<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 12, 1999
NUMEX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-9459 06-1034587
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
11111 Santa Monica Blvd., Suite 210
Los Angeles, California 90025
(Address of principal executive offices)
Registrant's telephone number, including area code: (310) 914-3007
Not applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND RESULTS
a. Financial Statements of Business Acquired
Audited Financial Statements for the Jeffrey A. Stern & Associates,
Inc. ("JSA Group") appear on pages F-3 - F-15.
Unaudited Pro Forma Financial Statements for the JSA Group and
Numex Corporation appear on pages F-17 - F-22.
2
<PAGE>
Jeffrey A. Stern & Associates, Inc.
-----------------------
Consolidated Financial Statements
For the Years Ended March 31, 1999 and 1998
-----------------------
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Contents
Report of independent certified public accountant F-3
Consolidated financial statements
Balance sheets F-4
Statements of operations F-5
Statements of stockholders' deficit F-6
Statements of cash flows F-7
Notes to consolidated financial statements F-9
F-2
<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Santa Monica, California
We have audited the accompanying consolidated balance sheet of Jeffrey A.
Stern & Associates and Subsidiary as of March 31, 1999 and the related
consolidated statements of operations, stockholders' deficit and cash flows
for the years ended March 31, 1999 and 1998. 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 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 these 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 financial position of Jeffrey
A. Stern & Associates and Subsidiary as of March 31, 1999 and the results of
their operations and cash flows for each of the years ended March 31, 1999
and 1998, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1
to the consolidated financial statements, the Company has suffered recurring
operating losses and, at March 31, 1999, had negative working capital and a
stockholder's deficit. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ BDO Seidman, LLP
Los Angeles, CA
May 25, 1999
F-3
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Consolidated Balance Sheet
<TABLE>
<CAPTION>
MARCH 31, 1999
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<S> <C>
ASSETS (Note 5)
CURRENT ASSETS
Cash $ 85,086
Accounts receivable, net of allowance for doubtful
accounts of $120,480 422,980
Capitalized production costs 114,828
Employee advances 21,719
- -----------------------------------------------------------------------------------------------
Total current assets 644,613
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $165,716 (Notes 2 and 3) 90,962
OTHER ASSETS 8,683
- -----------------------------------------------------------------------------------------------
$ 744,258
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 798,669
Advances on bank line-of-credit (Notes 5 and 8) 1,800,000
Deferred revenues 755,897
Current portion of capital lease obligations (Note 3) 11,031
Current portion of note payable (Note 4) 236,250
- -----------------------------------------------------------------------------------------------
Total current liabilities 3,601,847
LONG-TERM PORTION OF BANK LINE-OF-CREDIT (Notes 5 and 8) 939,594
NOTE PAYABLE, net of current portion (Note 4) 36,903
CAPITAL LEASE OBLIGATIONS, net of current portion (Note 3) 10,839
- -----------------------------------------------------------------------------------------------
Total liabilities 4,589,183
- -----------------------------------------------------------------------------------------------
MINORITY INTEREST 201,589
COMMITMENTS AND CONTINGENCIES (Note 5 and 7)
SHAREHOLDER'S DEFICIT
Common stock, no par value, 10,000 shares authorized;
1,000 shares issued and outstanding 1,500
Accumulated deficit (4,048,014)
- -----------------------------------------------------------------------------------------------
Total shareholder's deficit (4,046,514)
- -----------------------------------------------------------------------------------------------
$ 744,258
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
F-4
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31, 1999 1998
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $ 5,587,291 $ 5,546,315
COST OF REVENUES 3,322,767 3,858,002
- -----------------------------------------------------------------------------------------------------
GROSS PROFIT 2,264,524 1,688,313
OPERATING EXPENSES 2,283,881 1,919,179
- -----------------------------------------------------------------------------------------------------
OPERATING LOSS (19,357) (230,866)
- -----------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Gain on dispositions of property and equipment - 96,904
Interest expense, net (336,623) (328,674)
- -----------------------------------------------------------------------------------------------------
Total other expense (336,623) (231,770)
- -----------------------------------------------------------------------------------------------------
LOSS BEFORE MINORITY INTEREST (355,980) (462,636)
MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARY (83,810) (45,556)
- -----------------------------------------------------------------------------------------------------
NET LOSS $ (439,790) $ (508,192)
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
F-5
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Consolidated Statements of Shareholder's Deficit
For Years Ended March 31, 1998 and 1999
<TABLE>
<CAPTION>
Common Stock
--------------------------- Accumulated
Shares Amount Deficit Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, April 1, 1997 1,000 $ 1,500 $ (3,100,032) $(3,098,532)
NET LOSS - - (508,192) (508,192)
- ----------------------------------------------------------------------------------------------------
BALANCE, March 31, 1998 1,000 1,500 (3,608,224) (3,606,724)
NET LOSS - - (439,790) (439,790)
- ----------------------------------------------------------------------------------------------------
BALANCE, March 31, 1999 1,000 $ 1,500 $ (4,048,014) $ (4,046,514)
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
F-6
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE YEARS ENDED MARCH 31, 1999 1998
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (439,790) $ (508,192)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 49,788 47,015
Minority interest in net income of subsidiary 83,810 45,559
Gain on sale of assets - (96,904)
Loss on retirement of fixed assets - 74,002
Write off of debt issued to employees - (6,501)
Write off of prepaid selling commissions 94,932 -
Allowance for uncollectible receivables 66,841 3,039
Changes in operating assets and liabilities:
Accounts receivable 72,084 (239,352)
Other liabilities (13,502) 13,502
Prepaid expenses - (29,989)
Capitalized production costs 106,817 (221,646)
Accounts payable and accrued expenses 206,327 (178,674)
Deferred revenues (81,014) 559,396
Deposits - 10,600
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 146,293 (528,145)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Debt issued to employees (15,217) -
Purchase of equipment (6,729) -
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (21,946) -
- --------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in bank overdraft (54,463) 54,463
Proceeds from bank line of credit - 199,179
Debt received from (paid to) officers 80,003 (33,024)
Proceeds (repayment) on note payable (32,500) 305,653
Payments for obligations under capital leases (17,051) (31,980)
Distributions to minority shareholder (15,250) (42,000)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (39,261) 452,291
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31, 1999 1998
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH 85,086 (75,854)
CASH, beginning of year - 75,854
- --------------------------------------------------------------------------------------------------------------------
CASH, end of year $ 85,086 $ -
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid during the year for the following:
Interest $ 255,393 $ 288,722
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
F-8
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. SUMMARY OF ORGANIZATION AND NATURE OF BUSINESS
SIGNIFICANT
ACCOUNTING Jeffrey A. Stern & Associates, Inc., ("JSA"), a
POLICIES California corporation incorporated in January 1990,
and its majority-owned subsidiary, JSA
Communications, LLC ("LLC" and collectively the
"Company") provide distributing and publishing
services to various commercial customers throughout
the United States. In addition, the Company is
engaged in publishing, circulating and selling
advertisements in its own print publications. On
April 9, 1999, the Company issued 106.09 shares of
common stock to acquire all the minority interest
shares of common stock of LLC (see Note 8). On April
12, 1999, Numex Corporation acquired all the
outstanding capital stock of the Company (see Note
8).
GOING CONCERN UNCERTAINTY
The accompanying consolidated financial statements
have been prepared assuming that the Company will
continue as a going concern which contemplates the
realization of assets and the satisfaction of
liabilities in the normal course of business. The
carrying amounts of assets and liabilities presented
in the financial statements do not purport to
represent realizable or settlement values. However,
the Company has suffered recurring operating losses
and has a working capital and stockholders deficit
that impair its ability to obtain additional
financing. These factors raise substantial doubt
about the Company's ability to continue as a going
concern.
The Company intends to manage short-term liquidity
concerns through its renegotiation of the notes
payable and line-of-credit terms. The Company
believes additional funding from Numex (see Note 8)
and the modified financing arrangement will provide
the necessary funding and improve working capital
needed to operate the Company and enter into new
business which management believes will significantly
improve the Company's operating results. There can be
no assurance, however that the additional financing
and the new business will result in higher operating
cash flows.
In addition, the Company is continuing its efforts to
secure working capital for operations, expansion and
possible acquisitions, mergers, joint ventures,
and/or other business combinations. However, there
can be no assurance that the Company will be able to
secure additional capital, or that if such capital is
available, whether the terms or conditions would be
acceptable to the Company.
F-9
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. SUMMARY OF PRINCIPLES OF CONSOLIDATION
SIGNIFICANT
ACCOUNTING The consolidated financial statements include the
POLICIES accounts of JSA and its majority-owned subsidiary,
(CONTINUED) JSA Communications, LLC. All significant intercompany
accounts and transactions have been eliminated in
consolidation. The minority interest in subsidiary in
the accompanying consolidated balance sheets
represents the minority shareholder's equity in JSA
Communications, LLC. On April 9, 1999, the Company
issued 106.09 shares of its common stock to acquire
all the minority interest shares of common stock (see
Note 8).
REVENUE RECOGNITION
Revenue from publishing services is recognized when
the printed publications are shipped to the
customers. Revenue from advertisements is recognized
when the publication is distributed to the general
public.
ACCOUNTING ESTIMATES
The preparation of the Company's 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 reported periods. Actual results
may differ from these estimates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost.
Depreciation and amortization have been provided over
the estimated useful lives of the assets using the
straight-line method. Major renewals and betterments
are capitalized. Maintenance, minor renewals and
repairs are charged to expense when incurred.
LONG-LIVED ASSETS
Long-lived assets, such as property and equipment,
are evaluated for impairment when events or changes
in circumstances indicate that the carrying amount of
the assets may not be recoverable through the
estimated undiscounted future cash flows from the use
of these assets. When any such impairment exists, the
related assets will be written down to fair value.
F-10
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. SUMMARY OF CONCENTRATIONS OF CREDIT AND BUSINESS RISK
SIGNIFICANT
ACCOUNTING The Company's receivables are unsecured and are
POLICIES generally due upon receipt. For the year ended March
(CONTINUED) 31, 1999, the Company had two customers which
accounted for 46% of the Company's consolidated
revenues. For the year ended March 31, 1998, the
Company had two customers which accounted for 36% of
the Company's consolidated revenues.
The Company has exposure to credit risk to the extent
that its cash and cash equivalents exceed amounts
covered by federal deposit insurance. The Company
believes that its credit risk is not significant.
The Company's customer contracts are subject to
performance audits. In the event that the customer
believes the Company did not perform under the terms
of the contracts, the Company may be at risk to
collect its customer receivables or be required to
refund payments back to the customer.
COMPUTATION OF EARNINGS PER SHARES
For the year ended March 31, 1998, the Company
adopted Statements of Financial Accounting Standards
("SFAS") No. 128, which requires the presentation of
basic and dilutive earnings per share, which replaces
primary and fully diluted earnings per share. Basic
net loss per share is computed using the weighted
average number of common shares outstanding during
the period. Dilutive net loss per share is computed
using the weighted average number of common shares
outstanding during the period, plus the dilutive
effect of potential common stock. The Company has no
potential common stock outstanding as of March 31,
1999 and 1998.
INCOME TAXES
The Company has elected S corporation status for
federal and California income tax purposes. As a
result of this election the tax attributes of the
Company pass through to its shareholder and the
Company does not record a provision for federal
income taxes. California has partially conformed to
the federal provisions recognizing S corporations as
pass through entities, however, California still
imposes a 1 1/2% tax at the corporate level.
In October 1998, the FASB issued SFAS No. 134,
Accounting for Mortgage-Backed Securities Retained
after the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise (SFAS No. 134),
which establishes standards for certain activities of
mortgage banking enterprises. SFAS No. 134 is
effective for fiscal years beginning after December
15, 1998. The adoption of SFAS No. 134 did not have
an impact on the Company's results of operations,
financial position or cash flows.
F-11
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. SUMMARY OF INCOME TAXES
SIGNIFICANT
ACCOUNTING The provision for state income taxes is based upon
POLICIES reported earnings before income taxes at the
(CONTINUED) applicable state tax rate under the asset and
liability approach. Deferred income taxes are
recognized for income and expense items that are
reported for financial reporting purposes in
different years than for income tax reporting
purposes at the applicable state tax rate. Deferred
tax assets and related valuation reserves and
deferred tax liabilities were not material as of
March 31, 1999 and 1998.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the
Company considers all highly liquid investments with
an original maturity of three months or less to be
cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments,
including cash, accounts receivable and accounts
payable approximate fair value due to their short
maturities. The carrying amounts of the
line-of-credit and capital lease obligations
approximate fair value because the interest rates on
these instruments approximate the rate at which the
Company could borrow at March 31, 1999.
RECLASSIFICATIONS
Certain reclassifications have been made to prior
year amounts to conform to current year consolidated
financial statement presentation.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities",
which establishes accounting and reporting standards
for derivative instruments, including certain
derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for
hedging activities. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June
15, 1999. As the Company does not currently engage in
derivative or hedging activities there will be no
impact to the Company's results of operations,
financial position or cash flow upon the adoption of
this standard.
In October 1998, the FASB issued SFAS No. 134,
Accounting for Mortgage-Backed Securities Retained
after the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise (SFAS No. 134),
which establishes standards for certain activities of
mortgage banking enterprises. SFAS No. 134 is
effective for fiscal years beginning after December
15, 1998. The adoption of SFAS No. 134 will not have
an impact on the Company's results of operations,
financial position or cash flows.
F-12
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Notes to Consolidated Financial Statements
2. PROPERTY AND Property and equipment consist of:
EQUIPMENT
<TABLE>
<CAPTION>
1999 Useful Lives
---------------------------------------------------------------
<S> <C> <C>
Furniture and office equipment $ 78,027 5-7 Years
Computer equipment 144,072 2-3 Years
Vehicle 34,579 3-5 Years
---------------------------------------------------------------
256,678
Less: Accumulated depreciation
and amortization 165,716
---------------------------------------------------------------
$ 90,962
---------------------------------------------------------------
</TABLE>
Included in equipment is $23,280 of equipment under
capital lease and related accumulated amortization of
$14,384.
3. CAPITAL LEASE The Company leases certain equipment under capital
OBLIGATIONS leases. The following is a schedule of future minimum
lease payments required under the capital leases,
together with the present value of future minimum
payments.
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31, AMOUNT
---------------------------------------------------------------
<S> <C>
2000 $ 14,965
2001 10,018
---------------------------------------------------------------
24,983
Less: Amount representing interest 3,113
---------------------------------------------------------------
Present value of minimum lease payments 21,870
Less: Current portion 11,031
---------------------------------------------------------------
Long-term portion $ 10,839
---------------------------------------------------------------
</TABLE>
F-13
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Notes to Consolidated Financial Statements
4. NOTE PAYABLE On November 1, 1997, the Company entered into a
promissory note payable arrangement with a vendor for
an original principal amount of $351,903. The note is
unsecured, and calls for an interest rate of 10% (per
annum) for all payments 10 days overdue. Any
remaining unpaid principal balance as of May 1, 1999
and thereafter, will bear an interest rate of 6% per
annum. The Lender waived its right (as defined in the
agreement) to accelerate the note repayment caused by
the change in the Company ownership. The Company
reached an agreement with the vendor which amended
the original terms of this agreement. The amended
agreement requires repayment of the $64,250 past due
as follows: $25,000 on April 15, 1999, $39,250 on May
15, 1999, thereafter quarterly calendar payments of
$30,000 on June 30, 1999, $46,000 on September 30,
1999 and $48,000 on December 31, 1999 through
maturity. The balance outstanding at March 31, 1999
was $273,153.
Minimum future payments under the note payable are as
follows:
MARCH 31, AMOUNT
------------------------------------------------------
2000 $ 236,250
2001 36,903
------------------------------------------------------
$ 275,153
------------------------------------------------------
5. ADVANCES The Company has an available line-of-credit with a
UNDER BANK bank for borrowings up to $2,790,000. The credit
LINE-OF-CREDIT agreement requires reductions in available borrowings
throughout the term of the agreement, which expires
October 1, 1999. The line-of-credit bears interest at
the bank's prime rate (7.75% at March 31, 1999) plus
1%, secured by substantially all assets of the Company.
Additionally, the Company's shareholder has
personally guaranteed $500,000 under this
line-of-credit. Also, the Company agreed to pay the
bank additional interest based on a minimum internal
rate of return of 17.5%, up to a maximum of 25%, if
the Company does not meet certain bank required
financial covenants, beginning with the quarter
ending March 31, 1998. The additional interest will
no longer accrue when the Company has satisfied all
financial covenants and is current with its interest
payments. As of March 31, 1999, the Company was not
in compliance with any of the financial covenants and
had an outstanding loan balance of $2,739,594. See
Note 8.
6. RELATED PARTY During 1999 and 1998, the Company's subsidiary paid
TRANSACTIONS management and consulting fees to the minority
shareholder of JSA Communications, LLC totaling
$130,128 and $124,128.
F-14
<PAGE>
Jeffrey A. Stern & Associates, Inc. and Subsidiary
Notes to Consolidated Financial Statements
7. COMMITMENTS In June 1997, the Company entered into a lease for
AND its offices that expire February 2000 and June 2001.
CONTINGENCIES The Company's noncancelable future minimum lease
commitments at March 31, 1999 are as follows:
YEAR ENDING MARCH 31, AMOUNT
---------------------------------------------
2000 $ 80,446
2001 4,750
---------------------------------------------
$ 85,196
---------------------------------------------
Rental and storage expense, including charges for
operating expenses, was $87,174 and $116,601 for the
years ended May 31, 1999 and 1998.
The Company is subject to various lawsuits and claims
arising out of the normal course of its business. In
the opinion of management, the ultimate liability to
the Company as a result of any legal proceedings will
not materially effect the financial position of the
Company.
8. SUBSEQUENT On April 9, 1999, the Company issued 93.464 shares of
EVENT no par value common stock, to certain employees as
compensation. The total value of shares issued was
$563,378.
On April 9, 1999 the Company elected to dissolve and
liquidate its subsidiary, JSA, LLC and transfer all
of the assets and liabilities to the Company.
Pursuant to the transaction, the Company issued
106.09 shares of the common stock to acquire the
minority's interest in the subsidiary.
On April 12, 1999, the Company merged with and into
Numex Corporation ("Numex") under a plan of
reorganization. The shareholders of the Company
received 3,046,875 shares of Numex common stock (or
approximately 26% of Numex's common stock on the
effective date of the merger) in exchange for all of
the issued and outstanding stock of the Company.
Numex also completed a private placement of 144,000
shares of Series B Convertible Preferred stock.
Concurrent with this placement and the above merger,
the Company reached an agreement with the Lender
(Note 5) to amend the line of credit. In accordance
with the amendment, the Company paid $1,800,000 to
refinance the outstanding balance of $2,739,594 to
approxima,tely $939,000. The amendment requires
calendar quarter principal payments beginning with
the quarter ending June 30, 2002 through March 31,
2006 at the rate of 6.25% of the outstanding
principal balance and 12.5% of the outstanding
principal balance from March 31, 2004 through March
31, 2005. Interest is payable monthly and the
interest rate is based on an adjusted LIBOR rate plus
3% or on the Prime rate plus 1% (as defined in the
agreement).
F-15
<PAGE>
Numex Corporation
Contents
<TABLE>
<CAPTION>
<S> <C>
Unaudited pro forma condensed consolidated financial information F-17
Unaudited pro forma condensed consolidated balance sheet F-18
Unaudited pro forma condensed consolidated statement of operations F-19
Notes to unaudited pro forma condensed consolidated financial statements F-20
</TABLE>
F-16
<PAGE>
Numex Corporation
Unaudited Pro Forma Condensed Consolidated Financial Information
In April 1999, all of the outstanding common stock of Jeffrey A. Stern &
Associates, Inc. ("JSA") was acquired by Numex Corporation ("Numex"). Listed
below are the various events occurring within JSA and Numex in conjunction with
this acquisition (all transactions referred to collectively as the "Merger
Transaction"):
(a) On April 9, 1999, JSA issued 93.464 shares of no par value common
stock, to certain employees as compensation. Additionally, JSA elected
to dissolve and liquidate its subsidiary, JSA, LLC, and transfer all of
the assets and liabilities to JSA. Pursuant to the transaction, JSA
issued 106.09 shares of the common stock to acquire the minority's
interest in this subsidiary.
(b) On April 12, 1999, JSA merged with and into Numex under a plan of
reorganization. In conjunction with the merger the former officers of
JSA became officers of Numex. The shareholders of the Company received
3,046,875 shares of Numex common stock (or approximately 26% of Numex's
common stock on the effective date of the merger).
For accounting purposes, this transaction was accounted for as an
acquisition of Numex by JSA (reverse acquisition). The shares held by
the shareholders of Numex prior to the acquisition have been recognized
as if they were issued in connection with the acquisition of Numex by
JSA.
(c) Numex also completed a private placement of 144,000 shares of Series B
Convertible Preferred stock. Concurrent with this placement and the
above merger, the Company reached an agreement with its Lender to amend
the line of credit. In accordance with the amendment, the Company paid
$1,800,000 to finance the outstanding balance of $2,739,594 to
approximately $939,000.
The accompanying condensed consolidated financial statements illustrate the
effect of the Merger Transaction ("Pro Forma") on Numex's financial position and
results of operations. The pro forma condensed consolidated balance sheet as of
March 31, 1999 is based on the historical balance sheets of JSA and Numex as of
that date and assumes the merger took place on that date. The pro forma
condensed consolidated statement of operations for the year ended March 31, 1999
is based on the historical statements of JSA and Numex and assumes the merger
Transaction took place on April 1, 1998.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the merger and there can be no assurance that the
foregoing results will be obtained, nor are they indicative of future
operations.
The accompanying pro forma condensed consolidated financial statements should be
read in connection with the historical financial statements of Jeffrey A. Stern
& Associates, Inc. and Numex Corporation.
F-17
<PAGE>
Numex Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
JSA NUMEX PRO FORMA
MARCH 31, MARCH 31, PRO FORMA CONSOLIDATED
1999 1999 ADJUSTMENTS AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 85,086 $ 123,692 $ 3,298,000 (d) 1,706,778
(1,800,000)(e)
Accounts receivable, net 422,980 21,310 444,290
Capitalized production costs 114,828 - 114,828
Employee advances 21,719 - 21,719
Stock subscription receivable - 89,900 89,900
Prepaid expenses and other assets - 496 496
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 644,613 235,398 1,498,000 2,378,011
Property and equipment, net 90,962 8,197 99,159
Goodwill - - 437,894 (b) 437,894
Other assets 8,683 7,991 16,674
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 744,258 $ 251,586 $ 1,935,894 $ 2,931,738
- ----------------------------------------------------------------------------------------------------------------------
Accounts payable and accrued expenses $ 798,669 $ 66,145 $ - $ 864,814
Advances on bank line of credit 1,800,000 - (1,800,000)(e) -
Deferred revenues 755,897 - 755,897
Current portion of capital lease obligation 11,031 - 11,031
Current portion of notes payable 236,250 - 236,250
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 3,601,847 66,145 (1,800,000) 1,867,992
Bank line of credit, long term 939,594 (939,594)(e)
Note payable, long-term 36,903 - 939,594 (e) 976,497
Capital lease long term 10,839 - 10,839
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 4,589,183 66,145 (1,800,000) 2,855,328
- ----------------------------------------------------------------------------------------------------------------------
Minority interest in subsidiary 201,589 - (201,589)(b) -
Preferred stock - - 144,000 (d) 144,000
Common stock 1,500 1,194,034 23,721 (a) 1,549,369
26,926 (b)
(1,500)(c)
304,688 (c)
Treasury stock - (7,750) (7,750)
Additional paid in capital - 10,866,433 539,657 (a) 1,274,076
612,557 (b)
(11,867,276)(c)
(303,188)(c)
3,154,000 (d)
(1,728,107)(k)
Stockholder deficit (4,048,014) (11,867,276) (563,378)(a) (2,883,285)
11,867,276 (c)
1,728,107 (k)
- ----------------------------------------------------------------------------------------------------------------------
Total equity (deficit) (4,046,514) 185,441 3,937,483 76,410
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and equity (deficit) 744,258 251,586 1,935,894 2,931,738
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
F-18
<PAGE>
Numex Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
<TABLE>
<CAPTION>
JSA NUMEX PRO FORMA
MARCH 31, MARCH 31, PRO FORMA CONSOLIDATED
1999 1999 ADJUSTMENTS AMOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 5,587,291 $ 15,970 $ $ 5,603,261
Cost of revenue 3,322,767 11,258 3,334,025
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 2,264,524 4,712 2,269,236
Operating expenses 2,283,881 453,899 539,657 (f) 3,365,016
87,579 (h)
- ----------------------------------------------------------------------------------------------------------------------
Operating profit (loss) (19,357) (449,187) (627,236) (1,095,780)
Interest expense, net (336,623) (10,555) 165,060 (j) (182,118)
Miscellaneous income - 5,745 5,745
Gain on sale - 10,135 10,135
Minority interest in subsidiary (83,810) - 83,810 (g) -
Provision for income tax (expense) - (800) (800)
- ----------------------------------------------------------------------------------------------------------------------
Net loss (439,790) (444,662) (378,366) (1,262,818)
Cumulative preferred stock dividend - 31,123 180,000 (i) 211,123
Deemed dividend on cumulative Preferred Stock 1,728,107 (k) 1,728,107
- ----------------------------------------------------------------------------------------------------------------------
Net loss allocable to common shareholders (439,790) (475,785) (2,286,473) (3,202,048)
- ----------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per common share (0.04) (.21)
- ----------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding used to calculate basic and
diluted loss per common share 11,123,351 14,954,333
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO PRO FORMA FINANCIAL STATEMENTS.
F-19
<PAGE>
Numex Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
1. PRO FORMA ADJUSTMENTS: BALANCE SHEET
The adjustments to the pro forma condensed consolidated balance sheet are as
follows:
(a) To reflect the issuance of Jeffrey A. Stern & Associates ("JSA") common
stock to various employees as compensation:
<TABLE>
<CAPTION>
<S> <C>
Number of JSA common stock shares issued to employees 93.464
Multiplied by: number of Numex common stock shares issued for JSA common stock shares in
relation to the reverse merger 2,538
------------
Total number of shares issued 237,212
Multiplied by: fair market value of Numex stock on date of issuance $ 2.375
------------
Fair market value of shares issued to employees $ 563,378
Less: Numex common stock par value ($0.10 per share) 23,721
------------
Additional paid-in-capital $ 539,657
------------
------------
</TABLE>
(b) To reflect the issuance of JSA common stock to acquire the minority
interest in JSA, LLC:
CALCULATION OF GOODWILL
-----------------------
<TABLE>
<CAPTION>
<S> <C>
Number of JSA common stock shares issued to Barry Feilcher 106.09
Multiplied by: number of Numex common stock shares issued for JSA common stock shares in
relation to the reverse merger 2,538
------------
Total number of shares issued 269,256
Multiplied by: fair market value of Numex stock on date of issuance $ 2.375
------------
Fair market value of shares issued to Barry Feilcher $ 639,483
Less: minority interest 201,589
------------
------------
Goodwill recognized $ 437,894
------------
------------
</TABLE>
(c) To reflect the reverse merger between JSA and Numex, as follows:
1. Elimination of Numex's $11,867,276 stockholder deficit in
conjunction with the reverse merger.
2. Elimination of JSA common stock in conjunction with the reverse
merger:
<TABLE>
<CAPTION>
<S> <C>
Number of Numex common stock shares issued to acquire JSA 3,046,875
Multiplied by: par value of Numex common stock $ 0.10
------------
Par value of Numex shares issued $ 304,688
Less: par value of JSA common stock shares acquired 1,500
------------
Additional paid-in-capital $ 303,188
------------
------------
</TABLE>
F-20
<PAGE>
Numex Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(d) To reflect the issuance of 144,000 shares of Series B Preferred Stock:
<TABLE>
<CAPTION>
<S> <C>
Total shares issued in private placement 144,000
Multiplied by: per share offering price $ 25
------------
Gross proceeds from offering $ 3,600,000
Less: placement agent commissions 252,000
Less: other private placement expenses 50,000
------------
Total proceeds received $ 3,298,000
Less: par value of shares issued ($1.00 per share) 144,000
------------
Additional paid-in-capital $ 3,154,000
------------
------------
</TABLE>
(e) To reflect the refinancing of JSA's bank line of credit to a term loan:
<TABLE>
<CAPTION>
<S> <C>
Outstanding balance prior to merger $ 2,739,594
Less: Payment of outstanding balance 1,800,000
------------
Remaining outstanding balance refinanced to a term loan $ 939,594
------------
------------
</TABLE>
2. PRO FORMA ADJUSTMENTS: INCOME STATEMENT
The adjustments to the pro forma condensed consolidated statement of operations
are as follows:
(f) To reflect the expense incurred from the issuance of JSA common stock to
employees as calculated in adjustment (a) above.
(g) To eliminate the minority interest in JSA, LLC, in conjunction with JSA's
acquisition of such minority interest.
(h) To reflect goodwill amortization for one year:
<TABLE>
<CAPTION>
<S> <C>
Goodwill recognized from acquisition of JSA, LLC $ 437,894
Divided by: amortization period (in years) 5
------------
Amortization per year $ 87,579
------------
------------
</TABLE>
(i) To reflect annual dividend payment for preferred stock:
<TABLE>
<CAPTION>
<S> <C>
Outstanding shares of preferred stock 144,000
Multiplied by: annual dividend payment $ 1.25
------------
Total annual dividend payment $ 180,000
------------
------------
</TABLE>
F-21
<PAGE>
Numex Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(j) To reflect the reduction of interest expense due to refinancing of bank
line of credit:
<TABLE>
<CAPTION>
<S> <C>
Payment of outstanding balance $ 1,800,000
Multiplied by: annual interest rate 9.17%
------------
Interest expense saved $ 165,060
------------
------------
</TABLE>
(k) To reflect the deemed dividend in conjunction with the Private
Placement:
<TABLE>
<CAPTION>
<S> <C>
FMV of Numex common stock on 3/10/99 (date of private placement) $ 2.22
Conversion ratio of preferred shares to common shares 16.667
----------
Common stock value of preferred shares issued $ 37.00
Less: Preferred share offering price 25.00
----------
Preferred share deemed dividend $ 12.00
Preferred shares issued in private placement 144,000
----------
Deemed dividend on cumulative preferred stock 1,728,107
----------
----------
</TABLE>
F-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NUMEX CORPORATION
-----------------
(Registrant)
Date: June 25, 1999 By: /s/ Jeffrey A. Stern
-------------------------------------
Jeffrey A. Stern
President and Chief Executive Officer
