SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 4, 1998
Zomax Optical Media, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Minnesota
(State or Other Jurisdiction of Incorporation)
0-28426 41-1833089
(Commission File Number) (I.R.S. Employer Identification Number)
5353 Nathan Lane
Plymouth, Minnesota 55442
(Address of Principal Executive Offices) (Zip Code)
612-553-9300
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
The undersigned registrant hereby amends Item 7 of its Current Report on Form
8-K dated February 4, 1998 as set forth below:
Item 7. Financial Statements, Pro Forma Information and Exhibits.
(a) Financial statements of businesses acquired.
Audited financial statements of Next Generation Services, LLC,
Primary Marketing Group and Primary Marketing Group Limited
for the three years ended December 31, 1997, 1996 and 1995
are filed as part of this report on the following pages:
Page
Report of Independent Public Accountants dated
January 29, 1998.......................................... 5
Combined Balance Sheets as of December 31, 1997,
1996 and 1995............................................. 6
Combined Statements of Operations for Years Ended
December 31, 1997, 1996 and 1995.......................... 7
Combined Statements of Owners' Equity for Years Ended
December 31, 1997, 1996 and 1995...........................8
Combined Statements of Cash Flows for Years Ended
December 31, 1997, 1996 and 1995......................... 9
Notes to Combined Financial Statements................... 10
(b) Pro forma financial information.
Pro Forma Unaudited Condensed Combined Financial
Statements ...............................................15
Pro Forma Unaudited Condensed Combined Balance Sheet as
of December 26, 1997......................................16
Pro Forma Unaudited Condensed Combined Balance Sheet as
of December 27, 1996......................................17
Pro Forma Unaudited Condensed Combined Statement of
Operations for the Year ended December 26, 1997.......... 18
Pro Forma Unaudited Condensed Combined Statement of
Operations for the Year ended December 27, 1996.......... 19
Notes to Pro Forma Unaudited Condensed
Combined Financial Statements.............................20
<PAGE>
(c) Exhibits:
2.1 Stock Purchase Agreement dated February 3, 1998 by and among
Zomax Optical Media, Inc., Zomax Services, Inc., Primary
Marketing Group Limited and the shareholders of Primary
Marketing Group Limited. Upon the request of the Commission,
the Registrant agrees to furnish a copy of the exhibits and
schedules to the Stock Purchase Agreement, subject to requests
for confidential treatment of certain information contained in
such exhibits and schedules.
2.2 Merger Agreement dated February 3, 1998 by and among Zomax
Optical Media, Inc., Zomax Services, Inc., Next Generation
Services, LLC, Primary Marketing Group and the holders of all
membership interests of Next Generation Services, LLC and
shares of Primary Marketing Group. Upon the request of the
Commission, the Registrant agrees to furnish a copy of the
exhibits and schedules to the Merger Agreement, subject to
requests for confidential treatment of certain information
contained in such exhibits and schedules.
2.3 Asset Purchase Agreement dated February 3, 1998 by and among
Zomax Optical Media, Inc. and Kao Infosystems Company. Upon
the request of the Commission, the Registrant agrees to
furnish a copy of the exhibits and schedules to the Asset
Purchase Agreement, subject to requests for confidential
treatment of certain information contained in such exhibits
and schedules.
23.1 Consent of Arthur Andersen 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.
Dated: April 17, 1998
ZOMAX OPTICAL MEDIA, INC.
By /s/ James T. Anderson
James T. Anderson, President and
Chief Executive Officer
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of Next Generation Services, LLC, Primary Marketing Group and
Primary Marketing Group Limited:
We have audited the accompanying combined balance sheets of Next Generation
Services, LLC (a California limited liability corporation), Primary Marketing
Group, Inc. (a California corporation), and Primary Marketing Group Limited, (an
Irish limited liability company), as of December 31, 1997, 1996 and 1995, and
the related combined statements of operations, owners' 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 Next Generation
Services, LLC, Primary Marketing Group and Primary Marketing Group Limited
as of December 31, 1997, 1996, and 1995, and the results of their operations and
their cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
January 29, 1998
<PAGE>
NEXT GENERATION SERVICES, LLC,
PRIMARY MARKETING GROUP
AND PRIMARY MARKETING GROUP LIMITED
Combined Balance Sheets
As of December 31
<TABLE>
<CAPTION>
1997 1996 1995
--------------- ------------ ------------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 194,514 $1,029,800 $ 168,982
Accounts receivable, net of allowance for doubtful
accounts of $100,000 in 1997 1,054,624 2,306,902 1,873,746
Inventories 137,259 201,796 2,676
Prepaid expenses and other 98,449 123,418 107,454
----------- ----------- -----------
Total current assets 1,484,846 3,661,916 2,152,858
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$281,665, $192,187 and $223,448
442,131 216,911 167,983
OTHER ASSETS, net 14,622 3,414 259,264
----------- ----------- -----------
$1,941,599 $3,882,241 $2,580,105
=========== =========== ===========
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 661,823 $1,738,693 $ 208,208
Accrued expenses 410,371 228,586 135,243
Current portion of notes payable 140,000 270,000 170,000
----------- ----------- -----------
Total current liabilities 1,212,194 2,237,279 513,451
NOTES PAYABLE, net of current portion 63,333 - -
NOTE PAYABLE TO FORMER OWNER, net of current portion
- 120,000 390,000
----------- ----------- -----------
Total liabilities 1,275,527 2,357,279 903,451
----------- ----------- -----------
COMMITMENTS AND
CONTINGENCIES (Note 3)
OWNERS' EQUITY:
Partners' deficit - - (561,792)
Limited liability company interests 491,758 299,952 -
Common stock 4,134 4,134 4,134
Retained earnings 170,180 1,220,876 2,234,312
----------- ----------- -----------
Total owners' equity 666,072 1,524,962 1,676,654
----------- ----------- -----------
$1,941,599 $3,882,241 $2,580,105
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
<PAGE>
NEXT GENERATION SERVICES, LLC,
PRIMARY MARKETING GROUP
AND PRIMARY MARKETING GROUP LIMITED
Combined Statements of Operations
For the Years Ended December 31
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------- --------------
<S> <C> <C> <C>
SALES $ 9,970,100 $ 8,318,761 $3,640,862
COMMISSION INCOME 2,457,002 3,021,708 5,589,354
-------------- ------------- ------------
Total revenues 12,427,102 11,340,469 9,230,216
COSTS AND EXPENSES:
Product sales 4,740,014 4,820,112 1,189,268
Selling, general and administrative expenses 6,302,261 5,105,861 5,411,203
-------------- ------------- ------------
Operating income 1,384,827 1,414,496 2,629,745
INTEREST AND OTHER INCOME, net 6,228 44,545 65,610
-------------- ------------- ------------
Net income $ 1,391,055 $ 1,459,041 $2,695,355
============== ============= ============
PRO FORMA:
Net income before income taxes $ 1,391,055 $ 1,459,041 $2,695,355
Provision for income taxes 570,000 598,000 1,094,000
-------------- ------------- ------------
Net income $ 821,055 $ 861,041 $1,601,355
============== ============= ============
</TABLE>
The accompanying notes are an integral part of these combined statements.
<PAGE>
NEXT GENERATION SERVICES, LLC,
PRIMARY MARKETING GROUP
AND PRIMARY MARKETING GROUP LIMITED
Combined Statements of Owners' Equity
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Limited
Partners' Liability Common Stock
Capital Company ----------------- Retained
(Deficit) Interests Shares Amount Earnings Total
---------- ---------- ------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 $ 212,397 $ - 810,000 $3,974 $1,369,918 $1,586,289
Net income 877,411 - - - 1,817,944 2,695,355
Shares issued - - 100 160 - 160
Distributions to owners (1,089,600) - - - (953,550) (2,043,150)
Treasury purchase of partnership interests (562,000) - - - - (562,000)
---------- ---------- ------- ------ ---------- ----------
BALANCE, December 31, 1995 (561,792) - 810,100 4,134 2,234,312 1,676,654
Transfer of partnership interests in exchange
for interests in limited liability company 561,792 (561,792) - - - -
Net income - 1,411,477 - - 47,564 1,459,041
Distributions to owners - (549,733) - - (1,051,000) (1,600,733)
Shares repurchased - - (20,000) - (10,000) (10,000)
---------- ---------- ------- ------ ---------- ----------
BALANCE, December 31, 1996 - 299,952 790,100 4,134 1,220,876 1,524,962
Net income (loss) - 1,820,598 - - (429,543) 1,391,055
Distributions to owners - (1,628,792) - - (621,153) (2,249,945)
---------- ---------- ------- ------ ---------- ----------
BALANCE, December 31, 1997 $ - $ 491,758 790,100 $4,134 $ 170,180 $ 666,072
========== ========== ======= ====== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined statements.
<PAGE>
NEXT GENERATION SERVICES, LLC,
PRIMARY MARKETING GROUP
AND PRIMARY MARKETING GROUP LIMITED
Combined Statements of Cash Flows
For the Years Ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $1,391,055 $1,459,041 $2,695,355
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization 89,478 81,261 78,519
Write-down of other asset - 250,000 -
Changes in operating assets and liabilities:
Accounts receivable 1,252,278 (433,156) (531,480)
Inventories 64,537 (199,120) -
Prepaid expenses and other 24,969 (15,964) 152,516
Accounts payable (1,076,870) 1,530,485 128,198
Accrued expenses 181,785 93,343 (3,209)
----------- ----------- -----------
Net cash provided by operating activities
1,927,232 2,765,890 2,519,899
----------- ----------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment, net (314,698) (130,189) (182,709)
Change in other assets (11,208) 5,850 (151,052)
----------- ----------- -----------
Net cash used in investing activities
(325,906) (124,339) (333,761)
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from notes payable 100,000 - 560,000
Repayment of notes payable (286,667) (170,000) (34,630)
Repurchase of equity interest from owners - (10,000) (562,000)
Distributions to owners (2,249,945) (1,600,733) (2,043,150)
----------- ----------- -----------
Net cash used in financing activities (2,436,612) (1,780,733) (2,079,780)
----------- ----------- -----------
Net increase (decrease) in cash (835,286) 860,818 106,358
CASH AND CASH EQUIVALENTS:
Beginning of year 1,029,800 168,982 62,624
----------- ----------- -----------
End of year $ 194,514 $1,029,800 $ 168,982
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
<PAGE>
NEXT GENERATION SERVICES, LLC,
PRIMARY MARKETING GROUP
AND PRIMARY MARKETING GROUP LIMITED
Notes to Combined Financial Statements
As of December 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies:
Sale of the Companies
On February 4, 1998, Primary Marketing Group (PMG) and Next Generation
Services, LLC (NGS) were merged with and into Zomax Services, Inc. (the
Subsidiary), a wholly owned subsidiary of Zomax Optical Media, Inc.
(the Registrant) pursuant to a Merger Agreement dated February 3, 1998 (the
Merger). In the Merger, all issued and outstanding shares of PMG common stock
and membership interests in NGS were converted into the right to receive shares
of the Registrant's common stock. In aggregate, 795,860 shares of the
Registrant's common stock were issued to Anthony Angelini, Ronald Silzer, Brian
Fleury, Andrew Berg and Blake White in connection with the Merger. Prior to the
Merger, PMG's business consisted of providing manufacturers' representative
services in the computer industry and NGS' business consisted primarily of
providing returned merchandise authorization processing services in the computer
industry. PMG and NGS operated their respective businesses from facilities
located in and around San Jose, California. The Subsidiary intends to provide
substantially the same products and services that PMG and NGS provided prior to
the Merger.
As a result of the Merger, the Subsidiary succeeded to PMG's 78% ownership stake
in the capital stock of Primary Marketing Group Limited (PMG Limited), a company
incorporated under the laws of Ireland. Simultaneous to the Merger, the
Subsidiary acquired the remaining 22% of the outstanding capital stock of PMG
Limited in exchange for shares of the Registrant's common stock pursuant to the
terms of a Stock Purchase Agreement dated February 3, 1998 (the Acquisition). In
aggregate, 4,142 shares of the Registrant's common stock were issued to Anthony
Angelini, Ronald Silzer, Brain Fleury, Andrew Berg, Blake White and Patrick
Burke in connection with the Acquisition. Prior to the Acquisition, PMG Limited
was a multimedia manufacturing and services company with operations in Dublin,
Ireland. The Subsidiary intends to continue to operate PMG Limited as a wholly
owned subsidiary providing substantially the same products and services that PMG
Limited provided prior to the Acquisition.
The transactions will be accounted for using the pooling-of-interests method of
accounting.
<PAGE>
Principles of Combination
The combined financial statements include the consolidated accounts of NGS, PMG
and PMG Limited, collectively referred to herein as the Companies. The
accompanying financial statements are presented on a combined basis as a result
of the common ownership of the Companies. Significant intercompany transactions
and accounts have been eliminated in the combination. The capital accounts of
the Companies include the following:
<TABLE>
<CAPTION>
Shares/ Shares/Units
Par Units Issued and
Organizational Form Value Authorized Outstanding
----------------------------- ------- ---------- ------------
<S> <C> <C> <C> <C>
NGS Limited Liability Company N/A N/A N/A
PMG S Corporation - 2,000,000 790,000
PMG Limited Irish Limited Liability Company - 1,000,000 100
</TABLE>
Revenue Recognition
The Companies record sales revenue at the time the service is rendered or
merchandise is shipped. Commission income is recorded monthly as the services
are rendered.
Major Customers
In 1997 and 1996 two customers accounted for 27% and 14% and 10% and 16%,
respectively, of the Companies' sales. In 1995 two customers accounted for 12%
and 12%, respectively of the Companies' sales.
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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period.
Ultimate results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid short-term investments with original
maturities of 90 days or less and are recorded at cost, which approximates
market value.
Inventories
Inventories, consisting of material, labor and overhead are stated at the lower
of first-in, first-out cost or market. Inventories consists of finished goods
diskettes.
<PAGE>
Property and Equipment
Property and equipment are stated at cost. Repairs and maintenance are charged
to expense as incurred, while significant betterments are capitalized.
Depreciation is calculated using the straight-line method over the estimated
useful lives.
Property and equipment consisted of the following as of December 31:
<TABLE>
<CAPTION>
1997 1996 1995 Lives
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Manufacturing equipment $526,493 $388,891 $371,224 7 years
Office equipment 4,291 19,150 19,150 5-7 years
Leasehold improvements 193,012 1,057 1,057 Lease term
-------- --------- --------
Less- Accumulated depreciation (281,665) (192,187) (223,448)
-------- --------- --------
Property and equipment, net $442,131 $216,911 $167,983
======== ========= ========
</TABLE>
Dividends
NGS distributes approximately 75% of its taxable income to its members. PMG
distributes 100% of its taxable income to its shareholders.
Pro Forma Income Taxes
As a result of the Companies' legal structure as a limited liability company
(NGS and PMG Limited) and S corporation (PMG), the Companies' net income or loss
is reported in the income tax returns of its individual owners. Accordingly, no
provision for income taxes is reflected in the combined statements of
operations.
In connection with the acquisition discussed in Note 1, the Companies will
become taxable entities. Pro forma income taxes have been calculated using an
effective tax rate of 41%.
Fair Value of Financial Instruments
The financial instruments with which the Companies are involved are primarily of
a traditional nature. For most instruments, including cash, receivables,
accounts payable, accrued expenses and short-term debt, the Companies have
assumed that the carrying amounts approximate fair value because of their
short-term nature.
2. Note Payable:
As of December 31, 1997, the Companies had an installment loan with a lender for
$83,333. The interest rate is at the bank's reference rate plus 1.625% (10.125%
December 31, 1997). The payment terms are monthly payments of $1,667 due until
February, 2002.
The Companies had a note payable at December 31, 1997 totaling $120,000 in
connection with the redemption of the equity interests of a former owner. This
note is scheduled to be paid off during 1998.
<PAGE>
3. Commitments and Contingencies:
Litigation
The Companies are involved in claims arising in the normal course of business.
In management's opinion, the final resolution of these claims should not have a
material effect on the Companies' financial position or results of operations.
Operating Leases
The Companies are committed under operating leases for the rental of
manufacturing, warehouse and office facilities. Rent expense for the years ended
December 31, 1997, 1996 and 1995 was $495,668, $289,262 and $237,479,
respectively. Minimum future lease commitments under noncancelable lease
agreements in excess of one year as of December 31, 1997 are as follows:
1998 $428,550
1999 402,428
2000 313,672
2001 281,454
2002 23,351
<PAGE>
PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
The following pro forma unaudited condensed combined financial statements
include the historical financial statements of Zomax Optical Media, Inc.
(Successor to Zomax Optical Media Limited Partnership) and give effect to the
transactions and events described in the notes accompanying the pro forma
unaudited condensed combined financial statements as if the transactions and
events referred to therein were initiated at the beginning of the periods
presented.
On February 4, 1998, Primary Marketing Group (PMG) and Next Generation
Services, LLC (NGS) were merged with and into Zomax Services, Inc. (the
Subsidiary), a wholly owned subsidiary of Zomax Optical Media, Inc. (the Company
or the Registrant) pursuant to a Merger Agreement dated February 3, 1998 (the
Merger). In the Merger, all issued and outstanding shares of PMG common stock
and membership interests in NGS were converted into the right to receive shares
of the Registrant's common stock. In aggregate, 795,860 shares of the
Registrant's common stock were issued to Anthony Angelini, Ronald Silzer, Brian
Fleury, Andrew Berg and Blake White in connection with the Merger. Prior to the
Merger, PMG's business consisted of providing manufacturers' representative
services in the computer industry and NGS' business consisted primarily of
providing returned merchandise authorization processing services in the computer
industry. PMG and NGS operated their respective businesses from facilities
located in and around San Jose, California. The Subsidiary intends to provide
substantially the same products and services that PMG and NGS provided prior to
the Merger.
As a result of the Merger, the Subsidiary succeeded to PMG's 78% ownership stake
in the capital stock of Primary Marketing Group Limited (PMG Limited), a company
incorporated under the laws of Ireland. Simultaneous to the Merger, the
Subsidiary acquired the remaining 22% of the outstanding capital stock of PMG
Limited in exchange for shares of the Registrant's common stock pursuant to the
terms of a Stock Purchase Agreement dated February 3, 1998 (the Acquisition). In
aggregate, 4,142 shares of the Registrant's common stock were issued to Anthony
Angelini, Ronald Silzer, Brain Fleury, Andrew Berg, Blake White and Patrick
Burke in connection with the Acquisition. Prior to the Acquisition, PMG Limited
was a multimedia manufacturing and services company with operations in Dublin,
Ireland. The Subsidiary intends to continue to operate PMG Limited as a wholly
owned subsidiary providing substantially the same products and services that PMG
Limited provided prior to the Acquisition.
These transactions will be accounted for using the pooling-of-interests method
of accounting.
The pro forma adjustments are based on available information and certain
estimates and assumptions. Therefore, it is likely that the actual adjustments
will differ from the pro forma adjustments. The Company believes that such
estimates and assumptions provide a reasonable basis for presenting all of the
significant effects of the transactions and events and that the pro forma
adjustments give appropriate effect to those estimates and assumptions and are
properly applied in the pro forma unaudited condensed combined financial
statements.
The pro forma unaudited condensed combined financial statements should be read
in conjunction with the historical financial statements and related notes
included in the Company's Form 10-K. The pro forma unaudited condensed combined
financial statements are provided for informational purposes only and should not
be construed to be indicative of the Company's results of operations or the
Company's financial position had the transactions and events described above
been consummated on the dates assumed and do not project the Company's financial
position or results of operations for any future date or period.
<PAGE>
ZOMAX OPTICAL MEDIA, INC.
Pro Forma Unaudited Condensed Combined Balance Sheet
As of December 26, 1997
<TABLE>
<CAPTION>
The NGS, PMG, Pro Forma
Company PMG Limited Subtotal Adjustments Pro Forma
------------- ------------- ------------ -------------- -------------
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,018,903 $ 194,514 $ 5,213,417 $ - $ 5,213,417
Accounts receivable, net 6,105,574 1,054,624 7,160,198 - 7,160,198
Inventories 1,465,911 137,259 1,603,170 - 1,603,170
Prepaid expenses and other 781,265 98,449 879,714 - 879,714
Deferred income taxes 897,000 - 897,000 56,000(5) 953,000
------------ ------------ ------------ ---------- ------------
Total current assets 14,268,653 1,484,846 15,753,499 56,000 15,809,499
PROPERTY AND EQUIPMENT, net 13,560,563 442,131 14,002,694 - 14,002,694
GOODWILL AND OTHER ASSETS, net 1,255,595 14,622 1,270,217 103,000(5) 1,373,217
------------ ------------ ------------ ---------- ------------
$29,084,811 $1,941,599 $31,026,410 $159,000 $31,185,410
============ ============ ============ ========== ============
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable $ 2,153,950 $ 140,000 $ 2,293,950 $ - $ 2,293,950
Accounts payable and accrued expenses
7,097,646 1,072,194 8,169,840 - 8,169,840
Income taxes payable 240,882 - 240,882 - 240,882
------------ ------------ ------------ ---------- ------------
Total current liabilities 9,492,478 1,212,194 10,704,672 - 10,704,672
DEFERRED INCOME TAXES 755,000 - 755,000 - 755,000
LONG-TERM NOTES PAYABLE, net of current portion 3,040,642 63,333 3,103,975 - 3,103,975
------------ ------------ ------------ ---------- ------------
Total liabilities 13,288,120 1,275,527 14,563,647 - 14,563,647
------------ ------------ ------------ ---------- ------------
OWNERS' EQUITY:
Limited liability company interests - 491,758 491,758 (491,758)(2) -
Common stock 12,504,982 4,134 12,509,116 491,758 (2) 13,000,874
Retained earnings 3,291,709 170,180 3,461,889 159,000 (5) 3,620,889
------------ ------------ ------------ ----------- ------------
Total owners' equity 15,796,691 666,072 16,462,763 159,000 16,621,763
------------ ------------ ------------ ---------- ------------
Total liabilities and
owners' equity $29,084,811 $1,941,599 $31,026,410 $159,000 $31,185,410
============ ============ ============ ========== ============
The accompanying notes are an integral part of this unaudited pro forma balance sheet.
</TABLE>
<PAGE>
ZOMAX OPTICAL MEDIA, INC.
Pro Forma Unaudited Condensed Combined Balance Sheet
As of December 27, 1996
<TABLE>
<CAPTION>
The NGS, PMG, Pro Forma
Company(1) PMG Limited Subtotal Adjustments Pro Forma
---------- ----------- -------- ------------ ---------
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,914,899 $1,029,800 $ 7,944,699 $ - $ 7,944,699
Accounts receivable, net 3,944,929 2,306,902 6,251,831 - 6,251,831
Inventories 1,262,665 201,796 1,464,461 - 1,464,461
Prepaid expenses and other 110,443 123,418 233,861 - 233,861
Deferred income taxes 494,000 - 494,000 15,000(5) 509,000
------------ ---------- ----------- -------- -----------
Total current assets 12,726,936 3,661,916 16,388,852 15,000 16,403,852
PROPERTY AND EQUIPMENT, net 7,574,501 216,911 7,791,412 - 7,791,412
OTHER ASSETS, net 138,416 3,414 141,830 103,000(5) 244,830
------------ ---------- ----------- -------- -----------
$20,439,853 $3,882,241 $24,322,094 $118,000 $24,440,094
============ ========== =========== ======== ===========
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable $ 1,508,607 $ 270,000 $ 1,778,607 $ - $ 1,778,607
Accounts payable 1,590,088 1,738,693 3,328,781 - 3,328,781
Accrued expenses 1,510,049 228,586 1,738,635 - 1,738,635
Income taxes payable 513,819 - 513,819 - 513,819
------------ ---------- ----------- -------- -----------
Total current liabilities 5,122,563 2,237,279 7,359,842 - 7,359,842
DEFERRED INCOME TAXES 485,000 - 485,000 - 485,000
LONG-TERM NOTES PAYABLE, net of
current portion 1,714,374 120,000 1,834,374 - 1,834,374
------------ ---------- ----------- -------- -----------
Total liabilities 7,321,937 2,357,279 9,679,216 - 9,679,216
------------ ---------- ----------- -------- -----------
OWNERS' EQUITY:
Limited liability company interests - 299,952 299,952 (299,952)(2) -
Common stock 12,133,585 4,134 12,137,719 299,952 (2) 12,437,671
Retained earnings 984,331 1,220,876 2,205,207 118,000 (5) 2,323,207
------------ ---------- ----------- -------- -----------
Total owners' equity 13,117,916 1,524,962 14,642,878 118,000 14,760,878
------------ ---------- ----------- -------- -----------
Total liabilities and
owners' equity $20,439,853 $3,882,241 $24,322,094 $118,000 $24,440,094
============ ========== =========== ======== ===========
The accompanying notes are an integral part of this unaudited pro forma balance sheet.
</TABLE>
<PAGE>
ZOMAX OPTICAL MEDIA, INC.
Pro Forma Unaudited Condensed Combined Statement of Operations
For the Year Ended December 26, 1997
<TABLE>
<CAPTION>
NGS, PMG, Pro Forma
The Company PMG Limited Subtotal Adjustments Pro Forma
----------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SALES $37,906,853 $ 9,970,100 $47,876,953 $ - $47,876,953
COST OF SALES 28,033,354 4,740,014 32,773,368 - 32,773,368
----------- ----------- ----------- --------- -----------
Gross profit 9,873,499 5,230,086 15,103,585 - 15,103,585
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,859,326 4,000,580 9,859,906 - 9,859,906
----------- ----------- ----------- --------- -----------
Operating income 4,014,173 1,229,506 5,243,679 - 5,243,679
INTEREST EXPENSE 408,915 - 408,915 - 408,915
INTEREST INCOME AND OTHER (222,120) (6,228) (228,348) - (228,348)
OTHER INCOME, NET - (155,321) (155,321) - (155,321)
----------- ----------- ---------- --------- -----------
Income before provision for income taxes 3,827,378 1,391,055 5,218,433 - 5,218,433
PROVISION FOR INCOME TAXES 1,520,000 - 1,520,000 570,000(4) 2,090,000
----------- ----------- ---------- --------- -----------
Net income $ 2,307,378 $ 1,391,055 $ 3,698,433 $(570,000) $ 3,128,433
=========== =========== ========== ========= ===========
EARNINGS PER COMMON SHARE:
Basic $ 0.52 $ 0.60
=========== ===========
Diluted $ 0.51 $ 0.58
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 4,424,166 800,002(2) 5,224,168
=========== ========= ===========
Diluted 4,557,509 800,002(2) 5,357,511
=========== ========= ===========
The accompanying notes are an integral part of this unaudited pro forma statement.
</TABLE>
<PAGE>
ZOMAX OPTICAL MEDIA, INC.
Pro Forma Unaudited Condensed Combined Statement of Operations
For the Year Ended December 27, 1996
<TABLE>
<CAPTION>
The NGS, PMG, Pro Forma
Company(1) PMG Limited Subtotal Adjustments Pro Forma
---------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SALES $18,547,796 $ 8,318,761 $26,866,557 $ - $26,866,557
COST OF SALES 13,270,046 4,820,112 18,090,158 - 18,090,158
----------- ----------- ----------- --------- -----------
Gross profit 5,277,750 3,498,649 8,776,399 - 8,776,399
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,050,980 2,315,267 5,366,247 - 5,366,247
----------- ----------- ----------- --------- -----------
Operating income 2,226,770 1,183,382 3,410,152 - 3,410,152
INTEREST EXPENSE 357,166 - 357,166 - 357,166
INTEREST INCOME AND OTHER (284,624) (44,545) (329,169) - (329,169)
OTHER INCOME, NET - (231,114) (231,114) - (231,114)
----------- ----------- ----------- --------- -----------
Income before provision for income taxes 2,154,228 1,459,041 3,613,269 - 3,613,269
PROVISION FOR INCOME TAXES 668,000 - 668,000 - 668,000
----------- ----------- ----------- --------- ------------
Net income $ 1,486,228 $ 1,459,041 $ 2,945,269 $ - $ 2,945,269
=========== =========== =========== ========= ===========
PRO FORMA:
Income before provision for income taxes $ 2,154,228 $ 1,459,041 $ 3,613,269 $ - $ 3,613,269
Provision for income taxes 863,000(3) - 863,000 598,000(4) 1,461,000
----------- ----------- ----------- --------- -----------
Net income $ 1,291,228 $ 1,459,041 $ 2,750,269 $(598,000) $ 2,152,269
=========== =========== =========== ========= ===========
EARNINGS PER COMMON SHARE:
Basic $ .34 $ 0.47
=========== ===========
Diluted $ .34 $ 0.47
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 3,789,875 800,002(2) 4,589,877
=========== ========= ===========
Diluted 3,801,444 800,002(2) 4,601,446
=========== ========= ===========
The accompanying notes are an integral part of this unaudited pro forma statement.
</TABLE>
<PAGE>
ZOMAX OPTICAL MEDIA, INC.
Pro Forma Unaudited Condensed Combined Statement of Operations
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
NGS, PMG,
PMG Pro Forma
The Company Limited Subtotal Adjustments Pro Forma
----------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
SALES $13,217,539 $3,640,862 $16,858,401 $ - $16,858,401
COST OF SALES 10,036,991 1,189,268 11,226,259 - 11,226,259
----------- ---------- ----------- ----------- -----------
Gross profit 3,180,548 2,451,594 5,632,142 - 5,632,142
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,053,443 1,799,501 3,852,944 - 3,852,944
----------- ---------- ----------- ----------- -----------
Operating income 1,127,105 652,093 1,779,198 - 1,779,198
INTEREST EXPENSE 318,087 - 318,087 - 318,087
INTEREST INCOME AND OTHER (70,956) (65,610) (136,566) - (136,566)
OTHER INCOME, NET - (1,977,652) (1,977,652) - (1,977,652)
----------- ---------- ----------- ----------- -----------
Income before provision for income taxes 879,974 2,695,355 3,575,329 - 3,575,329
PROVISION FOR INCOME TAXES 340,000(3) - 340,000 1,094,000(4) 1,434,000
----------- ---------- ----------- ----------- -----------
Net income $ 539,974 $2,695,355 $ 3,235,329 $(1,094,000) $ 2,141,329
=========== ========== =========== =========== ===========
EARNINGS PER COMMON SHARE:
Basic $ 0.19 $ 0.59
=========== ===========
Diluted $ 0.19 $ 0.59
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 2,800,000 800,002(2) 3,600,002
=========== =========== ===========
Diluted 2,800,000 800,002(2) 3,600,002
=========== ============ ===========
The accompanying notes are an integral part of this unaudited pro forma statement.
</TABLE>
<PAGE>
ZOMAX OPTICAL MEDIA, INC.
Notes to Pro Forma Unaudited Condensed
Combined Financial Statements
For the Three-Year Period Ended December 26, 1997
1. Initial Public Offering:
The Company completed an initial public offering on May 10, 1996 and, upon
completion of the initial stock offering, received all of the operating assets
and liabilities of Zomax Optical Media Limited Partnership in exchange for
2,800,000 shares of its common stock.
2. Common Stock:
Reflects the issuance of the Company's 800,002 common shares in exchange for
all of the equity interests of NGS, PMG and PMG Limited.
3. Income Tax Provision for Zomax Optical Media Limited Partnership:
Reflects the pro forma income tax provision for Zomax Optical Media Limited
Partnership at an effective income tax rate of 40.1% and 38.6% for the years
ended December 27, 1996 and December 31, 1995, respectively.
4. Income Tax Provision for NGS, PMG and PMG Limited:
Reflects the pro forma income tax provision at an effective income tax rate of
41%, giving effect to a blended rate of 40% for the combined operations.
5. Deferred Income Taxes:
Reflects establishment of deferred income taxes.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX TO FORM 8-K/A-1
Date of Report: Commission File No.:
February 4, 1998 0-28426
ZOMAX OPTICAL MEDIA, INC.
EXHIBIT
NO. ITEM
2.1* Stock Purchase Agreement dated February 3, 1998 by and among
Zomax Optical Media, Inc., Zomax Services, Inc., Primary
Marketing Group Limited and the shareholders of Primary
Marketing Group Limited. Upon the request of the Commission,
the Company agrees to furnish a copy of the exhibits and
schedules to the Stock Purchase Agreement, subject to requests
for confidential treatment of certain information contained in
such exhibits and schedules.
2.2* Merger Agreement dated February 3, 1998 by and among Zomax
Optical Media, Inc., Zomax Services, Inc., Next Generation
Services, LLC, Primary Marketing Group and the holders of all
membership interests of Next Generation Services, LLC and
shares of Primary Marketing Group. Upon the request of the
Commission, the Company agrees to furnish a copy of the
exhibits and schedules to the Merger Agreement, subject to
requests for confidential treatment of certain information
contained in such exhibits and schedules.
2.3* Asset Purchase Agreement dated February 3, 1998 by and among
Zomax Optical Media, Inc. and Kao Infosystems Company. Upon
the request of the Commission, the Registrant agrees to
furnish a copy of the exhibits and schedules to the Asset
Purchase Agreement, subject to requests for confidential
treatment of certain information contained in such exhibits
and schedules.
23.1 Consent of Arthur Andersen LLP.
*Previously filed with Form 8-K
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K into the Company's previously filed
Registration Statements File Nos. 333-06133 and 333-06145.
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
April 16, 1998
