plan for the year ended December 31, 2000 was approximately 1,046 SEK. 11 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------- NOTE 8. MAJOR CUSTOMER Sales to a major customer (which consists of six wholly-owned subsidiaries of a Scandinavian and European bus and truck manufacturing company) during the years ended December 31, 2000 and 1999 are as follows:
Amount of Net Sales Years Ended December 31, ------------------------------------ 2000 1999 ------------------------------------ Customer A SEK 31,261 SEK 25,788 -------------- -------------- SEK 31,261 SEK 25,788 ============== ============== Trade Accounts Receivable December 31, ------------------------------------ 2000 1999 ------------------------------------ Customer A SEK 2,839 SEK 4,819 -------------- -------------- SEK 2,839 SEK 4,819 ============== ==============
Because of the nature of the Company's business, the major customers may vary between years. NOTE 9. OTHER COMPREHENSIVE INCOME The following is a summary of the tax effects of the components of other comprehensive income, consisting solely of foreign currency translation adjustments, reported in the statements of stockholders' equity for the years ended December 31, 2000 and 1999:
Pre-tax Tax Net-of-tax Amount Expense Amount -------------- -------------- -------------- Year ended December 31, 2000: Foreign currency translation adjustment SEK 628 SEK 176 SEK 452 ============== ============== ============== Year ended December 31, 1999: Foreign currency translation adjustment SEK 155 SEK 43 SEK 112 ============== ============== ==============
12 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------- NOTE 10. FOREIGN OPERATIONS The Company has one business segment in which it develops, manufactures, and distributes information systems primarily for buses used in public transportation. Customers are primarily bus manufacturers located in Scandinavia, Germany, Australia, and Brazil. Summarized financial information for the Company's foreign sales (attributed to countries based on the location of the subsidiary) for the year ended December 31, 2000 and 1999 is as follows:
2000 1999 ----------------------------------- Sweden SEK 99,761 SEK 96,277 Germany 11,925 7,727 Australia 6,770 - Brazil 13,850 1,594 Elimination of inter-company sales (18,275) (9,505) ------------ ------------ SEK 114,031 SEK 96,093 ============ ============ The following table presents information about the Company's operating income by geographic area: Sweden SEK (647) SEK 1,302 Germany (1,013) (252) Australia 770 - Brazil 1,767 328 Elimination of inter-company income (loss) 445 (161) ------------ ------------ SEK 1,322 SEK 1,217 ============ ============ The following table presents information about the Company's identifiable assets by geographic area: Sweden SEK 43,365 SEK 37,387 Germany 3,730 4,624 Australia 5,311 - Brazil 6,297 3,772 Elimination of inter-company receivables and payables (13,006) (10,324) ------------ ------------ SEK 45,697 SEK 35,459 ============ ============
13 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (SEK AMOUNTS IN THOUSANDS) - -------------------------------------------------------------------------------- NOTE 11. CONTINGENCIES The Company, in the normal course of operations, is involved in several legal actions, which are vigorously being contested. In management's opinion, the ultimate resolution of these matters will not have a material adverse effect on the Company's financial position. NOTE 12. SUBSEQUENT EVENT On June 28, 2001, all of the outstanding stock of the Company was acquired by Digital Recorders, Inc. ("Digital"), a manufacturer incorporated in the United States, and its wholly-owned subsidiary, DRI Europa AB ("DRI Europa"). The acquisition of the Company's stock was made pursuant to an Amended Option Agreement, dated March 13, 2001, and a Stock Purchase Agreement, dated June 27, 2001. Both agreements were between Digital and DRI Europa, as the purchasers, and the Company's individual shareholders, as the sellers. The purchase price for the Company's shares consisted of a combination of cash, notes to the individual sellers, Digital stock and warrants to purchase Digital stock. The total purchase price was approximately 80,277 SEK. As a result of the acquisition, the Company has become a wholly-owned subsidiary of DRI Europa. 14 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 CONTENTS - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- FINANCIAL STATEMENTS Consolidated balance sheets 1 Consolidated statements of income 2 Consolidated statements of cash flows 3 - 4 Notes to consolidated financial statements 5 - 8 - -----------------------------------------------------------------------------------
MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(SEK AND DOLLAR AMOUNTS IN THOUSANDS) (EXCEPT FOR SHARE AND PER SHARE INFORMATION) MARCH 31, MARCH 31, DECEMBER 31, 2001 2001 2000 ASSETS (UNAUDITED) (NOTE) - ----------------------------------------------------------------------------------------------------------------------------------- Current Assets Cash and cash equivalents SEK 2,182 $ 210 SEK 2,077 Trade accounts receivable 21,966 2,112 19,494 Other receivables 4,777 459 2,694 Inventories 15,557 1,496 15,630 Prepaid expenses and other assets 558 54 487 ------------------------------- ---------- TOTAL CURRENT ASSETS 45,040 4,331 40,382 Property and equipment, net of accumulated depreciation 2,950 284 4,094 Other assets 867 83 1,221 ------------------------------- ---------- TOTAL ASSETS SEK 48,857 $ 4,698 SEK 45,697 =============================== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Lines of credit SEK 11,544 $ 1,110 SEK 10,061 Accounts payable 10,614 1,020 10,459 Accrued expenses 6,323 608 6,017 Income tax payable 1,019 98 646 Other current liabilities 1,411 136 2,522 ------------------------------- ---------- TOTAL CURRENT LIABILITIES 30,911 2,972 29,705 ------------------------------- ---------- Long Term Liabilities Deferred income taxes 389 37 145 Deferred compensation benefits 860 83 911 ------------------------------- ---------- TOTAL LONG TERM LIABILITIES 1,249 120 1,056 ------------------------------- ---------- TOTAL LIABILITIES 32,160 3,092 30,761 ------------------------------- ---------- Minority interest in consolidated subsidiary 2,163 208 1,819 ------------------------------- ---------- Stockholders' Equity Share capital, par value $1.00 per share, 100,000 shares authorized and outstanding 100 12 100 Legal reserve 2,106 266 2,653 Accumulated other comprehensive income, foreign translation adjustment (348) (98) 564 Retained earnings 12,676 1,218 9,800 ------------------------------- ---------- TOTAL STOCKHOLDERS' EQUITY 14,534 1,398 13,117 ------------------------------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY SEK 48,857 $ 4,698 SEK 45,697 =============================== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Note: The consolidated balance sheet as of December 31, 2000 was taken from the audited financial statements as of that date. 1 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(SEK AND DOLLAR AMOUNTS IN THOUSANDS) (EXCEPT FOR SHARE AND PER SHARE INFORMATION) For the Three Months Ended March 31, 2001 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- Net sales SEK 34,207 $ 3,511 SEK 26,148 Cost of sales 18,306 1,879 15,076 ------------------------------- ---------- GROSS PROFIT 15,901 1,632 11,072 ------------------------------- ---------- Operating expenses: Selling, general and administrative 10,113 1,038 8,178 Research and development 1,500 154 1,705 ------------------------------- ---------- Total operating expenses 11,613 1,192 9,883 ------------------------------- ---------- OPERATING INCOME 4,288 440 1,189 ------------------------------- ---------- Nonoperating income (expense): Other income (expense) (139) (14) (28) Interest (expense) (9) (1) (17) ------------------------------- ---------- Total nonoperating income (expense) (148) (15) (45) ------------------------------- ---------- INCOME BEFORE INCOME TAXES 4,140 425 1,144 Income tax expense 920 94 534 ------------------------------- ---------- INCOME BEFORE MINORITY INTEREST IN NET INCOME OF CONSOLIDATED SUBSIDIARY 3,220 331 610 Minority interest in net income of consolidated subsidiary 344 35 99 ------------------------------- ---------- NET INCOME SEK 2,876 $ 296 SEK 511 =============================== ========== COMPREHENSIVE INCOME SEK 1,964 $ 202 SEK 482 =============================== ========== EARNINGS PER SHARE: Earnings per common share SEK 28.76 $ 2.96 SEK 5.11 =============================== ========== Weighted average shares outstanding 100,000 100,000 100,000 =============================== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 2 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(AMOUNTS IN THOUSANDS) For the Three Months Ended March 31, 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- Cash Flows From Operating Activities Net income SEK 2,876 SEK 511 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Minority interest in net income of consolidated subsidiary 344 99 Depreciation 224 368 Deferred income taxes 244 (9) Book value of property and equipment and other assets disposed 2,290 - Changes in operating assets and liabilities: (Increase) in trade accounts receivable (2,472) (889) (Increase) decrease in other receivables (2,083) 33 (Increase) decrease in inventories 73 (2,654) (Increase) in prepaid expenses and other current assets (71) (328) Increase in accounts payable 155 2,547 (Decrease) increase in accrued expenses 306 (916) Increase in income tax payable 373 341 (Decrease) in other current liabilities (1,111) (824) (Decrease) in deferred compensation benefits (51) - ---------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,097 (1,721) ---------------------------------------- Cash Flows From Investing Activities Proceeds from sales of property and equipment 1 - Purchases of property and equipment (1,050) (653) Other 33 16 ---------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (1,016) (637) ---------------------------------------- Cash Flows From Financing Activities Net proceeds from bank borrowings 1,483 244 Change in legal reserve (547) 363 ---------------------------------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 936 607 ---------------------------------------- Effect of exchange rate change (912) (29) ---------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 105 (1,780) Cash and cash equivalents at beginning of period 2,077 6,222 -------------- ------------ Cash and cash equivalents at end of period SEK 2,182 SEK 4,442 ============== ============ (Continued) 3 MOBITEC HOLDING AB AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (AMOUNTS IN THOUSANDS) For the Three Months Ended March 31, 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- Supplemental Disclosures of Cash Flow Information Cash payments for: Interest SEK 9 SEK 17 ============== ============ Income taxes SEK 303 SEK 202 ============== ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------- NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS: The Company develops, manufactures, and distributes information systems primarily for buses used in public transportation. Customers are primarily bus manufacturers located in Australia, Brazil, Germany, and Scandinavia. A summary of the Company's significant accounting policies follows: BASIS OF PRESENTATION: In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting only of normal adjustments) necessary for a fair presentation of the financial position of Mobitec Holding AB and subsidiaries (the "Company") at March 31, 2001 and December 31, 2000, the results of operations for the three months ended March 31, 2001 and 2000, and cash flows for the three months ended March 31, 2001 and 2000. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the Company's annual 2000 financial statements. These consolidated financial statements have been prepared in Swedish Krona (SEK), the Company's functional currency. The 2001 consolidated balance sheet and statement of income reflect amounts in US dollars in a "convenience translation" column. The consolidated financial statements have also been prepared in accordance with accounting principles generally accepted in the United States of America. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Mobitec AB. The consolidated financial statements also include the accounts of Mobitec AB's wholly owned subsidiaries (Mobitec GmbH, Mobitec Australia, Pty Ltd., Mobitec Klimat AB and Mobitec Hexair AB) and the accounts of its 50% owned subsidiary, Mobitec Brazil LTDA. Mobitec Hexair AB was sold on December 31, 2000 and Mobitec Klimat AB was sold on January 1, 2001. All significant inter-company accounts and transactions have been eliminated in consolidation. INVENTORIES: Inventories are stated at the lower of cost (average cost) or market. PROPERTY AND EQUIPMENT: Property and equipment is stated at cost, less accumulated depreciation. If facts and circumstances suggest that the property and equipment will not be recoverable, as determined, based on the undiscounted cash flows over the remaining depreciable period, the Company will review for impairment. To the extent that there is an impairment, analysis is preformed based on several criteria, including but not limited to, revenue trends, discounted operation cash flows and other factors to determine the impairment amount. The Company computes depreciation on its equipment using the straight-line method over the following estimated useful lives:
Years --------- Buildings 50 Leasehold improvements 5 Machinery and equipment 3 to 10
ESTIMATES: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INCOME TAXES: The Company reports deferred tax assets and liabilities attributable to temporary differences between the book value of assets and liabilities and their tax value. The accumulated deferred tax liability is adjusted each year by applying the current tax rate in each country and is reported in the balance sheet as deferred income taxes. 5 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------- NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FOREIGN CURRENCY TRANSLATION: Assets and liabilities of the Company's foreign subsidiaries are translated at exchange rates prevailing at the end of the period. Revenue and expense transactions are translated at the average of exchange rates in effect during the period. Translations gains and losses are recorded directly to stockholders' equity. Realized gains and losses on foreign currency transactions, if any, are included in operations. FAIR VALUE OF FINANCIAL INSTRUMENTS: The following summarizes the major methods and assumptions used in estimating the fair value of financial instruments: Cash and cash equivalents - The carrying amount approximates fair value due to the relatively short-term period to maturity of these instruments. Short-term borrowings - The carrying amount approximates fair value due to the variable interest rate adjustments based upon market conditions. REVENUE RECOGNITION: The Company recognizes operating revenues upon shipment of goods to customers. RESEARCH AND DEVELOPMENT: The Company expenses all research and development costs at the time expenses are incurred. EARNINGS PER SHARE AMOUNTS: Earnings per share has been computed based upon the weighted average number of shares of share capital outstanding. NOTE 2. OTHER COMPREHENSIVE INCOME The following is a summary of the tax effects of the components of other comprehensive income, consisting solely of foreign currency translation adjustments, reported in the statements of stockholders' equity for the three months ended March 31, 2001 and 2000:
Pre-tax Tax Net-of-tax Amount (Benefit) Amount ------------ ------------- -------------- Three months ended March 31, 2001: Foreign currency translation adjustment SEK (1,266) SEK (354) SEK (912) ============ ============= ============== Three months ended March 31, 2000: Foreign currency translation adjustment SEK (40) SEK (11) SEK (29) ============ ============= ==============
6 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------- NOTE 3. FOREIGN OPERATIONS The Company has one business segment in which it develops, manufactures, and distributes information systems primarily for buses used in public transportation. Customers are primarily bus manufacturers located in Scandinavia, Germany, Australia, and Brazil. Summarized financial information for the Company's foreign sales (attributed to countries based on the location of the subsidiary) for the three months ended March 31, 2001 and 2000 is as follows:
2001 2000 ---------------------------------------- Sweden SEK 29,414 SEK 24,978 Germany 3,209 3,746 Australia 3,778 - Brazil 4,106 2,197 Elimination of inter-company sales (6,300) (4,773) ---------------- ------------- SEK 34,207 SEK 26,148 ================ =============
The following table presents information about the Company's operating income (loss) by geographic area: Sweden SEK 2,676 SEK 726 Germany (106) 128 Australia 279 - Brazil 840 179 Elimination of inter-company income (loss) 599 156 ---------------- ------------- SEK 4,288 SEK 1,189 ================ =============
The following table presents information about the Company's identifiable assets by geographic area: Sweden SEK 43,928 Germany 3,444 Australia 5,124 Brazil 7,012 Elimination of inter-company receivables and payables (10,651) ---------------- SEK 48,857 ================
7 MOBITEC HOLDING AB AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------- NOTE 4. SUBSEQUENT EVENT On June 28, 2001, all of the outstanding stock of the Company was acquired by Digital Recorders, Inc. ("Digital"), a manufacturer incorporated in the United States, and its wholly-owned subsidiary, DRI Europa AB ("DRI Europa"). The acquisition of the Company's stock was made pursuant to an Amended Option Agreement, dated March 13, 2001, and a Stock Purchase Agreement, dated June 27, 2001. Both agreements were between Digital and DRI Europa, as the purchasers, and the Company's individual shareholders, as the sellers. The purchase price for the Company's shares consisted of a combination of cash, notes to the individual sellers, Digital stock and warrants to purchase Digital stock. The total purchase price was approximately 80,277 SEK. As a result of the acquisition, the Company has become a wholly-owned subsidiary of DRI Europa. 8 EX-99.2 4 a2058666zex-99_2.txt EXHIBIT 99.2 DIGITAL RECORDERS, INC. PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Unaudited) These pro forma condensed financial statements reflect the June 28, 2001 acquisition of Mobitec Holding AB and Subsidiaries. The pro forma condensed financial statements present the balance sheet as if the transaction had occurred on March 31, 2001 and the income statement as if the transaction had occurred at January 1, 2000 for the year ended December 31, 2000 and carried through the three months ended March 31, 2001. The following unaudited pro forma condensed statements of operations are derived from the audited statement of operations of Digital Recorders, Inc. (DRI or the Company) for the year ended December 31, 2000 and the audited statement of operations of Mobitec Holding AB and Subsidiaries for the year ended December 31, 2000. The March 31, 2001 balance sheets and the statements of operations for the three months ended March 31, 2001 are derived from their unaudited interim financial statements. The unaudited financial information herein reflects all adjustments, consisting only of normal recurring adjustments which, in the opinion of management of the respective companies, are necessary to fairly state the Company's financial position and results of its operations. These pro forma condensed statements of operations and balance sheet do not purport to represent what the Company's results or financial condition would actually have been if the Acquisition had occurred on the dates indicated or to project the Company's results or financial condition for or at any future period or date. The pro forma adjustments, as described in the accompanying data, are based on available information and certain assumptions that management believes are reasonable. The unaudited pro forma condensed financial statements should be read in conjunction with the historical financial statements and related notes of DRI and Mobitec Holding AB. DIGITAL RECORDERS, INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET MARCH 31, 2001 (Amounts in Thousands) (Unaudited)
PRO FORMA PRO FORMA DIGITAL MOBITEC ADJUSTMENTS NOTE COMBINED --------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 81 $ 210 $ - B1 $ 291 Trade accounts receivable - net 7,067 2,112 - 9,179 Other receivables 46 459 - 505 Inventories 5,557 1,496 - 7,053 Prepaids and other current assets 438 54 - 492 --------------------------------------------------------------------- Total current assets 13,189 4,331 - 17,520 Property and equipment - net 602 284 - 886 Goodwill - net 1,049 - 2,559 B2 3,608 Intangible assets - net 76 - 4,500 B2 4,576 Deferred taxes 170 - - 170 Other assets 522 83 - 605 --------------------------------------------------------------------- TOTAL ASSETS $ 15,608 $ 4,698 $ 7,059 $ 27,365 ===================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Line of credit and current maturities $ 4,163 $ 1,110 $ 404 B3 $ 5,677 Accounts payable 2,347 1,020 349 B1 3,716 Accounts payable, related party 2,685 - - 2,685 Accrued expenses 938 608 - 1,546 Income tax payable - 98 - 98 Other current liabilities - 136 - 136 Preferred stock dividends payable 44 - - 44 --------------------------------------------------------------------- Total current liabilities 10,177 2,972 753 13,902 --------------------------------------------------------------------- LONG TERM LIABILITIES Other liabilities - 37 - 37 Long term liabilities - 83 6,548 B3 6,631 --------------------------------------------------------------------- Total long term liabilities - 120 6,548 6,668 --------------------------------------------------------------------- Total Liabilities 10,177 3,092 7,301 20,570 --------------------------------------------------------------------- SERIES AAA REDEEMABLE, CONVERTIBLE, NONVOTING PREFERRED STOCK 1,770 - - 1,770 --------------------------------------------------------------------- MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY - 208 - 208 --------------------------------------------------------------------- STOCKHOLDERS' EQUITY: Share capital - 12 (12) B2 - Legal reserve - 266 (266) B2 - Common stock 327 - 43 B4 370 Additional paid-in-capital 11,115 - 1,113 B4 12,228 Accumulated other comprehensive income (loss) (407) (98) 98 B2 (407) Accumulated earnings (deficit) (7,374) 1,218 (1,218) B2 (7,374) --------------------------------------------------------------------- Total stockholders' equity 3,661 1,398 (242) 4,817 --------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,608 $ 4,698 $ 7,059 $ 27,365 =====================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. DIGITAL RECORDERS, INC. PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2001 (Amounts in Thousands Except Share and Per Share Information) (Unaudited)
PRO FORMA PRO FORMA DIGITAL MOBITEC ADJUSTMENTS NOTE COMBINED --------------------------------------------------------------------- Net sales $ 6,981 $ 3,511 $ - $ 10,492 Cost of sales 4,420 1,879 - 6,299 --------------------------------------------------------------------- Gross profit 2,561 1,632 - 4,193 --------------------------------------------------------------------- Operating expenses: Selling, general and administrative 1,936 1,038 142 C-1 3,116 Research and development 535 154 - 689 Other - - - - --------------------------------------------------------------------- Total operating expenses 2,471 1,192 142 3,805 --------------------------------------------------------------------- Operating income (loss) 90 440 (142) 388 --------------------------------------------------------------------- Other expense (2) (14) - (16) Interest expense (137) (1) (179) C-2 (317) --------------------------------------------------------------------- Total other expense and interest expense (139) (15) (179) (333) --------------------------------------------------------------------- Income (loss) before income taxes (49) 425 (321) 55 Income tax expense - 94 - 94 --------------------------------------------------------------------- Net income (loss) (49) 331 (321) (39) Minority interest in net income of consolidated subsidiary - 35 - 35 Preferred stock dividend requirements 44 - - 44 --------------------------------------------------------------------- Net income (loss) applicable to common shareholders $ (93) $ 296 $ (321) $ (118) ===================================================================== Earnings per share: Net loss per share - basic and diluted $ (0.03) $ (0.03) ============ ============ Weighted average number of common shares outstanding 3,274,475 3,704,475 ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. DIGITAL RECORDERS, INC. PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 (Amounts in Thousands Except Share and Per Share Information) (Unaudited)
PRO FORMA PRO FORMA DIGITAL MOBITEC ADJUSTMENTS NOTE COMBINED --------------------------------------------------------------------- Net sales $ 29,886 $ 12,438 $ (716) C3 $ 41,608 Cost of sales 18,980 7,413 (562) C3 25,831 --------------------------------------------------------------------- Gross profit 10,906 5,025 (154) 15,777 --------------------------------------------------------------------- Operating expenses: Selling, general and administrative 8,378 4,121 222 C1, C3 12,721 Research and development 2,295 744 - 3,039 Other - 16 - 16 --------------------------------------------------------------------- Total operating expenses 10,673 4,881 222 15,776 --------------------------------------------------------------------- Operating income (loss) 233 144 (376) 1 --------------------------------------------------------------------- Other expense (2) 24 - 22 Interest expense (510) (47) (576) C2 (1,133) --------------------------------------------------------------------- Total other expense and interest expense (512) (23) (576) (1,111) --------------------------------------------------------------------- Income (loss) before income taxes (279) 121 (952) (1,110) Income tax expense - 54 56 C3 110 --------------------------------------------------------------------- Net income (loss) (279) 67 (1,008) (1,220) Minority interest in net income of consolidated subsidiary - 88 - 88 Preferred stock dividend requirements 177 - - 177 --------------------------------------------------------------------- Net income (loss) applicable to common shareholders $ (456) $ (21) $ (1,008) $ (1,485) ===================================================================== Earnings per share: Net loss per share - basic and diluted $ (0.14) $ (0.40) ============ ============ Weighted average number of common shares outstanding 3,274,475 3,704,475 ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. DIGITAL RECORDERS, INC. NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS Note A--Acquisition: On June 28, 2001, the Company and its wholly owned subsidiary, DRI Europa AB ("DRI Europa"), acquired all of the outstanding stock of Mobitec Holding AB ("Mobitec"), a Swedish manufacturer. The acquisition of the Mobitec shares was made pursuant to an Amended Option Agreement, dated March 13, 2001, and a Stock Purchase Agreement, dated June 27, 2001. Both agreements were between the Company and DRI Europa, as the purchasers, and the individual Mobitec shareholders, as the sellers. The purchase price for the Mobitec shares consisted of a combination of cash, notes, stock and warrants to purchase stock. The total purchase price, including acquisition costs, was $8,458,183, consisting of (i) $5,368,958 in cash, (ii) promissory notes issued by DRI Europa to the sellers aggregating $2,111,325 (iii) 430,000 restricted shares of the Company's common stock (valued at $915,900 or $2.13 per share) issued to two of the sellers, and (iv) warrants to purchase in the aggregate of 100,000 shares of the Company's common stock at an exercise price of $4.00 per share for a period of five years (valued at a total of $62,000) issued to one of the sellers. The excess of the total acquisition cost over the fair value of the net assets acquired of $2,559,000 will be amortized over 15 years by the straight-line method. Note B--Pro Forma Adjustments - Balance Sheet: (1) Represents the cash received from (i) the issuance of $3,000,000 of convertible debentures which are convertible to up to 1,500,000 shares of the Company's common stock, which funds will be used to fund part of the Stock Purchase Agreement, and (ii) the borrowing of $2,020,629 from Svenska Handelsbaken AB, less (i) the cash consideration of $4,375,140 paid as part of the Acquisition and (ii) $993,818 in professional fees and expenses (less $348,329 accrued) related to the Acquisition. (2) Represents the fair value of goodwill and intangible assets (customer lists, product designs and non-compete agreements) acquired and recorded in connection with the Acquisition and the elimination of Mobitec's stockholders' equity. The total purchase price has been allocated, on a preliminary basis, to goodwill and intangible assets as follows: Goodwill $2,559,000 ========== Intangible assets: Customer lists $2,900,000 Product designs 1,500,000 Non-compete agreements 100,000 ---------- $4,500,000 ==========
(3) Represents the borrowings incurred related to the financing of the Acquisition of (i) $2,820,000 of convertible debentures which are convertible into up to 1,500,000 shares of the Company's common stock, and (ii) $2,020,629 in a term loan from Svenska Handelsbaken AB, and (iii) $2,111,325 in seller financed debt issued to the Bodin Sellers. All borrowings are reflected as long-term obligations except for $404,126 of the term loan which is due within one year. DIGITAL RECORDERS, INC. NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (4) Represents the issuance of 430,000 Restricted Shares of the Company's common stock as part of the consideration for the Acquisition using a fair market value of $2.13, the value as of the date of the acquisition and the issuance of 100,000 warrants valued at $62,000. Also represents an allocation to additional paid-in capital of $180,000, the value of the 200,000 warrants attached to the convertible debentures. Note C--Pro Forma Adjustments - Statements of Operations: (1) Represents amortization expense of $567,000 of recorded goodwill and intangible assets over the following estimated lives:
Years ----- Goodwill 15 Customer lists 15 Product designs 5-10 Non-compete agreements 3
(2) Represents the interest expense for the year ended December 31, 2000 and the three months ended March 31, 2001 associated with the issuance of the convertible debentures of $2,820,000 (8%), the seller financed notes of $2,111,325 (9%) and the borrowings in connection with the Svenska Handelsbaken AB term loan of $2,020,629 (5.35%). Also represents the interest expense for the year ended December 31, 2000 and the three months ended March 31, 2001 associated with the amortization of the $180,000 amount of the discounted convertible debentures. (3) Represents the removal of the income and expenses ($345,000) of Mobitec Klimat AB, a subsidiary sold on January 1, 2001, which is not part of the Acquisition. No adjustment is required for the statements of operations for the three months ended March 31, 2001. -----END PRIVACY-ENHANCED MESSAGE-----