SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities and Exchange Act of 1834
Date of Report (Date of earliest event reported): June 18, 1998
CADAPULT GRAPHIC SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-21853 87-0413539
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
110 Commerce Drive, Allendale, New Jersey 07401
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 236-1100
Seafoods Plus, Ltd.
(Former name or former address, if changed since last report.)
<PAGE>
Item 7. Financial Statements and Exhibits
On or about July 7, 1998, the registrant submitted a Form 8-K describing
the acquisition of Cadapult Graphic Systems Inc., a New Jersey corporation.
Certain financial statements for the acquired business and pro forma financial
information that were not available at the time of the initial filing on Form
8-K are provided in this Form 8-K/A.
(a) Financial Statements of Business Acquired.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors'Report...................................................3
Balance Sheets as of April 30, 1998 and 1997..................................5
Statements of Operations......................................................6
Statements of Changes in Stockholders' Equity.................................7
Statements of Cash Flows......................................................8
Notes to Financial Statements.................................................9
INDEX TO BBG TECHNOLOGIES FINANCIAL STATEMENTS
Financial Statements and Auditors' Report March 12, 1998.....................16
Financial Statements and Auditors' Report December 31, 1997..................22
Financial Statements and Auditors' Report December 31, 1996..................29
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Cadapult Graphic Systems, Inc.
We have audited the accompanying balance sheet of Cadapult Graphic Systems, Inc.
as of April 30, 1998 and the related statements of operations, changes in
stockholders' equity 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 Cadapult Graphic Systems, Inc.
at April 30, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Livingston, New Jersey
June 5, 1998, except as to Note 4
for which the date is August 3, 1998
3
<PAGE>
To the Shareholders of
Cadapult Graphic Systems, Inc.
Allendale, New Jersey
I have audited the accompanying balance sheet of Cadapult Graphic Systems, Inc.
as of April 30, 1997, and the related statements of operations and retained
earnings, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides reasonable basis for my opinion.
In my report dated July 24, 1997, I disclosed that I did not physically observe
the inventory as of April 30, 1996 and, accordingly, did not express an opinion
on the statements of operations and retained earnings and cash flows for the
year ended April 30,1997. Subsequent to the date of my original report, by using
alternative auditing methods and procedures I was able to satisfy myself to the
value of the inventory at April 30, 1996. Accordingly, my present opinion on the
April 30, 1997 financial statements presented herein, is different from that
expressed in my previous report.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Cadapult Graphic Systems, Inc. as
of April 30, 1997 and the results of its operations and cash flows for the year
then ended in conformity with generally accepted accounting principles.
ROBERT N. NEVITT, P.C.
Baldwin, New York
July 24, 1998 except for the third
paragraph above and Note 10,
as to which the date is May 14, 1998
4
<PAGE>
<TABLE>
<CAPTION>
CADAPULT GRAPHIC SYSTEMS, INC.
BALANCE SHEETS
April 30,
----------------------------
ASSETS 1998 1997
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $382,568 $ 30,444
Accounts receivable, less allowance for doubtful
accounts of $22,500 in 1998 and 1997 1,114,978 1,091,890
Inventories 779,927 724,846
Prepaid and refundable income taxes 46,295 -
Prepaid expenses and other current assets 50,446 4,128
------------ ------------
Total Current Assets 2,374,214 1,851,308
------------ ------------
PROPERTY AND EQUIPMENT 241,416 204,203
------------ ------------
OTHER ASSETS:
Goodwill and other intangible assets 415,797 -
Security deposits 31,343 26,491
------------- ------------
447,140 26,491
------------ ------------
$3,062,770 $2,082,002
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank $1,000,000 $ 550,000
Current maturities of long-term debt 89,136 10,173
Accounts payable 1,025,795 697,588
Accrued expenses and other current liabilities 173,461 80,865
Due to officer 20,000 -
Deferred revenue 156,348 130,026
Deferred income taxes 10,000 -
-------------- -----------
Total Current Liabilities 2,474,740 1,468,652
------------- -----------
OTHER LIABILITIES:
Long-term debt, less current maturities 171,897 11,007
Notes payable to related party 70,832 50,000
Deferred income taxes - 32,800
-------------- -----------
242,729 93,807
------------ -----------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, .001 par value,
Authorized 50,000,000 shares; issued 1,650,000
shares in 1998 and 1,548,450 in 1997 1,650 $ 300
Additional paid-in capital 43,650 -
Retained earnings 300,001 519,243
------------ -----------
Total Stockholders' Equity 345,301 519,543
------------ -----------
$3,062,770 $2,082,002
========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF OPERATIONS
Year Ended April 30,
--------------------------------
1998 1997
-------------- ----------------
<S> <C> <C>
NET SALES $7,103,906 $8,594,082
---------- -----------
COSTS AND EXPENSES:
Cost of sales 5,174,402 6,468,513
Selling, general and administrative expenses 2,138,915 1,972,221
----------- ----------
7,313,317 8,440,734
----------- ----------
INCOME (LOSS) FROM OPERATIONS (209,411) 153,348
------------ ----------
OTHER EXPENSE (INCOME):
Interest expense, net 90,829 78,175
Gain on sale of equipment (18,500) -
------------- ----------
72,329 78,175
------------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (CREDITS) (281,740) 75,173
INCOME TAXES (CREDITS):
Current (39,698) 58,000
Deferred (22,800) (39,500)
-------------- ----------
(62,498) 18,500
NET INCOME (LOSS) $ (219,242) $ 56,673
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,622,682 1,548,450
============ ============
NET INCOME (LOSS) PER COMMON SHARE -
BASIC AND DILUTED $ (.14) $ .04
============ ============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Additional Total
------------------- Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
---------- ------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
BALANCES, APRIL 30, 1996 1,548,450 $ 300 $ - $ 462,570 $ 462,870
YEAR ENDED APRIL 30, 1997:
Net income - - - 56,673 56,673
--------- ------- -------- --------- ----------
BALANCES, APRIL 30, 1997 1,548,450 300 - 519,243 519,543
YEAR ENDED APRIL 30, 1998:
Sale of stock to employees 101,550 102 44,898 - 45,000
Change in par value - 1,248 (1,248) - -
Net loss - - - (219,242) (219,242)
--------- ------- -------- --------- ----------
BALANCES, APRIL 30, 1998 1,650,000 $ 1,650 $ 43,650 $300,001 $ 345,301
========= ======= ========= ======== ===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended April 30,
--------------------------------
1998 1997
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (219,242) $ 56,673
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 73,525 91,308
Gain on sale of equipment (18,500) -
Deferred income taxes (22,800) (39,500)
Changes in operating assets and liabilities:
Accounts receivable 394,474 50,367
Inventories (7,528) (134,614)
Prepaid and refundable income taxes (46,295) -
Prepaid expenses and other current asset (91,318) 3,972
Security deposits (4,852) -
Accounts payable 9,523 (268,437)
Accrued expenses and other current liabilities 137,596 55,095
Deferred revenue 26,322 129,636
------------ ---------
Net cash flows from operating activities 230,905 (55,500)
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (105,703) (143,498)
Proceeds from sale of equipment 18,500 -
Cost of net assets of acquired business (546,431) -
------------ ----------
Net cash flows from investing activities (633,634) (143,498)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable to bank 450,000 365,000
Proceeds of long-term debt 250,000 (14,309)
Payments on long-term debt (10,147) (188,572)
Advances from officer 20,000 -
Sale of common stock 45,000 -
------------ ------------
Net cash flows from financing activities 754,853 162,119
------------ ------------
NET CHANGE IN CASH 352,124 (36,879)
CASH, BEGINNING OF YEAR 30,444 67,323
------------ ------------
CASH, END OF YEAR $ 382,568 $ 30,444
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 94,377 $ 78,175
============ ============
Income taxes paid $ 5,032 $ 18,187
============ ============
Noncash investing activity Acquisition of business:
Fair value of assets acquired $ 865,115
Fair value of liabilities assumed 318,684
------------
Net cash payment $ 546,431
============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Nature of the Business and Summary of Significant Accounting
Policies:
Nature of the Business - Cadapult Graphic Systems, Inc. (the
"Company") provides computer graphic systems, peripherals,
supplies and service to visual communicators and graphic
professionals. The Company is a systems integrator and a value
added dealer/reseller of computer graphics equipment and supplies
to customers. The Company has offices in Massachusetts, Albany
and New York, New York and New Jersey.
Estimates and Uncertainties - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results, as
determined at a later date, could differ from those estimates.
Revenue Recognition - Revenue is recognized at the point of
shipment for goods sold, and ratably through the duration of
service contracts. Deferred revenue consists principally of
billings on service contracts prior to rendering related
services.
Concentration of Credit Risk - Financial instruments that
potentially subject the Company to concentration of credit risk
consist primarily of cash and unsecured trade receivables. The
Company maintains its cash balances in financial institutions
which are insured by the Federal Deposit Insurance Corporation up
to $100,000 each. At April 30, 1998, the Company has uninsured
balances totalling approximately $230,000.
Concentrations of credit risk with respect to all trade
receivables are considered to be limited due to the quantity of
customers comprising the Company's customer base. The Company
performs ongoing credit evaluations of its customers' financial
condition and does not require collateral. Management feels that
credit risk beyond the established allowance at April 30, 1998 is
limited.
Inventories - Inventories are stated at the lower of cost
(specific identification method) or market.
Property and Equipment - Property and equipment are stated at
cost. The Company provides for depreciation using the
straight-line and accelerated methods by charges to income at
rates based upon the recovery periods of 5 to 7 years for
furniture and equipment and over the useful lives or the lease
term, if shorter, for leasehold improvements.
9
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Goodwill and Other Intangible Assets - Goodwill consists of the
excess of cost over fair market value of the net assets of the
acquired business. The intangible assets are being amortized on
the straight-line method over the following years:
Cost Life (Years)
Goodwill $350,000 15
Covenant-not-to-compete 50,000 5
Financing costs 20,832 3
------
$420,832
========
The carrying value of intangible assets is periodically reviewed
by the Company based on expected future undiscounted operating
cash flows. Based upon its most recent analysis, the Company
believes that no material impairment exists at April 30, 1998.
Income Taxes - Deferred tax assets and liabilities are recognized
based on differences between the book and tax bases of assets and
liabilities using presently enacted income tax rates. The
provision for income taxes is the sum of the amount of income
taxes paid, payable or receivable for the year as determined by
applying the provisions of the applicable enacted tax laws to
taxable income for that year and the net change during the year
in the Company's deferred tax assets and liabilities. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.
Employee Benefit Plan - The Company has a 401(k)
savings/retirement plan for all of its eligible employees. The
plan allows for employee contributions to be matched by the
Company on a pro-rata basis. Contributions made by the Company
for 1998 and 1997 were $10,461 and $8,751, respectively.
Net Income (Loss) Per Share - The Company has adopted Statement
of Financial Accounting Standards 128 "Earnings Per Share" ("SFAS
128"). Basic earnings per share is calculated based on the
weighted average number of common shares outstanding during the
period and excludes all dilution. Diluted earnings per share is
calculated by using the weighted average number of common shares
outstanding, while also giving effect to all dilutive potential
common shares that were outstanding during the period.
New Accounting Pronouncements - Effective in 1998, the Company
will be required to adopt Statement of Financial Accounting
Standards 130 "Reporting Comprehensive Income" and 131
"Disclosures about Segments of an Enterprise and Related
Information". The adoption of these standards is
10
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
not expected to have a material effect on the Company's financial
statements.
Note 2 - Purchase of Business:
Effective March 13, 1998, the Company purchased for $546,431 in
cash certain assets and assumed certain liabilities of BBG
Technologies, Inc. ("BBG") a Massachusetts corporation. The
assets purchased included accounts receivable and a covenant not-
to-compete ($50,000). The excess of the purchase price over the
fair value of the net assets acquired ($350,000) was allocated to
goodwill.
The following unaudited pro forma consolidated results of
operations for the years ended April 30, 1997 and 1998 assumes
the BBG Acquisition had occurred on May 1, 1996 giving effect to
purchase accounting adjustments and financing. The pro forma
results have been prepared for informational purposes only and do
not reflect any benefit from economies which might be achieved
from combined operations. The pro forma results do not represent
results which would have occurred if the acquisition had taken
place on the basis assumed above, nor are they indicative of the
results of future combined operations.
Year Ended April 30,
---------------------------------
1997 1998
---------------- ---------------
(Unaudited)
Net sales $10,786,876 $8,982,117
Net income (loss) $194,259 $(144,535)
Basic and diluted income (loss) per
share $.13 $(.09)
Note 3 - Property and Equipment:
Property and equipment are summarized as follows:
April 30,
--------------------------------
1998 1997
--------------- ---------------
Office equipment $594,862 $525,173
Furniture and fixtures 129,109 111,717
Automobiles 65,379 65,379
Leasehold improvements 18,624 -
------- -------
807,974 702,269
Less: Accumulated depreciation and
amortization 566,558 498,066
------- -------
$ 241,416 $ 204,203
=========== ===============
11
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 4 - Note Payable to Bank:
The Company has an agreement with a bank under which it can
borrow up to $1,200,000 under a revolving line-of-credit, subject
to availability of collateral. Borrowings bear interest at 1%
over the bank's base rate, are payable on demand and are
collateralized by all assets of the Company.
Advances under the note payable to bank and the $250,000 note
payable (Note 5) become immediately due and payable if certain
financial covenants, as defined in the loan agreements, are not
met. At April 30, 1998, the Company was not in compliance with
certain of these covenants, including financial covenants and
ratios. Lack of compliance was waived by the bank on August 3,
1998. As a result of a private placement completed in August 1998
(see Note 10), the Company believes it will be in compliance
throughout fiscal year ending April 30, 1999.
Note 5 - Long-term Debt:
A summary of long-term debt follows:
April 30,
Interest --------------------
Description Rate 1998 1997
- ------------------------------ -------- ------- -----------
Loan payable in monthly installments of
principal and interest of $6,944
through April 2001, collateralized by 1% over
all assets of the Company prime $250,000 $ -
Loan payable in monthly installments of
principal and interest of $543 through
February 2000, collateralized by an
automobile 8.49% 11,033 16,325
Other - - 4,855
----------- ----------
261,033 21,180
Less: Current maturities 89,136 10,173
----------- ----------
$ 171,897 11,007
=========== ========
Long-term debt at April 30, 1998 matures as follows:
Year Ending April 30,
---------------------
1999 $ 89,136
2000 88,563
2001 83,334
----------
$261,033
==========
12
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 6 - Income Taxes:
The components of the provision (credit) for income taxes are
summarized as follows:
Year Ended April 30,
-----------------------
1998 1997
----------- ----------
Current:
Federal $ (45,390) $ 47,000
State and local 5,692 11,000
------------ --------
(39,698) 58,000
Deferred:
Federal (15,100) (30,000)
State and local (7,700) (9,500)
(22,800) (39,500)
---------- ---------
$ (62,498) $ 18,500
=========== =========
The provision (credit) for income taxes for the years ended April
30, 1998 and 1997 differs from the statutory federal rate of 34%
principally due to the benefit of lower federal tax brackets and
state and local taxes, net of federal benefit.
At April 30, 1998, deferred state and local tax asset of
approximately $13,000 which relates principally to net operating
loss carryforwards partially reduced by liability for cash to
accrual conversion has been offset by a 100% valuation allowance,
due to the operating loss for the fiscal year ended April 30,
1998. The deferred federal tax liability relates principally to
cash to accrual conversion.
Available state net operating loss carryforwards totalling
approximately $130,000 will expire through 2005.
Note 7 - Stockholders' Equity:
During the year ended April 30, 1998, the Company issued
approximately 101,550 shares of its common stock to three
employees for $45,000.
13
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 8 - Commitments:
Leases - The Company leases its premises under lease agreements
which expire through 2000 and certain automobiles under operating
leases that expire in 1999 and 2000. Future minimum lease
payments are as follows:
Year Ending April 30,
1999 $54,780
2000 50,837
2001 9,921
-----------
$115,538
Rent expense amounted to $196,512 and $148,776 for the years
ended April 30, 1998 and 1997, respectively.
Employment Agreements - On May 1, 1998, the Company entered into
a five year employment agreement with its President for a base
salary of $180,000 per annum subject to certain adjustments. In
addition, the Company has three year employment agreements with
three employees providing for aggregate compensation of $255,000
per annum.
Note 9 - Major Supplier:
Purchases from one supplier in 1998 and two suppliers in 1997
accounted for approximately 53% and 48% of total purchases in
1998 and 1997, respectively.
At April 30, 1998, one supplier accounted for approximately 69%
of the Company's accounts payable. If the supplier fails to
provide the required inventory, it may have a negative impact on
the Company.
Note 10 - Subsequent Events:
a) Merger:
Pursuant to an Agreement and Plan of Reorganization dated June
5, 1998, the stockholders of the Company exchanged all their
shares of stock owned for 1,650,000 shares (72%) of $.001 par
value common stock of Seafoods Plus, Ltd. ("SPL"), an inactive
public company. Under the agreement, the Company became a
wholly-owned subsidiary of SPL, and will merge with SPL in
1998. The merger will be recorded as a recapitalization of the
Company and an issuance of shares to SPL's shareholders on
June 5, 1998. The Company will continue operating as Cadapult
Graphic Systems, Inc.
14
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
All references to the Company's common stock in the 1998
balance sheet, the 1998 and 1997 statements of operations and
notes to the financial statements retroactively reflect the
recapitalization.
b) Stock Compensation Plan:
The Company's Board of Directors has adopted the Cadapult
Graphic Systems, Inc. 1998 Incentive Plan (the "Plan"),
subject to shareholder approval, under which 500,000 of the
Company's authorized but unissued shares of common stock have
been reserved for issuance of stock options. The stock options
(which may be "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended)
entitle the holder to purchase shares of the Company's common
stock for up to ten years from the date of grant (five years
for persons owning more than 10 percent of the total combined
voting power of the Company) at a price not less than the fair
market value (110% of fair market value for persons owning
more than 10% of the combined voting power of the Company) of
the common stock on the date of grant. In general, any
employee, director, officer or exclusive agent of, advisor or
consultant to, the Company or a related entity is eligible to
participate in the Plan. The stock options are
nontransferable, except upon death. Pursuant to the Plan,
certain key employees and the President were granted five and
ten year incentive stock options to purchase an aggregate
total of 138,183 shares at prices of $1.25 to $1.375 per
share.
The Company granted its President five year stock options to
purchase up to 800,000 shares which vest upon the Company
attaining certain specified milestones and are exercisable at
$1.375 per share.
The Company will follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25")
and related interpretations in accounting for stock-based
compensation. The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123").
c) Private Placement (Unaudited):
In August 1998 the Company completed a private placement
through the sale of 524,000 shares of its common stock for net
proceeds of approximately $620,000.
15
<PAGE>
To the Board of Directors
BBG Technologies, Inc.
Stoneham, Massachusetts
We have audited the accompanying balance sheet of BBG Technologies, Inc. as of
March 12, 1998 and the related statements of income and retained earnings and
cash flows for the period January 1, 1998 to March 12, 1998. 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 BBG Technologies, Inc. as of
March 12, 1998, and the results of its operations and its cash flows for the
period January 1, 1998 to March 12, 1998 in conformity with generally accepted
accounting principles.
Rucci, Bardaro + Barrett, P.C.
Certified Public Accountants
August 13, 1998
16
<PAGE>
BBG TECHNOLOGIES, INC.
BALANCE SHEET
As of March 12, 1998
ASSETS
------
Current Assets
Cash - Medford Savings $ 10,349
Accounts Receivable 377,077
Tektronix Rebate Receivable 29,512
Inventory - Supplies 32,230
Inventory - Printers 16,676
----------
Total Current Assets $ 465,844
---------
TOTAL ASSETS $ 465,844
=========
LIABILITIES
Current Liabilities
Accounts Payable $ 318,684
Sales Tax Payable 10,973
Accrued Health Deduction 442
----------
Total Current Liabilities $ 330,099
----------
TOTAL LIABILITIES $ 330,099
----------
STOCKHOLDERS' EQUITY
Common Stock (200,000 Shares $ 42,710
Authorizing, Issued and
Outstanding)
Retained Earnings 93,035
----------
TOTAL STOCKHOLDERS' EQUITY $ 135,745
----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 465,844
==========
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
BBG TECHNOLOGIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the period January 1, 1998 to March 12, 1998
Sales $ 369,465
Rebates - Tektronix 29,512
----------
Total Sales $ 398,977
Cost of Sales $ 360,970
----------
Gross Profit 38,007
Operating Expenses
Office Supplies Expense 465
Payroll Expense 8,113
Payroll Taxes Expense 1,030
Legal & Accounting Expense 8,144
Travel Expense 5,000
Group Insurance Expense 5,283
Miscellaneous Expense 79
Credit Card Expense 400
Penalties & Interest 681
Donations 100
--------
Total Operating Expenses 29,295
----------
Net Income $ 8,712
Retained Earnings,
January 1, 1998 114,323
Dividend Distribution (30,000)
----------
Retained Earnings,
December 31, 1998 $93,035
=======---
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
BBG TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
For the period January 1, 1998 to March 12, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,712
Net change in receivables, inventory
Payables and accrued items (14,787)
-----------
NET CASH PROVIDED BY OPERATIONS (6,075)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividend distributions (30,000)
-----------
NET CASH USED BY FINANCING
ACTIVITIES (30,000)
----------
NET DECREASE IN CASH (36,075)
Cash, January 1, 1998 46,424
----------
Cash, March 12, 1998 $ 10,349
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for:
MA Excise tax $ 456
==========
Interest $ 59
==========
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
BBG TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
March 12, 1998
NOTE A - BASIS OF OPERATIONS
1. Business
--------
On November 1, 1996, BBG Technologies, Inc. was formed by a
transfer of assets, specifically inventory only, from the two
shareholders, who in turn had received the inventory, immediately
prior, through a distribution from BBG New Media, Inc. For the
period January 1, 1996 through October 31, 1996 the activity of
BBG New Media, Inc. (formerly known as Boston Business Graphics,
Inc.), is presented as it relates to the activity of BBG
Technologies only, as extracted as a business segment of BBG New
Media, Inc., in a pro forma format in order to present a full
year of activity. For the two months ended December 31, 1996, BBG
Technologies, Inc. operated as a C Corporation. Beginning January
1, 1997, BBG Technologies, Inc. elected S Corporation status (See
Note B-3).
2. Business Operation
------------------
BBG Technologies, Inc., a Massachusetts corporation, is a
reseller of computer equipment and supplies as well as service
contracts covering the equipment they sell.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
1. Revenue Recognition
-------------------
Revenue for sales of computer equipment and related supplies are
recorded upon delivery.
2. Inventory
---------
BBG Technologies, Inc., values their inventory using the FIFO
method accounted for on a specific identification basis.
As of and prior to December 31, 1995, no inventory was
maintained.
3. Income Taxes
------------
As of January 1, 1997, the shareholders of BBG Technologies, Inc.
elected the provisions available under Subchapter S of the
Internal Revenue Code, whereby any loss or gain recognized by the
corporation is distributed to shareholders based on their
respective percentage of stock owned. Therefore, the corporation
is not responsible for Federal income taxes.
20
<PAGE>
BBG TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
March 12, 1998
NOTE B - SIGNIFICANT ACCOUNTING POLICIES - Continued
The Commonwealth of Massachusetts has adopted S-corporation
provisions resulting in similar treatment for state tax purposes,
with the exception of a minimum excise tax of $456.
4. Rebates
----------
BBG Technologies, Inc. receives rebates from their primary
supplier, Tektronix, Inc., based on a percentage of purchases
volume calculated by the vendor.
NOTE C - RELATED PARTY
As referred to in Note A-1 above, BBG Technologies, Inc. began
operations on November 1, 1996, when Boston Business Graphics,
Inc., effectively bifurcated operations, becoming BBG New Media,
Inc., and BBG Technologies, Inc. The two corporations utilize the
same office facilities. Additionally, stock of the two
corporations are owned by the same two shareholders, in the same
percentages.
Other than allocated amounts shown on the December 31, 1996
income statement there are no other allocation of expenses
between the related parties. While certain equipment and other
assets of Boston Business Graphics, Inc., may have been partially
utilized by BBG Technologies, Inc., no basis for allocation of
such exists.
NOTE D - SUBSEQUENT EVENT
On March 13, 1998, virtually all tangible and intangible
operating assets of BBG Technologies, Inc., were purchased by
Cadapult, Inc., an unrelated third party. As of that date, BBG
Technologies, Inc., ceased all operations as a going concern.
Subsequent Event - Going Concern
--------------------------------
As the amount realized in the sale exceeded the reported amounts
on the balance sheet as of March 12, 1998, realization of all
amounts reported is assured.
21
<PAGE>
To the Board of Directors
BBG Technologies, Inc.
Stoneham, Massachusetts
We have audited the accompanying balance sheet of BBG Technologies, Inc. as of
December 31, 1997 and the related statements of income and retained earnings,
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 BBG Technologies, Inc. as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Rucci, Bardaro + Barrett, P.C.
Certified Public Accountants
August 13, 1998
22
<PAGE>
BBG TECHNOLOGIES, INC.
BALANCE SHEET
As of December 31, 1997
ASSETS
------
Current Assets
Cash - Medford Savings $ 46,424
Accounts Receivable 298,225
Tektronix Rebate Receivable 25,867
Inventory - Supplies 39,873
Inventory - Printers 16,675
-----------
Total Current Assets $ 427,064
-----------
TOTAL ASSETS $ 427,064
===========
LIABILITIES
-----------
Current Liabilities
Accounts Payable $ 241,518
Accounts Payable - Related Party 7,338
Sales Tax Payable 19,669
Accrued Health Deduction 441
Accrued Commission 524
Accrued Excise Tax 541
---------
Total Current Liabilities $ 270,031
----------
TOTAL LIABILITIES $ 270,031
----------
STOCKHOLDERS' EQUITY
--------------------
Common Stock (200,000 Shares $ 42,710
Authorizing, Issued and
Outstanding)
Retained Earnings 114,323
TOTAL STOCKHOLDERS' EQUITY $ 157,033
----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 427,064
==========
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
BBG TECHNOLOGIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the year ended December 31, 1997
Sales 2,052,105
Rebates - Tektronix 85,619
----------
Total Sales $ 2,137,724
Cost of Sales $ 1,770,245
-----------
Gross Profit 367,479
Operating Expenses
Office Supplies Expense 791
Payroll Expense 45,894
Payroll Taxes Expense 4,425
Entertainment Expense 10,322
Travel Expense 3,114
Education Expense 4,008
Computer Expense 2,590
Miscellaneous Expense 549
Credit Card Expense 3,424
Penalties & Interest 683
Massachusetts Excise Tax and Annual 541
Report
Employee Benefit Program 1,056
-----------
Total Operating Expenses 77,397
---------
Net Income $ 290,082
Retained Earnings, January 1, 1997 37,501
Dividend Distribution (213,260)
Retained Earnings, December 31, 1997 $ 114,323
=========
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
BBG TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
For the year ended December 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 290,082
Net change in receivables, inventory
payables and accrued items (56,959)
----------
NET CASH PROVIDED BY OPERATIONS $ 223,123
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividend distributions (213,260)
----------
NET CASH USED BY
FINANCING ACTIVITIES (213,260)
----------
NET INCREASE IN CASH 19,863
Cash, January 1, 1997 26,561
----------
Cash, December 31, 1997 $ 46,424
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for:
Interest $ 412
==========
Massachusetts Corporate Excise tax $ 4,910
==========
Federal Income Tax $ 9,056
==========
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
BBG TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1997
NOTE A - BASIS OF OPERATIONS
1. Business
--------
On November 1, 1996, BBG Technologies, Inc. was formed by a
transfer of assets, specifically inventory only, from the two
shareholders, who in turn had received the inventory,
immediately prior, through a distribution from BBG New Media,
Inc. For the period January 1, 1996 through October 31, 1996
the activity of BBG New Media, Inc. (formerly known as Boston
Business Graphics, Inc.), is presented as it relates to the
activity of BBG Technologies only, as extracted as a business
segment of BBG New Media, Inc., in a pro forma format in order
to present a full year of activity. For the two months ended
December 31, 1996, BBG Technologies, Inc. operated as a C
Corporation. Beginning January 1, 1997, BBG Technologies, Inc.
elected S Corporation status (See Note B-3).
2. Business Operation
------------------
BBG Technologies, Inc., a Massachusetts corporation, is a
reseller of computer equipment and supplies as well as service
contracts covering the equipment they sell.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
1. Revenue Recognition
-------------------
Revenue for sales of computer equipment and related supplies
are recorded upon delivery.
2. Inventory
---------
BBG Technologies, Inc., values their inventory using the FIFO
method accounted for on a specific identification basis.
As of and prior to December 31, 1995, no inventory was
maintained.
26
<PAGE>
BBG TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE B - SIGNIFICANT ACCOUNTING POLICIES - Continued
3. Income Taxes
------------
As noted in Note A-1 above, for the first two months of
operation, BBG Technologies, Inc., operated as a C
Corporation, and was therefore responsible for federal and
state corporate taxes. The amount of federal and state
corporate taxes incurred in 1996 and paid in 1997 are $9,056
and $4,910 respectively.
As of January 1, 1997, the shareholders of BBG Technologies,
Inc. have elected the provisions available under Subchapter S
of the Internal Revenue Code, whereby any loss or gain
recognized by the corporation is distributed to shareholders
based on their respective percentage of stock owned.
Therefore, BBG Technologies, Inc., is not responsible for
Federal income taxes.
The Commonwealth of Massachusetts has adopted S-corporation
provisions resulting in similar treatment for state tax
purposes, with the exception of a minimum excise tax of $456.
4. Rebates
-------
BBG Technologies, Inc. receives rebates from their primary
supplier, Tektronix, Inc., based on a percentage of purchases
volume calculated by the vendor.
NOTE C - CONCENTRATION OF RISK
1. Sales
-----
BBG Technologies, Inc., sells computer equipment and supplies
to a variety of customers, the sales and related accounts
receivable balances for the top three largest customers are as
follows:
Accounts Receivable
Sales Balance
----- -------------------
MIT Lincoln Labs $ 434,000 $ 67,200
Polaroid 231,000 105,500
Cabletron Systems 136,000 6,500
--------- ---------
Total $ 801,000 $ 179,200
========= =========
27
<PAGE>
BBG TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE C - CONCENTRATION OF RISK - Continued
2. Purchases
---------
BBG Technologies, Inc., purchases equipment, supplies and
service contracts for resale virtually exclusively from
Tektronix, Inc.
NOTE D - RELATED PARTY
As referred to in Note A-1 above, BBG Technologies, Inc. began
operations on November 1, 1996, when Boston Business Graphics,
Inc., effectively bifurcated operations, becoming BBG New
Media, Inc., and BBG Technologies, Inc. The two corporations
utilize the same office facilities. Additionally, stock of the
two corporations are owned by the same two shareholders, in
the same percentages.
Other than allocated amounts shown on the December 31, 1996
income statement there are no other allocation of expenses
between the related parties. While certain equipment and other
assets of Boston Business Graphics, Inc., may have been
partially utilized by BBG Technologies, Inc., no basis for
allocation of such exists.
NOTE E - SUBSEQUENT EVENT
On March 13, 1998, virtually all tangible and intangible
operating assets of BBG Technologies, Inc., were purchased by
Cadapult, Inc., an unrelated third party. As of that date, BBG
Technologies, Inc., ceased all operations as a going concern.
28
<PAGE>
To the Board of Directors
BBG Technologies, Inc.
Stoneham, Massachusetts
We have audited the accompanying balance sheet of BBG Technologies, Inc. as of
December 31, 1996 and the related statements of income and retained earnings,
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 BBG Technologies, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Rucci, Bardaro + Barrett, P.C.
Certified Public Accountants
August 13, 1998
29
<PAGE>
BBG TECHNOLOGIES, INC.
BALANCE SHEET
As of December 31, 1996
ASSETS
------
Current Assets
Cash - Medford Savings $ 26,561
Accounts Receivable 247,979
Inventory 32,285
-----------
Total Current Assets $ 306,825
---------
TOTAL ASSETS $ 306,825
=========
LIABILITIES
-----------
Current Liabilities
Accounts Payable $ 203,951
Sales Tax Payable 8,697
Income Taxes Payable 13,966
------------
Total Current Liabilities $ 226,614
----------
TOTAL LIABILITIES $ 226,614
----------
STOCKHOLDERS' EQUITY
--------------------
Common Stock (200,000 Shares $ 42,710
Authorizing, Issued and
Outstanding)
Retained Earnings 37,501
----------
TOTAL STOCKHOLDERS' EQUITY $ 80,211
----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 306,825
==========
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
BBG TECHNOLOGIES, INC.
INCOME STATEMENT
For the year ended December 31, 1996
Sales $ 2,252,980
Rebates - Tektronix 48,474
----------
Total Sales $ 2,301,454
Cost of Sales $ 1,885,076
-----------
Gross Profit 416,378
Operating Expenses
Office Supplies Expense 3,337
Payroll Expense 37,500
Payroll Taxes Expense 3,000
Rent Expense 14,806
Utilities Expense 8,259
Business Insurance Expense 2,548
Group Insurance Expense 7,800
Income Tax Expense - C Corp period 13,966
---------
Total Operating Expenses 91,216
-----------
Net Income $ 325,162
===========
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
BBG TECHNOLOGIES, INC.
STATEMENT OF RETAINED EARNINGS
For the year ended December 31, 1996
Retained Earnings, January 1, 1996 $ 0
Net Income $ 325,162
Earnings Retained by Predecessor (Note A-1) (287,661)
-----------
Retained Earnings, December 31, 1996 $ 37,501
===========
The accompanying notes are an integral part of the
financial statements.
32
<PAGE>
BBG TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
For the year ended December 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 325,162
Net change in receivables, inventory
payables and accrued items (10,940)
----------
NET CASH PROVIDED BY OPERATIONS $ 314,222
CASH FLOWS FROM FINANCING ACTIVITIES:
Earnings retained by predecessor (Note A-1) (287,661)
----------
NET CASH USED BY FINANCING (287,661)
---------
NET INCREASE IN CASH 26,561
Cash, January 1, 1996 -
---------
Cash, December 31, 1996 $ 26,561
==========
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
BBG TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996
NOTE A - BASIS OF OPERATIONS
1. Business
--------
On November 1, 1996, BBG Technologies, Inc. was formed by a
transfer of assets, specifically inventory only, from the two
shareholders, who in turn had received the inventory,
immediately prior, through a distribution from BBG New Media,
Inc. For the period January 1, 1996 through October 31, 1996
the activity of BBG New Media, Inc. (formerly known as Boston
Business Graphics, Inc.), is presented as it relates to the
activity of BBG Technologies only, as extracted as a business
segment of BBG New Media, Inc., in a pro forma format in order
to present a full year of activity. For the two months ended
December 31, 1996, BBG Technologies, Inc. operated as a C
Corporation. Beginning January 1, 1997, BBG Technologies, Inc.
elected S Corporation status (See Note B-3).
2. Business Operation
------------------
BBG Technologies, Inc., a Massachusetts corporation, is a
reseller of computer equipment and supplies as well as service
contracts covering the equipment they sell.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
1. Revenue Recognition
-------------------
Revenue for sales of computer equipment and related supplies
are recorded upon delivery.
2. Inventory
---------
BBG Technologies, Inc., values their inventory using the FIFO
method accounted for on a specific identification basis.
As of and prior to December 31, 1995, no inventory was
maintained.
34
<PAGE>
BBG TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE B - SIGNIFICANT ACCOUNTING POLICIES - Continued
3. Income Taxes
As noted in Note A-1 above, for the first two months of
operation, BBG Technologies, Inc., operated as a C
Corporation, and was therefore responsible for federal and
state corporate taxes. The amount of federal and state
corporate taxes incurred in 1996 and paid in 1997 are $9,056
and $4,910, respectively.
4. Rebates
BBG Technologies, Inc. receives rebates from their primary
supplier, Tektronix, Inc., based on a percentage of purchases
volume calculated by the vendor.
NOTE C - CONCENTRATION OF RISK
1. Sales
BBG Technologies, Inc., sells computer equipment and supplies
to a variety of customers, the sales and related accounts
receivable balances for the top three largest customers are as
follows:
Accounts Receivable
Sales Balance
--------- -------------------
MIT Lincoln Labs $ 302,000 $ 32,800
Cabletron Systems 134,000 55,000
BBN/GTE Netowrking 113,000 18,000
--------- ---------
Total $ 549,000 $ 105,800
========= =========
2. Purchases
BBG Technologies, Inc., purchases equipment, supplies and
service contracts for resale virtually exclusively from
Tektronix, Inc.
35
<PAGE>
BBG TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
NOTE D - RELATED PARTY
As referred to in Note A-1 above, BBG Technologies, Inc. began
operations on November 1, 1996, when Boston Business Graphics,
Inc., effectively bifurcated operations, becoming BBG New
Media, Inc., and BBG Technologies, Inc. The two corporations
utilize the same office facilities. Additionally, stock of the
two corporations are owned by the same two shareholders, in
the same percentages.
Other than allocated amounts shown on the December 31, 1996
income statement there are no other allocation of expenses
between the related parties. While certain equipment and other
assets of Boston Business Graphics, Inc., may have been
partially utilized by BBG Technologies, Inc., no basis for
allocation of such exists.
NOTE E - SUBSEQUENT EVENT
On March 13, 1998, virtually all tangible and intangible
operating assets of BBG Technologies, Inc., were purchased by
Cadapult, Inc., an unrelated third party. As of that date, BBG
Technologies, Inc., ceased all operations as a going concern.
36
<PAGE>
(b) Pro Forma Financial Information.
INDEX TO PRO FORMA INFORMATION
Pro Forma Consolidated Financial Data.........................................38
Pro Forma Condensed Consolidated Statement of Operations
Year Ended April 30, 1998 (unaudited).........................................39
Notes to Unaudited Pro Forma Consolidated Statement of Operations.............40
Pro Forma Consolidated Balance Sheet April 30, 1998 (unaudited)...............41
Pro Forma Condensed Statements of Operations Year Ended April 30,
1998 (unaudited)..............................................................42
Notes to Pro Forma Financial Statements.......................................43
37
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
Set forth below are two sets of pro forma financial information and related
notes. The first set presents pro forma financial information for the
acquisition that Cadapult consummated in 1998 (the "Acquisition"). This set
includes an unaudited pro forma consolidated statement of operations of the
Company for the year ended April 30, 1998 giving effect to the Acquisition (see
Note 1 of Notes to Pro Forma Consolidated Statement of Operations) as if it had
occurred on May 1, 1997.
The second set presents pro forma financial information to reflect the merger of
Cadapult into a newly formed, wholly-owned subsidiary of Seafoods Plus, Ltd.
("SPL") an inactive public company. Pursuant to an Agreement and Plan of
Reorganization dated June 5, 1998, the stockholders of the Company exchanged all
of their shares of stock for 72% of the common stock of SPL. The merger, which
was consummated on June 18, 1998, will be recorded as a recapitalization (the
"Recapitalization") of the Company and an issuance of shares to SPL's
shareholders. This set includes an unaudited pro forma consolidated balance
sheet of the Company giving effect to the merger as if it had occurred on April
30, 1998 and an unaudited pro forma consolidated statement of operations of the
Company giving effect to the Recapitalization as if it had occurred on May 1,
1997.
This pro forma financial information is based on the estimates and assumptions
set forth herein and in the notes thereto and has been prepared utilizing the
consolidated and combined financial statements and notes thereto appearing
elsewhere herein.
The following unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of (i) the results
of operations of the Company that actually would have occurred had the
Acquisition or the Recapitalization been consummated on the dates indicated or
(ii) the results of operations of the Company that may occur or be obtained in
the future. The following information is qualified in its entirety by reference
to and should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's consolidated
financial statements, including the notes thereto, and the other historical
financial information appearing elsewhere herein.
38
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Historical BBG Adjustments(2) Pro forma
---------- --- -------------- ---------
<S> <C> <C> <C> <C>
NET SALES $7,103,906 $1,878,211 $ - $8,982,117
---------- ---------- -------------- ----------
COSTS AND EXPENSES:
Cost of sales 5,174,402 1,587,548 - 6,761,950
Selling, general and
administrative 2,138,915 85,217 29,157(a) 2,253,289
----------- ---------- -------------- ----------
7,313,317 1,672,765 29,157 9,015,239
----------- ---------- -------------- ----------
OPERATING INCOME (LOSS) (209,411) 205,446 (29,157) (33,122)
------------- --------- -------------- ----------
OTHER EXPENSE (INCOME):
Interest expense, net 90,829 - 41,563 132,390
Gain on sale of equipment (18,500) - - (18,500)
------------- ------------ -------------- ----------
72,329 - 41,563 113,892
------------- ------------ -------------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES (CREDITS) (281,740) 205,446 (70,720) (147,014)
INCOME TAXES (CREDITS) (62,498) - 60,000(c) (2,498)
------------- ------------- -------------- ----------
NET INCOME (LOSS) $ (219,242) $ 205,446 $ (130,720) $ (144,516)
=========== ============= ============== ============
NET LOSS PER SHARE OF
COMMON STOCK $ (.14) $ (.09)
============ =========
See the accompanying notes to pro forma condensed consolidated financial
statements.
</TABLE>
39
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Note 1 - Acquisition:
On March 13, 1998 the Company acquired certain assets and assumed
certain liabilities of BBG Technologies, Inc. ("BBG"), a
Massachusetts corporation for $546,431 in cash. The acquisition
was accounted for under the purchase method of accounting. Under
the purchase method of accounting, the results of operations of
an acquired entity are included in the Company's historical
financial statements from its acquisition date. Acquired assets
and assumed liabilities have been recorded based on their fair
market values as of the date of acquisition with the excess of
the purchase price over the fair value of the net assets acquired
allocated to goodwill. The financial information of BBG reflects
the results of operations of that entity for the period May 1,
1997 to March 13, 1998.
Note 2 - Presentation and Pro Forma Adjustments:
The unaudited pro forma condensed consolidated statement of
operations for the year ended April 30, 1998 presented above has
been prepared as if the acquisition described in Note 1 had been
consummated as of May 1, 1997.
Pro forma adjustments have been made for the following:
a) Amortization expense adjustments to reflect amortization of
goodwill over a 15-year period and covenants-not-to-compete
over five years.
b) Interest expense adjustments to reflect interest costs on debt
obligations incurred as if the acquisition financing had
occurred on May 1, 1997.
c) Income taxes to reflect pro forma income taxes on BBG income,
less the effect of available net operating loss carryforward.
40
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
--------------------------
ASSETS Cadapult SPL Adjustments Consolidated
------ -------- --- ----------- ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $382,568 $ 583 $(583)a $382,568
Accounts receivable, net 1,114,978 - - 1,114,978
Inventories 779,927 - - 779,927
Other current assets 96,741 - - 96,741
-------- ------ ------- ---------
Total Current 2,374,214 583 (583) 2,374,214
Assets
PROPERTY AND EQUIPMENT, LESS
ACCUMULATED DEPRECIATION 241,416 - - 241,416
OTHER ASSETS 447,140 - - 447,140
---------- ------- ------- ---------
$3,062,770 $ 583 $ 583 $3,062,770
========== ======= ======= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Notes payable to bank $1,000,000 - $1,000,000
Accounts payable and accrued
expenses 1,199,256 501 $(501)a 1,199,256
Current maturities of long-term 89,136 - - 89,136
debt
Other current liabilities 186,348 - 186,348
------------ ------ ------- ----------
Total Current 2,474,740 501 (501) 2,474,740
----------- ----- ------- ----------
Liabilities
OTHER LIABILITIES:
Long-term debt 171,897 - - 171,897
Notes payable to related parties 70,832 7,909 (7,909)a 70,832
------------ ----- -------- ----------
242,729 7,909 (7,909) 242,729
------------ ----- -------- ----------
STOCKHOLDERS' EQUITY:
Common stock and paid-in capital 45,300 39,327 (28,877)b,c 55,750
Retained earnings (deficit) 300,001 (47,154) 36,704a,b,c 289,551
------------ -------- ----------- ----------
Total Stockholders' Equity 345,301 (7,827) 7,827 345,301
------------ -------- ----------- ----------
$3,062,770 $ 583 $ (583) $3,062,770
============ ======== =========== ==========
</TABLE>
See the accompanying notes to pro forma condensed financial statements.
41
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED APRIL 30, 1998
(Unaudited)
Pro Forma
Cadapult and Pro Forma
BBG SPL Consolidated
------------ --- ------------
NET SALES $8,982,117 $ - $ 8,982,117
---------- ----- ------------
COSTS AND EXPENSES:
Cost of sales 6,761,950 - 6,761,950
Selling, general and administrative 2,253,289 1,442 2,254,731
---------- ------ ------------
9,015,239 1,442 9,016,681
---------- ------ ------------
OPERATING LOSS (33,122) (1,442) (34,564)
---------- ------ ------------
OTHER EXPENSE:
Interest expense, net 132,390 - 132,390
Gain on sale of equipment (18,500) - (18,500)
---------- ------ ------------
113,892 - 113,892
---------- ------ ------------
LOSS BEFORE INCOME TAXES
(CREDITS) (147,014) (1,442) (148,456)
INCOME TAXES (CREDITS) (2,498) 100 (2,398)
---------- ------ ------------
NET LOSS $ (144,516) $(1,542) $ (146,058)
============ ======= ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 1,622,682 637,518 2,287,518
---------- ------- ----------
NET LOSS PER SHARE OF
COMMON STOCK $ (.09) $ (.01) $ (.06)e
========== ======== ==========
See the accompanying notes to pro forma condensed financial statements.
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CADAPULT GRAPHIC SYSTEMS, INC.
(Formerly SPL)
NOTES TO PRO FORMA FINANCIAL STATEMENTS
Note A - SPL is a publicly held corporation whose newly formed
subsidiary merged with Cadapult on June 18, 1998; in connection
with this merger, SPL changed its name to Cadapult Graphic
Systems, Inc. ("Cadapult"). For accounting purposes, this
transaction has been treated as a recapitalization with the net
assets of SPL being stated at fair value in accordance with the
purchase method of accounting; accordingly, the then outstanding
shares of SPL are considered outstanding commencing with the date
of merger. The historical financial statements of SPL prior to
the merger will no longer be reported, as Cadapult's financial
statements are now considered the financial statements of the
ongoing reporting entity.
Note B - The unaudited pro forma balance sheet at April 30, 1998
presented herein has been prepared as if the Recapitalization had
been consummated on April 30, 1998.
The unaudited pro forma statement of operations for the year
ended April 30, 1998, is based upon the pro forma Statement of
Operations of the Company and BBG presented elsewhere herein and
has been prepared as if the Recapitalization described in Note 1,
had been consummated as of May 1, 1997.
Pro forma adjustments have been made for the following:
a) To record the gain on forgiveness of SPL's notes payable to
related parties and record the payment of accrued expenses
with remaining cash.
b) To record issuance of 66,068 shares of common stock for
legal fees valued at $10,450.
c) To record the elimination of SPL's equity accounts and
record its net tangible deficit as a reduction in Cadapult's
retained earnings.
The issuance of 571,450 shares of common stock to SPL
stockholders resulted in an adjustment to common stock and
paid-in-capital.
Note C - Statements of operations for SPL were derived from the annual
financial statements on Form 10-K for the year ended December 31,
1997 plus the most recent interim periods reported on Form 10-Q
(March 31, 1998), less comparable periods of the prior year
(March 31, 1997).
Note D - Changes in ownership contemplated herein are expected to
result in a restriction on the availability of net operating loss
carryforwards of $47,000 applicable to SPL to the value of the
Company on the date of such change multiplied by the Federal
long-term tax exempt rate ("annual limitation"). To the extent
amounts available under this annual limitation are not used, they
may be carried forward for the remainder of the 15 year period
following the year the losses were originally incurred.
Note E - Net loss per share is calculated by treating all shares of Common
Stock issued after April 30, 1998 as outstanding for all periods
reported.
43
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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.
CADAPULT GRAPHIC SYSTEMS, INC.
Date: August 27, 1998 /s/ Michael W. Levin
--------------------
Michael W. Levin, President
44
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