<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) April 20, 2000
-----------------------
JAWS Technologies, Inc.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Nevada 7371 98-0167013
----------------------------------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
</TABLE>
1013-17th Avenue S.W. Calgary, Alberta, Canada T2T 0A7
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (403) 508-5055
-----------------------
-------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 20, 2000, JAWS Technologies, Inc., a Nevada Corporation
("JAWS") entered into a Stock Purchase Agreement with Nucleus Consulting, Inc.,
an Illinois corporation (now named JAWS Inc.), and Charles A. Ehredt, the sole
shareholder of JAWS, Inc. ("Ehredt") (the "Stock Purchase Agreement"). All of
the conditions to the Stock Purchase Agreement have been satisfied or waived.
Under the terms of the Stock Purchase Agreement, JAWS acquired 100% of the
issued and outstanding shares of common stock, par value $1.00 of JAWS, Inc. for
an aggregate purchase price of up to $4,000,000 in cash and shares of JAWS
common stock (the "Common Stock"). The purchase price included closing payments
of $250,000 in cash and the issuance of 142,857 shares of common stock (valued
at $1,000,000, or $7.00 per share) to the former sole stockholder of JAWS Inc.,
and further includes (i) cash payments aggregating up to $750,000 and payable
over the nine-month period following closing (which are contingent upon the
former sole stockholder and president of JAWS Inc. remaining employed with JAWS)
and (ii) shares issuances of up to 142,857 shares of Common Stock on each of the
first and second anniversary dates of the closing (in each case, valued at
$1,000,000, or $7.00 per share), subject to Ehredt's continuation of employment
and the achievement of certain revenue and earnings milestones over the
respective post-closing periods.
JAWS Inc., a Chicago based company incorporated in 1994, is a
consulting firm, which specializes in assisting clients in deploying
cost-effective, reliable networked solutions on a global, national and local
scale. JAWS Inc.'s client base includes objective through the use of the most
privately held business and Fortune 500 companies.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a). and (b). The financial statements and pro forma financial
information, required as part of this Current Report on Form 8-K are included
herein commencing on page F-1.
(c) Exhibits
2.1 Stock Purchase Agreement, dated April 20, 2000, among JAWS
Technologies, Inc., a Nevada corporation, Nucleus Consulting,
Inc., an Illinois corporation, and Charles A. Ehredt.*
23.1 Consent of Klayman & Korman, LLC
99.1 Press Release, dated April 24, 2000.*
--------------
* Previously filed with the registrant's Current Report on Form 8-K, filed with
the Commission on May 5,2000.
<PAGE> 3
JAWS TECHNOLOGIES INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(All amounts stated in $U.S.)
<TABLE>
<CAPTION>
As at March 31, 2000
Jaws
Technologies, Inc.
JAWS Nucleus Note Pro Forma Pro Forma
Technologies, Inc. Consulting Inc. Reference Adjustments Consolidated
Unaudited Unaudited Unaudited
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C> <C>
Cash and short term deposits $ 8,925,293 $ 0 2.0 ($1,000,000) $ 7,925,293
Term deposits $ 437,970 $ 0 -- $ 437,970
Accounts receivable $ 812,604 $ 472,716 -- $ 1,285,320
Due from Related Parties $ 76,486 $ 0 -- $ 76,486
Prepaid expenses $ 222,361 $ 8,783 -- $ 231,144
---------------------------------------------------------------------------
$ 10,474,714 $ 481,499 ($1,000,000) $ 9,956,213
Intangible Assets - Goodwill $ 17,132,051 $ 0 2.0 $2,164,719 $ 19,296,770
Equipment and Leasehold Improvements (net) $ 1,249,083 $ 72,284 $ 1,321,367
Investment $ 20,000 $ 0 -- $ 20,000
---------------------------------------------------------------------------
TOTAL ASSETS $ 28,875,848 $ 553,783 $1,164,719 $ 30,594,350
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Bank Indebtedness $ 461,687 $ 2,073 -- $ 463,760
Accounts payable and accrued liabilities $ 1,344,566 $ 150,503 2.0 $ 300,000 $ 1,795,069
Current portion of capital leases $ 53,992 $ 0 -- $ 53,992
Due to related parties $ 174,144 $ 43,926 -- $ 218,070
Due to shareholders $ 235,743 $ 0 -- $ 235,743
Income Tax Payable $ 0 $ 88,000 -- $ 88,000
Deferred Income Taxes $ 0 $ 104,000 -- $ 104,000
Deferred Revenue $ 0 $ 30,000 -- $ 30,000
---------------------------------------------------------------------------
$ 2,270,132 $ 418,502 $ 300,000 $ 2,988,634
Obligations under capital leases $ 139,000 $ 0 -- $ 139,000
---------------------------------------------------------------------------
TOTAL LIABILITIES $ 2,409,132 $ 418,502 $ 300,000 $ 3,127,634
STOCKHOLDERS EQUITY (DEFICIENCY)
Share capital $ 41,220,600 $ 1,000 2.0 $1,000,000 $ 42,220,600
2.0 ($ 1,000)
Cumulative translation adjustment ($ 352,916) $ 0 -- ($ 352,916)
(Deficit) / Retained Earnings ($ 14,400,968) $ 134,281 2.0 ($ 134,281) ($ 14,400,968)
---------------------------------------------------------------------------
$ 26,466,716 $ 135,281 $ 864,719 $ 27,466,716
---------------------------------------------------------------------------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 28,875,848 $ 553,783 $1,164,719 $ 30,594,350
===========================================================================
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements.
F-1
<PAGE> 4
JAWS TECHNOLOGIES INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(All amounts stated in $U.S.)
<TABLE>
<CAPTION>
Three Month Period ending March 31, 2000
JAWS Offsite Data Nucleus Note Pro Forma Jaws Technologies,
Technologies, Storage Inc. * Consulting, Reference Adjustments Inc. Pro Forma
Inc. Inc. Consolidated
UNAUDITED UNAUDITED UNAUDITED UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
REVENUE $ 651,982 $ 31,177 $ 403,521 -- $ 1,086,680
COST OF SALES $ 0 $ 22,573 $ 0 -- $ 22,573
EXPENSES
Advertising & Promotion $ 475,166 $ 55,726 $ 0 -- $ 530,892
General & Administration $ 3,295,802 $ 139,160 $ 337,412 -- $ 3,772,374
Sub-contracting Costs $ 0 $ 0 $ 0 -- $ 0
------------------------------------------------------------------------------------
Loss before Interest, Financing Fees,
Depreciation & Amortization, & Provision
for Income Taxes ($3,118,986) ($ 186,281) $ 66,109 ($ 3,239,158)
Interest Expense & Amortization of
Deferred Financing Fees & Debt Discount $ 13,365 $ 0 $ 0 -- $ 13,365
Foreign Exchange (Gain) / Loss ($ 175,565) $ 0 $ 0 -- ($ 175,565)
Depreciation & Amortization $ 1,063,265 $ 0 $ 0 3.0 $547,326 $ 1,610,591
Provision for Income Taxes $ 0 $ 0 $ 23,000 -- $ 23,000
------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD ($ 4,020,051) ($ 186,281) $ 43,109 ($547,326) ($ 4,710,550)
Net loss per common share ($ 0.14) -- -- -- ($ 0.16)
Weighted avg number of shares outstanding 28,774,888 -- -- 2.0 142,587 28,917,475
</TABLE>
* Numbers for Offsite represent results only for the period of January 1,
2000 to January 29, 2000.
See accompanying notes to the unaudited pro forma consolidated financial
statements
F-2
<PAGE> 5
JAWS TECHNOLOGIES INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
March 31, 2000
1. The accompanying unaudited pro forma consolidated financial statements have
been prepared by management from the unaudited financial statements as at
March 31, 2000 and for the 3 month period then ended of Jaws Technologies,
Inc. (a Nevada corporation) ("Jaws"), and the unaudited financial
statements of Offsite and Nucleus Consulting Inc (an Illinois Company)
("Nucleus"), as at March 31, 2000 and for the 3 month period ended March
31, 2000, together with other information available to the companies. In
the opinion of the management of Jaws, these unaudited pro forma
consolidated financial statements include all adjustments necessary for
fair presentation in accordance with generally accepted accounting
principles in the United States. These unaudited pro forma consolidated
financial statements may not be indicative of the financial position or the
results of operations that actually would have occurred if the events
reflected therein had been in effect on the dates indicated nor of the
financial position or the results of operations which may be obtained in
the future.
These unaudited pro forma consolidated financial statements should be read
in conjunction with the audited and unaudited financial statements of the
companies included elsewhere in this filing.
2. The unaudited pro forma consolidated balance sheet as at March 31, 2000
gives effect to the following assumptions and transactions outlined in this
filing as if the effective dates of those transactions were March 31, 2000:
The acquisition of all of the outstanding shares of Nucleus for
$250,000 in cash and 142,857 shares of Jaws with an ascribed value of
$1,000,000. The Company paid consideration of $750,000 into a trust
which will be released on the third, sixth and nine month anniversaries
of the closing of the transaction. In addition there is contingent
consideration payable of 285,714 commons shares of the Company at an
ascribed value of $7.00 per share or $2,000,000 in total. Half of the
common share consideration will be released if the actual revenues and
earnings before interest and taxes for the year ended April 20,2001
equal or exceed $3,500,000 and $800,000 respectively and the remaining
share consideration will be released if actual revenues and earnings
for the year ended April 20, 2002 equal or exceed $5,250,000 and
$1,200,000 respectively. The contingent consideration has not been
reflected in these consolidated financial statements, as the outcome of
the contingent share consideration cannot be reasonably determined at
this time
The acquisition has been accounted for in these unaudited pro forma
consolidated financial statements using the purchase method. The
aggregate purchase price of $2,300,000 has been allocated to the net
assets acquired based on their estimated fair values, as follows:
<TABLE>
<CAPTION>
PURCHASE PRICE ALLOCATION
----------------------------------- ----------------------------
<S> <C>
Net assets acquired $ 135,281
Goodwill $ 2,164,719
PURCHASE PRICE $ 2,300,000
Consideration:
Common Shares of JAWS $ 1,000,000
Cash $ 1,000,000
Acquisition Costs $ 300,000
TOTAL CONSIDERATION $ 2,300,000
</TABLE>
3. The unaudited pro forma consolidated statement of income for the three
month period ended March 31, 2000 gives effect to the acquisitions by Jaws
as described in 2.0 above as if the transactions had occurred January 1,
2000. The following adjustments are reflected:
F-3
<PAGE> 6
JAWS TECHNOLOGIES INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(All amounts stated in $U.S.)
March 31, 2000
The amortization of goodwill attributable to the allocation of the purchase
price of Nucleus and Offsite in excess of the carrying value of the net
assets acquired, (see 2.0 above and the acquisition of Offsite) calculated
on a straight-line basis over a period of three years.
4. The amounts shown in these unaudited pro forma consolidated financial
statements for Pace and for Offsite have been translated into United States
dollars from Canadian dollars at the period end rate for the balance sheet
and the period average rate for the income statement.
F-4
<PAGE> 7
INDEPENDENT AUDITORS' REPORTS
Board of Directors
Nucleus Consulting, Inc.
Chicago, Illinois
We have audited the accompanying balance sheets of Nucleus Consulting, Inc. as
of December 31, 1999, 1998 and 1997, and the related statements of operations,
changes in stockholders' equity 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 auditing standards generally accepted
in the United States. 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 Nucleus Consulting, Inc. as of
December 31, 1999, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
February 10, 2000
/s/ Klayman & Korman, LLC
F-5
<PAGE> 8
NUCLEUS CONSULTING, INC
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31, December 31, December 31,
2000 1999 1998 1997
---------------- ------------------ ------------------- ---------------------
(unaudited) (audited) (audited) (audited)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash $ 0 $ 0 $ 85,594 $ 16,171
Accounts receivable 472,716 371,584 321,184 313,367
Prepaid expense 4,298 807 3,465 6,449
---------------- ------------------ ------------------- ---------------------
Total current assets 477,014 372,391 410,243 335,987
Property and equipment, net
of accumulated depreciation 72,284 78,186 107,467 100,363
Other assets
Security deposits 4,485 4,485 4,485 4,230
---------------- ------------------ ------------------- ---------------------
Total assets $ 553,783 $ 455,062 $ 522,195 $ 440,580
================ ================== =================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 2,073 $ 9,791 $ 0 $ 0
Line of credit 0 0 97,000 49,694
Current portion of long-term debt 0 0 20,000 20,000
Accounts payable 126,738 132,302 353,620 74,620
Accrued expenses 23,765 29,100 18,322 38,420
Due to officer 43,926 22,697 0 0
Income tax payable 88,000 88,000 0 0
Deferred income taxes 104,000 76,000 0 9,000
Deferred revenue 30,000 0 0 0
---------------- ------------------ ------------------- ---------------------
Total current liabilities 418,502 357,890 488,942 191,734
---------------- ------------------ ------------------- ---------------------
Long-term liabilities
Line of credit 0 0 97,000 49,693
Long-term debt 0 0 45,000 65,000
Deferred income taxes 0 5,000 0 11,000
---------------- ------------------ ------------------- ---------------------
Total long-term liabilities 0 5,000 142,000 125,693
Stockholders' equity 135,281 92,172 (108,747) 123,153
---------------- ------------------ ------------------- ---------------------
Total liabilities and
stockholders' equity $ 553,783 $ 455,062 $ 522,195 $ 440,580
================ ================== =================== =====================
</TABLE>
See notes to financial statements.
F-6
<PAGE> 9
NUCLEUS CONSULTING, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months
ended Year ended Year ended Year ended
March 31, December 31, December 31, December 31,
2000 1999 1998 1997
------------------- ------------------- ------------------- ------------------
(unaudited) (audited) (audited) (audited)
<S> <C> <C> <C> <C>
Revenues $ 403,521 $ 3,434,719 $ 1,099,205 $ 1,910,430
Operating expenses 337,412 2,854,913 1,330,620 1,857,964
------------------- ------------------- ------------------- ------------------
Income (loss) from operations 66,109 579,806 (231,415) 52,466
------------------- ------------------- ------------------- ------------------
Other income (expense)
Interest expense 0 (7,574) (20,485) (11,316)
Interest income 0 987 0 0
------------------- ------------------- ------------------- ------------------
0 (6,587) (20,485) (11,316)
------------------- ------------------- ------------------- ------------------
Income (loss) before provision for
income taxes 66,109 573,219 (251,900) 41,150
Provision for income tax benefit
(expense) (23,000) (169,000) 20,000 (12,500)
------------------- ------------------- ------------------- ------------------
Net income (loss) $ 43,109 $ 404,219 $ (231,900) $ 28,650
=================== =================== =================== ==================
</TABLE>
See notes to financial statements.
F-7
<PAGE> 10
NUCLEUS CONSULTING, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common Stock (1)
--------------------------------
Retained
Shares Amount Earnings(defecit) Total
-------------- -------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Audited
-------
Balance, December 31, 1996 40,475 $ 35,000 $ 59,503 $ 94,503
Net Income 0 0 28,650 28,650
-------------- -------------- --------------- ----------------
Balance, December 31, 1997 40,475 35,000 88,153 123,153
Net loss 0 0 (231,900) (231,900)
Shares granted under stock
grant plan 3,166 0 0 0
-------------- -------------- --------------- ----------------
Balance, December 31, 1998 43,641 35,000 (143,747) (108,747)
Net income 0 0 404,219 404,219
Repurchase and retirement of
common stock (35,550) (34,000) (169,300) (203,300)
-------------- -------------- --------------- ----------------
Balance, December 31, 1999 8,091 1,000 91,172 92,172
Unaudited
---------
Net income 0 0 43,109 43,109
-------------- -------------- --------------- ----------------
Balance, March 31, 2000 8,091 $ 1,000 $ 134,281 $ 135,281
============== ============== =============== ================
</TABLE>
(1) $1 par value, 1,000,000 shares authorized.
See notes to financial statements.
F-8
<PAGE> 11
NUCLEUS CONSULTING, INC.,
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months
ended Year ended Year ended Year ended
March 31, December 31, December 31, December 31,
2000 1999 1998 1997
----------------- --------------- -------------- -------------------
(unaudited) (audited) (audited) (audited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 43,109 $ 404,219 $ (231,900) $ 28,650
Adjustments to reconcile net income (loss) to net
cash flows provided by operating activities
Depreciation 8,136 32,312 29,766 24,132
Provision for deferred income tax (benefit)
expense 23,000 81,000 (20,000) 12,500
Changes in
Accounts receivable (101,132) (50,402) (7,817) (227,203)
Prepaid expenses (3,491) 2,658 2,984 (6,449)
Security deposit 0 0 (255) (4,230)
Accounts payable (5,564) (221,316) 279,000 36,360
Accrued expenses (5,335) 10,778 (20,098) 34,425
Due to officer 14,729 22,697 0 0
Income taxes payable 0 88,000 0 0
Deferred income 30,000 0 0 (10,000)
----------------- --------------- -------------- -------------------
Net cash flows provided by (used in)
operating activities 3,452 369,946 31,680 (111,815)
----------------- --------------- -------------- -------------------
Cash flows used in investing activities
Purchases of property and equipment (2,234) (3,031) (36,870) (30,156)
----------------- --------------- -------------- -------------------
Cash flows from financing activities
Bank overdraft (7,718) 9,791 0 0
Advance from stockholder 6,500 0 0 0
Repurchase and retirement of common stock 0 (203,300) 0 0
Principal repayments on note payable, stockholder 0 0 0 (33,000)
Principal repayments on long-term debt 0 (65,000) (20,000) (15,000)
Proceeds from long-term debt 0 0 0 100,000
Net borrowings (repayments) on line of credit 0 (194,000) 94,613 99,387
----------------- --------------- -------------- -------------------
Net cash flows provided by (used in)
financing activities (1,218) (452,509) 74,613 151,387
----------------- --------------- -------------- -------------------
Net increase (decrease) in cash 0 (85,594) 69,423 9,416
Cash,
Beginning of year 0 85,594 16,171 6,755
----------------- --------------- -------------- -------------------
End of year 0 $0 $ 85,594 $ 16,171
================= =============== ============== ===================
Supplemental disclosure of cash flow information
Cash paid during the year for interest 0 $ 7,574 $ 20,485 $ 11,901
================= =============== ============== ===================
Cash paid during the year for income taxes $ 1,543
-------------------
</TABLE>
See notes to financial statements.
F-9
<PAGE> 12
NUCLEUS CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Nucleus Consulting, Inc. (the "Company"), is a consulting firm specializing
in assisting companies achieve corporate objectives through the use of the most
appropriate networking technologies including data networking and telephony and
mobile communications. The Company's clients are located throughout the United
States. Clients include privately held businesses and Fortune 500 companies. The
Company grants credit to substantially all of its clients.
Accounting Principles
The financial statements have been prepared on the basis of accounting
principles generally accepted in the United States.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
Revenue Recognition
The Company recognizes revenue as time is incurred on projects.
Property and Equipment
Property and equipment is stated at cost. Major improvements and additions,
with an estimated useful life of more than one year, are capitalized.
Depreciation is computed using the straight-line method. When property and
equipment are disposed of, the cost and related accumulated depreciation
are removed from the accounts and the corresponding gain or loss, if any,
is included in net income. The estimated useful lives of depreciable assets
are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Computer equipment 5
Furniture and fixtures 7
</TABLE>
F-10
<PAGE> 13
NUCLEUS CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to the cash basis method of accounting used for
income tax purposes, the tax effect of net operating loss carryforwards,
and the use of different depreciation methods and lives for financial
statement and income tax purposes. If it is more likely than not that some
portion or all of a deferred tax asset will not be realized, a valuation
allowance is recognized. The deferred tax liability represents the future
tax consequences of those temporary differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled.
Interim Financial Information
The unaudited financial statements for the three month period ended March
31, 2000 included herein are unaudited; however, they contain all normal
recurring accruals and adjustments which, in the opinion of management, are
necessary to present fairly the financial position of the Company at March
31, 2000 and the results of its operations and cash flows for the three
months ended March 31, 2000.
2. PROPERTY AND EQUIPMENT
At March 31, 2000 and December 31, 1999, 1998 and 1997 property and
equipment and related accumulated depreciation consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31, December 31, December 31,
2000 1999 1998 1997
--------------- --------------- --------------- --------------
(unaudited) (audited) (audited) (audited)
<S> <C> <C> <C> <C>
Computer equipment $ 138,700 $ 136,467 $ 133,436 $ 131,353
Furniture and fixtures 40,413 40,413 40,413 5,626
--------------- --------------- --------------- ----------------
179,113 176,880 173,849 136,979
Less accumulated depreciation (106,829) (98,694) (66,382) (36,616)
--------------- --------------- --------------- ----------------
$ 72,284 $ 78,186 $ 107,467 $ 100,363
=============== =============== =============== ================
</TABLE>
Depreciation expense for the three months ended March 31, 2000 (unaudited)
and the years ended December 31, 1999, 1998, and 1997 was $8,136, $32,312,
$29,766, and $24,132 respectively.
F-11
<PAGE> 14
NUCLEUS CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS.
3. LINE OF CREDIT
The Company had a $200,000 line of credit available from Citibank, F.S.B.
Interest on the outstanding borrowings was payable monthly at the bank's
prime rate plus 1.5%. Principle was payable in 24 equal monthly
installments. Borrowings were collateralized by substantially all of the
assets of the Company and a personal guarantee by the Company's majority
stockholder. The line of credit was repaid in full and not renewed during
the year ended December 31, 1999.
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
March 31, December 31, December 31, December 31,
2000 1999 1998 1997
--------------- --------------- --------------- ---------------
(unaudited) (audited) (audited) (audited)
<S> <C> <C> <C> <C>
Citibank, F.S.B., note payable
in monthly installments of
$1,667, plus interest at 9.92%
to March 24, 2002. The note
was repaid during 1999. $ 0 $ 0 $ 65,000 $ 85,000
Less current portion 0 0 (20,000) 20,000
--------------- --------------- --------------- ----------------
Long-term portion $ 0 $ 0 $ 45,000 $ 65,000
=============== =============== =============== ================
</TABLE>
5. RELATED PARTY TRANSACTIONS
Due to officer at March 31, 2000 and December 31, 1999, includes consulting
fees payable to the Company's stockholder in the amount $37,426 and
$22,697, respectively and a loan at March 31, 2000 to the Company of
$6,500. The loan is non-interest bearing and is due on demand. Included in
the accompanying statement of operations for the three months ended March
31, 2000 and year ended December 31, 1999 is an expense of $23,926 and
$65,034 respectively, relating to consulting services provided by the
stockholder.
The majority stockholder of the Company, has a minority equity interest in
a customer. Revenues for the year ended December 31, 1999 and outstanding
accounts receivable at December 31, 1999 from this customer were $296,637
and $280,314, respectively. Revenues and accounts receivable from this
customers for the three months ended March 31, 2000 (unaudited), were
$146,956 and $304,895, respectively. Revenues from this customer
represented 36% of the Company's revenue for the three months ended March
31, 2000 (unaudited).
F-12
<PAGE> 15
NUCLEUS CONSULTING INC.
NOTES TO FINANCIAL STATEMENTS.
5. RELATED PARTY TRANSACTIONS (CONTINUED)
During 1997, the Company leased its premises from the majority stockholder
in accordance with the term of an operating lease. The Company terminated
its lease with the stockholder as of January 1, 1998 and moved to a new
location. For the year ended December 31, 1997, rent expense related to
this lease was $20,400.
6. COMMITMENTS
Lease of Premises
The Company is obligated in accordance with the terms of a lease for office
space through December 31, 2002. In addition to rentals, the Company is
responsible for their proportionate share of real estate taxes and other
occupancy costs for the property.
Future minimum rental payments are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
-------------
<S> <C>
1998 $ 21,000
1999 21,840
2000 22,713
2001 23,622
2002 24,567
---------------
$ 113,742
===============
</TABLE>
Royalties
The Company was obligated by an exclusive licensing agreement for the use
of the name "NUCLEUS", whereby the Company was required to pay a royalty of
2% of all annual revenue up to a maximum royalty of $53,700 adjusted
annually, based on the CPI. The term of the licensing agreement was
indefinite and could be terminated by the Company at anytime. The licensing
agreement was terminated in 1998.
F-13
<PAGE> 16
NUCLEUS CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS.
7. INCOME TAXES
The provision for income tax expense (benefit) consists of the following
components.
<TABLE>
<CAPTION>
March 31, December 31, December 31, December 31,
2000 1999 1998 1997
--------------- --------------- --------------- ----------------
(unaudited) (audited) (audited) (audited)
<S> <C> <C> <C> <C>
Current
Federal $ 0 $ 72,000 $ 0 $ 0
State 0 16,000 0 0
--------------- --------------- --------------- ----------------
Total current provision 0 88,000 0 0
Deferred provision (benefit) 23,000 81,000 (20,000) 12,500
--------------- --------------- --------------- ----------------
Income tax expense (benefit) $ 23,000 $ 169,000 $ (20,000) $ 12,500
=============== =============== =============== ================
</TABLE>
Deferred tax liabilities and assets consisted of the following components.
<TABLE>
<CAPTION>
March 31, December 31, December 31, December 31,
2000 1999 1998 1997
--------------- --------------- --------------- ----------------
(unaudited) (audited) (audited) (audited)
<S> <C> <C> <C> <C>
Liability
Tax effect of temporary
differences $ 190,806 $ 154,600 $ 161,300 $ 49,000
--------------- --------------- --------------- ----------------
Asset
Tax effect of temporary
differences 86,806 73,600 152,500 0
Benefit of net operating loss
carryforwards 0 0 50,000 29,000
Valuation allowance 0 0 (41,200) 0
--------------- --------------- --------------- ----------------
86,806 73,600 161,300 29,000
--------------- --------------- --------------- ----------------
Net deferred tax liability $ 104,000 $ 81,000 $ 0 $ 20,000
=============== =============== =============== ================
</TABLE>
At December 31, 1997 the Company had a net operating loss carryforward of
approximately $130,000 expiring December 31, 2012. This loss was fully
utilized in 1999.
F-14
<PAGE> 17
NUCLEUS CONSULTING, INC.
NOTES TO FINANCIAL STATEMENTS.
8. 401(k) PLAN
The Company has a salary reduction plan established under Internal Revenue
Code Section 401(k) covering substantially all employees. Company
contributions to the plan are determined at the discretion of the board of
directors. The discretionary contribution made for the three months ended
March 31, 2000 (unaudited) and the years ended December 31, 1999 and 1998,
was $5,516, $8,875 and $10,280, respectively. There was no contribution
made for the year ended December 31, 1997.
9. MAJOR CUSTOMERS
During 1997, aggregate revenues from major customers were $1,034,379. At
December 31, 1997, the aggregate receivable from those customers was
$28,718.
During 1999 and 1998, aggregate revenues from three major customers was
$2,405,089 and $907,750, respectively. At December 31, 1999 and 1998, the
aggregate receivables from those customers were $0 and $315,926,
respectively.
10. STOCK GRANT PLAN
The Company has a stock grant plan for certain eligible employees. The
Company may grant up to 100,000 shares of common stock, which vests over
service periods. During the year ended December 31, 1998 the Company
awarded 3,166 shares of common stock to its officers. All shares awarded
were vested. The fair market value of the shares at the date of award was
$0. The fair market value of the shares was determined based on the net
equity of the Company as reported in the audited financial statements for
the year ended December 31, 1997.
11. SUBSEQUENT EVENT
On April 20, 2000, the Company's sole stockholder entered into a Stock
Purchase Agreement with JAWS Technologies, Inc. (JAWS). Under the terms of
the Agreement JAWS acquired 100% of the issued and outstanding shares of
common stock. As a result of this transaction, the Company changed its name
to JAWS, Inc.
F-15
<PAGE> 18
SIGNATURES
Pursuant to the requirements set forth in the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: June 16, 2000 JAWS TECHNOLOGIES, INC.
By: /s/ Vikki Robinson
----------------------------
Name: Vikki Robinson
Title: Corporate Secretary
<PAGE> 19
EXHIBIT INDEX
2.1 Stock Purchase Agreement, dated April 20, 2000, among JAWS
Technologies, Inc., a Nevada corporation, Nucleus Consulting,
Inc., an Illinois corporation, and Charles A. Ehredt*
23.1 Consent of Klayman & Korman, LLC
99.1 Press Release, dated April 24, 2000.*
--------------------------
*/ Previously filed with the registrant's Current Report on Form 8-K, filed with
the Commission on May 5, 2000.
