<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
June 30, 1999
-----------------------------------------------
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 (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
17891 Cartwright Avenue
Irvine, CA 92614
--------------------------------------
(Address of principal executive offices)
(949) 449-8000
--------------------------------------------------
(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 May 3, 1999 to read as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Report of Independent Accountants
Balance Sheets of Dynamic Technologies, Inc. as of March
31, 1999 and April 30, 1998
Statements of Income and Retained Earnings of Dynamic
Technologies, Inc. for the eleven months ended March 31,
1999 and the year ended April 30, 1998
Statements of Cash Flows of Dynamic Technologies, Inc. for
the eleven months ended March 31, 1999 and the year ended
April 30, 1998
Notes to Financial Statements
(b) Report of Independent Accountants
Balance Sheet of SB Holdings, Inc. as of December 31, 1998
Statement of Income and Retained Earnings of SB Holdings,
Inc. for the year ended December 31, 1998
Statement of Cash Flows of SB Holdings, Inc. for the year
ended December 31, 1998
Notes to Financial Statements
(c) Introduction to Unaudited Pro Forma Condensed Financial
Information
Unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1999
Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended June 30, 1998
Unaudited Pro Forma Condensed Combined Statement of
Operations (for the nine months ended March 31, 1999
Notes to Unaudited Pro Forma Condensed Combined Financial
Information
2
<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: July 6, 1999 By: /s/ Horace Hertz
---------------------
Horace Hertz
Chief Financial Officer
3
<PAGE>
INDEX TO EXHIBITS
None
4
<PAGE>
MYERS
& ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
- ----------------------------
DYNAMIC TECHNOLOGIES, INC.
FINANCIAL STATEMENTS AND ACCOMPANYING INFORMATION
ELEVEN MONTHS ENDED MARCH 31, 1999 AND YEAR ENDED APRIL 30, 1998
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Income and Retained Earnings 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-10
ACCOMPANYING INFORMATION
Independent Auditor's Report on Accompanying Information 11
Schedules of Cost of Sales 12
Schedules of Selling, General and Administrative Expenses 13
<PAGE>
MYERS
& ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
- ----------------------------
1515 West Chester Pike, Suite C-3
West Chester, PA 19382-7782
Phone: (610) 692-0464
Fax: (610) 344-9912
INDEPENDENT AUDITOR'S REPORT
To the Stockholders of Dynamic Technologies, Inc.
We have audited the accompanying balance sheets of Dynamic Technologies, Inc.
(the Company) as of March 31, 1999 and April 30, 1998, and the related
statements of income and retained earnings and cash flows for the eleven
months then ended, and year then ended, respectively. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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 Dynamic Technologies, Inc.
as of March 31, 1999 and April 30, 1998, and the results of its operations
and its cash flows for the eleven months then ended and year then ended,
respectively, in conformity with generally accepted accounting principles.
As discussed in note J to the financial statements, the Company's two
shareholders sold all of their outstanding stock in the Company for cash and
common stock of Javelin Systems, Inc. (Javelin). Simultaneously, the Company
became a wholly owned subsidiary of Javelin on April 23, 1999.
/s/ Myers & Associates
- ----------------------------------
MYERS & ASSOCIATES
Certified Public Accountants
June 3, 1999
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
BALANCE SHEETS
MARCH 31, 1999 AND APRIL 30, 1998
ASSETS
<TABLE>
<CAPTION>
March 31, April 30,
1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 608,662 $ -
Marketable securities 906,987 275,539
Accounts receivable 1,307,053 1,215,025
Prepaid expenses 3,135 30,385
Loan receivable - stockholders 10,000 -
----------- -----------
TOTAL CURRENT ASSETS 2,835,837 1,520,949
----------- -----------
PROPERTY AND EQUIPMENT
Furniture and fixtures 60,243 40,919
Office equipment 138,798 94,238
Vehicles 33,684 33,684
----------- -----------
232,725 168,841
Less accumulated depreciation 127,189 86,848
----------- -----------
NET PROPERTY AND EQUIPMENT 105,536 81,993
----------- -----------
OTHER ASSETS 5,053 7,102
----------- -----------
TOTAL ASSETS $ 2,946,426 $ 1,610,044
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, April 30,
1999 1998
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 55,965 $ 5,534
Accrued payroll and payroll taxes 1,084,981 93,923
Accrued expenses 65,193 81,233
Accrued current income taxes 338,516 3,430
Deferred income taxes 360,600 468,800
Deferred revenue 7,000 32,000
----------- -----------
TOTAL CURRENT LIABILITIES 1,912,255 684,920
----------- -----------
OTHER LIABILITIES
Note payable - stockholders - 210,000
----------- -----------
TOTAL LIABILITIES 1,912,255 894,920
----------- -----------
STOCKHOLDERS' EQUITY
COMMON STOCK (no par value,
10,000 shares authorized, 1,000
shares issued and outstanding) 1,000 1,000
RETAINED EARNINGS 1,033,171 714,124
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,034,171 715,124
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,946,426 $ 1,610,044
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE ELEVEN MONTHS ENDED MARCH 31, 1999
AND YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
March 31, April 30,
1999 1998
---------- ----------
<S> <C> <C>
NET SALES $6,681,721 $4,770,318
COST OF SALES 808,021 900,979
---------- ----------
GROSS PROFIT 5,873,700 3,869,339
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 5,296,227 2,731,321
---------- ----------
INCOME FROM OPERATIONS 577,473 1,138,018
OTHER INCOME (EXPENSES)
Interest expense - (23,775)
Penalties - (10,577)
Interest income 1,449 1,873
Dividend income 34,864 32,249
Loss on sale of assets - (3,695)
Loss on marketable securities (39,484) -
Gain on sale of investments - 2,404
Other (635) 88
---------- ----------
TOTAL OTHER INCOME (EXPENSE) (3,806) (1,433)
---------- ----------
INCOME BEFORE INCOME TAXES 573,667 1,136,585
PROVISION FOR INCOME TAXES 254,620 487,830
---------- ----------
NET INCOME 319,047 648,755
RETAINED EARNINGS, BEGINNING OF PERIOD 714,124 65,369
---------- ----------
RETAINED EARNINGS, END OF PERIOD $1,033,171 $ 714,124
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED MARCH 31, 1999
AND YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
March 31, April 30,
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 319,047 $ 648,755
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 42,390 86,708
Provision for deferred tax (benefit) expense (108,200) 457,900
(Gain) loss on investments 39,484 (2,404)
Loss on sale of fixed assets - 3,695
(Increase) decrease in certain current assets:
Accounts receivable (92,028) (1,176,346)
Prepaid expenses 27,250 (15,811)
Deposits/escrow - 38,839
Increase (decrease) in certain current liabilities:
Accounts payable 50,431 (94,467)
Accrued liabilities and expenses 1,310,104 132,212
Deferred revenue (25,000) 32,000
---------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,563,478 111,081
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (949,600) (723,134)
Purchase of fixed assets (63,884) (72,707)
Proceeds from sale of fixed assets - 20,000
Proceeds from sale of marketable securities 278,668 450,000
---------- -----------
NET CASH (USED) BY INVESTING ACTIVITIES (734,816) (325,841)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of shareholder loans (220,000) (240,000)
Expenditure for lease acquisition - (6,350)
---------- -----------
NET CASH (USED) BY FINANCING ACTIVITIES (220,000) (246,350)
---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 608,662 $ (461,110)
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE ELEVEN MONTHS ENDED MARCH 31, 1999
AND YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
March 31, April 30,
1999 1998
---------- -----------
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 608,662 $ (461,110)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD - 461,110
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 608,662 $ -
---------- -----------
---------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR:
INTEREST $ - $ 23,775
---------- -----------
---------- -----------
INCOME TAXES $ 27,734 $ 26,824
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Dynamic Technologies, Inc. is a technical
service company that provides a wide range of services primarily to
the pharmaceutical industry, including asset management, network
engineering, data center management, custom software development,
internet/intranet development, technical "help-desk" support, and
computer training.
USE OF ESTIMATES - The preparation of the accompanying financial
statements in conformity with generally accepted accounting
principles requires management to make certain estimates and
assumptions that directly affect the results of reported assets,
liabilities, revenues, and expenses. Actual results may differ from
these estimates.
CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments with an original maturity of three months or less to be
cash equivalents.
MARKETABLE SECURITIES - The Company's marketable securities consist
of a mutual fund acquired with cash not immediately needed in
operations. The investment is held temporarily and is readily
convertible to cash when needed. The mutual fund is recorded at
market value, which approximates cost.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - No allowance for uncollectible
accounts has been provided. Management has evaluated the accounts
and believes they are all collectible.
PROPERTY, EQUIPMENT AND DEPRECIATION - Property and equipment are
valued at cost less accumulated depreciation. Maintenance and repair
costs are charged to expense as incurred. Gains and losses on
disposition of property and equipment are reflected in income.
Depreciation is computed on the straight-line and accelerated
methods for financial accounting purposes, based on the estimated
useful lives of the assets.
INCOME TAXES - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes. Deferred taxes arise
substantially from the difference between financial reporting using
accrual accounting under generally accepted accounting principles
and tax reporting using the cash method. The deferred tax liability
represents the future tax return consequence of reporting collected
receivables as taxable income and reporting accounts payable and
accrued expenses as deductible expenses when paid.
7
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED REVENUE - The Company recognizes revenue from service
contracts ratably over the contract period. Deferred revenue
represents amounts billed in advance of the contract period.
NOTE B - CONCENTRATION OF CREDIT RISK
The Company maintains bank deposit accounts at one local financial
institution. The balances, at times, may exceed federally insured
limits. Uninsured balances are approximately $531,000 at March 31,
1999.
NOTE C - MARKETABLE SECURITIES
Proceeds from sales of marketable securities were $278,668 during
the eleven months ended March 31, 1999 and $450,000 during fiscal
year ended April 30, 1998.
NOTE D - INCOME TAXES
The provisions for income taxes consist of the following components:
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended
March 31, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Current $ 362,820 $ 29,930
Deferred (benefit expense) (108,200) 457,900
--------- --------
Provision for income taxes $ 254,620 $487,830
--------- --------
--------- --------
</TABLE>
A reconciliation of the statutory U.S. federal rate and effective
tax rates follows:
<TABLE>
<S> <C> <C>
Statutory U.S. federal rate 34.0% 34.0%
State income taxes, net of
federal benefit 9.9% 7.3%
Other .5% 1.6%
--------- --------
Total 44.4% 42.9%
--------- --------
--------- --------
</TABLE>
8
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
NOTE E - RETIREMENT PLAN
Effective July 1, 1997, the Company adopted a 401(k) retirement
plan. The plan covers all employees after 90 days of continuous
active employment, who are at least 21 years of age. The Company
currently does not match any elected salary deferral made by
eligible employees, but pays for the cost of administering the plan.
NOTE F - OPERATING LEASES
The Company has various leases for equipment, automobiles and office
space, which are classified as operating leases. Future minimum
lease payments under the non-cancelable operating leases are as
follows:
<TABLE>
<S> <C>
4/30/2000 $204,516
4/30/2001 91,816
--------
$296,332
--------
--------
</TABLE>
Rent expense associated with these leases were $172,940 for the
eleven months ended March 31, 1999, and $119,680 for the year ended
April 30, 1998.
NOTE G - NOTE PAYABLE - STOCKHOLDERS
An uncollateralized note payable ($210,000 at April 30, 1998) to the
Company shareholders was repaid in 1998. Interest ($23,775) in 1998
accrued at 6%.
NOTE H - RELATED PARTY TRANSACTIONS
Under a management agreement for the use of key employees, the
Company paid and accrued a management fee of $241,000 to SB
Holdings, Inc. (Holdings) in fiscal year ended April 30, 1998. One
of the Company's shareholders is a 50% shareholder in Holdings along
with a management employee of the Company.
These same individuals controlled Big Bang Software, Inc., which was
liquidated in 1998. In fiscal 1998, the Company paid royalties to
Big Bang Software, Inc. of $81,000.
One of the Company's shareholders also owns all of the stock of
Interphase Systems, Inc., which is currently inactive.
9
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
NOTE H - RELATED PARTY TRANSACTIONS (CONTINUED)
At March 31, 1999, accrued payroll included discretionary bonuses of
$700,354 to shareholders and the management employee. In fiscal year
1998, $886,000 was paid to the shareholders in discretionary bonuses.
NOTE I - MAJOR CUSTOMER
A material part of the Company's business is dependent upon two
customers, the loss of which would have a materially adverse effect
on the Company. For the eleven months ended March 31, 1999, and year
ended April 30, 1998, sales to these customers were approximately
$6,379,000 and $4,500,000, respectively, which accounted for
approximately 95% and 94% of revenues, respectively. The Company had
an accounts receivable balance from these two customers of
approximately $1,242,000 at March 31, 1999.
NOTE J - SUBSEQUENT EVENT
Effective April 23, 1999, the stockholders of the Company sold all
of their shares of Company stock for cash and stock to Javelin
Systems, Inc., a publicly traded company. On that date, the Company
became a wholly owned subsidiary of Javelin.
NOTE K - YEAR 2000 (UNAUDITED)
The "Year 2000 issue" refers to the potential failure of computer
software and embedded computer chips to properly recognize the year
2000 and later dates. The Company and its vendors have addressed the
changes that will be needed on the computer systems used by the
Company. They believe that these systems will be no more likely to
suffer disruptions from the year 2000 problem than from any other
type of hardware or software problem than may occur from time to
time with many complex systems.
10
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON ACCOMPANYING INFORMATION
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedules of cost of
sales and selling, general and administrative expenses are presented for
purposes of additional analyses and are not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
June 3, 1999
West Chester, PA
11
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
SCHEDULES OF COST OF SALES
FOR THE ELEVEN MONTHS ENDED MARCH 31, 1999
AND YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
March 31, April 30,
1999 1998
--------- ---------
<S> <C> <C>
Computer hardware, software and parts $582,841 $541,227
Instruction services 198,197 -
Management fees - 241,000
Royalties - 81,233
Shipping 21,051 35,547
System development consulting 5,932 1,972
-------- --------
TOTAL COST OF SALES $808,021 $900,979
-------- --------
-------- --------
</TABLE>
12
<PAGE>
DYNAMIC TECHNOLOGIES, INC.
SCHEDULE OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE ELEVEN MONTHS ENDED MARCH 31, 1999
AND YEAR ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
March 31, April 30,
1999 1998
---------- ----------
<S> <C> <C>
Advertising and promotions $ 52,971 $ 20,444
Auto expenses 11,136 10,110
Bank and merchant fees 439 1,480
Contributions 360 2,368
Depreciation and amortization 42,390 86,708
Dues and subscriptions 2,427 4,047
Equipment rental 41,610 19,591
Insurance 105,778 55,380
Miscellaneous 3,300 2,842
Office expense 20,596 28,817
Printing and reproduction 32,540 28,632
Professional fees 39,820 31,727
Rent 120,680 92,141
Repairs and maintenance 25,536 11,515
Salaries and wages 4,288,307 2,058,222
Seminars, meetings and trade shows 10,390 14,933
Taxes, payroll 239,697 115,228
Telephone 91,373 92,824
Training and recruiting 50,976 3,339
Travel and entertainment 94,296 35,532
Tuition and education 2,946 2,962
Utilities 18,659 12,479
---------- ----------
TOTAL SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES $5,296,227 $2,731,321
---------- ----------
---------- ----------
</TABLE>
13
<PAGE>
MYERS
& ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
- ----------------------------
SB HOLDINGS, INC.
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
<PAGE>
SB HOLDINGS, INC.
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Income and Accumulated Deficit 3
Statement of Cash Flows 4
Notes to Financial Statements 5
<PAGE>
MYERS
& ASSOCIATES
CERTIFIED PUBLIC ACCOUNTANTS
- ----------------------------
1515 West Chester Pike, Suite C-3
West Chester, PA 19382-7782
Phone: (610) 692-0464
Fax: (610) 344-9912
INDEPENDENT AUDITOR'S REPORT
To the Stockholders of SB Holdings, Inc.
We have audited the accompanying balance sheet of SB Holdings, Inc. (the
Company) as of December 31, 1998, and the related statements of income and
accumulated deficit and cash flows for the year 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 SB Holdings, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
As discussed in note D to the financial statements, the Company's two
shareholders sold all of their outstanding stock in the Company to Javelin
Systems, Inc. (Javelin). Simultaneously, the Company became a wholly owned
subsidiary of Javelin on April 23, 1999.
/s/ Myers & Associates
- ----------------------------------
MYERS & ASSOCIATES
Certified Public Accountants
June 3, 1999
<PAGE>
SB HOLDINGS, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS
Cash $ 150
-------
TOTAL ASSETS $ 150
-------
-------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Payroll tax liabilities $ 112
-------
TOTAL LIABILITIES 112
-------
-------
STOCKHOLDERS' EQUITY
COMMON STOCK (no par value, 10,000
shares authorized, 2,000 shares
issued and outstanding) 2,000
ACCUMULATED DEFICIT (1,962)
-------
TOTAL STOCKHOLDERS' EQUITY 38
-------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 150
-------
-------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
SB HOLDINGS, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
REVENUE $241,000
GENERAL AND ADMINISTRATIVE EXPENSES
Bank service charges 31
Legal fees 9,289
Salaries 270,000
Taxes, payroll 13,069
Taxes, other 573
-------
TOTAL GENERAL AND ADMINISTRATIVE
EXPENSES 292,962
--------
NET (LOSS) (51,962)
RETAINED EARNINGS - BEGINNING 100,000
DISTRIBUTIONS (50,000)
--------
ACCUMULATED DEFICIT - ENDING $ (1,962)
--------
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SB HOLDINGS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (51,962)
Adjustments to reconcile net
income to net cash:
Decrease in accounts receivable 100,000
Increase in accounts payable 112
----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 48,150
CASH FLOWS FROM INVESTING ACTIVITIES -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholders' loans 2,000
Distributions (50,000)
----------
NET CASH (USED) BY
FINANCING ACTIVITIES (48,000)
--------
NET INCREASE IN CASH 150
CASH AT BEGINNING OF YEAR -
--------
CASH AT END OF YEAR $ 150
--------
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SB HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE A - ORGANIZATION
SB Holdings, Inc. is in the business of software development,
computer consulting and related services.
NOTE B - INCOME TAXES
The Company, with the consent of its stockholders, has elected under
the Internal Revenue Code to be an S corporation. In lieu of
corporation income taxes, the stockholders of an S corporation are
taxed on their proportionate share of the Company's taxable income.
Therefore, no provision or liability for federal income taxes has
been included in the financial statements.
NOTE C - RELATED PARTY TRANSACTIONS
Under a management agreement for the use of key employees, the
Company received a management fee of $241,000 from Dynamic
Technologies, Inc. (Dynamic) in year ended December 31, 1998. One of
the Company's shareholders is a 49% shareholder in Dynamic and the
other shareholder is a management employee of Dynamic.
These same individuals controlled Big Bang Software, Inc. which was
liquidated in 1998.
One of the Company's shareholders also owns all of the stock of
Interphase Systems, Inc., which is currently inactive.
NOTE D - SUBSEQUENT EVENT
Effective April 23, 1999, the stockholders of the Company sold all
of their shares of Company stock to Javelin Systems, Inc., a
publicly traded company. On that date, the Company became a wholly
owned subsidiary of Javelin.
5
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On April 23, 1999, Javelin Systems, Inc., a Delaware corporation ("Javelin"
or the "Company"), acquired all of the outstanding capital stock (the "DTI
Stock") of Dynamic Technologies, Inc., a Pennsylvania corporation ("DTI"),
and all of the outstanding capital stock (the "SB Stock") of SB Holdings,
Inc., a Pennsylvania corporation ("SB"), from John Biglin, Denise Biglin and
John Seitz (collectively, the "Selling Shareholders"), pursuant to the terms
of a Stock Purchase Agreement, dated April 23, 1999, by and among the
Company, DTI, SB and the Selling Shareholders (the "Agreement"). The
aggregate purchase price for the DTI Stock and the SB Stock consisted of
$10,000,000 in cash and 452,226 shares of the Common Stock of the Company.
The Company may be required to pay an additional (i) $2,000,000 in cash and
(ii) $1,000,000 in value (as defined in the Agreement) of Common Stock of the
Company issuable upon the satisfaction of certain milestones for each of the
quarters in the fiscal year ending April 30, 2000. The purchase price was
determined based upon negotiations between the parties. The cash portion of
the consideration used proceeds from the Company's public offering of Common
Stock completed in February 1999. The acquisition has been accounted for by
the purchase method, and accordingly, the results of operations of DTI and SB
have been included with those of the Company beginning on the date of
acquisition. The purchase price of $14,397,800 (including acquisition costs
of $147,800) was based on the quoted market price of the Company's common
stock discounted by 15% due to restrictions and liquidity. The purchase price
resulted in excess of acquisition costs over net assets of $13,485,400. Such
excess (which will increase for any contingent payments) will be amortized
over 10 years. The final allocation of the purchase price and the life of the
resulting goodwill may vary as additional information is obtained and as an
appraisal from an independent valuation firm is completed; accordingly, the
ultimate allocation and the amortization of goodwill may differ from that
used in the accompanying pro forma combined financial information.
DTI and SB provide custom Internet/Intranet software and services. The
Company currently intends to maintain DTI and SB as wholly-owned subsidiaries
of the Company, and intends to continue to use DTI's and SB's plant,
equipment and other physical property in the manner in which it was used
prior to the closing.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31,
1999, combines the historical balance sheets of Javelin, DTI and SB as if the
acquisition had occurred on March 31, 1999, after giving effect to certain
adjustments described in the attached Notes to Unaudited Pro Forma Condensed
Combined Financial Information.
The Unaudited Pro Forma Condensed Combined Statements of Operations for the
year ended June 30, 1998 and for the nine months ended March 31, 1999 present
the
<PAGE>
combined results of operations of Javelin, DTI and SB as if the acquisition
had occurred July 1, 1997, after giving effect to certain adjustments
described in the attached Notes to Unaudited Pro Forma Condensed Combined
Financial Information.
The pro forma results of operations are not necessarily indicative of the
results of future operations. No assurance can be given with respect to the
ultimate future results of operations.
This report on Form 8-KA contains forward looking statements which are
subject to risks and uncertainties, including the risks described in the
Company's periodic reports and other filings with the Securities Exchange
Commission.
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
PROFORMA
JAVELIN DTI SB ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 22,211,300 $ 608,700 $ 100 $(10,147,800) $ 12,672,300
MARKETABLE SECURITIES 907,000 907,000
ACCOUNTS RECEIVABLE - NET 15,069,800 1,307,100 16,376,900
INVENTORIES 14,059,000 14,059,000
DEFERRED INCOME TAXES 204,900 204,900
OTHER CURRENT ASSETS 651,300 13,000 664,300
--------------------------------------------------------------------------
TOTAL CURRENT ASSETS 52,196,300 2,835,800 100 (10,147,800) 44,884,400
PROPERTY AND EQUIPMENT, NET 2,200,400 105,500 2,305,900
EXCESS OF COST OVER NET ASSETS OF
PURCHASED BUSINESSES 11,100,600 13,363,600 24,464,200
DEFERRED FINANCING COSTS 692,900 692,900
OTHER ASSETS, NET 174,300 5,100 179,400
--------------------------------------------------------------------------
TOTAL ASSETS $ 66,364,500 $ 2,946,400 $ 100 $ 3,215,800 $ 72,526,800
--------------------------------------------------------------------------
--------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
LINE OF CREDIT $ 1,878,600 $ $ $ $ 1,878,600
ACCOUNTS PAYABLE 7,194,600 56,000 7,250,600
ACCRUED EXPENSES 2,308,800 1,150,200 3,459,000
CURRENT MATURITIES OF LONG-TERM DEBT 300,000 300,000
CUSTOMER DEPOSITS 2,700 2,700
DEFERRED MAINTENANCE REVENUES 497,800 7,000 504,800
INCOME TAXES PAYABLE 912,100 338,500 1,250,600
DEFERRED INCOME TAXES 360,600 360,600
--------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 13,094,600 1,912,300 - - 15,006,900
--------------------------------------------------------------------------
--------------------------------------------------------------------------
DEFERRED RENT EXPENSE 15,100 15,100
--------------------------------------------------------------------------
LONG-TERM DEBT, NET OF CURRENT PORTION 1,331,800 1,331,800
--------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, $0.01 PAR VALUE:
AUTHORIZED SHARES--1,000,000;
ISSUED AND OUTSTANDING SHARES--NONE
COMMON STOCK, $.01 PAR VALUE:
AUTHORIZED SHARES--20,000,000;
ISSUED AND OUTSTANDING SHARES--
ACTUAL, 8,334,581; AS ADJUSTED,
8,786,807 83,300 1,000 2,000 1,500 87,800
ADDITIONAL PAID IN CAPITAL 49,618,600 4,245,500 53,864,100
DEFERRED COMPENSATION (14,400) (14,400)
RETAINED EARNINGS 2,314,400 1,033,100 (1,900) (1,031,200) 2,314,400
ACCUMULATED OTHER COMPREHENSIVE LOSS (78,900) (78,900)
--------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 51,923,000 1,034,100 100 3,215,800 56,173,000
--------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 66,364,500 $ 2,946,400 $ 100 $ 3,215,800 $ 72,526,800
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
<PAGE>
JAVELIN SYSTEMS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
JAVELIN DTI SB ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C>
REVENUES:
PRODUCT SALES $27,132,400 $ $ $ $27,132,400
SERVICE 2,513,700 4,770,300 7,284,000
-------------------------------------------------------------------------
TOTAL REVENUES 29,646,100 4,770,300 34,416,400
-------------------------------------------------------------------------
COST OF REVENUES:
COST OF PRODUCT SALES 19,831,300 19,831,300
COST OF SERVICE 1,904,700 901,000 2,805,700
-------------------------------------------------------------------------
TOTAL COST OF REVENUES 21,736,000 901,000 22,637,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
GROSS PROFIT 7,910,100 3,869,300 11,779,400
-------------------------------------------------------------------------
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT 874,000 874,000
SELLING AND MARKETING 1,179,900 70,800 1,250,700
GENERAL AND ADMINISTRATIVE 4,195,500 2,660,500 717,300 7,573,300
-------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 6,249,400 2,731,300 717,300 9,698,000
-------------------------------------------------------------------------
INCOME FROM OPERATIONS 1,660,700 1,138,000 (717,300) 2,081,400
INTEREST EXPENSE, NET (115,000) (23,800) (138,800)
OTHER INCOME 53,300 22,400 75,700
-------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,599,000 1,136,600 (717,300) 2,018,300
PROVISION FOR INCOME TAXES (584,900) (487,800) (265,700) (1,338,400)
-------------------------------------------------------------------------
NET INCOME $ 1,014,100 $ 648,800 $ $(983,000) $ 679,900
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EARNINGS PER COMMON SHARE:
BASIC $ 0.28 $ 0.17
----------- ------------
----------- ------------
DILUTED $ 0.27 $ 0.16
----------- ------------
----------- ------------
SHARES USED IN COMPUTING
EARNINGS PER SHARE:
BASIC 3,622,604 4,074,830
----------- ------------
----------- ------------
DILUTED 3,750,611 4,202,837
----------- ------------
----------- ------------
</TABLE>
<PAGE>
JAVELIN SYSTEMS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
JAVELIN DTI SB ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C>
REVENUES:
PRODUCT SALES $43,132,400 $ $ $ $43,132,400
SERVICE 8,758,200 5,551,100 241,000 14,550,300
--------------------------------------------------------------------
TOTAL REVENUES 51,890,600 5,551,100 241,000 57,682,700
--------------------------------------------------------------------
COST OF REVENUES:
COST OF PRODUCT SALES 30,752,400 30,752,400
COST OF SERVICE 6,993,300 214,000 270,000 7,477,300
--------------------------------------------------------------------
TOTAL COST OF REVENUES 37,745,700 214,000 270,000 38,229,700
--------------------------------------------------------------------
--------------------------------------------------------------------
GROSS PROFIT 14,144,900 5,337,100 (29,000) 19,453,000
--------------------------------------------------------------------
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT 932,600 932,600
SELLING AND MARKETING 2,506,700 171,200 2,677,900
GENERAL AND ADMINISTRATIVE 6,535,900 4,084,500 23,000 (129,800) 10,513,600
--------------------------------------------------------------------
TOTAL OPERATING EXPENSES 9,975,200 4,255,700 23,000 (129,800) 14,124,100
--------------------------------------------------------------------
INCOME FROM OPERATIONS 4,169,700 1,081,400 (52,000) 129,800 5,328,900
INTEREST EXPENSE, NET (615,200) (615,200)
OTHER INCOME 22,900 (3,800) 19,100
--------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 3,577,400 1,077,600 (52,000) 129,800 4,732,800
PROVISION FOR INCOME TAXES (1,395,700) (478,200) (498,100) (2,372,000)
--------------------------------------------------------------------
NET INCOME $ 2,181,700 $ 599,400 $(52,000) $(368,300) $ 2,360,800
--------------------------------------------------------------------
--------------------------------------------------------------------
EARNINGS PER COMMON SHARE:
BASIC $ 0.40 $ 0.40
----------- -----------
----------- -----------
DILUTED $ 0.39 $ 0.39
----------- -----------
----------- -----------
SHARES USED IN COMPUTING
EARNINGS PER SHARE:
BASIC 5,444,549 5,896,775
----------- -----------
----------- -----------
DILUTED 5,633,269 6,085,495
----------- -----------
----------- -----------
</TABLE>
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
NOTE 1 - BASIS OF PRESENTATION
On April 23, 1999, Javelin Systems, Inc., a Delaware corporation ("Javelin"
or the "Company"), acquired all of the outstanding capital stock (the "DTI
Stock") of Dynamic Technologies, Inc., a Pennsylvania corporation ("DTI"),
and all of the outstanding capital stock (the "SB Stock") of SB Holdings,
Inc., a Pennsylvania corporation ("SB"), from John Biglin, Denise Biglin and
John Seitz (collectively, the "Selling Shareholders"), pursuant to the terms
of a Stock Purchase Agreement, dated April 23, 1999, by and among the
Company, DTI, SB and the Selling Shareholders (the "Agreement"). The
aggregate purchase price for the DTI Stock and the SB Stock consisted of
$10,000,000 in cash and 452,226 shares of the Common Stock of the Company.
The Company may be required to pay an additional (i) $2,000,000 in cash and
(ii) $1,000,000 in value (as defined in the Agreement) of Common Stock of the
Company issuable upon the satisfaction of certain milestones for each of the
quarters in the fiscal year ending April 30, 2000. The purchase price was
determined based upon negotiations between the parties. The cash portion of
the consideration used proceeds from the Company's public offering of Common
Stock completed in February 1999. The acquisition has been accounted for by
the purchase method, and accordingly, the results of operations of DTI and SB
have been included with those of the Company beginning on the date of
acquisition. The purchase price of $14,397,800 (including acquisition costs
of $147,800) was based on the quoted market price of the Company's common
stock discounted by 15% due to restrictions and liquidity. The purchase price
resulted in excess of acquisition costs over net assets of $13,485,400. Such
excess (which will increase for any contingent payments) will be amortized
over 10 years. The final allocation of the purchase price and the life of the
resulting goodwill may vary as additional information is obtained and as an
appraisal from an independent valuation firm is completed; accordingly, the
ultimate allocation and the amortization of goodwill may differ from that
used in the accompanying unaudited pro forma condensed combined financial
information.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31,
1999, combines the historical balance sheets of Javelin, DTI and SB as if the
acquisition had occurred on March 31, 1999, after giving effect to certain
adjustments described in the attached Notes to Unaudited Pro Forma Condensed
Combined Financial Information.
The Unaudited Pro Forma Condensed Combined Statements of Income for the year
ended June 30, 1998 presents the combined results of Javelin for the year
ended June 30, 1998, of DTI for the year ended April 30, 1998 and of SB for
the year ended April 30, 1998 as if the acquisition had occurred July 1,
1997, after giving effect to certain adjustments described in the attached
Notes to Unaudited Pro Forma Condensed Combined Financial Information. The
Unaudited Pro Forma Condensed Combined Statements of Income for the nine
months ended March 31, 1999 presents the combined results of Javelin for the
nine months ended March 31, 1999, of DTI for the nine months ended January
31, 1999 and of SB for the nine months ended January 31, 1999 as if the
<PAGE>
acquisition had occurred July 1, 1997, after giving effect to certain
adjustments described in the attached Notes to Unaudited Pro Forma Condensed
Combined Financial Information.
The Unaudited Pro Forma Condensed Combined Financial Information should be
read in conjunction with the historical financial statements and the related
notes thereto of Javelin Systems, Inc. for the year ended June 30, 1998 which
are included in the Company's Annual Report on Form 10-KSB and for the nine
months ended March 31, 1999 which are included in Form 10-QSB.
NOTE 2 - ADJUSTMENTS
The Unaudited Pro Forma Condensed Combined Financial Information reflects the
acquisition of DTI and SB 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 March 31, 1999 are
as follows:
<TABLE>
<S> <C> <C> <C>
(1) Goodwill 13,363,600
Common Stock of DTI and SB 3,000
Retained Earnings 1,031,200
Cash 10,147,800
Common Stock of Javelin 4,500
Additional Paid In Capital 4,245,500
</TABLE>
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, 1998 are summarized as follows:
(2) Amortization of goodwill 1,336,400
(3) Reduction in salaries to two former shareholders 619,100
The reduction represents the difference between the actual salaries
paid and/or accrued to the shareholders of DTI/SB and the
post-acquisition salaries to be paid pursuant to employment
agreements.
(4) Increase in provision for income taxes 265,700
The increase represents the additional income tax provision relating
to the reduction in salaries described above. The amortization of
goodwill is not deductible for income tax purposes, and accordingly,
no benefit therefor has been recorded.
Purchase accounting adjustments related to the foregoing acquisitions
reflected in the Unaudited Pro Forma Condensed Combined Statement of
Operations for the nine months ended March 31, 1999 are summarized as follows:
(5) Amortization of goodwill 1,002,300
(6) Reduction in salaries to two former shareholders 1,132,100
(7) Increase in provision for income taxes 498,100
