SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 22, 1999
(Date of earliest event reported)
MYTURN.COM, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware 000-22611 11-3344575
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File No.) (IRS Employer Identification
of incorporation) Number)
333 North First Street, Jacksonville, Florida 32250
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 249-5756
Compu-DAWN, Inc.
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
EXPLANATORY NOTE
On January 21, 2000 Compu-DAWN, Inc. changed its name to MyTurn.com, Inc.
References to Compu-DAWN, Inc. herein means MyTurn.com, Inc.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
(i) Independent auditor's report.
(ii) Balance Sheet of GlobalPC as at June 30, 1999 and
December 31, 1998.
(iii)Statements of Operations of GlobalPC for the six
months ended June 30, 1999, the period from April 1,
1998 (inception) to December 31, 1998 and the period
from April 1, 1998 (inception) to June 30, 1999.
(iv) Statement of Changes in Shareholders' Equity of
GlobalPC for the period from April 1, 1998 (inception)
to June 30, 1999.
(v) Notes to financial statements.
(vi) Statement of Cash Flows of GlobalPC for the six months
ended June 30, 1999, the period from April 1, 1998
(inception) to December 31, 1998 and the period from
April 1, 1998 (inception) to June 30, 1999.
(vii)Balance sheet and Statement of Operations of GlobalPC,
Inc. as of September 30, 1999 are included in the pro
forma financial statement referred to in the June 30,
1999 notes set forth under paragraph (a) (v) above.
(b) Pro Forma Financial Information (giving effect to the acquisition
of assets from GlobalPC, Inc.)
(i) Pro Forma Unaudited Condensed Balance Sheet of
Compu-DAWN as of September 30,1999.
(ii) Pro Forma Unaudited Condensed Statements of Operations
of Compu-DAWN for the nine months ended September 30,
1999.
(iii)Pro Forma Unaudited Condensed Balance Sheet of
Compu-DAWN as of December 31, 1998.
(iv) Pro Forma Unaudited Condensed Statements of Operations
of Compu-DAWN for the year ended December 31, 1998.
2
<PAGE>
(c) Additional Pro Forma Information (giving effect to the
acquisition of assets from GlobalPC, Inc. and the private
placements through Hornblower & Weeks).
(i) Pro Forma Balance Sheet of Compu-DAWN as of September
30, 1999.
(ii) Pro Forma Statement of Operations of Compu-DAWN for the
nine months ended September 30, 1999.
3
<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.
COMPU-DAWN, INC.
Dated: February 3, By: /s/ Paul K. Danner
-------------------------
Paul K. Danner,
Chief Executive Officer
4
<PAGE>
GLOBAL PC, INC.
(a development stage company)
AUDITED FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998
F-1
<PAGE>
GLOBAL PC, INC.
(a development stage company)
AUDITED FINANCIAL STATEMENTS
JUNE 30, 1999 AND DECEMBER 31, 1998
Contents
Independent Auditors' Report 1 (F-3)
Balance Sheets 2-3 (F-4 - F-5)
Statements of Operations 4 (F-6)
Statements of Shareholders' Equity 5 (F-7)
Statements of Cash Flows 6-7 (F-8 - F-9)
Notes to Financial Statements 8-14 (F-10 - F-16)
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Global PC, Inc.
Alameda, California
We have audited the accompanying balance sheets of Global PC, Inc. (a
development stage company) (the Company) as of June 30, 1999 and December 31,
1998, and the related statements of operations, changes in shareholders' equity
and cash flows for the six months ended June 30, 1999, the period from April 1,
1998 (inception) to December 31, 1998, and the period from April 1, 1998
(inception) to June 30, 1999. These financial statements are the responsibility
of the management of the Company. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit 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 Global PC, Inc. as of June 30,
1999 and December 31, 1998, and the results of its operations and its cash flows
for the six months ended June 30, 1999, the period from April 1, 1998
(inception) to December 31, 1998, and the period from April 1, 1998 (inception)
to June 30, 1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
since inception that raise substantial doubt about the entity's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note A. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Petrinovich, Pugh & Company
Petrinovich, Pugh & Company
San Jose, California
August 24, 1999
F-3
<PAGE>
GLOBAL PC, INC.
(a development stage company)
BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
June 30, December 31,
1999 1998
------- -----------
ASSETS
CURRENT ASSETS:
Cash $ 62,022 $ 945,572
Accounts receivable 52,994 -
Licenses 415,000 415,000
Software development costs 1,339,017 419,261
Prepaid expenses 66,000 12,600
Total current assets 1,935,033 1,792,433
PROPERTY AND EQUIPMENT:
Equipment and tooling 192,627 117,618
Software 9,395 11,306
Furniture and fixtures 10,975 11,175
------------- ------------
212,997 140,009
Less accumulated depreciation 22,130 7,517
------------- ------------
Net property and equipment 190,867 132,582
------------- ------------
$ 2,125,900 $ 1,925,015
============= =============
/TABLE>
F-4
<PAGE>
GLOBAL PC, INC.
(a development stage company)
BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 1,469,936 $ 502,772
Accrued expenses 568,125 543,272
Income taxes payable 1,600 800
Convertible promissory notes 324,407 -
Note payable 120,000 -
-------------- --------------
Total current liabilities 2,484,068 1,046,844
SHAREHOLDERS' EQUITY:
Preferred stock - Series A, $0.85 par value;
4,705,882 shares authorized; 3,458,826 and
3,400,002 shares issued and outstanding 2,909,986 2,859,986
Common stock, $0.001 par value; 20,000,000 shares
authorized; 6,547,812 and 6,540,000 issued
andoutstanding 6,931 6,540
Deficit accumulated during the development stage (3,275,085) (1,988,355)
-------------- ---------------
Total shareholders' (deficit) equity (358,168) 878,171
--------------- -------------
$ 2,125,900 $ 1,925,015
============ ===========
</TABLE>
F-5
<PAGE>
GLOBAL PC, INC.
(a development stage company)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999, THE PERIOD
FROM APRIL 1, 1998 (INCEPTION) TO DECEMBER 31, 1998, AND THE
PERIOD FROM APRIL 1, 1998 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<CAPTION>
Period from
April 1, 1998
(Inception)
June 30, December 31, to June 30,
1999 1998 1999
-------- ------------ -------------
<S> <C> <C> <C>
Consulting revenue $ 108,609 $ - $ 108,609
Expenses:
Selling, general and administrative 991,947 1,530,318 2,522,265
Research and development 362,682 443,351 806,033
----------- ------------- -------------
Total expenses 1,354,629 1,973,669 3,328,298
----------- ------------- -------------
Loss from operations (1,246,020) (1,973,669) (3,219,689)
Other income (expense):
Interest income 2,229 5,244 7,473
Interest expense (42,139) (19,130) (61,269)
----------- ---------- ---------
Total other income (expense) (39,910) (13,886) (53,796)
----------- ---------- ---------
Loss before provision for income taxes (1,285,930) (1,987,555) (3,273,485)
Provision for income taxes 800 800 1,600
-------------- ------------- ------------
Net loss $(1,286,730) $(1,988,355) $(3,275,085)
=============== ============= =============
</TABLE>
F-6
<PAGE>
GLOBAL PC, INC.
(a development stage company)
STATEMENTS OF SHAREHOLDERS' EQUITY
PERIOD FROM APRIL 1, 1998 (DATE OF INCEPTION) TO JUNE 30, 1999
<TABLE>
<CAPTION>
Series A
Preferred Stock Common Stock Accumulated
------------------------ ------------------
Shares Amount Shares Amount Deficit Total
---------- ------------- ---------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1998 - $ - - $ - $ - $ -
Issuance of preferred stock 3,400,002 2,859,986 - - - 2,859,986
Issuance of common stock - - 6,540,000 6,540 - 6,540
Net loss - - - - (1,988,355) (1,988,355)
------------ ----------- ----------- ----------- ------------- ------------
Balance at December 31, 1998 3,400,002 2,859,986 6,540,000 6,540 (1,988,355) 878,171
Issuance of preferred stock 58,824 50,000 - - - 50,000
Issuance of common stock - - 7,812 391 - 391
Net loss - - - - (1,286,730) (1,286,730)
------------ ----------- ---------- ---------- ------------- ------------
Balance at June 30, 1999 3,458,826 $2,909,986 6,547,812 $ 6,931 $(3,275,085) $ (358,168)
============ ========== ========= ========= ============ ============
</TABLE>
F-7
<PAGE>
GLOBAL PC, INC.
(a development stage company)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999, THE PERIOD
FROM APRIL 1, 1998 (INCEPTION) TO DECEMBER 31, 1998, AND THE
PERIOD FROM APRIL 1, 1998 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<CAPTION>
Period from
April 1, 1998
(Inception)
June 30, December 31, to June 30,
1999 1998 1999
------- ------------ --------------
CASH FLOWS FROM OPERATIONS:
<S> <C> <C> <C>
Net loss $(1,286,730) $ (1,988,355) $ (3,275,085)
Adjustments to reconcile net loss
to net cash used for operations:
Depreciation 14,613 7,517 22,130
Changes in certain current assets and
current liabilities:
Accounts receivable (52,994) - (52,994)
Licenses - (415,000) (415,000)
Software development costs (919,756) (419,261) (1,339,017)
Prepaid expenses (53,400) (12,600) (66,000)
Accounts payable 967,164 504,312 1,471,476
Income tax payable 800 800 1,600
Accrued expenses 24,853 543,272 568,125
Accrued interest - 15,233 15,233
--------------- -------------- -------------
Net cash used for operations (1,305,450) (1,764,082) (3,069,532)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,898) (140,099) (142,997)
--------------- -------------- -------------
Net cash used for investing activities (2,898) (140,099) (142,997)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible
promissory notes 324,407 665,000 989,407
Proceeds from issuance of note payable 50,000 - 50,000
Proceeds from issuance of common stock 391 5,000 5,391
Proceeds from issuance of preferred stock 50,000 2,179,753 2,229,753
------------ ------------ ------------
Net cash provided by financing activities 424,798 2,849,753 3,274,551
------------ ----------- ------------
Net (decrease) increase in cash (883,550) 945,572 62,022
Cash, beginning of the period 945,572 - -
------------- ------------ ------------
Cash, end of the period $ 62,022 $ 945,572 $ 62,022
============ ============ =============
</TABLE>
F-8
<PAGE>
GLOBAL PC, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999, THE PERIOD
FROM APRIL 1, 1998 (INCEPTION) TO DECEMBER 31, 1998, AND THE
PERIOD FROM APRIL 1, 1998 (INCEPTION) TO JUNE 30, 1999
Supplemental disclosures of cash flow information:
For the periods ended June 30, 1999 and December 31, 1998, there was no
cash paid for interest and income taxes.
Supplemental schedule of non-cash financing and investing activities:
<TABLE>
<CAPTION>
April 1, 1998
(Inception)
June 30, December 31, to June 30,
1999 1998 1999
-------- ------------ -------------
<S> <C> <C> <C>
Tooling equipment acquired $ 70,000 $ - $ 70,000
by note payable
Issuance of common stock - 1,540 1,540
Conversion of promissory notes
to preferred stock - 665,000 665,000
Conversion of accrued interest
on promissory notes to
preferred stock - 15,233 15,233
</TABLE>
F-9
<PAGE>
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Company: Global PC, Inc. (the Company), founded in April 1, 1998, is a
development stage company focusing on delivering full-featured computing
functionality to a non-technical audience. The Company is the co-developer and
worldwide licensee of GEOS, a user-friendly, powerful operating system and
software suite. The Company's first product is GlobalPC, an integrated PC that
comes pre-loaded with an office productivity suite including word processor,
spreadsheet, database, and graphics program as well as several other programs,
including games and the exclusive GlobalPC online access software. Global PC,
Inc. is based in Alameda, California.
Going concern: The Company has incurred significant losses in development of its
product and will need to continue to devote significant resources toward the
research, development and marketing of its products in order to generate
revenues from product sales and services. For that reason there is substantial
doubt about the Company's ability to continue as a going concern. The Company is
currently in negotiation to sell substantially all of its assets (see Note I).
If the asset sale is completed, the Company will be liquidated.
Property and equipment: Property and equipment are stated at cost. Depreciation
is computed using the straight-line and accelerated methods for financial and
income tax reporting purposes, respectively, over estimated useful lives ranging
from three to seven years. Major repairs or replacements of property and
equipment are capitalized. Maintenance repairs and minor replacements are
charged to operations as incurred.
Consulting revenue: The Company performed consulting services for a related
party and a third party. The Company recognizes revenue as the services are
performed.
Advertising: The Company expenses advertising costs as they are incurred.
Licenses: The Company has entered into license agreements for the use and
distribution of certain computer software programs. Prepayment of license fees
are capitalized and will be amortized over the term of the license agreement.
Software development costs: In accordance with Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," the Company capitalizes the direct costs and
allocated overhead associated with the development of software products. Initial
costs are charged to operations as research prior to the development of a
detailed program design or a working model. Costs incurred subsequent to the
product release, and research and development performed under contract are
charged to operations.
F-10
<PAGE>
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Capitalized cost will be amortized over the estimated product life on the
straight-line basis. Unamortized costs will be carried at the lower of book
value or net realizable value.
Income taxes: The Company utilizes the liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No. 109 (SFAS
109), Accounting for Income Taxes. Under the liability method, deferred taxes
are determined based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE B - SOFTWARE DEVELOPMENT COSTS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------------- ---------------
<S> <C> <C>
Balance, beginning of period $ 419,261 $ -
Current period:
Total expenditures 1,282,438 862,612
Less research and development expense 362,682 443,351
------------- --------------
Net capitalized costs $ 1,339,017 $ 419,261
=========== ===============
</TABLE>
In management's opinion, the net realizable value of future sales exceeds the
carrying value of unamortized software costs; therefore, no adjustment to
carrying value is required.
F-11
<PAGE>
NOTE C - ACCRUED EXPENSES
Accrued expenses consist of the following:
June 30, December 31,
1999 1998
----------------- -------------
License fees $ 270,000 $ 390,000
Payroll 158,332 103,544
Vacation 72,040 45,830
Interest 44,431 3,898
Tax penalties 23,322 -
------------- ---------
$ 568,125 $ 543,272
============= ==========
NOTE D - CONVERTIBLE PROMISSORY NOTES
Convertible promissory notes at June 30, 1999 consist of the following:
Note payable to shareholder,
interest at 10%, due on demand $ 128,000
Note payable to shareholder,
interest at 10%, due on demand 25,000
Note payable to shareholder,
interest at 10%, due on demand 167,657
Note payable to shareholder,
interest at 10%, due on demand 3,750
-----------
$ 324,407
=============
All the notes are convertible to Series A preferred stock at the option of
lenders at a conversion rate equal to the issuance price of preferred stock at
the time of conversion. Warrants to purchase a total of 108,115 shares of common
stock at $1 per share were issued in conjunction with the issuance of the notes
and expire in five years from their grant dates.
NOTE E - NOTE PAYABLE
As of June 30, 1999, the Company has a note payable with Compu-DAWN, Inc.
bearing interest at 10% per annum, due on demand. The note is secured by the
Company's assets.
F-12
<PAGE>
NOTE F - PREFERRED STOCK
The Company has authorized 4,705,882 and issued 3,458,826 shares of Series A
preferred stock at a purchase price of $.85 per share. The preferred stock
provides for non-cumulative dividends at the rate of 10% per annum, in
preference to common stock when and if declared by the Board of Directors. No
dividends were declared for the periods ended June 30, 1999 and December 31,
1998.
Each share of Series A preferred stock at the holder's option is convertible
into one share of common stock. During the periods ended June 30, 1999 and
December 31, 1998, no Series A preferred stock was converted into common stock.
In the event of any liquidation or winding up of the Company, the holders of
Series A shall be entitled to receive $0.85 per share, plus declared and unpaid
dividends, prior to any distribution to holders of common stock.
NOTE G - INCOME TAXES
The provision for income taxes consists of the following:
June 30, December 31,
1999 1998
--------- ------------
Current:
Federal $ - $ -
State 800 800
Deferred:
Federal - -
State - -
---------- ------------
- -
---------- ------------
$ 800 $ 800
=========== ============
Deferred taxes arose due to timing differences in recognizing deductions,
primarily depreciation and net operating losses, for financial and income tax
reporting purposes.
NOTE G - INCOME TAXES (CONTINUED)
The tax effects of temporary differences that gave rise to significant portions
of the deferred tax assets and liabilities are presented below.
June 30, December 31,
1999 1998
---------- --------------
Deferred tax assets:
Net operating losses $ 1,793,508 $ 1,035,461
State taxes 272 272
------------ --------------
1,793,780 1,035,733
Deferred tax liabilities:
F-13
<PAGE>
Property and equipment, principally
due to differences in depreciation 11,440 6,463
--------- -----------
1,782,340 1,029,270
Less valuation allowance 1,782,340 1,029,270
--------- ----------
$ - $ -
========= ==========
As of June 30, 1999, the Company has net operating loss carry forwards of
approximately $4,189,000 and $4,178,000 for federal and state purposes that may
be used to offset future taxable income. The federal and state research and
development credit carryforwards was approximately $49,000 and $27,000,
respectively. The federal and state net operating loss carry forwards will begin
to expire in the period ending December 31, 2014 and 2007, respectively.
NOTE H - STOCK OPTION PLAN
In 1998, the Board of Directors approved and implemented the 1998 Stock Option
Plan (the Plan). Under the Plan, the Company reserved 3,000,000 shares of common
stock for issuance to employees, officers, directors and consultants and to
promote the success of the Company's business. Under the Plan, the Board of
Directors may grant incentive or nonstatutory stock options at a price not less
than 110% or 85%, respectively, of the fair market value of common stock, as
determined by the Administrator at the time of grant. Options under the Plan
vest at a minimum rate of 20% per year over five years from the date the option
is granted. Stock issued through option exercises are subject to the Company's
right of repurchase at the original exercise price.
F-14
<PAGE>
NOTE H - STOCK OPTION PLAN (CONTINUED)
Activities under the stock option plan are as follows:
<TABLE>
<CAPTION>
Outstanding Options .
--------------------------------------------------
Shares
Available Number of Price Per
for Grant Shares Share Total
--------- ---------- -------- -----
Balance at April 1, 1998
<S> <C> <C> <C> <C>
Shares reserved 3,000,000 - $ - $ -
Options granted (2,018,371) 2,018,371 0.05 100,919
Options exercised - (7,812) 0.05 (391)
Options cancelled 65,625 (65,625) 0.05 (3,281)
------------ ------------- ----------- -----------------
Balance at December 31, 1998 1,047,254 1,944,934 0.05 97,247
Options granted (119,166) 119,166 0.05 5,958
Options cancelled 681,838 (681,838) 0.05 (34,092)
------------ ------------ ----------- ----------------
Balance at June 30, 1999 1,609,926 1,382,262 0.05 $ 69,113
=========== =========== =========== ===============
Options exercisable at December 31, 1998 126,293 $ 0.05 $ 6,315
============ =========== ===============
Options exercisable at June 30, 1999 1,010,824 $ 0.05 $ 50,541
============ ============ ===============
</TABLE>
NOTE I - SUBSEQUENT EVENT
As of August 24, 1999 the Company was negotiating an agreement to sell
substantially all of the Company's assets to Compu-DAWN, Inc. As a result, the
Company will receive 634,284 common shares of Compu-DAWN, Inc. (approximately $2
per share as of August 24, 1999) plus up to an additional 75,000 common shares
of Compu-DAWN, Inc. In addition, the Company will receive Class A warrants,
Class B warrants, and Class C warrants to purchase common shares of Compu-DAWN,
Inc. totaling 2,269,284, 1,901,400 and 83,000, respectively.
F-15
<PAGE>
NOTE J - RELATED PARTIES
The Company has outstanding employee payables of approximately $16,000 as of
June 30, 1999.
For the periods ended June 30, 1999 and December 31, 1998, Techfarm, Inc., a
shareholder of the Company, provided management services to the Company totaling
$16,000 and $12,000, respectively.
As of June 30, 1999 and December 31, 1998 the Company has outstanding accounts
payable balances due to various shareholders of approximately $516,000 and
$168,000, respectively.
The Company leases its building in Alameda, California from Geoworks, a
shareholder of the Company, under an operating lease agreement that expired in
June 1999. The Company continues to rent the facility on a month by month basis.
The Company is responsible for all maintenance, insurance, and property taxes.
For the periods ended June 30, 1999 and December 31, 1998, rent expense under
the operating lease agreement was approximately $58,800 and $42,600,
respectively.
P-1
<PAGE>
Compu-DAWN, Inc.
INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
The following unuadited pro forma financial statements have been prepared based
upon certain pro form adjustments to historical financial statements of
Compu-DAWN, Inc., (the Company). The pro forma financial should be read in
conjunction with the notes and the historical financial statements of the
Company.
The accompanying pro forma balance sheets have been presented as if the
transactions described below occurred at the Company's balance sheet dates,
September 30, 1999 and December 31, 1998. The accompanying pro forma statements
of operations have been prepared as if the transactions occurred at the
beginning of the nine months ended September 30, 1999 and for the year ended
December 31, 1998.
These pro forma financial statements do not purport to be indicative of the
results which would actually have been obtained had the pro forma transaction
been completed as of the beginning of the nine months ended September 30, 1999
and for the year ended December 31, 1998.
The pro forma adjustments give effect to the acquisition of assets of GlobalPC,
Inc. in December 1999 (see notes to pro forma financial statements) which are as
follows (except for Note 6 which gives effect to the private placement through
Hornblower and Weeks as placement agent in November 1999):
Note 1 - asset purchase price calculation.
Note 2 - calculation of goodwill.
Note 3 - elimination of un-assumed liabilities.
Note 4 - amortization of Goodwill
Note 5 - elimination and adjustments to shareholders' equity
Note 6 - private placement through Hornblower and Weeks.
P-2
<PAGE>
Compu-DAWN, Inc.
INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Asset Purchase Price Calculation:
<TABLE>
<CAPTION>
<S> <C>
Shares Issued (709,284 shares at $4.363* per share) $3,094,606
Guaranteed Warrants Issued:
Class B Warrants (1,901,400 at $4.65** per warrant) 8,841,510
Class C Warrants (383,000 at $4.65** per warrant) 1,780,950
Cash 275,000
Advances 1,523,651
----------
Total Purchase Price $15,515,717
==========
* Average closing price surrounding the period before and after the signing
and announcement of the Asset Purchase Agreement.
** Calculated using the Black Scholes model of valuation.
Comment:
Class A Warrants are contingency warrants, thus they are not included in
the Asset Purchase Price Calculation.
NOTE 2. Calculation of Goodwill:
Asset Purchase Price $15,515,717
Less:
Net Assets Acquired (as of November 30, 1999) 2,488,630
-----------
Total Goodwill $13,027,087
===========
NOTE 3. These adjustments reflect the elimination of GlobalPC, Inc. liabilities
not transferred to the Company in this transaction.
NOTE 4. This adjustment reflects amortization associated with the Goodwill. The
Company calculates the amortization of Goodwill over 36 months.
Total Goodwill $13,027,087
Monthly amortization (36 months) 361,864
-----------
Nine month total $ 3,256,776
===========
Total Goodwill $13,027,087
Less:
Current period amortization (3,256,776)
------------
Goodwill - Net $9,770,311
===========
NOTE 5. This adjustment reflects the portion of GlobalPC, Inc. shareholders'
equity not assumed by the Company pursuant to the Asset Purchase
Agreement.
Common Stock Adjustment (6,931)
Add:
The common stock issued in
conjunction with the Asset
Purchase Agreement:
(709,285 @ .01 par value) 7,093
-----
Adjustment 162
===
</TABLE>
Additional Paid In Capital adjustment reflects the
cumulative adjustment to the cost of the acquisition.
<PAGE>
NOTE 6. This adjustment reflects impact of the private placement undertaken by
Hornblower and Weeks as placement agent in October and November 1999. See
the Company's Quarterly Report on Form 10-QSB for the three months ended
September 30, 1999, Item 2 "Management's Discussion and Analysis of
Financial Condition and Result of Operations" for a discussion of the
private placement through Hornblower and Weeks.
P-3
<PAGE>
b(i) Compu-DAWN, Inc.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Compu-DAWN GlobalPC Adjustments Consolidated
---------- -------- ----------- ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 362,092 $ 77,056 $ (275,000) (1) $ 164,148
Accounts receivable (net) 21,949 33,800 - 55,749
Prepaid expenses 32,027 - - 32,027
Licenses - 956,218 - 956,218
Software development costs - 1,033,124 - 1,033,124
Inventory 64,832 69,886 134,718
-------------- ------------- --------------------- ---------
TOTAL CURRENT ASSETS 480,900 2,170,084 (275,000) 2,375,984
FIXED ASSETS - NET 95,953 185,482 281,435
GOODWILL - - 13,027,087 (2) 13,027,087
OTHER ASSETS:
Notes receivable 611,573 - (611,573) (3) -
Capitalized lease payable 157,676 - - 157,676
Security deposits 28,293 66,000 - 94,293
---------------- ------------- -------------------- ------------
TOTAL OTHER ASSETS 797,542 66,000 (611,573) 251,969
TOTAL ASSETS $ 1,374,395 $2,421,566 $ 12,140,514 $ 15,936,475
================ ============= ==================== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 722,900 $2,213,934 (2,118,272) (3) $ 818,562
Current portion - long term debt 54,845 326,007 (326,007) (3) 54,845
Interest Payable - 8,490 (8,490) (3) (0)
Notes Payable - Compu-DAWN, Inc. - 611,573 (611,573) (3) (0)
Net liabilities of discontinued operations 455,796 - - 455,796
------------- ------------- ----------------- -------------
TOTAL CURRENT LIABILITIES 1,233,541 3,160,004 (3,064,342) 1,329,203
NON-CURRENT LIABILITIES:
Long term debt 22,791 - - 22,791
Deferred rent liability 36,900 - - 36,900
-------------- ------------- ---------------- ---------------
TOTAL NON-CURRENT LIABILITIES: 59,691 - - 59,691
TOTAL LIABILITIES 1,293,232 3,160,004 (3,064,342) 1,388,894
SHAREHOLDERS' EQUITY:
Preferred Stock 26 2,909,986 (2,909,986) (5) 26
Common Stock 45,537 6,931 162 (5) 49,630
Additional paid-in-capital 16,252,234 - 14,459,325 (1),(5) 30,711,559
Retained earnings (15,762,625) (3,655,355) 3,655,355 (5) (15,762,625)
Treasury Stock (451,009) - - (451,009)
-------------- ------------- ------------------ ----------------
TOTAL STOCKHOLDER'S EQUITY 81,163 (738,438) 15,204,856 14,547,581
- --------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,374,395 $2,421,556 $12,140,514 $ 15,936,475
=============== ============= =================== =================
</TABLE>
P-4
<PAGE>
b(ii) Compu-DAWN, Inc.
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Compu-DAWN GlobalPC Adjustments Consolidated
<S> <C> <C> <C> <C>
REVENUES - NET $ 550,979 $ - $ - $ 550,979
---------------- ------------ ------------------ ----------------
COST AND EXPENSES:
Programming costs and expenses - - - -
Cost of revenues 296,136 - - 296,136
General and administrative 1,787,954 - - 1,787,954
Amortization expense - - 3,256,776 (4) 3,256,776
Interest expense and financing costs 99,517 - - 99,517
Loss on settlement 71,000 - - 71,000
Research and development - - - -
----------------- ----------- ------------------- ----------------
TOTAL COST AND EXPENSES 2,254,607 3,256,776 5,511,383
----------------- ----------- ------------------- ----------------
LOSS FROM CONTINUING OPERATIONS (1,703,628) - (3,256,776) (4,960,404)
----------------- ----------- ------------------- ----------------
DISCONTINUED OPERATIONS:
Loss from discontinued operations (6,976,008) - - (6,976,008)
Gain on sale of discontinued operations 537,732 - - 537,732
------------------ ----------- ------------------- ----------------
TOTAL DISCONTINUED OPERATIONS (6,438,276) - - (6,438,276)
------------------ ----------- ------------------- ----------------
PROVISION FOR INCOME TAXES - - - -
------------------ ----------- ------------------- -----------------
NET LOSS $ (8,141,904) $ - $(3,256,776) $(11,398,680)
================== =========== =================== =================
BASIC INCOME (LOSS) PER COMMON SHARE:
From continuing operations $ (0.44) $(1.08)
From discontinued operations $ (1.79) $(1.52)
Gain on sale of discontinued operations $ 0.14 $ 0.12
------------------ -----------------
Basic net loss $ (2.09) $(2.48)
================== =================
DILUTED INCOME (LOSS) PER COMMON SHARE:
From continuing operations $ (0.44) $(1.08)
From discontinued operations $ (1.79) $(1.52)
Gain on sale of discontinued operations $ 0.08 $ 0.06
------------------- ------------------
Diluted net loss per common shares $ (2.15) $(2.54)
=================== ==================
Average common shares outstanding, basic 3,887,625 709,284 4,596,909
=================== =================== ==================
Average common shares outstanding, diluted 6,476,210 $ 2,993,684 9,469,894
=================== =================== ==================
</TABLE>
P-5
<PAGE>
b(iii)
Compu-DAWN, Inc.
PRO FORMA BALANCE SHEET
DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Compu-DAWN GlobalPC Adjustments Consolidated
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,378,400 $ 945,572 $ (275,000) (1) $ 5,048,972
Prepaid expenses - 12,600 - 12,600
Licenses - 415,000 - 415,000
Software development costs - 419,261 - 419,261
Net assets of discontinued operations 919,520 - - 919,520
--------------- --------- --------------- -------------
TOTAL CURRENT ASSETS 5,297,920 1,792,433 (275,000) 6,815,353
FIXED ASSETS - (NET) - 132,582 - 132,582
GOODWILL - - 13,027,087 (2) 13,027,087
OTHER ASSETS
TOTAL ASSETS $ 5,297,920 $ 1,925,015 12,752,087 $ 19,975,022
============== =========== ================= =============
LIABILITIES AND SHAREHOLDER' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ - $ 1,046,844 (951,182) (3) $ 95,662
-------------- ----------- ------------------ -------------
TOTAL LIABILITIES - 1,046,844 (951,182) 95,662
SHAREHOLDERS' EQUITY
Preferred stock 50 2,859,986 (2,859,986) (3) 50
Common Stock 32,654 6,540 553 (1) 39,747
Additional paid-in-capital 13,661,649 - 14,574,347 (1) 28,235,996
Retained earnings (7,620,721) (1,988,355) 1,988,355 (3) (7,620,721)
Accumulated other comprehensive income (150,000) - - (150,000)
Treasury Stock (625,712) - - (625,712)
-------------- ----------- ----------------- -------------
TOTAL SHAREHOLDER'S EQUITY 5,297,920 878,171 13,703,269 19,879,360
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 5,297,920 $ 1,925,015 $ 12,752,087 $ 19,975,022
============== =========== =================== =============
</TABLE>
P-6
<PAGE>
b(iv)
Compu-DAWN, Inc.
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Compu-DAWN GlobalPC Adjustments Consolidated
<S> <C> <C> <C> <C>
REVENUES:
Interest and other income $ 332,067 $ 5,244 $ - $ 337,311
-------------- ----------- ----------------- -----------------
COST AND EXPENSES:
Loss due to terminated investment transaction 296,952 - - 296,952
General and administrative - 1,530,318 - 1,530,318
Amortization expense - - 4,342,368 (4) 4,342,368
Interest expense 17,459 19,130 - 36,589
Research and development - 443,351 - 443,351
-------------- ---------- ---------------- ------------------
TOTAL COST AND EXPENSES 314,411 1,992,799 4,342,368 6,649,578
-------------- ---------- ---------------- ------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 17,656 (1,987,555) (4,342,368) (6,312,267)
-------------- ---------- ---------------- ------------------
DISCONTINUED OPERATIONS:
Loss from discontinued operations (2,801,208) - - (2,801,208)
-------------- ---------- ----------------- ------------------
PROVISION FOR INCOME TAXES - (800) - (800)
-------------- ---------- ----------------- ------------------
NET LOSS $ (2,783,552) $(1,986,755) $(4,342,368) $ (9,114,275)
================ ========== ================= ==================
BASIC AND DILUTED (LOSS) PER COMMON SHARE:
From continuing operations $ 0.00 $(1.37)
From discontinued operations $ (0.72) $(0.61)
---------------- ------------------
Basic and diluted net (loss) per common share $ (0.72) $(1.98)
================= ===================
Average common shares outstanding, basic 3,887,625 709,284 4,596,909
================ ================ ===================
Average common shares outstanding, diluted 6,476,210 2,993,684 9,469,894
================ ================ ===================
</TABLE>
P-7
<PAGE>
c(i)
Compu-DAWN, Inc.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Compu-DAWN GlobalPC Adjustments Consolidated
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 362,092 $ 77,056 $ 1,699,968 (1)(6) $ 2,109,116
Accounts receivable (net) 21,949 33,800 - 55,749
Prepaid expenses 32,027 - - 32,027
Licenses - 956,218 - 956,218
Software development costs - 1,033,124 - 1,033,124
Inventory 64,832 69,886 - 134,718
----------------- ----------- --------------- ----------------
TOTAL CURRENT ASSETS 480,900 2,170,084 1,669,968 4,320,952
FIXED ASSETS - NET 95,953 185,482 281,435
GOODWILL - - 13,027,087 (4) 13,027,087
OTHER ASSETS:
Notes receivable 611,573 - (611,573)(3) -
Capitalized lease payable 157,676 - - 157,676
Security deposits 28,293 66,000 - 94,293
----------------- ----------- ----------------- ----------------
TOTAL OTHER ASSETS 798,542 66,000 (611,573) 251,969
TOTAL ASSETS $ 1,374,395 $ 2,421,566 $14,085,482 $ 17,881,443
================= ============ ================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 722,900 $ 2,213,934 (2,118,272)(3) $ 818,562
Current portion - long term debt 54,845 326,007 (326,007)(3) 54,845
Interest Payable - 8,490 (8,490)(3) (0)
Notes Payable - Compu-DAWN, Inc. - 611,573 (611,573)(3) 0
Net Liabilities of discontinued operations 455,796 - - 455,796
----------------- ----------- ------------------ -----------------
TOTAL CURRENT LIABILITES 1,233,541 3,160,004 (3,064,342) 1,329,203
NON-CURRENT LIABILITIES:
Long Term Debt 22,791 - - 22,791
Deferred rent liability 36,900 - - 36,900
------------------ ---------- ------------------ -----------------
TOTAL NON-CURRENT LIABILITIES 59,691 - - 59,691
TOTAL LIABILITIES 1,293,232 3,160,004 (3,064,342) 1,388,894
SHAREHOLDERS' EQUITY:
Preferred Stock 26 2,909,486 (2,909,986)(5) 26
Common Stock 42,537 6,931 14,312 (1),(5),(6) 63,780
Additional paid-in-capital 16,252,234 - 16,817,576 (5),(6) 33,069,809
Retained earnings (15,762,625) (3,655,355) 3,227,922 (5) (16,190,057)
Treasury stock (451,009) - (451,009)
----------------- ---------- -------------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 81,163 (738,438) 17,149,823 16,492,549
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 1,374,395 $ 2,421,566 $14,085,482 $ 17,881,443
================= ========== ===================== ====================
</TABLE>
P-8
<PAGE>
c(ii)
Compu-DAWN, Inc.
PRO FORMA STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Compu-DAWN GlobalPC Adjustments Consolidated
<S> <C> <C> <C> <C>
REVENUES - NET $ 550,979 $ - $ - $ 550,979
---------------- -------- --------------- ---------------
COST AND EXPENSES:
Programming costs and expenses - - - -
Cost of revenues 296,136 - - 296,136
General and administrative 1,787,954 - - 1,787,954
Amortization expense - - 3,256,776 (4) 3,256,776
Interest expense and financing costs 99,517 - - 99,517
Loss on settlement 71,000 - - 71,000
Research and development - - - -
---------------- --------- ---------------- ----------------
TOTAL COST AND EXPENSE 2,254,607 - 3,256,776 5,511,383
---------------- --------- ---------------- ----------------
LOSS FROM CONTINUING OPERATIONS (1,703,628) - (3,256,776) (4,960,404)
---------------- --------- ---------------- ----------------
DISCONTINUED OPERATIONS:
Loss from discontinued operations (6,976,008) - - (6,976,008)
Gain on sale of discontinued operations 537,732 - - 537,732
---------------- --------- --------------- ----------------
TOTAL DISCONTINUED OPERATIONS (6,438,276) - - (6,438,276)
---------------- --------- --------------- ----------------
PROVISION FOR INCOME TAXES - - - -
---------------- --------- --------------- ----------------
NET LOSS $ (8,141,904) $ - $ (3,256,776) $ (11,398,680)
================ ========= =============== ================
BASIC INCOME LOSS PER COMMON SHARE:
From continuing operations $ (0.44) $ (1.08)
From discontinued operations $ (1.79) $ (1.52)
Gain on sale of discontinued operations $ 0.14 $ 0.12
---------------- --------- --------------- ----------------
Basic net loss per common share $ (2.09) $ (2.48)
================ ========= =============== ================
DILUTED INCOME LOSS PER COMMON SHARE:
From continuing operations $ (0.44) $ (1.08)
From discontinued operations $ (1.79) $ (1.52)
Gain on sale of discontinued operations $ 0.08 $ 0.06
---------------- -----------------
Diluted net loss per common share $ (2.15) $ (2.54)
================ =================
Average common shares outstanding, basic 3,887,625 709,284 4,596,909
================ =============== =================
Average common shares outstanding, diluted 6,476,210 2,993,681 9,469,894
================ =============== =================
</TABLE>
P-9
<PAGE>
