-----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, CjYXYdFCMg4r8EUOv9yBKWIiqcn3CH7llZ9IyXeMc/45hulap+0ff4jrZpBkXXcV qSpPQ0m/ypsYoupFv8kSpg== 0000936392-96-000819.txt : 19961001 0000936392-96-000819.hdr.sgml : 19961001 ACCESSION NUMBER: 0000936392-96-000819 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960716 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960930 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLIED DIGITAL ACCESS INC CENTRAL INDEX KEY: 0000919048 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 680132939 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-23698 FILM NUMBER: 96637065 BUSINESS ADDRESS: STREET 1: 9855 SCRANTON RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6196232200 8-K/A 1 APPLIED DIGITAL ACCESS, INC. -- FORM 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT (AMENDMENT NO. 1) Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 July 16, 1996 Date of Report (Date of earliest event reported) APPLIED DIGITAL ACCESS, INC. (Exact name of registrant as specified in its charter) California 0-23698 68-0132939 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 9855 Scranton Road San Diego, CA 92121 (Address of principal executive offices) (619) 623-2200 (Registrant's telephone number, including area code) Total number of pages: 13 2 The undersigned hereby amends Item 7 of its Current Report on Form 8-K filed with the Commission on July 16, 1996 to read as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Report of Independent Accountants..........................................................4 Statement of Net Assets Acquired at July 16, 1996 as of' December 31, 1995..........................................................................5 Statement of Operations for the Year Ended December 31, 1995...............................6 Notes to the Statement of Net Assets Acquired at July 16, 1996 and Statement of Operations................................................................7 (b) Introduction to Unaudited Pro Forma Financial Statements...................................9 Pro Forma Combining Balance Sheets (Unaudited) as of June 30, 1996.............................................................................10 Pro Forma Combining Statements of Operations (Unaudited) for the Six Months Ended June 30, 1996....................................................11 Pro Forma Combining Statements of Operations (Unaudited) for the Year Ended December 31, 1995......................................................12 Note to Pro Forma Combining Financial Statements (Unaudited)..............................13
2 3 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. Applied Digital Access, Inc. Dated: September 30, 1996 By: /s/ PETER P. SAVAGE ------------------------------------- Peter P. Savage President and Chief Executive Officer 3 4 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Applied Digital Access, Inc. We have audited the accompanying Statement of Net Assets Acquired at July 16, 1996 as of December 31, 1995 and Statement of Operations for the year ended December 31, 1995 (collectively the "Statements") of the Special Services Network Division (acquired by Applied Digital Access, Inc. from MPR Teltech, Ltd. ["MPR"]). The Statements are the responsibility of Applied Digital Access, Inc.'s management. Our responsibility is to express an opinion on the Statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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. The accompanying Statements were prepared for inclusion in the Form 8-K/A of Applied Digital Access, Inc. on the basis of presentation as described in Note 1, and are not intended to be a complete presentation of the Special Services Network Division's assets, liabilities, and operations. In our opinion, the Statements referred to above present fairly, in all material respects, the net assets acquired at July 16, 1996 as of December 31, 1995 and the results of operations for the year ended December 31, 1995 of the Special Services Network Division on the basis of presentation as described in Note 1, in conformity with generally accepted accounting principles. San Diego, California September 20, 1996 4 5 SPECIAL SERVICES NETWORK DIVISION (ACQUIRED BY APPLIED DIGITAL ACCESS, INC.) STATEMENT OF NET ASSETS ACQUIRED AT JULY 16, 1996 AS OF DECEMBER 31, 1995 (IN THOUSANDS) ---------- Computer equipment, net of accumulated depreciation of $2,703 $493 --- Net assets acquired $493 ====
The accompanying notes are an integral part of these statements. 5 6 SPECIAL SERVICES NETWORK DIVISION (ACQUIRED BY APPLIED DIGITAL ACCESS, INC.) STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS) ---------- Revenues $10,412 ------- Cost of revenues: Division costs, direct 5,720 Corporate allocation, indirect 2,793 ------- 8,513 ------- Income before income taxes 1,899 Provision for income taxes 1,045 ------- $ 854 =======
The accompanying notes are an integral part of these statements. 6 7 SPECIAL SERVICES NETWORK DIVISION (ACQUIRED BY APPLIED DIGITAL ACCESS, INC.) NOTES TO THE STATEMENT OF NET ASSETS ACQUIRED AT JULY 16, 1996 AND STATEMENT OF OPERATIONS ---------- 1. BASIS OF PRESENTATION: On July 16, 1996 ("Acquisition Date"), Applied Digital Access, Inc. ("ADA") acquired certain assets of MPR Teltech, Ltd. ("MPR Teltech"), a subsidiary of BC TELECOM, Inc. The assets acquired were part of MPR Teltech's operating unit commonly known as the Special Services Network Division ("SSN"). SSN is an operations systems software development group with expertise in development of network management systems for public access. SSN developed operations system software primarily for Prism Systems, Ltd., a joint venture of Northern Telecom and BC TELECOM, Inc. ADA and its subsidiary Applied Digital Access-Canada, Inc. ("ADA-Canada") acquired the assets for $4.2 million in cash and 150,000 shares of ADA's common stock. The transaction will be accounted for under the purchase method. The Statement of Net Assets Acquired as of July 16, 1996 is not intended to be a complete presentation of the assets and liabilities of the Special Services Network Division, rather a presentation of tangible assets acquired by ADA at July 16, 1996 as of December 31, 1995 at MPR Teltech's historical net book value. The accompanying Statement of Operations include only the revenues and expenses attributable to SSN's operations. Prior to the acquisition, SSN was included in the financial statements of MPR Teltech which were included in the consolidated financial statements of BC TELECOM, Inc., and was not accounted for as a separate entity. The Statement of Operations includes certain expenses that were incurred in connection with the operations of SSN which were allocated to SSN by MPR Teltech. Such allocated expenses include costs incurred by MPR Teltech associated with supporting SSN's operations and included the following expenses: quality control, manufacturing management, legal services, financial services, facilities management, business support, human resources, computer services, purchasing and executive support. Such costs were allocated to SSN's indirect cost of revenues based on SSN's direct labor costs as a percentage of total MPR Teltech direct labor costs. Interest expense which may have been incurred for any debt directly or indirectly associated with the operations of SSN and income taxes were not charged to SSN's Statement of Operations. 7 8 SPECIAL SERVICES NETWORK DIVISION (ACQUIRED BY APPLIED DIGITAL ACCESS, INC.) NOTES TO THE STATEMENT OF NET ASSETS ACQUIRED AT JULY 16, 1996 AND STATEMENT OF OPERATIONS, CONTINUED ---------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from estimates. COMPUTER EQUIPMENT Computer equipment is stated at cost and depreciated over the estimated useful lives of the assets (three years) using the straight-line method. Maintenance and repairs are charged to expense as incurred. Upon retirement or disposition, the computer equipment and related accumulated depreciation are removed from the accounts and any resulting profit or loss is credited or charged to income. Depreciation expense, maintenance and repairs, and any profit or loss upon retirement or disposition are recorded on MPR Teltech's records and allocated to the operating units (see Note 1). REVENUE RECOGNITION For the year ended December 31, 1995, approximately 98% of SSN's revenues were earned under a master agreement between MPR Teltech and Prism Systems, Ltd. Under such agreement, revenue is recognized as costs are incurred, including a profit percentage, in accordance with the contract terms. INCOME TAXES The provision for income taxes represents the calculation of taxes at the Canadian statutory rate of 55% as if SSN were a separate entity at December 31, 1995. 8 9 APPLIED DIGITAL ACCESS, INC. AND THE SPECIAL SERVICES NETWORK DIVISION OF MPR TELTECH, LTD. INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS ---------- On July 16, 1996, Applied Digital Access, Inc. ("ADA") acquired certain assets of MPR Teltech, Ltd. ("MPR Teltech"), a subsidiary of BC TELECOM, Inc. The assets acquired were part of MPR Teltech's operating unit commonly known as the Special Services Network Division ("SSN"). ADA and its Canadian subsidiary, Applied Digital Access-Canada, Inc. ("ADA-Canada") acquired the assets for $4.2 million in cash and 150,000 shares of ADA's common stock. The transaction will be accounted for as a purchase. SSN is located in Vancouver, British Columbia, Canada, and has expertise in the development of network management systems for public carriers. SSN has become part of ADA-Canada and will develop network performance management operations systems software products for ADA and its customers. ADA intends to use the acquired equipment in the same manner in which it was previously used and intends to maintain a majority of the assets and related operations in Vancouver, British Columbia, Canada for the foreseeable future. The attached unaudited pro forma combining financial statements for the year ended December 31, 1995 and six months ended June 30, 1996 and as of June 30, 1996 give effect to the acquisition accounted for by the purchase method. The pro forma combining statements of operations assume that the acquisition took place at January 1, 1995. In addition, the pro forma information for ADA reflects the pro forma combination of ADA and Applied Computing Devices, Inc. ("ACD"). ADA acquired certain assets of ACD for $1.7 million in cash in February 1996. ACD was a company that developed and marketed operating system software used primarily by independent telephone companies to manage certain functions in their network. The December 31, 1995 pro forma combining financial statements reflecting the ACD asset acquisition by ADA are included in the Form 8-K/A previously filed on February 29, 1996. The pro forma combining financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated at the beginning of the periods presented, nor is it necessarily indicative of future operating results. The pro forma combining financial information should be read in conjunction with the historical financial statements and the related notes thereto of ADA and ACD, previously filed, and the historical financial statements and related notes thereto of SSN included herein. 9 10 APPLIED DIGITAL ACCESS, INC. AND SPECIAL SERVICES NETWORK DIVISION PRO FORMA COMBINING BALANCE SHEETS (UNAUDITED) AS OF JUNE 30, 1996 (IN THOUSANDS) ----------
ADA SSN ADJUSTMENTS COMBINED --- --- ----------- -------- ASSETS - ------ Current assets: Cash and cash equivalents...................... $ 1,883 $ -- $ -- $ 1,883 Investments - current.......................... 22,076 -- (4,256)(a) 17,820 Accounts receivable, net....................... 3,411 -- -- 3,411 Inventory, net................................. 7,441 -- -- 7,441 Deferred income taxes.......................... 750 -- -- 750 Prepaid expenses and other current assets...... 1,646 -- -- 1,646 -------- -------- -------- -------- Total current assets................... 37,207 -- (4,256) 32,951 Investments, non-current........................... 5,972 -- -- 5,972 Property and equipment, net........................ 4,019 493 363 (a) 4,875 Deferred income taxes.............................. 752 -- -- 752 Other.............................................. 315 -- 2,588 (a) 2,903 -------- -------- -------- -------- $ 48,265 $ 493 $ (1,305) $ 47,453 ======== ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable............................... $ 1,724 $ -- $ -- $ 1,724 Accrued expenses............................... 1,338 -- 200 (a) 1,538 Accrued warranty............................... 1,368 -- -- 1,368 Current portion of obligations under capital lease.............................. 23 -- -- 23 -------- -------- -------- -------- Total current liabilities.............. 4,453 -- 200 4,653 Obligations under capital leases, net of current portion................................ 41 -- -- 41 -------- -------- -------- -------- Total liabilities...................... 4,494 -- 200 4,694 Shareholders' equity: Common stock................................... 49,318 -- 1,088 (a) 50,406 Additional paid-in capital..................... 2,416 -- -- 2,416 Unrealized gain on investments................. (4) -- -- (4) Accumulated deficit............................ (7,959) -- (2,100)(a) (10,059) Division equity................................ -- 493 (493)(a) - -------- -------- -------- -------- Total shareholders' equity............. 43,771 493 (1,505) 42,759 -------- -------- -------- -------- $ 48,265 $ 493 $ (1,305) $ 47,453 ======== ======== ======== ========
10 11 APPLIED DIGITAL ACCESS, INC. AND SPECIAL SERVICES NETWORK DIVISION PRO FORMA COMBINING STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA) ----------
ADA SSN ADJUSTMENTS COMBINED --- --- ----------- -------- Revenue ...................................... $11,253 $ 4,544 $ - $ 15,797 Cost of revenue................................... 5,067 2,585 (73)(b) 7,579 Corporate allocation.............................. - 990 - 990 ------- ------- --------- -------- Gross profit.......................... 6,186 969 (73) 7,228 Operating expenses: Research and development...................... 3,962 - - 3,962 In-process research and development related to acquisition.................... 1,186 - - 1,186 Sales and marketing........................... 3,335 - - 3,335 General and administrative.................... 1,526 - 432 (b) 1,958 ------- ------- --------- -------- Total operating expenses.............. 10,009 - 432 10,441 ------- ------- --------- -------- Operating income (loss)............... (3,823) 969 (359) (3,213) Interest income................................... 953 - - 953 Other income, net................................. 42 - - 42 ------- ------- --------- -------- Income (loss) before income taxes..... (2,828) 969 (359) (2,218) Income tax provision.............................. - 533 - 533 ------- ------- --------- -------- Net income (loss)..................... $(2,828) $ 436 $ (359) $ (2,751) ======= ======= ========= ======== Loss per common share............................. $ (.24) $ (.23) ======= ======== Shares used in per share computations............. 11,983 12,133 ======= ========
11 12 APPLIED DIGITAL ACCESS, INC. AND SPECIAL SERVICES NETWORK DIVISION PRO FORMA COMBINING STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS, EXCEPT PER SHARE DATA) ----------
ADA SSN ADJUSTMENTS COMBINED -------- -------- ----------- -------- Revenue .......................................... $ 28,335 $ 10,412 $ -- $ 38,747 Cost of revenue .................................. 9,925 5,720 (145)(b) 15,500 Corporate allocation ............................. -- 2,793 -- 2,793 -------- -------- -------- --------- Gross profit ......................... 18,410 1,899 145 20,454 Operating expenses: Research and development ..................... 11,502 -- -- 11,502 In-process research and development related to acquisition ................... 1,186 -- 2,100(a) 3,286 Sales and marketing .......................... 7,270 -- -- 7,270 General and administrative ................... 7,185 -- 863(b) 8,048 -------- -------- -------- --------- Total operating expenses ............. 27,143 -- 2,963 30,106 -------- -------- -------- --------- Operating income (loss) .............. (8,733) 1,899 (2,818) (9,652) Interest income .................................. 2,023 -- -- 2,023 Other income, net ................................ 153 -- -- 153 -------- -------- -------- --------- Income (loss) before income taxes .... (6,557) 1,899 (2,818) (7,476) Income tax provision ............................. -- 1,045 -- 1,045 -------- -------- -------- --------- Net income (loss) .................... $ (6,557) $ 854 $ (2,818) $ (8,521) ======== ======== ======== ========= Loss per common share ............................ $ (.56) $ (.71) ======== ========= Shares used in per share computations ............ 11,806 11,956 ======== =========
12 13 APPLIED DIGITAL ACCESS, INC. AND SPECIAL SERVICES NETWORK DIVISION NOTE TO PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED) ---------- PRO FORMA FINANCIAL STATEMENTS: The pro forma financial statements have been prepared to reflect the acquisition of SSN by ADA. Pro forma adjustments are made to reflect the following:
a. Cash price paid $4,256,000 Value of 150,000 shares of common stock issued 1,088,000 Transaction costs incurred 200,000 ---------- Total purchase price $5,544,000 ========== Purchase price allocation: In-process research and development acquired $2,100,000 Know how and other 2,588,000 Property and equipment 856,000 ---------- Total $5,544,000 ==========
b. Reflects the adjustment of SSN's results for the depreciation as a result of the acquisition. Property and equipment of $856,000 with a three year life results in annual depreciation of $285,000. Know how and other of $2,588,000 with a three year life results in annual amortization of $856,000. 13 -----END PRIVACY-ENHANCED MESSAGE-----