<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date earliest event reported) February 26, 1996
EVOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other Jurisdiction of Incorporation)
0-27788 22-3420712
(Commission File No.) (I.R.S. Employer Identification No.)
65 Railroad Avenue, Ridgefield, New Jersey 07657
(Address of principal executive offices) (zip code)
Registrant's telephone number including area code: (201) 941-6550
<PAGE>
Item 2. Acquisition or Disposition of Assets
This amendment is being filed to report required financial
information and to update an earlier filed Report on Form 8-K
(the "Form 8-K"). Except as disclosed herein, there has been no
change in the information previously reported in the Form 8-K.
Capitalized terms not defined herein shall have the meaning
ascribed to them in the Form 8-K.
Taking into account certain post closing adjustments, the
purchase price for the Assets aggregated $3,825,000, as follows:
(a) $1,125,000 in cash; (b) $500,000 in a 30-day promissory note;
(c) the assumption of approximately $1,200,000 in liabilities
(which includes a mortgage in the amount of approximately
$460,000 in connection with the purchase of real estate); and (d)
$1,000,000 in a promissory note bearing interest at the annual
rate of 10%. Principal under the note shall be payable
exclusively in shares of Registrant's Common Stock in four equal
quarterly installments commencing August 1, 1996.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
Complete audited financial statements for Smart Style
Industries, Inc. and Affiliates for the fiscal years ended
December 31, 1995 and 1994 are filed herewith
(b) Pro Forma Financial Information
Pro forma financial information for Registrant and
Subsidiaries as of December 31, 1995 is filed herewith.
(c) Exhibits
(1) Agreement of Sale dated February 26, 1996, among
Registrant, Smart Style Acquisition Corp., Lions Acquisition
Corp., Smart Style Industries, Inc., Classic Craft, Inc. and
Lions Manufacturing, Inc.*
(2) License Agreement by and between Registrant and
H.W. Carter & Sons, Inc.*
----------------
* Previously filed
<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 thereunto duly authorized.
EVOLUTIONS, INC.
By /s/ Michael Nafash
Michael Nafash, President
Date: May 8, 1996
<PAGE>
SMART STYLE INDUSTRIES, INC.
AND AFFILIATES
REPORT ON AUDITS OF
COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<PAGE>
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
REPORT ON AUDITS OF COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
CONTENTS
Page
----
Report of Independent Certified Public Accountants F-1
Combined balance sheets as of December 31, 1995 and 1994 F-2
Combined statements of operations for the years ended
December 31, 1995 and 1994 F-3
Combined statement of stockholder's (deficiency) equity
for the years ended December 31, 1995 and 1994 F-4
Combined statements of cash flows for the years ended
December 31, 1995 and 1994 F-5
Notes to combined financial statements F-6 - F-10
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
Independent Auditors' Report
Board of Directors and Stockholder
Smart Style Industries, Inc.
New York, New York
We have audited the combined balance sheets of Smart Style Industries, Inc. and
Affiliates as of December 31, 1995 and 1994 and the related combined statements
of operations, stockholder's (deficiency) equity and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Smart Style
Industries, Inc. and Affiliates as of December 31, 1995 and 1994 and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 14, subsequent to year end the Company sold substantially
all its assets to Evolutions, Inc.
HOLTZ RUBENSTEIN & CO., LLP
April 12, 1996
Melville, New York
F-1
<PAGE>
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
December 31,
--------------------------
ASSETS (Note 14) 1995 1994
------ ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 11,348 $ 25,869
Accounts receivable 32,099 107,637
Inventories (Note 2) 1,788,171 3,748,912
Prepaid expenses 8,896 1,075
----------- -----------
1,840,514 3,883,493
PROPERTY, PLANT AND EQUIPMENT, net
(Notes 3 and 6) 711,552 702,262
OTHER ASSETS 18,014 18,014
----------- -----------
$ 2,570,080 $ 4,603,769
=========== ===========
LIABILITIES AND STOCKHOLDER'S (DEFICIENCY) EQUITY
-------------------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,135,920 $ 1,650,633
Due to factor (Note 4) 914,694 1,029,727
Due to related party (Note 5) 75,000 125,000
Due to stockholder (Note 7) 837,874 468,187
Current portion of long-term debt (Note 6) 48,707 14,055
----------- -----------
3,012,195 3,287,602
----------- -----------
DUE TO RELATED PARTY (Note 5) -- 75,000
----------- -----------
LONG-TERM DEBT (Note 6) 489,485 460,415
----------- -----------
COMMITMENTS (Note 8)
STOCKHOLDER'S (DEFICIENCY) EQUITY: (Note 9)
Common stock, no par value; 400 shares
outstanding; stated at 30,000 30,000
Common stock, $1 par value, 100 shares
outstanding 100 100
Additional paid-in capital 47,289 546,069
Deficit (1,047,700) 189,240
Proprietor's capital 38,711 15,343
----------- -----------
(931,600) 780,752
----------- -----------
$ 2,570,080 $ 4,603,769
=========== ===========
See notes to combined financial statements
F-2
<PAGE>
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
Years Ended
December 31,
----------------------------
1995 1994
------------ ------------
REVENUES (Note 10) $ 10,554,371 $ 13,145,446
------------ ------------
COSTS AND EXPENSES: (Note 8)
Cost of sales 9,482,878 11,531,486
Selling, general and administrative 1,793,336 1,690,051
------------ ------------
11,276,214 13,221,537
------------ ------------
OPERATING LOSS (721,843) (76,091)
INTEREST EXPENSE (Notes 4 and 6) 491,729 477,154
------------ ------------
NET LOSS $ (1,213,572) $ (553,245)
============ ============
NET LOSS PER SHARE (Note 9) $ (2,427.14) $ (1,106.49)
============ ============
Weighted average number of shares of common
stock outstanding (Note 9) 500 500
============ ============
See notes to combined financial statements
F-3
<PAGE>
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
COMBINED STATEMENT OF STOCKHOLDER'S (DEFICIENCY) EQUITY
<TABLE>
<CAPTION>
1208 Industrial
Smart Style - Lions - Classic Craft Avenue
------------------------------------------------------------------- -------------
Common Shares
------------- Additional (Deficit)
Common, Common, Paid-in Retained Proprietor's
No Par $1 Par Stated At Capital Earnings Capital Total
------ ------ --------- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - January 1, 1994 400 100 $30,100 $ 546,069 $ 771,144 $(6,820) $1,340,493
DISTRIBUTIONS -- -- -- -- (6,496) -- (6,496)
NET (LOSS) INCOME -- -- -- -- (575,408) 22,163 (553,245)
--- --- ------- --------- ----------- ------- ----------
BALANCE - December 31, 1994 400 100 30,100 546,069 189,240 15,343 780,752
DISTRIBUTIONS -- -- -- (498,780) -- -- (498,780)
NET (LOSS) INCOME -- -- -- -- (1,236,940) 23,368 (1,213,572)
--- --- ------- --------- ----------- ------- ----------
BALANCE - December 31, 1995 400 100 $30,100 $ 47,289 $(1,047,700) $38,711 $(931,600)
=== === ======= ========= =========== ======= ==========
</TABLE>
See notes to combined financial statements
F-4
<PAGE>
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
Years Ended
December 31,
-----------------------
1995 1994
----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,213,572) $(553,245)
----------- ---------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 91,077 87,679
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 75,538 26,893
Inventories 1,960,741 (314,865)
Prepaid expenses (7,821) 17,925
Other assets -- (3,427)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses (514,713) 505,670
----------- ---------
Total adjustments 1,604,822 319,875
----------- ---------
Net cash provided by (used in) operating
activities 391,250 (233,370)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (100,367) (70,723)
----------- ---------
Net cash used in investing activities (100,367) (70,723)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in due to factor (115,033) 10,552
Proceeds from long-term debt 100,000 --
Principal payments on long-term debt (36,278) (24,796)
Stockholder loans 369,687 65,187
Advances from related parties -- 200,000
Repayments to related parties (125,000) --
Stockholder distributions (498,780) (6,496)
----------- ---------
Net cash (used in) provided by financing
activities (305,404) 244,447
----------- ---------
Net decrease in cash and cash equivalents (14,521) (59,646)
Cash and cash equivalents at beginning of year 25,869 85,515
----------- ---------
Cash and cash equivalents at end of year $ 11,348 $ 25,869
=========== =========
See notes to combined financial statements
F-5
<PAGE>
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. Description of Company and Summary of Significant Accounting Policies:
a. Description of company
The accompanying combined financial statements include the financial
position and results of operations of Smart Style Industries, Inc. ("Smart
Style") and its commonly-owned affiliates, as described below (collectively, the
"Company"). The companies are owned by and are under the common management and
control of the same shareholder. All material intercompany transactions and
balances have been eliminated. The component members of the group are as
follows:
Smart Style Engaged in the wholesaling
of men's, women's, and
children's clothing.
Lions Manufacturing Company, Inc. Engaged in the contract
("Lions") sewing of clothing.
Classic Craft Industries, Inc. ("Classic Engaged in the contract
Craft") sewing of clothing.
Ceased operations in July
1995.
1208 Industrial Avenue Engaged in real estate
holdings.
b. Inventories
Inventories are valued at the lower of cost (first-in, first-out
method) or market.
c. Depreciation and amortization
Depreciation is computed principally on the straight-line method over
the estimated useful lives of the related assets. Amortization of leasehold
improvements is computed by the straight-line method over the life of the lease
or the useful life of the related asset, whichever is shorter.
d. Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
e. 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.
F-6
<PAGE>
2. Inventories:
Inventories consist of the following:
December 31,
-----------------------
1995 1994
---------- ----------
Raw materials $ 885,741 $1,521,144
Work-in-process 267,066 567,826
Finished goods 635,364 1,659,942
---------- ----------
$1,788,171 $3,748,912
========== ==========
3. Property, Plant and Equipment:
Property, plant and equipment, at cost, consists of the following:
December 31,
-----------------------
1995 1994
---------- ----------
Land $ 50,000 $ 50,000
Building and improvements 450,000 450,000
Machinery and equipment 431,525 419,680
Computers and office equipment 91,663 77,962
Leasehold improvements 119,585 44,764
---------- ----------
1,142,773 1,042,406
Less accumulated depreciation 431,221 340,144
---------- ----------
$ 711,552 $ 702,262
========== ==========
4. Due to Factor:
The Company had a factoring agreement under which the Company sold
substantially all of its trade accounts receivable, without recourse, and could
request advances on the net sales factored at anytime before their maturity
date. The factor charged a commission on the net sales factored and interest on
advances at prime (8 1/2% at December 31, 1995) + 2%. Total charges to the
factor approximated $443,000 and $434,000 for the years ended December 31, 1995
and 1994, respectively.
This factoring agreement was terminated in February, 1996.
5. Due to Related Party:
In June 1994, the Company borrowed $200,000 from a relative of a
stockholder. The loan bears interest at prime and is due on demand. The loan is
collateralized by securities of the Company's stockholder.
F-7
<PAGE>
6. Long-Term Debt:
Long-term debt consists of the following:
December 31,
---------------------
1995 1994
--------- ---------
Mortgage payable, bearing interest at 9%, payable
in monthly installments of $4,682 including
interest through November 2010, collateralized
by land and building $ 460,415 $ 474,470
Note payable, bearing interest at prime plus 3/4%,
payable in monthly installments of $2,778 plus
interest through April 1998, collateralized by
machinery and equipment 77,777 --
--------- ---------
538,192 474,470
Less current portion 48,707 14,055
--------- ---------
$ 489,485 $ 460,415
========= =========
Future maturities of long-term debt is as follows:
Year Ending
December 31, Amount
------------ ------
1996 $ 48,700
1997 50,100
1998 29,500
1999 20,100
2000 22,000
Thereafter 367,700
7. Due to Shareholder:
Amounts due to shareholder are non-interest bearing and are due on
demand.
8. Commitments:
Leases
The Company leases certain facilities under non-cancellable operating
leases expiring through April 1998. The Company also leases certain equipment
under an operating lease.
Rent expense under operating leases approximated $190,000 and $280,000
for the years ended December 31, 1995 and 1994, respectively.
A summary of the future minimum lease payments is as follows:
Year Ending
December 31, Amount
------------ ------
1996 $149,000
1997 146,000
1998 42,000
F-8
<PAGE>
9. Stockholder's (Deficiency) Equity:
a. Capitalization
The Companies authorized capital consists of the following:
Smart Style 200 shares of common stock, no par value
Lions 100,000 shares of common stock, no par value
Classic Craft 100,000 shares of common stock, $1 par value
b. Loss per share
Net loss per common share was computed by dividing the net loss by the
weighted average number of shares of common stock outstanding during each period
presented.
10. Major Customers:
Sales to three customers accounted for 13%, 19% and 13% of revenues for
1995 and 8%, 19% and 15%, of revenues for 1994.
11. Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable from
sales. The Company performs ongoing credit evaluations of its customers'
financial condition and payment history. Generally, accounts receivable are due
within 60 days. Credit losses have historically been insignificant and
consistently within management's expectations. Most of the Company's business
activity is with retailers located in the United States.
12. Income Taxes:
Smart Style, Lions and Classic Craft have elected by unanimous consent
of the shareholders to be taxed under the provisions of Sub-chapter "S" of the
Internal Revenue Code ("S" Corporation). 1208 Industrial Avenue is a sole
proprietorship. The stockholder includes his respective shares of each company's
net income in his individual income tax returns.
13. Fair Value of Financial Instruments:
In 1995, the Company adopted Financial Accounting Standards Board
Statement No. 107, which requires disclosures about the fair value of the
Company's financial instruments. The methods and assumptions used to estimate
the fair value of the following classes of financial instruments were:
Current Assets and Current Liabilities: The carrying amount of cash and
temporary cash investments, current receivables and payables and certain
other short-term financial instruments approximate their fair value.
Long-Term Debt: The fair value of the Company's long-term debt, including
the current portion, is estimated using discounted cash flow analysis,
based on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
F-9
<PAGE>
13. Fair Value of Financial Instruments: (Cont'd)
The carrying amount and fair value of the Company's financial instruments
at December 31, 1995 are as follows:
Carrying
Amount Fair Value
------ ----------
Cash and cash equivalents $ 11,300 $ 11,300
Accounts receivable and prepaid expenses 41,000 41,000
Accounts payable and accrued expenses 1,135,900 1,135,900
Due to factor 914,700 914,700
Due to related party 75,000 75,000
Due to shareholder 837,900 837,900
Long-term debt 538,200 538,200
14. Subsequent Event:
On February 26, 1996, the Company sold essentially all of its assets to
Evolutions, Inc. ("Evolutions"). Consideration consisted of (i) $1,125,000 cash,
(ii) a $500,000 30-day promissory note, (iii) the assumption of liabilities,
including the mortgage payable, approximating $1,200,000, and (iv) a $1,000,000
promissory note, bearing interest at 10% per annum. Principal under the
$1,000,000 note is payable in shares of Evolutions' common stock in four
quarterly installments commencing August 1, 1996. The Company also received
warrants to purchase 100,000 shares of common stock. In addition, the Company is
entitled to an additional $1,000,000 in common stock over a period of five
years, if certain earnings tests are met.
In January 1996 and February 1996, the Company borrowed $625,000 from
Evolutions.
F-10
<PAGE>
EVOLUTIONS, INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL STATEMENTS
DECEMBER 31, 1995
<PAGE>
EVOLUTIONS, INC. AND SUBSIDIARIES AND
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
NOTES TO PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995
(Unaudited)
The pro forma combined balance sheet of Evolutions, Inc. and
subsidiaries ("Evolutions") and Smart Style Industries, Inc. and affiliates
("SSI") gives effect to the purchase of substantially all of the assets of SSI
as if the transaction had occurred on December 31, 1995.
The cost of the acquisition was $1,125,000 in cash, $500,000 in a
30-day promissory note, the assumption of approximately $1,200,000 in
liabilities, and $1,000,000 in a promissory note bearing interest at the annual
rate of 10%, principal payable in shares of Evolution's common stock. This
acquisition was accounted for as a purchase. Under this method of accounting,
all assets and liabilities are recorded at their fair value as of the date of
acquisition. The allocation of the purchase price to assets resulted in an
increase in inventory of $75,000 for the estimated manufacturing profit related
to the finished goods inventory and a net increase of $894,000 in property,
plant and equipment based upon appraised values determined by independent
valuation specialists. The purchase price exceeded the fair value of net assets
by approximately $306,000. This amount, in addition to the value of 145,000
shares of common stock issued to third parties assisting with the acquisition
($174,000), has been recorded as goodwill and will be amortized on the straight
line method over a 10-year period.
In connection with financing the acquisition , Evolutions received
gross proceeds of $2,000,000 from bridge loans and $1,000,000 from a private
placement of 200,000 Units, each Unit consisting of two shares of common stock
and one warrant.
Footnotes to pro forma combined balance sheet:
(1) Elimination of assets, liabilities, and equity not acquired or
assumed by Evolutions and application of purchase accounting,
assuming the issuance of 350,000 shares of common stock to satisfy
the $1,000,000 promissory note
(2) Proceeds of bridge loans and private placement obtained by
Evolutions to fund the acquisition
(3) Common stock issued to third parties assisting with the acquisition
The pro forma combined balance sheet does not give effect to the
issuance of up to an additional $1,000,000 in common stock payable to the seller
contingent upon certain earnings tests being met over a period of five years.
<PAGE>
EVOLUTIONS, INC. AND SUBSIDIARIES AND
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Smart Style
Evolutions, Inc. Industries, Inc. Pro Forma Pro Forma
and Subsidiaries and Affiliates Adjustments Combined
---------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,508 $ 11,348 (1) $ (11,348) $1,886,508
(2) 3,000,000
(1) (1,125,000)
Due from broker 280,851 -- 280,851
Investments in available-for-sale
securities 762,119 -- 762,119
Accounts receivable, net 183,689 32,099 (1) (32,099) 183,689
Inventory -- 1,788,171 75,000 1,863,171
Note receivable - related party 15,000 -- 15,000
Prepaid expenses and other
current assets -- 8,896 (1) (8,896) --
---------- ---------- ---------- ----------
Total current assets 1,253,167 1,840,514 1,897,657 4,991,338
PROPERTY, PLANT AND
EQUIPMENT, NET 89,147 711,552 (1) 894,000 1,694,699
GOODWILL, NET 261,262 -- (3) 174,000
(1) 306,277 741,539
INTANGIBLES, NET 976,190 -- (1) 50,000 1,026,190
OTHER ASSETS -- 18,014 (1) (18,014) --
---------- ---------- ---------- ----------
$2,579,766 $2,570,080 $3,303,920 $8,453,766
========== ========== ========== ==========
</TABLE>
<PAGE>
EVOLUTIONS, INC. AND SUBSIDIARIES AND
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Smart Style
Evolutions, Inc. Industries, Inc. Pro Forma Pro Forma
and Subsidiaries and Affiliates Adjustments Combined
---------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 945,677 $ 1,135,920 (1) $ (474,112) $ 1,607,485
Bridge loans payable -- -- (2) 2,000,000 2,000,000
Notes payable -- -- (1) 500,000 500,000
Due to factor -- 914,694 (1) (914,694) --
Loans Payable 809,500 -- 809,500
Due to related party -- 75,000 (1) (75,000) --
Due to shareholder -- 837,874 (1) (837,874)
Current portion of long-term debt -- 48,707 48,707
----------- ----------- ----------- -----------
Total current liabilities 1,755,177 3,012,195 198,320 4,965,692
----------- ----------- ----------- -----------
LONG-TERM DEBT -- 489,485 -- 489,485
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, no par value, 50,000,000
shares authorized; 3,599,553 and 4,094,553
issued and outstanding, stated at 3,392,035 -- (2) 1,000,000 5,566,035
(3) 174,000
(1) 1,000,000
Common stock, no par value, 400 shares
outstanding, stated at -- 30,000 (1) (30,000) --
Common stock, $1 par value, 100 shares
outstanding, stated at -- 100 (1) (100) --
Additional paid-in capital -- 47,289 (1) (47,289) --
Deficit (1,944,490) (1,047,700) (1) 1,047,700 (1,944,490)
Proprietor's capital -- 38,711 (1) (38,711) --
Unrealized holding loss on securities
available-for-sale (622,956) -- -- (622,956)
----------- ----------- ----------- -----------
824,589 (931,600) 3,105,600 2,998,589
----------- ----------- ----------- -----------
$ 2,579,766 $ 2,570,080 $ 3,303,920 $ 8,453,766
=========== =========== =========== ===========
</TABLE>
See notes to Unaudited Pro Forma Combined Balance Sheet
<PAGE>
EVOLUTIONS, INC. AND SUBSIDIARIES AND
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
The pro forma combined statements of operations of Evolutions, Inc. and
subsidiaries ("Evolutions") and Smart Style Industries, Inc. and affiliates
("SSI") gives effect to the purchase of substantially all of the assets of SSI
as if the transaction had occurred as of the beginning of twelve months ended
December 31, 1995. The pro forma adjustments to reflect the acquisition are
summarized below.
(1) Estimated additional depreciation and amortization related to
property, plant and equipment and intangible assets recorded at
fair value and amortization of goodwill created by acquisition
(2) Elimination of SSI common shares
(3) Assumed issuance of 350,000 shares of common stock to satisfy
$1,000,000 promissory note
(4) Common shares issued to third parties assisting with the
acquisition
The pro forma combined statement of operations does not give effect to the
issuance of up to an additional $1,000,000 in common stock payable to the seller
contingent upon certain earnings tests being met over a period of five years.
<PAGE>
EVOLUTIONS, INC. AND SUBSIDIARIES AND
SMART STYLE INDUSTRIES, INC. AND AFFILIATES
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Smart Style
Evolutions, Inc. Industries, Inc. Pro Forma Pro Forma
and Subsidiaries and Affiliates Adjustments Combined
---------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
REVENUES $ 571,326 $10,554,371 $ -- $11,125,697
----------- ----------- --------- -----------
COSTS AND EXPENSES:
Cost of sales 433,782 9,482,878 -- 9,916,660
Selling, general and administrative 1,036,361 1,793,336 (1) 183,228 3,012,925
Bad debt expense 199,195 -- -- 199,195
----------- ----------- --------- -----------
1,669,338 11,276,214 183,228 13,128,780
----------- ----------- --------- -----------
OPERATING LOSS (1,098,012) (721,843) (183,228) (2,003,083)
----------- ----------- --------- -----------
OTHER:
Loss on sale of securities 407,538 -- -- 407,538
Interest expense 98,319 491,729 -- 590,048
Interest Income (917) -- -- (917)
----------- ----------- --------- -----------
504,940 491,729 -- 996,669
----------- ----------- --------- -----------
NET LOSS $(1,602,952) $(1,213,572) $(183,228) $(2,999,752)
=========== =========== ========= ===========
NET LOSS PER SHARE $ (0.52) $ (2,427.14) $ (0.84)
=========== =========== ===========
Weighted average number of shares of
common stock outstanding 3,079,358 500 (2) (500) 3,574,358
=========== =========== (3) 350,000 ===========
(4) 145,000
</TABLE>
See notes to Unaudited Proforma Combined Statements of Operations
