FORM 8 - K
CURRENT REPORT
Filed Pursuant to Section 13 or 15 (d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
October 30, 1996
------------------
Minute Man of America, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Arkansas 0-4289 71-0390957
---------------- ------------------- ------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification
Number)
2129 North 15th Street, Melrose Park, Illinois 60160
---------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (708) 681-3660
<PAGE>
ITEM 1. Changes in Control of Registrant
On October 15, 1996, the Company in a non-monetary transaction, after a 1 for
4 reverse stock split, exchanged 2,000,000 shares of its stock with the three
shareholders of Tone Products, Inc. for their stock in Tone Products.
As a result of this transaction, the following items were also agreed to:
(a) The Company changed its name to Tone Products, Inc.
(b) The board of directors was expanded to seven members. Tone Products, Inc.
is to place six members on the board and one current board member will
remain on the board.
<TABLE>
<CAPTION>
Security Ownership of Certain Beneficial Owners
Name and Address of Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
- -------------- --------------------- -------------------- ----------
<S> <C> <C> <C>
Common stock Timothy Evon 666,667 shares 23.5%
2129 North 15th Street
Melrose Park, Illinois
60160
Common stock Thomas Evon 666,667 shares 23.5%
2129 North 15th Street
Melrose Park, Illinois
60160
Common stock Michael Evon 666,666 shares 23.5%
2129 North 15th Street
Melrose Park, Illinois
60160
--------- ----
2,000,000 shares 70.5%
========= ====
</TABLE>
ITEM 2. Acquisition of Assets
On October 15, 1996, the Company acquired, in a non-monetary transaction, Tone
Products, Inc. in exchange for 2,000,000 shares of the Company. This
transaction will be accounted for as a purchase transaction. Tone Products,
Inc. has locations in Melrose Park, Illinois and Las Vegas, Nevada. They
manufacture and distribute food products consisting primarily of juices, sauces
and snack foods.
The purchase price of Tone Products, Inc. consisted of the following:
Value of 2,000,000 shares
issued to shareholders of Tone $4,000,000
The purchase price of Tone Products, Inc. is the fair market value of the
Company stock issued to acquire Tone Products, Inc.
ITEM 7. Financial Statements, Pro Forma Financial Information, and Exhibits
(a) Financial Statements of business acquired.
<PAGE>
TONE PRODUCTS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
________________
Report of Independent Auditors F-2
Financial Statements of Tone Products, Inc.:
Consolidated Balance Sheets, F-3
September 30, 1996 and December 31, 1995
Consolidated Statements of Operations for the F-4
Nine Months Ended September 30, 1996 and the
Year Ended December 31, 1995
Consolidated Statements of Shareholders' Equity for F-5
Nine Months Ended September 30, 1996 and the
Year Ended December 31, 1995
Consolidated Statements of Cash Flows for the F-7
Nine Months Ended September 30, 1996 and the
Year Ended December 31, 1995
Notes to Consolidated Financial Statements F-9
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
____________________________________
To the Board of Directors
Tone Products, Inc.
Melrose Park, Illinois
We have audited the accompanying consolidated balance sheets of Tone Products,
Inc. and its wholly owned subsidiary as of September 30, 1996 and December 31,
1995 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the nine month and one year periods ended September
30, 1996 and December 31, 1995. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Tone
Products, Inc. and its wholly owned subsidiary as of September 30, 1996 and
December 31, 1995, and the consolidated results of their operations and their
cash flows for each of the nine month and one year periods ended September 30,
1996 and December 31, 1995, respectively, in conformity with generally accepted
accounting principles.
/s/ Kelly & Company
Kelly & Company
Newport Beach, California
December 5, 1996
F-2
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and December 31, 1995
________________
Assets
<CAPTION>
September 30, December 31,
1996 1995
--------- ---------
<S> <C> <C>
Current assets:
Cash and equivalents $155,746 $118,411
Accounts receivable 939,332 432,031
Inventory 1,113,177 665,507
Prepaid expenses 6,685 17,629
Deferred tax asset 5,230 4,913
--------- ---------
Total current assets 2,220,170 1,238,491
Property, plant and equipment, net 1,464,724 1,924,708
Goodwill 432,252 -
--------- ---------
Total assets $4,117,146 $3,163,199
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $853,196 $730,655
Line of credit payable 610,927 -
Notes payable to bank, current portion 224,007 38,603
Advances from shareholders - 26,913
Income taxes payable 28,224 64,378
--------- ---------
Total liabilities 1,716,354 860,549
Notes payable to bank, long term 14,269 249,988
Note payable to related party - 625,000
Deferred tax liability 67,882 146,539
--------- ---------
Total liabilities 1,798,505 1,882,076
Commitments and contingencies
Shareholders' equity:
Common stock ($100 par value; 3,000
shares authorized, 600 shares issued and
outstanding) 40,000 40,000
Paid-in capital 10,568 70,127
Stock subscription proceeds 1,038,000 -
Retained earnings 1,230,073 1,170,996
--------- ---------
Total shareholders' equity 2,318,641 1,281,123
--------- ---------
Total liabilities and shareholders' equity $4,117,146 $3,163,199
========= =========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
</TABLE>
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1996 and
The Year Ended December 31, 1995
________________
<CAPTION>
September 30, December 31,
1996 1995
--------- ---------
<S> <C> <C>
Net sales $6,245,918 $5,858,032
Cost of sales 4,590,317 4,053,088
--------- ---------
Gross profit 1,655,601 1,804,944
--------- ---------
Operating costs and expenses:
Wages and salaries 487,198 594,718
Selling and promotion 297,844 192,029
Insurance 99,030 105,777
Occupancy costs 226,012 177,058
Depreciation and amortization 175,766 199,752
Other operating expenses 175,027 114,092
--------- ---------
Total operating costs and expenses 1,460,877 1,383,426
--------- ---------
Income from operations 194,724 421,518
--------- ---------
Other income (expense):
Interest expense, net of interest income (62,536) (89,615)
Other income 2,139 -
--------- ---------
(60,397) (89,615)
--------- ---------
Income before provision for income 134,327 331,903
Provision for income taxes 75,250 87,840
--------- ---------
Net income $59,077 $244,063
========= =========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
</TABLE>
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 1996 and
The Year Ended December 31, 1995
________________
<CAPTION>
Common Common Paid-in
Shares Stock Capital
--------- -------- ---------
<S> <C> <C> <C>
Balance, December 31, 1994 600 $40,000 $70,127
Net income - - -
---------- ---------- --------
Balance, December 31, 1995 600 40,000 70,127
Distribution of building to
shareholders - - (59,559)
Subscription of stock - - -
Net income - - -
---------- ---------- --------
Balance, September 30, 1996 600 $40,000 $10,568
========== ========== ==========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
</TABLE>
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 1996 and
The Year Ended December 31, 1995
Continued
________________
<CAPTION>
Stock
Subscription Retained
Proceeds Earnings Total
--------- -------- ---------
<S> <C> <C> <C>
Balance, December 31, 1994 - $926,933 $1,037,060
Net income - 244,063 244,063
---------- ---------- ----------
Balance, December 31, 1995 - 1,170,996 1,281,123
Distribution of building to
shareholders - - (59,559)
Subscription of stock $1,038,000 - 1,038,000
Net income - 59,077 59,077
---------- ---------- ----------
Balance, September 30, 1996 $1,038,000 $1,230,073 $2,318,641
========== ========== ==========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
</TABLE>
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and
The Year Ended December 31, 1995
________________
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities
Net income $59,077 $244,063
Adjustments to reconcile income (loss) to
net cash provided by operating activities:
Depreciation and amortization 175,766 199,752
Decrease (increase) in assets:
Accounts receivable (382,936) 111,998
Inventory (228,271) (365,643)
Prepaid expenses 16,601 5,548
Deferred tax asset (317) (4,913)
Other assets - 60,838
Increase (decrease) in liabilities:
Line of credit payable 610,927 -
Accounts payable 53,330 (299,998)
Advances to shareholders (26,913) 26,913
Income taxes payable (36,154) 59,524
Deferred tax liabilities (78,657) 76,266
--------- ---------
Cash provided by operating activities 162,453 114,348
--------- ---------
Cash flows provided by (used in) investing
activities:
Purchases of property and equipment (92,549) (293,934)
Acquisition of subsidiary (770,254) -
--------- ---------
Cash (used in) investing activities (862,803) (293,934)
--------- ---------
Cash flows provided by (used in) financing
activities:
Principle payments of debt (271,756) (64,785)
Proceeds from notes payable 221,441 135,177
Subscription of common stock 788,000 -
--------- ---------
Cash provided by financing activities 737,685 70,392
--------- ---------
Net increase (decrease) in cash 37,335 (109,194)
Cash at beginning of period 118,411 227,605
--------- ---------
Cash at end of period $155,746 $118,411
========= =========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
</TABLE>
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1996 and
The Year Ended December 31, 1995
________________
Supplemental Disclosure of Cash Flow Information
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Interest $64,983 $90,513
Income taxes $33,064 $27,213
</TABLE>
<TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities
<S> <C>
Distribution of building to shareholder
Equity distributed $59,559
Liability satisfied $625,000
Net book value of assets distributed $(684,559)
Acquisition of subsidiary (non-cash portion):
Assets acquired 300,000
Liabilities incurred (50,000)
Stock subscription proceeds (250,000)
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-8
<PAGE>
TONE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________
1. Summary of Significant Accounting Policies
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of Tone Products,
Inc. and its wholly owned subsidiary, Fun City Popcorn, Inc. All significant
intercompany transactions have been eliminated.
Operations
- ----------
Tone Products, Inc. (the "Company") is engaged in the purchase, manufacture, and
wholesale distribution of food products in the beverage, snack, syrup,
condiments, and sauce categories.
On May 31, 1996, the Company acquired Fun City Popcorn, Inc. ("Fun City")
(Note 14). Fun City produces and sells a snack food product line that is
complimentary to the Company's other product lines.
Recognition of Revenue
- ----------------------
Revenues are recognized when the Company's products are shipped.
Cash and Equivalents
- --------------------
The Company classifies all highly liquid investments with maturities of three
months or less as cash equivalents.
Inventory
- ---------
Inventories are stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis. The Company regularly monitors inventory for excess
or obsolete items and makes any valuation corrections when such adjustments are
needed.
F-9
<PAGE>
1. Summary of Significant Accounting Policies, Continued
Property, Plant, and Equipment
- ------------------------------
Property, plant, and equipment are recorded at cost and are depreciated using
the straight-line method over the expected useful lives noted below.
Expenditures for normal maintenance and repairs are charged to income, and
significant improvements are capitalized. The cost and related accumulated
depreciation of assets are removed from the accounts upon retirement or other
disposition, and resulting profit or loss is reflected in the statement of
operations.
Estimated
Useful Life
---------
Building 39 years
Building improvements 39 years
Leasehold improvements 39 years
Machinery and equipment 7 years
Furniture and fixtures 5 - 7 years
Vehicles 5 - 7 years
Goodwill
- --------
Goodwill is being amortized over fifteen years using the straight line method.
The Company periodically reviews the value of its goodwill to determine if an
impairment has occurred. The Company measures the potential impairment of
recorded goodwill by the undiscounted value of expected future operating cash
flows in relation to its net capital investment in the subsidiary.
Income Taxes
- ------------
The Company accounts for deferred income taxes using the liability method in
accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes." Deferred income taxes are computed based on the
tax liability or benefit in future years of the reversal of temporary
differences in the recognition of income or deduction of expenses between
financial and tax reporting purposes. The net difference between tax expense
and taxes currently payable is reflected in the balance sheet as deferred
income taxes. Deferred tax assets and/or liabilities are classified as current
and noncurrent based on the classification of the related asset or liability for
financial reporting purposes, or based on the expected reversal date for
deferred taxes that are not related to an asset or liability. The Company files
a consolidated federal income tax return and reports results from operations on
a unitary basis for state income tax purposes.
F-10
<PAGE>
1. Summary of Significant Accounting Policies, Continued
Disclosures About Fair Value of Financial Investments
- -----------------------------------------------------
The Company accounts for the value of financial instruments using the fair value
method as described in Statement of Financial Standards No. 107 (SFAS 107)
"Disclosures about Fair Value of Financial Instruments."
Advertising Costs
- -----------------
Advertising costs are expensed as they are incurred. Advertising expense was
$32,594 and $3,926 for the nine month and one year periods ended September 30,
1996 and December 31, 1995, respectively.
Estimates
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Accounts Receivable
Accounts receivable consists of the following:
1996 1995
------- -------
Trade accounts receivable $909,332 $422,444
Due from related party 30,000 9,587
------- -------
$939,332 $432,031
======= =======
During the nine month and one year periods ended September 30, 1996 and
December 31, 1995, respectively, the Company wrote off $46,364 and $14,614,
in uncollectible accounts receivable.
F-11
<PAGE>
3. Inventory
Inventory consists of the following:
1996 1995
------- -------
Raw materials $782,623 $492,582
Finished goods 330,554 172,925
------- -------
$1,113,177 $665,507
========= =======
4. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
1996 1995
------- -------
Building - $724,467
Building improvements - 281,734
Leasehold improvements $369,890 310,044
Machinery and equipment 2,261,941 1,477,190
Furniture and fixtures 95,178 60,631
Vehicles 271,464 213,103
--------- ---------
2,998,473 3,067,169
Less: accumulated depreciation (1,533,749) (1,222,461)
--------- ---------
1,464,724 1,844,708
Land - 80,000
--------- ---------
$1,464,724 $1,924,708
========= =========
5. Bank Line of Credit
The Company has a line of credit with a bank that was rewritten on September 3,
1996. The promissory note bears interest at the bank's base borrowing rate plus
three quarters of a point (9.00% at September 30, 1996). The term of the
financing agreement allows the Company to borrow up to $700,000, and is secured
by the Company's assets. At September 30, 1996, there was a balance of $610,927
on the line of credit. Accrued interest payable is due monthly and the
outstanding loan balance is payable on January 30, 1997. Management is currently
negotiating an extension of this line.
F-12
<PAGE>
6. Notes Payable to Bank
Notes payable to bank consist of the following:
1996 1995
------- -------
Note payable to a bank, secured by
the Company's assets, payable in twelve
monthly principal installments of $3,690
plus accrued interest, with a balloon principal
and interest payment of $178,489 due on
April 30, 1997. Interest is calculated
at the bank's base borrowing rate plus
three-quarters of a point (9.00% at September 30,
1996). $199,289 $228,821
Notes payable to a bank consists of four separate
promissory notes, secured by Company vehicles.
The notes payable call for monthly installments of
principal and interest of $2,301 for terms which
do not exceed three years. At September 30, 1996,
the promissory notes bear interest rates between
8.25% and 9.75%
38,987 59,770
------- -------
Total notes payable 238,276 288,591
Less: current maturities (224,007) (38,603)
------- -------
Long term portion of notes payable $14,269 $249,988
======= =======
Maturities of notes payable to bank for the years ending September 30:
1997 $224,007
1998 12,388
1999 1,881
7. Income Tax
The components of the provision for income taxes are as follows:
1996 1995
------- -------
Current expense:
Federal $48,292 $73,785
State 12,656 14,450
------- -------
60,948 88,235
------- -------
Deferred expense (benefit):
Federal 11,775 (958)
State 2,527 563
------- -------
14,302 (395)
------- -------
$75,250 $87,840
======= =======
F-13
<PAGE>
7. Income Tax, Continued
Significant components of the Company's deferred income tax assets and
liabilities at September 30, 1996 and December 31, 1995, are as follows:
1996 1995
------- -------
Deferred income tax asset:
State $8,584 $14,283
Other 986 -
------- -------
Total deferred income tax asset 9,570 14,283
Valuation allowance - -
------- -------
Net deferred income tax asset 9,570 14,283
------- -------
Deferred income tax liability:
Depreciation 72,222 155,909
------- -------
Total deferred income tax liability 72,222 155,909
------- -------
Net deferred income tax liability $62,652 $141,626
======= =======
Income tax expense differs from the expected federal income tax expense due
primarily to state taxes and permanent timing differences resulting from the
acquisition of its subsidiary.
8. Commitments
The Company has operating leases for certain of its facilities. Future minimum
lease payments at September 30, 1996, are as follows:
Due to
Total Related Parties
------- ------------
1997 $266,891 $251,771
1998 91,875 91,875
------- -------
Total future minimum lease payments $358,766 $343,646
======= =======
Rental expense resulting from operating lease agreements was $172,012 and
$104,500 during the nine month and one year periods ended September 30, 1996
and December 31, 1995, respectively.
The Company is the guarantor on a $300,000 promissory note with a bank for the
benefit of the shareholders. All terms and conditions of the loan agreement
are being met by the shareholders.
F-14
<PAGE>
9. Concentration of Credit Risk
The Company sells products to private companies, certain governmental entities,
and public institutions primarily within a 300-mile radius of their two
locations. Credit is extended based on an evaluation of the customer's
financial condition.Exposure to losses on accounts receivable is principally
dependant on each customer's financial condition. The Company monitors its
exposure for credit losses and writes off accounts receivable that it deems are
not collectible.
The Company maintains its cash in bank deposit accounts which exceed federally
insured limits by $55,746 and $18,411 at September 30, 1996 and December 31,
1995, respectively; however, the Company has not experienced any losses in such
accounts.
10. Disclosures about Fair Values of Financial Instruments
SFAS No. 107 requires disclosure of the fair value of all financial instruments
both on and off the Company's balance sheet. The estimated fair value amounts
have been determined by the Company, using available market information and
appropriate valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The following methods and assumptions were used by the Company in estimating
fair value disclosures for financial statements:
Cash and equivalents, accounts receivable, inventory, prepaids, certain other
current assets, accounts payable, line of credit payable, current maturity of
long term debt, and certain other current liability amounts are reported in the
balance sheet at approximate fair value due to the short term maturities of
these instruments.
The fair value of the notes payable is estimated by determining the net present
value of future payments. The carrying amount on the balance sheet approximates
the fair value as the interest rates approximate current market rates.
The fair value of the note payable to related party is not determinable;
however, this debt was transferred along with the related property at February
2, 1996.
The fair value of the off balance sheet debt guarantee approximates the amount
of the debt as the interest rate on this debt approximates current market rates.
F-15
<PAGE>
11. Profit-Sharing Plan
Effective January 1, 1989, the Company amended and restated a noncontributory
profit sharing retirement plan covering substantially all employees. Annual
employer contributions to the plan are made at the discretion of management.
No employer contribution was made for the nine months ended September 30,
1996, and an employer contribution of $30,490 was made for the year ended
December 31, 1995.
12. Related Party Transactions
The Company leases from entities owned by its shareholders certain operating
facilities. For the nine month and one year periods ended September 30, 1996
and December 31, 1995, respectively, the Company paid the entities $161,849 and
$104,500 in rent.
On February 2, 1996, the Company made an election to adopt a corporate
reorganization (Type A for income tax purposes) and partially liquidated certain
assets and the related liability to the Company's shareholders, transferring its
real property with a net book value of $684,559 and related mortgage payable of
$625,000 into a newly formed corporation. This transaction resulted in no gain
or loss to the Company and a shareholders' equity distribution of $59,559 to the
shareholders.
During the nine month and one year periods ended September 30, 1996 and December
31, 1995, respectively, the Company had sales of $39,316 and $142,311 to a
related corporation. Included in accounts receivable at September 30, 1996
and December 31, 1995, was $30,000 and $9,587, respectively, due from this
related corporation.
The Company owed a related party $625,000 at December 31, 1995, that was not
evidenced by any formal debt instrument or security agreement. The Company-owed
amount bore an interest rate of 9.4% with interest only payments due monthly.
Interest expense for the nine month and one year periods ended September 30,
1996 and December 31, 1995, respectively, includes $18,771 and $57,573 relating
to the Company's note payable to related party.
13. Acquisition of Wholly-Owned Subsidiary
On May 31, 1996, the Company acquired all of the outstanding stock of Fun City
Popcorn, Inc., a Nevada Corporation, for $1,075,000 as follows:
Cash $875,000
Stock subscribed 200,000
---------
$1,075,000
=========
The acquisition will be accounted for as a purchase transaction and,
accordingly, the fair value of the purchase price will be allocated to assets
and liabilities based on the estimated fair value as of the acquisition date.
The excess value of the Company's stock over and above the value of the net
assets of $442,076, recorded as goodwill to be amortized on the straight-line
basis over 15 years. The amount of goodwill amortization for fiscal 1996 was
$9,824.
F-16
<PAGE>
13. Acquisition of Wholly-Owned Subsidiary, Continued
The net purchase price was allocated as follows:
Working capital $354,167
Plant and equipment 469,903
Goodwill 442,076
Other liabilities (191,146)
---------
Purchase price $1,075,000
=========
The operating results of this subsidiary have been included in the consolidated
statement of income from the date of acquisition.
The following unaudited pro forma information presents a summary of consolidated
results of operations of the Company and Fun City, for the nine month and one
year periods ended September 30, 1996 and December 31, 1995, as if the
acquisition had occurred at the beginning of 1995.
1996 1995
--------- ---------
Net sales $6,994,039 $7,437,561
Net earnings 95,764 217,329
14. Common Stock
During the nine month period ended September 30, 1996, the Company raised
$838,000 through a private placement.
In addition, as part of the acquisition of Fun City, the former owner of Fun
City also subscribed to 100,000 shares of stock.
15. Subsequent Events
A. On October 15, 1996, the Company acquired (in a reverse acquisition) a 70.5%
interest in Minute Man of America, Inc. ("MMA"), a publicly held company. The
shareholders of the Company exchanged all of their stock in the Company for
2,000,000 common shares of MMA. As part of this transaction:
1. MMA changed its name to Tone Products, Inc.
2. The board of directors of MMA was expanded from three to seven members.
Tone has placed six members on the board and one former MMA board member
will remain.
The purchase price of $4,000,000 is the fair value of the MMA stock issued to
acquire the Company. This transaction will be accounted for as a purchase.
F-17
<PAGE>
15. Subsequent Events, Continued
B. On December 5, 1996, the Company, disposed of the former sole operating
segment in MMA. The sale will not have a significant effect on reported sales
or earnings in the future.
As the subsequent events are significant to the Company's financial statements,
a pro forma balance sheet at September 30, 1996, and a pro forma income
statement for the year ended September 30, 1996 are included in this footnote.
These pro forma financial statements assume the transaction occurred on October
1, 1995. Pro forma adjustment A includes the operations of the Company from
January 1, 1996 to September 30, 1996 and the operations of Fun City from June
1, 1996 to September 30, 1996. The information provided in this subsequent
event footnote differs from similar information in Note 13, as the information
provided therein reflects the full nine months of operations for both entities.
F-18
<PAGE>
15. Subsequent Events, Continued
Pro Forma Balance Sheet (Unaudited)
September 30, 1996
________________
Minute Man
of America, Inc. Pro Forma
September 30, 1996 Adjustments Pro Forma
------- ----------- ---------
ASSETS
Current assets:
Cash $84,120 (A) $155,746
(B) (50,988) $188,878
Accounts receivable 187,948 (A) 939,332
(B) (187,948) 939,332
Inventory 160,488 (A) 1,113,177
(B) (160,488) 1,113,177
Prepaids - (A) 6,685 6,685
Deferred tax asset - (A) 5,230 5,230
------- --------- ---------
Total current assets 432,556 1,820,746 2,253,302
Property 194,424 (A) 1,464,724
(B) (194,424) 1,464,724
Other assets 1,748 (B) (1,355) 393
Goodwill - (A) 432,252 432,252
196,172 1,701,197 1,897,369
------- --------- ---------
Total assets $628,728 $3,521,943 $4,150,671
======= ========= =========
F-19
<PAGE>
15. Subsequent Events, Continued
Pro Forma Balance Sheet (Unaudited)
September 30, 1996
Continued
________________
Minute Man
of America, Inc. Pro Forma
September 30, 1996 Adjustments Pro Forma
------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit payable - (A) $610,927 $610,927
Accounts payable $52,839 (A) 853,196
(B) (45,453) 860,582
Advances from related party 20,000 (B) (20,000) -
Note payable, current
portion - (A) 224,007 224,007
Capital lease obligation 8,410 (B) (8,410) -
Income taxes payable - (A) 28,224 28,224
------- --------- ---------
Total current liabilities 81,249 1,642,491 1,723,740
Notes payable long term - (A) 14,269 14,269
Capital lease obligation 38,467 (38,467) -
Deferred tax liability - (A) 67,882 67,882
38,467 43,684 82,151
------- --------- ---------
Total liabilities 119,716 1,686,175 1,805,891
------- --------- ---------
Shareholders' equity:
Preferred stock 750,000 (B) (750,000) -
Common stock 309,375 (A) 40,000 349,375
Paid in capital 862,997 (A) 10,568
(A) (118,259) 755,306
Stock subscription proceeds - (A) 1,038,000 1,038,000
Retained earnings (1,413,360) (A) 1,230,073
(B) 385,386 202,099
------- --------- ---------
Total shareholder's equity 509,012 1,835,768 2,344,780
------- --------- ---------
Total liabilities and
shareholders' equity $628,728 $3,521,943 $4,150,671
======= ========= =========
F-20
<PAGE>
15. Subsequent Events, Continued
Pro Forma Statement of Operations (Unaudited)
September 30, 1996
________________
Minute Man
of America, Inc. Pro Forma
September 30, 1996 Adjustments Pro Forma
------- ----------- ---------
Sales $841,402 (A) $6,245,918
(B) (841,402) $6,245,918
Cost of sales 847,652 (A) (4,590,317)
(B) 847,652 4,590,317
------- ---------
Gross profit (loss) (6,250) 1,655,601
Operating costs and expense 338,773 (A) (1,460,877)
(B) 306,781 1,492,869
------- ---------
(Loss) income from
operations (345,023) 162,732
Other income (expense) (17,876) (A) (60,397)
(B) 78,101 (172)
------- ---------
Income before provision for
income taxes (362,899) 162,560
Provision for income taxes 639 (A) (75,250)
(B) 69 (75,820)
------- --------- ---------
Net (loss) income $(363,538) $450,278 $86,740
======== ========= =========
(A) To show effect of Tone acquisition as if it had taken place on October
1, 1995.
(B) To show effect of disposal of the former sole operating entity of MMA as
if it had taken place on October 1, 1995.
F-21
<PAGE>
(b) Pro forma financial information
The accompanying unaudited pro forma balance sheet and statement of operations
reflect the consolidated financial position and operations of Tone Products,
Inc. (formerly Minute Man of America, Inc.) and Subsidiary as of September 30,
1996 and its operations for the year ended September 30, 1996. Each of these
pro forma financial statements reflect the acquisition of Tone Products, Inc.
on October 15, 1996, as well as the disposal of Gibson Specialty Corp. reported
in the Form 8-K dated December 20, 1996.
The pro forma balance sheet at September 30, 1996 and the pro forma statement
of operations for the year ended September 30, 1996 assumes the acquisition of
Tone Products, Inc. on October 15, 1996, as well as the disposal of Gibson
Specialty Corp. reported in the Form 8-K dated December 20, 1996, assumes that
these transactions were completed on October 1, 1995.
The pro forma financial information is not necessarily indicative of the
results which actually would have occurred had the transactions been in effect
on the dates and for the period indicated or which may result in the future.
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
(Formerly Minute Man of America, Inc.)
Pro Forma Balance Sheet (Unaudited)
September 30, 1996
________________
<CAPTION>
Pro Forma
Company Adjustments Pro Forma
------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $84,120 (A) $155,746
(B) (50,988) $188,878
Accounts receivable 187,948 (A) 939,332
(B) (187,948) 939,332
Inventory 160,488 (A) 1,113,177
(B) (160,488) 1,113,177
Prepaids - (A) 6,685 6,685
Deferred tax asset - (A) 5,230 5,230
------- --------- ---------
Total current assets 432,556 1,820,746 2,253,302
Property 194,424 (A) 1,464,724
(B) (194,424) 1,464,724
Other assets 1,748 (B) (1,355) 393
Goodwill - (A) 432,252 432,252
196,172 1,701,197 1,897,369
------- --------- ---------
Total assets $628,728 $3,521,943 $4,150,671
======= ========= =========
<FN>
See notes to pro forma financial statements.
</TABLE>
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
(Formerly Minute Man of America, Inc.)
Pro Forma Balance Sheet (Unaudited)
Continued
September 30, 1996
________________
<CAPTION>
Pro Forma
Company Adjustments Pro Forma
------- ----------- ---------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit payable - (A) $610,927 $610,927
Accounts payable $52,839 (A) 853,196
(B) (45,453) 860,582
Advances from related party 20,000 (B) (20,000) -
Note payable, current
portion - (A) 224,007 224,007
Capital lease obligation 8,410 (B) (8,410) -
Income taxes payable - (A) 28,224 28,224
------- --------- ---------
Total current liabilities 81,249 1,642,491 1,723,740
Notes payable long term - (A) 14,269 14,269
Capital lease obligation 38,467 (38,467) -
Deferred tax liability - (A) 67,882 67,882
38,467 43,684 82,151
------- --------- ---------
Total liabilities 119,716 1,686,175 1,805,891
------- --------- ---------
Shareholders' equity:
Preferred stock 750,000 (B) (750,000) -
Common stock 309,375 (A) 40,000 349,375
Paid in capital 862,997 (A) 10,568
(A) (118,259) 755,306
Stock subscription proceeds - (A) 1,038,000 1,038,000
Retained earnings (1,413,360) (A) 1,230,073
(B) 385,386 202,099
------- --------- ---------
Total shareholder's equity 509,012 1,835,768 2,344,780
------- --------- ---------
Total liabilities and
shareholders' equity $628,728 $3,521,943 $4,150,671
======= ========= =========
<FN>
See notes to pro forma financial statements.
</TABLE>
<PAGE>
<TABLE>
TONE PRODUCTS, INC.
(Formerly Minute Man of America, Inc.)
Pro Forma Statement of Operations (Unaudited)
For the Nine Months Ended September 30, 1996
________________
<CAPTION>
Pro Forma
Company Adjustments Pro Forma
------- ----------- ---------
<S> <C> <C> <C>
Sales $841,402 (A) $6,245,918
(B) (841,402) $6,245,918
Cost of sales 847,652 (A) (4,590,317)
(B) 847,652 4,590,317
------- ---------
Gross profit (loss) (6,250) 1,655,601
Operating costs and expense 338,773 (A) (1,460,877)
(B) 306,781 1,492,869
------- ---------
(Loss) income from
operations (345,023) 162,732
Other income (expense) (17,876) (A) (60,397)
(B) 78,101 (172)
------- ---------
Income before provision for
income taxes (362,899) 162,560
Provision for income taxes 639 (A) (75,250)
(B) 69 (75,820)
------- --------- ---------
Net (loss) income $(363,538) $450,278 $86,740
======== ========= =========
<FN>
See notes to pro forma financial statements.
</TABLE>
<PAGE>
TONE PRODUCTS, INC.
(Formerly Minute Man of America, Inc.)
Notes to Pro Forma Financial Statement
September 30, 1996
________________
(A) To record purchase of Tone Products, Inc. on October 15, 1996 and to record
income and expense items related to purchase.
(B) To record disposal of the Gibson Specialty Corp. on December 5, 1996, and
to to record income and expense items related to disposal.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: October 30, 1996 MINUTE MAN OF AMERICA, INC.
By: /s/ Timothy Evon
----------------------------
Name: Timothy Evon
Title: Director and President
<PAGE>
