SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): June 29, 1999
AUDIOGENESIS SYSTEMS, INC.
(Exact name of registrant as specified in charter)
New Jersey 000-24991 22-3487471
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
7 Doig Road, Suite 3
Wayne, New Jersey 07470
(Address of principal executive offices)
Registrant's telephone number, including area code (973) 696-9400
EXPLANATORY NOTE
This Form 8-K/A amends Item 7 of the current report on Form 8-K filed by
Audiogenesis Systems, Inc. ("Audiogenesis") on July 12, 1999 to include
financial statements that were not available at the time of the filing of the
initial report. The financial statements are required as a result of an
agreement executed on June 29, 1999 pertaining to the acquisition by
Audiogenesis of Allstates Air Cargo, Inc. ("Allstates").
<PAGE>
Item 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
Item 7(a)
FALLON & FALLON LLP
CERTIFIED PUBLIC ACCOUNTANTS
1392 ROUTE 36, SUITE 102
HAZLET, NEW JERSEY 07730-1716
TELEPHONE: (732) 888-2070
FAX: (732) 888-6245
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Allstates Air Cargo, Inc.
And Subsidiaries
We have audited the accompanying Consolidated Balance Sheets of Allstates
Air Cargo, Inc. and Subsidiaries(the "Company") as of September 30, 1998 and
1997, and the related Consolidated Statements of Operations, Stockholders'
Equity, and Cash Flows for the years then ended. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material Respects, the consolidated financial position
of Allstates Air Cargo, Inc. and subsidiaries as of September 30, 1998 and
1997, and the consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.
HAZLET, NEW JERSEY
MAY 19, 1999
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<PAGE>
<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998 AND 1997
ASSETS
1998 1997
Current assets: ---- ----
Cash and cash equivalents $ 175,673 $ 200,978
Accounts receivable - trade, net of allowance
for doubtful accounts of $410,501 in 1998
$577,990 in 1997 3,796,346 4,058,905
Prepaid expenses and other assets 85,659 53,942
Deferred income taxes 165,502 228,981
--------- ---------
Total current assets 4,223,180 4,542,806
Property, plant and equipment, net 477,449 476,040
Security deposits 104,759 20,514
Deferred income taxes 34,090 4,958
Other assets 184,629 165,573
--------- ---------
Total assets $5,024,107 $5,209,891
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,824,374 $3,291,845
Accrued expenses 482,063 353,766
Short-term bank borrowing 400,000 280,000
Current portion of notes payable 101,084 113,914
Income taxes payable - 4,379
Note payable, related party - -
Interest payable, related party - 20,384
--------- ---------
Total current liabilities 3,807,521 4,064,288
Long-term notes payable, less current portion 69,618 100,865
--------- ---------
Total liabilities 3,877,139 4,165,153
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 1,000 shares
authorized, 210 shares issued and
outstanding 6,000 6,000
Deferred financing costs ( 60,000) ( 50,000)
Currency translation adjustments ( 9,824) ( 1,447)
Retained earnings 1,210,792 1,090,185
--------- ---------
Total stockholders' equity 1,146,968 1,044,738
--------- ---------
Total liabilities and stockholders' equity $5,024,107 $5,209,891
========= =========
The accompanying notes are an integral part of the
consolidated financial statements.
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
---- ----
Revenues $25,997,927 $25,133,787
Cost of 16,304,751 15,729,005
----------- ----------
Gross profit 9,693,176 9,404,782
Selling, general and administrative expenses
(includes rent expense to related party of
$92,203 and $86,150, respectively) 9,416,799 9,318,419
----------- ----------
Income from operations 276,377 86,363
Interest income 9,512 1,887
Interest expense (includes interest expense
due to related party of $0 and $13,467,
respectively) ( 54,061) ( 45,301)
Other income 19,733 33,195
----------- ----------
Income before income tax provision 251,561 76,144
Income tax provision ( 130,954) ( 98,553)
Net income (loss) $ 120,607 $( 22,409)
=========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Deferred Currency Total
Common Stock Financing Translation Retained Stockholders'
Shares Amount Costs Adjustments Earnings Equity
------ ------ ---------- ------------- ---------- --------------
Balance at
September 30, 1996 210 $6,000 $ - $ - $1,112,594 $1,118,594
Deferred financing
costs - - (50,000) - - 50,000
1997 net loss - - - - (22,409) ( 22,409)
Currency translation
adjustments - - - (1,447) - ( 1,447)
------ ------ ---------- ------------- ---------- --------------
Balance at
September 30, 1997 210 6,000 (50,000) (1,447) 1,090,185 1,044,738
Deferred financing
costs (10,000) ( 10,000)
1998 net income 120,607 120,607
Currency translation
adjustments - - - (8,377) - ( 8,377)
------ ------ ---------- ------------- ---------- --------------
Balance at
September 30, 1997 210 $6,000 $(60,000) $(9,824) $1,210,792 $1,146,968
====== ====== ========== ============= ========== ==============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
---- ----
Cash flows from operating activities:
Net income (loss) $ 120,607 $ ( 22,409)
Adjustments to reconcile net income to net
Cash used in operating activities:
Depreciation 179,012 154,745
Provision for doubtful accounts 6,703 182,500
Gain (loss) on sale of equipment 2,328 ( 1,200)
Deferred income taxes 34,347 ( 4,045)
(Increase) decrease in assets:
Accounts receivable 255,856 (829,092)
Prepaid expenses and other assets ( 50,773) (218,748)
Security deposits ( 84,245) ( 2,400)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (339,174) 360,203
Income tax payable ( 4,379) ( 74,064)
Interest payable, related party ( 20,384) 3,467
---------- ----------
Net cash provided by (used in) operating
activities 99,898 (451,043)
Cash flows from investing activities:
Purchase of equipment (110,924) (108,042)
Proceeds from sale of equipment 42,343 1,200
Net Cash Used In Investing Activities ( 68,581) (106,842)
---------- ----------
Cash flows from financing activities:
Repayments under notes payable ( 157,944) (110,246)
Repayments under short-term bank borrowings (280,000) -
Repayments under note payable, related party - (200,000)
Borrowings under short-term bank borrowings 400,000 280,000
Deferred financing costs ( 10,000) ( 50,000)
---------- ----------
Net cash used in financing activities ( 47,944) ( 80,246)
---------- ----------
Net increase (decrease) in cash and
cash equivalents ( 16,627) (638,131)
Currency translation adjustments ( 8,678) ( 676)
Cash and cash equivalents, beginning of year 200,978 839,785
---------- ----------
Cash and cash equivalents, end of year $ 175,673 $ 200,978
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 100,986 $ 176,662
Cash paid during the year for interest $ 75,411 $ 41,834
Equipment acquired through notes payable $ 113,867 $ 127,075
The accompanying notes are an integral part of the consolidated financial
statements.
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Organization:
Allstates Air Cargo, Inc. has been providing domestic and international air
freight service since 1962. Allstates Air Cargo, Inc. maintains operating
facilities throughout the United States and operates in one principal
industry segment.
The Company has two wholly owned subsidiaries, Allstates Allcargo (US), Inc.,
who owns Allstates Allcargo (UK) Ltd. (the "affiliate"), a corporation
organized under the laws of England and Allstates Logistics, a New Jersey
corporation. In January 1999, the Company purchased the minority interest of
the affiliate for approximately $11,000. Allstates Logistics, Inc. was
incorporated in December 1997 for the purpose of offering its customers ocean
freight service.
2. Summary of Significant Accounting Policies:
Principles of Consolidation
The accompanying financial statements include the assets, liabilities and
earnings (loss) of Allstates Air Cargo, Inc. and subsidiaries and its
affiliate (collectively, the "Company"). All material intercompany accounts
and balances have been eliminated.
Translation of Foreign Currencies
Assets and liabilities of the affiliate whose functional currency is British
pounds are translated at year-end rates of exchange and revenues and expenses
are translated at weighted average exchange rates prevailing during the year.
Resulting translation adjustments and the related income tax effects, are
accumulated in the currency translation adjustment component of stockholders'
equity. Currency translation gains and losses are recognized in income
currently.
Revenue Recognition
Revenues are recognized at the time the freight departs the terminal of
origin. This method approximates recognizing revenues when shipment is
completed.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be
cash equivalents.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk consists principally of cash and accounts
receivable. The Company places its cash primarily with one quality financial
institution. The Company had a cash balance on deposit with this bank at
September 30, 1998 that exceeded the $100,000 balance insured by the F.D.I.C.
-14-
<PAGE>
<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued):
Concentration of Credit Risk (continued)
The Company provides services to customers in diverse industries located
primarily in the United States. Substantially all sales are denominated in
the U.S. dollar. Management believes that concentrations of credit risk with
respect to trade receivables are limited due to the large number of customers
comprising the Company's customer base and their dispersion across many
different industries and geographic regions. For the year ended September
30, 1997, $2,536,501 or 10% of the Company's consolidated revenues were
earned from one major customer. The loss of this customer could have a
material adverse effect on the Company's consolidated financial position and
results of operations. No customer represented 10% or more of consolidated
revenues for the year ended September 30, 1998. The Company performs ongoing
credit evaluations of its customers to minimize credit risk.
Fair Value of Financial Instruments
The carrying amount of current notes payable approximates fair value because
of the short maturity of these items. The Company's line of credit has a
variable interest rate which adjusts with changes in market interest rates,
and the book value of such indebtedness is deemed to approximate fair value.
It is not practicable to estimate the fair value of long-term notes payable
as the cost of obtaining an independent valuation appears excessive
considering the materiality of the instruments to the Company. It is also
not practicable to estimate the fair value of note payable, related party
because of the association with the majority stockholder.
Property, Plant and Equipment
Property and equipment consist principally of buildings and improvements,
vehicles, computers and computer software, office equipment and furniture and
fixtures and is stated at cost. Depreciation is provided on the straight-
line method over the estimated useful lives of the assets which is generally
three to fifteen years. Expenditures for maintenance and repairs, which do
not extend the economic useful life of the related assets, are charged to
operations as incurred. Gains or losses on disposal of equipment are
reflected in the statements of operations.
Income Taxes
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
and tax bases of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
Estimates Used in Preparation of Financial Statements
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 dates of the financial statements
and the reported amounts of revenues and expenses for the periods reported.
Actual results could differ from these estimates.
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<PAGE>
<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Correction of an Error
During 1998, the company discovered an error in the amount of $89,271 in its
affiliates accounts payable. The effect of the correction of this error
resulted in a decrease of $89,271 in net income for the year ended September
30, 1997, resulting in a loss for the period of $22,409. Accordingly, the
financial statements have been restated for the above adjustments.
4. Property, plant and equipment:
Property and equipment costs consist of the following at:
September 30, September 30,
1998 1997
------------- -------------
Land $ 30,000 $ 30,000
Buildings and improvements 180,294 180,294
Vehicles 633,287 659,098
Computer and other equipment 198,992 105,121
Computer software 144,137 144,137
Furniture and fixtures 47,843 38,333
---------- ----------
1,234,553 1,156,983
Less: accumulated depreciation 757,104 680,943
---------- ----------
$ 477,449 $ 476,040
========== ==========
Depreciation expense charged to income from operations for the years ended
September 30, 1998 and 1997 was $179,012 and $154,745, respectively.
5. Other Assets:
On April 14, 1997, the Company pledged $165,573 as a condition of obtaining a
HM Customs and Excise bond. The purpose of the bond is to guarantee payment
of value added taxes and excise taxes that the Company's affiliate will
collect from its customers. The cash pledged is maintained in a certificate
of deposit in a financial institution earning interest at approximately 5%.
At September 30, 1998 the cost approximated fair market value. The
certificate of deposit matured on April 14, 1999 and was renewed for one
year.
6. Notes Payable:
Notes payable consisted of the following:
September 30, September 30,
1998 1997
------------- ------------
1.90% to 10.90% interest on various notes
payable $170,702 $214,779
Less: current portion 101,084 113,914
--------- ---------
Notes payable, net of current portion $ 69,618 $100,865
========= =========
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Notes Payable (continued):
The notes payable are collateralized by certain vehicles of the Company.
Total maturities of notes payable as of September 30, 1998 are as follows:
Year ending
September 30,
1998 $101,084
1999 50,017
2000 19,601
--------
$170,702
========
7. Short-Term Bank Borrowing:
The Company has a $1,000,000 line of credit agreement with a bank, which
expires September 28, 1999. Interest on outstanding borrowings currently
accrues at the Wall Street Journal's prime rate of interest less .25% per
annum (8.25% at September 30, 1998). The interest rate is predicated upon
the Company maintaining a compensating account balance in a non-interest
bearing account equal to at least 15% of the outstanding principal balance.
If, at any time, the Company fails to maintain the compensating balance, the
interest rate will increase by 1% over the rate currently accruing. The line
of credit is collateralized by the Company's accounts receivable. Advances
under the line of credit are limited to 70% of accounts receivable sixty days
or less.
At September 30, 1998, there was $400,000 of outstanding borrowings under
this agreement. The loan is due and payable in full at maturity or upon
demand in the event of default.
8. Income Taxes:
The Company's 1998 and 1997 provision for income taxes consists of the
following:
For the year ended
September 30,
1998 1997
---- ----
Current:
Federal $ 73,675 $ 76,466
State 22,932 26,132
-------- ---------
96,607 102,598
Deferred:
Federal 27,909 ( 3,115)
State 6,438 ( 930)
-------- ----------
34,347 ( 4,045)
-------- ----------
$130,954 $ 98,553
======== ==========
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Income Taxes (continued):
The difference between the United States federal statutory tax rate and the
Company's effective tax rate for 1998 and 1997 are as follows:
For the Year Ended
September 30,
1998 1997
---- ----
United States federal statutory tax rate 34.0% 34.0%
State taxes, net of federal benefit 6.1% 6.1%
Non-deductible expenditures 15.1% 17.8%
Other 1.2% 1.7%
----- -----
Effective tax rate 56.4% 59.6%
===== =====
The tax effect of temporary differences which make up the significant
components of the deferred tax asset for financial reporting purposes at
September 30, 1998 and 1997 are as follows:
1998 1997
---- ----
Deferred tax assets:
Accounts receivable $165,502 $228,981
Equipment 34,090 4,958
-------- --------
Deferred tax assets $199,592 $233,939
======== ========
The Companies affiliate has income tax loss carryforwards amounting to
$187,000. The deferred tax asset as a result of this carryforward has been
offset in full by a valuation allowance.
9. Pension Plans:
Effective May 1994, the Company adopted a discretionary non-standardized
401(k) profit sharing plan. The terms of the plan provide for eligible
employees ("participants") who have met certain age and service requirements
to participate by electing to contribute up to the maximum percentage
allowable not to exceed the limits of Code Section 401(k), 404 and 415 (the
"Code"). For 1998, the maximum percentage allowed by the Code was the lesser
of 25% of an employees' compensation of which 15% is tax deductible, or
$10,000. The Company may make matching contributions equal to a
discretionary percentage, as determined by the Company, up to 6% of a
participants' salary. Company contributions vest at the rate of 20% of the
balance at each employees' third, fourth, fifth, sixth, and seventh
anniversary of employment. The employees' contributions are immediately
vested. The Company's contribution to the plan for the years ended September
30, 1998 and 1997 was $11,594 and $20,995, respectively. The plan also
allows employer discretionary contributions allocated in accordance with
participants' compensation. The Company did not make any discretionary
contributions to the plan for the years ended September 30, 1998 and 1997.
-18-
<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Related Party Transactions:
The Company leases real estate in two locations from the sole stockholder of
the Company. Rent expense under these arrangements for the years ended
September 30, 1998 and 1997 was $92,203 and $86,150, respectively.
11. Stockholders' Equity:
The Company has incurred direct costs associated with plans to obtain
additional debt or equity financing. These costs have been shown separately
in the equity section of the consolidated balance sheet and deducted from
total stockholders' equity and will be expensed if the financing is not
obtained.
12. Commitments and Contingencies:
Lease Commitments
The Company leases certain terminal facilities and its corporate headquarters
under operating leases which expire over the next four years. These
operating leases provide the Company with the option to renew it's lease at
the then fair rental value. Generally, management expects that leases will
be renewed or replaced by other leases in the normal course of business. In
September 1998 the Companies' affiliate leased terminal facilities in the
U.K. for approximately $80,000 annually for ten years. The affiliate plans
to sublet a portion of the space. Future minimum lease payments under all
leases with initial or remaining noncancellable lease terms in excess of one
year are as follows as of September 30, 1998:
Year ending
September 30:
-------------
1999 $ 330,012
2000 289,962
2001 170,712
2002 132,914
2003 130,240
Thereafter 427,125
----------
$1,480,965
Rent expense under operating leases for the years ended September 30, 1998
and 1997 was $365,968 and $342,751, respectively.
In addition, the Company sublet office space and has recorded $17,360 and
$18,691 in rental income for the years ended September 30, 1998 and 1997,
respectively.
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<PAGE>
<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
13. Litigation:
The Company is involved in legal proceedings, claims and litigation including
employee matters and other matters arising in the normal course of business.
In the opinion of management, the outcome of such current legal proceedings
will not materially affect the Company's consolidated financial position when
resolved in a future period.
The Company is also involved in an environmental proceeding. In December
1996, five underground storage tanks ("USTs") and two aboveground storage
tanks were removed from a facility in which the Company leases office space.
Post-excavation sampling results confirmed that certain soil contamination
remained present after the removals at the location of two of the USTs.
Also, at the time of the removals, free-floating groundwater contamination
was observed in the area of these two former USTs. In response, the Company
entered into a Memorandum of Agreement with the New Jersey Department of
Environmental Protection (the "DEP") on June 11, 1997 to address the
contamination. The Company installed three monitoring wells and sampled the
wells in December 1997. Negotiations with the DEP have resulted in the DEP's
concurrence that no further delineation of soil contamination is required for
one of the two former USTs. The remaining UST has shown certain contaminants
to be present at levels in excess of the DEP's groundwater cleanup criteria.
The Company believes that certain of the contaminants are migrating onto the
premises from off-site sources. Under New Jersey statutory law, a property
owner cannot be required to clean up groundwater contamination emanating from
another party's site; nor may a property owner be required to clean
groundwater to a condition better than that of the groundwater entering its
property. The Company has made claims against their liability insurance
carriers for coverage. Due to the uncertain nature and extent of any
additional investigatory or remedial activities that may be required
regarding the existing site conditions, potential future costs cannot be
estimated by management at this time. If an adverse judgment is entered, the
potential effect on the consolidated financial position and consolidated
results of operations, in the period in which resolved, cannot be ascertained
at this time, but may be material.
The Company was a plaintiff in a lawsuit with the United States Government
(the "Government") for delinquent accounts receivables approximating $273,000
(net of $131,000 allowance) as of September 30, 1998. The lawsuit has been
settled and, in March of 1999, the government paid the Company $282,000 in
satisfaction of the full outstanding receivable.
14. Subsequent Events
In April of 1999 the Company purchased one share of stock from its sole
shareholder for $202,597.
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<PAGE>
FALLON & FALLON LLP
CERTIFIED PUBLIC ACCOUNTANTS
1392 ROUTE 36, SUITE 102
HAZLET, NEW JERSEY 07730-1716
TELEPHONE: (732) 888-2070
FAX: (732) 888-6245
ACCOUNTANTS' COMPILATION REPORT
To the Board of Directors
Allstates Air Cargo, Inc.
and Subsidiaries
We have compiled the accompanying consolidated balance sheet of Allstates Air
Cargo, Inc. and Subsidiaries as of March 31, 1999, and the statements of
operation, stockholder's equity, and cash flows for the six months ended
March 31, 1999 and 1998, in accordance with Statements on Standards for
Accounting and Review Services issued by the American institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required
by generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the company's financial position, results of operations,
and cash flows. Accordingly, these financial statements are not designed for
those who are not informed about such matters.
July 28, 1999 FALLON & FALLON LLP
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
ASSETS
Current assets:
Cash and cash equivalents $ 109,056
Accounts receivable - trade, net of allowance
for doubtful accounts of $469,856 3,686,760
Prepaid expenses and other assets 86,773
Deferred income taxes 189,428
------------
Total current assets 4,072,017
Property, plant and equipment, net 518,743
Security deposits 76,484
Deferred income taxes 33,879
Other assets 184,584
------------
Total assets $4,885,707
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $2,302,957
Accrued expenses 462,396
Short-term bank borrowing 170,000
Current portion of notes payable 86,201
Income taxes payable 273,023
------------
Total current liabilities 3,294,577
Long-term notes payable, less current portion 65,649
------------
Total liabilities 3,360,226
------------
Commitments and contingencies
Stockholder's equity:
Common stock, no par value, 1,000 shares authorized,
210 shares issued and outstanding 6,000
Currency translation adjustments 3,888
Retained earnings 1,515,593
------------
Total stockholder's equity 1,525,481
------------
Total liabilities and stockholder's equity $4,885,707
============
See accountants' compilation report.
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED
MARCH 31,
1999 1998
------ ------
Revenues $15,926,900 $12,819,451
Cost of transportation 9,564,065 8,128,232
----------- -----------
Gross profit 6,362,835 4,691,219
Selling, general and
administrative expenses 5,727,572 4,596,119
----------- -----------
Income from operations 635,263 95,100
Interest income 63 9,000
Interest expense ( 27,299) ( 23,956)
Other income (loss) ( 665) 12,380
----------- -----------
Income before income tax provision 607,362 92,524
Income tax provision ( 302,561) ( 45,272)
----------- -----------
Net income $ 304,801 $ 47,252
=========== ===========
See accountants' compilation report.
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<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Deferred Currency Total
Common Stock Financing Translation Retained Stockholders'
Shares Amount Costs Adjustments Earnings Equity
------ ------ ---------- ------------- ---------- --------------
Balance at
September 30, 1997 210 6,000 (50,000) (1,447) 1,090,185 1,044,738
Net income for the six
months ended
March 31, 1998 - - - - 47,252 47,252
Deferred financing
costs (10,000) ( 10,000)
Currency translation
adjustments - - - (1,984) - ( 1,984)
------ ------ ---------- ------------- ---------- --------------
Balance at
March 31, 1998 210 $6,000 $(60,000) $(3,431) $1,137,437 $1,080,006
====== ====== ========== ============= ========== ==============
Deferred Currency Total
Common Stock Financing Translation Retained Stockholders'
Shares Amount Costs Adjustments Earnings Equity
------ ------ ---------- ------------- ---------- --------------
Balance at
September 30, 1998 210 6,000 (60,000) (9,824) 1,210,792 1,146,968
Net income for the six
months ended
March 31, 1999 - - - - 304,801 304,801
Deferred financing
costs 60,000 60,000
Currency translation
adjustments - - - 13,712 - 13,712
------ ------ ---------- ------------- ---------- --------------
Balance at
March 31, 1999 210 $6,000 $ - $ 3,888 $1,515,593 $1,525,481
====== ====== ========== ============= ========== ==============
</TABLE>
See accountants' compilation report.
-24-
<PAGE>
<PAGE>
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
MARCH 31,
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 304,801 $ 47,252
Adjustments to reconcile net income to net
Cash used in operating activities:
Depreciation 87,356 81,542
Provision for doubtful accounts 58,818 41,581
Gain (loss) on sale of equipment 582 4,551
Deferred financing cost 60,000 -
Deferred income taxes (23,715)
(Increase) decrease in assets:
Accounts receivable 50,767 813,548
Prepaid expenses and other assets 8,862 ( 14,910)
Security deposits ( 28,275) 779
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (572,470) (1,036,120)
Income tax payable 273,023 37,560
Interest payable, related party - ( 20,384
---------- ----------
Net cash provided by (used in) operating
activities 276,299 ( 44,601)
---------- ----------
Cash flows from investing activities:
Purchase of equipment ( 70,025) ( 85,469)
Proceeds from sale of equipment 14,070 6,700
Investment in subsidiary ( 10,014) -
---------- ----------
Net Cash Used In Investing Activities ( 65,969) ( 78,769)
---------- ----------
Cash flows from financing activities:
Repayments under notes payable ( 60,663) ( 65,217)
Repayments under short-term bank borrowings (330,000) (320,000)
Borrowings under short-term bank borrowings 100,000 350,000
---------- ----------
Net cash used in financing activities ( 290,663) ( 35,217)
---------- ----------
Net increase (decrease) in cash and
cash equivalents ( 80,329) (158,587)
Currency translation adjustments ( 13,712) ( 1,984)
Cash and cash equivalents,
beginning of six months 175,673 200,978
---------- ----------
Cash and cash equivalents, end of six months $ 109,056 $ 40,407
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the six months for
income taxes $ 26,538 $ 7,712
Cash paid during the six months for interest $ 45,552 $ 19,831
Equipment acquired through notes payable $ 41,811 $ 39,851
See accountants' compilation report.
-25-
<PAGE>
Forward looking statements
Certain statements made in this Information Statement are "forward looking
statements". Without limiting the generality of the foregoing, such
information can be identified by the use of forward-looking terminology such
as "anticipate", "will", "would", "expect", "intend", "plans to" or
"believes", or other variations thereon, or comparable terminology. Actual
results, performance or developments may differ materially from those
expressed or implied by such forward-looking statements as a result of market
uncertainties or industry factors. Some important factors that may cause
actual results that differ materially from those in any forward-looking
statements may include the availability of financing in the time frame
required, market acceptance of products and services, competitive pressures,
and the ability to attract and retain key executive sales and management
personnel. Audiogenesis and Allstates each disclaims any obligation or
responsibility to update any such forward-looking statements.
-26-
<PAGE>
<PAGE>
Item 7(b)
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA AND UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA
The Selected Financial Data and the Unaudited Pro Forma Financial Data
is provided to aid you in your analysis of the financial aspects of the
merger and is presented in summary only. This Data should be read in
conjunction with, and is qualified in its entirety by, the respective
historical financial statements and notes thereto, if applicable, of
Audiogenesis Systems, Inc. ("ASI") and Allstates Air Cargo, Inc.
("Allstates") incorporated by reference into the Information Statement
and the financial statements and notes thereto in ASI's Form 10QSB dated May
12, 1999 and 10SB12G/A dated April 1, 1999.
ALLSTATES AIR CARGO, INC. AND SUBSIDIARIES SELECTED
FINANCIAL DATA
We derived the following information from Allstates' audited financial
statements.
Years Ended September 30,
1998 1997 1996
--------------------------------------
OPERATION STATEMENT DATA:
Revenues........................ $25,997,927 $25,133,787 $22,390,079
Income before income taxes...... 251,561 76,144 281,165
Net income (loss)............... 120,607 (22,409) 113,546
BALANCE SHEET DATA:
Accounts receivable............. $ 3,796,346 $ 4,058,905 $ 3,416,029
Total assets.................... 5,024,107 5,209,891 4,902,854
Accounts payable................ 2,824,374 3,291,845 3,033,012
Notes payable................... 170,702 214,779 397,950
Total liabilities............... 3,877,139 4,165,153 3,784,260
Stockholders' equity............ 1,146,968 1,044,738 1,118,594
F-1
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
SUMMARY HISTORICAL FINANCIAL DATA AND SUMMARY
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<S> <C> <C> <C> <C>
Allstates Allstates Pro Forma
Historical Six Historical Six Pro Forma Six Year Ended
Months Ended Months Ended Months Ended September
30,
March 31, 1999 March 31, 1998 March 31, 1999 1998
-------------- -------------- -------------- -----------
OPERATING DATA:
Total revenues.... $15,926,900 $12,819,451 $16,140,187 $26,473,202
=========== =========== ============ ===========
Income (loss)
before
income taxes.....$ 607,362 $ 92,524 $ 746,798 $( 103,481)
=========== =========== ============ ===========
Net income (loss)..$ 304,801 $ 47,252 $ 480,973 $( 160,963)
=========== =========== ============ ===========
Net income (loss)
per weighted
average Common
Stock outstanding $ 0.02 $ 0.00 $ 0.01 $( 0.01)
=========== =========== ============ ===========
Weighted average
Common Stock
outstanding 18,000,000 18,000,000 32,109,872 32,109,872
=========== =========== ============ ===========
BALANCE SHEET DATA (at end of period):
Accounts
receivable........ $3,686,760 $ 3,203,775 $ 3,719,786 $ 3,828,529
Total assets........ 4,885,707 4,240,847 5,291,496 5,555,302
Accounts payable... 2,302,957 2,190,620 2,347,286 2,846,758
Notes payable...... 151,850 189,413 2,711,850 2,730,702
Total liabilities... 3,360,226 3,160,842 6,208,416 6,850,735
Stockholders' equity. 1,525,481 1,080,006 (916,920) (1,295,433)
</TABLE>
F-2
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
As of March 31, 1999
The Unaudited Pro Forma Combined Balance Sheet gives effect to the proposed
merger of Audiogenesis Systems, Inc. ("ASI") and Allstates Air Cargo, Inc.
("Allstates") as a recapitalization of Allstates with Allstates as the
acquiror (reverse acquisition). This event has been presented as if it had
occurred on March 31, 1999. The Unaudited Pro Forma Combined Balance Sheet
gives effect to the merger under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16. In the opinion
of management, all significant adjustments necessary to reflect the effects
of the merger have been made.
The Unaudited Pro Forma Combined Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual combined
financial position of ASI and Allstates would have been, nor does it purport
to represent the future combined financial position of ASI and Allstates.
This Unaudited Pro Forma Combined Balance Sheet should be read in conjunction
with, and is qualified in its entirety by, the respective historical
financial statements and notes thereto, if applicable, of ASI and Allstates
incorporated by reference into the Information Statement and the financial
statements and notes thereto in ASI's Form 10QSB dated May 12, 1999.
F-3
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of March 31, 1999
ASSETS
Pro Forma ASI
ASI Allstates Merger Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ---------
Cash and cash equivalents $ 68,670 $ 109,056 $(22,500)(A) $ 155,226
Accounts receivable 33,026 3,686,760 - 3,719,786
Inventories 74,890 - - 74,890
Property, plant and equipment 4,116 518,743 - 522,859
Security deposits 1,957 76,484 - 78,441
Other assets 300 494,664 - 494,964
Goodwill - - 245,330 (B) 245,330
---------- ---------- ----------- ---------
Total assets $ 182,959 $4,885,707 $ 222,830 $5,291,496
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 44,329 $2,161,594 $ - $2,205,923
Accrued expenses 160,180 462,396 - 622,576
Short-term bank borrowing - 311,363 - 311,363
Notes payable - 151,850 2,560,000(C) 2,711,850
Shareholder loan 80,000 - - 80,000
Taxes payable 3,681 273,023 - 276,704
---------- ---------- ----------- ---------
Total liabilities 288,190 3,360,226 2,560,000 6,208,416
========== ========== =========== =========
Stockholders' equity:
Common stock 1,149,858 6,000 (1,032,259)(D) 123,599
Currency translation adjustments - 3,888 - 3,888
Retained earnings (deficit) (1,255,089) 1,515,593 1,255,089(E) 1,515,593
Treasury stock - -
(2,560,000)(F)(2,560,000)
---------- ---------- ----------- ---------
Total stockholders' equity ( 105,231) 1,525,481 (2,337,170) ( 916,920)
---------- ---------- ----------- ---------
Total liabilities and
stockholders' equity $ 182,959 $4,885,707 $ 222,830 $5,291,496
========== ========== =========== =========
F-4
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1999
The Unaudited Pro Forma Combined Statement of Operations gives effect to the
proposed merger of Audiogenesis Systems, Inc. ("ASI") and Allstates Air
Cargo, Inc. ("Allstates") as a recapitalization of Allstates with Allstates
as the acquiror (reverse acquisition). This event has been presented as if it
had occurred at the beginning of the six month period ended March 31, 1999.
The Unaudited Pro Forma Combined Statement of Operations gives effect to the
merger under the purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16. In the opinion of management, all
significant adjustments necessary to reflect the effects of the merger have
been made.
The Unaudited Pro Forma Combined Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the
actual combined financial position of ASI and Allstates would have been, nor
does it purport to represent the future combined financial position of ASI
and Allstates. This Unaudited Pro Forma Combined Statement of Operations
should be read in conjunction with, and is qualified in its entirety by, the
respective historical financial statements and notes thereto, if applicable,
of ASI and Allstates incorporated by reference into the Information Statement
and the financial statements and notes thereto in ASI's Form 10QSB dated May
12, 1999.
F-5
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1999
Pro Forma ASI
ASI Allstates Merger Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ---------
Revenues $513,287 $15,926,900 $(300,000)(G)$16,140,187
Cost of revenues 112,679 9,564,065 - 9,676,744
---------- ---------- ----------- ----------
Gross profit 400,000 6,362,835 (300,000) 6,463,443
Operating expenses:
Selling, general and
administrative 188,766 5,727,572 (300,000)(G) 5,616,338
Research and development 25,000 - - 25,000
---------- ---------- ----------- ---------
Total operating expenses 213,766 5,727,572 (300,000) 5,641,338
---------- ---------- ----------- ---------
Income from operations 186,842 635,263 - 822,105
Other income (expense):
Interest income - 63 - 63
Interest expense (3,575) ( 27,299) (89,600)(H) (120,474)
Other income (loss) 45,769 ( 665) - 45,104
---------- ---------- ----------- ---------
Income before income taxes 229,036 607,362 (89,600) 746,798
---------- ---------- ----------- ---------
Income tax provision - ( 302,561) 36,736(I) (265,825)
---------- ---------- ----------- ---------
Net income $229,036 $ 304,801 $(52,864) $ 480,973
========== ========== =========== =========
Weighted average of common
shares outstanding $18,000,000
$14,109,872(J)$32,109,872
========== =========== =========
Net income per common share $ 0.02 $ 0.01
========== ==========
F-6
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
As of September 30, 1998
The Unaudited Pro Forma Combined Balance Sheet gives effect to the proposed
merger of Audiogenesis Systems, Inc. ("ASI") and Allstates Air Cargo, Inc.
("Allstates") as a recapitalization of Allstates with Allstates as the
acquiror (reverse acquisition). This event has been presented as if it had
occurred on September 30, 1998. The Unaudited Pro Forma Combined Balance
Sheet gives effect to the merger under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16. In the opinion
of management, all significant adjustments necessary to reflect the effects
of the merger have been made.
The Unaudited Pro Forma Combined Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual combined
financial position of ASI and Allstates would have been, nor does it purport
to represent the future combined financial position of ASI and Allstates.
This Unaudited Pro Forma Combined Balance Sheet should be read in conjunction
with, and is qualified in its entirety by, the respective historical
financial statements and notes thereto of ASI and Allstates incorporated by
reference into the Information Statement and the financial statements and
notes thereto in ASI's Form 10SB12G/A dated April 1, 1999.
F-7
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of September 30, 1998
ASSETS
Pro Forma ASI
ASI Allstates Merger Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ---------
Cash and cash equivalents $ 1,834 $ 175,673 $(22,500)(K) $ 155,007
Accounts receivable 32,183 3,796,346 - 3,828,529
Inventories 41,065 - - 41,065
Property, plant and equipment 1,990 477,449 - 479,439
Security deposits 1,957 104,759 - 106,716
Other assets 300 469,880 - 470,180
Goodwill - - 474,366(L) 474,366
---------- ---------- ----------- ---------
Total assets 79,329 5,024,107 451,866 5,555,302
========== ========== =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable 22,384 2,824,374 - 2,846,758
Accrued expenses 291,720 482,063 - 773,783
Short-term bank borrowing - 400,000 - 400,000
Notes payable - 170,702 2,560,000(M) 2,730,702
Shareholder loan 95,000 - - 95,000
Taxes payable 4,492 - - 4,492
---------- ---------- ----------- ---------
Total liabilities 413,596 3,877,139 2,560,000 6,850,735
========== ========== =========== =========
Stockholders' equity:
Common stock 1,149,858 6,000 (1,032,259)(N) 123,599
Currency translation
adjustments - ( 9,824) - (9,824)
Retained earnings (deficit) (1,484,125) 1,210,792 1,484,125(O) 1,210,792
Deferred financing costs - (60,000) - ( 60,000)
Treasury stock - -
(2,560,000)(P)(2,560,000)
---------- ---------- ----------- ---------
Total stockholders equity ( 334,267) 1,146,968 (2,108,134) (1,295,433)
---------- ---------- ----------- ---------
Total liabilities and
stockholders' equity $ 79,329 $5,024,107 $ 451,866 $5,555,302
========== ========== =========== =========
F-8
<PAGE>
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
For the Year Ended September 30, 1998
The Unaudited Pro Forma Combined Statement of Operations gives effect to
the proposed merger of Audiogenesis Systems, Inc. ("ASI") and Allstates Air
Cargo, Inc. ("Allstates") as a recapitalization of Allstates with Allstates
as the acquiror (reverse acquisition). This event has been presented as if it
had occurred at the beginning of the year ended September 30, 1998. The
Unaudited Pro Forma Combined Statement of Operations gives effect to the
merger under the purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16. In the opinion of management, all
significant adjustments necessary to reflect the effects of the merger have
been made.
The Unaudited Pro Forma Combined Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the
actual combined financial position of ASI and Allstates would have been, nor
does it purport to represent the future combined financial position of ASI
and Allstates. This Unaudited Pro Forma Combined Statement of Operations
should be read in conjunction with, and is qualified in its entirety by, the
respective historical financial statements and notes thereto of ASI and
Allstates incorporated by reference into the Information Statement and the
financial statements and notes thereto in ASI's Form 10SB12G/A dated April 1,
1999.
F-9
<PAGE>
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended September 30, 1998
Pro Forma ASI
ASI Allstates Merger Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ---------
Revenues $475,275 $25,997,927 $ - $26,473,202
Cost of revenues 197,429 16,304,751 - 16,502,180
---------- ---------- ----------- ---------
Gross profit 277,846 9,693,176 - 9,971,022
---------- ---------- ----------- ---------
Operating expenses:
Selling, general and
administrative 339,019 9,416,799 - 9,755,818
Research and development 100,000 - - 100,000
---------- ---------- ----------- ---------
Total operating expenses 439,019 9,416,799 - 9,855,818
---------- ---------- ----------- ---------
Income from operations (161,173) 276,377 - 115,204
Other income (expense):
Interest income - 9,512 - 9,512
Interest expense (14,669) ( 54,061) (179,200)(Q) (247,930)
Other income (loss) - 19,733 - 19,733
---------- ---------- ----------- ---------
Income before income taxes (175,842) 251,561 (179,200) (103,481)
Income tax provision - 130,954 ( 73,472)(R) 57,482
---------- ---------- ----------- ---------
Net income (loss) $(175,842) $ 120,607 $(105,728) $(160,963)
========== ========== =========== =========
Weighted average of common
shares outstanding $18,000,000$14,109,872(S)$32,109,872
========== =========== ==========
Net income per common share $ 0.01 $ ( 0.01)
========== =========
F-10
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of March 31, 1999
A. Represents an adjustment for the estimated costs of the merger for
professional fees and printing.
B. Goodwill is calculated as the excess of the aggregate fair value of
ASI's outstanding stock ($140,099 assuming a market price of $.01 per share)
at the date of acquisition after allocation to ASI's net assets of
$(105,231).
C. The merger agreement provides for the assumption of an obligation to pay
$2,560,000 to the Estate of Albert G. Hoffman, Jr.
D. Represents an adjustment to eliminate the book value of ASI's common
stock of $1,149,858, to increase Allstates' common stock by the fair value of
ASI's outstanding stock of $140,099, and to record the estimated costs of the
merger of $22,500.
E. Represents an adjustment to eliminate ASI's retained deficit.
F. The assumption of the $2,560,000 obligation (see note C) has been
accounted for as the purchase of treasury stock.
F-11
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1999
G. Represents an adjustment to eliminate inter-company transactions.
H. Represents interest on the assumed note payable of $2,560,000 for six
months at 7%.
I. Represents the tax adjustment for the additional interest expense.
J. Recapitalizes Allstates' shares to 18,000,000, the equivalent number of
shares received in the transaction and shows the shares retained by ASI's
shareholders as issued for the reverse acquisition.
F-12
<PAGE>
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of September 30, 1998
K. Represents an adjustment for the estimated costs of the merger for
professional fees and printing.
L. Goodwill is calculated as the excess of the aggregate fair value of ASI's
outstanding stock ($140,099 assuming a market price of $.01 per share) at the
date of acquisition after allocation to ASI's net assets of $(334,267).
M. The merger agreement provides for the assumption of the obligation to pay
$2,560,000 to the Estate of Albert G. Hoffman, Jr.
N. Represents an adjustment to eliminate ASI's common stock of 1,149,858, to
increase Allstates' common stock by the fair value of ASI's outstanding stock
of $140,099, and to record the estimated costs of the merger of $22,500.
O. Represents an adjustment to eliminate ASI's retained deficit.
P. The assumption of the $2,560,000 obligation (see note M) has been
accounted for as the purchase of treasury stock.
F-13
<PAGE>
<PAGE>
AUDIOGENESIS SYSTEMS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended September 30, 1998
Q. Represents interest on the assumed note payable of $2,560,000 for one
year at 7%.
R. Represents the tax adjustment for the additional interest expense.
S. Recapitalizes Allstates' shares to 18,000,000, the equivalent number of
shares received in the transaction and shows the shares retained by ASI's
shareholders as issued for the reverse acquisition.
F-14
<PAGE>
Item 7(c) Exhibits
None.
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.
Audiogenesis Systems, Inc.
/s/ Sam DiGiralomo
DATED: August 17, 1999
By: Sam DiGiralomo
President
