SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A1
CURRENT REPORT
Pursuant to Section 13 and 15(d) of the
Securities and Exchange Act of 1934
Date of Report: April 19, 1999
(Date of earliest event reported): February 18, 1999
USASURANCE GROUP, INC.
----------------------
(Exact name of Registrant as specified in Charter)
Colorado 0-26920 84-1298212
-------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
7345 E. Peakview Ave.
Englewood, Colorado 80111
------------------- -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (303) 689-0123.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The audited financial statements of the Assets and Liabilities acquired
by the Company from 2Xtreme Performance Group, Inc. in February 1999, along with
a pro forma financial statement, is included herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this amendment to its report to be signed on its
behalf by the undersigned hereunto duly authorized.
USASURANCE GROUP, INC.
By: s/Peter L. Hirsch
---------------------
Peter L. Hirsch,
President
Dated: April 28, 1999
<PAGE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
INDEPENDENT AUDITOR'S REPORT...............................................1
FINANCIAL STATEMENTS
Balance Sheet.....................................................2
Statements of Operations..........................................3
Statement of Changes in Members' (Deficit) Capital................4
Statements of Cash Flows..........................................5
Notes to the Financial Statements.................................6
<PAGE>
INDEPENDENT AUDITOR'S REPORT
April 9, 1999
Board of Directors
2Xtreme Performance International, LLC
Dallas, Texas
We have audited the accompanying balance sheet of 2Xtreme Performance
International, LLC as of December 31, 1998, and the related statements of
operations, changes in members' (deficit) capital and cash flows for the years
ended December 31, 1998 and 1997. 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 2Xtreme Performance
International, LLC as of December 31, 1998, and the results of its operations
and its cash flows for the years ended December 31, 1998 and 1997, in conformity
with generally accepted accounting principles.
s/Hein + Associates LLP
Certified Public Accountants
1
<PAGE>
<TABLE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
BALANCE SHEET
DECEMBER 31, 1998
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 174,162
Restricted cash 1,148,513
Accounts receivable:
Trade, no allowance for doubtful accounts considered necessary 749,765
Related parties 352,422
Inventory 1,590,870
Prepaid expenses 246,396
----------
Total current assets 4,262,128
PROPERTY AND EQUIPMENT, net 1,567,464
DEPOSITS 83,687
----------
Total assets $5,913,279
==========
LIABILITIES AND MEMBERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of capital leases and notes payable $ 81,653
Accounts payable 1,950,026
Returns and disputed items payable 808,122
Payroll taxes payable 67,822
Customer deposits 724,997
Accrued salaries and commissions 549,024
Sales taxes payable 1,152,620
----------
Total current liabilities 5,334,264
CAPITAL LEASES AND NOTES PAYABLE, less current portion 306,125
COMMITMENTS AND CONTINGENCIES (Notes 5 and 8)
MEMBERS' CAPITAL 272,890
----------
Total liabilities and members' capital $5,913,279
==========
</TABLE>
2
<PAGE>
<TABLE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
STATEMENTS OF OPERATIONS
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
SALES, net $ 41,125,279 $ 29,468,204
COST OF SALES 12,971,200 8,973,719
------------ -------------
GROSS PROFIT 28,154,079 20,494,485
OPERATING EXPENSES:
Selling expenses 4,565,663 3,597,321
Advertising and promotion 7,720,676 6,173,211
Salaries and subcontract labor 8,418,364 6,554,699
Depreciation 255,776 128,103
Other general and administrative 5,243,564 3,614,114
------------ ------------
Total operating expenses 26,204,043 20,067,448
------------ ------------
OPERATING INCOME 1,950,036 427,037
OTHER INCOME (EXPENSES):
Interest expense, net (126,353) (17,675)
Penalties (301,134) (58,912)
Gain on sale of assets 27,807 --
Miscellaneous income 15,835 28,310
------------ ------------
Total other (expense) (383,845) (48,277)
============ ============
NET INCOME $ 1,566,191 $ 378,760
============ ============
</TABLE>
3
<PAGE>
<TABLE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
STATEMENTS OF CHANGES IN MEMBERS' (DEFICIT) CAPITAL
FOR THE PERIOD FROM JANUARY 1, 1997 TO DECEMBER 31, 1998
<S> <C>
MEMBERS' DEFICIT, January 1, 1997 $ (111,089)
Net income for the year 378,760
Capital withdrawals (766,072)
-----------
MEMBERS' DEFICIT, December 31, 1997 (498,401)
Net income for the year 1,566,191
Capital contributions 35,000
Capital withdrawals (829,900)
-----------
MEMBERS' CAPITAL, December 31, 1998 $ 272,890
===========
</TABLE>
4
<PAGE>
<TABLE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
STATEMENTS OF CASH FLOWS
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,566,191 $ 378,760
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 255,776 128,103
Gain on sale of assets (27,807) -
(Increase) decrease in:
Restricted cash (469,014) (573,104)
Inventory (413,175) (817,135)
Accounts receivable (613,013) (364,765)
Prepaid expenses (180,854) 254,612
Deposits (63,282) (20,405)
Increase (decrease) in:
Accounts payable (115,221) 1,309,019
Returns and disputed items payable 271,079 361,865
Accrued salaries and commissions (252,988) 694,182
Customer deposits 575,476 52,316
Payroll taxes payable 52,442 (121,732)
Sales taxes payable 683,732 110,838
----------- -----------
Net cash provided by operating activities 1,269,342 1,392,554
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment 86,389 -
Additions to property and equipment (856,742) (603,578)
----------- -----------
Net cash used by investing activities (770,353) (603,578)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to notes payable 276,016 -
Net change in note payable - member -- (350,069)
Contributions by members 35,000 -
Withdrawals by members (829,900) (766,072)
Principal payments on capital leases (67,320) (55,860)
----------- -----------
Net cash used by financing activities (586,204 (1,172,001)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (138,715) (383,025)
CASH AND CASH EQUIVALENTS, beginning of year 312,877 695,902
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 174,162 $ 312,877
=========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 126,353 $ 24,921
=========== ===========
Equipment purchased with a note payable $ 28,386 $ 110,914
=========== ===========
Vehicle traded-in on new vehicle $ 58,571 $ -
=========== ===========
</TABLE>
5
<PAGE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
2Xtreme Performance International, LLC (the Company) was organized as a
Texas Limited Liability Company on December 20, 1995. The Company's period
of duration is through December 31, 2005. The Company is engaged in
multi-level marketing of vitamins, health products and nutritional
supplements to numerous independent resellers throughout the United States.
Also, in 1998 the Company began selling computers and credit card merchant
accounts to its multi-level marketing customers.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash Equivalents
The Company considers all cash on hand and in banks, certificates of
deposit and other highly liquid debt instruments with a maturity of three
months or less at the date of purchase to be cash equivalents.
Restricted Cash and Returns and Disputed Items Payable
At December 31, 1998, $1,148,513 was held in restricted cash accounts,
predominantly by the Company, on behalf of credit card companies for
potential returns or credit card disputes. These funds will be available to
the Company without restrictions six months after termination of any of the
credit card company agreements. As of December 31, 1998 and 1997, the
Company has included in current liabilities $808,122 and $537,043,
respectively as estimates for returns and disputed items.
Inventory
Inventory consists primarily of purchased vitamins and health products held
for resale and is valued at the lower of cost or market. Cost is determined
by the first-in, first-out method. The Company does not carry an inventory
of the computers it sells, because the computers are drop shipped directly
from the manufacturer.
Property and Equipment
Property and equipment is recorded at cost and depreciated over the
estimated useful lives, generally three to ten years (or the lease term, if
shorter), of the individual assets, using the straight-line method.
Expenditures for repairs and maintenance are charged to expense as
incurred. Renewals and betterments which extend the economic life of the
respective asset are capitalized. Gains and losses from disposition of
property and equipment are recognized as incurred and are included in
operations.
The Company reviews long-lived assets, such as property and equipment, for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. This review had no
impact on the financial statements of the Company for the years ended
December 31, 1998 and 1997.
6
<PAGE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
NOTES TO FINANCIAL STATEMENTS
Income Taxes
The Company is a limited liability company, which is not required to pay
corporate federal income taxes. The members of a limited liability company
are taxed individually on their proportionate share of the Company's
taxable income. Therefore, no provision or liability for federal income
taxes has been included in these financial statements. The basis of the
Company's assets and liabilities are approximately the same for financial
statement and federal income tax reporting purposes except for property and
equipment for which the basis for financial statement purposes exceeds the
tax basis by approximately $150,000.
Revenue Recognition
Revenue for product sales is recognized at the time of shipment to the
Company's customers. Customers have the right to return products based upon
certain company guidelines and the laws of the respective state in which
the customer resides. Revenue is recorded net of estimated returns and
disputed items.
Commissions
Commissions are earned on product and seminar sales based upon a graduated
commissions pay scale and are paid to the Company's internal marketing
department, seminar speakers and independent distributors. The Company
charges commissions to expense in the period that the related sale occurs.
Advertising
The Company expenses advertising costs as incurred.
2. PROPERTY AND EQUIPMENT AND CAPITAL LEASES
A summary of property and equipment as of December 31, 1998 is as follows:
Computer equipment $356,714
Office equipment 118,518
Seminar equipment 34,235
Production equipment 160,301
Computer software 184,626
Furniture and fixtures 311,288
Leasehold improvements 340,424
Motor vehicles 451,226
---------
1,957,332
Accumulated depreciation
and amortization (389,868)
---------
1,567,464
Depreciation and amortization expense of $255,776 and $128,103 was recorded
for the years ended December 31, 1998 and 1997, respectively.
The Company leases certain equipment and vehicles under agreements
classified as capital leases. Equipment and vehicles under these leases
have a cost basis of $258,474 and accumulated amortization of $71,308 at
December 31, 1998. These amounts are included in the above schedule. The
following is a schedule of future minimum lease payments under capital
leases at December 31, 1998:
7
<PAGE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, Amount
1999 $ 61,293
2000 20,246
2001 15,631
2002 10,412
---------
Future minimum lease payments 107,691
Less amount representing interest (14,503)
---------
Present value of net minimum lease payments 93,188
Less current portion (53,371)
---------
$ 39,817
=========
3. NOTES PAYABLE
The Company has a note payable to a bank with a balance of $251,916 at
December 31, 1998. The note is due in monthly installments of $2,612, which
includes principal and interest at 9.1% through June 2013 and is
collateralized by a recreational vehicle. The Company also has two other
notes payable with a total balance of $42,674 at December 31, 1998 that are
collateralized by vehicles and equipment.
Aggregate maturities required on long-term debt at December 31, 1998 are as
follows:
Years Ending December 31,
1999 $ 28,282
2000 21,193
2001 17,792
2002 16,754
2003 15,388
Thereafter 195,181
---------
294,590
Less current portion (28,282)
---------
$ 266,308
=========
4. RELATED PARTY TRANSACTIONS
Since February 1998 the Company has provided services as described below
for an affiliated company (DSI), owned by a trust affiliated with the
controlling member. DSI markets self-help and nutritional product kits
through the use of infomercials. The Company advances operating funds to
DSI and provides media buying and fulfillment services on behalf of DSI.
Additionally, the Company purchases the names of potential distributor
leads from DSI. The Company believes that the services charged to DSI and
the leads purchased from DSI approximate the costs that would be charged by
third parties. For the year ended December 31, 1998 the Company charged DSI
$1,186,716 for services rendered on behalf of DSI and paid DSI $2,788,800
for the purchase of leads. As of December 31, 1998, the Company has a
non-interest bearing, unsecured demand receivable from DSI of $352,422.
8
<PAGE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
NOTES TO FINANCIAL STATEMENTS
The Company had a non-interest bearing, unsecured demand receivable from an
employee in the amount of $100,000 at December 31, 1997. This amount was
repaid in 1998.
5. COMMITMENTS AND CONTINGENCIES
The Company conducts its operations from several facilities that are leased
under noncancellable leases that expire over the next three years. The
Company also leases vehicles, office and computer equipment, and warehouse
equipment under operating leases that also expire over the next three
years. The Company incurred rent expense of $444,276 and $188,514, during
the years ended December 31, 1998 and 1997, respectively.
The following is a schedule of future minimum rental payments required
under the above operating leases as of December 31, 1998:
Year Ending December 31, Amount
1999 $ 763,025
2000 533,913
2001 25,497
----------
$1,322,435
==========
The Company has been served letters of Assurance of Voluntary Compliance
(AVC) from the states of Texas and Michigan proposing to settle claims
against the Company for alleged violations of the respective states' trade
laws. The state of Michigan also issued a Cease and Desist Order, in 1999,
which prohibits the Company from marketing in Michigan. The Texas AVC
imposes potential fines of up to $150,000 plus unspecified restitution
costs. The Michigan AVC imposes potential fines of $25,000 per each
violation of the state's cease and desist order filed against the Company.
The Company intends to negotiate settlements in both cases. The Company has
not recorded a liability for either matter, due to the uncertainty of the
amount of the Company's ultimate costs, if any.
The Company is involved in other litigation in the ordinary course of its
business and operations. The Company does not expect the outcome of any of
this litigation to have a material impact on its financial position or
results of operations.
6. CONCENTRATION OF SUPPLY
During 1998, the Company purchased approximately 73% of its materials from
five suppliers. During 1997, the Company purchased approximately 33% of its
materials from four suppliers. In the event of a loss of a significant
supplier, management believes the Company could easily locate a
replacement, but the new supplier would require four to six weeks before it
could begin to deliver product.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK The
Company's financial instruments are cash, restricted cash, amounts
receivable and payable. Management believes the fair values of these
instruments approximate the carrying values, due to the short-term nature
of the instruments.
The Company occasionally maintains cash deposits in excess of FDIC
insurance limits. The Company had cash and restricted cash accounts in
several banks in excess of such limits totaling $567,140 and $609,773
December 31, 1998 and 1997, respectively.
Financial instruments that subject the Company to credit risk consist
principally of trade receivables and restricted cash. These amounts are
primarily due from large credit card processing companies and a leasing
company. The Company generally receives payments on the receivables within
a short period after submission and an allowance is effectively provided
for the restricted cash as described in Note 1. As such, management
believes that an allowance for doubtful accounts is not considered
necessary at
9
<PAGE>
2XTREME PERFORMANCE INTERNATIONAL, LLC
NOTES TO FINANCIAL STATEMENTS
December 31, 1998.
8. YEAR 2000
The Company and/or other entities with which the Company transacts business
could be adversely affected by the year 2000 problem, which is the result
of computer programs being written using two digits rather than four to
define the applicable year. Any programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a major system failure or miscalculations. The Company
has begun to take actions it believes are reasonably designed to address
the year 2000 problem with respect to computer systems in use, but has not
fully determined the impact on their future operations or the costs they
may incur to remediate the problem. There can be no assurance the actions
taken will be sufficient to avoid any adverse impacts to the Company.
9. SUBSEQUENT EVENTS
On February 16, 1999, 100% of 2Xtreme's ownership interests were acquired
for $4,500,000 by Akahi Corp., a wholly-owned subsidiary of USAsurance
Group, Inc., a Colorado corporation. The acquisition was accounted for as a
purchase consisting of $1,000,000 in cash and $3,500,000 of promissory
notes payable to the previous owners.
In conjunction with the acquisition described above, the Company changed
its name to Akahi.com. As a result of the change, inventory with the
2Xtreme logo or references to the previous owner consisting primarily of
forms, brochures, apparel, and other marketing tools valued at
approximately $295,000 at December 31, 1998 became obsolete and will be
written off during the first quarter of 1999. The inventory value at the
date the name change occurred was approximately $281,000.
On February 16, 1999, the Company entered into an exclusive marketing
agreement with DSI. Under the agreement, the Company obtained the right to
use DSI's infomercial for a period of 90 days. The terms of the agreement
require the Company to pay for all media costs associated with airing the
infomercial, all call center costs, and all product fulfillment, shipping,
and warehousing costs. In addition, the Company is required to pay DSI a
commission of $40 per lead that is generated by the infomercial during the
90 day period.
10
<PAGE>
USASURANCE GROUP, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On February 16, 1999, Akahi Corp., a wholly-owned subsidiary of USAsurance
Group, Inc., (the Company) acquired 100% of the ownership interest in 2Xtreme
Performance International (2Xtreme) for $4,500,000 consisting of $1,000,000 in
cash and promissory notes totaling $3,500,000 to the previous owners. To fund
the $1,000,000 cash payment for the acquisition, the Company executed a $935,000
one year note payable and issued 650,000 shares of its common stock at $.10 per
share. The following unaudited pro forma financial statements have been prepared
to demonstrate the effect on the Company's results of operations as if 2Xtreme
had been acquired at the beginning of the respective periods covered by the
statements of operations. 2Xtreme operates on a December 31 year end. In order
to conform with the Company's fiscal year end of May 31, the statements of
operations for the 12 months ended June 30, 1998 and for the nine months ended
February 28, 1999 were prepared using the same basis of accounting as the
historical financial information provided herein. 2Xtreme's statement of
operations for the 12 months ended June 30, 1998 was prepared by aggregating the
6 month period ended December 31, 1997 and the 6 month period ended June 30,
1998. 2Xtreme's statement of operations for the nine months ended February 28,
1999 was prepared by aggregating the 7 month period ended December 31, 1998 and
the 2 month period ended February 28, 1999. The pro forma financial statements
should be read in conjunction with the historical financial information of
2Xtreme included herein and with the financial statements of the Company as
filed in their Forms 10-QSB and 10-KSB. The pro forma financial statements
should not be construed as a reflection of the results of operations that
actually would have occurred if the acquisition would have occurred on the above
dates.
F-1
<PAGE>
<TABLE>
USASURANCE GROUP, INC. AND 2XTREME PERFORMANCE INTERNATIONAL, LLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED FEBRUARY 28, 1999
<CAPTION>
2Xtreme USAsurance Pro Forma
Performance Group, Inc. Adjustments Pro Forma
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 31,775,743 $ - - $ 31,775,743
COST OF SALES 9,123,289 - - 9,123,289
------------- ------------- --------------- -------------
GROSS PROFIT 22,652,454 - - 22,652,454
EXPENSES:
Selling expenses 3,641,485 - - 3,641,485
Advertising and promotion 3,712,575 - - 3,712,575
Salaries and Subcontract labor 6,266,389 - - 6,266,389
Depreciation and amortization 187,598 - 313,093 (1) 500,691
Other general and administrative 7,745,967 31,762 7,777,729
------------- ------------- --------------- -------------
Total operating expenses 21,554,014 31,762 313,093 21,898,869
------------- ------------- --------------- -------------
OPERATING INCOME (LOSS) 1,098,440 (31,762) (313,093) 753,585
OTHER INCOME (EXPENSE)
Interest expense, net (130,620) (10,613) (727,069) (2) (868,302)
Penalties (269,353) - - (269,353)
Miscellaneous income 113,740 - - 113,740
------------- ------------- --------------- -------------
Total other expenses (286,233) (10,613) (727,069) (1,023,915)
------------- ------------- --------------- -------------
NET INCOME (LOSS) $ 812,207 $ (42,375) $ (1,040,162) $ (270,330)
============= ============= =============== =============
EARNINGS PER SHARE (0.03) (0.17)
============= =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,601,714 1,601,714
============= =============
See accompanying notes to pro forma financial statements.
</TABLE>
F-2
<PAGE>
<TABLE>
USASURANCE GROUP, INC. AND 2XTREME PERFORMANCE INTERNATIONAL, LLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
FOR THE TWELVE MONTHS ENDED
JUNE 30, 1998 MAY 31, 1998
------------- ------------
Pro Forma
2Xtreme USAsurance Pro Forma May 31,
Performance Group, Inc. Adjustments 1998
----------- ----------- ----------- ----
<S> <C> <C> <C> <C>
REVENUES $ 36,311,679 $ - - $ 36,311,679
COST OF SALES 11,830,219 - - 11,830,219
------------ ------------ ------------ ------------
GROSS PROFIT 24,481,460 - - 24,481,460
EXPENSES:
Selling expenses 4,199,613 - - 4,199,613
Advertising and promotion 6,838,574 - - 6,838,574
Salaries and subcontract labor 8,018,158 - - 8,018,158
Depreciation and amortization 178,216 - 417,458 (1) 595,674
Other general and administrative 4,624,724 94,490 - 4,719,214
------------ ------------ ------------ ------------
Total operating expenses 23,859,285 94,490 417,458 24,371,233
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) 622,175 (94,490) (417,458) 110,227
OTHER INCOME (EXPENSE)
Interest expense, net (14,064) (12,379) (969,425)(2) (995,868)
Penalties (115,241) - - (115,241)
Miscellaneous income 55,289 2,123 - 57,412
------------ ------------ ------------ ------------
Total other expenses (74,016) (10,256) (969,425) (1,053,697)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 548,159 $ (104,746) $ (1,386,883) $ (943,470)
============ ============ ============ ============
EARNINGS PER SHARE (0.07) (0.60)
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,566,000 1,566,000
============ ============
See accompanying notes to pro forma financial statements.
</TABLE>
F-3
<PAGE>
USASURANCE GROUP, INC. AND 2XTREME PERFORMANCE INTERNATIONAL, LLC
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(1) Adjustment to record amortization of the goodwill resulting from the
acquisition over a period of 10 years as if 2Xtreme had been acquired as
of the beginning of the respective periods.
(2) Adjustment to (a) record additional interest expense at 7.75% (prime
rate) on the $3,500,000 promissory notes and at 10.5% on the $935,000
promissory note, and (b) to amortize the discount on the $935,000
promissory note, as if 2Xtreme had been acquired at the beginning of the
respective periods.
F-4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,322,675
<SECURITIES> 0
<RECEIVABLES> 1,102,187
<ALLOWANCES> 0
<INVENTORY> 1,590,870
<CURRENT-ASSETS> 4,262,128
<PP&E> 1,567,464
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,913,279
<CURRENT-LIABILITIES> 5,334,264
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 272,890
<TOTAL-LIABILITY-AND-EQUITY> 5,913,279
<SALES> 41,125,279
<TOTAL-REVENUES> 41,125,279
<CGS> 12,971,200
<TOTAL-COSTS> 12,971,200
<OTHER-EXPENSES> 1,950,036
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (126,353)
<INCOME-PRETAX> 1,566,191
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,566,191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,566,191
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
