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Analex Corp – ‘8-K/A’ for 5/27/99

On:  Monday, 7/26/99   ·   For:  5/27/99   ·   Accession #:  44800-99-21   ·   File #:  0-05404

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  As Of                Filer                Filing    For·On·As Docs:Size

 7/26/99  Analex Corp                       8-K/A:7     5/27/99    1:39K

Amendment to Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment to Current Report                           29     96K

Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 7. Financial Statements and Exhibits
3Item 7(a). Financial Statements of Business Acquired
4Item 7(a). Financial Statements of Businesses Acquired
8Statements of Operations
22Item 7(b) Pro Forma Financial Information 
8-K/A1st Page of 29TOC↑TopPreviousNext↓BottomJust 1st
 

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): May 27, 1999          

HADRON, INC.          
(Exact name of the registrant as specified in its charter)          

New York                    0-5404                     11-2120726   
(State of Incorporation)      (Commission                (I.R.S. Employer       
                           File Number)                Identification No.)

7611 Little River Turnpike, Suite 404 West, Annandale, Virginia         22003   
         (Address of principal executive offices)                   (Zip Code)

(703) 642-9404          
Registrant's telephone number, including area code          


8-K/A2nd Page of 29TOC1stPreviousNext↓BottomJust 2nd

 The undersigned Registrant hereby amends its Current Report on Form 8-K
dated May 27, 1999 by the addition of financial statements as set forth in      
Item 7 below.                                                                   

Item 7.  Financial Statements and Exhibits                                      

(a)  Financial statements of businesses acquired:                     

AVENUE TECHNOLOGIES, INC.                                   
FINANCIAL STATEMENTS FOR THE YEARS                          
ENDED DECEMBER 31, 1998 AND 1997                            

Report of Independent Auditors                              
Balance Sheets                                              
Statements of Operations                                    
Statements of Changes in Stockholders' Equity               
Statements of Cash Flows                                    
Notes to Financial Statements                               

AVENUE TECHNOLOGIES, INC.                                   
FINANCIAL STATEMENTS FOR THE THREE MONTHS                   
ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)                   

Balance Sheet as of March 31, 1999                          
Statements of Operations                                    
Statements of Cash Flows                                    
Notes to Financial Statements                               

(b)  Pro Forma financial information:                                 

HADRON, INC. PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)     

Pro Forma Combined Balance Sheets as of March 31, 1999      

Pro Forma Combined Statements of                            
Operations for the Nine Months Ended March 31, 1999       

Pro Forma Combined Statements of                            
Operations for the Fiscal Year Ended June 30, 1998        

Notes to Unaudited Pro Forma Combined                       
Financial Statements                                      


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INDEX TO FINANCIAL STATEMENTS           

Item 7(a) Financial Statements of Business Acquired                             

AVENUE TECHNOLOGIES, INC.                                   
FINANCIAL STATEMENTS FOR THE YEARS                          
     ENDED DECEMBER 31, 1998 AND 1997                         PAGE NO.
                                                              --------
Report of Independent Auditors                            1 
Balance Sheets                                            2 
Statements of Operations                                  3 
Statements of Changes in Stockholders' Equity             4 
Statements of Cash Flows                                  5 
Notes to Financial Statements                             6 

AVENUE TECHNOLOGIES, INC.                                   
FINANCIAL STATEMENTS FOR THE THREE MONTHS                   
ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)                   

Balance Sheet as of March 31, 1999                        12
Statements of Operations                                  13
Statements of Cash Flows                                  14
Notes to Financial Statements                             15

Item 7(b) Pro Forma Financial Information                           16          

HADRON, INC. PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)     

Pro Forma Combined Balance Sheets as of March 31, 1999    17

Pro Forma Combined Statements of                            
 Operations for the Nine Months Ended March 31, 1999      19

Pro Forma Combined Statements of                            
 Operations for the Fiscal Year Ended June 30, 1998       20

Notes to Unaudited Pro Forma Combined                       
 Financial Statements                                     21


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Item 7(a) Financial Statements of Businesses Acquired                           

Avenue Technologies, Inc.                   

Financial Statements                    

Years ended December 31, 1998 and 1997                  
with Report of Independent Auditors                   


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Avenue Technologies, Inc.                   

Financial Statements                    

Years ended December 31, 1998 and 1997                    

Contents                    

Report of Independent Auditors                             1                    

Financial Statements                                                            

Balance Sheets                                             2                    
Statements of Operations..                                 3                    
Statements of Changes in Stockholders' Equity.             4                    
Statements of Cash Flows                                   5                    
Notes to Financial Statements                           6-11                    


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Report of Independent Auditors                    

Board of Directors                                                              
Avenue Technologies, Inc.                                                       

We  have  audited the accompanying balance sheets of  Avenue                    
Technologies, Inc. as of December 31, 1998 and 1997, and the                    
related  statements of operations, changes in  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  generally                    
accepted auditing standards. 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 financial statements referred  to above                    
present  fairly,  in  all material respects,  the  financial                    
position  of Avenue Technologies, Inc. at December 31,  1998                    
and  1997,  and the results of its operations and  its  cash                    
flows  for the years then ended in conformity with generally                    
accepted accounting principles.                                                 

                     /S/ Ernst & Young LLP

July 9, 1999                                                                    
Washington, D.C.                                                                


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                                                                [Download Table]
                  Avenue Technologies, Inc.                                

                       Balance Sheets                                      

                                                        December 31        
                                                    1998           1997    
                                               -------------    -----------
                                                                           

Assets                                                                     
Cash and cash equivalents                            $ 8,750    $   3,020  
Accounts receivable, including                                             
unbilled of $437,006 and $105,550                  1,693,147    2,511,279  
                                               -------------    -----------
Total current assets                               1,701,897    2,514,299  

Property and equipment, net                          134,463      174,149  
Other assets                                          80,159       94,656  
                                               -------------    -----------
Total assets                                     $ 1,916,519   $2,783,104  
                                               =============    ===========
Liabilities and stockholders'                                              
equity                                                                     
Current liabilities:                                                       
Line of credit                                   $   760,000  $            
Accounts payable                                     253,308    1,636,618  
Accrued payroll and benefits                         237,896      178,326  
Demand note payable to stockholder                   209,749       70,638  
Deferred revenue                                      30,672       69,131  
Current portion of long-term debt                     16,086       22,244  
Deferred taxes                                        66,367      199,065  
                                               -------------    -----------
Total current liabilities                          1,574,078    2,176,022  

Long-term debt, less current maturities               28,387       66,024  
                                               -------------    -----------

Stockholders' equity:                                                      
Common stock:                                                              
Class A, $.001 par value,                                                  
authorized 800,000 shares, issued                                          
and outstanding 750,336 shares in                                          
1998 and 496,673 shares in 1997                         750           497  
   Class B, $.001 par value,                                               
authorized, issued and outstanding                                         
500,000 shares in 1998 and 1997                         500           500  
Additional capital                                   17,512        17,635  
Retained earnings                                   295,292       522,426  
                                              -------------    ----------- 
                                                    314,054       541,058  
                                              -------------    ----------- 
Total liabilities and stockholders' equity     $  1,916,519    $2,783,104  
                                              =============    ==========  

See accompanying notes.                                                         


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                                                                [Download Table]
                  Avenue Technologies, Inc.                    

                  Statements of Operations                     

                                       Year ended December 31  
                                         1998          1997    
                                      -----------  ------------
                                                               
Revenue                               $ 8,057,699  $ 9,545,662 
Direct expenses                         5,546,385    7,625,927 
                                      -----------  ------------
Gross profit                            2,511,314    1,919,735 
Indirect expenses                       2,914,021    1,518,590 
                                      -----------  ------------
Operating income (loss)                  (402,707)     401,145 

Other income (expense):                                        
Other income                               60,621        8,864 
Interest income                            11,242          770 
Interest expense                          (29,088)      (7,721)
                                      -----------  ------------
                                           42,775        1,913 
                                      -----------  ------------
Income (loss) before income taxes        (359,932)     403,058 

Benefit from (provision for) income                            
taxes                                     132,798     (167,676)
                                      -----------  ------------
Net income (loss)                      $ (227,134)  $  235,382 
                                      ===========  ============

See accompanying notes.                                                         


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                                                                [Download Table]
                  Avenue Technologies, Inc.                                  

        Statements of Changes in Stockholders' Equity                        


                      Common                                      Total      
                       Stock     Common  Additional  Retained   Stockholders'
                       Shares     Stock    Capital   Earnings     Equity     
                      -------    ------- ----------  ---------  ------------ 
                                                                             
Balance at                                                                   
December 31, 1996     754,629     $  755   $         $ 287,044   $ 287,799   

Net income                                             235,382     235,382   
Issuance of                                                                  
 common stock         242,044        242    17,635                  17,877   
                      -------    ------- ----------  ---------  ------------ 
Balance at                                                                   
December 31, 1997     996,673        997    17,635     522,426     541,058   

Net loss                                              (227,134)   (227,134)  
Issuance of                                                                  
 common stock         253,663        253      (123)                    130   
                      -------    ------- ----------  ---------  ------------ 
Balance at                                                                   
December 31, 1998   1,250,336    $ 1,250  $ 17,512   $ 295,292   $ 314,054   
                    =========    ======= ==========  =========  ============ 

See accompanying notes.                                                         


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                                                                [Download Table]

                  Avenue Technologies, Inc.                        

                  Statements of Cash Flows                         

                                            Year ended December 31 
                                               1998        1997    
                                            ----------  ---------- 
                                                                   
Operating activities                                               
Net income (loss)                          $ (227,134)  $  235,382 
Adjustments to reconcile net income                                
(loss) to net cash (used in) provided by                           
operating activities:                                              
Depreciation and amortization                  37,354       22,324 
Deferred taxes                               (132,798)     167,676 
(Increase) decrease in:                                            
Accounts receivable                           818,132   (1,815,655)
Other assets                                   14,497      (83,347)
Increase (decrease) in:                                            
Accounts payable                           (1,383,310)   1,383,578 
Accrued payroll and related taxes              59,570       65,646 
Deferred revenue                              (38,459)      69,131 
                                            ----------  ---------- 
Net cash (used in) provided by operating                           
activities                                   (852,148)      44,735 

Investing activities                                               
Purchases of property and equipment           (25,526)    (140,798)
                                            ----------  ---------- 
Net cash (used in) investing activities       (25,526)    (140,798)
                                            ----------  ---------- 
Financing activities                                               
Payments on line of credit                    (40,000)    (530,000)
Proceeds from line of credit                  800,000      480,000 
Principal payments on long-term debt          (15,837)     (11,663)
Proceeds from long-term debt                                67,354 
Net proceeds (payments) on demand note                             
to stockholder                                139,111      (24,615)
Proceeds from stock issuance                      130              
                                            ----------  ---------- 
Net  cash provided by (used in) financing                          
activities                                    883,404      (18,924)
                                            ----------  ---------- 
Net  increase (decrease) in cash and cash                          
equivalents                                     5,730     (114,987)
                                            ----------  ---------- 
Cash  and cash equivalents, beginning  of                          
year                                            3,020      118,007 
                                            ----------  ---------- 
Cash and cash equivalents, end of year      $   8,750    $   3,020 
                                            ==========  ========== 
Supplemental  disclosure  of  cash flow                            
information                                                        
Cash payments for interest                  $  29,088    $   7,721 
                                            ==========  ========== 

See accompanying notes.                                                         


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Avenue Technologies, Inc.                   

Notes to Financial Statements                   

December 31, 1998 and 1997                    

1. Nature of Business and Significant Accounting Policies                       

Nature of Business                                                              

Avenue  Technologies,  Inc. (the  Company)  provides  system                    
engineering, digital communications and computer  consulting                    
services  to government and private sector clientele  in                        
the Washington metropolitan area.                                               

A summary of the Company's significant accounting  policies                     
follows:                                                                        

Risks and Uncertainties                                                         

Financial instruments which potentially subject the  Company                    
to concentrations of credit risk consist principally of cash                    
and  cash equivalents, and accounts receivable.  The Company                    
maintains its cash and cash equivalents principally  in  two                    
United  States  commercial banks.  Cash in excess  of  daily                    
requirements is invested by the banks in one-day  repurchase                    
agreements   of  securities  of  United  States   Government                    
agencies.   To  date,  the Company has not  incurred  losses                    
related to cash and cash equivalents.                                           

The  Company's  accounts receivable consist  principally  of                    
accounts  receivable from prime contractors to agencies  and                    
departments  of the United States Government.   The  Company                    
extends  credit in the normal course of operations and  does                    
not require collateral from its customers.                                      

The  Company  has  historically been, and continues  to  be,                    
heavily  dependent upon direct and indirect  contracts  from                    
various    U.S.   government   agencies.    Contracts    and                    
subcontracts with the U.S. Government are subject  to  audit                    
by audit agencies of the government.  Such audits determine,                    
among  other  things,  whether  an  adjustment  of  invoices                    
rendered   to  the  government  is  appropriate  under   the                    
underlying  terms  of  the contracts.  All  U.S.  government                    
contracts contain clauses which allow for the termination of                    
contracts at the convenience of the government.                                 

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, liabilities, and contingent liabilities                    
at  the  date  of the financial statements and the  reported                    
amounts  of  revenues  and  expenses  during  the  reporting                    
periods.  Actual results could differ from those estimates.                     


8-K/A12th Page of 29TOC1stPreviousNext↓BottomJust 12th

Cash Equivalents                                                                

Cash equivalents represent amounts invested in highly liquid                    
short-term  instruments with a maturity of three  months  or                    
less.                                                                           

Revenue and Cost Recognition                                                    

Revenue  from "cost-plus-fixed-fee" contracts is  recognized                    
on  the basis of reimbursable contract costs incurred during                    
the  period  plus the fee earned.  Revenue  from  "time  and                    
material"  contracts is recognized on the basis of man-hours                    
provided  plus  other reimbursable contract  costs  incurred                    
during   the  period.   Revenue  from  "firm  fixed   price"                    
contracts  is  recognized  on the percentage  of  completion                    
method.   Under  this  method, individual  contract  revenue                    
earned  is  increased  by the percentage  relationship  that                    
contract  costs  incurred bear to management's  estimate  of                    
total  contract costs.  The Company provides  currently  for                    
all known or anticipated losses on contracts.                                   

Accounts Receivable                                                             

Accounts  receivable is comprised of amounts billed  to  the                    
U.S.  government  and unbilled amounts  that  are  for  rate                    
variances   between  provisional  and  actual   rates,   fee                    
withholdings,  and retentions. In accordance  with  industry                    
practice,   accounts   receivable  relating   to   long-term                    
contracts  are classified as current, even though a  portion                    
of  these, including the rate variances, may not be realized                    
within  one year.  Similarly, payables relating to long-term                    
contracts are classified as current.                                            

Property and Equipment                                                          

Property and equipment are stated at cost and depreciated or                    
amortized  over  the estimated useful lives  of  the  assets                    
(generally  three  to  five years) using  the  straight-line                    
method.                                                                         

Income Taxes                                                                    

Deferred tax liabilities and assets are determined based  on                    
the difference between the financial statement and tax bases                    
of assets and liabilities, using enacted tax rates in effect                    
for  the  year  in  which the differences  are  expected  to                    
reverse.                                                                        


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2. Property and Equipment                                                       

                                                                [Download Table]
                                                     1998         1997    
                                               ------------    -----------
                                                                          
Furniture and equipment                          $  52,342      $ 46,786  
Computer equipment                                  95,682        79,553  
Vehicle                                             30,604        60,479  
Leasehold improvements                              25,529        21,279  
                                               ------------    -----------
                                                   204,157       208,097  
Less accumulated depreciation and amortization      69,694        33,948  
                                               ------------    -----------
                                               $   134,463     $ 174,149  
                                               ============    ===========

Depreciation  and  amortization  expenses  on  property  and                    
equipment in the amount of $37,354 and $22,324 were  charged                    
to  operations  for the years ended December  31,  1998  and                    
1997, respectively.                                                             

3. Long-Term Debt                                                               

Long-term  debt at December 31, 1998 and 1997  consisted  of                    
the following:                                                                  

                                                                [Download Table]
                                             1998           1997    
                                          ----------     -----------
                                                                    
Note    payable   with   the   original                             
principal  of $19,818, dated  May  28,                              
1998,    payable   in    60    monthly                              
installments    of   $413    including                              
interest at 8.99%, secured by vehicle,                              
due May 2003.                               $17,946       $         
Note  payable  (term  loan),  with  the                             
original  principal  sum  of  $38,000,                              
dated December 18, 1997, payable in 36                              
monthly    installments   of   $1,220,                              
including interest at 9.5%, secured by                              
furniture,  guaranteed by stockholder,                              
due December 2000.                           26,527         38,000  
Note    payable   with   the   original                             
principal sum of $30,000, dated May 8,                              
1996,    payable   in    60    monthly                              
installments    of   $636    including                              
interest at 9.75%, secured by vehicle,                              
due May 2001.                                               22,119  
Note    payable   with   the   original                             
principal   sum   of  $29,354,   dated                              
September  12,  1997,  payable  in  60                              
monthly installments of $597 including                              
interest at 7.99%, secured by vehicle,                              
due September 2002.                                         28,149  
                                          ----------     -----------
                                             44,473         88,268  
Less current maturities                      16,086         22,244  
                                          ----------     -----------
                                            $28,387        $66,024  
                                          ==========     ===========


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Maturities of long-term obligations at December 31, 1998 are                    
due in future years as follows:                                                 

Years ending December 31,                                                       

                                                                [Download Table]
                                              
1999                                $  16,086 
2000                                   17,682 
2001                                    4,146 
2002                                    4,554 
2003                                    2,005 
                                    ----------
                                    $  44,473 
                                    ==========

The  Company  had  available  an  $800,000  line  of  credit                    
facility,  which  accrued interest at 1.5% above  the  prime                    
rate.   The  facility expired in May 1999.  Borrowings  were                    
subject  to  borrowing base requirements based  on  eligible                    
accounts receivable, were secured by accounts receivable and                    
property   and   equipment  and  were  guaranteed   by   the                    
stockholder.                                                                    

4.  Employee Profit-Sharing Plan                                                

The  Company  has a 401(k) salary deferral plan that  covers                    
full-time employees who meet minimum age requirements.   The                    
plan  provides  for discretionary Company contributions  for                    
eligible  employees  out  of  current  or  accumulated   net                    
profits.  Profit-sharing expense of $88,964 and $46,106  was                    
charged to operations for the years ended December 31,  1998                    
and 1997, respectively.                                                         

5. Income Taxes                                                                 

The components of the income tax (provision) benefit for the                    
years ended December 31, 1998 and 1997, are as follows:                         

                                                                [Download Table]
                                          1998       1997   
                                       ---------  ----------
                                                            
Current:                                                    
 Federal                                $         $         
 State                                                      
                                       ---------  ----------
                                       ---------  ----------
Deferred:                                                   
 Federal                                 119,107   (150,474)
 State                                    13,691    (17,202)
                                       ---------  ----------
                                         132,798   (167,676)
                                       ---------  ----------
                                       $ 132,798  $(167,676)
                                       =========  ==========


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Taxable  temporary differences giving rise to  deferred  tax                    
assets  and  liabilities are related to net  operating  loss                    
carryforwards, depreciable basis of property  and  equipment                    
and  the use of the cash basis of accounting for income  tax                    
purposes  and the accrual basis of accounting for  financial                    
statement  purposes.  The net operating losses are available                    
through  the year 2011 to offset future taxable income.   As                    
of  December  31,  1998, the net operating loss  totaled  $1                    
million.                                                                        

6. Transactions With Related Parties                                            

McLean Research Corporation ("MRC"), a company owned in part                    
by  Howard  C.  Whetzel, Chairman of the Company,  subleases                    
office  space at the Company's headquarters.  The  month-to-                    
month  sublease provides for a pro-rata share of  the  lease                    
rent.  MRC moved to new offices in July 1999.                                   

In  December  1998,  MRC paid the Company  $48,265  for  its                    
assistance  in the transfer of certain Company employees  to                    
MRC.                                                                            

7.  Commitments and Contingencies                                               

The   Company  rents  office  space  under  a  noncancelable                    
operating  lease, which expires December 31, 2002.   Minimum                    
monthly  rent  in  1999 is $26,989 with a 3%  increase  each                    
year.   In addition, the Company is required to pay its  pro                    
rata share of real estate taxes and operating expenses.                         

As  of December 31, 1998, the Company has a letter of credit                    
agreement for $52,411.  In the event of default on its lease                    
agreement  for office space, the landlord is the beneficiary                    
of  the  letter  of credit.  The letter is  secured  by  the                    
assets of the Company.                                                          

The  Company entered into a sublease arrangement for  office                    
space  in Arlington, Virginia, commencing June 1, 1998,  and                    
ending  May 31, 2000.  In addition to basic monthly rent  of                    
$1,308,  the Company is responsible for a pro rata share  of                    
real estate taxes and operating expenses.                                       

Total future minimum lease payments as of December 31,  1998                    
are as follows:                                                                 

Years ending December 31,                                                       

                                                                [Download Table]
                                              
1999                                $  339,557
2000                                   340,086
2001                                   343,554
2002                                   353,861
                                    ----------
                                    $1,377,058
                                    ==========


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Rental expense was $290,568 and $110,767 for the years ended                    
December 31, 1998 and 1997, respectively.                                       

The  Company's revenues and costs related to contracts  with                    
agencies  and  departments of the U.S.  Government  are                         
subject to audit by the Defense Contract Audit Agency, which                    
has  completed the majority of its audits for the  Company's                    
fiscal years through fiscal year 1997.  It is the opinion of                    
management that the results of such audits will not  have  a                    
material  effect on the financial condition  or  results  of                    
operations of the Company.                                                      

In  December  1997, the Company received a Stop  Work  Order                    
from  a  Department  of Defense agency.   The  contract  was                    
terminated  for  convenience.  The Company has  submitted  a                    
termination  claim for approximately $419,000,  representing                    
the  costs  incurred by the Company and its  subcontractors.                    
The  U.S.  government has questioned certain  of  the  costs                    
submitted.   Discussions are ongoing for the  resolution  of                    
the  final claim amounts. It is reasonably possible  that  a                    
lesser  amount could be received. The Company believes  that                    
resolution  of  the claim will not have a  material  adverse                    
financial impact.                                                               

8.  Subsequent Event                                                            

On  May 12, 1999, Hadron, Inc. purchased all the outstanding                    
common  stock of the Company for approximately $2.5 million.                    
The  Company  will operate as a wholly-owned  subsidiary  of                    
Hadron, Inc.                                                                    

9.  Year 2000 (unaudited)                                                       

The Year 2000 issue is the result of computer programs being                    
written  using  two digits rather than four  to  define  the                    
applicable  year,  resulting in possible system  failure  or                    
miscalculations causing disruptions of operations.                              

The  Company has completed an internal review and assessment                    
of  the  impact  of the Year 2000 issue upon its  operating,                    
financial,  and  accounting  systems.   At  this  time,  the                    
Company believes that, with respect to its internal systems,                    
the   Year   2000  issue  will  not  pose  any   significant                    
operational problems or costs.  The Company has commenced  a                    
program  to  assess the impact of the Year 2000  issue  with                    
respect to the Company's major vendors  and  customers.                         
Letters will  be  sent  requesting detailed, written                            
information  concerning existing or anticipated  Year 2000                      
compliance by their systems,  insofar as  the  operating                        
systems relate to the Company's  business activities                            
with  such  parties.   The  Company  expects  to receive                        
replies during 1999 and will update its  assessment                             
of any impact at that time.                                                     


8-K/A17th Page of 29TOC1stPreviousNext↓BottomJust 17th

Avenue Technologies, Inc.                   

Financial Statements (Unaudited)                    

Three months ended March 31, 1999 and 1998                    


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                                                                [Download Table]
                  Avenue Technologies, Inc.               

                  Balance Sheet (Unaudited)               

                                               March 31   
                                                 1999     
                                            --------------
                                                          
Assets                                                    
Current assets:                                           
Cash and cash equivalents                    $      76,452
Accounts receivable, including                            
unbilled of $67,907                              1,301,509
                                            --------------
Total current assets                             1,377,961

Property and equipment, net                        126,485
Other assets                                        50,063
                                            --------------
Total assets                                 $   1,554,509
                                            ==============
Liabilities and stockholders' equity                      
Current liabilities:                                      
Line of credit                               $     800,000
Accounts payable                                   206,435
Accrued payroll and benefits                       218,192
Deferred revenue                                    30,672
Deferred taxes                                      12,011
                                            --------------
Total current liabilities                        1,267,310

Long-term debt, less current maturities             65,363
                                            --------------
Stockholders' equity:                                     
Common stock:                                             
 Class A, $.001 par value,                                
 authorized 800,000 shares, issued                        
 and outstanding 750,736 shares                        750
 Class B, $.001 par value,                                
 authorized, issued and outstanding                       
 500,000 shares                                        500
Additional capital                                  17,672
Retained earnings                                  202,914
                                            --------------
                                                   221,836
                                            --------------
Total liabilities and stockholders' equity   $   1,554,509
                                            ==============

See accompanying notes.                                                         


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                                                                [Download Table]
                  Avenue Technologies, Inc.                     

            Statements of Operations (Unaudited)                


                                            Three Months        
                                            ended March 31      
                                          1999         1998     
                                      ------------  ----------- 
                                                                
Revenue                               $  1,132,214  $ 2,670,228 
Direct expenses                            656,456    1,977,547 
                                      ------------  ----------- 
Gross profit                               475,758      692,681 
Indirect expenses                          611,828      823,519 
                                      ------------  ----------- 
Operating loss                            (136,070)    (130,838)

Other income (expense):                                         
  Interest income                              112          475 
  Interest expense                         (10,673)      (2,071)
                                      ------------  ----------- 
                                           (10,561)      (1,596)
                                      ------------  ----------- 
Loss before income taxes                  (146,631)    (132,434)

Benefit from income taxes                   54,253       49,000 
                                      ------------  ----------- 
Net loss                               $   (92,378)  $  (83,434)
                                      ============  =========== 

See accompanying notes.                                                         


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                                                                [Download Table]
                  Avenue Technologies, Inc.                        

            Statements of Cash Flows (Unaudited)                   

                                            Three Months ended     
                                                 March 31          
                                             1999         1998     
                                         -----------   ------------
                                                                   
Operating activities                                               
Net loss                                 $   (92,378)   $  (83,434)
Adjustments to reconcile net loss to net                           
cash (used in) provided by operating                               
activities:                                                        
Depreciation and amortization                  7,609         1,964 
Deferred taxes                               (54,356)     (196,024)
(Increase) decrease in:                                            
Accounts receivable                          391,638       762,096 
Other assets                                  30,096         9,389 
Increase (decrease) in:                                            
Accounts payable                             (46,873)   (1,031,108)
Accrued payroll and related taxes            (19,704)      123,519 
Deferred revenue                                            63,000 
                                         -----------   ------------
Net cash provided by (used in) operating                           
activities                                   216,032      (350,598)

Investing activities                                               
Purchases of property and equipment              369       (11,765)
                                         -----------   ------------
Net cash provided by (used in) investing                           
activities                                       369       (11,765)
                                         -----------   ------------
Financing activities                                               
Payments on line of credit                  (760,000)              
Proceeds from line of credit                 800,000       222,327 
Principal payments on long-term debt          (3,858)       (6,152)
Net payments on demand note to                                     
stockholder                                 (185,001)       (9,000)
Proceeds from stock issuance                     160               
                                         -----------   ------------
Net cash provided by (used in) financing                           
activities                                  (148,699)      207,175 
                                         -----------   ------------
Net  increase (decrease) in cash and cash                          
equivalents                                   67,702      (155,188)

Cash  and cash equivalents, beginning of                           
period                                         8,750         3,020 
                                         -----------   ------------
Cash and cash equivalents, end of period   $  76,452    $ (152,168)
                                         ===========   ============

See accompanying notes.                                                         


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Avenue Technologies, Inc.                   

Notes to Financial Statements (Unaudited)                   

March 31, 1999 and 1998                   

1. Basis of Presentation                                                        

The  interim  financial statements for Avenue  Technologies,                    
Inc.  (the  Company) are unaudited, but in  the  opinion  of                    
management  reflect  all  adjustments  (consisting  only  of                    
normal recurring accruals) necessary for a fair presentation                    
of  results for such periods.  The results of operations for                    
any interim period are not necessarily indicative of results                    
for  the  full year.  These financial statements  should  be                    
read  in conjunction with the financial statements and notes                    
thereto  included in the financial statements for  the  year                    
ended December 31, 1998.                                                        


8-K/A22nd Page of 29TOC1stPreviousNext↓BottomJust 22nd

Item 7(b) Pro Forma Financial Information                                       

PRO FORMA FINANCIAL INFORMATION               

The   unaudited  pro  forma  combined   financial                     
statements  are based upon the historical consolidated  financial               
statements  of  Hadron,  Inc. (the "Company")  adjusted  to  give               
effect to the acquisition of Avenue Technologies, Inc. ("ATI") by               
the Company under the purchase method of accounting in accordance               
with Accounting Principles Board Opinion No. 16.  The acquisition               
of ATI was consummated in May 1999.                                             

The unaudited pro forma combined balance sheets at                    
March  31,  1999 are presented as if the above transactions  were               
consummated on March 31, 1999.  The unaudited pro forma condensed               
combined statements of operations for the nine months ended March               
31, 1999 and the fiscal year ended June 30, 1998 are presented as               
if the above transactions were consummated on July 1, 1997.                     

This  information  should be read in  conjunction  with  the          
notes  and  the consolidated financial statements of the  Company               
incorporated by reference herein and the financial statements  of               
ATI  included herein. The unaudited pro forma combined                          
financial  data  do not purport to represent what  the  Company's               
results   of  operations  actually  would  have  been  had   such               
transactions  and events occurred on the dates specified,  or  to               
project the Company's results of operations for any future period               
or  date.   In  the  opinion of management of  the  Company,  all               
adjustments  and  reclassifications  have  been  made  that   are               
necessary to present the pro forma combined data.                               

A preliminary allocation of the purchase price has been made          
to  the  assets  and liabilities based on available  information.               
The  actual allocation of purchase price and the resulting effect               
on  income from operations may differ significantly from the  pro               
forma  amounts  included  herein.  These  pro  forma  adjustments               
represent  the  Company's preliminary determination  of  purchase               
accounting  adjustments and are based upon available  information               
and   certain  assumptions  that  the  Company  believes  to   be               
reasonable.  Consequently, the amounts reflected in the pro forma               
financial statements are subject to change, and the final amounts               
may differ substantially.                                                       


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                                                        [Enlarge/Download Table]
                               HADRON, INC.                                                        
               PRO FORMA COMBINED BALANCE SHEETS (UNAUDITED)                                       
                             AS OF MARCH 31, 1999                                                  

                                             Historical   Historical                    Pro Forma  
ASSETS                                        HADRON        ATI         Adjustments     Combined   
------                                      ----------   ----------   --------------   ----------- 
                                                                                                   

     Current assets:                                                                               
       Cash and cash equivalents             $   67,400   $   76,452   $  (95,624)<F1>   $   48,228
       Accounts receivable, net               2,783,500    1,301,509                      4,085,009
       Prepaid expenses and other               184,100                                     184,100
                                             ----------   ----------   -----------       ----------
         Total current assets                 3,035,000    1,377,961      (95,624)        4,317,337
                                             ----------   ----------   -----------       ----------

     Fixed assets                               169,700      126,485                        296,185
     Assets held for resale                     135,900                                     135,900
     Goodwill                                                           2,407,296 <F2>    2,407,296
     Other                                       33,900       50,063                         83,963
                                             ----------   ----------   -----------       ----------
         Total other assets                     339,500      176,548    2,407,296         2,923,344
                                             ----------   ----------   -----------       ----------

     Total assets                            $3,374,500   $1,554,509   $2,311,672        $7,240,681
                                             ==========   ==========   ===========       ==========
<FN>                                                                                               
   <F1>  Represents cash payments of approximately $96,000 related to the                          
         acquisition, including payments to ATI shareholders' and financial                        
         advisors.                                                                                 

   <F2>  To record goodwill of approximately $2,407,000 associated with the                        
         purchase.                                                                                 
</FN>                                                                                              
                                                                              
                    See Notes to Pro Forma Combined Financial Statements
                     (Unaudited)
                    -17-


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                                                        [Enlarge/Download Table]
                             HADRON, INC.                                                          
             PRO FORMA COMBINED BALANCE SHEETS (UNAUDITED)                                         
                           AS OF MARCH 31, 1999                                                    

                                             Historical   Historical                   Pro Forma   
   LIABILITIES AND SHAREHOLDERS' EQUITY        HADRON        ATI       Adjustments      Combined   
   ------------------------------------     ----------   ----------   ------------    -----------  
                                                                                                   
   Current liabilities:                                                                            
     Accounts payable                       $  369,000   $  206,435   $                $   575,435 
     Note payable - line of credit                          800,000                        800,000 
     Notes payable - related parties           330,900                 1,475,672 <F3>    1,806,572 
     Other current liabilities               2,174,900      218,192       60,000 <F4>    2,453,092 
     Deferred taxes                                          12,011                         12,011 
     Deferred revenue                                        30,672                         30,672 
                                            ----------   ----------    ----------      ----------- 
       Total current liabilities             2,874,800    1,267,310    1,535,672         5,677,782 
                                            ----------   ----------    ----------      ----------- 
   Note payable - related party                100,000                   997,836 <F3>    1,097,836 
   Long-term debt                                            65,363                         65,363 
   Other                                        56,500                                      56,500 
                                            ----------   ----------    ----------      ----------- 
       Total long-term liabilities             156,500       65,363      997,836         1,219,699 
                                            ----------   ----------    ----------      ----------- 

   Total liabilities                         3,031,300    1,332,673    2,533,508         6,897,481 
                                            ----------   ----------    ----------      ----------- 
   Shareholders' equity:                                                                           

   Common stock                                 37,000        1,250       (1,250)<F5>       37,000 
   Additional capital                        9,502,600       17,672      (17,672)<F5>    9,502,600 
   Accumulated deficit                      (9,196,400)     202,914     (202,914)<F5>   (9,196,400)
                                            ----------   ----------    ----------      ----------- 
   Total shareholders' equity                  343,200      221,836     (221,836)          343,200 
                                            ----------   ----------    ----------      ----------- 

   Total liabilities and shareholders'                                                             
    equity                                  $3,374,500   $1,554,509   $2,311,672        $7,240,681 
                                            ==========   ==========   ===========      =========== 
<FN>                                                                                                 
<F3>  To record issuance of notes payable, including 90-day notes for                              
      approximately $1,476,000 and 3-year $997,000 notes.                                          

<F4>  To record legal and financial expenses of approximately $60,000                              
      associated with the acquisition.                                                             

<F5>  To eliminate ATI's shareholders' equity of approximately $222,000                            
      at purchase date.                                                                            
</FN>                                                                                                

                  See Notes to Pro Forma Combined Financial Statements
                   (Unaudited)
                    -18-


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                                                        [Enlarge/Download Table]

                                   HADRON, INC.                                                         
                  PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)                               
                        FOR THE NINE MONTHS ENDED MARCH 31, 1999                                        

                                                Historical Results for                                  
                                                   Nine Months Ended                                    
                                                    March 31, 1999                                      
                                                                                          Pro Forma     
                                              Hadron          ATI       Adjustments        Combined     
                                           -----------   -----------   ------------     ------------    
                                                                                                        
Revenues                                   $14,943,200   $ 4,311,861   $                 $19,255,061    
                                           -----------   -----------   ------------     ------------    
Operating costs and expenses:                                                                           
  Costs of revenue                          13,203,100     4,114,133                      17,317,233    
  Selling, general and administrative        1,498,100       594,873       257,925 <F6>    2,350,898    
                                           -----------   -----------   ------------     ------------    
Total operating costs and expenses          14,701,200     4,709,006       257,925        19,668,131    

Operating income (loss)                        242,000      (397,145)     (257,925)         (413,070)   
                                           -----------   -----------   ------------     ------------    
Other income (expense)                         (26,700)       34,673      (130,676)<F7>     (122,703)   
                                           -----------   -----------   ------------     ------------    
Income (loss) before income taxes              215,300      (362,472)     (388,601)         (535,773)   

Benefit from (provision for) income taxes      (24,900)      133,737                         108,837    
                                           -----------   -----------   ------------     ------------    

Net income (loss)                          $   190,400   $  (228,735)  $  (388,601)      $  (426,936)   
                                           ===========   ===========   ============     ============    

Per share data:                                                                                         

Net income (loss) per share                                                                             
  Basic                                    $       .11                                  $      (.24)<F8>
                                           ===========                                  ============    
  Diluted                                  $       .06                                  $      (.24)<F8>
                                           ===========                                  ============    
Weighted average number of shares                                                                       
  Basic                                      1,774,225                                     1,774,225<F8>
                                           ===========                                  ============    
  Diluted                                    3,109,660                                     1,774,225<F8>
                                           ===========                                  ============    
<FN>                                                                                                    
    <F6>  To record goodwill amortization of approximately $258,000.                                    

    <F7>  To record interest expense related to the notes payable                                       
          discussed above of approximately $131,000.                                                    

    <F8>  To reflect the impact of the acquisition on the Company's                                     
          basic and diluted earnings per share computations.                                            
</FN>                                                                                                   

                See Notes to Pro Forma Combined Financial Statements
               (Unaudited)
                - 19 -


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                                                        [Enlarge/Download Table]
                                   HADRON, INC.                                                      
                PRO FORMA COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)                              
                       FOR THE FISCAL YEAR ENDED JUNE 30, 1998                                       

                                                Historical Results for                               
                                                  Fiscal Year ended                                  
                                                    June 30, 1998                                    
                                                                                      Pro Forma      
                                          Hadron          ATI       Adjustments       Combined       
                                       -----------   -----------   --------------   ------------     
                                                                                                     
Revenues                               $21,133,900   $10,953,237   $                 $32,087,137     
                                       -----------   -----------   --------------   ------------     
Operating costs and expenses:                                                                        
  Costs of revenue                      18,118,100    10,027,897                      28,145,997     
  Selling, general and administrative    2,127,500       825,502       343,899 <F6>    3,296,901     
                                       -----------   -----------   --------------   ------------     
Total operating costs and expenses      20,245,600    10,853,399       343,899        31,442,898     
                                       -----------   -----------   --------------   ------------     
Operating income (loss)                    888,300        99,838      (343,899)          644,239     
                                       -----------   -----------   --------------   ------------     
Other income (expense)                     (69,200)       12,537      (174,235)<F7>     (230,898)    
                                       -----------   -----------   --------------   ------------     
Income (loss) before income taxes          819,100       112,375      (518,134)          413,341     

Provision for income taxes                 (58,500)      (53,381)                       (111,881)    
                                       -----------   -----------   --------------   ------------     

Net income (loss)                      $   760,600   $    58,994   $  (518,134)      $   301,460     
                                       ===========   ===========   ==============   ============     

Per share data:                                                                                      

Net income per share                                                                                 
  Basic                                $       .45                                   $       .18 <F8>
                                       ===========                                  ============     
  Diluted                              $       .26                                   $       .11 <F8>
                                       ===========                                  ============     
Weighted average number of shares                                                                    
  Basic                                  1,686,808                                    1,686,808 <F8> 
                                       ===========                                  ============     
  Diluted                                2,990,897                                    3,434,381 <F8> 
                                       ===========                                  ============     
<FN>                                                                                                 
    <F6>  To record goodwill amortization of approximately $344,000.                                 

    <F7>  To record interest expense related to the notes payable                                    
          discussed above of approximately $174,000.                                                 

    <F8>  To reflect the impact of the acquisition on the Company's                                  
          basic and diluted earnings per share computations.                                         

</FN>                                                                                                

                See Notes to Pro Forma Combined Financial Statements
                     (Unaudited)
                    - 20 -


8-K/A27th Page of 29TOC1stPreviousNext↓BottomJust 27th

NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (UNAUDITED)          
MARCH 31, 1999 AND JUNE 30, 1998                

1.  Acquisition of Avenue Technologies, Inc.                                    

Effective   May  12,  1999,  the  Company  acquired   Avenue          
Technologies,  Inc.  ("ATI"), a privately-held  defense  analysis               
firm based in Alexandria, VA, for approximately $2,500,000.   ATI               
will  operate  as a wholly-owned subsidiary.  The purchase  price               
was  satisfied with a payment of $27,000 and the issuance of  90-               
day  notes for approximately $1,476,000, interest payable at  the               
prime  rate (7.75% at March 31, 1999),  and  3-year  $997,000                   
convertible  notes,  interest payable  at  6%.  The 3-year notes                
are convertible  into  444,000 shares of the Company's Common Stock             
at $2.25 per share.  The Company incurred financial, legal and                  
accounting   costs   associated  with   the   ATI   purchase   of               
approximately  $129,000, of which $69,000 was paid in cash at closing.          
Included in these  fees  was  a  $25,000 payment  made  to  a                   
Hadron employee for  advisory  services  in connection with the                 
purchase.                                                                       

(A)  Represents cash payments of approximately $96,000 related to               
the acquisition, including payments to ATI shareholders' and          
financial advisors.                                                   

(B)  To  record  goodwill of approximately $2,407,000  associated               
with the purchase, representing the total cost of acquisition         
of $2,629,000 in excess of the fair value of assets acquired of       
$1,555,000 and liabilities assumed of $1,333,000.                     

(C)  To record issuance of notes payable, including 90-day notes                
for approximately $1,476,000 and 3-year $997,000 notes.               

(D)  To  record  legal  and financial costs payable of  approximately           
$60,000 associated with the acquisition.                              

(E)  To  eliminate  ATI's shareholders' equity  of  approximately               
$222,000.                                                             

(F)  To  record  goodwill amortization of approximately  $258,000  and          
$344,000 for the nine and twelve months, respectively, based on       
an amortization period of seven years.                                

(G)  To  record  interest expense related to  the  notes  payable               
issued in connection with the acquisition of approximately            
$131,000 and $174,000 for the nine and twelve months, respectively.   

(H)  To  reflect  the impact of the acquisition on the  Company's               
basic  and  diluted  earnings  per  share  computations,  as          
reflected below:                                                      


8-K/A28th Page of 29TOC1stPreviousNext↓BottomJust 28th

2.  Earnings per Share                                                          

The following table sets forth the computation of basic and         
diluted earnings per share:                                                     

                                                                [Download Table]

                                   Pro Forma Combined     Pro Forma Combined
                                    Nine Months ended     Fiscal Year Ended 
                                      March 31, 1999        June 30, 1998   
                                    -----------------     ------------------
                                                                            
Numerator: Net income (loss)          $ (426,900)           $ 301,500       

Effect of dilutive securities:                                              
 Convertible debt                                              71,900       
                                    -----------------     ------------------
Numerator for diluted earnings                                              
 per share - income available                                               
 to common shareholders after                                               
 assumed conversion                  $  (426,900)          $  373,400       
                                    =================     ==================
Denominator:                                                                
 Denominator for basic                                                      
  earnings per share:                                                       
  weighted average shares                                                   
  outstanding                          1,774,225            1,686,808       

 Effect of dilutive securities:                                             
  Warrants                                                    855,064       
  Employee stock options                                      249,025       
  Convertible debt                                            643,484       
                                    -----------------     ------------------
Denominator for diluted                                                     
 earnings per share                    1,774,225            3,434,381       
                                    =================     ==================
Basic earnings per share            $       (.24)         $       .18       
                                    =================     ==================
Diluted earnings per share          $       (.24)         $       .11       
                                    =================     ==================


8-K/ALast Page of 29TOC1stPreviousNext↓BottomJust 29th

SIGNATURE           

  Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

  Hadron, Inc.

Date: July 26, 1999                By:   /S/ C.W. GILLULY                       
                            --------------------------------
                C.W. Gilluly
                                Chairman and Chief Executive
           Officer

Dates Referenced Herein   and   Documents Incorporated by Reference

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