<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 22, 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 (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
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 January 5, 1998 to read as follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Report of Independent Accountants
Balance Sheets as of December 31, 1997 and 1996
Statements of Income for the years ended December 31, 1997 and
1996
Statements of Changes in Stockholders' Equity for the years ended
December 31, 1997 and 1996
Statements of Cash Flows for the years ended December 31, 1997 and
1996
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)
<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 6, 1998 By: /s/ Horace Hertz
------------------------------
Horace Hertz
Chief Financial Officer
<PAGE>
================================================================================
CCI GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL
STATEMENTS
DECEMBER 31, 1997
================================================================================
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
- --------------------------------------------------------------------------------
PAGE
<S> <C>
AUDITORS' REPORT........................................................ 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets........................................... 2
Consolidated Statements Of Income..................................... 3
Consolidated Statements Of Changes
In Stockholders' Equity............................................. 4
Consolidated Statements of Cash Flows................................. 5
Notes to Consolidated Financial Statements............................ 6- 14
</TABLE>
<PAGE>
[LETTERHEAD OF RBG&CO.]
Stockholders and Board of Directors
CCI Group, Inc.
We have audited the accompanying consolidated balance sheets of CCI Group, Inc.
and subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our 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 consolidated financial position of CCI Group, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the consolidated results
of operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Rubin, Brown, Gornstein & Co. LLP
February 6, 1998
St. Louis, Missouri
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
---------------------------
1997 1996
---------------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 793,509 $ 134,806
Accounts receivable 1,197,299 563,899
Inventory 1,196,848 373,403
Prepaid expenses 14,179 15,526
Other assets 22,575 15,006
- -------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,224,410 1,102,640
- -------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment 330,080 90,886
Accumulated depreciation (96,733) (27,951)
- -------------------------------------------------------------------------------------
TOTAL PROPERTY AND EQUIPMENT 233,347 62,935
- -------------------------------------------------------------------------------------
TOTAL ASSETS $ 3,457,757 $ 1,165,575
=====================================================================================
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 651,296 $ 210,898
Billings in excess of costs and estimated earnings on
uncompleted contracts 1,479,413 537,372
Line of credit 365,000 --
Note payable - officer 185,478 99,990
Accrued expenses 189,220 275,505
Accrued income taxes 199,666 1,822
- -------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,070,073 1,125,587
- -------------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Deferred income taxes 8,379 5,795
Minority interest in subsidiaries -- 35,452
- -------------------------------------------------------------------------------------
TOTAL LONG-TERM LIABILITIES 8,379 41,247
- -------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock:
$1 par value, 30,000 shares authorized, 1,000 shares 1,000 1,000
issued and outstanding
Retained earnings 378,305 126,008
Treasury stock -- (128,267)
- -------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 379,305 (1,259)
- -------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,457,757 $ 1,165,575
=====================================================================================
- -------------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements. Page 2
</TABLE>
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
-----------------------------
1997 1996
-----------------------------
<S> <C> <C>
REVENUES
Product sales $ 7,575,558 $ 4,602,186
Sales of services 1,939,380 367,926
- ------------------------------------------------------------------------------------
TOTAL REVENUES 9,514,938 4,970,112
- ------------------------------------------------------------------------------------
COST OF SALES
Cost of products 6,335,727 3,773,499
Cost of services 1,487,700 64,116
- ------------------------------------------------------------------------------------
TOTAL COST OF SALES 7,823,427 3,837,615
- ------------------------------------------------------------------------------------
GROSS PROFIT 1,691,511 1,132,497
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,177,209 1,055,116
- ------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 514,302 77,381
- ------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Other income 6,500 1,890
Interest expense (22,554) --
Loss on sale of assets (2,156) --
Interest income 1,387 13,052
- ------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (16,823) 14,942
- ------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION
FOR INCOME TAXES AND MINORITY INTEREST 497,479 92,323
PROVISION FOR INCOME TAXES 201,973 23,326
- ------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY
INTEREST 295,506 68,997
MINORITY INTEREST -- 6,894
- ------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 295,506 62,103
LOSS FROM DISCONTINUED AUTOMOTIVE OPERATIONS, NET
OF APPLICABLE INCOME TAX CREDIT OF $4,211 AND $2,709 (6,160) (8,012)
GAIN FROM DISPOSAL OF AUTOMOTIVE
SEGMENT, NET OF APPLICABLE INCOME
TAXES OF $29,643 43,370 --
- ------------------------------------------------------------------------------------
NET INCOME $ 332,716 $ 54,091
====================================================================================
INCOME PER SHARE OF COMMON STOCK:
Income from continuing operations 322 70
Discontinued operations 41 (9)
- ------------------------------------------------------------------------------------
NET INCOME $ 363 $ 61
====================================================================================
- -------------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements. Page 3
</TABLE>
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK RETAINED TREASURY STOCK STOCKHOLDERS'
------------------- EARNINGS ---------------------------- EQUITY
SHARES AMOUNT (DEFICIT) SHARES AMOUNT (DEFICIT)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1995 1,000 $ 1,000 $ 71,917 -- $ -- $ 72,917
PURCHASE OF TREASURY STOCK -- -- -- 450 128,267 (128,267)
NET INCOME -- -- 54,091 -- -- 54,091
- ------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1996 1,000 1,000 126,008 450 128,267 (1,259)
TREASURY STOCK REISSUED TO
EMPLOYEES -- -- (36,465) (168) (47,861) 11,396
TREASURY STOCK REISSUED TO
STOCKHOLDER -- -- (43,954) (282) (80,406) 36,452
NET INCOME -- -- 332,716 -- -- 332,716
- ------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1997 1,000 $ 1,000 $ 378,305 -- $ -- $ 379,305
============================================================================================================
- ------------------------------------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements. Page 4
</TABLE>
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $10,004,350 $ 6,075,501
Cash paid to suppliers and employees (9,582,820) (5,906,488)
Interest paid (16,839) --
Interest received 1,417 --
Income taxes paid (25,600) (16,500)
Other receipts 6,500 4,167
- -------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 387,008 156,680
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of treasury stock -- (128,267)
Capital expenditures (241,659) (62,126)
Proceeds from sale of segment 62,866 --
Proceeds from sale of assets -- 74,927
- -------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (178,793) (115,466)
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (payments to) officer 85,488 (48,593)
Proceeds from line of credit 365,000 --
- -------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 450,488 (48,593)
- -------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 658,703 (7,379)
CASH - BEGINNING OF YEAR 134,806 142,185
- -------------------------------------------------------------------------------------------
CASH - END OF YEAR $ 793,509 $ 134,806
===========================================================================================
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 332,716 $ 54,091
- -------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 70,091 18,056
Minority interest in subsidiaries -- 6,894
Wages paid by company stock 11,396 --
Loss (gain) on sale of property 2,156 (66,096)
Gain on sale of segment (73,013) --
Increase in accounts receivable (633,400) (388,816)
Increase in interest receivable -- (5,387)
Increase in inventory (863,298) (248,003)
Decrease (increase) in prepaid expenses 1,347 (12,409)
Increase in other assets (7,569) (2,439)
Increase in accounts payable 490,398 165,622
Increase in billing in excess of costs and estimated
earnings on uncompleted contracts 942,041 418,292
Increase (decrease) in income tax payable 197,844 (1,678)
Increase in deferred taxes 2,584 5,795
(Increase) decrease in accrued expenses (86,285) 212,758
- -------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS 54,292 102,589
- -------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 387,008 $ 156,680
===========================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Proceeds from sale of segment through reduction in
accounts payable $ 50,000 $ --
===========================================================================================
- -------------------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements. Page 5
</TABLE>
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
BUSINESS DESCRIPTION
CCI GROUP, INC. (the Company) is the parent company of CCI Technology, Inc.,
CCI Payment Systems, Inc., Sourcelink, Inc., and Custom Configurations, Inc.
The parent company is a holding company.
CCI Technology, Inc. is a general contractor for the design, configuration and
deployment of retail point of sale, information management and data collection
systems, primarily for the food service industry. CCI Technology's services
include installation, training, support, and documentation. CCI Payment
Systems, Inc. is the distributor of payment processing systems assembled and
configured by CCI Technology. Custom Configurations, Inc. was the manufacturer
of certain automotive parts. Sourcelink, Inc. was the distributor of those
automotive parts. All CCI Group companies market throughout the United States.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all subsidiaries, which are all more than 50% owned. Intercompany
accounts and transactions have been eliminated in the consolidated
financial statements.
REVENUE RECOGNITION
The Company recognizes contract revenue principally on the percentage of
completion method. The percent complete is measured independently for each
contract based on the terms of that contract. The majority of contracts'
percent complete is based on the completion of specific phases indicated
within the contract. Other revenues are recognized on the basis of
shipment of products or performance of services.
Contract costs include all direct labor and benefits, materials unique to
or installed in the project, subcontractor cost and indirect cost
allocations, including employee benefits.
As long-term contracts extend over one or more years, revisions in cost and
earnings estimates during the course of the work are reflected in the
accounting period in which the facts which require the revision become
known. At the time a loss on a contract becomes known, the entire amount
of the estimated ultimate loss is recognized in the financial statements.
- --------------------------------------------------------------------------------
Page 6
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
The Company generally does not have any significant remaining obligations
upon shipment of its products. Product returns and sales allowances, which
have not been significant historically, are provided for at the date of
sale.
Amounts billed to customers in excess of revenue earned is included as a
current liability, "billings in excess of costs and estimated earnings on
uncompleted contracts" on the balance sheet. At December 31, 1997 and
1996, this account balance consists principally of amounts billed on
contracts to be started in 1998 and 1997, respectively.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly-liquid debt instruments to be cash equivalents.
ACCOUNTS RECEIVABLE-ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company uses the allowance method to account for uncollectible accounts
receivable. The allowance for doubtful accounts is based on prior years'
experience and management analysis of possible bad debts. As of December
31, 1997 and 1996, management has determined no allowance is required.
INVENTORY
The Company uses the weighted average cost method of valuing inventory. At
December 31, 1997 and 1996, inventory consists principally of purchased
computer hardware and components.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation and amortization is
computed using both straight line and accelerated methods. Asset lives
range from 3 to 5 years.
Repairs and maintenance are charged to expense when incurred. Expenditures
for major renewals and betterments that extend the useful life of the
assets are capitalized.
DEFERRED INCOME ON SERVICE SALES
The Company includes product service with some system contracts. Revenues
billed specifically for the service portion of the contract are deferred
and amortized on a straight-line basis over the life of the service
contract. Service contract costs are charged to operations as incurred.
- --------------------------------------------------------------------------------
Page 7
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
INCOME TAXES
The Company's operations are included in consolidated tax returns, which
includes the operation of the four subsidiary companies, through the sale
date of the Company, December 22, 1997. The consolidated tax return
excluded CCI Payment Systems, Inc. which was an S Corporation from its
inception May 5, 1997 through December 15, 1997.
The Company accounts for income taxes using the asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, the Company generally considers all
expected future events other than enactments of changes in the tax law or
rates.
CCI Payment Systems, Inc. elected S corporate status effective on its date
of incorporation. Therefore, the income and losses through December 22,
1997 are included in the income tax returns of the shareholders. No
provision or liability for income taxes is recorded for this subsidiary for
that period.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income applicable to
common shareholders by the weighted average number of shares outstanding
during each year. The weighted average number of common shares outstanding
used to compute income (loss) per common share for 1997 and 1996 was 918
and 888, respectively.
USE OF ESTIMATES
The presentation 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.
WARRANTIES
The Company's products are under warranty for defects in material and
workmanship for up to one year. Certain components included in the
Company's products are covered by manufacturer's warranties. Costs related
to after-sale service and repair have been considered insignificant.
- --------------------------------------------------------------------------------
Page 8
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consist of:
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
Computer hardware $119,306 $ 39,508
Computer software 38,454 22,057
Computer hardware held for operating lease 78,030 --
Office equipment 60,167 19,469
Shop equipment 23,009 7,102
Vehicles 11,114 2,750
- ---------------------------------------------------------------------
330,080 90,886
Less: Accumulated depreciation (96,733) (27,951)
- ---------------------------------------------------------------------
$233,347 $ 62,935
=====================================================================
</TABLE>
Depreciation and amortization expense charged against income amounted to
$70,091 in 1997 and $18,056 in 1996.
3. LINE OF CREDIT AGREEMENT
In 1997, the Company had a $1,000,000 line of credit from Magna Bank which
matures August 5, 1998. Interest is payable monthly at a rate of one
percent over the prime rate. The Company's inventory, accounts receivable,
property, furniture and equipment are collateral for the line of credit.
4. INCOME TAXES
Deferred income taxes are provided for the temporary differences between
the tax and financial reporting basis of the Company's assets and
liabilities at December 31, 1997 and 1996, utilizing the tax rates expected
to be in effect when the temporary differences reverse. The principal
temporary difference results from the use of accelerated tax depreciation
methods for income tax reporting purposes.
- --------------------------------------------------------------------------------
Page 9
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
The income tax provision charged to continuing operations during the years
ended December 31 was as follows:
<TABLE>
<CAPTION>
1997 1996
-----------------------
<S> <C> <C>
Current Tax Expense :
Federal $ 172,258 $ 13,744
State 27,131 3,787
- -------------------------------------------------------
Total Current Tax Expense 199,389 17,531
Deferred Tax Expense 2,584 5,795
- -------------------------------------------------------
PROVISION FOR INCOME TAX $ 201,973 $ 23,326
=======================================================
</TABLE>
Deferred tax liabilities at December 31 were comprised of the following:
<TABLE>
<CAPTION>
1997 1996
--------------------
<S> <C> <C>
Deferred Tax Liabilities:
Tax over book depreciation $ 8,379 $ 5,795
=======================================================
</TABLE>
5. LEASE AGREEMENTS
The Company leases its office and warehouse facility under a noncancellable
agreement. The lease calls for monthly rental payments of $7,569 and
expires October 31, 1998. Rent expense for the years ended December 31,
1997 and 1996 totaled $89,412 and $63,273, respectively.
In 1997, CCI Technology, Inc. leased equipment to two customers under
month-to-month operating lease agreements. The leases call for monthly
lease payments of $33 to $50 per month per unit leased. Lease income for
the year ended December 31, 1997 totaled $69,831. At December 31, 1997,
the assets are carried on the books at $78,030 less $19,191 accumulated
depreciation.
- --------------------------------------------------------------------------------
Page 10
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
6. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk are cash investments and trade receivables.
The Company places its cash investments with high-credit-quality financial
institutions. Deposits in excess of the FDIC insurance limit amounted to
$693,384 and $34,807 at December 31, 1997 and 1996, respectively.
In the normal course of business, the Company provides credit terms to its
customers and collateral is generally not required. Accordingly, the
Company performs ongoing credit evaluations of its customers and maintains
allowances for potential losses, if necessary.
The Company has a significant concentration of credit risk with respect to
a receivable from a development stage customer engaged in payment
processing services (a niche market of the point of sale industry).
Repayment is dependent upon the customer's ability to continue to raise
capital for operations and expansion.
This receivable represents 57% of total accounts receivable at December 31,
1997.
- --------------------------------------------------------------------------------
Page 11
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
7. LINES OF BUSINESS
The Company operates in two major lines of business: point of sale systems
and automotive parts. Information concerning operations in these segments
at December 31, 1997 and 1996, and for the years then ended, is presented
below:
<TABLE>
<CAPTION>
AUTOMOTIVE
POINT OF PARTS
SALE (DISCONTINUED
SYSTEMS OPERATIONS) CONSOLIDATED
----------------------------------------------
<S> <C> <C> <C>
1997
Net operating revenues (excluding
intersegment transfers) $ 9,514,938 $ 170,624 $ 9,685,562
Operating income 514,302 2,727 517,029
Identifiable operating assets 3,450,593 7,164 3,457,757
Capital expenditures 241,659 -- 241,659
Depreciation and amortization 70,091 -- 70,091
1996
Net operating revenues (excluding
intersegment transfers) $ 4,970,112 $ 1,075,913 $ 6,046,025
Operating income (loss) 77,381 (53,914) 23,467
Identifiable operating assets 932,392 233,183 1,165,575
Capital expenditures 62,126 -- 62,126
Depreciation and amortization 16,991 1,065 18,056
</TABLE>
8. MAJOR CUSTOMERS
During the year ended December 31, 1997, three customers, each accounted
for over 10% of the Company's revenues. Sales to these customers
represented 20%, 39% and 11% of total Company sales. At December 31, 1997,
accounts receivable from these customers were 11%, 13% and 57% of total
accounts receivable, respectively.
During the year ended December 31, 1996, three customers, each accounted
for over 10% of the Company's revenues. Sales to these customers
represented 26%, 21% and 11% of total Company sales. At December 31,
1996, accounts receivable from these customers were 18%, 22% and 25% of
total accounts receivable, respectively.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
9. EMPLOYEE RETIREMENT PLAN
The Company has a defined contribution profit sharing plan which covered
substantially all full-time employees. This Plan was amended and restated
in 1997 to qualify as a salary reduction defined contribution profit
sharing plan under Section 401(k) of the Internal Revenue code. The
Company's contributions to the plan are made at the discretion of the Board
of Directors. The Company's contribution for 1996 of $50,000 was accrued
at December 31, 1996 and paid in 1997. No contribution is accrued at
December 31, 1997.
10. TREASURY STOCK TRANSACTIONS
In 1996, the Company and Custom Configurations purchased 450 shares and 320
shares, respectively, of treasury stock from an officer of the companies.
The treasury stock was recorded at cost.
In January 1997, 168 shares of treasury stock of the Company were reissued
to employees. Compensation expense of $11,396 was recorded based on the
estimated fair value of the Company's stock, with the difference between
the fair value and cost recorded as an adjustment to retained earnings.
In 1997, prior to the sale of the Company, the Company acquired 320 shares
of CCI Technology stock, 200 shares of Sourcelink stock, and 1,000 shares
of CCI Payment Systems stock in exchange for 282 shares of stock from its
treasury stock. The difference between the estimated fair value of stock
traded and the treasury stock cost was recorded as an adjustment to
retained earnings. With these transactions, the Company owns one hundred
percent of all of its subsidiaries.
11. SALE OF AUTOMOTIVE SEGMENT
In 1996, Custom Configurations, Inc. sold its operating assets. The sale
resulted in a gain on sale of assets of $66,096.
In 1997, Sourcelink, Inc. sold its operating assets for a price not to
exceed $200,000. $50,000 was paid immediately by a reduction in the
accounts payable to the purchaser. The remaining purchase price is being
paid on a per unit basis as units are sold and delivered by the purchaser.
In 1997, Sourcelink has recognized $73,013 of gain from the sale. The
remainder of the gain will be recognized when realized.
- --------------------------------------------------------------------------------
Page 13
<PAGE>
CCI GROUP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
Custom Configurations and Sourcelink made up the Company's automotive
segment of its business. As such, the operations of these companies
through the sale of Sourcelink have been recorded as discontinued
operations in the accompanying statements. The gain on sale of Sourcelink
has been recorded as income from disposal of a segment, net of income
taxes.
12. SALE OF COMPANY
On December 22, 1997, the Company's shareholders exchanged the Company's
1,000 shares of issued and outstanding stock for 670,000 shares of Javelin
Systems, Inc. common stock. 290,000 shares have been put in escrow until
certain sale provisions are met. Subsequent to this sale, the Company is
owned one hundred percent by Javelin Systems, Inc.
13. RELATED PARTY TRANSACTIONS
The Company has notes payable to a former corporate officer for $185,478
and $99,990 at December 31, 1997 and 1996, respectively. The notes are due
on demand and carry interest at a rate of 10%. Interest expense on the
notes payable for the years ended December 31, 1997 and 1996 was $22,168
and $23,279, respectively. Interest payable to the officer for the years
ended December 31, 1997 and 1996 was $34,739 and $19,356, respectively.
Subsequent to December 31, 1997, the Company paid its notes payable and
interest due the officer in full.
CCI Technology purchased $166,584 of equipment and repairs from Javelin
Systems, Inc., prior to its acquisition. CCI Technology owed Javelin
$15,394 at December 31, 1997.
- --------------------------------------------------------------------------------
Page 14
<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 level of
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.
