<PAGE> 1
FORM 8 - K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 29, 1999
FOCUS AFFILIATES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
1-12571 95-4467726
- -------------------------------- ---------------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
401 East Corporate Drive, Suite 220
Lewisville, Texas 75057
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(214) 222-7979
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
<PAGE> 2
Item 5. OTHER EVENT
On October 29, 1999, Focus Affiliates Inc. ("Focus"), formerly known as
Intellicell Corp., completed the acquisition of Cellular Wholesalers, Inc.
("CWI"), a privately held wholesale distributor of wireless phone products.
Focus filed a Form 8-K on August 26, 1999 to report that it had entered into an
agreement to acquire CWI and filed a second Form 8-K on November 10, 1999 (the
"November 10, 1999 Form 8-K") to report that it had completed this acquisition.
To comply with the applicable Form 8-K filing requirements, the November 10,
1999 Form 8-K included by reference certain financial information with respect
to the CWI acquisition. This information included operating data for CWI for the
nine-month period ended June 30, 1999 and balance sheet data for CWI at June 30,
1999 and pro forma combined financial data for Focus and CWI that included the
applicable interim period (collectively, the "CWI Financial Information").
Under the terms of the Company's acquisition of CWI, the purchase price to be
paid by the Company was based in part on CWI's stockholders' equity as of the
date of the closing of the acquisition. In the process of reviewing CWI's
closing date equity, the Company determined that certain financial information
concerning CWI that had been prepared by CWI and furnished to the Company for
inclusion in the November 10, 1999 Form 8-K had been significantly misstated by
CWI. Focus, with assistance from Arthur Andersen, thereupon performed a detailed
analysis and reconciliation and verification work with respect to the CWI
Financial Information in order to determine the extent of the misstatements and
to correct the misstated information.
The misstatements to the CWI Financial Information resulted primarily from the
following:
(a) Reserve levels for excess and obsolete inventory and
uncollectible accounts receivable were not deemed to be
adequate and were not measured in a consistent fashion with
the historical audited financial statements.
(b) A proper cut off was not performed to insure that liabilities
were recorded for all expenses incurred prior to June 30,
1999.
(c) Various account reconciliations had not been performed on a
current basis to substantiate certain asset and liability
balances as of June 30, 1999.
(d) Failure to pro rate an executive bonus granted during the
year.
<PAGE> 3
The adjustment to the CWI net income for the nine-month period ended June 30,
1999 and to CWI's stockholders' equity as of June 30, 1999 are as follows:
<TABLE>
<CAPTION>
CWI
CWI Stockholders'
Net Income Equity
(Unaudited) (Unaudited)
----------- -------------
<S> <C> <C>
As Stated in November 10, 1999 Form 8-K $ 650 $ 756
Adjustments { Income / (Expense) }:
Additional reserves required (402) (402)
Cutoff corrections (87) (87)
Proration of executive bonus (869) (869)
Other (38) (60)
----- -----
Amended $(746) $(662)
===== =====
</TABLE>
The corrected CWI Financial Information is set forth as Exhibit 10.1 hereto (the
Cellular Wholesalers, Inc. Selected Financial Data table) and Exhibit 10.2
hereto (the Selected Pro Forma Data table, the Comparative per Share Data of
Focus and CWI table, the Unaudited Pro Forma Combined Balance Sheet of Focus and
CWI and the Unaudited Pro Forma Combined Statements of Operations of Focus and
CWI).
The corrections to the CWI Financial Information were reflected in the financial
information contained in the financial statements that were included in the Form
10-K for Focus for the year ended December 31, 1999. The reductions in net
income and stockholders' equity for CWI for the nine-months ended June 30, 1999
also will have no impact on the cash position of Focus as of December 31, 1999
or subsequent thereto.
Focus has petitioned the American Arbitration Association seeking to rescind the
CWI acquisition, or in the alternative, seeking monetary damages from the former
CWI stockholders (including certain members of the former CWI management team)
based, in part, on the misstatements of the CWI Financial Information. There can
be no assurance, however, that Focus will be successful in obtaining a
rescission of the CWI acquisition or monetary damages from the former CWI
stockholders.
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
10.1 Cellular Wholesalers, Inc. Selected Financial Data
10.2 Selected Unaudited Pro Forma Combined Financial Data
10.3 Unaudited Pro Forma Combined Financial Data
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
FOCUS AFFILIATES, INC.
Date: May 11, 2000 By: /s/ JOHN SWINEHART
-------------------------------------------
John Swinehart, Chairman of the Board,
Vice President of Finance and
Principal Accounting Officer
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Cellular Wholesalers, Inc. Selected Financial Data
10.2 Selected Unaudited Pro Forma Combined Financial Data
10.3 Unaudited Pro Forma Combined Financial Data
</TABLE>
<PAGE> 1
EXHIBIT 10.1
As discussed in Item 5, the accompanying financial information as of June 30,
1999, that was included in the Intellicell Corp. Proxy Statement dated August
26, 1999 page 27, have been revised to reflect the proper financial results of
CWI at that date.
CELLULAR WHOLESALERS, INC. SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for CWI for
the year ended July 31, 1994, the fourteen-month period ended September 30, 1995
and the years ended September 30, 1996, 1997 and 1998, and the nine months ended
June 30, 1999. Such data have been derived from, and should be read in
conjunction with, the audited financial statements and other financial
information contained in CWI's audited financial statements for the years ended
September 30, 1998, 1997 and 1996, incorporated the notes thereto, which are
attached to this Proxy Statement as Appendix C.
CWI SELECTED FINANCIAL DATA
(THOUSANDS EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
14 Months Nine Months
Year Ended Ended Year Ended Year Ended Year Ended Ended
July 31, September 30, September 30, September 30, September 30, June 30,
1994 1995 1996 1997 1998 1999
(Unaudited) (Unaudited) (Audited) (Audited) (Audited) (Unaudited)
----------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net Sales $ 61,593 $ 62,992 $ 40,135 $ 53,265 $ 81,031 $ 58,310
Cost of Sales 57,117 59,662 36,014 47,673 73,138 52,678
-------- ----------- -------- --------- --------- ---------
Gross Profit 4,476 3,330 4,120 5,592 7,893 5,632
Selling, general and
administrative expenses 3,604 5,620 3,365 4,043 5,842 6,263
-------- ----------- -------- --------- --------- ---------
Income (loss) from
operations 872 (2,290) 756 1,549 2,051 (631)
Other income (expense) (437) (919) (506) (122) (892) (115)
-------- ----------- -------- --------- --------- ---------
Income (loss) before
income tax expense 435 (3,209) 250 1,427 1,159 (746)
(benefit)
Income tax expense
(benefit) -- -- (13) -- 15 --
-------- ----------- -------- --------- --------- ---------
Net (loss) income 435 (3,209) 263 1,427 1,144 (746)
======== =========== ======== ========= ========= =========
Pro Forma net income (loss) 435 (3,209) 263 1,427 1,144 (746)
======== =========== ======== ========= ========= =========
Pro Forma net income
(loss) per share (basic
and diluted) $ 543.27 $ (4,011.66) $ 328.34 $1,783.94 $1,429.77 $ (932.50)
======== =========== ======== ========= ========= =========
Weighted average number of
common shares
outstanding (basic) 800 800 800 800 800 800
Weighted average number of
common shares
outstanding (diluted) 800 800 800 800 800 800
BALANCE SHEET DATA:
Working Capital (deficiency) $ 136 $ (3,211) $ (2,488) $ (1,092) $ 6,092 $ (2,274)
Total Assets 15,464 7,913 7,368 9,002 15,585 20,483
Short-term debt 14,449 10,164 9,050 9,170 8,260 8,875
Total Liabilities 14,983 10,642 9,834 10,040 15,480 21,145
Stockholders' equity
(capital deficiency) 481 (2,728) (2,466) (1,039) 105 (662)
</TABLE>
<PAGE> 1
EXHIBIT 10.2
As discussed in Item 5, the accompanying financial information as of June 30,
1999, that was included in the Intellicell Corp. Proxy Statement dated August
26, 1999 on page 28 through 30, have been revised to reflect the proper
financial results of CWI as of that date.
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth selected unaudited pro forma combined financial
data for Focus, formerly Intellicell, for the year ended December 31, 1998, and
for the six month period ended June 30, 1999. The financial data are presented
to reflect the estimated impact on the historical financial statements of Focus
for the CWI Merger, which will be accounted for using the purchase method, the
issuance of 2,250,000 shares of Focus Common Stock and approximately $4,160,000
in cash as merger consideration (the total consideration that would be payable
if CWI's total stockholders' equity on the Closing Date is equal to CWI's total
stockholders' equity as of June 30, 1999). The income statement data assume that
the CWI Merger had been consummated at the beginning of the earliest period
presented, combining the annual statements of operations of Focus for the year
ended December 31, 1998 and CWI for the year ended September 30, 1998. Interim
statements of operations of Focus are for the six months ended June 30, 1999 and
for CWI are for the six month period from January 1, 1999 through June 30, 1999.
The balance sheet data assumes that the CWI Merger had been consummated on June
30, 1999. The unaudited pro forma combined financial statements do not reflect
any cost savings and other synergies nor merger related expenses anticipated by
Focus management as a result of the CWI Merger and are not necessarily
indicative of the results of operations or the financial position which would
have occurred had the CWI Merger been consummated at the beginning of the
earliest period presented, nor are they necessarily indicative of Focus's future
results of operations or financial position. The unaudited pro forma combined
financial data should be read in conjunction with the historical financial
statements, including the notes thereto, of Focus and CWI and the Unaudited Pro
Forma Combined Financial Information, which is attached hereto as Appendix D.
<PAGE> 2
SELECTED PRO FORMA DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
December 31, 1998 June 30, 1999
----------------- ----------------
<S> <C> <C>
Operations:
Net Sales $ 108,818 $ 51,117
Cost of Sales 99,290 46,739
Gross Profit 9,528 4,378
Selling, General and Administrative Expenses 10,009 7,536
Amortization of Goodwill 1,382 691
Income (loss) from Operations (1,863) (3,849)
Other Income (expense) (1,249) 18
Income (loss) Before Income Tax Expense (benefit) (3,112) (3,831)
Income Tax Expense (benefit) -- --
Net (loss) Income (3,112) (3,831)
Pro Forma Net Income (loss) Per Share (0.47) (0.44)
Weighted Average Number of Common Shares Outstanding 6,665,902 8,793,636
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
-------------
<S> <C>
Balance Sheet Data:
Working Capital (deficiency) $ (5,541)
Total Assets 41,252
Total Liabilities 31,798
Stockholders' Equity 9,454
</TABLE>
<PAGE> 3
COMPARATIVE PER SHARE DATA OF FOCUS AND CWI
The following table sets forth certain earnings and net tangible book value per
share data for Focus and CWI on historical and pro forma bases. The pro forma
combined earnings per share data are derived from the Unaudited Pro Forma
Combined Statements of Operations appearing elsewhere herein, which give effect
to the CWI Merger using the purchase accounting method as if the CWI Merger had
been consummated at the beginning of the earliest period presented. There were
no cash dividends declared in the periods indicated. Book value data for all pro
forma presentations is based upon the weighted average number of outstanding
shares of Focus Common Stock, adjusted to include the estimated number of shares
of Focus Common Stock to be issued in the CWI Merger. The information set forth
below should be read in conjunction with the historical financial statements of
Focus and of CWI and the Unaudited Pro Forma Combined Financial Information,
including the notes thereto, incorporated by reference or appearing elsewhere in
this Proxy Statement.
The pro forma data do not reflect any cost savings and other synergies or merger
related expenses anticipated by Focus management as a result of the CWI Merger.
<TABLE>
<CAPTION>
Focus Pro Forma
June 30, 1999 June 30, 1999
Focus: (Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
Balance Sheet Data:
Total Stockholders' Equity $ 2,294 $ 9,454
Less Goodwill - 13,822
Net Tangible Book Value (deficit) 2,294 (4,368)
Number of Issued and Outstanding Shares of Common Stock 7,014,893 9,264,893
Net Tangible Book Value (deficit) Per Share 0.33 (0.47)
</TABLE>
<TABLE>
<CAPTION>
Focus Pro Forma Focus Pro Forma
Year Ended Year Ended Six Months Six Months
December 31, December 31, Ended June 30, Ended June 30,
1998 1998 1999 1999
(Audited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Operating Data:
Net Loss $ (2,769) $ (3,112) $ (2,174) $ (3,831)
Weighted Average Number of Common
Shares Outstanding 4,415,902 6,665,902 6,534,636 8,793,636
Basic and Diluted Loss Per Share (0.63) (0.47) (0.33) (0.44)
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Equivalent
CWI June 30, Pro Forma
1999 June 30, 1999
CWI: (Unaudited) (Unaudited)
------------ -------------
<S> <C> <C>
Balance Sheet Data:
Total Stockholders' Equity $ (662)
Number of Issued and Outstanding Shares of Common Stock 800
Net Tangible Book Value (deficit) Per Share $(827.50)
Net Pro Forma Tangible Book Value (deficit) Per Share $ (0.47)
Multiply by Exchange Ratio 2,812.50
Equivalent Pro Forma Net Tangible Book Value Per Share $(1,321.88)
</TABLE>
<TABLE>
<CAPTION>
Equivalent Pro Equivalent
CWI Year Forma Year CWI Pro Forma
Ended Ended Six Months Six Months
September 30, September 30, Ended Ended
1998 1998 June 30, 1999 June 30, 1999
(Audited) (Unaudited) (Unaudited) (Unaudited)
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating Data:
Net Income $ 1,144 $ (906)
Weighted Average Number of Common
Share Outstanding 800 800
Basic Earnings Per Share 1,430.00 $(1,132.50)
Net Pro Forma Earnings (loss)
Per Share $ (0.47) $ (0.44)
Multiply by Exchange Ratio 2,812.50 2,812.50
Equivalent Pro Forma Earnings (loss)
Per Share $(1,321.88) $(1,237.50)
</TABLE>
<PAGE> 1
EXHIBIT 10.3
As discussed in Item 5, the accompanying financial information as of June 30,
1999, that was included in the Intellicell Corp. Proxy Statement dated August
26, 1999 in Appendix D, have been revised to reflect the proper financial
results of CWI as of that date.
APPENDIX D
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Balance Sheet of Focus and CWI as of
June 30, 1999, and the Unaudited Pro Forma Combined Statements of Operations for
the year ended December 31, 1998, and the six months ended June 30, 1999, have
been prepared to reflect the effect on the historical results of Focus of the
acquisition of all issued and outstanding capital stock of CWI.
The Unaudited Pro Forma Combined Balance Sheet has been prepared as if the
transactions occurred on June 30, 1999; the Unaudited Pro Forma Combined
Statements of Operations have been prepared as if the transactions occurred on
January 1, 1998. The pro forma financial information set forth below is
unaudited and not necessarily indicative of the results that would actually have
occurred if the transaction had been consummated as of June 30, 1999, or January
1, 1998, or the results which may be obtained in the future.
The pro forma adjustments, as described in the Noted to the Unaudited Pro Forma
Combined Financial Information, are based on available information and upon
certain assumptions that management believes are reasonable. The Unaudited Pro
Forma Combined Financial Information should be read in conjunction with Focus
and CWI historical financial statements, including the related noted thereto.
<PAGE> 2
UNAUDITED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
Focus CWI
June 30, 1999 June 30, 1999 Pro Forma Pro Forma
(Unaudited) (Unaudited) Adjustments Combined
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents $ 1,593 $ -- $ 1,593
Accounts Receivable, net 3,194 7,169 10,363
Inventories, net 1,124 5,726 6,850
Other Current Assets 475 4,518 4,993
-------- -------- -------- --------
Total Current Assets 6,386 17,413 -- 23,799
Property and Equipment, net 395 2,989 3,384
Goodwill -- -- 13,822 13,822
Other Noncurrent Assets 166 81 247
-------- -------- -------- --------
Total Other Assets $ 6,947 $ 20,483 $ 13,822 $ 41,252
======== ======== ======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Cash required to finance the acquisition $ 5,000 $ 5,000
Accounts Payable $ 2,810 $ 6,378 9,188
Revolving Credit Facility 1,376 8,875 10,251
Accrued Expenses 467 4,434 4,901
-------- -------- -------- --------
Total Current Liabilities 4,653 19,687 29,340
Long-term debt -- 1,458 1,000 2,458
Stockholders' Equity 2,294 (662) 7,822 9,454
-------- -------- -------- --------
Total Liabilities and Stockholders' Equity $ 6,947 $ 20,483 $ 13,822 $ 41,252
======== ======== ======== ========
</TABLE>
<PAGE> 3
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Focus CWI
Year Ended Year Ended
December 31, September 30, Combined
1998 1998 Pro Forma Pro Forma
(Audited) (Audited) Adjustments Totals
------------ ------------- ----------- ---------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Sales $ 27,787 $ 81,031 $ 108,818
Cost of Sales 26,152 73,138 99,290
----------- ----------- ----------- -----------
Gross Profit 1,635 7,893 9,528
Selling, general and administrative expenses 4,167 5,842 10,009
Amortization of goodwill -- -- 1,382 1,382
----------- ----------- ----------- -----------
Income (loss) from operations (2,532) 2,051 (1,382) (1,863)
Other income (expense) (237) (892) (120) (1,249)
----------- ----------- ----------- -----------
Income (loss) before income tax expense (benefit) (2,769) 1,159 (1,502) (3,112)
Income tax expense (benefit) -- 15 (15) --
----------- ----------- ----------- -----------
Net (loss) income $ (2,769) $ 1,144 $ (1,487) $ (3,112)
=========== =========== =========== ===========
Pro Forma Basic and Diluted Loss Per Share $ (0.47)
===========
Weighted average number of common shares outstanding 6,665,902
===========
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Focus
Six Months CWI
Ended Six Months
June 30, Ended Combined
1999 June 30, 1999 Pro Forma Pro Forma
(Unaudited) (Unaudited) Adjustments Totals
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Sales $ 14,219 $ 36,898 $ 51,117
Cost of Sales 13,397 33,342 46,739
----------- ----------- ----------- -----------
Gross Profit 822 3,556 4,378
Selling, general and administrative expenses 2,979 4,557 7,536
Amortization of goodwill -- -- 691 691
----------- ----------- ----------- -----------
Income (loss) from operations (2,157) (1,001) (691) (3,849)
Other income (expense) (17) 95 (60) 18
----------- ----------- ----------- -----------
Income (loss) before income tax expense (benefit) (2,174) (906) (751) (3,831)
Income tax expense (benefit) -- -- -- --
----------- ----------- ----------- -----------
Net (loss) income $ (2,174) $ (906) $ (751) $ (3,831)
=========== =========== =========== ===========
Pro Forma Basic and Diluted Loss Per Share $ (0.44)
===========
Weighted average number of common shares outstanding 8,793,636
===========
</TABLE>
<PAGE> 5
FOCUS AFFILIATES, INC. AND CELLULAR WHOLESALERS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
1. DESCRIPTION OF MERGER
On the closing date, anticipated as of September 30, 1999, each share of
issued and outstanding capital stock of CWI will be exchanged for cash and
shares of Focus common stock. The total consideration to be received by CWI
stockholders will be $15,000,000 ("Base Consideration"), plus an additional
amount ("Additional Consideration") in the event the total stockholders'
equity of CWI as of the closing date exceeds $177,667. The Base
Consideration will consist of $6,000,000 in cash and $9,000,000 of shares
of Focus common stock. For purposes of the merger, the shares will have a
value of $4.00, resulting in 2,250,000 shares of Focus common stock to be
issued to CWI stockholders. The Additional Consideration, if any, will
consist of an additional number of shares of Focus common stock equal to
(i) the amount by which the closing date equity exceeds $177,667, divided
by (ii) $4.00. However, the cash portion of the Base Consideration will be
reduced by the amount the closing date equity is less than $1,177,667.
The Company funded the cash portion of the purchase price by selling
$5,000,000 of convertible subordinated notes convertible into 1,250,000
shares of common stock of the Company and warrants to purchase 644,050
shares of common stock of the Company at an exercise price of $4 per share.
In addition, the Company sold $1,000,000 of convertible subordinated notes
with attached warrants to purchase 150,000 shares at $5.55 per share to two
separate noteholders.
2. BASIS OF PRESENTATION
The unaudited pro forma combined financial statements give effect to the
pending acquisition by Focus of 100% of the issued and outstanding shares
of common stock of CWI and are based on the estimates and assumptions set
forth therein. This pro forma information has been prepared utilizing the
historical financial statements of each entity. The pro forma financial
data is provided for comparative purposes only and does not purport to be
indicative of the results which actually could have been obtained if the
acquisition had been effected on the date indicated or those results which
may be obtained in the future.
The Unaudited Pro Forma Combined Balance Sheet assumes that the acquisition
was consummated on June 30, 1999, combining the balance sheets of Focus and
CWI at June 30, 1999. The Unaudited Pro Forma Combined Statements of
Operations assume that the acquisition was consummated on January 1, 1998,
combining the annual statements of operations of Focus for the year ended
December 31, 1998 and CWI for the year ended September 30, 1998, and the
interim statements of operations of Focus for the six months ended June 30,
1999 and CWI for the six month period ended June 30, 1999.
<PAGE> 6
The transaction will be accounted for under the purchase method of
accounting. At June 30, 1999, the pro forma Goodwill was calculated as
follows:
<TABLE>
<S> <C> <C> <C>
Purchase Price - Base Consideration $ 15,000,000(1)
Adjustment to reduce cash portion of Base
Consideration:
Required Equity $ 1,177,667
Equity at June 30, 1999 (662,000) (1,840,000)
-----------
Additional Consideration:
Equity at June 30, 1999 (662,000)
Required Equity 177,667
-----------
Excess --
Divided by 4
------------
Additional common stock --
Assigned Value $ 4.00 --
------------ ------------
Adjusted purchase price 13,160,000
Net Assets of CWI (662,000)
------------
Goodwill $ 13,822,000
============
</TABLE>
(1) See Footnote 1 - Description of Merger
For financial purposes, goodwill will be amortized on a straight-line basis over
a ten-year period. Annual amortization is approximately $1,382,000.
<PAGE> 7
The pro forma adjustments on the combined balance sheet are as follows:
<TABLE>
<S> <C>
Goodwill recognized $ 13,822,000
------------
Effect on total assets 13,822,000
------------
Cash required to finance the acquisition 6,000,000
Common stock increased by 2,250,000 shares at
$.01 par value, less $1,000
CWI common stock 22,000
Additional paid-in capital increased 7,138,000
Retained Earnings of CWI eliminated 662,000
------------
Effect on total liabilities and stockholders'
equity $ 13,822,000
------------
</TABLE>
