<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A
Current Report
(Amendment No. 1)
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
December 19, 1997
------------------------------------------------
Date of Report (Date of earliest event reported)
JAVELIN SYSTEMS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-21477 52-1945748
- ------------------------------- ------------ -------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
1881 Langley Avenue
Irvine, CA 92614
----------------------------------------
(Address of principal executive offices)
(714) 223-5130
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
The undersigned hereby amends Item 7 of its Current Report on Form 8-K filed
with the Commission on December 30, 1997 to read as follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Independent Auditors Report
Balance Sheet as of October 31, 1997
Statement of Operations for the twelve months ended October 31, 1997
Statement of Stockholders' Deficit for the twelve months ended
October 31, 1997
Statement of Cash Flows for the twelve months ended October 31, 1997
Notes to Financial Statements
(b) Introduction to Pro Forma Financial Statements
Pro Forma Combined Balance Sheet (Unaudited) as of December 31, 1997
Pro Forma Combined Statement of Operations (Unaudited) for the year
ended June 30, 1997
Pro Forma Combined Statement of Operations (Unaudited) for the six
months ended December 31, 1997
Notes to Pro Forma Combined Financial Statement (Unaudited)
(c) Exhibit No. Description
----------- -----------
2.1 Amendment to Purchase Agreement dated January 23, 1998
by and between Javelin Systems, Inc., and Mark LeMay,
as Agent for Paul R. Amestoy, Greg Kosin, Mark LeMay
and Ralph E. Rudzik, Jr.
<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.
Javelin Systems, Inc.
Dated: March 4, 1998 By: /s/ HORACE HERTZ
--------------------------
Horace Hertz
Chief Financial Officer
<PAGE>
POSNET COMPUTERS, INC.
FINANCIAL STATEMENTS
As Of October 31, 1997 and for the
Twelve-Month Period Ended October 31, 1997
with
INDEPENDENT AUDITORS' REPORT THEREON
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<S> <C>
Independent Auditors' Report............................................... 1
Financial Statements:
Balance Sheet as of October 31, 1997..................................... 2
Statement of Operations for the twelve-month
period ended October 31, 1997........................................... 3
Statement of Stockholders' Deficit for the twelve-month
period ended October 31, 1997........................................... 4
Statement of Cash Flows for the twelve-month
period ended October 31, 1997........................................... 5
Notes to Financial Statements............................................ 6 - 12
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Posnet Computers, Inc.
We have audited the accompanying balance sheet of Posnet Computers, Inc. (the
"Company") as of October 31, 1997, and the related statements of operations,
stockholders' deficit and cash flows for the twelve-month period then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Posnet Computers, Inc. as of
October 31, 1997, and the results of its operations and its cash flows for the
twelve-month period then ended in conformity with generally accepted accounting
principles.
CORBIN & WERTZ
Irvine, California
January 21, 1998
<PAGE>
- --------------------------------------------------------------------------------
POSNET COMPUTERS, INC.
BALANCE SHEET
As of October 31, 1997
- -------------------------------------------------------------------------------
ASSETS (Note 4)
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash $ -
Accounts receivable, net of allowance for doubtful
accounts of $30,000 729,537
Inventories 126,905
Prepaid expenses 7,951
----------
Total current assets 864,393
Property and equipment, net (Note 2) 62,644
Other assets (Note 3) 49,000
----------
$ 976,037
==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
Current liabilities:
Bank overdraft $ 120,751
Accounts payable and accrued expenses 716,355
Customer deposits 60,618
Bank line-of-credit and equipment line-of-credit (Note 4) 95,134
Notes payable - stockholders (Note 6) 49,200
----------
Total current liabilities 1,042,058
----------
Commitments and contingencies (Note 7)
Stockholders' deficit (Note 8):
Common stock, no par value; 100,000 shares authorized;
4,000 shares issued and outstanding 121,622
Accumulated deficit (187,643)
----------
Total stockholders' deficit (66,021)
----------
$ 976,037
==========
</TABLE>
- -------------------------------------------------------------------------------
See accompanying notes to financial statements
Page 2
<PAGE>
- -------------------------------------------------------------------------------
POSNET COMPUTERS, INC.
STATEMENT OF OPERATIONS
For The Twelve-Month Period Ended October 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Net sales $4,813,501
Cost of sales 2,804,806
----------
Gross profit 2,008,695
Salaries and related expenses 1,371,752
Selling, general and administrative expenses 648,503
----------
Loss from operations (11,560)
Interest expense 15,602
----------
Loss before provision for income taxes (27,162)
Provision for income taxes (Note 5) 800
----------
Net loss $ (27,962)
==========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
Page 3
<PAGE>
- --------------------------------------------------------------------------------
POSNET COMPUTERS, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
For the Twelve-Month Period Ended October 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
----------------- Accumulated
Shares Amount Deficit Total
------ -------- ----------- ---------
<S> <C> <C> <C> <C>
Balances, November 1, 1996 4,000 $121,622 $(159,681) $(38,059)
Net loss - - (27,962) (27,962)
----- -------- --------- --------
Balances, October 31, 1997 4,000 $121,622 $(187,643) $(66,021)
===== ======== ========= ========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
Page 4
<PAGE>
- --------------------------------------------------------------------------------
POSNET COMPUTERS, INC.
STATEMENT OF CASH FLOWS
For The Twelve-Month Period Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $ (27,962)
Adjustments to reconcile net loss to net cash used
in operating activities:
Bad debt expense 50,000
Depreciation and amortization 26,425
Impairment loss on other asset 10,000
Changes in operating assets and liabilities:
Accounts receivable (208,133)
Inventories (65,035)
Prepaid expenses 7,864
Accounts payable and accrued expenses 243,827
Customer deposits (78,860)
---------
Net cash used in operating activities (41,874)
---------
Cash flows from investing activities:
Purchase of property and equipment (11,007)
Advances to stockholders (18,213)
---------
Net cash used in investing activities (29,220)
---------
Cash flows from financing activities:
Net payments on bank line-of-credit and equipment line-of-credit (56,878)
Increases in notes payable - stockholders 25,000
Bank overdraft 102,972
---------
Net cash provided by financing activities 71,094
---------
Net change in cash -
Cash at beginning of year -
---------
Cash at end of year $ -
=========
Supplemental disclosure of cash flow information -
Cash paid during year for:
Interest $ 15,602
=========
Income taxes $ 4,807
=========
</TABLE>
Supplemental disclosure of non-cash investing and financing activities -
See notes to the financial statements for certain non-cash transactions
entered into during the twelve-month period ended October 31, 1997.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
Page 5
<PAGE>
- -------------------------------------------------------------------------------
POSNET COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
For The Twelve-Month Period Ended October 31, 1997
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
- -----------------------------------------------------
Organization and Nature of Operations
- -------------------------------------
Posnet Computers, Inc. (the "Company") was incorporated in the state of
California in July 1992. The Company sells new and refurbished point-of-sales
systems within the hospitality industry, primarily to restaurants. The Company
recently expanded to include value-added services, including system integration
and specialized reporting capabilities, for its customers located in the United
States.
These financial statements are presented as of October 31, 1997 and for the
twelve-month period ended October 31, 1997 (the "Period").
Risks, Uncertainties and Concentrations
- ---------------------------------------
Cash
Cash balances are maintained at one bank. Accounts at this institution are
insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000.
During fiscal 1997, the Company had cash balances in this bank which exceeded
the FDIC limit.
Customers
The majority of the Company's sales are to customers throughout the Western
United States. Credit is extended based on an evaluation of each customer's
financial condition and collateral is not required. The Company establishes an
allowance for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends and other information.
During the Period, the Company received a significant portion of its business
from one customer. During the Period, sales to this customer totaled 22%. As of
October 31, 1997, amounts due from this customer totaled 22% of net accounts
receivable. As of October 31, 1997, another customer accounted for 13% of net
accounts receivable. If the relationship between the Company and these customers
was altered, the future results of operations and financial condition could be
affected.
Suppliers
During the Period, the Company purchased a significant portion of its goods from
three suppliers. During the Period, purchases from these suppliers totaled 24%,
21% and 11% of total purchases, respectively. As of October 31, 1997, amounts
due to these suppliers totaled 42%,
- --------------------------------------------------------------------------------
Page 6
<PAGE>
- -------------------------------------------------------------------------------
POSNET COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS
For The Twelve-Month Period Ended October 31, 1997
- -------------------------------------------------------------------------------
18% and 12% of accounts payable. If the relationship between the Company and
these suppliers was altered, the future results of operations and financial
condition could be affected.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, continued
- ----------------------------------------------------------------
Fair Value of Financial Instruments
- -----------------------------------
The accompanying balance sheet includes financial instruments whereby the fair
market value of the financial instruments could be different than that recorded
on a historical basis. The Company's financial instruments consist of its cash,
accounts receivable, accounts payable, lines-of-credit and notes payable -
stockholders. The carrying amounts of the Company's financial instruments
generally approximate their fair values at October 31, 1997. The fair value of
the notes payable - stockholders was not readily determinable as market
comparables were not available for such an instruments.
Use of Estimates in the Preparation of Financial Statements
- -----------------------------------------------------------
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 the 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.
Significant estimates made by management are, among others, provisions for
losses on accounts receivable and provisions for slow moving and obsolete
inventories. Actual results could materially differ from those estimates.
Inventories
- -----------
Inventories are stated at the lower of cost or net realizable value. Cost is
determined on the first-in, first-out ("FIFO") method. Costs include only
materials; there are no direct labor or overhead components. The Company
operates in an industry in which its products are subject to design changes and
are manufactured based on customer specifications. Accordingly, should either
design requirements change significantly or orders cancel or decline, the
ultimate realizability of its inventories could be less than their carrying
values. As of October 31, 1997, management believes that inventories are carried
at their net realizable value.
Property and Equipment
- ----------------------
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the related assets,
ranging from three to seven years. Maintenance and repairs are charged to
expense as incurred. Significant renewals and betterments are capitalized. At
the time of retirement or other disposition of property and equipment, the cost
and accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in operations.
- --------------------------------------------------------------------------------
Page 7
<PAGE>
- -------------------------------------------------------------------------------
POSNET COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Twelve-Month Period Ended October 31, 1997
- -------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, continued
- ----------------------------------------------------------------
The Company assesses the recoverability of property and equipment by determining
whether the depreciation and amortization of property and equipment over its
remaining life can be recovered through projected undiscounted future cash
flows. The amount of property and equipment impairment, if any, is measured
based on fair value and is charged to operations in the period in which property
and equipment impairment is determined by management. As of October 31, 1997,
management believes that there is no impairment of property and equipment.
Warranty Accrual
- ----------------
The Company grants warranties on certain computer products for periods ranging
from ninety days to one year, commencing from the time of sale. For most
computer products sold, the Company receives a manufacturers warranty. As such,
the repair costs or rework costs are ultimately borne by the manufacturer.
Accordingly, no provision for warranties have been included in the accompanying
financial statements.
Revenue Recognition and Deferred Revenues
- -----------------------------------------
Revenues are recognized upon shipment of products and as services are rendered
to customers. Nonrefundable deposits received pursuant to certain contracts are
deferred as unearned revenues until the products are shipped or until such time
that the services are rendered to customers.
Advertising
- -----------
The Company reports the costs of all advertising as expense in the period in
which those costs are incurred.
Income Taxes
- ------------
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", ("SFAS 109"). Under SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance is
provided for significant deferred tax assets when it is more likely than not
that such assets will not be recovered.
- --------------------------------------------------------------------------------
Page 8
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, continued
- ----------------------------------------------------------------
New Disclosure Standard
- -----------------------
In June 1997, SFAS No. 130, "Comprehensive Income," ("SFAS 130") was issued
which becomes effective in fiscal 1998 and requires reclassification of earlier
financial statements for comparative purposes. SFAS 130 requires that changes in
the amounts of certain items, including foreign currency translation adjustments
and gains and losses on certain securities, be shown in the financial
statements. SFAS 130 does not require a specific format for the financial
statement in which comprehensive income is reported, but does require that an
amount representing total comprehensive income be reported in that statement.
The Company does not expect that the implementation of SFAS 130 will have a
material effect upon the Company's financial statements.
NOTE 2 - PROPERTY AND EQUIPMENT
- -------------------------------
Property and equipment (see Note 4) consists of the following as of October 31,
1997:
<TABLE>
<CAPTION>
<S> <C>
Office and computer equipment $ 65,823
Trucks and automobiles 45,076
Furniture and fixtures 15,884
Tools and test equipment 22,777
--------
149,560
Less accumulated depreciation and amortization (86,916)
--------
$ 62,644
========
</TABLE>
During the Period, depreciation and amortization expense totaled $26,425 and has
been reflected in selling, general and administrative expense in the
accompanying statement of operations.
NOTE 3 - OTHER ASSETS
- ---------------------
Other assets consist of the following as of October 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Investment in restaurant $10,000
Shareholder advances 39,000
-------
$49,000
=======
</TABLE>
As of October 31, 1997, the Company has a $10,000 (or a 0.75% ownership
interest) investment in a restaurant located in Southern California. The
investment in the restaurant is carried at cost. During the Period, the Company
recorded an impairment loss on this asset totaling $10,000.
Stockholder advances are due on demand and are non-interest bearing.
- --------------------------------------------------------------------------------
Page 9
<PAGE>
NOTE 4 - BANK LINE-OF-CREDIT AND EQUIPMENT LINE-OF CREDIT
- ---------------------------------------------------------
Bank Line-of-Credit
- -------------------
The Company has a $200,000 revolving line-of-credit (the "Line") with Wells
Fargo Bank which expires on February 10, 1998. Borrowings pursuant to the Line
($90,079 as of October 31, 1997) accrue interest at Wells Fargo Bank's prime
rate, as defined, plus 3.00% (11.50% as of October 31, 1997), and are personally
guaranteed by all of the Company's stockholders. The Line is secured by
substantially all of the assets of the Company.
The Line provides for various warranties, covenants and restrictions requiring
compliance on a continuing basis. Default on any warranty, covenant or
restriction could effect the bank's commitment to lend, and if not waived or
corrected, could accelerate the maturity of any borrowings outstanding under the
Line. Subsequent to October 31, 1997, the Company was acquired (see Note 8).
The Line has a provision which requires repayment upon such an event. The Line
is currently due and has not yet been repaid.
Equipment Line-of-Credit
- ------------------------
The Company has a $100,000 equipment line-of-credit (the "Equipment Line") with
Wells Fargo Bank which expires on March 5, 1998. Equipment purchase advances,
pursuant to the Equipment Line ($5,055 as of October 31, 1997), accrue interest
at either of the following two options: (1) fixed on the date of a particular
disbursement at 4.25% above the Treasury Rate, as defined, in effect at the
close of business on the Thursday of the week preceding such disbursement; or,
(2) prime rate, as defined, plus 2.00%. The principal of each equipment advance
shall be amortized over a period of not less than 24 months nor more than 96
months (depending on the type of equipment purchased), as agreed by the Company
and Wells Fargo Bank at the time of such equipment advance.
In August 1996, the Company borrowed $10,200, pursuant to the Equipment Line.
The Company elected option #1 (see above). The equipment purchase advance is
due in equal monthly installments of $482 over a 24 month period. The equipment
purchase advance bears interest at a fixed rate of 12.35% per annum The
equipment purchase advance is secured by the related equipment purchased (see
Note 2).
- --------------------------------------------------------------------------------
Page 10
<PAGE>
NOTE 5 - INCOME TAXES
- ---------------------
The provision for taxes consists of the following for the Period:
<TABLE>
<CAPTION>
Federal State Total
<S> <C> <C> <C>
Current $ - $800 $800
Deferred - - -
------- ---- ----
$ - $800 $800
======= ==== ====
</TABLE>
During the Period, the provision for taxes totaled $800, and differs from the
amount computed by applying the U.S. Federal income tax rate of 34% to income
attributable to continuing operations as a result of the following significant
reconciling items: meals and entertainment, keyman life insurance and an
increase in the valuation account.
As of October 31, 1997, the significant components of the Company's net deferred
tax assets are as follows:
<TABLE>
<CAPTION>
Deferred tax assets:
<S> <C>
Net operating losses $ 45,000
Allowance for bad debts 12,000
Other 4,000
--------
61,000
Valuation allowance (61,000)
--------
Deferred tax assets $ -
========
</TABLE>
During the Period, the valuation allowance increased $5,000.
As of October 31, 1997, the Company has net operating loss carryforwards
("NOLs") for Federal and state reporting purposes of approximately $112,000 and
$111,000, respectively, which expire in various years through 2012. The Federal
and state tax codes provide for restrictive limitations on the annual
utilization of NOLs to offset taxable income when the stock ownership of a
company significantly changes, as defined. In light of the Company's sale (see
Note 8), certain NOLs may currently, or in the foreseeable future, be subject to
such annual limitations. As such, an uncertainty exists as to the ultimate NOLs
that the Company will have to offset future taxable income. The Company's
management has recorded a valuation allowance to reflect for this uncertainty.
- --------------------------------------------------------------------------------
Page 11
<PAGE>
NOTE 6 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Notes Payable - Stockholders
- ----------------------------
As of October 31, 1997, the Company had notes with two stockholders totaling
$49,200. The notes are due on demand and bear interest at a rate of 10% per
annum. Subsequent to year end all principal and accrued interest pursuant to
these notes was repaid.
Other Matters
- -------------
See discussion in Note 3 for other related party transactions.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Operating Leases
- ----------------
The Company leases its facilities (located in Huntington Beach and the San
Francisco Bay Area) under two operating leases. The operating leases are month-
to-month. During the Period and pursuant to these operating leases, the Company
incurred rent expense totaling $49,000.
Royalty Agreement
- -----------------
In October 1994, the Company entered into a license agreement (the "License
Agreement") with an individual (the "Licensor") whereby the Licensor performs
repairs, maintenance and testing of RMS equipment on certain customers'
equipment (on behalf of the Company). As consideration, the Company is required
to pay the Licensor 7.5% of the total invoices billed to customers for theses
services. During the Period, the Company incurred royalty expense totaling
$9,900 pursuant to the License Agreement.
NOTE 8 - SUBSEQUENT EVENTS
- --------------------------
In December 19, 1997, all of the Company's shareholders (the "Selling
Shareholders") entered into a stock purchase agreement (the "SPA") with Javelin
Systems, Inc. (the "Purchaser"). Pursuant to the SPA and in exchange for 100% of
the Company's outstanding common stock, the Selling Shareholders received
225,000 shares of the Purchaser's common stock (the "Initial Consideration").
In addition to the Initial Consideration and upon certain events, as defined,
the Selling Shareholders may earn additional shares of the Purchaser's common
stock. The Purchaser is a public company traded on the NASDAQ SmallCap market
(NASDAQ:JVLN).
Other Matters
- -------------
See discussion of other subsequent events in Notes 4 and 6.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
On December 19, 1997, Javelin Systems, Inc. (the "Company") acquired all of
the outstanding capital stock of POSNET Computers, Inc. ("Posnet") pursuant to
the terms of a Stock Purchase Agreement by and among the Company, Posnet and the
selling shareholders of Posnet. Posnet sells, installs and maintains point-of-
sale (POS) systems and turnkey retail automation systems. The purchase price for
the Posnet stock consisted of 225,000 shares of the Common Stock of the Company.
The Company may be required to issue an additional 75,000 shares of its Common
Stock in 1998 and shares of its Common Stock with a market value of $500,000 in
each of 1999 and 2000 based upon the cumulative net profits (as defined in the
Stock Purchase Agreement) of Posnet during the three years ending December 31,
2000. The acquisition has been accounted for by the purchase method, and
accordingly, the results of operations of Posnet will be included with those of
the Company beginning January 1, 1998. The purchase price of $1,580,727
(including acquisition costs of $81,977) was based on the quoted market price of
the Company's Common Stock at the date of acquisition discounted by 25% due to
restrictions on liquidity. The purchase price resulted in excess of acquisition
costs over net assets of $1,678,453. Such excess (which will increase for any
contingent payments) is being amortized on a straight-line basis over 25 years.
On December 22, 1997, Javelin Systems, Inc. (the "Company") acquired all of
the outstanding capital stock of CCI Group, Inc. ("CCI") pursuant to the terms
of a Plan of Reorganization and Stock Purchase Agreement by and among the
Company, CCI and the selling shareholders of CCI. CCI sells, installs and
maintains POS systems and turnkey retail automation systems. The purchase price
for the CCI stock consisted of 670,000 shares of the Common Stock of the
Company. The acquisition has been accounted for by the purchase method, and
accordingly, the results of operations of CCI will be included with those of the
Company beginning January 1, 1998. The purchase price of $4,490,930 (including
acquisition costs of $125,461) was based on the quoted market price of the
Company's Common Stock at the date of acquisition discounted by 25% due to
restrictions on liquidity. The purchase price resulted in excess of acquisition
costs over net assets of $4,111,626. Such excess is being amortized on a
straight-line basis over 25 years.
The following Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 31, 1997, combines the historical balance sheets of Javelin, CCI and
Posnet as if the acquisitions had occurred on December 31, 1997, after giving
effect to certain adjustments described in the attached Notes to Unaudited Pro
Forma Condensed Financial Information.
The Unaudited Pro Forma Condensed Combined Statements of Income for the
year ended June 30, 1997 and for the six months ended December 31, 1997 present
the combined results of operations of Javelin, CCI and Posnet as if the
acquisitions had occurred on July 1, 1996, after giving effect to certain
adjustments described in the attached Notes to Unaudited Pro Forma Condensed
Financial Information.
The combined company expects to achieve merger benefits in the form of
operating cost savings. The pro forma earnings, which do not reflect any direct
costs or potential savings, which are expected to result from the consolidation
of operations of CCI and Posnet, are not indicative of the results of future
operations. No assurances can be given with respect to the ultimate levelof
expense savings.
This report on Form 8-K contains forward looking statements which are
subject to risks and uncertainties, including the risk that the combined
companies will not achieve operating cost and expense savings and risks
described in the Company's periodic reports and other filings with the
Securities Exchange Commission.
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS JAVELIN CCI POSNET ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash $ 525,188 $ 793,509 $(93,677) $ 1,225,021
Accounts receivable 3,735,843 1,197,299 546,663 $ (546,438) (1) 4,933,367
Allowance for doubtful accounts (98,000) (98,000)
Inventories 1,841,318 1,196,848 381,341 3,419,508
Other current assets 335,038 36,755 50,010 (200,000) (2) 221,803
----------- ---------- -------- ----------- -----------
Total current assets 6,339,387 3,224,411 884,338 (746,438) 9,701,697
----------- ---------- -------- ----------- -----------
Furniture, fixtures and equipment:
Computer equipment 175,222 104,014 32,546 311,782
Furniture and fixtures 258,151 61,591 2,447 322,189
Test equipment 1,273 1,273
Vehicles - 8,904 13,605 22,509
Assets under operating leases 58,838 58,838
Leasehold improvements 77,689 77,689
----------- ---------- -------- ----------- -----------
Total 511,062 233,347 49,871 - 794,280
Accumulated depreciation (90,538) (90,538)
----------- ---------- -------- ----------- -----------
Furniture, fixtures and
equipment, net 420,524 233,347 49,871 - 703,742
----------- ---------- -------- ----------- -----------
Other assets:
Investments 6,071,657 (6,071,657) (3) -
Goodwill 20,000 5,790,078 (3) 5,810,078
Other 37,247 - 7,546 44,793
----------- ---------- -------- ----------- -----------
Total other assets 6,108,904 - 27,546 (281,579) 5,854,871
----------- ---------- -------- ----------- -----------
TOTAL ASSETS $12,868,816 $3,457,757 $961,755 $(1,028,017) $16,260,310
=========== ========== ======== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities:
Lines of credit $ 1,000,000 $ 365,000 $ 3,755 $ 1,368,755
Loans payable to shareholders 185,478 44,200 229,678
Accounts payable 1,990,974 651,296 617,281 $ (546,438) (1) 2,713,113
Accrued expenses 172,704 189,200 67,866 429,790
Billings in excess of costs 1,479,413 126,379 1,605,792
Income taxes payable 199,666 -- 199,666
----------- ---------- ---------- ----------- -----------
Total current liabilities 3,163,678 3,070,073 859,481 (546,438) 6,546,794
Deferred income taxes 8,379 8,379
Deferred rent 3,177 3,177
Loan payable to Javelin 200,000 (200,000) (2) --
----------- ---------- ---------- ----------- -----------
3,166,856 3,078,452 1,059,481 (746,438) 6,558,351
----------- ---------- ---------- ----------- -----------
Stockholders' equity:
Common stock 40,347 1,000 121,622 (122,622) (3) 40,347
Additional paid-in-capital 10,488,350 -- -- 10,488,350
Deferred compensation (59,259) -- (59,259)
Accumulated deficit (767,478) 378,305 (219,348) (158,957) (3) (767,478)
----------- ---------- ---------- ----------- -----------
Total stockholders' equity 9,701,960 379,305 (97,726) (281,579) 9,701,960
----------- ---------- ---------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $12,868,816 $3,457,757 $ 961,755 $(1,028,017) $16,260,311
=========== ========== ========== =========== ===========
</TABLE>
<PAGE>
JAVELIN SYSTEMS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
CONSOLIDATING
JAVELIN CCI POSNET TOTAL ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
HARDWARE AND SOFTWARE $7,014,571 $6,844,542 $2,871,162 $16,730,275 $16,730,275
SERVICES - $1,396,132 $1,335,821 $ 2,731,953 $ 2,731,953
TOTAL $7,014,571 $8,240,674 $4,206,983 $19,462,228 - $19,462,228
COST OF SALES:
HARDWARE AND SOFTWARE $5,499,490 $5,955,019 $2,038,029 $13,492,538 $13,492,538
SERVICES - $1,041,945 $ 215,561 $ 1,257,506 $ 1,257,506
TOTAL $5,499,490 $6,996,964 $2,253,590 $14,750,044 - $14,750,044
GROSS MARGIN $1,515,081 $1,243,711 $1,953,393 $ 4,712,185 - $ 4,712,185
OPERATING EXPENSES:
SELLING, GENERAL AND
ADMINISTRATIVE $1,250,697 $1,205,555 $1,996,860 $ 4,453,112 $ 231,604 (4) $ 4,684,716
RESEARCH AND DEVELOPMENT $ 396,365 - - $ 396,365 $ 396,365
TOTAL $1,647,062 $1,205,555 $1,996,860 $ 4,849,477 $ 231,604 $ 5,081,081
OPERATING INCOME (LOSS) $ (131,981) $ 38,155 $ (43,467) $ (137,293) $(231,604) $ (368,897)
OTHER INCOME (EXPENSE) $ (694,905) $ (18,963) $ (19,690) $ (733,558) $ (733,558)
INCOME (LOSS) BEFORE
INCOME TAXES $ (826,886) $ 19,192 $ (63,157) $ (870,851) $(231,604) $(1,102,455)
PROVISION FOR INCOME TAXES - $ 7,792 $ 800 $ 8,592 - $ 8,592
NET INCOME (LOSS) $ (826,886) $ 11,400 $ (63,957) $ (879,443) $(231,604) $(1,111,047)
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,677,535
EARNINGS (LOSS) PER SHARE $ (0.30)
</TABLE>
<PAGE>
JAVELIN SYSTEMS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
CONSOLIDATING
JAVELIN CCI POSNET TOTAL ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
HARDWARE AND SOFTWARE $7,402,335 $3,718,255 $1,949,809 $13,070,399 $13,070,399
SERVICES - $ 925,145 $ 711,722 $ 1,636,867 $ 1,636,867
TOTAL $7,402,335 $4,643,400 $2,661,531 $14,707,266 - $14,707,266
COST OF SALES:
HARDWARE AND SOFTWARE $5,696,306 $3,049,018 $1,179,630 $ 9,924,954 $ 9,924,954
SERVICES - $ 652,461 $ 370,257 $ 1,022,718 $ 1,022,718
TOTAL $5,696,306 $3,701,479 $1,549,887 $10,947,672 - $10,947,672
GROSS MARGIN $1,706,029 $ 941,921 $1,111,644 $ 3,759,594 - $ 3,759,594
OPERATING EXPENSES:
SELLING, GENERAL AND
ADMINISTRATIVE $1,231,653 $ 862,467 $1,058,444 $ 3,152,564 $ 115,802 (5) $ 3,268,366
RESEARCH AND DEVELOPMENT $ 306,724 - - $ 306,724 $ 306,724
TOTAL $1,538,377 $ 862,467 $1,058,444 $ 3,459,289 $ 115,802 $ 3,575,091
OPERATING INCOME (LOSS) $ 167,651 $ 79,454 $ 53,200 $ 300,305 $(115,802) $ 184,503
OTHER INCOME (EXPENSE) $ 5,288 $ (6,240) $ 2,997 $ 2,045 $ 2,045
INCOME (LOSS) BEFORE
INCOME TAXES $ 172,939 $ 73,214 $ 56,196 $ 302,350 $(115,802) $ 186,548
PROVISION FOR INCOME TAXES $ 59,189 $ 29,725 $ 800 $ 89,714 - $ 89,714
NET INCOME (LOSS) $ 113,750 $ 43,489 $ 55,396 $ 212,636 $(115,802) $ 96,834
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,104,315
EARNINGS (LOSS) PER SHARE $ 0.02
</TABLE>
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
NOTE 1-BASIS OF PRESENTATION
On December 19, 1997, Javelin Systems, Inc. (the "Company") acquired all of
the outstanding capital stock of POSNET Computers, Inc. ("Posnet") pursuant to
the terms of a Stock Purchase Agreement by and among the Company, Posnet and the
selling shareholders of Posnet. Posnet sells, installs and maintains POS systems
and turnkey retail automation systems. The purchase price for the Posnet stock
consisted of 225,000 shares of the Common Stock of the Company. The Company may
be required to issue an additional 75,000 shares of its Common Stock in 1998 and
shares of its Common Stock with a market value of $500,000 in each of 1999 and
2000 based upon the cumulative net profits (as defined in the Stock Purchase
Agreement) of Posnet during the three years ending December 31, 2000. The
acquisition has been accounted for by the purchase method, and accordingly, the
results of operations of Posnet will be included with those of the Company
beginning January 1, 1998. The purchase price of $1,580,727 (including
acquisition costs of $81,977) was based on the quoted market price of the
Company's Common Stock at the date of acquisition discounted by 25% due to
restrictions on liquidity. The purchase price resulted in excess of acquisition
costs over net assets of $1,678,453. Such excess (which will increase for any
contingent payments) is being amortized on a straight-line basis over 25 years.
On December 22, 1997, Javelin Systems, Inc. (the "Company") acquired all of
the outstanding capital stock of CCI Group, Inc. ("CCI") pursuant to the terms
of a Plan of Reorganization and Stock Purchase Agreement by and among the
Company, CCI and the selling shareholders of CCI. CCI sells, installs and
maintains POS systems and turnkey retail automation systems. The purchase price
for the CCI stock consisted of 670,000 shares of the Common Stock of the
Company. The acquisition has been accounted for by the purchase method, and
accordingly, the results of operations of CCI will be included with those of the
Company beginning January 1, 1998. The purchase price of $4,490,930 (including
acquisition costs of $125,461) was based on the quoted market price of the
Company's Common Stock at the date of acquisition discounted by 25% due to
restrictions on liquidity. The purchase price resulted in excess of acquisition
costs over net assets of $4,111,626. Such excess is being amortized on a
straight-line basis over 25 years.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31,
1997, combines the historical balance sheets of Javelin, CCI and Posnet as if
the acquisitions had occurred on December 31, 1997, after giving effect to
certain adjustments described in the attached Notes to Unaudited Pro Forma
Condensed Financial Information.
The Unaudited Pro Forma Condensed Combined Statements of Income for the
year ended June 30, 1997 and for the six months ended December 31, 1997 present
the combined results of operations of Javelin, CCI and Posnet as if the
acquisitions had occurred on July 1, 1996, after giving effect to certain
adjustments described in the attached Notes to Unaudited Pro Forma Condensed
Financial Information.
<PAGE>
The Unaudited Pro Forma Condensed Financial Information should be read in
conjunction with the historical financial statements and the related notes
thereto of Javelin Systems, Inc.
NOTE 2
The unaudited Pro Forma Financial Information reflects the acquisition of
Posnet and CCI using the purchase method of accounting.
Purchase accounting adjustments related to the foregoing acquisitions
reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 31, 1997 are summarized as follows:
<TABLE>
<S> <C>
(1)
Accounts Payable $ 546,438
Accounts Receivable $ 546,438
To eliminate intercompany balances
(2)
Note Payable $ 200,000
Other current assets $ 200,000
To eliminate intercompany loan from
Javelin to Posnet
(3)
Goodwill $5,790,078
Common stock $ 122,622
Accumulated deficit $ 158,957
Investments $6,071,657
To eliminate investments in subsidiaries
No adjustment was necessary to eliminate intercompany profits from
inventory as such amount is not significant.
Purchase accounting adjustments related to the foregoing acquisitions
reflected in the Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended June 30, 1997 are summarized as follows:
(4)
Amortization of goodwill $ 231,604
</TABLE>
No adjustment to the provision for income taxes is required since the
amortization of goodwill is not deductible for income tax purposes.
<PAGE>
Purchase accounting adjustments related to the foregoing acquisitions
reflected in the unaudited Pro Forma Condensed Combined Statement of Operations
for the six months ended December 31, 1997 are summarized as follows:
<TABLE>
<S> <C>
(5)
Amortization of goodwill $115,802
</TABLE>
No adjustment to the provision for income taxes is required since the
amortization of goodwill is not deductible for income tax purposes.
<PAGE>
INDEX TO EXHIBITS
-----------------
EXHIBIT 2.1 Amendment to Purchase Agreement dated January 23, 1998 by
and between Javelin Systems, Inc. and Mark LeMay, as Agent
for Paul R. Amestoy, Greg Kosin, Mark LeMay and Ralph E.
Rudzik, Jr.
<PAGE>
EXHIBIT 2.1
JAVELIN SYSTEMS, INC.
AMENDMENT TO PURCHASE AGREEMENT
THIS AMENDMENT TO PURCHASE AGREEMENT (the "AMENDMENT") is made as of
January 23, 1998 between Javelin Systems, Inc., a Delaware corporation (the
"COMPANY") and Mark LeMay, as agent ("AGENT") for the following individuals (the
"SELLING SHAREHOLDERS"): Paul R. Amestoy, Greg Kosin, Mark LeMay and Ralph E.
Rudzik, Jr.
WHEREAS, the Company, the Agent, the Selling Shareholders and Posnet
Computers, Inc. entered into that certain Stock Purchase Agreement dated as of
December 19, 1997 (the "PURCHASE AGREEMENT") (capitalized terms used but not
defined herein shall have the meaning assigned to them in the Purchase
Agreement); and
WHEREAS, the Company and Agent desire to amend the Purchase Agreement as
provided below.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Amendment hereby agree as follows:
AMENDMENT
1. Section 1.1(c) of the Purchase Agreement is hereby amended so as to add a
second paragraph thereto as follows:
"Notwithstanding anything herein to the contrary, unless permitted by the
applicable rules and regulations of The Nasdaq SmallCap Market (or the
principal securities exchange on which the Purchaser Common Stock shall be
listed or traded if changed from The Nasdaq SmallCap Market), the aggregate
number of shares of Purchaser Common Stock issued or issuable under
Sections 1.1(a), (b) or (c) hereof shall not exceed the number of shares of
Purchaser Common Stock that Purchaser is permitted to issue in accordance
with Nasdaq Marketplace Rule 4310(c)(25)(H) without the necessity of
obtaining approval by Purchaser's stockholders. In the event that, as a
result of the foregoing sentence, Purchaser is precluded from paying any
portion of the First Annual Earnout Amount or the Second Annual Earnout
Amount in shares of Purchaser Common Stock, Purchaser shall pay to each
Selling Shareholder a sum of cash equal to such Selling Shareholder's Pro
Rata Percentage of the portion of the First Annual Earnout Amount or the
Second Annual Earnout Amount, as the case may be, not paid in shares of
Purchaser Common Stock."
2. Except as modified by this Amendment, the Purchase Agreement shall remain
in full force and effect. This Amendment shall be deemed an amendment to the
Purchase Agreement and
<PAGE>
shall become effective when executed and delivered by the Company and the Agent
as provided under Section 6.14 of the Purchase Agreement.
The foregoing Amendment is hereby executed as of the date first above
written.
THE COMPANY:
JAVELIN SYSTEMS, INC.
By: /s/ Richard Stack
----------------------------------
Title: Chief Executive Officer
-------------------------------
AGENT:
/s/ Mark LeMay
- -------------------------------------
MARK LEMAY
