SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 8-K/A
AMENDMENT NO. 2
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
December 17, 1998 (September 2, 1998)
-----------------
Unidigital Inc.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-27664 13-3856672
- --------------------------------------------------------------------------------
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
229 West 28th Street, New York, New York 10001
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (zip code)
(212) 244-7820
-------------------------------
(Registrant's telephone number,
including area code)
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
As reported in the Current Report on Form 8-K dated September 14, 1998
filed by Unidigital Inc. (the "Company"), on September 2, 1998, the Company
consummated the acquisition of all of the issued and outstanding capital stock
of Mega Art Corp. ("Mega Art") located in New York City. As a result of the
acquisition, Mega Art became a wholly-owned subsidiary of the Company.
On November 16, 1998, the Company filed Amendment No. 1 on Form 8-K/A to
file the financial statements and related pro forma financial statements
required pursuant to Item 7 of Form 8-K with respect to such transaction.
The Company is filing this Amendment No. 2 on Form 8-K/A to file amended
pro forma financial statements to reflect the correction of the impact of an
extraordinary loss related to the refinancing of certain of the Company's debt
in March 1998. The impact of such correction was to reduce the Company's net
income for the nine months ended May 31, 1998 by approximately $167,000.
<PAGE>
(a) Financial Information of Business Acquired.
MEGA ART CORP.
FINANCIAL STATEMENTS
For the Years Ended
July 31, 1998, 1997 and 1996
(With Independent Auditors' Report)
<PAGE>
MEGA ART CORP.
TABLE OF CONTENTS
For the Years Ended July 31, 1998, 1997 and 1996
Page
----
Independent Auditors' Report............................................1
Financial Statements
Balance Sheets.......................................................2
Statements of Operations.............................................3
Statements of Stockholders' Equity...................................4
Statements of Cash Flows.............................................5
Notes to Financial Statements........................................7
Supplementary Information
Schedules of Selling, General and
Administrative Expenses...........................................12
<PAGE>
Independent Auditors' Report
To the Stockholders
Mega Art Corp.:
We have audited the accompanying balance sheets of Mega Art Corp. as of
July 31, 1998, 1997 and 1996, and the related statements of operations,
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 audit.
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 Mega Art Corp. as of July
31, 1998, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying supplementary
schedules of selling, general and administrative expenses for the years ended
July 31, 1998, 1997 and 1996 are presented for purposes of additional analysis
and are not a required part of the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
August 25, 1998, except for the years ended July 1997 and 1996 as to which the
date is November 11, 1998
<PAGE>
<TABLE>
<CAPTION>
MEGA ART CORP.
BALANCE SHEETS
July 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Assets
Current
Cash and cash equivalents ...................... $ 29,907 $ 51,769 $ 125,055
Marketable securities .......................... 104,421
Accounts receivable ............................ 1,540,870 363,323 211,131
Prepaid expenses ............................... 89,587
Prepaid corporate income taxes ................. 8,000
Loans and exchanges ............................ 2,446
Advances to suppliers .......................... 35,000
----------- ----------- -----------
Total current assets ........................ 1,705,810 519,513 336,186
Property and equipment at cost, less
accumulated depreciation and
amortization of $219,010, $4,258
and $156,516, respectively ..................... 979,336 460,029 620,030
Security deposits ................................. 25,191 10,688
----------- ----------- -----------
Total assets ................................ $ 2,710,337 $ 990,230 $ 956,216
=========== =========== ===========
Liabilities
Current
Current portion of long-term debt .............. $ 99,846 $ -- $ --
Loan payable - equipment ....................... 400,000
Accounts payable and accrued expenses .......... 765,196 31,687 725,290
Payroll and sales taxes payable ................ 5,405 3,691 13,180
Corporate income taxes payable ................. 21,000 9,000
Deferred income ................................ 91,667
Deferred taxes ................................. 379,000 117,000 70,000
----------- ----------- -----------
Total current liabilities ................... 1,362,114 561,378 808,470
Long-term debt, net of current portion ............ 477,315
Loan payable - stockholder ........................ 322,871 240,641 46,302
----------- ----------- -----------
Total liabilities ........................... 2,162,300 802,019 854,772
----------- ----------- -----------
Stockholders' equity
Common stock, no par value, 100 shares
authorized, issued and outstanding ............. 2,000 2,000 2,000
Retained earnings ................................. 546,037 206,790 99,444
Unrealized loss on securities available
for sale ....................................... (20,579)
----------- ----------- -----------
Total stockholders' equity .................. 548,037 188,211 101,444
----------- ----------- -----------
Total liabilities and stockholders' equity .. $ 2,710,337 $ 990,230 $ 956,216
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEGA ART CORP.
STATEMENTS OF OPERATIONS
For the Years Ended July 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenue
Sales ................................... $ 4,516,340 $ 1,006,199 $ 503,928
Cost of goods sold ...................... 2,202,574 553,840 122,161
----------- ----------- -----------
Gross profit ......................... 2,313,766 452,359 381,767
----------- ----------- -----------
Expenses
Selling, general and administrative
expenses ............................. 1,698,570 601,740 251,986
Depreciation and amortization ........... 214,752 1,742 155,008
----------- ----------- -----------
Total expenses ....................... 1,913,322 603,482 406,994
----------- ----------- -----------
Income (loss) from operations ..... 400,444 (151,123) (25,227)
----------- ----------- -----------
Other income (expense)
Consulting income ....................... 225,000 205,062 227,718
Gain on sale of marketable securities ... 103,660
Gain on sale of equipment ............... 124,000
Interest income ......................... 5,326
Interest expense - stockholder .......... (10,992)
Interest expense ........................ (14,853)
----------- ----------- -----------
Total other income ................... 308,141 329,062 227,718
----------- ----------- -----------
Income before provision for
income taxes .................. 708,585 177,939 202,491
----------- ----------- -----------
Provision for income taxes
Current ................................. 33,000 14,593 3,508
Deferred ................................ 253,000 56,000 70,000
----------- ----------- -----------
Total provision for income taxes ..... 286,000 70,593 73,508
----------- ----------- -----------
Net income .................... $ 422,585 $ 107,346 $ 128,983
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEGA ART CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended July 31, 1998, 1997 and 1996
Common Stock
-----------------------
(Accumulated Unrealized
Number deficit) loss on Total
of Retained marketable stockholders'
shares Amount earnings securities equity (deficit)
------ ------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Balance, July 31, 1995 ....... 100 $ 2,000 $ (29,539) $ -- $ (27,539)
Net income for the year
ended July 31, 1996 ..... 128,983 128,983
--------- --------- --------- -------- ---------
Balance, July 31, 1996 ....... 100 2,000 99,444 101,444
Adjustment for
unrealized loss on
securities available-
for-sale ................ (20,579) (20,579)
Net income for the year
ended July 31, 1997 ..... 107,346 107,346
--------- --------- --------- -------- ---------
Balance, July 31, 1997 ....... 100 2,000 206,790 (20,579) 188,211
Adjustment for
unrealized loss on
securities available-
for-sale ................ 20,579 20,579
Prior period adjustment
for changes in accounts
receivable and accounts
payable (See Note 9) .... (83,338) (83,338)
Net income for the year
ended July 31, 1998 ..... 422,585 422,585
--------- --------- --------- -------- ---------
Balance, July 31, 1998 ....... 100 $ 2,000 $ 546,037 $ -- $ 548,037
========= ========= ========= ======== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEGA ART CORP.
STATEMENTS OF CASH FLOWS
For the Years Ended July 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ............................. $ 422,585 $ 107,346 $ 128,983
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization .... 214,752 1,742 155,008
Prior period adjustment .......... (83,338)
Realized gain on sale of
marketable securities ........ (103,660)
Gain on sale of property and
equipment .................... (124,000)
Bad debts ........................ 7,877
(Increase) decrease in:
Accounts receivable ................. (1,185,424) (152,192) (211,131)
Prepaid expenses .................... (89,587)
Prepaid corporate income taxes ...... (8,000)
Loans and exchanges ................. (2,446)
Advances to suppliers ............... (35,000)
Security deposits ................... (14,503) (10,688)
Increase (decrease) in:
Accounts payable and
accrued expenses ................. 733,509 (693,604) 725,112
Payroll and sales taxes payable ..... 1,714 (9,489) 13,180
Corporate income taxes payable ...... 12,000 9,000
Deferred income ..................... 91,667
Deferred taxes ...................... 262,000 47,000 70,000
----------- ----------- -----------
Net cash provided by (used in)
operating activities ................ 224,146 (824,885) 881,152
----------- ----------- -----------
Balance carried forward .................... 224,146 (824,885) 881,152
----------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEGA ART CORP.
STATEMENTS OF CASH FLOWS (continued)
For the Years Ended July 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance brought forward ............................... $ 224,146 $(824,885) $ 881,152
--------- --------- ---------
Cash flows from investing activities:
Purchase of marketable securities ................. (125,000)
Proceeds from sale of marketable
securities ..................................... 228,660
Purchase of property and equipment ................ (734,059) (457,740) (775,037)
Proceeds from sale of equipment ................... 740,000
--------- --------- ---------
Net cash provided by (used in)
investing activities ........................ (505,399) 157,260 (775,037)
--------- --------- ---------
Cash flows from financing activities:
Principal repayments on loan payable - equipment .. (22,839)
Proceeds from stockholder loan .................... 82,230 194,339 18,940
Repayment of loan payable - equipment ............. (400,000)
Proceeds from equipment loan ...................... 250,000 400,000
Increase in obligation under a capital
lease .......................................... 350,000
--------- --------- ---------
Net cash provided by financing
activities .................................. 259,391 594,339 18,940
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents .................................. (21,862) (73,286) 125,055
Cash and cash equivalents, beginning
of year ........................................... 51,769 125,055
--------- --------- ---------
Cash and cash equivalents, end of year ................ $ 29,907 $ 51,769 $ 125,055
========= ========= =========
Supplemental disclosure:
Interest paid ..................................... $ 25,845 $ -- $ --
Income taxes paid ................................. $ 20,000 $ 14,722 $ 3,508
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
MEGA ART CORP.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended July 31, 1998, 1997 and 1996
1. Business Activity
Mega Art Corp., (the "Company"), was incorporated on November 30, 1994,
under the laws of the State of New York. The Company is located in New York
City, and its principal activity is the development and production of media
display advertising for a variety of companies locally and throughout the world.
2. Summary of Significant Accounting Policies
The major accounting and reporting policies which have been followed in
preparing the accompanying financial statements are set forth below:
Concentration of Credit Risk
----------------------------
The Company maintains cash in bank deposit accounts at high credit quality
financial institutions. The balances, at times, may exceed federally insured
limits. At July 31,1998, the Company exceeded the insured limit by $589,731.
Accounts Receivable
-------------------
The Company periodically reviews accounts receivable. When accounts are
determined to be uncollectible, they are charged to operations. For the years
ended July 31, 1998, 1997 and 1996, the amounts charged to operations were
$7,877, $0 and $0, respectively. The Company considers all other accounts
receivable to be fully collectible; accordingly, no allowance for doubtful
accounts is required.
Property and Equipment
----------------------
Property and equipment is stated at cost. Significant additions or
improvements extending asset lives are capitalized; normal maintenance and
repair costs are expensed as incurred. Property and equipment is depreciated
over the estimated useful lives of the related assets using the Modified
Accelerated Cost Recovery System. Such depreciation approximates that which is
allowed using methods acceptable under generally accepted accounting principles.
Revenue Recognition
-------------------
Revenue is recognized when the goods produced are shipped. Certain sales
involve the rentals of display space. Revenues related to these sales are
recognized based on the actual amount of time that the display space is rented.
Billings in advance are recorded as deferred income.
<PAGE>
MEGA ART CORP.
NOTES TO FINANCIAL STATEMENTS
Income Taxes
------------
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," which requires an asset and
liability approach for income taxes. This method requires the recognition of a
deferred tax charge or credit for the expected future tax consequences of
temporary differences. Items that resulted in the recognition of deferred income
tax liabilities include the differences recognized between the accrual basis of
accounting and the cash basis of accounting, which is used for income tax
purposes.
Reclassifications
-----------------
Certain amounts in the 1997 financial statements have been reclassified in
order to conform with the 1998 presentation.
Estimates
---------
The financial statements are prepared in conformity with generally accepted
accounting principals which require management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
3. Cash and Cash Equivalents
Cash equivalents include highly liquid investments with a maturity of three
months or less. Cash equivalents consisted exclusively of money market accounts
at July 31, 1998, 1997 and 1996.
4. Property and Equipment
Property and equipment at July 31, 1998, 1997 and 1996 consists of the
following:
1998 1997 1996
---- ---- ----
Equipment ....................... $1,064,834 $ 458,787 $ 776,546
Furniture and fixtures .......... 5,405
Leasehold improvements .......... 128,107 5,500
---------- ---------- ----------
1,198,346 464,287 776,546
Less: accumulated depreciation .. 219,010 4,258 156,516
---------- ---------- ----------
$ 979,336 $ 460,029 $ 620,030
========== ========== ==========
<PAGE>
MEGA ART CORP.
NOTES TO FINANCIAL STATEMENTS
5. Long-Term Debt
Long-term debt at July 31, 1998, 1997 and 1996 consists of the following:
1998 1997 1996
---- ---- ----
Loan payable due in monthly
installments of $5,386 through
December 2002, including interest
at 10.60%.......................... $ 227,161 $ -- $ --
Equipment financing loan due in
monthly installments of $7,371
through July 2003, including
interest at 9.62%.................. 350,000
---------- -------- --------
577,161
Less: current maturities........... 99,846
---------- -------- --------
Long-term portion.................. $ 477,315 $ -- $ --
========== ======== ========
Aggregate maturities of long-term debt for the fiscal year ending July 31,
are as follows:
1999...................................... $ 99,846
2000...................................... 110,344
2001...................................... 121,950
2002...................................... 134,778
2003...................................... 110,243
---------
$ 577,161
=========
The loan payable and equipment loan are secured by UCC filings and credit
guarantees on the equipment financed.
<PAGE>
MEGA ART CORP.
NOTES TO FINANCIAL STATEMENTS
6. Income Taxes
Income tax expense at July 31, 1998, 1997 and 1996 is comprised of the
following:
1998 1997 1996
---- ---- ----
Current tax expense
Federal ..................... $ 21,000 $ 8,000 $ --
State and local ............. 12,000 6,593 3,508
-------- -------- --------
Total current ............ 33,000 14,593 3,508
-------- -------- --------
Deferred tax expense
Federal ..................... 201,000 29,000 41,000
State and local ............. 52,000 27,000 29,000
-------- -------- --------
Total deferred ........... 253,000 56,000 70,000
-------- -------- --------
Total income tax expense.. $286,000 $ 70,593 $ 73,508
======== ======== ========
7. Related Party Transactions
The Company has an unsecured demand loan payable to one of its stockholders
with no definite terms of repayment. Interest is being paid at an annual rate of
5.85%. The outstanding balance at July 31, 1998, 1997 and 1996 is $322,871,
$240,641 and $46,302, respectively.
8. Lease Commitments
The Company leases office and warehouse space under operating leases
expiring on March 31, 2002. The office space lease contains provisions for
periodic rate adjustments (e.g., real estate tax escalations) to reflect cost of
living index changes.
The future minimum lease payments under the operating leases at July 31,
1998 consists of the following:
1999...................................... $ 97,640
2000...................................... 102,319
2001...................................... 105,389
2002...................................... 36,939
---------
$ 342,287
=========
<PAGE>
MEGA ART CORP.
NOTES TO FINANCIAL STATEMENTS
9. Prior Period Adjustment
Certain adjustments, relating to the overstatement of the reported net
income in the Company's previously issued July 31, 1997 financial statements,
are reflected in the financial statements of the current year. This resulted in
the following changes to retained earnings as of July 31, 1997:
Overstatement of accounts receivable................ $ 35,327
Understatement of accounts payable.................. 48,011
---------
Net decrease in retained earnings............... $ 83,338
=========
10. Stock Purchase Agreement
The shareholders of Mega Art Corp. have entered into an agreement dated
August 3, 1998 with Unidigital Inc. whereby Unidigital would purchase the stock
of the Company. The closing of this agreement is scheduled to take place by
August 31, 1998.
<PAGE>
SUPPLEMENTARY INFORMATION
<PAGE>
MEGA ART CORP.
SCHEDULES OF SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
For the Years ended July 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Salary - officers .................. $ 741,100 $ 120,000 $ 116,000
Consulting fees .................... 401,199 76,878
Professional fees .................. 146,247 38,321 13,822
Travel ............................. 81,437 54,706 17,218
Telephone .......................... 51,717 19,485 10,036
Meals and entertainment ............ 45,043 12,527 15,256
Rent ............................... 43,419 15,125 33,620
Commissions ........................ 33,941 192,550 8,842
Office expense and supplies ........ 33,797 23,016 4,007
Payroll taxes ...................... 32,779 6,225 9,326
Promotion and marketing ............ 29,108 26,986 20,182
Repairs and maintenance ............ 16,140 10,350
Insurance .......................... 11,707 938 1,290
Employee benefits .................. 11,695
Bad debts .......................... 7,877
Miscellaneous ...................... 5,112 2,423
Equipment lease .................... 4,438
Utilities .......................... 1,814 2,210 2,387
---------- ---------- ----------
Total selling, general and
administrative expenses .. $1,698,570 $ 601,740 $ 251,986
========== ========== ==========
See Independent Auditors' Report.
<PAGE>
(b) Pro Forma Financial Information (unaudited).
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Financial Statements are based on the historical
financial statements of the Company, adjusted to give effect to the acquisition
of all of the capital stock of Mega Art by the Company (the "Mega Art
Acquisition"). The Pro Forma Balance Sheet assumes the Mega Art Acquisition
occurred as of the most recent balance sheet date prior to the acquisition date
of September 2, 1998. The Pro Forma Income Statements for the nine months ended
May 31, 1998 and the twelve months ended August 31, 1997 assume that the Mega
Art Acquisition occurred as of the first day of the applicable period. In
addition, the Pro Forma Income Statement for the twelve months ended August 31,
1997 is adjusted to give effect to the Company's acquisition of all of the
capital stock of Libra City Corporate Printing Limited on May 22, 1997 (the
"Libra Acquisition"), its acquisition of substantially all of the assets of
Boris Image Group, Inc. on April 4, 1997 (the "Boris Acquisition") and its
acquisition of substantially all of the assets of Kwik International Color, Ltd.
on March 25, 1998 (the "Kwik Acquisition") and assumes that such acquisitions
occurred as of September 1, 1996.
The Pro Forma Financial Statements should be read in conjunction with the
audited consolidated financial statements of the Company and the related notes
thereto which are included in the Company's Annual Report on Form 10-KSB for the
year ended August 31, 1997, the Company's Quarterly Report on Form 10-QSB for
the quarter ended May 31, 1998, as amended, the Company's Current Report on Form
8-K dated September 14, 1998, the Company's Current Report on Form 8-K/A dated
June 8, 1998, the Company's Current Report on Form 8-K dated April 8, 1998, the
Company's Current Report on Form 8-K dated June 6, 1997, the Company's Current
Report on Form 8-K/A dated August 5, 1997 (each as filed with the Securities and
Exchange Commission) and the audited financial statements of Mega Art that are
filed herewith.
The pro forma financial information does not purport to present what the
Company's results of operations would actually have been if the Mega Art
Acquisition, the Kwik Acquisition, the Libra Acquisition and the Boris
Acquisition had occurred on the assumed dates, as specified above, or to project
the Company's financial condition or results of operations for any future
period.
<PAGE>
<TABLE>
<CAPTION>
Unidigital Inc.
Pro Forma Condensed Balance Sheet (Unaudited)
May 31, 1998
ASSETS
Unidigital Mega Art Adjustments Pro Forma
---------- -------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ............................... $ 162,098 $ 500,321 $ -- $ 662,419
Accounts receivable (less allowance for doubtful
accounts for Unidigital of $553,499) .................. 14,546,337 830,000 -- 15,376,337
Deferred financing costs, net ........................... 1,107,204 -- -- 1,107,204
Prepaid expenses ........................................ 3,201,952 13,438 -- 3,215,390
Other current assets .................................... 3,645,179 -- -- 3,645,179
------------ ------------ ------------ ------------
Total current assets .................................. 22,662,770 1,343,759 -- 24,006,529
Property and equipment, net ............................... 13,807,594 731,836 -- 14,539,430
Intangible assets, net .................................... 27,252,774 -- 10,131,025 37,383,799
Other assets .............................................. 342,123 -- -- 342,123
------------ ------------ ------------ ------------
Total assets .......................................... $ 64,065,261 $ 2,075,595 $ 10,131,025 $ 76,271,881
============ ============ ============ ============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses ................... $ 7,258,029 $ 803,424 $ -- $8,061,453
Current portion of capital lease obligations ............ 2,230,281 -- -- 2,230,281
Current portion of long-term debt ....................... 2,942,775 315,444 -- 3,258,219
Income taxes payable .................................... 890,412 -- -- 890,412
Loans and notes payable to stockholders ................. 168,906 185,752 -- 354,658
------------ ------------ ------------ ------------
Total current liabilities ............................. 13,490,403 1,304,620 -- 14,795,023
Capital lease obligations, net of current portion ......... 3,275,900 -- -- 3,275,900
Long-term debt, net of current portion .................... 32,393,333 -- 5,900,000 38,293,333
Deferred income taxes ..................................... 543,970 -- -- 543,970
Loans and notes payable to stockholders, net of current
portion................................................. 207,495 -- -- 207,495
------------ ------------ ------------ ------------
Total liabilities ..................................... 49,911,101 1,304,620 5,900,000 57,115,721
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock -- authorized 5,000,000 shares for
Unidigital, $.01 par value each; none issued or
outstanding ............................................. -- -- -- --
Common stock -- authorized 10,000,000 shares for
Unidigital, $.01 par value each; 3,902,634 shares issued
and outstanding at May 31, 1998; authorized 100
shares for Mega Art, without par value; 100 shares
issued and outstanding at May 31, 1998 .................. 39,206 2,000 5,541 46,747
Additional paid-in capital ................................ 9,814,625 -- 4,992,459 14,807,084
Retained earnings ......................................... 4,237,005 7,689,975 (766,975) 4,239,005
Cumulative foreign translation adjustment ................. 63,324 -- -- 63,324
------------ ------------ ------------ ------------
Total stockholders' equity ............................ 14,154,160 770,975 4,231,025 19,156,160
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity ............ $ 64,065,261 $ 2,075,595 $ 10,131,025 $ 76,271,881
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Unidigital Inc.
Pro Forma Condensed Statement of Operations (Unaudited)
Nine Months Ended May 31, 1998
Unidigital Kwik* Mega Art Adjustments Pro Forma
---------- ---- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Net sales ................ $ 32,845,094 $ 8,092,515 $ 3,350,848 $ -- $ 44,288,457
------------ ------------ ------------ ------------ ------------
Expenses
Cost of sales ............ 17,597,651 5,569,089 1,460,302 -- 24,627,042
Selling, general &
administrative expenses . 10,943,509 2,982,431 688,075(a) (721,118) 13,892,897
Expenses incurred due to
restructuring ........... 246,930 -- -- -- 246,930
------------ ------------ ------------ ------------ ------------
Total operating expenses . 28,788,090 8,551,520 2,148,377 (721,118) 38,766,869
Income from operations ... 4,057,004 (459,005) 1,202,471 721,118 5,521,588
Interest expense ......... 1,388,359 134,199 10,761(b) 1,587,518 3,120,837
Interest expense-deferred
financing costs ......... 695,721 -- -- -- 695,721
Interest and other
expenses (income) ....... 126,604 (72,363) -- -- 54,241
------------ ------------ ------------ ------------ -----------
Income before income taxes 1,846,320 (520,841) 1,191,710 (866,400) 1,650,789
Provision for income taxes 704,299 78,770 548,187(c) (397,164) 934,092
------------ ------------ ------------ ------------ ------------
Net income before
extraordinary item......... 1,142,021 (599,611) 643,523 (469,236) 716,697
Extraordinary item - loss
on early retirement of debt
(net of income tax benefit
of $137,000)............. (143,000) -- -- -- (143,000)
------------ ------------ ------------ ------------ ------------
Net income ............... $ 999,021 $ (599,611) $ 643,523 $ (469,236) $ 573,697
============ ============ ============ ============ ============
Basic earnings (loss) per
common share:
Earnings before
extraordinary item..... $ 0.34 $ 0.17
Extraordinary item ..... (0.04) (0.03)
------------ ------------
Net income ............. $ 0.30 $ 0.14
============ ============
Diluted earnings (loss) per
common share:
Earnings before
extraordinary item..... $ 0.31 $ 0.16
Extraordinary item...... (0.04) (0.03)
------------ -------------
Net income.............. $ 0.27 $ 0.13
============ =============
Shares used to compute net
income per share:
Basic .................. 3,403,721 754,148 4,157,869
============ ============ ============
Diluted ................ 3,640,752 754,148 4,394,900
============ ============ ============
* September 1, 1997 to March 25, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Unidigital Inc.
Pro Forma Condensed Statement of Operations (Unaudited)
Year Ended August 31, 1997
Unidigital Libra Boris Kwik Mega Art
---------- ----- ----- ---- --------
<S> <C> <C> <C> <C> <C>
Revenues
Net sales ............. $ 27,261,856 $ 4,202,018 $ 3,276,883 $ 14,096,098 $ 1,642,750
------------ ------------ ------------ ------------ ------------
Expenses
Cost of sales ......... 14,449,663 3,053,209 1,733,080 8,435,133 729,254
Selling, general &
administrative
expenses ............. 9,673,071 1,270,444 1,615,998 4,965,031 644,709 (d)
------------ ------------ ------------ ------------ ------------
Total operating
expenses ............. 24,122,734 4,323,653 3,349,078 13,400,164 1,373,963
Income (loss) from
operations ........... 3,139,122 (121,635) (72,195) 695,934 268,787
Interest expense ...... 1,094,628 37,282 92,972 212,520 -- (e)
Interest expense-
deferred financing
costs ................ 138,069 -- -- -- --
Interest and other
(income) expenses .... (27,587) (21,584) -- 124,000 (124,000)
------------ ------------ ------------ ------------ ------------
Income (loss) before
income taxes ........ 1,934,012 (137,333) (165,167) 359,115 392,787
Provision for income
taxes ................ 593,280 (26,493) 3 178,237 140,593 (f)
------------ ------------ ------------ ------------ ------------
Net income (loss) ....... $ 1,340,732 $ (110,840) $ (165,170) $ 180,878 $ 252,194
============ ============ ============ ============ ============
Net income per share
available to common
stockholders:
Basic................. $ 0.41
============
Diluted............... $ 0.40
============
Shares used to
compute net income
per share:
Basic ................ 3,239,040
============
Diluted .............. 3,378,775
============
<PAGE>
Unidigital Inc.
Pro Forma Condensed Statement of Operations (Unaudited)
Year Ended August 31, 1997
Adjustments Pro Forma
----------- ---------
<S> <C>
Revenues
Net sales ............. $ -- $ 50,479,605
------------ ------------
Expenses
Cost of sales ......... 28,400,339
Selling, general &
administrative
expenses ............. (144,594) 18,024,659
------------ ------------
Total operating
expenses ............. (144,594) 46,424,998
Income (loss) from
operations ........... 144,594 4,054,607
Interest expense ...... 3,045,480 4,482,882
Interest expense-
deferred financing
costs ................ -- 138,069
Interest and other
(income) expenses .... -- (48,872)
------------ ------------
Income (loss) before
income taxes ........ (2,900,886) (517,472)
Provision for income
taxes ................ (1,049,050) (163,430)
Net income (loss) ....... $ (1,851,836) $ (354,042)
============ ============
Net income per share
available to common
stockholders:
Basic........... $ (0.08)
============
Diluted......... $ (0.07)
============
Shares used to
compute net income
per share:
Basic ................ 1,403,989 4,643,029
============ ===========
Diluted .............. 1,403,989 4,782,764
============ ===========
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated
Financial Statements (Unaudited)
For purposes of determining the pro forma effect of the Mega Art
Acquisition on the Company's balance sheet as of May 31, 1998 and the Company's
income statement for the nine months ended May 31, 1998, the following pro forma
adjustments have been made:
May 31,
1998
----
Cash received from borrowings ......................... $ 5,900,000
Cash consideration for Kwik Acquisition ............... 5,900,000
-----------
$ --
-----------
Consideration for Mega Art Acquisition
--------------------------------------
Cash .................................................. 5,800,000
Issuance of 754,148 common shares at $6.63 per share .. 5,000,000
Expenses of acquisition................................ 100,000
-----------
Total Consideration ........................ $10,900,000
Total value of net assets acquired ......... 768,975
Goodwill ................................... $10,131,025
===========
<TABLE>
<CAPTION>
Mega Art Kwik Total
-------- ---- -----
<S> <C> <C> <C>
(a) Amortization of goodwill over 25 years.. $ 300,543 $ 514,592 $ 815,136
(Excess) owners' compensation........... (12,000) (1,524,254) (1,536,254)
----------- ----------- -----------
$ 288,543 $(1,009,602) $ (721,118)
=========== =========== ===========
(b) Additional financing costs ............. $ (369,750) $(1,247,768) $(1,587,518)
=========== =========== ===========
(c) Pro forma tax adjustment ............... $ 246,752 $ (95,729) $ (397,164)
=========== =========== ===========
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated
Financial Statements (Unaudited)
For purposes of determining the pro forma effect of the Mega Art
Acquisition, the Kwik Acquisition, the Libra Acquisition and the Boris
Acquisition on the Company's income statement for the twelve months ended August
31, 1997, the following pro forma adjustments have been made:
<TABLE>
<CAPTION>
Mega Art Kwik Libra Boris Total
-------- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
(d) Amortization of goodwill ....... $ 400,725 $ 882,158 $ 128,962 $ 66,614 $ 1,478,459
Additional (Excess) owners'
compensation ................. 80,000 (1,703,053) -- -- (1,623,053)
----------- ----------- ----------- ------------- -----------
$ 480,725 $ (820,895) $ 128,962 $ 66,614 $ (144,594)
=========== =========== =========== ============= ===========
(e) Additional financing costs ..... $ (493,000) $(2,111,480) $ (441,000) $ -- $(3,045,480)
=========== =========== =========== ============= ===========
(f) Pro forma tax adjustment ....... $ (405,984) $ (457,678) $ (185,388) $ -- $(1,049,050)
=========== =========== =========== ============= ===========
</TABLE>
<PAGE>
(c) Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
4.1 Stockholders' Agreement dated as of
September 2, 1998 by and between
Unidigital Inc. and Ehud Aloni (included
as an exhibit to the Current Report on
Form 8-K of the Company dated September
14, 1998 and incorporated by reference
herein).
10.1 Agreement and Purchase of Sale dated as
of August 3, 1998 by and among
Unidigital Inc., Unison (NY), Inc., Mega
Art Corp., Ehud Aloni, Amit Primor,
Jeffrey E. Rothman and Seligson, Rothman
& Rothman (included as an exhibit to the
Current Report on Form 8-K of the
Company dated September 14, 1998 and
incorporated by reference herein).
10.2 Employment Agreement dated as of
September 2, 1998 by and between Mega
Art Corp. and Ehud Aloni (included as an
exhibit to the Current Report on Form
8-K of the Company dated September 14,
1998 and incorporated by reference
herein).
23.1 Consent of Robbins Spielman Koenigsberg
& Parker, LLP.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Unidigital Inc.
By: /s/ William E. Dye
-----------------------
William E. Dye, Chief Executive
Officer and Acting Chief Financial
Officer (Principal Executive,
Financial and Accounting Officer)
Date: December 17, 1998
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Form 8-K/A of our report dated August 25,
1998, except for the years ended July 1997 and 1996 as to which the date is
November 11, 1998, on our audit of the financial statements of Mega Art Corp. as
of July 31, 1998, and for each of the three years in the period ended, which
report is included in this Form 8-K/A.
/s/ Robbins Spielman Koenigsberg & Parker, LLP
New York, New York
December 16, 1998
