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 |
Historical |
Pro Forma |
Pro Forma |
|
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 | Historical | Pro Forma | |
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: |
|
| 33,616,188 |
Earnings (loss) per share: |
|
| $ (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