SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 8-K/A
AMENDMENT NO. 1
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) June 8, 1998 (March 24, 1998)
Unidigital Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-27664 13-3856672
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
545 West 45th Street, New York, New York 10036
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (zip code)
(212) 397-0800
----------------------------------------------
(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 April 8, 1998 filed
by Unidigital Inc. (the "Company"), on March 25, 1998, the Company, through a
wholly-owned subsidiary, Unison (NY), Inc., consummated the acquisition of
substantially all of the assets of Kwik International Color, Ltd. (the
"Seller"), located in New York City.
The Company hereby files this 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.
<PAGE>
(a) Financial Information of Business Acquired.
KWIK INTERNATIONAL COLOR, LTD.
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
TOGETHER WITH REPORT OF INDEPENDENT ACCOUNTANT
<PAGE>
KWIK INTERNATIONAL COLOR, LTD.
------------------------------
REPORT ON AUDITS OF FINANCIAL STATEMENTS
----------------------------------------
YEARS ENDED DECEMBER 31, 1997 AND 1996
--------------------------------------
CONTENTS
--------
Page
----
FINANCIAL STATEMENTS:
Independent auditors' report 1
Balance sheets 2
Statements of earnings 3
Statement of stockholders' equity 4
Statements of cash flows 5
Notes to financial statements 6 - 12
<PAGE>
FINANCIAL STATEMENTS
--------------------
<PAGE>
RUSSELL A. GLICK, CPA
---------------------
To the Officers and Stockholders of
Kwik International Color, Ltd.
I have audited the accompanying balance sheets of Kwik International Color, Ltd.
as of December 31, 1997 and 1996, and the related statements of earnings,
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based upon my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Kwik International Color, Ltd. as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three year period ended December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ Russell A. Glick, CPA
---------------------------
Certified Public Accountant
New York, New York
February 26, 1998
515 Madison Avenue, Suite 725 9 Park Place
New York, New York 10022 Great Neck, New York 11021
(212) 755-7340 (516) 466-2624
FAX (212) 759-9521 FAX (516) 466-0223
<PAGE>
- 2 -
<TABLE>
<CAPTION>
KWIK INTERNATIONAL COLOR, LTD.
------------------------------
BALANCE SHEETS
--------------
December 31,
-------------------------------
1997 1996
----------- -----------
ASSETS (Note 6)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 516,386 $ 247,452
Marketable securities 44,508 32,948
Accounts receivable 3,180,296 2,670,837
Inventories 324,793 180,259
Prepaid expenses (Note 11) 371,416 339,579
----------- -----------
Total current assets 4,437,399 3,471,075
INVESTMENT (Note 3) 312,185 250,729
PROPERTY AND EQUIPMENT, net (Note 4) 1,721,108 1,982,197
INTANGIBLE ASSET, net (Note 5) 28,125 60,625
OTHER ASSETS (Note 10) 1,227,664 1,453,347
----------- -----------
$ 7,726,481 $ 7,217,973
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable, bank (Note 6) $ 1,995,000 $ 1,450,000
Accounts payable 533,498 646,694
Accrued expenses (Note 8) 721,026 762,796
Income taxes payable -- 97,280
Current portion of long-term debt (Note 7) 196,991 268,480
----------- -----------
Total current liabilities 3,446,515 3,225,250
LONG-TERM DEBT (Note 7) 550,966 536,989
----------- -----------
Total liabilities 3,997,481 3,762,239
----------- -----------
COMMITMENTS (Notes 9 and 11)
STOCKHOLDERS' EQUITY:
Common stock, no par value, 200 shares authorized;
10 shares issued and outstanding 5,000 5,000
Retained earnings 3,823,078 3,561,372
Unrealized loss on available-for sale securities - net (99,078) (110,638)
----------- -----------
Total stockholders' equity 3,729,000 3,455,734
----------- -----------
$ 7,726,481 $ 7,217,973
=========== ===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- 3 -
KWIK INTERNATIONAL COLOR, LTD.
------------------------------
STATEMENTS OF EARNINGS
----------------------
Years Ended
December 31,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $ 14,324,884 $ 13,573,941 $ 13,412,163
COST OF GOODS SOLD
(Notes 4, 9 and 11) 8,590,790 7,843,438 8,173,437
----------- ----------- -----------
GROSS PROFIT 5,734,094 5,730,503 5,238,726
----------- ----------- -----------
OPERATING EXPENSES:
(Notes 4, 5, 9 and 11)
Selling 1,655,370 1,410,432 1,736,948
General and administrative 3,138,439 2,926,819 2,742,353
Interest 221,624 182,788 234,324
----------- ----------- -----------
5,015,433 4,520,039 4,713,625
----------- ----------- -----------
OPERATING INCOME 718,661 1,210,464 525,101
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Income (loss) from investment -
equity method 61,456 (2,789) 15,695
Interest and dividend income 41,272 45,932 22,985
Other income -- 105,375 --
Loss on disposal of fixed assets (11,085) -- --
----------- ----------- -----------
91,643 148,518 38,680
----------- ----------- -----------
NET INCOME BEFORE INCOME TAXES 810,304 1,358,982 563,781
INCOME TAXES 100,598 156,409 55,914
----------- ----------- -----------
NET EARNINGS $ 709,706 $ 1,202,573 $ 507,867
=========== =========== ===========
See notes to financial statements
</TABLE>
<PAGE>
- 4 -
<TABLE>
<CAPTION>
KWIK INTERNATIONAL COLOR, LTD.
------------------------------
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
Unrealized
Loss on
Available-
for-Sale
Common Retained Securities -
Stock Earnings Net Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $ 5,000 $ 1,950,932 $ (102,064) $ 1,853,868
Net earnings -- 507,867 -- 507,867
Distributions -- (100,000) -- (100,000)
Unrealized net gain on available-
for-sale securities -- -- (9,630) (9,630)
----------- ----------- ----------- -----------
Balance, December 31, 1995 5,000 2,358,799 (111,694) 2,252,105
Net earnings -- 1,202,573 -- 1,202,573
Unrealized net gain on available-
for-sale securities -- -- 1,056 1,056
----------- ----------- ----------- -----------
Balance, December 31, 1996 5,000 3,561,372 (110,638) 3,455,734
Net earnings -- 709,706 -- 709,706
Distributions -- (448,000) -- (448,000)
Unrealized net gain on available-
for-sale securities -- -- 11,560 11,560
----------- ----------- ----------- -----------
Balance, December 31, 1997 $ 5,000 $ 3,823,078 $ (99,078) $ 3,729,000
=========== =========== =========== ===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- 5 -
KWIK INTERNATIONAL COLOR, LTD.
------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Years Ended
December 31,
----------------------------------------
1997 1996 1995
---------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings $ 709,706 $ 1,202,573 $ 507,867
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 575,344 419,777 269,365
(Income) loss from investment -
equity method (61,456) 2,789 (15,695)
Loss disposal of fixed assets 11,085 -- --
(Increase) decrease in operating assets:
Accounts receivable (509,459) (953,339) (211,051)
Inventory (144,534) 25,848 22,008
Prepaid expenses (31,837) (253,000) (53,892)
Other assets (7,614) (105,433) (169,173)
Increase (decrease) in operating liabilities:
Accounts payable (113,197) (81,766) (250)
Accrued expenses (41,770) (267,539) 315,852
Corporation taxes payable (97,280) 81,576 9,798
----------- ----------- -----------
Total adjustments (420,718) (1,131,087) 166,962
----------- ----------- -----------
Net cash provided by operating activities 288,988 71,486 674,829
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 22,500 -- --
Purchase of intangible assets -- (100,000) --
Proceeds from (advances to) affiliates,
officers and employees 86,221 137,200 (41,423)
Purchases of equipment and improvements (120,746) (989,331) (181,661)
Decrease in cash surrender value -
officers' life insurance 8,109 -- --
----------- ----------- -----------
Net cash used for investing activities (3,916) (952,131) (223,084)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds of loans from bank 545,000 355,000 (50,000)
Proceeds of long-term debt -- 660,179 --
Proceeds from loans against cash surrender
value of officers' life insurance 144,324 -- --
Repayments of long-term debt (257,462) (210,853) (210,605)
S Corporation distributions (448,000) -- (100,000)
----------- ----------- -----------
Net cash (used in) provided by
financing activities (16,138) 804,326 (360,605)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 268,934 (76,319) 91,140
CASH AND CASH EQUIVALENTS,
beginning of year 247,452 323,771 232,631
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 516,386 $ 247,452 $ 323,771
=========== =========== ===========
See notes to financial statements
</TABLE>
<PAGE>
- 6 -
KWIK INTERNATIONAL COLOR, LTD.
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
--------------------------------------------
1. Summary of Significant Accounting Policies:
------------------------------------------
a. Nature of business
------------------
The Company is in the printing industry primarily performing color
separation services for various clients throughout the United States.
b. Equity method
-------------
Investments in companies in which the Company has a 20% to 50%
interest are carried at cost, adjusted for the Company's proportionate share of
their undistributed earnings or losses (see Note 3).
c. Use of estimates
----------------
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 and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
d. Statement of cash flows
-----------------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less to be
cash equivalents.
e. Marketable securities
---------------------
Marketable securities are valued at quoted market prices as of the
balance sheet date. The cost of the securities is $143,586. The marketable
securities have been categorized as available-for-sale equity securities.
f. Inventories
-----------
Inventories, primarily consisting of work-in progress, are valued at
the lower of cost (first-in, first-out) or market.
g. Property and equipment
----------------------
Property and equipment are valued at cost less accumulated
depreciation. Expenditures for additions, renewals and betterments are
capitalized; expenditures for maintenance and repairs are charged to expenses as
incurred. Upon retirement or disposal of assets, the cost and accumulated
depreciation are eliminated from the accounts and the resulting gain or loss is
included in determining the results of operations.
Depreciation is computed either on a straight-line, double-declining
or accelerated cost recovery method over the estimated useful lives of the
related assets.
<PAGE>
- 7 -
1. Summary of Significant Accounting Policies: (Cont'd)
-------------------------------------------
h. Intangible assets
-----------------
The cost of intangible assets are amortized on a straight-line basis
over their respective useful lives.
i. Income taxes
------------
The Company elected to have the corporation treated as a "Small
Business Corporation", pursuant to the Internal Revenue Code and related New
York State statute. As a result of this election, the income or loss and credits
of the Company will pass through directly to the individual stockholders.
Accordingly, no provision for federal income taxes is included in the financial
statements. New York State imposes a tax on "Small Business Corporations" which
approximates the incremental difference between corporate and individual tax
rates. Local taxes are provided for at the prevailing annual rates.
j. Reclassifications
-----------------
Certain reclassifications have been made to the 1996 and 1995
financial statements to conform to the 1997 presentation.
2. Concentration of Credit Risk:
----------------------------
The Company's financial instruments that are exposed to concentration of
credit risk consist primarily of its cash equivalents, marketable securities and
trade receivables.
The Company invests its temporary cash investments and marketable
securities with high quality institutions. This policy limits the Company's
exposure to concentration of credit risk.
Concentrations of credit risk with respect to trade receivables are
limited due to the large number of accounts comprising the Company's customer
base as well as their dispersion across different industries and geographic
areas. The Company routinely assesses the financial strength of its customers.
Only one individual customer accounted for more than 10% of the net sales for
the years ended December 31, 1997 and 1995. For the years ended December 31,
1997 and 1995, the Company's five largest individual customers, including the
one largest customer, accounted for 40% and 39% of net sales.
3. Investment:
----------
Investment carried at equity consists of the following:
December 31,
-----------------------------
1997 1996
------- -------
HMK Graphics Inc. and Subsidiaries
Equity owned 33-1/3% 33-1/3%
The following is a summary of financial position and results of
operations of the above companies as of:
April 30,
------------------------------------
1997 1996
-------------- --------------
Current assets $ 992,627 $ 962,687
Property and equipment, net 4,493,278 4,621,763
Other assets 4,932,910 5,160,135
-------------- --------------
$ 10,418,815 $ 10,744,585
============== ==============
<PAGE>
- 8 -
3. Investment: (Cont'd)
----------
April 30,
-----------------------------------
1997 1996
-------------- -------------
Current liabilities $ 1,084,230 $ 1,470,631
Long-term debt 6,594,918 6,601,728
Other long-term liabilities 1,828,111 1,945,038
-------------- -------------
9,507,259 10,017,397
Stockholders' equity 911,556 727,188
-------------- -------------
$ 10,418,815 $ 10,744,585
============== =============
Sales and rental income $ 2,274,104 $ 1,818,372
============== =============
Net income (loss) $ 184,368 $ (8,367)
============== =============
4. Property and Equipment:
Property and equipment consists of the following:
December 31,
------------------------------------
1997 1996
-------------- --------------
Equipment $ 4,832,263 $ 5,480,588
Leasehold improvements 703,459 690,987
------------- -------------
5,535,722 6,171,575
Less accumulated depreciation 3,814,614 4,189,378
------------- -------------
$ 1,721,108 $ 1,982,197
============= =============
Depreciation expense for the years ended December 31, 1997, 1996 and
1995 approximated $542,800, $380,400 and $269,400, respectively.
5. Intangible Asset:
----------------
Intangible asset consists of the following:
December 31,
--------------------------------
1997 1996
---------- -----------
Covenants not to compete $ 100,000 $ 100,000
Less accumulated amortization 71,875 39,375
---------- -----------
$ 28,125 $ 60,625
========== ===========
Amortization expense for the years ended December 31, 1997, 1996 and 1995
approximated $32,500, $39,400 and $0, respectively.
6. Loans Payable - Bank:
--------------------
At December 31, 1997, the Company has outstanding $1,995,000 against its
approved line of credit for $2,500,000 with an interest rate of .25% above the
bank's prime rate (8.50% at December 31, 1997). The loan is secured by all
assets of the Company and guaranteed by the shareholders. Advances under the
line are limited to 75% of eligible accounts receivable.
<PAGE>
- 9 -
7. Long-Term Debt:
--------------
Long-term debt consists of the following:
December 31,
--------------------------------
1997 1996
---------- -----------
U.S. Concord Inc. $ - $ 52,593
Heller Financial, Inc. (a) 76,552 153,976
JLJ Capital (b) 671,405 598,900
---------- -----------
747,957 805,469
Less current maturities 196,991 268,480
---------- -----------
$ 550,966 $ 536,989
========== ===========
The obligations consist of the following transactions:
(a) The obligation is payable in 48 monthly installments of $7,940 each.
Payments are scheduled to end in October, 1998. Each payment includes interest
at 8.038%. A Scitex Work Station was pledged as collateral for this note.
(b) During the year 1997, the Company entered into a new loan agreement
with JLJ Capital which encompassed the purchase of new machinery and equipment
for $199,950 and the refinance of certain existing debt totaling $500,050
leaving a new loan of $700,000. The note is payable in 60 monthly installments
of $14,275 each. Payments are scheduled to end in September 2002. Each payment
includes interest at 8.243% per annum. Certain equipment is pledged as
collateral for this note.
Scheduled payments to reduce debt are as follows:
Year Ending
December 31,
------------
1998 $ 196,991
1999 130,752
2000 141,945
2001 154,098
2002 124,171
----------
$ 747,957
==========
8. Accrued Expenses:
----------------
Accrued expenses consist of the following:
December 31,
--------------------------------
1997 1996
---------- -----------
Payroll and payroll taxes $ 113,922 $ 97,936
Pension plan 429,584 333,020
Other 177,520 331,840
---------- -----------
$ 721,026 $ 762,796
========== ===========
<PAGE>
- 10 -
9. Commitments:
-----------
The Company is obligated to make minimum annual rental payments as
follows:
1998 $ 524,400
1999 524,400
2000 557,175
2001 557,175
2002 557,175
Thereafter 1,114,350
-------------
$ 3,834,675
=============
The Company rents its New York City business premises from an affiliated
company (see Note 10). The leases are due to expire on December 31, 2004.
Total rent expense for operating leases for years ended December 31,
1997, 1996 and 1995 was approximately $551,000, $592,000 and $640,000,
respectively.
10. Related Party Transactions:
--------------------------
The Company made various loans to its officers. Such loans are payable on
demand with interest charged at 6% per annum The total officers loans, including
accrued interest, approximated $61,700 and $-0- at December 31, 1997 and 1996,
respectively.
In addition, the Company conducts business with various affiliated
companies. At December 31, 1997 and 1996, the amounts due to the Company from
its affiliates approximated $930,300 and $1,086,000, respectively.
Rent expense paid to an affiliated company for the years ended
December 31, 1997, 1996 and 1995 approximated $524,400, respectively.
11. Retirement Plans:
----------------
(a) The Company has a defined benefit pension plan for its non-union
employees. The Company's funding policy is to contribute annually the maximum
amount that can be deducted for Federal income tax purposes. Contributions are
intended to provide not only for benefits attributed to service to date but also
for those expected to be earned in the future.
Pension expense includes the following components:
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost of the current period $ 157,468 $ 68,768 $ 69,027
Interest cost on the projected
benefit obligation 104,445 84,791 117,584
Actual return on plan assets (149,123) (126,004) (191,670)
Net amortization of transition
asset, net asset gain and
other components 43,110 2,849 62,811
--------- --------- ---------
Pension expense $ 155,900 $ 30,404 $ 57,752
========= ========= =========
</TABLE>
<PAGE>
- 11 -
11. Retirement Plans:
----------------
The following sets forth the funded status of the plan and the
amounts shown in the accompanying balance sheets:
<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1996
----------- -----------
Actuarial present value of accumulated obligations:
<S> <C> <C>
Vested benefits $ 1,481,135 $ 1,270,570
Non-vested benefits 20,011 24,198
----------- -----------
Accumulated benefit obligation 1,501,146 1,294,768
Effect of anticipated future compensation
levels and other events 251,555 136,586
----------- -----------
Projected benefit obligation 1,752,701 1,431,354
Fair value of assets held in the plan, primarily
corporate securities 1,781,495 1,394,175
----------- -----------
Plan assets in excess of projected benefit obligations $ 28,794 $ (37,179)
=========== ===========
The unfunded excess consists of the following:
December 31,
--------------------------
1997 1996
----------- -----------
Unamortized asset at transition $ 14,110 $ 11,995
Net unrecognized actuarial loss (225,055) (305,303)
Prepaid pension cost, net of accrued liability 239,739 256,129
----------- -----------
$ 28,794 $ (37,179)
=========== ===========
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7%. The expected long-term
rate of return of assets was 7%. The rate of increase in salary level was 5%.
(b) The Company is a party to a multiemployer health, welfare and defined
benefit pension plan covering certain union employees. Costs for the years ended
December 31, 1997, 1996 and 1995 approximated $656,000, $636,000 and $658,000,
respectively.
(c) The Company maintains a nonqualified profit sharing plan for one key
employee where contributions are calculated at a rate of 5% of after-tax profit.
Expense for the years ended December 31, 1997, 1996 and 1995 approximated
$28,000, $63,000 and $0, respectively.
12. Supplementary Information - Statement of Cash Flows:
---------------------------------------------------
Cash paid for interest approximated $224,000, $180,600 and $206,500
during the years ended December 31, 1997, 1996 and 1995, respectively.
Cash paid for taxes approximated $248,800, $75,000 and $40,500 during
the years ended December 31, 1997, 1996 and 1995, respectively.
During 1997, the Company entered into a long-term financing agreement for
the purchase of equipment in the amount of $199,950. In addition, the Company
refinanced certain long-term obligations in the amount of $500,050.
<PAGE>
- 12 -
13. Subsequent Event:
On January 15, 1998, the Company purchased all of the issued and
outstanding shares of common stock of the Company owned by a retiring officer
(50% of the outstanding capital stock of the Company) at a purchase price of
$3,760,000.
As part of the redemption agreement, the Company paid $376,000 and
executed a promissory note for $3,384,000, with interest at 8%.
<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 substantially all of the assets of the Seller by the Company (the
"Kwik Acquisition"). The Pro Forma Balance Sheet assumes the Kwik Acquisition
occurred as of the most recent balance sheet date prior to the acquisition date
of March 25, 1998. The Pro Forma Income Statements for the six months ended
February 28, 1998 and the twelve months ended August 31, 1997 assume that the
Kwik 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") and its acquisition of substantially all of the assets of
Boris Image Group, Inc. on April 4, 1997 (the "Boris 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 February 28, 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 the Seller 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 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>
Pro Forma Condensed Balance Sheet (Unaudited)
---------------------------------------------
February 28, 1998
-----------------
ASSETS
Current assets: Unidigital Kwik Adjustments Pro Forma
---------- ---- ----------- ---------
<S> <C> <C> <C> <C>
Cash and cash equivalents ........................... $ 1,945,436 $ 114,012 $ $ 2,059,448
Accounts receivable (less allowance for doubtful
accounts for Unidigital of $264,337) .............. 11,092,840 2,885,670 13,978,510
Deferred financing costs, net ....................... 287,793 -- 287,793
Prepaid expenses .................................... 2,729,212 458,267 3,187,479
Other current assets ................................ 1,805,843 -- 1,805,843
------------ ------------ ------------
Total current assets ............................ 17,861,124 3,457,949 21,319,073
Property and equipment, net ............................ 11,463,726 1,667,868 13,131,594
Intangible assets, net ................................. 5,307,950 -- 22,053,951 27,361,901
Other assets ........................................... 214,249 234,025 885,000 1,333,274
------------ ------------ ------------ ------------
Total assets .................................... $ 34,847,049 $ 5,359,842 $ 22,938,951 $ 63,145,842
============ ============ ============ ============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses ............... $ 5,437,277 $ 1,295,134 $ (509,949) $ 6,222,462
Current portion of capital lease obligations......... 2,042,579 183,746 2,226,325
Current portion of long-term debt ................... 11,264,459 -- (8,750,500) 2,513,959
Income taxes payable ................................ 900,836 -- 900,836
Loans and notes payable to stockholders ............. 164,364 -- 750,000 914,364
------------ ------------ ------------ ------------
Total current liabilities ....................... 19,809,515 1,478,880 (8,510,449) 12,777,946
Capital lease obligations, net of current portion....... 2,338,283 529,913 2,868,196
Long-term debt, net of current portion ................. 2,044,202 -- 31,390,798 33,435,000
Deferred income taxes .................................. 399,036 -- 399,036
Loans and notes payable to stockholders,
net of current portion................................ 207,496 -- 207,496
------------ ------------ ------------ ------------
Total liabilities ............................... 24,798,532 2,008,793 22,880,349 49,687,674
------------ ------------ ------------ ------------
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; 3,249,461 shares
issued and outstanding at February 28, 1998;
authorized 200 shares for Kwik, without par value;
10 shares issued and outstanding at February 28, 1998 32,495 5,000 1,498 38,993
Additional paid-in capital ............................. 6,392,427 -- 3,403,153 9,795,580
Retained earnings ...................................... 3,936,409 3,445,127 (3,445,127) 3,936,409
Cumulative foreign translation adjustment .............. (312,814) (99,078) 99,078 (312,814)
------------ ------------ ------------ ------------
Total stockholders' equity ...................... 10,048,517 3,351,049 58,602 13,458,168
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity....... $ 34,847,049 $ 5,359,842 $ 22,938,951 $ 63,145,842
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Condensed Statement of Operations (Unaudited)
-------------------------------------------------------
Six Months Ended February 28, 1998
----------------------------------
Unidigital Kwik Adjustments Pro Forma
---------- ---- ----------- ---------
Revenues
- --------
<S> <C> <C> <C> <C>
Net sales.................................. $19,255,448 $ 7,225,280 $ $26,480,728
----------- ----------- ----------- -----------
Expenses
- --------
Cost of sales.............................. 10,300,273 4,918,976 15,219,249
Selling, general & administrative
expenses................................. 6,746,376 2,774,901 (a) (865,424) 8,655,853
----------- ----------- ----------- -----------
Total operating expenses................... 17,046,649 7,693,877 (865,424) 23,875,102
Income from operations..................... 2,208,799 (468,597) 865,424 2,605,626
Interest expense ........................... 748,607 118,199 (b) 1,043,801 1,910,607
Interest expense-deferred financing costs... 276,138 -- 276,138
Interest and other expenses (income) ....... 86,071 (70,278) 15,793
----------- ----------- ----------- -----------
Income before income taxes ................. 1,097,983 (516,518) (178,377) 403,088
Provision for income taxes ................. 399,558 78,770 (c) (328,932) 149,396
----------- ----------- ----------- -----------
Net income ................................... $ 698,425 $ (595,288) $ 150,555 $ 253,692
=========== ============ =========== ===========
Net income per share available to
common stockholders:
Basic ..................................... $ 0.22 $ 0.07
=========== ===========
Diluted ................................... $ 0.20 $ 0.06
=========== ===========
Shares used to compute net income per share:
Basic ..................................... 3,244,797 649,841 3,894,638
=========== =========== ===========
Diluted ................................... 3,436,008 649,841 4,105,377
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Condensed Statement of Operations (Unaudited)
-------------------------------------------------------
Year Ended August 31, 1997
--------------------------
Unidigital Libra Boris Kwik Adjustments Pro Forma
---------- ----- ----- ---- ----------- ---------
Revenues
- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales.......................... $ 27,261,856 $ 4,202,018 $ 3,276,883 $ 14,096,098 $ $ 48,836,855
------------ ----------- ------------ ------------ ----------- ------------
Expenses
- --------
Cost of sales...................... 14,449,663 3,053,209 1,733,080 8,435,133 27,671,085
Selling, general &
administrative expenses........... 9,673,071 1,270,444 1,615,998 4,965,031 (d) (625,319) 16,899,225
------------ ----------- ------------ ------------ ----------- ------------
Total operating expenses........... 24,122,734 4,323,653 3,349,078 13,400,164 (625,319) 44,570,310
Income (loss) from operations...... 3,139,122 (121,635) (72,195) 695,934 625,319 4,266,545
Interest expense................... 1,094,628 37,282 92,972 212,520 (e) 2,552,480 3,989,882
Interest expense-deferred financing
costs............................. 138,069 -- -- -- 138,069
Interest and other (income)
expenses.......................... (27,587) (21,584) -- 124,299 75,128
------------ ----------- ------------ ------------ ----------- ------------
Income (loss) before income taxes.. 1,934,012 (137,333) (165,167) 359,115 (1,927,161) 63,466
Provision for income taxes......... 593,280 (26,493) 3 178,237 (f) (643,066) 101,961
------------ ----------- ------------ ------------ ----------- ------------
Net income (loss).................... $ 1,340,732 $ (110,840) $ (165,170) $ 180,878 $(1,284,095) $ (38,495)
============ =========== ============ ============ =========== ============
Net income per share available to
common stockholders:
Basic ............................ $ 0.41 $ (0.01)
============ ============
Diluted........................... $ 0.40 $ (0.01)
============ ============
Shares used to compute net income
per share:
Basic ............................ 3,239,040 649,841 3,888,881
============ =========== ============
Diluted .......................... 3,378,775 649,841 4,028,616
============ =========== ============
</TABLE>
<PAGE>
Notes to Pro Forma Condensed Consolidated
-----------------------------------------
Financial Statements (Unaudited)
--------------------------------
For purposes of determining the pro forma effect of the Kwik
Acquisition on the Company's balance sheet as of February 28, 1998 and the
Company's income statement for the six months ended February 28, 1998, the
following pro forma adjustments have been made:
February 28,
1998
Cash received from borrowings $ 33,435,000
Cash consideration for Kwik Acquisition (21,245,349)
Debt repayment - other (12,189,651)
------------
--
============
Consideration for Kwik Acquisition
----------------------------------
Cash 20,590,349
Issuance of 649,841 common shares at $5.2469 per share 3,409,651
Note payable 750,000
Expenses of acquisition 655,000
------------
Total Consideration $ 25,405,000
============
Total value of net assets acquired 3,351,049
------------
Goodwill $ 22,053,951
============
(a) Amortization of goodwill over 25 years $ 441,079
Excess owners' compensation (1,306,503)
-------------
$ (865,424)
=============
(b) Additional interest expense $ (1,043,801)
=============
(c) Pro forma tax adjustment $ (328,932)
=============
<PAGE>
Notes to Pro Forma Condensed Consolidated
-----------------------------------------
Financial Statements (Unaudited)
--------------------------------
For purposes of determining the pro forma effect of 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>
Kwik Libra Boris Total
---- ----- ----- -----
<S> <C> <C> <C> <C>
(d) Amortization of goodwill $ 882,158 $ 128,962 $ 66,614 $ 1,077,734
Excess owners' compensation (1,703,053) (1,703,053)
------------ ----------- ----------- -----------
$ (820,895) $ 128,962 $ 66,614 $ (625,319)
============ =========== =========== ===========
(e) Additional financing costs $ (2,111,480) $ (441,000) $ -- $(2,552,480)
============ =========== =========== ===========
(f) Pro forma tax adjustment $ (457,678) $ (185,388) $ -- $ (643,066)
============ =========== =========== ===========
</TABLE>
<PAGE>
(c) Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
4.1 Stockholders' Agreement dated March 25, 1998
by and among Unidigital Inc., William E. Dye
and Richard J. Sirota (included as an
exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and
incorporated by reference herein).
10.1 Asset Purchase Agreement dated as of March
25, 1998 by and among Unidigital Inc.,
Unison (NY), Inc., Kwik International Color,
Ltd. and Richard J. Sirota (included as an
exhibit to the Current Report on Form 8-K
of the Company dated April 8, 1998 and
incorporated by reference herein).
10.2 Subordinated Promissory Note dated March
25, 1998 of Unidigital Inc. payable to Kwik
International Color, Ltd. in the principal
amount of $750,000 (included as an exhibit
to the Current Report on Form 8-K of the
Company dated April 8, 1998 and incorporated
by reference herein).
10.3 Employment Agreement dated as of March 25,
1998 by and between Unidigital Inc. and
Richard J. Sirota (included as an exhibit
to the Current Report on Form 8-K of the
Company dated April 8, 1998 and incorporated
by reference herein).
10.4 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W.
28th Street, New York, New York, on the
fourth floor, known as Room 401-405
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.5 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the seventh
floor, known as Room 706-714 and 707-713
<PAGE>
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.6 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the eighth
floor (included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.7 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the ninth
floor (included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.8 Credit Agreement dated as of March 24, 1998
by and among Unidigital Inc., the lenders
from time to time parties thereto and
Canadian Imperial Bank of Commerce (included
as an exhibit to the Current Report on Form
8-K of the Company dated April 8, 1998 and
incorporated by reference herein).
10.9 Term Note dated March 24, 1998 of Unidigital
Inc. payable to Canadian Imperial Bank
of Commerce in the principal amount of
$25,000,000 (included as an exhibit to the
Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by
reference herein).
10.10 Acquisition Note dated March 24, 1998 of
Unidigital Inc. payable to Canadian Imperial
Bank of Commerce in the principal amount
of $5,000,000 (included as an exhibit to the
Current Report on Form 8-K of the Company
dated April 8, 1998 and incorporated by
reference herein).
10.11 Revolving Credit Note dated March 24, 1998
of Unidigital Inc. payable to Canadian
<PAGE>
Imperial Bank of Commerce in the principal
amount of $10,000,000 (included as an
exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and
incorporated by reference herein).
10.12 Stock Pledge Agreement (U.S.) dated as of
March 24, 1998 made by Unidigital Inc. in
favor of Canadian Imperial Bank of Commerce
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
10.13 Mortgage dated as of March 24, 1998 made by
Unidigital Inc. in favor of Canadian
Imperial Bank of Commerce (included as
an exhibit to the Current Report on Form 8-K
of the Company dated April 8, 1998 and
incorporated by reference herein).
10.14 Security Agreement dated as of March 24,
1998 made by Unidigital Inc. in favor of
Canadian Imperial Bank of Commerce (included
as an exhibit to the Current Report on Form
8-K of the Company dated April 8, 1998 and
incorporated by reference herein).
10.15 Subsidiaries Guarantee dated as of March
24, 1998 made by each of Unidigital
Elements (NY), Inc., Unidigital Elements
(SF), Inc., Unison (NY), Inc. and Unison
(MA), Inc., in favor of Canadian Imperial
Bank of Commerce (included as an exhibit to
the Current Report on Form 8-K of the
Company dated April 8, 1998 and incorporated
by reference herein).
10.16 Intercreditor and Subordination Agreement
dated as of March 25, 1998 by and among Kwik
International Color, Ltd., Unidigital Inc.
and Canadian Imperial Bank of Commerce
(included as an exhibit to the Current
Report on Form 8-K of the Company dated
April 8, 1998 and incorporated by reference
herein).
<PAGE>
10.17 Mortgage, Assignment of Leases and Rents and
Security Agreement dated as of March 24,
1998 between Unidigital Inc. and Canadian
Imperial Bank of Commerce (included as an
exhibit to the Current Report on Form 8-K of
the Company dated April 8, 1998 and
incorporated by reference herein).
23.1 Consent of Russell A. Glick, CPA.
<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 (Principal Executive,
Financial and Accounting Officer)
Date: June 8, 1998
CONSENT OF INDEPENDENT ACCOUNTANT
---------------------------------
I consent to the inclusion in this Form 8-K/A of my report dated February 26,
1998 on my audit of the financial statements of Kwik International Color, Ltd as
of December 31, 1997, and for each of the three years in the period ended, which
report is included in this Form 8-K/A.
/s/ Russell A. Glick, CPA
---------------------------
Russell A. Glick, CPA
New York, New York
June 1, 1998
