<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------------
Date of Report (Date of Earliest Event Reported): January 11, 1995
DATAFLEX CORPORATION
---------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
NEW JERSEY
---------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-15551 22-2163376
------------------------------ ------------------------------
(Commission File Number) (I.R.S. Employer
Identification No.)
3920 Park Avenue, Edison, NJ 08820
--------------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
(908) 321-1100
---------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
---------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired:
Audited and unaudited financial statements of National Data
Products, Inc. for the periods specified in Regulation S-X
are attached hereto as Item 7(a).
(b) Pro Forma Financial Information:
Pro Forma Financial Statements of Dataflex Corporation
required pursuant to Article 11 of Regulation S-X are
attached hereto as Item 7(b).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: March 27, 1995 DATAFLEX CORPORATION
BY: /s/ Raymond DioGuardi
-------------------------
Raymond DioGuardi
Chief Financial Officer
NYFS01...:\04\40204\0004\2137\RPT3165T.51B
<PAGE>
<PAGE>
ITEM INDEX
------------
Page No. in
Manually Signed
Item Report
---- ---------------
7(a) National Data Products, Inc. 4
unaudited balance sheet as of
December 31, 1994 and unaudited
statements of income and cash
flows for the year then ended
National Data Products, Inc. 9
audited balance sheets as of
December 31, 1993 and December
31, 1992
National Data Products, Inc. 10
audited statements of income and
cash flows for years ended December
31, 1993 and December 31, 1992
National Data Products, Inc. 20
audited balance sheets as of
December 31, 1992 and December
31, 1991
National Data Products, Inc. 21
audited statements of income and
cash flows for years ended December
31, 1992, and December 31, 1991
7(b) Pro Forma Financial Statements 30
NYFS01...:\04\40204\0004\2137\RPT3165T.51B
<PAGE>
<PAGE>
Item 7(a)
NATIONAL DATA PRODUCTS, INC.
BALANCE SHEET
DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------
ASSETS
<S> <C>
CURRENT ASSETS
CASH $ 638,100
ACCOUNTS RECEIVABLE, NET 19,168,195
INVENTORY 2,801,468
OTHER CURRENT ASSETS 446,639
------------
TOTAL CURRENT ASSETS 23,054,402
LAND, BUILDING AND EQUIPMENT 5,106,569
--LESS ACCUM. DEPRECIATION (1,328,218)
-------------
NET LAND, BLDG. AND EQUIPMENT 3,778,351
OTHER ASSETS 16,252
------------
TOTAL ASSETS $ 26,849,005
============
<CAPTION>
LIABILITIES & STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 7,075,159
ACCRUED EXPENSES 1,713,270
SHORT TERM DEBT 16,449,375
CURRENT PORTION OF LT DEBT 178,863
------------
TOTAL CURRENT LIABILITIES $ 25,416,667
LT DEBT LESS CURRENT PORTION 1,332,338
------------
TOTAL LIABILITIES 26,749,005
STOCKHOLDERS' EQUITY
CAPITAL STOCK 1,000
ADDITIONAL PAID IN CAPITAL 666,667
ACCUMULATED DEFICIT (567,667)
------------
TOTAL STOCKHOLDERS' EQUITY 100,000
------------
TOTAL LIABILITIES AND EQUITY $ 26,849,005
============
</TABLE>
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(Unaudited)
<TABLE>
<S> <C>
Net Sales $ 120,643,183
Cost of Revenue 102,985,234
--------------
Gross Profit 17,657,949
Selling, General and Administrative
Expenses 11,985,385
Depreciation and Amortization Expense 559,019
Interest Expense 877,782
Other Income, net 2,840
--------------
Income Before Taxes 4,238,603
Provision for Income Taxes 0
--------------
Net Income $ 4,238,603
==============
</TABLE>
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
Statement of Cash Flows (Unaudited)
For the Year Ending December 31, 1994
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net Income $ 4,238,603
Adjustments to Reconcile Net Income
to Net Cash Used by Operating Activities
Depreciation and amortization 559,019
Bad debt expense 57,149
Loss on disposal of land, buildings
and equipment 68,287
Changes to Operating Assets & Liabilities
(Increase) in Accounts Receivable (7,197,522)
Decrease in Inventory 1,227,317
(Increase) in Other Current Assets (329,222)
Increase in Accounts Payable 2,426,823
Increase in Accrued Expenses 300,617
-----------
Net Cash Provided by Operating Activities 1,351,071
INVESTING ACTIVITIES
Purchases of land, buildings and equipment (1,423,335)
Proceeds from disposals of land, buildings
and equipment 20,000
Acquisitions of Other Assets (24,567)
Net Cash (Used by)
Investing Activities (1,427,902)
FINANCING ACTIVITIES
Net Borrowing under Line of Credit Agreement 7,873,465
Re-Payment of Other Debt (176,636)
Borrowing L/T Debt-Mortage 200,896
Distribution to Owners (7,581,856)
------------
Net Cash Provided by Financing Activities 315,869
-----------
Increase in Cash 239,038
Cash at Beginning of Period 399,062
-----------
Cash at December 31, 1994 $ 638,100
===========
</TABLE>
<PAGE>
<PAGE>
ARTHUR
ANDERSEN
Arthur Andersen & Co.
NATIONAL DATA PRODUCTS, INC.
FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 1993 AND 1992
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
<PAGE>
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
National Data Products, Inc.:
We have audited the accompanying balance sheets of National Data
Products, Inc. (a Florida corporation) as of December 31, 1993 and
1992, and the related statements of income and 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
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of National
Data Products, Inc. as of December 31, 1993 and 1992, and the results
of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Arthur Andersen & Co.
Tampa, Florida
February 24, 1994
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
----------------------------
BALANCE SHEETS - DECEMBER 31, 1993 AND 1992
-------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1993 1992
------ ---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash
Marketable securities, at cost $ 93,278 $ 128,909
Accounts receivable, less allowances of $691,000 and 245,784 -
$219,000 in 1993 and 1992, respectively, for credits
and doubtful accounts (Notes 3, 4 and 7) 12,022,822 5,702,535
Inventories (Notes 3 and 4) 3,867,163 2,123,694
Prepaid expenses and other assets 117,417 87,446
------------ ----------
Total current assets 16,346,464 8,042,584
LAND, BUILDINGS AND EQUIPMENT, net (Notes 2 and 4) 3,016,011 2,273,866
------------ ------------
$19,362,475 $10,316,450
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,484,713 $ 2,386,814
Accrued expenses 1,113,866 616,663
Deferred service contract revenue 238,787 157,577
Short-term debt (Note 3) 8,577,908 3,976,203
Current portion of long-term debt (Note 4) 116,160 141,772
------------ ------------
Total current liabilities 14,531,434 7,279,029
LONG-TERM DEBT, less current portion (Note 4) 1,370,780 1,112,227
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Common stock, par value $1.00 per share, 7,500 shares
authorized, 1,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 666,667 666,667
Retained earnings 2,792,594 1,257,527
------------ ------------
3,460,261 1,925,194
------------ ------------
$19,362,475 $10,316,450
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
----------------------------
STATEMENTS OF INCOME AND RETAINED EARNINGS
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
----------------------------------------------
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
NET SALES $70,643,100 $44,880,526
COST OF GOODS SOLD 58,483,587 37,709,449
------------ ------------
Gross Profit 12,159,513 7,171,077
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 8,978,120 5,687,447
DEPRECIATION AND AMORTIZATION EXPENSE 375,858 257,095
INTEREST EXPENSE 364,929 341,057
OTHER INCOME, net (101,960) (23,558)
------------ ------------
9,616,947 6,262,041
------------ ------------
INCOME BEFORE PROVISION FOR STATE AND
LOCAL TAXES 2,542,566 909,036
PROVISION FOR STATE AND LOCAL TAXES (Note 6) 25,000 -
------------ ------------
NET INCOME
2,517,566 909,036
------------ ------------
RETAINED EARNINGS, beginning of year 1,257,527 348,491
DIVIDENDS TO SHAREHOLDERS (982,499) -
------------ ------------
RETAINED EARNINGS, end of year $ 2,792,594 $ 1,257,527
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
-----------------------------
STATEMENTS OF CASH FLOWS
-------------------------
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
-----------------------------------------------
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $2,517,566 $ 909,036
Adjustments to reconcile net income to net cash (used in)
provided by operating activities-
Depreciation and amortization 375,858 257,095
Gain on sales of marketable securities and disposal
of land, building and equipment (101,960) (23,558)
Changes in operating assets and liabilities-
Increase in accounts receivable (6,320,287) (1,705,284)
(Increase) decrease in inventories (1,743,469) 194,832
Increase in prepaid expenses and other current assets (29,971) (21,874)
Increase in accounts payable 2,097,899 291,629
Increase in accrued expenses 497,203 194,647
Increased in deferred service contract revenue 81,210 65,158
---------- ----------
Total adjustments (5,143,517) (747,355)
---------- ----------
Net cash (used in) provided by operating activities (2,625,951) 161,681
---------- ----------
INVESTING ACTIVITIES:
Purchases of marketable securities (818,643) -
Proceeds from sales of marketable securities 665,766 -
Purchases of land, buildings and equipment (1,125,300) (470,126)
Proceeds from disposals of land, buildings and equipment 16,350 43,589
---------- ----------
Net cash used in investing activities (1,261,827) (426,537)
---------- ----------
FINANCING ACTIVITIES:
Net proceeds from short-term debt 4,601,705 511,057
Principal payments on long-term debt (157,059) (179,432)
Borrowings on long-term debt 390,000 -
Dividends to shareholders (982,499) -
---------- ----------
Net cash provided by financing activities 3,852,147 $ 331,625
---------- ----------
NET (DECREASE) INCREASE IN CASH (35,631) 66,769
CASH, beginning of year 128,909 62,140
---------- ----------
CASH, end of year $ 93,278 $ 128,909
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 347,727 $ 322,908
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1993 AND 1992
--------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Organization
------------
National Data Products, Inc. (the Company) is a Florida corporation
that distributes and services computer equipment and data processing
supplies to business customers throughout the United States.
Cash
----
For purposes of the statements of cash flows, cash includes cash on
hand and in bank accounts.
Marketable Securities
---------------------
Marketable securities are recorded at the lower of original cost or
market value. At December 31, 1993, the Company's marketable
securities consist of 10,000 shares of Players International
Incorporated common stock with an estimated market value of
approximately $247,500.
Inventories
-----------
Inventories, which primarily consist of finished computer hardware and
software products, supplies and forms, are stated at the lower of cost
or market, with cost being determined on a moving average basis which
approximates the first-in, first-out (FIFO) method.
Land, Buildings and Equipment
-----------------------------
Land, buildings and equipment are stated at cost. Depreciation
expense is computed over the estimated economic useful lives of the
related assets as follows:
<TABLE>
<CAPTION>
Method Years
------------- -----
<S> <S> <C>
Building and leasehold improvements Straight-line 31.5
Furniture, fixtures and equipment Accelerated 5-7
Vehicles Accelerated 5
</TABLE>
<PAGE>
<PAGE>
Leasehold improvements are amortized on a straight-line basis over the
shorter of the term of the lease or the estimated useful life of the
asset. Expenditures for renewals and improvements that significantly
add to or extend the useful life of the asset are capitalized.
Expenditures for maintenance and repairs are expensed when incurred.
When an asset is sold or retired, the cost of the asset and the
related accumulated depreciation are eliminated from the accounts and
any gain or loss is recognized at such time.
Cash Management System
----------------------
Under the Company's cash management system, disbursements by the bank
are reimbursed on a daily basis from the revolving line of credit
agreement (see Note 3). As a result, checks issued but not yet
presented to the bank are not considered reductions of cash or
accounts payable. Included in accounts payable are $2,063,809 and
$1,040,779 at December 31, 1993 and 1992, respectively, of outstanding
checks issued by the Company but not presented to the bank for
payment.
Deferred Service Contract Revenue
---------------------------------
The Company sells service and repair contracts that are separate and
distinct from the manufacturer's warranty agreements sold with its
products. The service contracts primarily extend for 12-month periods
or less. The revenue from the contracts is generally collected when
the service contract is signed. The Company recognizes its service
contract revenue ratably over the term of the contracts.
Reclassifications
-----------------
Certain reclassifications have been made to the 1992 financial
statements to conform with the 1993 presentation.
2. LAND, BUILDINGS AND EQUIPMENT:
------------------------------
Land, buildings and equipment consist of the following:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Land $ 683,756 $ 474,957
Buildings and leasehold improvements 1,647,857 1,295,835
Furniture, fixtures and equipment 1,582,079 1,019,257
Vehicles 108,970 155,173
----------- -----------
4,022,662 2,945,222
Less-Accumulated depreciation (1,006,651) (671,356)
----------- -----------
$3,016,011 $2,273,866
=========== ===========
</TABLE>
Substantially all of the Company's land, buildings and equipment is
held as collateral under the Company's long-term debt agreements (see
Note 4).
<PAGE>
<PAGE>
3. SHORT-TERM DEBT:
---------------
Short-term debt includes a revolving line of credit agreement with a
bank (the Line) which is due on demand and is collateralized by
certain of the Company's accounts receivable and inventories. Interest
is at the bank's prime rate plus .5 percent (6.5 percent at December
31, 1993). The availability under the Line was increased during the
year ended December 31, 1993, to the lesser of $9,000,000 or 50
percent of collateralized inventories, as defined, and 85 percent of
eligible receivables, as defined. Repayment of borrowings under this
arrangement is guaranteed by the officers and shareholders of the
Company. In addition, the bank agreed to issue up to $1,000,000 in
standby letters of credit to a supplier of the Company to support the
inventory floor plan. Availability under the Line is reduced by half
of the amount of the standby letters of credit. As of December 31,
1993 and 1992, outstanding borrowings were $6,570,339 and $2,127,382,
respectively. Among other restrictions, the Line requires the Company
to maintain certain minimum financial ratios. As of December 31,
1993, the Company was in compliance with the covenants.
The Company also has available a $4,500,000 inventory financing
agreement (the Agreement). The Agreement is secured by certain
inventories and repayments under the Agreement are due within 30 to 60
days of purchase, depending on the purchase date. Interest during
this period is paid by the Company's suppliers of the inventories.
The Company is assessed a late fee of 1.99 percent per month on the
outstanding balance of delinquent payments. Repayment of borrowings
under the Agreement is guaranteed by the officers and shareholders of
the Company. As of December 31, 1993 and 1992, outstanding borrowings
were $2,007,569 and $1,848,821, respectively. The Agreement contains
similar covenants as those issued in conjunction with the Line. As of
December 31, 1993, the Company was in compliance with the covenants
under the Agreement.
<PAGE>
<PAGE>
4. LONG-TERM DEBT.
--------------
Long-term debt as of December 31, 1993 and 1992, consists of the
following:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Mortgage note payable to a bank, payable
in monthly installments of $6,000
plus interest at the bank's prime
rate plus 1% (7% at December 31,
1993), with the remaining balance
due December 1, 1996, collateralized
by land and buildings $1,014,000 $1,076,000
Mortgage note payable to a bank, payable
in monthly installments of $1,300
plus interest at the bank's prime
rate plus 1% (7% at December 31,
1993), with the remaining balance
due June 1, 1997, collateralized by
a mortgage on certain land and
building of the Company 384,800 -
Note payable to a bank, payable in
monthly installments of $2,380 plus
interest at the bank's prime rate
plus 1.50% (7.5% at December 31,
1993), with the remaining balance
due December 1, 1996, collateralized
by a second mortgage on its land and
buildings 88,140 114,320
Various notes payable to a bank, payable
in aggregate - monthly installment
payments ranging from $543 to $4,444
including interest at rates ranging
from prime + 1% to 11.75%, all
amounts paid in full in 1993. - 63,679
---------- ----------
1,486,940 1,253,999
Less-Current portion of long-term debt 116,160 141,772
---------- ----------
$1,370,780 $1,112,227
========== ==========
</TABLE>
In addition to the primary collateral requirements discussed above,
all of the long-term debt is cross collateralized.
Future maturities of long-term debt as of December 31, 1993, are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1995 $ 116,160
1996 916,620
1997 338,000
----------
$1,370,780
==========
/TABLE
<PAGE>
<PAGE>
Repayment of the long-term debt is guaranteed by the officers and
shareholders of the Company. Among other restrictions, the note
agreements require the Company to maintain certain financial ratios.
As of December 31, 1993, the Company was in compliance with the
financial covenants under the note agreements.
5. 401(K) PROFIT SHARING PLAN:
--------------------------
The Company maintains a 401(k) profit sharing plan for its employees.
Contributions to the plan consist of the salary reductions elected by
employees, a discretionary matching contribution by the Company equal
to a percentage of the amount of salary reductions elected (up to 5
percent of compensation) and an additional discretionary amount
determined each year by the Company. Total Company contributions to
the plan were approximately $79,100 and $27,400 for the years ended
December 31, 1993 and 1992, respectively.
6. INCOME TAXES:
------------
The Company is organized under the provisions of Subchapter S of the
Internal Revenue Code. Accordingly, the Company is exempt from
federal income taxes and income taxes of certain states, and the
Company's taxable income is included in the shareholders' individual
tax returns. The Company recorded a tax provision of $25,000 for state
and local taxes in states which do not recognize the Subchapter S
corporation election for the fiscal year ended December 31, 1993. The
tax provision is included in accounts payable within the accompanying
balance sheets. The tax returns and the amount of taxable income or
loss are subject to examination by federal and state taxing
authorities. If such examinations result in changes to taxable income
or loss, the tax liabilities of the shareholders could be changed
accordingly.
7. RELATED PARTY TRANSACTIONS:
--------------------------
The Company has receivables from certain of its shareholders,
employees and related entities of employees and related entities of
approximately $27,400 and $63,600 as of December 31, 1993 and 1992,
respectively. These amounts are included in accounts receivable in
the accompanying balance sheets.
8. COMMITMENTS AND CONTINGENCIES:
-----------------------------
The Company has several noncancelable operating leases, primarily for
office and warehouse space, equipment and automobiles. Rent expense
of approximately $127,800 and $101,800 was recorded for the years
ended December 31, 1993 and 1992, respectively. Future
<PAGE>
<PAGE>
minimum lease payments under noncancelable operating leases as of
December 31, 1993, are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1994 $113,500
1995 64,900
1996 67,100
1997 2,600
--------
$248,100
========
</TABLE>
The Company has contingencies with respect to litigation arising in
the ordinary course of business. In the opinion of management, such
contingencies will not result in any loss which would materially
affect the financial position of the Company.
<PAGE>
<PAGE>
ARTHUR ANDERSEN
Arthur Andersen & Co.
NATIONAL DATA PRODUCTS, INC.
FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 1992 AND 1991
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
<PAGE>
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
National Data Products, Inc.:
We have audited the accompanying balance sheets of National Data
Products, Inc. (a Florida corporation) as of December 31, 1992 and
1991, and the related statements of income and 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
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of National
Data Products, Inc. as of December 31, 1992 and 1991, and the results
of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Tampa, Florida,
March 4, 1993
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
----------------------------
BALANCE SHEETS -- DECEMBER 31, 1992 AND 1991
--------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1992 1991
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $ 128,909 $ 62,140
Accounts receivable, less allowance
of approximately $219,000 and
$234,000 in 1992 and 1991,
respectively, for credits
and doubtful accounts (Notes 3,
4 and 7) 5,702,535 3,997,251
Inventories (Notes 1, 3 and 4) 2,123,694 2,318,526
Other 87,446 65,572
----------- ----------
Total current assets 8,042,584 6,443,489
----------- ----------
LAND, BUILDINGS AND EQUIPMENT, net
(Notes 1, 2, 4 and 7) 2,269,423 2,079,796
OTHER ASSETS 4,443 1,070
----------- ----------
$10,316,450 $8,524,355
=========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $2,386,814 $2,095,185
Accrued expenses 616,663 422,016
Deferred service contract
revenue (Note 1) 157,577 92,419
Short-term debt (Note 3) 3,976,203 3,465,146
Current portion of long-term
debt (Note 4) 141,772 173,663
----------- ----------
Total current liabilities 7,279,029 6,248,429
LONG-TERM DEBT, less current
portion (Note 4) 1,112,227 1,259,768
----------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Common stock, par value $1.00 per
share, 7,500 shares authorized,
1,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 666,667 666,667
Retained earnings 1,257,527 348,491
----------- ----------
1,925,194 1,016,158
----------- ----------
$10,316,450 $8,524,355
=========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
----------------------------
STATEMENTS OF INCOME AND RETAINED EARNINGS
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
----------------------------------------------
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
NET SALES $44,880,526 $34,905,543
COST OF GOODS SOLD 37,709,449 29,438,228
----------- -----------
Gross margin 7,171,077 5,467,315
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,687,447 4,678,238
DEPRECIATION AND AMORTIZATION EXPENSE 257,095 222,500
INTEREST EXPENSE 341,057 394,427
OTHER (INCOME) EXPENSE (23,558) 36,060
----------- -----------
Total expenses 6,262,041 5,331,225
----------- -----------
Net income 909,036 136,090
RETAINED EARNINGS, beginning of year 348,491 212,401
----------- -----------
RETAINED EARNINGS, end of year $ 1,257,527 $ 348,491
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
----------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
----------------------------------------------
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 909,036 $ 136,090
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation and amortization 257,095 222,500
Bad debt expense 45,000 90,413
(Gain) loss on disposals of land,
buildings and equipment (23,558) 36,060
Changes in operating assets and liabilities-
(Increase) decrease in accounts
receivable (1,750,284) 784,961
Decrease in inventories 194,832 1,050,354
Increase in other current assets (21,874) (48,049)
Increase (decrease) in accounts payable 291,629 (1,471,233)
Increase (decrease) in accrued expenses 194,647 (351,308)
Increase in deferred service contract
revenue 65,158 92,419
----------- -----------
Total adjustments (747,355) 406,117
----------- -----------
Net cash provided by operating
activities 161,681 542,207
----------- -----------
INVESTING ACTIVITIES:
Purchases of land, buildings and
equipment (465,462) (201,276)
Proceeds from disposals of land,
buildings and equipment 43,589 43,823
----------- -----------
Net cash used in investing
activities (421,873) (157,453)
----------- -----------
FINANCING ACTIVITIES:
Net advances of (payments on)
proceeds from short-term debt 511,057 (411,613)
Principal payments on long-term debt (179,432) (170,770)
Additional loan costs associated
with refinancing (4,664) -
---------- -----------
Net cash provided by (used in)
financing activities 326,961 (582,383)
---------- ----------
INCREASE (DECREASE) IN CASH 66,769 (197,629)
CASH, beginning of period 62,140 259,769
---------- ----------
CASH, end of period $ 128,909 $ 62,140
========== ==========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year
of interest $ 322,908 $ 411,597
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE>
NATIONAL DATA PRODUCTS, INC.
----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1992 AND 1991
--------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Organization
------------
National Data Products, Inc. (the Company) is a Florida corporation
that distributes computer equipment and data processing supplies to
business customers throughout the United States.
Cash
----
For purposes of the statements of cash flows, cash includes cash on
hand and in bank accounts.
Inventories
-----------
Inventories, which primarily consist of finished computer related
hardware and software products and forms, are stated at the lower of
cost or market, with cost being determined on a moving average basis
which approximates the first-in, first-out (FIFO) method. Inventories
include elements of materials, labor and overhead.
Land, Buildings and Equipment
-----------------------------
Land, buildings and equipment are stated at cost. Depreciation
expense is computed over the estimated economic useful lives of the
related assets as follows:
<TABLE>
<CAPTION>
Method Years
------ -----
<S> <S> <C>
Buildings and leasehold improvements Straight-line 31.5
Furniture, fixtures and equipment Accelerated 5-7
Vehicles Accelerated 5
</TABLE>
Leasehold improvements are amortized on a straight-line basis over the
shorter of the term of the lease or the estimated useful life of the
asset. Expenditures for renewals and improvements that significantly
add to or extend the useful life of the asset are capitalized.
Expenditures for maintenance and repairs are expensed when incurred.
When an asset is sold or retired, the cost of the asset and the
related accumulated depreciation are
<PAGE>
<PAGE>
eliminated from the accounts and any gain or loss is recognized at
such time.
Cash Management System
----------------------
Under the Company's cash management system, disbursements by the bank
are reimbursed on a daily basis from the revolving line of credit
agreement (see Note 3). As a result, checks issued but not yet
presented to the bank are not considered reductions of cash or
accounts payable. Included in accounts payable are $1,040,779 and
$1,126,131 at December 31, 1992 and 1991, respectively, of outstanding
checks issued by the Company but not presented to the bank for
payment.
Deferred Service Contract Revenue
---------------------------------
The Company sells service repair contracts that are separate and
distinct from the manufacturer's warranty agreements sold with its
products. The service contracts primarily extend for 12-month periods
or less. The revenue from the contracts is generally collected when
the service contract is signed. The Company recognizes its service
contract revenue ratably over the term of the contracts.
Reclassifications
-----------------
Certain reclassifications have been made to the 1991 financial
statements to conform with the 1992 presentation.
2. LAND, BUILDINGS AND EQUIPMENT:
-----------------------------
Land, buildings and equipment consist of the following:
<TABLE>
<CAPTION>
1992 1991
--------- ---------
<S> <C> <C>
Land $ 474,957 $ 474,957
Buildings and leasehold improvements 1,291,392 1,251,081
Furniture, fixtures and equipment 1,019,257 644,404
Vehicles 155,173 155,173
---------- ----------
2,940,779 2,525,615
Less- Accumulated depreciation (671,356) (445,819)
---------- ----------
$2,269,423 $2,079,796
========== ==========
</TABLE>
Substantially all of the Company's land, buildings and equipment is
held as security under the Company's long-term debt agreements (see
Note 4).
<PAGE>
<PAGE>
3. SHORT-TERM DEBT:
---------------
Short-term debt includes a revolving line of credit agreement with a
bank (the Line) which is due on demand and is collateralized by
certain of the Company's accounts receivable and inventories.
Interest is at the bank's prime rate plus 1.25 percent (7.25 percent
at December 31, 1992). The terms of the Line restrict borrowings to
the lesser of $4,000,000 or 40 percent of collateralized inventories,
as defined, and 85 percent of eligible receivables, as defined.
Repayment of borrowings under this arrangement is guaranteed by the
officers and shareholders of the Company. As of December 31, 1992 and
1991, outstanding borrowings were $2,127,382 and $2,061,463,
respectively. Among other restrictions, the Line requires the Company
to maintain certain minimum financial ratios. As of December 31,
1992, the Company was in compliance with the covenants.
The Company also has available a $2,000,000 inventory financing
agreement (the Agreement). The Agreement is secured by certain
inventories and repayments under the Agreement are due within 30 to 60
days of purchase, depending on the purchase date. Interest during
this period is paid by the Company's suppliers of the inventories.
The Company is assessed a late fee of 1.99 percent per month on the
outstanding balance of delinquent payments. Repayment of borrowings
under the Agreement is guaranteed by the officers and shareholders of
the Company. As of December 31, 1992 and 1991, outstanding borrowings
were $1,848,821 and $1,403,683, respectively. The Agreement contains
similar covenants as those issued in conjunction with the Line. As of
December 31, 1992, the Company was in compliance with the covenants
under the Agreement.
<PAGE>
<PAGE>
4. LONG-TERM DEBT:
--------------
Long-term debt consists of:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Mortgage note payable to a bank,
modified on February 4, 1993, due
December 1, 1996, payable in
monthly installments of $6,000
plus interest at the bank's prime
rate plus 1%, interest rate at
December 31, 1992, had floor of
9.5%, collateralized by land and
buildings $1,076,000 $1,124,000
Note payable to a bank, payable in
monthly installments of $2,380
plus interest at the bank's prime
rate plus 1.50% (7.5% at December
31, 1992), with the remaining
balance due December 1, 1996,
collateralized by a second
mortgage on its land and buildings 114,320 142,880
Note payable to a bank due
March 21, 1993, payable in monthly
installments of $4,444 plus
interest at the prime rate plus 1%
(7.0% at December 31, 1992),
collateralized by certain of the
Company's inventories, accounts
receivable and equipment 13,333 66,667
Note payable to a bank due December
27,1994, payable in monthly
installments of $1,400 plus
interest at the bank's prime rate
plus 1% (7.0% at December 31,
1992), collateralized by certain
of the Company's inventories,
accounts receivable and equipment 33,600 50,400
Notes payable to a bank with
maturities ranging from April 25,
1993 to August 1994, payable in
aggregate monthly installment
payments ranging from $543 to
$2,591 including interest at rates
ranging form 10.5% to 11.75%,
collateralized by Company vehicles 16,746 49,484
---------- ----------
Less-Current portion of long- 1,253,999 1,433,431
term debt
141,772 173,663
========== ==========
$1,112,227 $1,259,768
========== ==========
</TABLE>
<PAGE>
In addition to the primary collateral requirements discussed above,
all of the long-term debt is cross collateralized.
Future maturities of long-term debt as modified as of December 31,
1992, are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1993 $ 141,772
1994 121,027
1995 100,560
1996 890,640
----------
$1,253,999
==========
</TABLE>
Repayment of the long-term debt is guaranteed by the officers and
shareholders of the Company. Among other restrictions, the note
agreements require the Company to maintain certain financial ratios.
As of December 31, 1992, the Company was in compliance with the
financial covenants under the note agreements.
5. 401(K) PROFIT SHARING PLAN:
--------------------------
The Company maintains a 401(k) profit sharing plan for its employees.
Contributions to the plan consist of the salary reductions elected by
employees, a discretionary matching contribution by the Company equal
to a percentage of the amount of salary reductions elected (up to 5
percent of compensation) and an additional discretionary amount
determined each year by the Company. Total Company contributions to
the plan were approximately $27,400 and $22,800 for the years ended
December 31, 1992 and 1991, respectively.
<PAGE>
<PAGE>
6. INCOME TAXES:
------------
The Company is organized as a small business corporation under the
provisions of Subchapter S of the Internal Revenue Code. Accordingly,
the accompanying statements of income do not include a provision for
federal or state income taxes. All income or loss is reported through
the shareholders' personal tax returns. The tax returns and the
amount of taxable income or loss are subject to examination by federal
and state taxing authorities. If such examinations result in changes
to taxable income or loss, the tax liabilities of the shareholders
could be changed accordingly.
7. RELATED PARTY TRANSACTIONS:
--------------------------
During 1991, the Company exchanged one of its vehicles as well as one
of its shareholder's vehicles for two new vehicles. The Company
recorded a loss of approximately $16,200 on the exchange. In
addition, the Company recorded a receivable of approximately $13,200
from the shareholder on the exchange, which was charged to salary
expense within the year ended December 31, 1992. This amount was
properly included within the shareholder's compensation.
The Company has additional receivables from other shareholders,
employees and related entities of approximately $63,600 and $108,400
as of December 31, 1992 and 1991, respectively. These amounts are
included in accounts receivable in the accompanying balance sheets.
8. COMMITMENTS AND CONTINGENCIES:
-----------------------------
The Company has several noncancelable operating leases, primarily for
office and warehouse space, equipment and automobiles. Rent expense
of approximately $101,800 and $43,400 was recorded for the years ended
December 31, 1992 and 1991, respectively. Future minimum lease
payments under noncancelable operating leases as of December 31, 1992,
are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1993 $ 93,400
1994 72,400
1995 49,600
1996 52,000
1997 2,200
--------
$269,600
========
</TABLE>
The company has contingencies with respect to litigation arising in
the ordinary course of business. In the opinion of management, such
contingencies will not result in any loss which would materially
affect the financial position of the Company.
<PAGE>
<PAGE>
Item 7(b)
Unaudited Pro Forma Combined Financial Information
The following unaudited pro forma combined balance sheet reflects
the combined balance sheet of Dataflex Corporation ("Dataflex" or "The
Company") and the historical balance sheet of National Data Products,
Inc. ("NDP"), adjusted to give effect to the acquisition of
substantially all the assets and liabilities of NDP on January 1,
1995. The unaudited pro forma combined balance sheet assumes that the
acquisition occurred on December 31, 1994. The business combination
will be accounted for as a purchase.
The information utilized for NDP's historical statement of
operations in the pro forma financial information is based on
unaudited information for the year ended March 31, 1994, and for the
nine months ended December 31, 1994.
The unaudited pro forma combined statements of operations for the
year ended March 31, 1994 and for the nine months ended December 31,
1994 give effect to the acquisitions of Granite Computer Products,
Inc. ("Granite") on April 1, 1994, Advantage Systems, Inc.
("Advantage") on June 1, 1994, Hagen Computer Systems, Inc. ("Hagen")
on November 1, 1994 and NDP on January 1, 1995 as if they had occurred
at the beginning of the periods presented.
On August 19, 1994 the Company acquired Sunland Computer
Services, Inc. ("Sunland"), which has been accounted for under the
pooling of interests method. As such, the December 31, 1994 combined
balance sheet and the Statement of Operations for the year ended March
31, 1994 and the nine months ended December 31, 1994 of Dataflex
Corporation have been restated to include unaudited historical
information of Sunland.
The pro forma combined financial information does not purport to
represent what the Company's results of operations or financial
position would have been if the acquisitions had been consummated on
the dates indicated or that may be obtained in the future. The pro
forma financial information should be read in conjunction with the
financial statements and notes thereto of Dataflex, Sunland, Granite,
Advantage and NDP.
<PAGE>
<PAGE>
DATAFLEX CORPORATION
PRO FORMA COMBINED BALANCE SHEET
December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
As of December 31, 1994
--------------------------------------------------------------
Historical
-----------------------------
Pro Forma Combined
Dataflex NDP Adjustments Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 866,670 $ 638,100 $ 0 $ 1,504,770
Accounts Receivable, net 37,212,888 19,168,195 56,381,083
Inventory 22,488,196 2,801,468 25,289,664
Deferred Tax Asset 297,021 297,021
Other 6,956,163 446,639 7,402,802
------------ ------------ ------------ ------------
Total Current Assets 67,820,938 23,054,402 0 90,875,340
Property and Equipment, net 6,474,940 3,778,351 10,253,291
Other Assets 714,605 16,252 730,857
Goodwill, net 11,176,649 16,000,000(1) 27,176,649
------------ ------------ ------------ ------------
Total Assets $ 86,187,132 $ 26,849,005 $ 16,000,000 $129,036,137
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-Term Borrowings $ 25,601,108 $ 16,449,375 $ 6,200,000(1) $ 48,250,483
Accounts Payable 23,443,026 7,075,159 30,518,185
Accrued Expenses and Other Payables 5,668,850 1,713,270 775,000(4) 8,157,120
Income Taxes Payable 430,184 430,184
Current Portion of Long Term Debt 178,863 178,863
------------ ------------ ------------ ------------
Total Current Liabilities 55,143,168 25,416,667 6,975,000 87,534,835
Deferred Tax Payable 423,065 423,065
Other Long Term Liabilities 243,184 243,184
Long Term Debt 1,000,000 1,332,338 3,500,000(1) 5,832,338
------------ ------------ ------------ ------------
Total Liabilities 56,809,417 26,749,005 10,475,000 94,033,422
------------ ------------ ------------ ------------
Commitments and Contingencies
Shareholders' Equity:
Common Stock - no par value 14,787,561 1,000 5,624,000(1) 20,412,561
Paid in Capital 666,667 (666,667)(1) 0
Less: Loans Receivable from Officers
for Exercised Stock Options (628,723) (628,723)
Retained Earnings (Accumulated Deficit) 15,753,227 (567,667) 567,667(1) 15,753,227
------------ ------------ ------------ ------------
29,912,065 100,000 5,525,000 35,537,065
Less: Treasury Stock - At Cost (534,350) (534,350)
------------ ------------ ------------ ------------
Total Shareholders' Equity: 29,377,715 100,000 5,525,000 35,002,715
------------ ------------ ------------ ------------
Total Liabilities and Shareholders' Equity $ 86,187,132 $ 26,849,005 $ 16,000,000 $129,036,137
============ ============ ============ ============
</TABLE>
See accompanying notes to proforma combined financial information.
<PAGE>
<PAGE>
DATAFLEX CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
Nine Months Ended December 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
Historical
------------------------------------------------------
Dataflex* Advantage Hagen NDP
Nine Months April 1, April 1, April 1,
Ended 1994 to 1994 to 1994 to Pro Forma
December 31, May 31, October December Adjust- Pro Forma
1994 1994 31, 1994 31, 1994 Combined ments Combined
------------ ---------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue $175,789,150 $8,234,873 $5,680,599 $96,217,508 $285,922,130 $ 0 $285,922,130
Cost of Revenue 155,552,749 7,236,841 5,281,701 82,509,055 250,580,346 250,580,346
------------ ---------- ---------- ----------- ------------ ----------- ------------
Gross Profit 20,236,401 998,032 398,898 13,708,453 35,341,784 35,341,784
Selling, G & A
Expenses 15,504,747 226,595 397,892 9,733,133 25,862,367 508,000(2) 26,370,367
------------ ---------- ---------- ----------- ------------ ----------- ------------
Operating Income 4,731,654 771,437 1,006 3,975,320 9,479,417 (508,000) 8,971,417
Other Income
(Expense):
Interest Income
(Expense), Net (1,362,361) (87,751) (38,815) (739,986) (2,228,913) (608,350)(5) (2,837,263)
------------ ---------- ---------- ----------- ------------ ----------- ------------
Income (loss)
Before Income Taxes
3,369,293 683,686 (37,809) 3,235,334 7,250,504 (1,116,350) 6,134,154
Provision
(Benefit) for
Income Taxes 1,501,967 22,000 (17,209) 1,506,758 1,128,803(5) 2,635,561
Net Income (loss) $ 1,867,326 $ 661,686 $ (20,600) $ 3,235,334 $ 5,743,746 $(2,245,153) $ 3,498,593
============ ========== =========== =========== ============ ============ ============
Earnings per Common
Share $ 0.41 $ 1.26 $ 0.67
============ ============ ============
Weighted Average
Common and Common
Equivalent Shares
Outstanding 4,566,494 4,566,494 5,207,360
========= ========= =========
<FN>
* Restated to include results of operations of Sunland Acquisition
accounted for as a pooling of interests.
</TABLE>
See accompanying notes to pro forma combined financial information.
<PAGE>
<PAGE>
DATAFLEX CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended March 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
Historical Historical
----------------------------------- -------------------------------------------
Granite Advantage Hagen
Dataflex Sunland Dec, 31, Dec. 31, March 31,
March 31, 1994 March 31, 1994 Combined 1993 1993 1994
-------------- -------------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue $102,380,084 $19,968,484 $122,348,568 $42,812,500 $27,032,269 $8,422,226
Cost of Revenue 92,138,180 16,680,067 108,818,247 37,056,000 24,184,365 7,370,339
------------ ----------- ------------ ----------- ----------- ----------
Gross Profit 10,241,904 3,288,417 13,530,321 5,756,500 2,847,904 1,051,887
Selling, G&A Expenses 8,097,143 2,578,355 10,675,498 5,124,200 1,050,478 980,822
------------ ----------- ------------ ----------- ----------- ----------
Operating
Income 2,144,761 710,062 2,854,823 632,300 1,797,426 71,065
Other Income (Expense):
Interest Income (Expense),
Net 213,199 (208,442) 4,757 (131,200) (204,181) (41,675)
Litigation, Settlement &
Related Costs (847,500) (847,500)
Other, Net
----------- ----------- ----------- ----------- ----------- ----------
Income Before Income Taxes 1,510,460 501,620 2,012,080 501,100 1,593,245 29,390
Provision for Income Taxes 664,655 219,505 884,160 15,700 23,736 6,089
------------ ----------- ------------ ----------- ----------- ----------
Net Income $ 845,805 $ 282,115 $ 1,127,920 $ 485,400 $ 1,569,509 $ 23,301
============ =========== ============ =========== =========== ==========
Earnings per Common Share $ 0.25 $ 0.28
============ ============
Weighted Average Common and 3,445,036 4,085,036
Common Equivalent Shares ============ ============
Outstanding
<CAPTION>
Historical
----------
NDP Pro Forma Pro Forma
Dec. 31, 1993 Adjustments Combined
------------- ----------- --------
<S> <C> <C> <C>
Revenue $70,643,100 $ 0 $271,258,663
Cost of Revenue 59,470,830 (575,000)(3) 236,324,781
----------- ----------- ------------
Gross Profit 11,172,270 575,000 34,933,882
Selling, G&A Expenses 8,366,735 1,089,226(2) 27,286,959
----------- ----------- ------------
Operating Income 2,805,535 (514,226) 7,646,923
Other Income (Expense):
Interest Income (Expense), Net (364,929) (1,215,800)(5) (1,953,028)
Litigation, Settlement & Related Costs (847,500)
Other, Net 101,960 101,960
----------- ----------- ------------
Income Before Income Taxes 2,542,566 (1,730,026) 4,948,355
Provision for Income Taxes 25,000 1,188,288(5) 2,142,973
----------- ----------- ------------
Net Income $ 2,517,566 $(2,918,314) $ 2,805,382
=========== ============ ============
Earnings per Common Share $ 0.59
============
Weighted Average Common and Common Equivalent 4,781,433
Shares Outstanding ============
</TABLE>
See accompanying notes to pro forma combined financial
information.<PAGE>
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
1. THE ACQUISITIONS
On January 1, 1995, the Company acquired substantially all of the
assets and liabilities of National Data Products, Inc. ("NDP") for
$6,200,000 in cash, $3,500,000 in subordinated notes, and 625,000
shares of the Company's common stock with an aggregate market value of
$5,625,000. This acquisition has been accounted for as a purchase and
has been reflected in the Company's pro-forma balance sheet as of
December 31, 1994.
On August 19, 1994, Dataflex Corporation ("Dataflex" or the "Company")
acquired all of the outstanding stock of Sunland Computer Services,
Inc. ("Sunland"), a reseller and service provider of computer products
located in Phoenix, Arizona. Under the provisions of the agreement,
the Company acquired all of the issued and outstanding common stock of
Sunland in exchange for 640,000 shares of the Company's common stock,
no par value, with an aggregate market value of $4,800,000. The
Sunland acquisition has been accounted for as a pooling of interests.
On April 1, 1994, June 1, 1994 and November 1, 1994, the Company
acquired substantially all of the assets and liabilities of Granite
Computer Products, Inc. ("Granite"), Advantage Systems, Inc.
("Advantage"), and Hagen Computer Systems, Inc. ("Hagen"),
respectively. These acquisitions were accounted for as purchases and
have been reflected in the Company's balance sheet as of December 31,
1994.
2. GOODWILL AND AMORTIZATION
The amortization expense reflected on the pro forma statement of
operations for the year ended March 31, 1994 and the nine months ended
December 31, 1994 is calculated on a straight line basis utilizing a
useful life of 25 years based on estimated goodwill for the Granite,
Advantage, Hagen and NDP acquisitions of $27,230,636.
3. COST REDUCTIONS
As a result of the acquisitions the Company will receive additional cost
reductions with certain major manufacturers, where appropriate. The cost
savings are the result of increased purchasing volumes allowing for an
increase in vendor discounts to the Company. The cost reductions are
reflected on the pro forma statement of operations for the year ended
March 31, 1994 as a reduction to cost of goods sold.
<PAGE>
<PAGE>
4. ACCRUED EXPENSES AND OTHER PAYABLES
The Company has accrued for $775,000 of legal, audit and other costs
associated with the Aquisition of NDP.
5. CERTAIN OTHER EXPENSES
Certain other expenses have been adjusted on a pro forma basis to
reflect the transactions as if they had occurred at the beginning of
the periods ended March 31, 1994 and December 31, 1994, as follows:
<TABLE>
<CAPTION>
Total
-----
Year Ended March 31, 1994:
--------------------------
<S> <C>
Interest expense based on increased
borrowings at a 6% annual interest rate $1,215,800
Adjusted tax effect, at an effective tax
rate of 41% for Granite, Advantage, Hagen
and NDP $1,450,688
<CAPTION>
Nine Months Ended December 31, 1994:
------------------------------------
<S> <C>
Interest expense based on increased
borrowings at an average annual interest
rate of 7.4%. $ 608,350
Adjusted tax effect, at an effective tax
rate of 41% for Advantage, Hagen, and NDP $1,477,801
</TABLE>
