8-K/A 1 s8ka051005.htm 8K/A SUBMISSION FORM 8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549


FORM 8-K/A

(Amendment No. 1 to Form 8-K)


CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



February 25, 2005

Date of Report (Date of earliest event reported)


SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.

(Exact name of registrant as specified in its charter)


DELAWARE

 

000-50373

 

90-0182158

(State or other jurisdiction of incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)


91 HILL AVENUE NW

FORT WALTON BEACH, FLORIDA

32548

(Address of principal executive offices)(Zip Code)


 (850)-796-0909

(Registrant’s telephone number, including area code)


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 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


As previously reported under Item 2.01 of the Form 8-K filed by Spectrum Sciences & Software Holdings Corp. (the “Company”), dated as of February 25, 2005, the Company has completed its acquisition of all the issued and outstanding capital stock of Coast Engine and Equipment Co., Inc. (“CEECO”).  The description of the acquisition included in the Company’s February 25, 2005 Form 8-K is incorporated herein.  This report on Form 8-K/A is being filed to complete the exhibit record with respect to the February 25, 2005 Form 8-K.


Item 9.01  Financial Statements and Exhibits

(a)

Financial Statements of Businesses Acquired.


Report of Independent Registered Public Accounting Firm

F-1


Balance sheet as of December 31, 2004

F-2


Statements of income and retained earnings for the years ended December 31, 2004

and 2003

F-3


Statements of cash flows for the years ended December 31, 2004 and 2003

F-4


Notes to financial statements

F-5


 (b)

Unaudited Pro Forma Financial Information.


Introduction to pro forma condensed consolidated financial statements

F-8


Unaudited pro forma condensed consolidated balance sheet as of December 31, 2004

F-9


Unaudited pro forma condensed consolidated statement of income for the year ended

December 31, 2004

F-10


Notes to unaudited pro forma condensed consolidated financial statements

F-11


Consent of Independent Registered Public Accounting Firm

F-12






(c)

Exhibits.

The following exhibits are filed as part of this report:

Exhibit Number


Description

23.1

Consent of Independent Registered Public Accounting Firm, April 18, 2005

99.1

Financial Statements of Business Acquired

99.2

Unaudited Pro Forma Financial Information






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.


  

SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.

   
   

Date:  May 13, 2005

 

By:   /s/ Nancy C. Gontarek    

  

Name:  Nancy C. Gontarek

Title:  Chief Financial Officer

   



EXHIBIT INDEX


Exhibit Number


Description

23.1

Consent of Independent Registered Public Accounting Firm, April 18, 2005

99.1

Financial Statements of Business Acquired

99.2

Unaudited Pro Forma Financial Information







Exhibit 99.1


COAST ENGINE & EQUIPMENT CO., INC.

Financial Statements





Contents


Report of Independent Registered Public Accounting Firm

F-1


Financial Statements


Balance sheet

F-2


Statements of income and retained earnings

F-3


Statements of cash flows

F-4


Notes to financial statements

F-5







Exhibit 99.1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders

Coast Engine & Equipment Co., Inc.

Cape Canaveral, Florida


We have audited the accompanying balance sheet of Coast Engine & Equipment Co., Inc. (an S corporation) as of December 31, 2004, and the related statements of income, retained earnings and cash flows for the 2004 and 2003 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 the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Coast Engine & Equipment Co., Inc. as of December 31, 2004, and the results of its operation and its cash flows for the 2004 and 2003 years then ended in conformity with accounting principles generally accepted in the United States of America.



February 8, 2005

/s/ Berman Hopkins

Melbourne, Florida

Wright & LaHam, CPAs, LLP




F-1



COAST ENGINE & EQUIPMENT CO., INC.

Balance Sheet as of

December 31, 2004







     
     
 

ASSETS

    

2004

Current Assets

 

Cash

 $        46,424 

 

Accounts receivable , net

 134,457 

 

Inventory

 37,054 

 

Prepaid expenses

 568 

  

Total currrent assets

 218,503 

Property and Equipment, net

 129,182 

    

 $      347,685 

     
 

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current Liabilities

 

Accounts payable

 $        37,209 

 

Accrued expenses

 6,439 

  

Total current liabilities

 43,648 

     

Commitmtents and Contingencies

 -   

     

Stockholders' equity

 

Common stock, $1 par value, 1,000 shares

  

authorized, issued and outstanding

 1,000 

 

Retained earnings

 303,037 

    

 304,037 

    

 $     347,685 

 




The accompanying notes are an integral part of these financial statements.



F-2



COAST ENGINE & EQUIPMENT CO., INC.

Statements of Income and Retained Earnings

Years ended December 31, 2004 and 2003



   

2004

 

2003

      

Revenue

 $    1,631,706 

 

 $    875,614 

      

Cost of revenues

 

 910,902 

 

 507,509 

 

Gross profit

 720,804 

 

 368,105 

   

   

   

Operating expenses

    
 

General and administrative

 335,895 

 

 275,937 

 

Depreciation

 44,504 

 

 32,529 

 

 380,399 

 

 308,466 

 

Income from operations

 340,405 

 

 59,639 

   

   

   

Other income

   
 

Interest

 - 

 

 165 

 

Gain (loss) on disposal of equipment

 2,547 

 

 (621)

   

 2,547 

 

 (456)

      

Net income

 342,952 

 

 59,183 

      

Retained earnings, beginning of year

 270,085 

 

 210,902 

      

Distributions to stockholders

 (310,000)

 

 - 

      

Retained earnings, end of year

 $     303,037 

 

 $     270,085 











The accompanying notes are an integral part of these financial statements.



F-3



COAST ENGINE & EQUIPMENT CO., INC.

Statements of Cash Flows

Years ended December 31, 2004 and 2003






Cash Flows


     

2004

 

2003

Cash flows from operating activities

 

Net income

 $     342,952 

 

 $     59,183 

 

Adjustments to reconcile net income to net cash

  

provided by operating activities:

   

Depreciation

 44,504 

 

 32,529 

   

Provision for bad debts

 8,787 

 

 -   

   

(Gain) loss on sale of property and equipment

 (2,547)

 

 621 

   

Decrease (increase) in assets:

    

Accounts receivable

 (126,909)

 

 41,151 

    

Inventory

 27,009 

 

 (47,969)

    

Prepaid expenses

 24,485 

 

 (12,400)

   

(Decrease) increase in liabilities:

    

Accounts payable

 20,044 

 

 566 

   

Accrued expenses

 (9,454)

 

 4,875 

    

Net cash provided by operating activities

 328,871 

 

 78,556 

        

Cash flows from investng activities

 

Purchase of property and equipment

 (85,935)

 

 (43,385)

 

Proceeds from disposal of property and equipment

 5,000 

 

 5,000 

    

Net cash used in investing activities

 (80,935)

 

 (38,385)

        

Cash flows from financing activities

 

Payments on loans from stockholders

 -   

 

 (26,643)

 

Stockholder distributions

 (310,000)

 

 -   

   

Net cash used in financing activities

 (310,000)

 

 (26,643)

   

Net increase (decrease) in cash

 (62,064)

 

 13,528 

Cash, beginning of year

 108,488 

 

 94,960 

Cash, end of year

 $    46,424 

 

 $     108,488 

The accompanying notes are an integral part of these financial statements.




F-4



COAST ENGINE & EQUIPMENT CO., INC.

Notes to Financial Statements

December 31, 2004 and 2003



Note A – Nature of Business and Summary of Significant Accounting Policies


1.

Nature of business


Coast Engine & Equipment Co., Inc. (the “Company”) is principally engaged in providing many specialized fabrication and boat repair services and is certified to perform safety inspections and repairs to lifeboats.  The Company’s specialties include a full array of electrical, electronic, equipment and machinery repairs, HVAC and refrigeration servicing, pipe and sheet metal fabrication and installation, welding, custom insulation and flooring services, and engineering and design support.  The Company is strategically located on Florida’s east coast and services major commercial and governmental customers.


2.

Use of estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of continent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results may differ from those estimates.


3.

Cash and cash equivalents


The Company considers cash equivalents to include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less.


4.

Accounts receivable


Accounts receivable, which are carried at fair value, arise in the normal course of business.  It is the policy of management to review the outstanding accounts receivable at year-end and establish an allowance for uncollectible amounts based on judgment and historical experience with the customers.  Management has recorded an allowance for uncollectible accounts of $8,787 as of December 31, 2004.  The Company has determined that no allowance for uncollectible amounts was required as of December 31, 2003.


5.

Inventory


Inventory consists of materials and labor related to jobs in progress at each year-end and, therefore, is stated at cost.



F-5



COAST ENGINE & EQUIPMENT CO., INC.

Notes to Financial Statements

December 31, 2004 and 2003



Note A – Nature of Business and Summary of Significant Accounting Policies (continued)


6.

Property and equipment


Property and equipment are recorded at cost.  The cost of property and equipment is depreciated over the estimated useful lives of the related assets ranging from five to seven years for office equipment, five years for vehicles, and seven years for machinery and tools.  Depreciation is computed using the double declining balance method.  Expenditures for repairs and maintenance are charged to operations as incurred.


7.

Revenue and cost recognition


The Company recognizes revenue each year for all jobs completed during that year.  Job durations are typically one to three months and any material or labor costs incurred on jobs in progress at year-end are included in inventory.


Job costs consist of direct materials and labor.  General and administrative expenses are charged to operations as incurred.


8.

Income taxes


The Company, with the consent of its stockholders, elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code beginning January 1, 2003.  Under those provisions, the Company does not pay corporate income taxes on its taxable income.  Instead, the stockholders will report the Company’s taxable income or loss on their individual income tax returns.


Note B – Property and Equipment


The following is a summary of the components of property and equipment at December 31:


  

2004

Office furniture and equipment

 $      1,953 

Vehicles

 67,080 

Machinery and equipment

 205,857 

  

 274,890 

   

Less accumulated depreciation

 145,708 

  

 $   129,182 




F-6



COAST ENGINE & EQUIPMENT CO., INC.

Notes to Financial Statements

December 31, 2004 and 2003



Note C – Related Party Transactions


During the year ended December 31, 2004, the Company purchased two vehicles for the sum of $35,000 and various pieces of equipment with an aggregate value of $32,540 from the stockholders.  During the year ended December 31, 2003, the Company purchased from the stockholders for the sum of $31,080 two vehicles previously leased to the Company by the stockholders.


The Company’s facilities are leased from a related party (see Note E).


Note D – Concentrations


Concentration of customers


The Company recognized revenues of $786,405 (48.2%) from two customers and $800,763 (91.4%) from three customers during the years ended December 31, 2004 and 2003 respectively.  In addition, as of December 31, 2004 the balances due from these customers amounted to $88,871 or 62.0%.


Note E – Operating Lease


The Company leases its facilities from a company owned by one of the stockholders under a noncancelable three-year lease that commenced May 1, 2001 and expired April 30, 2004.  The lease was renewed for the period May 1, 2004 through April 30, 2006.  The rent expense for the years ended December 31, 2004 and 2003 was $60,594 and $36,498, respectively.  The following are the lease obligations for the next two years ending December 31:


 

Amount

2005

 $      71,016 

2006

 23,672 

 

 $      94,688 



Note F – Subsequent Event


On March 4, 2005, the Company’s stockholders sold all 1,000 shares of their Company stock to an outside party for $300,000, paid at closing, and an amount, not to exceed $200,000, equal to a multiple of three times the earnings before interest, income taxes, depreciation and amortization (the “annual earnings”) and payable within thirty days of the first, second and third year anniversaries of the closing date.  The first year’s annual earnings are payable in cash.  The second and third year annual earnings are payable by issuance of the Buyer’s stock.  If, on the third year anniversary of the closing date, the market value of the buyer’s stock is less than the second and third year annual earnings, the buyer will pay the sellers such difference with thirty days of the third anniversary of the closing date.



F-7



Exhibit 99.2

SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.

Introduction of Pro Forma Condensed Financial Statements



(UNAUDITED)


Effective February 25, 2005, Spectrum Sciences & Software Holdings Corp. (the “Company”) acquired all of the outstanding capital stock of Coast Engine and Equipment Co., Inc.(“CEECO”) from Louis T. Rogers and Marilyn G. Rogers, (the “Acquisition”) a corporation organized under the laws of Florida, pursuant to a Share Purchase Agreement (the “Purchase Agreement”) dated as of the same date.  Under the terms of the Agreement, the Company will pay to the shareholders a total purchase price of up to $900,000 over a three-year period.  The purchase price is payable in cash and stock of the Company and is subject to certain adjustments, including, without limitation, adjustments based on CEECO’s earnings during such three-year period.  Pursuant to a security agreement executed in connection with the Agreement, the Shareholders will retain a security interest in all of the assets of CEECO until the total purchase price has been paid by the Company.

 

The accompanying unaudited pro forma condensed consolidated balance sheet as of December 31, 2004 gives effect to the Acquisition as if the Acquisition occurred on that date.  The accompanying unaudited pro forma condensed statement of income for the year ended December 31, 2004 gives effect to the Acquisition as if it occurred on the first day of the period presented.


The fiscal year end of CEECO and the Company is December 31.  The unaudited pro forma condensed consolidated balance sheet and consolidated statement of income for the year ended December 31, 2004 is derived from CEECO’s audited financial statements as of and for the year ended December 31, 2004 and the Company’s audited consolidated financial statements as of and for the year ended December 31, 2004.  


The unaudited pro forma condensed consolidated financial information is provided for information purposes only and is not necessarily indicative of the results that would have occurred if the Acquisition had occurred on the first day of each period presented.  The unaudited pro forma condensed consolidated financial statements should not be construed as being representative of future operating results or financial position of the Company and should be read in conjunction with the:


·

Accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information;

·

The Company’s historical consolidated financial statements and notes included in the Company’s annual report on Form 10-KSB for the fiscal year ended December 31, 2004.

·

CEECO’s historical financial statements and notes for the fiscal year ended December 31, 2004. (included in this 8-K/A filing).




F-8



SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of December 31, 2004






 

Historical
Spectrum

Historical
CEECO

Pro Forma
Adjustments

Pro Forma
Spectrum

ASSETS

Current

Cash and cash equivalents

 $   5,666,910 

 $     46,424 

 $     (300,000)

 $   5,413,334 

Short term investments

 18,795,143 

 - 

 

 18,795,143 

Receivables

 2,759,756 

 134,457 

 - 

 2,894,213 

Inventory

 79,010 

 37,054 

 - 

 116,064 

Due from shareholder

 705,126 

 - 

 - 

 705,126 

Income tax receivable

 32,736 

 - 

 - 

 32,736 

Prepaid expenses

 849,742 

 568 

 - 

 850,310 

Total current assets

 28,888,423 

 218,503 

 (300,000)

 28,806,926 

Property, plans and equipment, net

 2,280,746 

 129,182 

 (56,307)

 2,353,621 

Other assets and deposits

 43,810 

 - 

 

 43,810 

Goodwill (Note 1)

 -

  -

 52,270 

 52,270 

TOTAL ASSETS

 $ 31,212,979 

 $    347,685 

 $     (304,037)

 $  31,256,627 

     

LIABILITIES AND SHAREHOLDERS' EQUITY

Current

 - 

Accounts payable

 $   1,025,030 

 37,209 

 - 

 1,062,239 

Accrued expenses

 482,923 

 6,439 

 - 

 489,362 

Due to related parties

 705,126 

 - 

 - 

 705,126 

Deferred revenue

 228,968 

 - 

 - 

 228,968 

Provision for contract losses

 148,248 

 - 

 - 

 148,248 

Total Current Liabilities

 2,590,295 

 43,648 

 - 

 2,633,943 

     

TOTAL LIABILITIES

 2,590,295 

 43,648 

 - 

 2,633,943 

     

Shareholders' equity

Common Stock

 3,897 

 1,000 

 (1,000)

 3,897 

Additional paid in capital

 69,895,120 

 - 

 - 

 69,895,120 

Retained earnings (deficit)

 (41,277,155)

 303,037 

 (303,037)

 (41,277,155)

Accumulated other comprehensive income

 822 

 - 

 - 

 822 

Total shareholders' equity

 28,622,684 

 304,037 

 - 

 28,622,684 

 

 $ 31,212,979 

 $    347,685 

 $    (304,037)

 $ 31,256,627 




See accompanying notes to the unaudited pro forma condensed consolidated financial statements




F-9



SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.

Unaudited Pro Forma Condensed Consolidated Statement of Income

For the year ended December 31, 2004





 

Historical
Spectrum

Historical
CEECO

Pro Forma
Spectrum

    
    

Revenue

 $   11,133,748 

 $    1,631,706 

 $   12,765,454 

    

Cost of revenues

 11,187,641 

 910,902 

 12,098,543 

    

Gross profit (loss)

 (53,893)

 720,804 

 666,911 

    

Operating expenses

 40,564,140 

 380,399 

 40,944,539 

    

Income (loss) from operations

 (40,618,033)

 340,405 

 (40,277,628)

    

Total non-operating income, net

 289,690 

 2,547 

 292,237 

    

Income (loss) before provision for income taxes

 (40,328,343)

 342,952 

 (39,985,391)

    

Provision for income tax (expense) benefit

 21,296 

 - 

 21,296 

    
    

Net income (loss)

 (40,307,047)

 342,952 

 (39,964,095)

    

Unrealized gain on available for sale securities

 822 

 - 

 822 

    
    

Total comprehensive income (loss)

 (40,306,225)

 342,952 

 (39,963,273)

    

Retained earnings (deficit), beginning of period

 (970,108)

 270,085 

 (700,023)

    

Distributions to shareholders

 - 

 (310,000)

 (310,000)

    

Retained earnings (deficit), end of period

 $(41,277,155)

 $     303,037 

 $ (40,974,118)

    

Weighted average common shares outstanding:
        Basic and diluted

 

 

 33,616,188

    

Earnings (loss) per share:
        Basic and diluted

 

 

 $           (1.19)



See accompanying notes to the unaudited pro forma condensed consolidated financial statements



F-10



SPECTRUM SCIENCES & SOFTWARE HOLDINGS CORP.

Notes to Unaudited Pro Forma Condensed Financial Statements


The unaudited pro forma condensed balance sheet and statement of income as of and for the year ended December 31, 2004 is derived from CEECO’s audited financial statements as of and for the year ended December 31, 2004 and the Company’s audited consolidated financial statements as of and for the year ended December 31, 2004.  



1.

Pro forma adjustments were made to the unaudited pro forma condensed consolidated balance sheet to eliminate historical CEECO’s equity accounts, adjust fixed assets to estimated fair value, record goodwill, and record estimated acquisition costs.



F-11



Exhibit 23.1






Consent of Independent Registered Certified Public Accounting Firm


We consent to the incorporation by reference in Registration Statements Nos. 333-113528 and 333-114680 of Spectrum Sciences and Software Holdings Corp. on Form S-8 of our report, dated February 8, 2005, relating to Coast Engine & Equipment Co., Inc


/s/ Berman Hopkins Wright & LaHam, CPAs, LLP.


Berman Hopkins Wright & Laham, CPA, LLP


April 18, 2005

Melbourne, Florida






F-12