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 1934
Date of Report (Date of earliest event reported): January 7, 1999
CADAPULT GRAPHIC SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-21853 87-0475073
(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
Not applicable
(Former name or former address, if changed since last report.)
1
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Cadapult Graphic Systems, Inc. (the "Company") filed with the
Commission a Current Report on Form 8-K on January 19, 1999. At Item 7 of the
Report, the Company indicated that it would file audited historical financial
statements of the business acquired and pro-forma financial information at a
later date. Set forth below is Item 7 of such Report amended to include the
audited historical financial statements of the business acquired and pro-forma
financial information.
(a) Financial Statements of Businesses Acquired.
INDEX TO TARTAN TECHNICAL, INC. FINANCIAL STATEMENTS Page
Independent Auditor's Report 3
Balance Sheets, December 31, 1998 and 1997 4
Statement of Income and Retained Earnings for 5
the Years ended December 31, 1998 and 1997
Schedules of Operating Expenses for the Years 6
Ended December 31, 1998 and 1997
Statement of Cash Flows for the Years Ended 7
December 31, 1998 and 1997
Notes to Financial Statements 8
(b) Pro Forma Financial Information.
INDEX TO FINANCIAL STATEMENTS Page
Pro Forma Consolidated Financial Data 11
Pro Forma Consolidated Balance Sheet, 12
December 31, 1998
Pro Forma Condensed Consolidated Statement of 13
Operations for the Six Months Ended December 31, 1998
Pro Forma Condensed Consolidated Statement of 14
Operations for the Year Ended April 30, 1998
Notes to Unaudited Pro Forma Consolidated 15
Statement of Operations
2
<PAGE>
[Letterhead of Belanger & Company, P.C.]
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors and Stockholders
Tartan Technical, Inc.
Tyngsboro, Massachusetts
We have audited the accompanying balance sheets of Tartan Technical, Inc.
(an S Corporation) as of December 31, 1998 and 1997, and the related statements
of income and retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tartan Technical, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 8 to the financial statements, on December 17, 1998,
the Company entered into an asset purchase agreement, effective January 1, 1999,
for the transfer of substantially all assets and the assumption of substantially
all liabilities of the business.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules of operating expenses are
presented for the purposes of additional analysis and are not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits 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.
/s/ Belanger & Company, P.C.
BELANGER & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Chelmsford, Massachusetts
February 1, 1999
3
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<TABLE>
TARTAN TECHNICAL, INC.
BALANCE SHEET
DECEMBER 31, 1998 AND 1997
<CAPTION>
Assets
------
1998 1997
---------- ----------
<S> <C> <C>
Current Assets:
- --------------
Cash $ 92,288 $ 18,328
Accounts receivable - trade (Notes 2 & 5) 223,086 452,533
Inventory 286,399 385,052
Prepaid expenses 20,027 11,168
---------- ----------
Total Current Assets 621,800 867,081
-------------------- ---------- ----------
Property and Equipment:
- ----------------------
Office furniture and equipment 123,484 98,559
Leasehold improvements 83,770 83,770
---------- ----------
207,254 182,329
Less: Accumulated depreciation 42,462 22,637
---- ---------- ----------
Net Property and Equipment 164,792 159,692
-------------------------- ---------- ----------
Other Assets:
- ------------
Organization costs 426 642
---------- ----------
Total Assets $ 787,018 $1,027,415
------------ ========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
- -------------------
Note payable - line of credit (Note 3) $ 145,823 $ 170,000
Note payable - short term (Note 4) 500,000 0
Accounts payable - trade (Note 5) 202,596 396,563
Sales taxes payable 9,026 22,408
Accrued expenses 52,170 54,292
----------- ----------
Total Current Liabilities 909,615 643,263
------------------------- ----------- ----------
Stockholders' Equity
- --------------------
Common stock - 200,000 shares authorized
issued and outstanding 1,000 shares 181,545 181,545
Retained earnings (Note 6) (304,142) 202,607
----------- ----------
Total Stockholders' Equity (122,597) 384,152
-------------------------- ----------- ----------
Total Liabilities and Stockholders' Equity $ 787,018 $1,027,415
------------------------------------------ =========== ==========
See accompanying notes which are an integral part of these financial statements.
</TABLE>
4
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<TABLE>
TARTAN TECHNICAL, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Sales (Note 5) $3,250,026 $4,175,125
- ----- ---------- ----------
Cost of Goods Sold:
- ------------------
Inventory - beginning of year 385,052 309,011
Purchases for resale 2,439,253 3,410,709
Freight in 7,410 11,883
---------- ----------
2,831,715 3,731,603
Inventory - end of year 286,399 385,052
---------- ----------
Total Cost of Goods Sold 2,545,316 3,346,551
------------------------ ---------- ----------
Gross Profit 704,710 828,574
------------
Operating Expenses - Schedule 648,960 673,168
- ----------------------------- ---------- ----------
Income From Operations 55,750 155,406
---------------------- ---------- ----------
Other Income (Expenses):
- -----------------------
Interest income 171 367
Commissions income 1,755 32,619
Interest expense (20,987) (21,285)
Purchase discounts 3,431 13,077
Gain (loss) on sales of property and equipment (3,369) 0
---------- ----------
Other Income (Expenses) - Net (18,999) 24,778
----------------------------- ---------- ----------
Net Income For The Year 36,751 180,184
-----------------------
Retained Earnings - Beginning of Year 202,607 88,611
- -------------------------------------
Distributions to shareholders (543,500) (66,188)
- ----------------------------- ---------- ----------
Retained Earnings - End of year $ (304,142) $ 202,607
- ------------------------------- ========== ==========
See accompanying notes which are an integral part of these financial statements.
</TABLE>
5
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<TABLE>
TARTAN TECHNICAL, INC.
SCHEDULES OF OEPRATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Operating Expenses:
- ------------------
Salaries and wages - officers $ 111,693 $ 187,126
Salaries and wages - other 210,998 162,718
Payroll taxes 30,681 27,003
Employee benefits 17,161 17,867
Employee retirement plan (Note 7) 17,815 22,901
Advertising and promotion 37,348 20,891
Auto expenses 18,754 15,979
Bad debts (3,630) 18,867
Bank charges 5,267 4,064
Commissions 3,976 15,435
Depreciation 22,602 12,751
Dues and subscriptions 2,803 3,038
Freight out 24,054 20,089
Insurance 10,704 7,678
Legal and accounting 21,546 14,301
Office supplies and expense 19,024 26,341
Postage 3,439 3,940
Rent - building (Note 5) 29,138 27,991
Repairs and maintenance 1,237 7,564
Selling expenses 30,738 23,600
Taxes - other 1,239 1,433
Telephone 11,899 12,762
Travel and entertainment 9,588 12,260
Utilities 9,375 5,128
Sundry 1,511 1,441
---------- ----------
Total Operating Expenses 648,960 673,168
------------------------ ========== ==========
See accompanying notes which are an integral part of these financial statements.
</TABLE>
6
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<TABLE>
TARTAN TECHNICAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
- ------------------------------------
Net income for the year $ 36,751 $ 180,184
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 22,818 12,966
Loss (Gain) on sale of property and equipment 3,369 0
Decrease (Increase) in operating assets:
Accounts receivable - trade 229,447 (21,569)
Accounts receivable - program discounts 0 24,996
Accounts receivable - shareholders 0 127,376
Inventory 98,653 (76,041)
Prepaid expenses (8,859) (2,832)
Increase (Decrease) in operating liabilities:
Accounts payable - trade (193,967) (84,689)
Sales tax payable (13,382) (5,556)
Accrued expenses (2,122) (17,594)
---------- ----------
Net Cash Provided By Operating Activities 172,708 137,241
----------------------------------------- ---------- ----------
Cash Flows From Investing Activities:
- ------------------------------------
Acquisition of property and equipment:
Office furniture and equipment (29,794) (70,350)
Motor vehicles (16,274) 0
Leasehold improvements 0 (83,770)
Proceeds from sales of property and equipment 14,997 0
Distributions to shareholders (543,500) (66,188)
---------- ----------
Net Cash Provided (Used) By
---------------------------
Investing Activities (574,571) (220,308)
-------------------- ---------- ----------
Cash Flows From Financing Activities:
- ------------------------------------
Proceeds from notes payable:
Short-term 525,000 368,000
Payments of notes payable:
Short-term (49,177) (318,000)
Long-term 0 (7,292)
---------- ----------
Net Cash Provided (Used) By
---------------------------
Financing Activities 475,823 42,708
-------------------- ---------- ----------
Net Increase (Decrease) In Cash 73,960 (40,359)
-------------------------------
Cash - Beginning of Year 18,328 58,687
------------------------ ---------- ----------
Cash - End of Year $ 92,288 $ 18,328
------------------ ========== ==========
See accompanying notes which are an integral part of these financial statements.
</TABLE>
7
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TARTAN TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
Note 1: Significant Accounting Policies:
-------------------------------
Business Activity:
-----------------
The Company is a value-added reseller of computers, computer
equipment, peripherals and supplies. The Company grants credit to
customers throughout New England and predominantly in Massachusetts.
The largest customer accounted for approximately 13% of total sales
for 1998.
Purchases from the Company's major supplier amounted to
approximately 56% of the total purchases for the year.
Use Of Estimates:
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Inventory:
---------
Merchandise inventory is stated at the lower of cost or
market. Cost is determined using the First-in, First-out (FIFO)
method of costing inventories.
Fixed Assets:
------------
For financial reporting purposes, depreciation and
amortization of fixed assets is computed utilizing the following
methods and estimated useful lives:
Asset Method Useful Life
----- ------ -----------
Office furniture and Straight line and
equipment declining balance 3 - 8 years
Leasehold improvements Straight line 39 years
The modified accelerated cost recovery system is used for
income tax purposes.
Expenditures for major renewals and betterments which extend
the useful lives of property and equipment are capitalized;
expenditures for maintenance and repairs are charged to expense as
incurred.
Corporation Income Taxes:
------------------------
The Company, at inception, elected by unanimous consent of its
shareholders to be taxed under subchapter S of the Internal Revenue
Code. Under those provisions, the Company does not pay corporate
income taxes on its taxable income. Instead, the stockholders are
liable for individual Federal and state income taxes on their
respective shares of the Company's taxable income.
8
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Statement of Cash Flows:
-----------------------
Interest and income taxes paid for the years ended December
31, 1998 and 1997 were as follows:
1998 1997
--------- ---------
Interest $ 18,947 $ 20,029
========= =========
Income taxes $ -0- $ -0-
========= =========
Note 2: Accounts Receivable - Trade:
---------------------------
Accounts receivable - trade are stated net of an allowance for
doubtful accounts in the amount of $2,600 and $6,230 at December 31,
1998 and 1997, respectively.
Note 3: Note Payable - Line of Credit:
-----------------------------
The Company has established a line of credit in the amount of
$200,000 with interest at the bank's prime rate plus 50 basis points
(8.25% at December 31, 1998), secured by all Company assets and by
commercial real estate of the shareholders.
Note 4: Note Payable - Short Term:
-------------------------
Note payable - short term at December 31, 1998 consisted of a
note payable to Family Bank with interest payable monthly at 6.91%,
due on June 9, 1999, secured by a certificate of deposit owned by
the shareholders.
Note 5: Related Party Transactions:
--------------------------
During 1998, sales to a person related to the two shareholders
amounted to $630, sales to an entity that is 30% owned by a
shareholder of the Company amounted to $53,794 and the entity was
billed for reimbursement of Company operating expenses in the amount
of $41,423. The Company purchased equipment from this entity for
$6,250.
Accounts receivable - trade includes amounts due from the
related parties of $13,984 and accounts payable - trade includes
$6,250 due to related parties at December 31, 1998.
Accounts payable - trade also includes amounts due to a share-
holder of $13,403 for Company expenses paid by the shareholder at
December 31, 1997.
During the years ended December 31, 1998 and 1997, expenses
charged to operations include amounts paid to a trust controlled by
the shareholders of the Company for the lease of a building in the
amount of $29,138 and $23,562, respectively.
9
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Note 6: Retained Earnings:
-----------------
The amount reflected in retained earnings at December 31, 1998
is as follows:
Accumulated Adjustments Account:
Balance - January 1, 1998 $ 175,830
Taxable income 21,358
Nondeductible expenses (1,190)
Distributions to shareholders (543,500)
---------
Balance - December 31, 1998 (347,502)
---------
Tax Timing Adjustments:
Balance - January 1, 1998 26,777
Excess tax depreciation 14,645
Accrued expenses - related parties (1,692)
Bad debts 3,630
---------
Balance - December 31, 1998 43,360
---------
$(304,142)
=========
Note 7: Defined Contribution Plan:
-------------------------
The Company sponsors a defined contribution pension plan
covering all eligible employees. Contributions to the plan totaled
$17,815 and $22,051 in 1998 and 1997, respectively.
Note 8: Subsequent Events:
-----------------
On December 17, 1998, the Company entered into an asset
purchase agreement with Catapult Graphic Systems, Inc., effective
January 1, 1999, for the transfer of substantially all assets and
the assumption of substantially all liabilities of the business, in
exchange for shares of unregistered and restricted common stock of
the purchaser.
10
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
Set forth below is pro forma financial information and related notes which
reflects the acquisition of Tartan Technical, Inc. ("Tartan") that the Company
consummated on January 7, 1999 (the "Acquisition"). Included is an unaudited
pro forma consolidated balance sheet of the Company giving effect to the
Acquisition as if it had occurred on December 31, 1998 and unaudited pro forma
consolidated statements of operations of the Company for the year ended April
30, 1998 and for the six month period ended December 31, 1998 giving effect to
the Acquisition (see Note 1 of Notes to Unaudited Pro Forma Consolidated
Statement of Operations) 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 financial statements of the Company and notes thereto
previously filed and the financial statements of Tartan 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 been consummated on the date 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 previously filed.
11
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<TABLE>
CADAPULT GRAPHIC SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(Unaudited)
<CAPTION>
Pro Forma
------------------------------
ASSETS Cadapult Tartan Adjustments Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 32,112 $ - $ 51,047(d) $ 83,159
Accounts receivable, net 1,462,082 190,860 - 1,652,942
Attorney escrow account 700,000 - (700,000)(d) -
Inventories 865,791 288,367 - 1,154,158
Other current assets 63,674 72,988 - 136,662
------------ ------------ ------------ ------------
Total Current Assets 3,123,659 552,215 (648,953) 3,026,921
PROPERTY AND EQUIPMENT, LESS
ACCUMULATED DEPRECIATION 243,576 195,862 (9,600)(a,b) 429,838
OTHER ASSETS 483,618 - 269,700(a,b) 753,318
------------ ------------ ------------- ------------
$ 3,850,853 $ 748,077 $ (388,853) $ 4,210,077
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Notes payable to bank $ 800,000 $ 648,953 $ (648,953)(d) $ 800,000
Accounts payable and accrued 1,852,532 213,124 - 2,065,656
expenses
Current maturities of long-term debt 89,478 - - 89,478
Deferred revenue 222,369 - - 222,369
------------ ------------ ------------ ------------
Total Current Liabilities 2,964,379 862,077 (648,953) 3,177,503
------------ ------------ ------------ ------------
OTHER LIABILITIES:
Long-term debt 112,187 - - 112,187
Note payable to related party 20,832 - - 20,832
------------ ------------ ------------ ------------
133,019 - - 133,019
------------ ------------ ------------ ------------
SHAREHOLDERS' EQUITY:
Common stock and paid-in capital 688,793 181,545 4,155(a,b) 874,493
Retained earnings (deficit) 64,662 (295,545) 255,945(a,b) 25,062
------------ ------------ ------------ ------------
Total Stockholders' Equity 753,455 (114,000) 260,100 899,555
------------ ------------ ------------ ------------
$ 3,850,853 $ 748,077 $ (388,853) $ 4,210,077
============ ============ ============ ============
See the accompanying notes to pro forma condensed consolidated financial statements.
</TABLE>
12
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<TABLE>
CADAUPLT GRAPHIC SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1998
(Unaudited)
<CAPTION>
Pro Forma
------------------------------
Cadapult Tartan Adjustments Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 4,475,635 $ 1,365,939 $ - $ 5,841,574
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 3,234,814 1,089,846 - 4,324,660
Selling, general and administrative 1,349,057 341,792 13,200(a,b) 1,704,049
------------ ------------ ------------ ------------
4,583,871 1,431,638 13,200 6,028,709
OPERATING LOSS (108,236) (65,699) (13,200) (187,135)
------------ ------------ ------------ ------------
OTHER EXPENSE:
Interest expense, net 57,202 13,765 - 70,967
Loss on sale of equipment - 3,369 - 3,369
------------ ------------ ------------ ------------
57,202 17,134 - 74,336
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (CREDITS) (165,438) (82,833) (13,200) (261,471)
INCOME TAXES (CREDITS) (39,000) - - (39,000)
------------ ------------ ------------ ------------
NET LOSS $ (126,438) $ (82,833) $ (13,200) $ (222,471)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,757,650 - 92,850 2,850,500
============ ============ ============ ============
NET LOSS PER SHARE OF
COMMON STOCK $ (.05) $ (.08)
============ ============
See the accompanying notes to pro forma condensed consolidated financial statements.
</TABLE>
13
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<TABLE>
CADAUPLT GRAPHIC SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1998
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
------------------------------
Cadapult
and SPL Tartan Adjustments Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 8,982,117 $ 4,057,282 $ - $ 13,039,399
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 6,761,950 3,169,652 - 9,931,602
Selling, general and administrative 2,254,731 730,423 26,400(a,b) 3,011,554
------------ ------------ ------------ ------------
9,016,681 3,900,075 26,400 12,943,156
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (34,564) 157,207 (26,400) 96,243
------------ ------------ ------------ ------------
OTHER EXPENSE:
Interest expense, net 132,392 24,011 - 156,403
Gain on sale of equipment (18,500) - - (18,500)
------------ ------------ ------------ ------------
113,892 24,011 - 137,903
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES (CREDITS) (148,456) 133,196 (26,400) (41,660)
INCOME TAXES (CREDITS) (2,398) - - (2,398)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (146,058) $ 133,196 $ (26,400) $ (39,262)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 2,287,500 92,850 2,380,350
============ ============ ============ ============
NET LOSS PER SHARE OF
COMMON STOCK $ (.02) $ (.02)
============ ============
See the accompanying notes to pro forma condensed consolidated financial statements.
</TABLE>
14
<PAGE>
CADAPULT GRAPHIC SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Note 1 - Acquisition:
On January 7, 1999, Cadapult Graphic Systems, Inc. (the "Company")
acquired certain assets and assumed certain liabilities of Tartan
Technical, Inc. ("Tartan"), a Massachusetts corporation for 185,700
shares of the Company's common stock (the "Acquisition").
Currently, 92,850 of these shares are held in escrow pursuant to the
resolution of a contingency based on Tartan achieving certain gross
profit levels over the next two years. 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 Tartan reflects the results
of operations of that entity for the interim period July 1, 1998 to
December 31, 1998 and for the fiscal year which began July 1, 1997
and ended June 30, 1998.
Note 2 - Presentation and Pro Forma Adjustments:
The unaudited pro forma consolidated balance sheet at December 31,
1998 presented herein has been prepared as if the Acquisition had
been consummated on December 31, 1998.
The unaudited pro forma condensed consolidated statements of
operations for the year ended April 30, 1998 and for the six months
ended December 31, 1998 presented above have been prepared as if the
Acquisition described in Note 1 had been consummated as of May 1,
1997.
Tartan's results for the year ended June 30, 1998 are being combined
with the Company's results for the year ended April 30, 1998. It
should be noted that the Company changed its year end to June 30;
accordingly, the interim period reported is for the six months ended
December 31, 1998.
15
<PAGE>
Pro forma adjustments have been made for the following:
a) Amortization expense adjustments to reflect amortization of
goodwill over a 15-year period at $20,000 per year ($10,000
for the six months ended December 31, 1998).
b) Depreciation expense adjustments to reflect depreciation over
a five year period of the increase in carrying value of fixed
assets to fair market value at $6,400 per year ($3,200 for the
six months ended December 31, 1998).
c) There was no adjustment for income taxes that would have been
required on Tartan's income as a result of its change from S
Corporation status (under Section 1361 of the Internal Revenue
Code) to a C Corporation, due to the Company's net losses. An
otherwise required benefit for income taxes to reflect pro
forma income taxes (credits) on Tartan losses for the six
months ended December 31, 1998, has been offset by a 100%
valuation allowance.
d) Amount included in escrow ($700,000) was released upon
consummation of the acquisition and utilized to payoff
Tartan's note payable of $648,953. The difference is included
in cash.
Note 3 - Net Earnings (Loss) Per Share:
Net earnings (loss) per share is calculated by treating all shares
of common stock issued to Tartan as outstanding for all periods
reported. The 92,850 shares in escrow will not be included in basic
earnings (loss) per share until the contingency is resolved. The
contingent shares are not required to be included in the calculation
of diluted earnings (loss) per share until the contingency is
resolved and then, only if their inclusion would be dilutive.
16
<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.
CADAPULT GRAPHIC SYSTEMS, INC.
Date: March 18, 1999 /s/ Michael W. Levin
------------------------------
Michael W. Levin, President
17
