<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 15, 2000
COMPASS KNOWLEDGE HOLDINGS, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 0-29615 87-0471549
--------------------------------- ---------------- ----------------------
(STATE OR OTHER JURISDICTION (COMMISSION FILE (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) NUMBER) IDENTIFICATION NUMBER)
2710 REW CIRCLE, SUITE 100
OCOEE, FLORIDA 34761
-----------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
(407) 573-2000
-----------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(407) 656-7585
-----------------------------------------------------------
(REGISTRANT'S FACSIMILE NUMBER, INCLUDING AREA CODE)
WWW.COMPASSKNOWLEDGE.COM
------------------------------
(REGISTRANT'S WEBSITE ADDRESS)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 23, 2000 Compass Knowledge Holdings, Inc. (the "Company")
filed a Form 8-K to report the acquisition of all of the outstanding capital
stock of Jamita, Inc. ("Jamita") and Rutherford Learning Group, Inc. ("RLG").
Pursuant to Item 7 of the Form 8-K, we indicated that we would file certain
financial information no later than October 13, 2000. On October 13, 2000 we
filed an Amendment to Form 8-K to report that the financial information was
still not available but that we would file the requisite financial information
as soon as practical but in no event later than October 30, 2000, the date
required by Item 7 of Form 8-K. This Amendment No. 2 is being filed to provide
such financial information.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following financial statements, pro forma financial information and exhibits
are filed as a part of this report.
(a) Financial Statements of Businesses Acquired
Jamita, Inc.
Included herein as Exhibit 2.10 to this Current Report of Form 8-K/A is
the letter of consent from Barnes Dennig & Company, Ltd., independent
accountants.
Report of Independent Certified Public Accountants
1999 and 1998 Financial Statements:
o Balance Sheets as of December 31, 1999 and 1998
o Statements of Loss and Retained Earnings (Deficit) for the years
ended December 31, 1999 and 1998
o Statements of Cash Flows for the years ended December 31, 1999
and 1998
Notes to Financial Statements
Six Months Ended June 30, 2000 Financial Statements:
o Unaudited Balance Sheet as of June 30, 2000
o Unaudited Statement of Loss and Accumulated Deficit for the six
months ended June 30, 2000
Rutherford Learning Group, Inc.
Included herein as Exhibit 2.9 to this Current Report of Form 8-K/A is
the letter of consent from Goodall Consulting, PA, independent
accountants.
Report of Independent Certified Public Accountants
1999 and 1998 Financial Statements:
o Balance Sheets as of September 30, 1999 and 1998
o Statements of Loss and Retained Earnings (Deficit) for the years
ended September 30, 1999 and 1998
o Statements of Cash Flows for the years ended September 30, 1999
and 1998
o Statements of changes in Equity for the years ended September 30,
1999 and 1998
2
<PAGE> 3
Notes to Financial Statements
Six Months Ended June 30, 2000 Financial Statements:
o Unaudited Balance Sheet as of June 30, 2000
o Unaudited Statement of Profit & Loss for the six months ended
June 30, 2000
(b) Pro forma financial information:
o Introduction to Unaudited Pro Forma Condensed Consolidated
Financial Information
o Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 2000
o Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the six months ended June 30, 2000
o Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1999
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
(c) Exhibits
Exhibit 2 Material Contracts
Exhibit 2.1* Agreement and Plan of Stock Purchase entered into by and
among COMPASS KNOWLEDGE HOLDINGS, INC., a Nevada
corporation ("CKHI") and COMPASS ACQUISITION CORP., a
Florida corporation (the "Acquisition Corp"), a wholly
owned subsidiary of CKHI (CKHI and the Acquisition Corp
shall sometimes be hereinafter collectively known as the
"Buyer") and LARRY G. ROWEDDER, NANCY ROWEDDER, TAMMY
ANDERSON, MIKE ROWEDDER, GINA ROWEDDER, JACQUELYN
ROWEDDER, LARRY G. ROWEDDER AS CUSTODIAN FOR JESSICA
ANDERSON UNDER THE OHIO TRANSFERS TO MINORS ACT and
MICHAEL RUTHERFORD (collectively the "Stockholders") and
JAMITA, INC., a Ohio corporation (hereinafter "Company"
or "Jamita").
Exhibit 2.2* Escrow Agreement entered into by and among Compass
Knowledge Holdings, Inc., a Florida corporation
(hereinafter referred to as "Buyer"), Jamita, Inc., an
Ohio corporation ("Jamita"), the shareholders of Jamita
listed on the signature page of this Escrow Agreement
(hereinafter jointly and severally called the
"Shareholder") and Firstar Bank, Cincinnati, Ohio (the
"Escrow Agent").
Exhibit 2.3* Registration Rights Agreement entered into by and among
COMPASS KNOWLEDGE HOLDINGS, INC., a Nevada corporation
(the "Company") and LARRY G. ROWEDDER, MICHAEL
RUTHERFORD, NANCY ROWEDDER, TAMMY ANDERSON, MIKE
ROWEDDER, GINA ROWEDDER, JACQUELYN ROWEDDER AND LARRY G.
ROWEDDER AS CUSTODIAN FOR JESSICA ANDERSON UNDER THE
OHIO TRANSFERS TO MINORS ACT (collectively the
"Stockholders").
Exhibit 2.4* Pledge Agreement entered into by and between Compass
Knowledge Holdings, Inc., a Nevada corporation, (the
3
<PAGE> 4
"Pledgor") and Firstar Bank, Firstar Bank, N.A.
Corporate Trust Dept., 425 Walnut Street, Cincinnati, OH
45201, Trustee ("Pledgee") for the Shareholders listed
on the signature page of this Agreement (collectively
the "Shareholder").
Exhibit 2.5* Employment Agreement by and between Jamita, Inc., a Ohio
corporation (the "Company"), and Michael Rutherford
("Employee").
Exhibit 2.6* Employment Agreement by and between Jamita, Inc., a Ohio
corporation (the "Company") and Larry G. Rowedder
("Employee").
Exhibit 2.7* Mutual General Releases of Larry G. Rowedder, Nancy
Rowedder, Tammy Anderson, Mike Rowedder, Gina Rowedder,
Jacquelyn Rowedder, and Larry G. Rowedder as Custodian
for Jessica Anderson Under the Ohio Transfers to Minors
Act (collectively, the "Rowedder Stockholders"), Michael
Rutherford ("Rutherford," and collectively with the
Rowedder Stockholders, the "Stockholders"), Jamita,
Inc., an Ohio corporation ("Jamita") and Rutherford
Learning Group, Inc., a North Carolina corporation
("RLG"), executed effective as of 11:59 p.m. on July 31,
2000.
Exhibit 2.8* Conditional Termination Agreement by and among COMPASS
KNOWLEDGE HOLDINGS, INC., a Nevada corporation ("CKHI")
and COMPASS ACQUISITION CORP., a Florida corporation
(the "Acquisition Corp"), a wholly owned subsidiary of
CKHI (CKHI and the Acquisition Corp shall sometimes be
hereinafter collectively known as the "Buyer") and LARRY
G. ROWEDDER, NANCY ROWEDDER, TAMMY ANDERSON, MIKE
ROWEDDER, GINA ROWEDDER, JACQUELYN ROWEDDER, LARRY G.
ROWEDDER AS CUSTODIAN FOR JESSICA ANDERSON UNDER THE
OHIO TRANSFERS TO MINORS ACT and MICHAEL RUTHERFORD
(collectively the "Stockholders") and JAMITA, INC., a
Ohio corporation (hereinafter "Company" or "Jamita").
Exhibit 2.9 Consent of Barnes Dennig & Company, Ltd., independent
accountants.
Exhibit 2.10 Consent of Goodall Consulting, PA, independent
accountants.
* These same exhibits were previously filed with the Current
Report on Form 8-K as exhibits 10.8 through 10.18, respectively.
This Amendment No. 2 to the Current Report corrects the exhibit
numbering and incorporates the exhibits herein by reference.
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COMPASS KNOWLEDGE HOLDINGS, INC.
Date: OCTOBER 30, 2000 BY: /s/ ROGERS W. KIRVEN, JR.
------------------------------
Chief Executive Officer and
Director
Date: OCTOBER 30, 2000 BY: /s/ ANTHONY RUBEN
------------------------------
Chief Financial Officer and
Treasurer
5
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Jamita, Inc.
Cincinnati, Ohio
We have audited the accompanying balance sheets of Jamita, Inc. as of
December 31, 1999 and 1998 and the related statements of loss and retained
earnings (deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 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 Jamita, Inc., as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Barnes Dennig & Company, Ltd.
July 27, 2000
6
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JAMITA, INC.
BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
- ASSETS - 1999 1998
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 814 $ --
Accounts receivable 4,125 19,318
Prepaid expenses 42,560 --
--------- ---------
Total current assets 47,499 19,318
--------- ---------
Property and equipment 21,622 8,138
Less accumulated depreciation (4,535) (1,698)
--------- ---------
Total property and equipment 17,087 6,440
--------- ---------
Total assets $ 64,586 $ 25,758
========= =========
- LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) -
CURRENT LIABILITIES
Accounts payable $ 99,855 $ 11,395
Cash overdraft 61,578 10,291
Unearned revenue 44,000 --
--------- ---------
Total current liabilities 205,433 21,686
--------- ---------
Shareholders' deficit:
Common stock; authorized 850 shares,
issued and outstanding 200 shares 8,000 8,000
Accumulated deficit (148,847) (3,928)
--------- ---------
Total shareholders' equity (deficit) (140,847) 4,072
--------- ---------
Total liabilities and shareholders'
equity (deficit) $ 64,586 $ 25,758
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
7
<PAGE> 8
JAMITA, INC.
STATEMENTS OF LOSS AND RETAINED EARNINGS (DEFICIT)
Years Ended December 31, 1999 and 1998
1999 1998
--------- ---------
REVENUES
Conference $ 67,125 $ 87,250
Consulting 33,202 53,289
Requisites of a Leader 650,058 --
Satellite dishes/receivers 69,000 --
--------- ---------
Total revenues 819,385 140,539
--------- ---------
OPERATING EXPENSES
Conference 43,548 37,751
Consulting 14,408 42,120
Requisites of a Leader 683,377 --
Satellite dishes/receivers 102,018 --
Travel 76,026 46,856
Other operating expenses 44,927 26,810
--------- ---------
Total operating expenses 964,304 153,537
--------- ---------
Net loss (144,919) (12,998)
Retained earnings (deficit) at beginning of year (3,928) 9,070
--------- ---------
Accumulated deficit at end of year $(148,847) $ (3,928)
========= =========
The accompanying notes are an integral part of these financial statements
8
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JAMITA, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(144,919) $ (12,998)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 2,837 1,168
(Increase) decrease in:
Accounts receivable 15,193 14,356
Prepaid expenses (42,560) --
Increase (decrease) in:
Accounts payable 139,747 (383)
Unearned revenue 44,000 --
--------- ---------
Net cash provided by operating activities 14,298 2,143
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of office equipment (13,484) (4,956)
--------- ---------
Net cash used in investing activities (13,484) (4,956)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 1,000
--------- ---------
Net cash provided by financing activities -- 1,000
--------- ---------
Net increase (decrease) in cash and cash equivalents 814 (1,813)
Cash and cash equivalents at beginning of year -- 1,813
--------- ---------
Cash and cash equivalents at end of year $ 814 $ --
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 212 $ 261
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
9
<PAGE> 10
JAMITA, INC.
NOTES TO FINANCIAL STATEMENTS
1 - Summary of Significant Accounting Policies
Jamita, Inc. ("the Company"), was incorporated under the laws
of Ohio on November 6, 1996. It operates as a consulting firm in the
field of school administration training for public and private school
districts nationwide.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash equivalents
include savings accounts and all certificates of deposit with original
maturities of three months or less. At times the amount on deposit may
exceed federally insured limits. The Company has not experienced any
losses in such an account and believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Property and Equipment
Property and equipment are carried at cost. Depreciation is
computed using straight-line methods over the estimated useful lives of
the assets. When assets are retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts, and
any resulting gain or loss is reflected in income for the period. The
cost of maintenance and repairs is charged to income as incurred;
significant renewals and betterments are capitalized.
Revenue Recognition
The Company sells a portion of its services utilizing
contracts ranging in duration from nine months to one year. The
customer's fee is billed in full at the beginning of the contract
period. Customer fees are recognized as services are delivered over the
duration of the contract. Unearned revenues consist of customer fees
billed for services to be rendered in the following year.
The Company uses the services of two contractors in
administering the contracts. Each contractor is paid a percentage of
customer fees collected during the year. The contractors' fees are
expensed as their services are provided over the duration of the
contract. A portion of prepaid expenses consist of contractor fees paid
or accrued for services to be provided in the following year.
Federal Income Taxes
The Company's shareholders have elected to be taxed as an S
Corporation. Under this election, the Company's net income is
reportable by the shareholders. Accordingly, no provision or liability
for federal income taxes is reflected in the accompanying statements.
10
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JAMITA, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
1 - Summary of Significant Accounting Policies (Continued)
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.
2 - Property and Equipment
Property and equipment consist of:
1999 1998
------- -------
Computer hardware $18,287 $ 6,602
Computer software 1,799 --
Office equipment 1,536 1,536
------- -------
Totals $21,622 $ 8,138
======= =======
11
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JAMITA, INC.
UNAUDITED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2000
12
<PAGE> 13
JAMITA, INC.
UNAUDITED BALANCE SHEET
June 30, 2000
- ASSETS -
Current assets:
Cash $ 34,105
Accounts receivable 53,103
Prepaid expenses 112,094
---------
Total current assets 199,302
---------
Office equipment 21,622
Less accumulated depreciation (6,774)
---------
Total property and equipment 14,848
---------
Total assets $ 214,150
=========
- LIABILITIES AND SHAREHOLDERS' DEFICIT -
Current liabilities:
Accounts payable $ 128,396
Unearned revenue 256,200
---------
Total current liabilities 384,596
---------
Shareholders' deficit:
Common stock; authorized 850 shares,
issued and outstanding 200 shares 8,000
Accumulated deficit (178,446)
---------
Total shareholders' deficit (170,446)
---------
Total liabilities and shareholders' deficit $ 214,150
=========
13
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JAMITA, INC.
UNAUDITED STATEMENT OF LOSS AND ACCUMULATED DEFICIT
Six Months Ended June 30, 2000
REVENUES
Conference $ 47,325
Consulting 22,590
Requisites of a Leader 363,425
Satellite dishes/receivers 31,000
---------
Total revenues 464,340
---------
OPERATING EXPENSES
Conference 27,632
Consulting 43,500
Requisites of a Leader 329,432
Satellite dishes/receivers 9,667
Travel 59,589
Other operating expenses 24,118
---------
Total operating expenses 493,938
---------
Net loss (29,598)
Accumulated deficit at beginning of period (148,848)
---------
Accumulated deficit at end of period $(178,446)
=========
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Rutherford Learning Group, Inc.
Matthews, NC
We have audited the accompanying balance sheet of Rutherford Learning
Group, Inc. as of September 30, 1999 and 1998, and the related statements of
income, retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
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 presentations.
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 Rutherford Learning
Group, Inc. as of September 30, 1999 and 1998, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
Goodall Consulting, PA
October 19, 2000
15
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RUTHERFORD LEARNING GROUP, INC.
BALANCE SHEETS
September 30, 1999 & 1998
1999 1998
-------- --------
ASSETS
Current Assets
BB&T Checking $ 15,474 $ --
BB&T Savings 20 --
Accounts Receivable 1,077 3,885
Income Tax Refund Receivable 3,878 --
Prepaid Lease Payments 736 --
-------- --------
Total Current Assets 21,185 3,885
Fixed Assets
Computers 3,343 1,000
Furniture & Fixtures 4,710 1,410
Office Equipment 1,321 1,018
Office Structure 19,739 19,739
Accumulated Depreciation (2,531) (1,053)
-------- --------
Total Fixed Assets 26,582 22,114
Other Assets
Loan to Stockholders 50,591 3,508
-------- --------
Total Other Assets 50,591 3,508
TOTAL ASSETS $ 98,358 $ 29,507
======== ========
The accompanying notes are an integral part of these financial statements.
16
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RUTHERFORD LEARNING GROUP, INC.
BALANCE SHEETS
September 30, 1999 & 1998
LIABILITIES & EQUITY 1999 1998
--------- ---------
Liabilities
Current Liabilities
Accounts Payable $ 2,010 $ 1,603
American Express Corporate Card 1,885 2,987
Income Taxes Payable -- 3,381
Payroll Liabilities 11,998 --
Retirement Plan Payable 20,000 9,123
--------- ---------
Total Current Liabilities 35,893 17,094
Total Liabilities 35,893 17,094
--------- ---------
Stockholder's Equity
Capital Stock 100 100
Paid In Capital 900 900
Retained Earnings, beginning 11,413 --
Net Income 260,376 98,367
Distributions (210,324) (86,954)
--------- ---------
Retained Earnings, ending 61,465 11,413
--------- ---------
Total Equity 62,465 12,413
--------- ---------
TOTAL LIABILITIES & EQUITY $ 98,358 $ 29,507
========= =========
The accompanying notes are an integral part of these financial statements.
17
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RUTHERFORD LEARNING GROUP, INC.
STATEMENTS OF INCOME
Years Ended September 30, 1999 and 1998
1999 1998
-------- --------
Ordinary Income/Expense
Income
Consulting Income $412,384 $110,816
Expense Reimbursement 27,375 26,943
-------- --------
Total Income 439,759 137,759
Expense
Advertising 2,495 --
Automobile Expense:
Car Lease 805 --
Automobile Expense - Other 8,676 5,291
-------- --------
Total Automotive Expense 9,481 5,291
Bank Service Charges 62 5
Credit Cards -- 110
Continuing Education -- 925
Distributor's Fees 80 45
Depreciation Expense 1,478 1,053
Job Supplies 6,016 246
Office Expenses 515 931
Office Supplies 461 264
Officer Wages 80,000 --
Payroll Tax Expense 5,968 --
Postage & Delivery -- 16
Accounting Fees 1,560 --
Retirement Plan Administration Fee 1,035 1,510
Retirement Plan Contribution 20,000 9,123
The accompanying notes are an integral part of these financial statements.
18
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RUTHERFORD LEARNING GROUP, INC.
STATEMENTS OF INCOME
Years Ended September 30, 1999 and 1998 (cont'd)
Taxes
Local 99 --
Property 161 --
State 108 --
--------- ---------
Total Taxes 368 --
Telephone 963 355
Travel & Entertainment
Entertainment 310 394
Meals 1,503 1,529
Travel 40,529 12,898
--------- ---------
Total Travel & Entertainment 42,342 14,821
Utilities -- 125
Total Expense 172,824 34,820
Net Ordinary Income 266,935 102,939
Other Income/Expense
Other Income
Interest Income 29 --
--------- ---------
Total Other Income 29 --
Other Expense
Org. Expenses 243 1,215
Provision for Income Taxes 6,345 3,357
--------- ---------
Total Other Expense 6,588 4,572
--------- ---------
Net Other Income (6,559) (4,572)
--------- ---------
Net Income $ 260,376 $ 98,367
========= =========
The accompanying notes are an integral part of these financial statements.
19
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RUTHERFORD LEARNING GROUP, INC.
STATEMENT OF CASH FLOWS
for the years ended September 30, 1999 & 1998
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 260,376 $ 98,367
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and Amortization $ 1,721 $ 1,074
Change in current assets and liabilities:
Decrease (increase) in accounts receivable 2,808 (3,885)
Increase in prepaid expenses (737) --
Increase in accounts payable 165 1,626
(Decrease) increase in credit card payable (1,102) 2,987
(Decrease) increase in income taxes payable (7,259) 3,381
Increase in retirement plan payable 10,877 9,123
Increase in organization costs -- (44)
Increase in payroll tax liabilities 11,998 --
--------- --------
TOTAL ADJUSTMENTS $ 18,471 $ 14,262
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 278,847 $112,629
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (5,946) (23,167)
Loans to Stockholders (47,083) (3,508)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (53,029) (26,675)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock -- 1,000
Authorized Distributions to Shareholder (210,324) (86,954)
--------- --------
NET CASH USED IN FINANCING ACTIVITIES (210,324) (85,954)
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,494 --
Cash and cash equivalents at beginning of year -- --
--------- --------
Cash and cash equivalents at end of year $ 15,494 $ --
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
Interest $ -- $ --
Income Taxes -- --
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
The Company did not have any noncash investing or financing
activities.
</TABLE>
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RUTHERFORD LEARNING GROUP, INC.
STATEMENT OF CHANGES IN PROPRIETOR'S CAPITAL AND STOCKHOLDER'S EQUITY
Years Ended September 30, 1999 & 1998
<TABLE>
<CAPTION>
PROPRIETOR'S COMMON ADDITIONAL RETAINED
CAPITAL STOCK PAID-IN-CAPITAL EARNINGS TOTAL
------------ ------ --------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Year (10/1/97) $ -- $ -- $ -- $ -- $ --
Net income $ 86,954 11,413 $ 98,367
Capital Withdrawn $(86,954) $ (86,954)
Stock Issuance (9/2/98) $100 $900 $ 1,000
Balance at End of Year (9/30/98) $ -- $100 $900 $ 11,413 $ 12,413
======== ==== ==== ========= =========
Net Income $ 260,376 $ 260,376
Distributions $(210,324) $(210,324)
Balance at End of Year (9/30/99) $ -- $100 $900 $ 61,465 $ 62,465
======== ==== ==== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
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RUTHERFORD LEARNING GROUP, INC
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Nature of Operations
The company began operations in 1997 as a sole proprietorship and was
incorporated on September 2, 1998. The shareholders elected to become a
Small Business Corporation (Subchapter S Corporation) under the
Internal Revenue Code on December 1, 1998.
The company's principal business activity is presenting training and
management seminars to teachers and other professionals. The company's
offices are in Charlotte, North Carolina.
Property and Equipment
The Company's fixed assets are recorded at cost and depreciated using
the straight line method. The current depreciation is calculated using
the following expected useful lives:
Computer 5 Years
Furniture & Fixtures 7 Years
Office Equipment 7 Years
Building Structure 39 Years
The Company has an established policy of expensing small equipment
purchases when the useful life does not exceed one year.
Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements while the entity was a C Corporation (from
October 1, 1998 to November 30, 1998). No deferred taxes were
recognized because there were no timing differences between financial
and income tax reporting.
As of December 1, 1998, the Company, with the consent of its
shareholders, elected under the Internal Revenue Code to be a
Subchapter S Corporation. In lieu of corporation income taxes, the
shareholders of an S-Corporation are taxed on their proportionate share
of the Company's taxable income. Therefore, no provision or liability
for federal income taxes has been included in these financial
statements after December 1, 1998. Deferred income taxes are not
provided since the Company is not taxed on its income.
22
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Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.
Accounts Receivable
No allowance for doubtful accounts is recorded on the Company's books.
Uncollectible accounts are written off when management deems such
amounts as unrecoverable.
Note 2 - Related Party Transactions
The Company has a note receivable of $50,591in 1999 and $3,508 in 1998
from the only shareholder of the corporation, Michael Rutherford. The
loan is unsecured and charges zero interest.
Note 3 - Rentals Under Operating Leases
The Company leases a car from BMW Financial Services. The lease is for
36 months and began on September 30, 1999. The Company has the option
to purchase the vehicle at the end of the lease period for the residual
value. The lease did not meet the requirements for a capital lease;
therefore, it is classified as an operating lease.
The following is a schedule of future minimum rental payments required
under the above operating lease as of September 30, 1999.
YEAR ENDING
30-SEP AMOUNT
----------- ------
2000 $8,841
2001 $8,841
2002 $8,104
-------
Total $25,786
=======
Note 4 - Defined Contribution Plan
The Company maintains a defined contribution pension plan. The company
may contribute between ten and twenty five percent of an employee's
annual wages to the plan.
During 1999 and 1998 the Company had only one employee, Michael
Rutherford. The accrued contributions during the calendar years were
$27,500 and $9,123, respectively.
The plan was originally established in January 1998 as a Money Purchase
Plan-Keogh and the 1998 contribution was based on Michael Rutherford's
net self employment income. In 1999, Rutherford Learning Group, Inc.
absorbed the plan and the contribution was based on Michael
Rutherford's wages for the year.
The following costs are the costs associated with the pension plan.
Set Up $800
1998 $710
1999 $1,035
There have been no payments made to beneficiaries since the inception
of the plan.
23
<PAGE> 24
Note 5 - Retained Earnings Reconciliation
ACCUMULATED ADJUSTMENTS ACCOUNT
Beginning Balance, October 1, 1998 --
S-Corporation 1999 Net Income 236,791
Non-Deductible Expense (Meals & Lodging) (57)
Distributions (210,324)
---------
Ending Balance, September 30, 1999 26,410
ACCUMULATED EARNINGS & PROFIT
Beginning Balance, October 1, 1998 12,584
C-Corporation 1999 Net Income 23,642
Ending Balance, September 30, 1999 36,226
---------
TOTAL RETAINED EARNINGS AS OF SEPTEMBER 30, 1999 $ 62,636
=========
Note 6 - Subsequent Events
The Company's sole shareholder and employee sold one hundred percent of
its issued stock to Compass Knowledge Holdings, Inc. on August 1, 2000
and assigned the assets and liabilities of the Company, in their
entirety, to a newly formed corporation, Rutherford Interactive Design,
Inc. immediately prior to the sale. Mike Rutherford then entered into
an employment agreement and a non-competition agreement with the
Company. Mike Rutherford is the sole shareholder of Rutherford
Interactive Design, Inc.
24
<PAGE> 25
RUTHERFORD LEARNING GROUP, INC.
UNAUDITED BALANCE SHEET
June 30, 2000
JUN 30, '00
------------------------
ASSETS
Current Assets
Checking/Savings
BB&T Checking 10,204
--------
Total Checking/Savings 10,203
Accounts Receivable
Accounts Receivable 9,788
--------
Total Accounts Receivable 9,788
Other Current Assets
Due from Mike Carter 2,775
Income Tax Refund Receivable 3,878
Loan to Stockholders 23,221
Prepaid Lease Payments 737
--------
Total Other Current Assets 30,611
--------
Total Current Assets 50,603
Fixed Assets
Accumulated Depreciation (3,946)
Computers 3,343
Furniture and Fixtures 5,525
Office Equipment 1,321
Office Structure 19,739
--------
Total Fixed Assets 25,982
Other Assets
Form 8752 Required Payment 23,421
--------
Total Other Assets 23,421
--------
TOTAL ASSETS 100,006
========
25
<PAGE> 26
RUTHERFORD LEARNING GROUP, INC.
UNAUDITED BALANCE SHEET
June 30, 2000 (Cont'd)
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
Accounts Payable 2,897
--------
Total Accounts Payable 2,897
Credit Cards
Amex Corp Card 4,347
--------
Total Credit Cards 4,347
Other Current Liabilities
Amex Line of Credit 15,096
Payroll Liabilities 10,710
--------
Total Other Current Liabilities 25,806
--------
Total Current Liabilities 33,050
--------
Total Liabilities 33,050
Equity
Capital Stock 100
Distributions (172,293)
Paid-In-Capital 900
Retained Earnings 56,669
Net Income 181,580
--------
Total Equity 66,956
--------
TOTAL LIABILITIES & EQUITY 100,006
========
26
<PAGE> 27
RUTHERFORD LEARNING GROUP, INC.
UNAUDITED INCOME STATEMENT
For the Six Months ended June 30, 2000
JAN - JUN '00
------------------
Ordinary Income/Expense
Income
Consulting Income 265,250
Expense Reimbursement 16,021
-------
Total Income 281,271
Expense
Automobile Expense
Car Lease 4,421
Automobile Expense - Other 3,595
-------
Total Automobile Expense 8,016
Bank Service Charges 30
Contributions 300
Depreciation Expense 943
Insurance
Health 1,240
Liability Insurance 518
Vehicle 601
-------
Total Insurance 2,359
Interest Expense
Finance Charge 293
Interest Expense - Other 146
-------
Total Interest Expense 439
Job Supplies 836
Licenses and Permits 125
Office Expenses 1,171
Office Supplies 583
Officer Wages 60,000
Payroll Tax Expense
Interest on Balance 259
Penalties 733
Payroll Tax Expense - Other 4,813
-------
Total Payroll Tax Expense 5,805
27
<PAGE> 28
RUTHERFORD LEARNING GROUP, INC.
UNAUDITED INCOME STATEMENT
For the Six Months ended June 30, 2000 (cont'd)
Professional Fees
Accounting 3,515
-------
Total Professional Fees 3,515
Taxes
Property 120
-------
Total Taxes 120
Telephone 1,267
Travel & Ent
Meals 527
Travel 13,655
-------
Total Travel & Ent 14,182
-------
Total Expense 99,691
-------
Net Ordinary Income 181,580
Other Income/Expense
Other Income
Interest Income 0
-------
Total Other Income 0
Other Expense
Other Expenses 0
-------
Total Other Expense 0
-------
Net Other Income 0
-------
Net Income 181,580
=======
28
<PAGE> 29
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information has
been prepared giving effect to the acquisition of Jamita, Inc. and
Rutherford Learning Group, Inc. as if the transactions had occurred on
June 30, 2000 for the unaudited pro forma condensed consolidated
balance sheet. For the unaudited pro forma condensed consolidated
statements of operations for the six months ended June 30, 2000 and for
the year ended December 31, 1999, the information has been prepared as
if the transactions had occurred at the beginning of the period
presented.
The unaudited pro forma information is based on historical
financial statements of Compass Knowledge Holdings, Inc., Jamita, Inc.
and Rutherford Learning Group, Inc. after giving effect to the
transactions using the purchase method of accounting and the
adjustments in the accompanying notes to the unaudited pro forma
financial statements.
These unaudited pro forma statements may not be indicative of
the results that actually would have occurred if the combination had
been in effect on the dates indicated or which may be obtained in the
future. The unaudited pro forma financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto, together with Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the
Company's Form 10-SB/A filed with the Securities and Exchange
Commission on May 12, 2000 and the audited financial statements and
notes thereto, of Jamita, Inc. and Rutherford Learning Group, Inc.
29
<PAGE> 30
COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
As of June 30, 2000
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------
COMPASS PRO FORMA PRO FORMA
KNOWLEDGE JAMITA, INC. RUTHERFORD ADJUSTMENTS CONSOLIDATED
--------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,060,873 $ 34,105 $ 10,204 $ (1,925,000) (a) $ 2,180,182
Accounts receivable 9,264 53,103 9,788 72,155
Due from related parties 115,830 -- 23,221 139,051
Other assets 170,054 112,094 7,390 289,538
---------- --------- --------- -------- -----------
Total current assets 4,356,021 199,302 50,603 (1,925,000) 2,680,926
Property and Equipment, net 169,269 14,848 25,982 (45,195) (c) 174,491
9,587 (c)
Goodwill, net 945,051 -- -- 2,100,866 (a) 3,045,917
Other Assets 846,601 -- 23,421 -- 870,022
---------- --------- --------- -------- -----------
Total Assets $ 6,316,942 $ 214,150 $ 100,006 $140,258 $ 6,771,356
========== ========= ========= ======== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 274,436 $ 128,396 $ 33,050 $ (162,216) (b) $ 273,666
Deferred revenue 267,257 256,200 -- 523,457
Amounts due to related parties 500 -- -- 155,964 (a) 156,464
---------- --------- --------- -------- -----------
Total Liabilities 542,193 384,596 33,050 (6,252) 956,587
(103,490) (i)
Stockholders' Equity 5,774,749 (170,446) 66,956 250,000 (j) 5,817,769
---------- --------- --------- -------- -----------
Total Liabilities and Stockholders'
Equity $6,316,942 $ 214,150 $ 100,006 $140,258 $ 6,771,356
========== ========= ========= ======== ===========
</TABLE>
See accompanying notes to unaudited pro forma
condensed consolidated financial statements
30
<PAGE> 31
COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------
COMPASS PRO FORMA PRO FORMA
KNOWLEDGE JAMITA, INC. RUTHERFORD ADJUSTMENTS CONSOLIDATED
--------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Revenue from operations $ 1,426,527 $ 464,340 $ 281,271 $ -- $ 2,172,138
EXPENSES
Cost of services 310,371 469,820 82,198 (75,000)(e) 787,389
Selling and promotional 211,309 -- -- -- 211,309
General and administrative 1,083,016 24,118 17,493 870 (c) 1,304,474
75,000 (e)
105,042 (f)
(1,065)(g)
Interest expense 155 -- -- - 155
------------ ---------- --------- ----------- -----------
Total expenses 1,604,851 493,938 99,691 104,847 2,303,327
Non-operating income 151,603 -- -- (57,750)(d) 93,853
------------ ---------- --------- ----------- -----------
Net income (Loss) before minority interest (26,721) (29,598) 181,580 (162,597) (37,336)
Minority Interest -- -- -- -- (h) --
------------ ---------- --------- ----------- -----------
Less: Preferred stock dividends 74,822 -- -- -- 74,822
------------ ---------- --------- ----------- -----------
Net income (Loss) available to common
shareholders $(101,543) $ (29,598) $ 181,580 $ (162,597) $(112,158)
============ ========== ========= =========== ===========
Pro forma earnings per share:
Basic $ (0.007) $ -- $ -- $ -- $ (0.008)
============ ========== ========= =========== ===========
Diluted $ (0.006) $ -- $ -- $ -- $ (0.007)
============ ========== ========= =========== ===========
Pro forma weighted average shares outstanding:
Basic 14,750,000 -- -- 125,000(j) 14,875,000
============ ========== ========= =========== ===========
Diluted 15,676,000 -- -- 125,000 15,801,000
============ ========== ========= =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
31
<PAGE> 32
COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the year ended December 31, 1999, except for Rutherford
which is for the year ended September 30, 1999
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------
COMPASS PRO FORMA PRO FORMA
KNOWLEDGE JAMITA, INC. RUTHERFORD ADJUSTMENTS CONSOLIDATED
--------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Revenue from operations $ 2,659,306 $ 819,385 $439,759 $ -- $ 3,918,450
EXPENSES
Cost of services 616,101 919,377 131,823 (150,000)(e) 1,517,301
Selling and promotional 431,431 6,712 - -- 438,143
General and administrative 1,272,886 38,821 41,001 1,740 (c) 1,712,811
210,084 (f)
(1,721)(g)
150,000 (e)
Interest expense 14,803 -- -- -- 14,803
----------- --------- -------- ----------- -----------
Total expenses 2,335,221 964,910 172,824 210,103 3,683,058
Non-operating income 20,461 606 (6,559) (115,500)(d) (100,992)
----------- --------- -------- ----------- -----------
Income before minority interest in net
income of subsidiary 344,546 (144,919) 260,376 (325,603) 134,400
Minority interest in net income of subsidiary 189,114 -- -- -- (h) 189,114
----------- --------- -------- ----------- -----------
Net Income (Loss) 155,432 (144,919) 260,376 (325,603) (54,214)
Less: Preferred stock dividends 17,500 -- -- 17,500
----------- --------- -------- ----------- -----------
Net income available to common
shareholders $ 137,932 $(144,919) $260,376 $ (325,603) $ (72,214)
=========== ========= ======== =========== ===========
Pro forma earnings per share:
Basic $ 0.011 $ -- $ -- $ -- $ (0.006)
=========== ========= ======== =========== ===========
Diluted $ 0.011 $ -- $ -- $ -- $ (0.005)
=========== ========= ======== =========== ===========
Pro forma weighted average shares outstanding
Basic 12,544,520 -- -- 125,000(j) 12,669,520
=========== ========= ======== =========== ===========
Diluted 13,079,779 -- -- 125,000 13,204,779
=========== ========= ======== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
32
<PAGE> 33
COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Historical Financial Statements
Year End Financial Statements: The condensed statement of operations
for the year ended December 31, 1999 has been derived from the audited financial
statements at that date, but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
Interim Financial Statements: The condensed consolidated balance sheet
at June 30, 2000 and the condensed consolidated statement of operations for the
six months then ended are unaudited and reflect all adjustments (consisting only
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results for the interim period. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto, together with Management's Discussion and Analysis
of Financial Condition and Results of Operations, contained in the Company's
Form 10-SB/A filed with the Securities and Exchange Commission on May 12, 2000.
The results of operations for the six months ended June 30, 2000 are not
necessarily indicative of future financial results.
Note 2 - Acquisition of Jamita, Inc. and Rutherford Learning Group, Inc.
On August 15, 2000, we completed the acquisition of the outstanding
capital stock of Jamita, Inc. (Jamita), a distance learning leadership
development services firm headquartered in Cincinnati, Ohio and Rutherford
Learning Group, Inc. (RLG), a consulting services firm headquartered in
Matthews, North Carolina. The acquisition, recorded under the purchase method of
accounting, included the purchase of all the outstanding shares of common stock
of RLG and 90% of the outstanding common stock of Jamita for $2,175,000 (before
contingent consideration) plus acquisition costs of $155,964, consisting of
legal and accounting fees, and the assumption of liabilities of $138,201, net of
$281,035 in assets, resulting in intangible assets acquired of $2,469,165. The
purchase price has been allocated to assets acquired that will be depreciated
over three to five years and liabilities assumed based on estimated fair market
values at the date of acquisition. Goodwill related to Jamita and RLG in the
amount of $2,469,l65 is being amortized over ten years on a straight-line basis.
The contingent consideration consists of 562,500 shares of CKHI common stock
valued at $2.00 per share (which is approximately the average closing price of
the stock for the 20-day period ended August 14, 2000) was placed into an escrow
account for distribution to the Jamita shareholders subject to Jamita having net
collections of approximately $1 million in the first fiscal year following the
closing. We may also make additional payments if certain net collection goals
are achieved in each of the first two fiscal years following the closing.
Note 3 - Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet as of June
30, 2000 has been prepared assuming the acquisitions occurred on June 30, 2000.
The unaudited pro forma condensed consolidated statements of operations for the
year ended December 31, 1999 and for the six months ended June 30, 2000 have
been prepared giving effect to the acquisition of Jamita and RLG as if it had
occurred at the beginning of the period presented. Due to the pro forma losses
reported for both periods, no tax benefit has been taken.
The unaudited pro forma information is presented for illustrative
purposes only and does not purport
33
<PAGE> 34
COMPASS KNOWLEDGE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
to present what the Company's results would be if the transaction occurred at
the dates indicated, nor does such information purport to project the results of
operations or financial position for any future period or as any future date.
Note 4 - Unaudited Pro Forma Condensed Consolidated Financial Adjustments as of
and for the six months ended June 30, 2000
(a) To give effect to the reduction in cash of $1,925,000 for the purchase
of the outstanding shares of common stock of Jamita, Inc. and
Rutherford Learning Group, recording the goodwill associated with the
acquisition ($2,100,866), which includes the acquisition costs
($155,964).
(b) To adjust the balance sheet for accounts payable and accrued expenses
not assumed by the buyer ($162,216).
(c) Property and equipment ($45,195) with the associated accumulated
depreciation ($9,587) retained by Jamita, Inc. and Rutherford Learning
Group, and the appropriate depreciation expense related to the assets
acquired ($870).
(d) Represents the pro forma effect of the reduction in interest income
of $57,750 on the cash purchase price of $1,925,000 at an interest rate
of 6.00%, which approximates the buyer's rate of invested funds.
(e) Pro forma adjustment of additional compensation expense of $75,000 for
a new employment agreement with management as a direct result of the
acquisition of Jamita, Inc., and corresponding reduction of commission
expense from historical Jamita and RLG cost of sales.
(f) Amortization of goodwill associated with the purchase of Jamita, Inc.
and Rutherford Learning Group, Inc. for six months ended June 30, 2000.
(g) To adjust for the depreciation and amortization of assets not acquired
($1,065).
(h) In connection with the above referenced acquisition, a minority
interest in Jamita was issued to Michael Rutherford. None of the
historical losses of Jamita have been allocated to the minority
interest for purposes of the pro forma presentation. See Note 2.
(i) This adjustment represents the elimination of equity from Jamita and
Rutherford.
(j) This adjustment represents the issuance of 125,000 shares of Compass
Knowledge Holdings stock in connection with the acquisition of
Rutherford with a market value of $2.00 per share on the date of the
transaction.
Note 5 - Unaudited Pro Forma Condensed Consolidated Financial Adjustments for
the year ended December 31, 1999
(c) The depreciation expense for the property and equipment acquired from
Jamita ($1,740).
(d) Represents the pro forma effect of the reduction in interest income of
$115,500 on the cash purchase price of $1,925,000 at an interest rate
of 6.00%, which approximates the buyer's rate of invested funds.
(e) Pro forma adjustment of additional compensation expense of $150,000 for
a new employment agreement with management as a direct result of the
acquisition of Jamita, Inc., and corresponding reduction of commission
expense from historical Jamita and RLG cost of sales.
(f) Amortization of goodwill associated with the purchase of Jamita, Inc.
and Rutherford Learning Group, Inc. for twelve months ended December
31, 1999.
(g) To adjust the depreciation and amortization of assets not acquired
($1,721).
(h) In connection with the above referenced acquisition, a minority
interest in Jamita was issued to Michael Rutherford. None of the
historical losses of Jamita have been allocated to the minority
interest for purposes of the pro forma presentation. See Note 2.
34
