SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): April 2, 1996
DIXIE NATIONAL CORPORATION
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(Exact name of registrant as specified in its charter)
Mississippi 0-3296 64-0440887
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(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
107 The Executive Center
Hilton Head Island, South Carolina, 29928
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(Address of principal executive offices)
Registrant's telephone number, including area code:
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(803) 785-7850
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As previously reported in its Form 10-K Annual Report for the year ended
December 31, 1995 and its Form 10-Q for the quarter ended March 31, 1996,
Dixie National Corporation ("Corporation") completed the acquisition of 100%
of the outstanding stock of Text Retrieval Systems, Inc. ("TRS"). The
Corporation is filing this Form 8-K at this time to provide financial
statements for an acquired business as well as pro forma financial
information.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The following lists the financial statements of Text Retrieval Systems, Inc.
("TRS") attached hereto:
Independent Auditor's Report------------------------------------------------ 4
Balance Sheet at June 30, 1995-----------------------------------------------5
Statement of Operations for the year ended
June 30, 1995----------------------------------------------------------------6
Statement of Owners' Equity for year ended
June 30, 1995----------------------------------------------------------------7
Statement of Cash Flows for the year ended
June 30, 1995----------------------------------------------------------------8
Notes to Financial Statements--------------------------------------------9, 10
Balance Sheet at March 31, 1996 (Unaudited)---------------------------------11
Income Statement and Charges in retained
earnings (deficit) for the nine months ended
March 31, 1996 (Unaudited)--------------------------------------------------12
(b) Proforma Financial Statements
The following lists the unaudited proforma financial information attached
hereto:
Proforma consolidated balance sheet at
March 31, 1996--------------------------------------------------------------13
Proforma consolidated income statement for
the nine months ended March 31, 1996----------------------------------------14
Proforma consolidated statement of operations
for year ended December 31, 1995--------------------------------------------15
Notes to unaudited proforma consolidated
financial statements----------------------------------------------------16, 17
(c) Exhibits
None
3
<PAGE>
PAILET, MEUNIER AND LEBLANC, L.L.P
CERTIFIED PUBLIC ACCOUNTANTS
MANAGEMENT CONSULTANTS
INDEPENDENT AUDITOR'S REPORT
To the Owners
Text Retrieval Systems, Inc.
We have audited the accompanying balance sheet of Text Retrieval Systems, Inc.
for June 30, 1995 and the related statements of operations, owners' equity and
cash flows for the year 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 audit 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
financial statement presentation. We believe that our audit provides 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 Text Retrieval Systems, Inc.
as of June 30, 1995 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
Metairie, Louisiana \s\ Pailet, Meunier and LeBlanc, L.L.P
May 13, 1996
4
<PAGE>
<TABLE>
TEXT RETRIEVAL SYSTEMS, INC.
BALANCE SHEET
JUNE 30, 1995
ASSETS
CURRENT ASSETS
<S> <C>
Cash $ 6,737
----------
Property and Equipment
Furniture and fixtures 13,330
Equipment 60,190
----------
73,520
Less: accumulated depreciation 6,971
----------
Total Property and Equipment 66,549
Total Assets $ 73,286
==========
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES
Account payable $ 18,607
Accounts payable ERS 893
Advances by ERS 46,155
----------
Total Current Liabilities 65,655
----------
EQUITY
Capital stock, 1,300 shares authorized and issued 519,877
Retained earnings (512,246)
----------
Total Equity 7,631
----------
Total Liabilities and Owners' Equity $ 73,286
==========
See auditor's report and accompanying notes.
</TABLE>
5
<PAGE>
<TABLE>
TEXT RETRIEVAL SYSTEMS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
<S> <C>
Income
Income - sale of libraries $ 18,815
License fees 25,000
Annual subscription 295
Other income 40
----------
Total Income 44,150
----------
Expenses
Bank charges 145
Credit card fees 330
Commissions 2,027
Depreciation expense 6,971
Dues and subscriptions 674
Employee benefits 150
Insurance 9,117
Legal and professional fees 500
Licenses and fees 524
Miscellaneous 10
Office supplies 4,462
Payroll taxes 2,958
Postage 1,216
Rent 5,357
Research and development expense 484,025
Royalties 1,167
Salaries 32,870
Supplies 111
Telephone 3,482
Travel 300
----------
Total Expenses 556,396
----------
Net Loss $(512,246)
==========
See auditor's report and accompanying notes.
</TABLE>
6
<PAGE>
<TABLE>
TEXT RETRIEVAL SYSTEMS, INC.
STATEMENT OF OWNERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1995
<S> <C>
Owners' Equity
July 1, 1994 $ 19,700
Capital Contributions 500,177
Net Loss (512,246)
----------
Owners' Equity $ 7,631
June 30, 1995 ==========
See auditor's report and accompanying notes.
</TABLE>
7
<PAGE>
<TABLE>
TEXT RETRIEVAL SYSTEMS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1995
<S> <C>
Cash flows from operating activities:
Net Loss $(512,246)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 6,971
Increase in accounts payable 19,500
----------
Total adjustments 26,471
----------
Net cash used by operating activities (485,775)
Cash flows from investing activities:
Cash payments for the purchase of property (73,520)
----------
Net cash used by investing activities (73,520)
Cash flows from financing activities:
Proceeds from advance by ERS 46,155
Capital contributions 500,177
----------
Net cash provided by financing activities 546,332
----------
Net decrease in cash and cash equivalents (12,963)
Cash and cash equivalents, beginning of year 19,700
----------
Cash and cash equivalents, ending of year $ 6,737
==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest expense $ -0-
See auditor's report and accompanying notes.
</TABLE>
8
<PAGE>
TEXT RETRIEVAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
NOTE A - ORGANIZATION
The Corporation was formed on January 20, 1994 in the state of Florida,
primarily to develop, manufacture, and sell "Information Retrieval Libraries;"
however, the business is not restricted to those activities. The Corporation
began developing their product in 1994, and business transactions began in
September 1994.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements are prepared on the accrual basis of accounting.
FURNITURE AND EQUIPMENT
Furniture and Equipment are recorded at cost. Maintenance, repairs, and minor
replacements are charged against income as incurred; major replacements and
betterments are capitalized. Depreciation is provided using the straight-line
method over the estimated useful life of each asset, which is seven years for
furniture and fixture and five years for equipment.
INCOME TAXES
The Corporation has a net operating loss. Therefore, no income taxes are
reflected in the financial statements.
CASH AND CASH EQUIVALENTS
For purposes of the Statement of Cash Flows, cash and cash equivalents are
comprised of unrestricted deposits in banks.
NOTE C - USE OF ESTIMATES 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 date of the financial statements and
the reported amounts of revenues and expense during the reporting period.
Actual results could differ from those estimates.
9
<PAGE>
NOTE D - FURNITURE AND EQUIPMENT
<TABLE>
Furniture and equipment consist of the following:
<S> <C>
Furniture $13,330
Equipment 60,190
-------
Total 73,520
Less: accumulated depreciation 6,971
-------
Balance $66,549
=======
</TABLE>
NOTE E - RESEARCH AND DEVELOPMENT
Research and development expenditures consist of all costs of collecting and
computerizing the two libraries, (Low Income and Conventional Multi-Family
Compliance Systems and Employer's Complete Human Resource Legal Reference
System) and primary costs of labor and research costs. Research and
development expenditures are expensed in the financial statements. The Company
has elected to amortize research and development costs over a 60-month period
for income tax purposes.
NOTE F - SUBSEQUENT EVENT
An agreement was entered on June 15, 1995, effective June 1, 1995, between
Text Retrieval Systems, Inc. and Electronic Reference Systems, Inc. ("ERS").
Under the original contract, Text Retrieval would maintain its rights to the
software concepts it developed, and ERS would control the means in which the
product was sold, marketed, and distributed. The original contract has various
other provisions such as contributions to be used in marketing the TRS
product, repayment of advances, and other items.
In January 1996, TRS purchased 100% of the stock of ERS, therefore, altering
the above-described contract.
In October 1995, an agreement with Dixie National Corporation was made for a
$750,000 line of credit. TRS gave 35% of its outstanding shares of stock for
this line of credit. As part of this agreement, Dixie National Corporation had
an option to purchase all outstanding shares of TRS stock by June 1997. In
April 1996, Dixie National Corporation exercised this option.
NOTE G - ADVERTISING
The Corporation incurred advertising costs of $-0- in 1995. Advertising costs
are expensed as incurred.
10
<PAGE>
TEXT RETRIEVAL SYSTEMS, INC.
BALANCE SHEET
AS OF MARCH 31, 1996 (UNAUDITED)
<TABLE>
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents $ (1,546)
Accounts receivable - miscellaneous 350
Inventory 21,088
----------
Total Current Assets 19,892
----------
Plant, Property, and Equipment
Plant, property, and equipment (at cost) 134,211
Accumulated depreciation (13,942)
----------
Total Plant, Property, and Equipment 120,269
Non-Current Assets
Deposit 722
----------
Total Non-Current Assets 722
----------
Total Assets $ 140,883
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 259,915
Notes payable 6,667
Loans payable - Dixie National Corporation 132,677
----------
Total Current Liabilities 399,259
----------
Note payable - Dixie National Corporation 749,990
----------
Total Long-Term Liabilities 749,990
----------
Total Liabilities 1,149,249
----------
Stockholders' Equity
Common stock 503,145
Retained earnings (deficit) (1,511,511)
-----------
Total Stockholders' Equity (1,008,366)
-----------
Total Liabilities and Stockholders' Equity $ 140,883
============
</TABLE>
-11-
<PAGE>
TEXT RETRIEVAL SYSTEMS, INC.
INCOME STATEMENT
AND CHANGES IN RETAINED EARNINGS (DEFICIT)
FOR THE NINE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INCOME
Sales $ 21,325
------------
Total Sales 21,325
------------
EXPENSES
Wages, benefits, and related costs 306,406
Depreciation 6,971
General and adminstrative expenses 707,213
------------
Total Operating Expenses 1,020,590
OPERATING INCOME (loss) (999,265)
------------
NET INCOME (loss) (999,265)
Retained earnings (deficit), July 1, 1995 (512,246)
------------
RETAINED EARNINGS (deficit) March 31, 1996 $(1,511,511)
============
</TABLE>
12
<PAGE>
DIXIE NATIONAL CORPORATION AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1996
------------- ------------- ------------- ------------- -------------
ASSETS Historical Historical Proforma See Proforma
Dixie TRS Balance Adjustments Note Balance
Balance
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $3,508,695 $ (1,546) (1) $3,507,149
Accounts receivable - miscellaneous 3,527 350 (1) 3,877
Federal income tax receivable 302,000 302,000
Leases receivable - current portion 100,853 100,853
Inventory 0 21,088 0 (1) 21,088
------------- ------------- ------------- -------------
Total Current Assets 3,915,075 19,892 0 3,934,967
------------- ------------- ------------- -------------
Plant, Property, and Equipment
Plant, property, and equipment (at cost) 1,225,827 134,211 (1) 1,360,038
Accumulated depreciation (823,660) (13,942) 0 (1) (837,602)
------------- ------------- ------------- -------------
Total Plant, Property, and
Equipment (net) 402,167 120,269 0 522,436
------------- ------------- ------------- -------------
Non-Current Assets
Leases receivable - non-current portion 365,239 365,239
Investment in TRS 492,975 (492,975) (2) 0
Advances to TRS 135,597 (135,597) (2) 0
Goodwill - TRS 61,970 2,988,854 (3) 3,050,824
Accumulated Amortization - Goodwill (762,706) (3) (762,706)
Option - TRS 100,000 (100,000) (2) 0
Deposits 0 722 0 722
------------- ------------- ------------- -------------
Total Non-current Assets 1,155,781 722 1,497,576 2,654,079
------------- ------------- ------------- -------------
Total Assets $5,473,023 $ 140,883 $1,497,576 $7,111,482
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 95,386 $259,915 $355,301
Notes payable 23,341 139,344 (132,677) (2) 30,008
Mortgage note payable - current portion 107,839 107,839
------------- ------------- ------------- -------------
Total Current Liabilities 226,566 399,259 (132,677) 493,148
------------- ------------- ------------- -------------
Non-current Liabilities
Note payable - Dixie 749,990 (749,990) (2)
Mortgage note payable -
non-current portion 295,673 295,673
Deferred taxes 127,483 - - 127,483
------------- ------------- ------------- -------------
Total Non-Current Liabilities 423,156 749,990 (749,990) 423,156
------------- ------------- ------------- -------------
Total Liabilities 649,722 1,149,249 (882,667) 916,304
------------- ------------- ------------- -------------
Stockholders' Equity
Common stock - Dixie 10,598,773 2,500,000 (2) 13,098,773
Common stock - TRS 503,144 (503,144) (2)
Discount on common stock (996,222) (508,750) (2) (1,504,972)
Treasury stock (1,112) (1,112)
Retained earnings (deficit) - Dixie (4,778,138) (619,373) (2) (5,397,511)
Retained earnings (deficit) - TRS 0 (1,511,510) 1,511,510 (2) 0
------------- ------------- ------------- -------------
Total Stockholders' Equity 4,823,301 (1,008,366) 2,380,243 6,195,178
------------- ------------- ------------- -------------
Total Liabilities and
Stockholders' Equity $5,473,023 $ 140,883 $ 1,497,576 $7,111,482
============= ============= ============= =============
</TABLE>
13
<PAGE>
DIXIE NATIONAL CORPORATION AND SUBSIDIARIES
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
------------- ------------- ------------- ------------- -------------
Historical TRS Proforma See Proforma
Balance Balance Adjustment Note Balance
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Income $ 46,650 $ 11,221 $ 57,871
------------- ------------- -------------
Total Revenue 46,650 11,221 57,871
------------- ------------- -------------
EXPENSES
Wages, benefits, and related costs 61,427 181,171 242,598
Depreciation 9,150 6,971 16,121
Amortization of Goodwill 152,541 (3) 152,541
Research and development costs -0- 471,596 471,596
Interest expense 10,998 - 10,998
General and administrative expenses 176,271 110,462 - 286,733
------------- ------------- ------------- -------------
Total Operating Expenses 257,846 770,200 152,541 1,180,587
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) (211,196) (758,979) (152,541) (1,122,716)
------------- ------------- ------------- -------------
NON-OPERATING INCOME (LOSS)
Interest income - investments 24,179 - 24,179
Lease income - Fry Guy, Inc. 19,131 - 19,131
TRS loss (143,333) 143,333 (2)
Gain on disposal of marketable
securities 671,160 0 0 671,160
------------- ------------- ------------- -------------
Total Non-operating
Income (loss) 571,137 0 143,333 714,470
------------- ------------- ------------- -------------
Income (loss) from continuing
operations before income taxes 359,941 (758,979) (9,208) (408,246)
Income taxes 0 0 2,762 2,762
------------- ------------- ------------- -------------
Income (loss) from continuing operations 359,941 (758,979) (6,446) (405,484)
------------- ------------- ------------- -------------
Net income (loss) $ 359,941 $ (758,979) $ (6,446) $ (405,484)
============= ============= ============= =============
Earnings Per Share:
Net income (loss) per share $ .034 $ (.031)
======= ========
Weighted average shares outstanding 10,597,661 13,097,661
========== ===========
</TABLE>
14
<PAGE>
DIXIE NATIONAL CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------- ------------- ------------- ------------- -------------
TRS PROFORMA SEE PROFORMA
HISTORICAL BALANCE ADJUSTMENT NOTE BALANCE
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues
Premiums $ 2,485,974 - $ 2,485,974
Net investment income 1,950,874 - 1,950,874
Realized investment gains (losses) 155,741 155,741
Unrealized investment gains 347,859 347,859
Other 92,089 23,146 0 (2) 115,235
------------- ------------- ------------- -------------
TOTAL REVENUES 5,032,537 23,146 0 5,055,683
------------- ------------- ------------- -------------
BENEFITS AND EXPENSES
Benefits and claims to policyholders 1,495,591 1,495,591
Amortization of deferred policy
acquisition costs and value
of insurance purchased 699,285 699,285
Commission, net 385,354 385,354
General expenses, net 2,491,339 293,665 (2) 2,785,004
Interest expense 436,204 436,204
Insurance taxes, licenses and fees 315,830 315,830
Provision for litigation settlement 1,007,271 1,007,271
Loss on sales of life insurance subsidiary 4,174,535 4,174,535
Loss on write-down of
non-marketable security 1,051,217 1,051,217
Research and development expenses - 486,164 (2) 486,164
Amortization of acquired goodwill - - 610,165 (3) 610,165
------------- ------------- ------------- -------------
TOTAL BENEFITS
AND EXPENSES 12,056,626 779,829 610,165 13,446,620
------------- ------------- ------------- -------------
(LOSS) BEFORE INCOME $ (7,024,089) (756,683) $ 610,165 $ (8,390,937)
TAXES ============= ============= ============= =============
</TABLE>
15
<PAGE>
DIXIE NATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
The unaudited proforma consolidated financial statements give effect to the
acquisition by Dixie National Corporation of Text Retrieval Systems, Inc. in a
transaction to be accounted for as a purchase. The unaudited proforma balance
sheet is based on the individual balance sheets of Dixie National Corporation
and Text Retrieval Systems, Inc. and have been prepared to reflect the
acquisition by Dixie National Corporation of Text Retrieval Systems, Inc. as
of December 31, 1995 and as of March 31, 1996. The unaudited proforma
statements of operations are based on the individual statements of income of
Dixie National Corporation and Text Retrieval Systems, Inc. and combines the
results of operations of Dixie National Corporation and Text Retrieval
Systems, Inc. for the year ended December 31, 1995 and the three months ended
March 31, 1996 as if the acquisition had occurred on January 1, 1995. These
unaudited proforma financial statements should be read in conjunction with the
historical financial statements and notes thereto of Dixie National
Corporation and Text Retrieval Systems, Inc. included elsewhere in this
filing.
These unaudited proforma consolidated financial statements for the periods
ended December 31, 1995 and March 31, 1996 have been prepared by the
Corporation's Management based on the historical audited financial statements
of Dixie National Corporation for the year ended December 31, 1995 and the
unaudited Dixie National Corporation financial statements for the three months
ended March 31, 1996. Since Text Retrieval Systems, Inc. has a fiscal year
ending on June 30, 1995 for which audited financial statements are included,
it was necessary to combine the Text Retrieval Systems, Inc. financial
statements for the period January 1, 1995 to June 30, 1995 with the unaudited
financial statements of Text Retrieval Systems, Inc. for the period July 1,
1995 to December 31, 1995 to prepare an unaudited financial statement which
has been combined with the above-referenced audited financial statements of
Dixie National Corporation to prepare the unaudited proforma financial
statements of the Corporation at December 31, 1995. The unaudited financial
statements for the three months ended March 31, 1996 of Dixie National
Corporation and Text Retrieval Systems, Inc. have been combined to present the
proforma consolidated financial statements for Dixie National Corporation and
Subsidiaries at March 31, 1996. These Proforma Financial Statements may not be
indications of the results that actually would have occurred if the purchase
had been in effect on the date indicated or which may be obtained in the
future. The proforma consolidated financial statements should be read in
conjunction with the audited financial statements and notes incorporated by
reference or contained elsewhere herein.
16
<PAGE>
NOTE 2 - ACQUISITION OF TEXT RETRIEVAL SYSTEMS, INC.
On April 2, 1996 Dixie National Corporation exercised its option and completed
the 100% acquisition of Text Retrieval Systems, Inc., a privately-held
corporation based in Ponte Vedra Beach, Florida. In October 1995 the
Corporation acquired the option with a 35% initial ownership interest in Text
Retrieval Systems, Inc. Under the terms of the Text Retrieval Systems, Inc.
agreement, the Corporation issued 100,000 shares of its common stock to the
prior owners and granted Text Retrieval Systems, Inc. a $750,000 line of
credit for working capital purposes. To complete the acquisition of Text
Retrieval Systems, Inc., the Corporation issued 2,500,000 additional shares of
its common stock and converted all outstanding debt to equity. The 2,500,000
additional shares of its common stock having a $1 per share par value had a
market value of $.7965 per share at the date of acquisition. This resulted in
recording a discount on Dixie National Corporation common stock of $508,750.
The final purchase price to be paid for Text Retrieval Systems, Inc. and
numbers of shares to be issued will be determined based upon certain
performance criteria to be measured for the twelve months ending June 30,
1997.
NOTE 3. - GOODWILL
The acquisition of Text Retrieval Systems, Inc. by Dixie National Corporation
results in recognition of $3,050,824 of goodwill. For financial statements
purposes, this goodwill will be amortized over a sixty-month period. The
proforma consolidated statements of operations for the year ended December 31,
1995 include amortization of $610,165 while March 31, 1996 Proformas record
amortization of $152,541.
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.
DIXIE NATIONAL CORPORATION
(Registrant)
/s/G. Thomas Reed
-----------------
Date: June 25, 1996 G. Thomas Reed
President and
Chief Operating Officer
/s/David E. Williams
--------------------
Date: June 25, 1996 David E. Williams
Vice President and
Chief Financial Officer
17
