<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT AMENDMENT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 18 , 1998
--------------------- --
LA-MAN CORPORATION
----------------------------------------------------------------------------
Nevada 014427 38-2286268
- ---------------------------- -------------------- -----------------
(State or other jurisdiction (Commission File No) (IRS Employer
of incorporation) Identification No.)
5029 Edgewater Drive, Orlando, FL 32810
----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 521-7477
---------------------------
Not Applicable
----------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 2, 1998, La-Man Corporation, the Registrant (the "Company") filed
a Current Report on Form 8-K dated as of February 18, 1998, reporting the
Company's acquisition by merger of Electronic Sign Corporation, a California
corporation d/b/a Ad Art ("ESC"). This Form 8-K/A amends the Form 8-K Current
Report by filing, with this Form 8-K/A, the financial statements and pro forma
financial information required pursuant to Item 7.
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
(a) Financial Statements of Business Acquired. The following documents are
filed as part of this Report:
ELECTRONIC SIGN CORPORATION AND SUBSIDIARY (DBA AD ART)
Report of Independent Certified Public Accountants - Bartig, Basler and Ray,
CPAs, Inc.
Consolidated Balance Sheet as of December 31, 1997
Consolidated Statements of Income and Retained Earnings for years ended December
31, 1997 and 1996
Consolidated Statements of Cash Flows for years ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information. The following pro forma financial
information is filed as part of this report
LA-MAN CORPORATION AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
La-Man Corporation and Subsidiaries Pro Forma Consolidated Balance Sheet as of
December 31, 1997
La-Man Corporation and Subsidiaries Pro Forma Consolidated Statement of
Income for year ended June 30, 1997
La-Man Corporation and Subsidiaries Pro Forma Consolidated Statement of
Income for the six months ended December 31, 1997
La-Man Corporation and Subsidiaries Notes to Pro Forma Consolidated Financial
Statements
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 8-K/A to be signed on its behalf
by the undersigned hereunto duly authorized.
LA-MAN CORPORATION
(REGISTRANT)
Date: April 28, 1998 By: /s/ J. William Brandner
-------------------------------
J. William Brandner, President
and Chief Executive Officer
<PAGE>
ITEM 7(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ELECTRONIC SIGN CORPORATION AND SUBSIDIARY (DBA AD ART)
Report of Independent Certified Public Accountants - Bartig, Basler and Ray,
CPAs, Inc.
Consolidated Balance Sheet as of December 31, 1997
Consolidated Statements of Income and Retained Earnings for years ended December
31, 1997 and 1996
Consolidated Statements of Cash Flows for years ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DECEMBER 31, 1997 AND 1996
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
------
<S> <C>
Report of Independent Certified Public Accountants.......... 1
Consolidated Financial Statements
Consolidated Balance Sheet................................ 2
Consolidated Statements of Income and Retained Earnings... 3
Consolidated Statements of Cash Flows..................... 4
Notes to Consolidated Financial Statements................ 5-14
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Electronic Sign Corporation (DBA Ad Art)
We have audited the accompanying consolidated balance sheet of Electronic Sign
Corporation (DBA Ad Art) (A California Corporation) and subsidiaries as of
December 31, 1997, and the related consolidated statements of income, retained
earnings and cash flows for each of the two years in the period ended December
31, 1997. 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 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 financial position of Electronic Sign
Corporation (DBA Ad Art) and subsidiaries at December 31, 1997, and the results
of their operations and their cash flows for each of the two years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
BARTIG, BASLER & RAY, CPAs, INC.
Citrus Heights, California
February 25, 1998
1
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Consolidated Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 144,268
Accounts receivable:
Trade accounts receivable, less allowance for
doubtful accounts of $144,524 2,756,086
Other receivables 144,098
Inventories 3,245,556
Costs and estimated earnings in excess of
billings on uncompleted contracts in progress 760,846
Deposits 89,884
Prepaid expenses 69,612
Deferred income taxes 183,344
----------
Total Current Assets 7,393,694
Property, plant and equipment 2,390,223
Other assets 61,972
----------
$9,845,889
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $3,297,805
Customer deposits 131,781
Accrued expenses 793,395
Liability for lawsuit settlement 139,278
Income taxes payable 337,672
Current portion of long-term debt 50,665
Current portion of obligations under capital leases 32,849
----------
Total Current Liabilities 4,783,445
NONCURRENT LIABILITIES
Long-term debt, less current maturities 1,130,750
Obligations under capital leases, less current
portion 38,106
Line of credit 2,698,397
----------
Total Liabilities 8,650,698
----------
STOCKHOLDERS' EQUITY
Common stock, no par value; authorized 1,000 shares,
issued and outstanding - 50 shares 5,000
Retained earnings 1,190,191
----------
Total Stockholders' Equity 1,195,191
----------
$9,845,889
==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Consolidated Statements of Income
and Retained Earnings
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Net sales $28,277,081 $27,955,818
Cost of sales 20,496,833 20,464,530
----------- -----------
Gross Profit 7,780,248 7,491,288
----------- -----------
Expenses
Selling 4,766,681 4,544,776
Art department 387,797 350,215
General and administrative 1,503,037 1,343,839
----------- -----------
Total Expenses 6,657,515 6,238,830
----------- -----------
Income from operations 1,122,733 1,252,458
----------- -----------
Other income (expenses)
Interest income 9,870 15,570
Other income 36,316 75,906
Interest expense (401,596) (75,866)
Aborted merger expenses -- (605,469)
----------- -----------
Total Other Income (Expenses) (355,410) (589,859)
----------- -----------
Income before income taxes 767,323 662,599
Income tax expenses 243,665 308,765
----------- -----------
Net income 523,658 353,834
Retained earnings, beginning 666,533 312,699
----------- -----------
Retained earnings, ending $ 1,190,191 $ 666,533
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 523,658 $ 353,834
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Depreciation 257,613 126,947
Deferred income taxes (61,456) (38,215)
Loss on disposals of property 24,586 6,592
Changes in operating assets and liabilities:
Trade accounts receivable (863,283) 159,484
Other receivables (48,015) (15,779)
Inventories (278,464) (777,341)
Costs and estimated earnings in excess of
billings on uncompleted contracts in progress 959,908 (1,838,005)
Deposits 188,807 (229,053)
Prepaid expenses (55,492) 20,425
Other assets (61,972) --
Accounts payable (1,547,829) 2,254,727
Customer deposits (1,088,678) 694,650
Accrued expenses (18,914) 285,398
Income taxes payable (345,624) 313,138
----------- -----------
Net Cash Provided by (Used for) Operating Activities (2,415,155) 1,316,802
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures (369,720) (1,064,231)
----------- -----------
Net Cash Used for Investing Activities (369,720) (1,064,231)
----------- -----------
Cash Flows from Financing Activities:
New capital leases 32,561 52,020
Net borrowings on line of credit 2,698,397 --
Principal payments on long-term debt (88,733) (9,175)
Payments on capital lease obligations (44,851) (34,089)
----------- -----------
Net Cash Provided (Used) by Financing Activities 2,597,374 8,756
----------- -----------
Net increase (decrease) in cash (187,501) 261,327
Cash, beginning of year 331,769 70,442
----------- -----------
Cash, end of year $ 144,268 $ 331,769
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
History and Business Activity
Electronic Sign Corporation (the Company) is engaged in the
manufacturing and installation of electronic signs. The Company was
incorporated under the laws of the State of California in 1995.
Effective May 22, 1995, the Company acquired certain assets and assumed
certain liabilities of Ad Art Signs, Inc. Assets acquired included
petty cash accounts, salesmen and other travel advances, deposits for
various insurance policies and certain inventory items (including work
in process). Liabilities assumed included obligations to complete work-
in-progress, obligations for service and maintenance agreements and
certain warranty and payroll obligations. Effective July 15, 1996, the
Company completed the purchase of real estate and equipment owned by Ad
Art Signs, Inc. These assets had been leased from Ad Art Signs, Inc. on
a month-to-month basis.
The consideration given for these assets included the following:
<TABLE>
<S> <C>
Notes and mortgage payable $ 971,698
Indebtedness to an individual 275,000
Cash payment 295,757
----------
$1,542,455
==========
</TABLE>
The acquisition was accounted for under the purchase method. Some of
the stockholders of the Company were also stockholders in Ad Art Signs,
Inc.
Principles of Consolidation
The financial statements include the accounts and operations of the
Company and Electronic Sign Corporation (DBA Ad Art) of Nevada, a
wholly-owned subsidiary. Intercompany transactions have been eliminated
in consolidation.
5
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Revenue Recognition
The Company recognizes revenues on long-term construction contracts
under the percentage-of-completion method, measured by the percentage
of contract costs incurred to estimated total costs for each contract.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance. Provisions for
estimated losses on uncompleted contracts are made in the period in
which such losses are determined. Changes in job performance, job
conditions, and estimated profitability may result in revisions to
costs and income and are recognized in the period in which the
revisions are determined. Profit is included in revenues when its
realization is reasonably assured.
Inventories
Inventories are stated at the lower of cost or market and consist of
raw materials used in the production of the Company's product, work-in-
process, and finished goods. Cost is determined by the rolling weighted
average method.
Depreciation
Depreciation of property and equipment is provided on the straight-line
method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements 40 years
Machinery, vehicles and equipment 3-10 years
Office furniture and equipment 5-10 years
</TABLE>
Income Taxes
Income tax expense or benefit includes both current and deferred state
and federal income taxes. Deferred income taxes are provided for
temporary differences in the recognition of income and expense for
financial reporting and income tax purposes. Deferred income tax assets
and liabilities are computed for differences between the financial
statement and tax bases of assets, liabilities and tax carry forwards
that will result in taxable or deductible amounts in future periods
based upon enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Deferred
tax liabilities are recognized when incurred; deferred tax assets, when
necessary, are reduced by a valuation allowance and recognized when it
is more likely than not that the asset will be realized.
6
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Significant estimates used
in preparing these financial statements include those assumed in
computing profit percentages under the percentage-of-completion method
of revenue recognition.
Financial Instruments
The carrying amounts of financial instruments, including cash
receivables and accounts payable approximated fair value as of December
31, 1997, because of the relatively short maturity of these
instruments. The carrying amounts of long-term debt approximated fair
value at December 31, 1997, based upon interest rates that are
currently available for debt with similar terms. Substantially all
financial instruments are held for purposes other than trading.
Note 2: TRADE ACCOUNTS RECEIVABLE
-------------------------
Trade accounts receivable consist of:
<TABLE>
<S> <C>
Completed contracts $3,606,656
Contracts in progress 184,320
----------
3,790,976
Less: Allowance for doubtful accounts (144,524)
Deferred income (890,366)
----------
$2,756,086
==========
</TABLE>
7
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 3: INVENTORIES
-----------
Inventories are as follows:
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Raw materials and finished goods $2,029,340
Work-in-process 1,295,461
----------
3,324,801
Reserve for obsolescence (79,245)
----------
$3,245,556
==========
</TABLE>
Note 4: PROPERTY AND EQUIPMENT
----------------------
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Land $ 339,802
Building and improvements 1,201,935
Machinery, vehicles and equipment 924,887
Office furniture and equipment 308,285
----------
2,774,909
Less: accumulated depreciation (384,686)
----------
$2,390,223
==========
</TABLE>
The depreciation expense for 1997 was $257,613 and for 1996 was
$126,947.
Note 5: COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
-----------------------------------------------------------------
CONTRACTS IN PROGRESS
---------------------
Costs and estimated earnings on uncompleted contracts consist of the
following at December 31, 1997:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts $1,101,727
Estimated earnings 281,981
----------
1,383,708
Billings to date (622,862)
----------
Costs and estimated earnings in excess of
billings on uncompleted contracts in progress $ 760,846
==========
</TABLE>
8
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 6: LONG-TERM DEBT
--------------
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Long-term debt consists of the following:
8% note payable due in monthly installments of $3,000
through March 1, 1999. Secured by deed of trust on
real property. $ 264,216
8% note payable due in monthly installments of $8,663
through May 2013. Secured by deed of trust on land
and building $ 917,199
----------
Total Payable 1,181,415
Current Portion 50,665
----------
Long-Term Debt $1,130,750
==========
</TABLE>
Aggregate maturities of long-term debt over future years are as
follows:
<TABLE>
<S> <C>
1998 $ 50,665
1999 282,961
2000 37,001
2001 40,073
2002 43,399
Thereafter 727,316
----------
$1,181,415
==========
</TABLE>
Note 7: COMMITMENTS
-----------
The Company conducts its operations partially from leased facilities.
These leases are classified as operating leases and expire on various
dates through 2002.
The Company also leases equipment under capital leases which expire on
various dates through 2000. The total capitalized cost for this
equipment is $131,153 with accumulated depreciation of $35,401 as of
December 31, 1997.
9
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 7: COMMITMENTS (continued)
-----------
As of December 31, 1997, future net minimum lease payments under
capital leases and future minimum rental payments required under
operating leases that have initial or remaining noncancelable lease
terms in excess of one year are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year Ending December 31, Leases Leases
------- ----------
<S> <C> <C>
1998 $60,978 $ 369,580
1999 15,422 368,755
2000 2,217 330,262
2001 -- 289,301
2002 -- 16,726
------- ----------
78,617 $1,374,624
==========
Less amount representing interest (7,662)
-------
Present value minimum lease payments $70,955
=======
</TABLE>
Rental expense for the years ended December 31, 1997 and 1996 was
approximately $334,996 and $228,605, respectively.
Note 8: LINE OF CREDIT
--------------
The Company has a $3,000,000 line of credit which had a balance of
$2,698,397 at December 31, 1997. Advances on the credit line carry an
interest rate of 2.5% over prime. Under the terms of this loan
agreement, the line of credit matures March 31, 1999 and is
collateralized by deposits, accounts receivable, inventory and
property. The agreement has covenants which require the Company to
comply with monthly reporting procedures and other legal provisions
that will not impair the collateral. At December 31, 1997, the Company
was not in violation of any loan covenants.
10
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 9: PENSION PLANS
-------------
The Company is a party to four different labor contracts with three
locals of the International Brotherhood of Electrical Workers Union
(IBEWU). Under the terms of the contracts, the Company is required to
contribute 3% of participating employee payroll to a multi-employer
pension plan administered by the IBEWU. For the years ended December
31, 1997 and 1996, the Company's pension cost was $190,242 and
$148,580, respectively. If the plan terminates or the Company
withdraws, the Company could be subject to a withdrawal liability.
The Company also has a defined contribution retirement 401(k) plan
covering substantially all of its employees. Under the plan, the
Company will contribute a matching 20% of each employee contribution to
a maximum annual Company contribution of either $200 per employee or 3%
of each employee's compensation. The Company contribution under the
plan was $24,532 and $17,045 for the years ended December 31, 1997 and
1996, respectively.
Note 10: INCOME TAXES
------------
The components of deferred tax assets and liabilities consist of the
following as of December 31, 1997:
<TABLE>
<S> <C>
Deferred Tax Assets
Accounts receivable $ 58,009
Accrued expenses 326,253
---------
Gross Deferred Tax Assets 384,262
Valuation allowance --
---------
Total Deferred Tax Assets 384,262
Deferred Tax Liabilities
Inventory (113,181)
Plant and equipment (87,737)
---------
Net Deferred Tax Assets $ 183,344
=========
</TABLE>
11
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 10: INCOME TAXES (continued)
------------
The Company believes that it is more likely than not that deferred tax
assets will be realized through future taxable earnings. The valuation
allowance at December 31, 1997 was estimated at $0.
Income tax expense (benefits) at December 31, 1997 and 1996 consist of
the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Currently Payable:
Federal income tax $291,050 $304,532
State franchise tax 14,071 42,449
-------- --------
305,121 346,981
-------- --------
Deferred Asset:
Federal income tax $(47,217) $(29,361)
State franchise tax (14,239) (8,855)
-------- --------
(61,456) (38,216)
-------- --------
Total $243,665 $308,765
======== ========
</TABLE>
The following summary reconciles differences from taxes on income at
the federal combined and state statutory rate with the effective
rate:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Federal taxes on income at statutory rate 34.00% 34.00%
State taxes on income at statutory rate 9.30 9.30
Federal benefit for prepayment of state taxes (3.16) (3.16)
------- -------
Combined federal and state statutory rate 40.14% 40.14%
Nondeductible expenses and permanent differences 8.99 7.80
State tax refunds, credits and apportionment (7.90) (4.50)
Other (9.48) 3.16
------- -------
Taxes on income at effective rates 31.75% 46.60%
======= =======
</TABLE>
12
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 11: CONCENTRATION OF CREDIT RISK
----------------------------
The Company sells signs in the United States and internationally. The
Company performs ongoing credit evaluations of its customers and in
some instances, requires deposits on customer orders. The Company
maintains reserves for potential credit losses and such losses have
been within management's expectations.
Approximately 46% of the Company's labor force is covered by
collective bargaining agreements which are generally renewed every
three years. Approximately 35% of the Company's labor force is covered
by agreements which will expire within the next year.
Note 12: ABORTED REORGANIZATION AND MERGER
---------------------------------
Effective October 1996, the Company had concluded a plan of
reorganization and merger with a dormant public corporation.
Throughout the remainder of 1996 the parties to the merger became
adversarial and, in December 1996, discussions began regarding the
recision of the plan of reorganization and merger. In April 1997, a
Mutual Agreement Regarding Recision, was entered into between the
Company, the dormant public company and other individuals, all of
which were parties to the original transaction. The purpose of the
recision was to reverse the merger and place each party, more or less,
in the same position it would have been in had the merger never taken
place. Total costs incurred by the Company, primarily for legal and
consulting fees, related to the original merger and the recision
totaled $605,469. Of these costs, $120,000 is the result of a
Settlement Agreement and Mutual General Release where the Company has
agreed to pay $120,000 in installments without interest in exchange
for dismissal of all litigation..
Note 13: SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Cash Paid During the Period for:
Interest expense $374,968 $75,865
Income taxes $718,395 $80,800
</TABLE>
13
<PAGE>
ELECTRONIC SIGN CORPORATION
AND SUBSIDIARY
(DBA AD ART)
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
Note 13: SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (continued)
------------------------------------------------
Supplemental disclosures of noncash investing and financing
activities:
Effective July 15, 1996, the Company acquired certain assets and
assumed certain liabilities of Ad Art Signs, Inc. These were:
<TABLE>
<S> <C>
Assets
Land $ 339,802
Building 948,176
Equipment 254,477
----------
$1,542,455
==========
Liabilities
Notes and mortgage payable $ 971,698
Amount due to an individual 275,000
----------
Total Liabilities 1,246,698
Cash payment 295,757
----------
$1,542,455
==========
</TABLE>
Note 14: SUBSEQUENT EVENTS
-----------------
In January and February of 1998 the Company entered into several
leases for the use of several vehicles valued in total at $917,480.
Lease terms expire at various terms through 2002. These leases were
classified as operating leases and included in the net minimum future
rental payments of footnote 6.
On February 18, 1998, La-Man Corporation purchased 100% of the
outstanding common stock of the Company from existing shareholders in
exchange for $3,000,000 and 810,000 shares of its common stock.
14
<PAGE>
ITEM 7(B) PRO FORMA FINANCIAL INFORMATION
LA-MAN CORPORATION AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
La-Man Corporation and Subsidiaries Pro Forma Consolidated Balance Sheet as of
December 31, 1997
La-Man Corporation and Subsidiaries Pro Forma Consolidated Statement of
Income for year ended June 30, 1997
La-Man Corporation and Subsidiaries Pro Forma Consolidated Statement of
Income for the six months ended December 31, 1997
La-Man Corporation and Subsidiaries Notes to Pro Forma Consolidated Financial
Statements
15
<PAGE>
LA-MAN CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET - UNAUDITED
DECEMBER 31, 1997
<TABLE>
<CAPTION>
La-Man Electronic Sign Consolidated
Corporation and Corporation Pro Forma Pro Forma
Subsidiaries (d/b/a Ad Art) Adjustments Balance Sheet
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ - $ 144,268 $ 4,365,000 (1) $ 1,266,718
(3,242,550) (2)
Accounts receivable:
Trade - net 2,542,615 2,756,086 - 5,298,701
Other 129,245 144,098 - 273,343
Inventories 1,104,546 3,245,556 - 4,350,102
Costs and estimated earnings in excess of
billings on uncompleted contracts in progress 160,680 760,846 - 921,526
Prepaid expenses 443,481 159,496 - 602,977
Deferred tax assets 297,000 183,344 - 480,344
- -------------------------------------------------------------------------------------------------------------------------------
4,677,567 7,393,694 1,122,450 13,193,711
- -------------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - NET 3,116,515 2,390,223 1,100,000 (3) 6,606,738
- -------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Intangibles - net 2,931,148 - 4,319,809 (4) 7,428,957
178,000 (5)
Other 318,940 61,972 - 380,912
- -------------------------------------------------------------------------------------------------------------------------------
3,250,088 61,972 4,497,809 7,809,869
- -------------------------------------------------------------------------------------------------------------------------------
$11,044,170 $9,845,889 $6,720,259 $27,610,318
===============================================================================================================================
LIABILITIES AND STOCKHOLDERS= EQUITY
CURRENT LIABILITIES
Accounts payable $ 586,771 $3,297,805 - $ 3,884,576
Customer deposits 568,843 131,781 - 700,624
Accrued expenses 759,415 1,270,345 - 2,029,760
Deferred income 19,257 - - 19,257
Current maturities of long-term debt 360,000 50,665 - 410,665
Current portion of obligations under capital leases 28,808 32,849 - 61,657
- -------------------------------------------------------------------------------------------------------------------------------
2,323,094 4,783,445 - 7,106,539
- -------------------------------------------------------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
Long-term debt, less current maturities 2,890,000 1,130,750 3,500,000 (6) 7,520,750
Obligations under capital leases, less current portion 6,166 38,106 - 44,272
Line of credit 461,000 2,698,397 - 3,159,397
- -------------------------------------------------------------------------------------------------------------------------------
3,357,166 3,867,253 3,500,000 10,724,419
- -------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS= EQUITY
Common stock 3,597 5,000 1,041 (7) 4,638
(5,000) (8)
Additional paid-in capital 6,565,339 - 4,414,409 (9) 10,979,748
Accumulated deficit (1,205,026) 1,190,191 (1,190,191) (8) (1,205,026)
- -------------------------------------------------------------------------------------------------------------------------------
5,363,910 1,195,191 3,220,259 9,779,360
- -------------------------------------------------------------------------------------------------------------------------------
$11,044,170 $9,845,889 $ 6,720,259 $27,610,318
===============================================================================================================================
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
1
<PAGE>
LA-MAN CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME - UNAUDITED
YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
La-Man Electronic Sign Consolidated
Corporation and Corporation Pro Forma Pro Forma Statement
Subsidiaries (d/b/a Ad Art) Adjustments of Income
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $15,945,627 $31,292,549 $ - $47,238,176
COST OF SALES 8,123,075 23,181,042 - 31,304,117
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit 7,822,552 8,111,507 15,934,059
Operating expenses 6,790,925 6,993,417 153,424 (10) 13,937,766
- ----------------------------------------------------------------------------------------------------------------------------------
Income from operations 1,031,627 1,118,090 (153,424) 1,996,293
OTHER INCOME (EXPENSE)
Interest income 100,770 9,362 - 110,132
Interest expense (233,140) (147,166) (306,250) (11) (686,556)
Gain(loss) on disposal of property and equipment 270,892 (296) - 270,596
Aborted merger expenses - (605,469) - (605,469)
Miscellaneous income 19,253 67,533 - 86,786
- ----------------------------------------------------------------------------------------------------------------------------------
157,775 (676,036) (306,250) (824,511)
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income tax benefit 1,189,402 442,054 (459,674) 1,171,782
Income tax benefit (expense) 229,000 (198,927) 109,454 (12) 139,527
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 1,418,402 243,127 (350,220) 1,311,309
DISCONTINUED OPERATIONS
Loss from operations of discontinued operations 281,371 - - 281,371
Loss on disposal of discontinued operations 371,572 - - 371,572
- ----------------------------------------------------------------------------------------------------------------------------------
652,943 - - 652,943
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 765,459 $ 243,127 $ (350,220) $ 658,366
==================================================================================================================================
BASIC EARNINGS PER COMMON SHARE
Continuing operations $ .43 $ (.14) $ 0.29
Discontinued operations (.20) .06 (0.14)
- ----------------------------------------------------------------------------------------------------------------------------------
$ .23 $ (.08) $ 0.15
==================================================================================================================================
DILUTED EARNINGS PER COMMON SHARE
Continuing operations $ .37 $ (.10) $ 0.27
Discontinued operations (.16) .06 (0.10)
- ----------------------------------------------------------------------------------------------------------------------------------
$ .21 $ (.04) $ 0.17
==================================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 3,438,580 1,041,482 (13) 4,480,062
Diluted 4,202,331 1,743,155 (13) 5,945,486
==================================================================================================================================
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
2
<PAGE>
LA-MAN CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME - UNAUDITED
SIX MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
La-Man Electronic Sign Consolidated
Corporation and Corporation Pro Forma Pro Forma Statement
Subsidiaries (d/b/a Ad Art) Adjustments of Income
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $9,771,147 $16,430,292 $ - $26,201,439
COST OF SALES 5,327,422 12,445,435 - 17,772,857
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit 4,443,725 3,984,857 8,428,582
Operating expenses 3,937,168 3,063,625 76,712 (10) 7,077,505
- ----------------------------------------------------------------------------------------------------------------------------------
Income from operations 506,557 921,232 (76,712) 1,351,077
OTHER INCOME (EXPENSE)
Interest income 48,873 6,823 - 55,696
Interest expense (118,955) (207,868) (153,125) (11) (479,948)
Gain (loss) on disposal of property and equipment 3,150 (3,577) - (427)
Miscellaneous income 20,013 3,155 - 23,168
- ----------------------------------------------------------------------------------------------------------------------------------
(46,919) (201,467) (153,125) (401,511)
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income tax benefit 459,638 719,765 (229,837) 949,566
Income tax (expense) benefit (98,000) (228,565) 54,727 (12) (271,838)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 361,638 $ 491,200 $ (175,110) $ 677,728
==================================================================================================================================
EARNINGS PER COMMON SHARE
Basic $ .10 $ .05 $ .15
Diluted $ .08 $ .04 $ .12
==================================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 3,572,578 1,041,482 (13) 4,614,060
Diluted 4,801,469 1,778,324 (13) 6,579,793
==================================================================================================================================
</TABLE>
See accompanying notes to unaudited pro forma consolidated financial statements
3
<PAGE>
LA-MAN COMPORATION AND SUBSIDIARIES
Notes to Unaudited Pro Forma Consolidated Financial Statements
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated financial statements
illustrate the effect of the acquisition of Electronic Sign Corporation
(d/b/a Ad Art) ("Ad Art") by La-Man Corporation ("The Company") on the
Company's financial position and results of operations. The unaudited
pro forma consolidated balance sheet as of December 31, 1997 is based
upon the historical balance sheets of the Company and Ad Art as of that
date and assumes that the acquisition took place on that date. The
unaudited pro forma consolidated statements of income for the year
ended June 30, 1997 and the six months ended December 31, 1997 are
prepared based upon the historical results of operations of the Company
and Ad Art and assumes that the acquisition occurred at July 1, 1996.
The La-Man Corporation and subsidiaries balance sheet as of December
31, 1997 and the statement of income for the six months ended December
31, 1997 and the Ad Art balance sheet as of June 30, 1997 and the
statements of income for the year and six months ended June 30, 1997
and December 31, 1997, respectively, are unaudited but, in the opinion
of management, include all adjustments, consisting only of normal
recurring accruals, necessary for the fair presentation of the results
of operations.
The pro forma consolidated financial statements do not purport to be
indicative of what actual results of operations would have been had the
acquisition occurred on the dates as presented in the pro forma
consolidated financial statements and the pro forma consolidated
financial statements may not be indicative of results that may occur in
the future. In addition, the pro forma consolidated financial
statements may not be indicative of the actual results of the
acquisition. In particular, the pro forma consolidated financial
statements are based upon management=s current estimate of the
allocation of the purchase price. The actual allocations may differ.
The consolidated pro forma financial statements should be read in
conjunction with the historical financial statements of the Company and
Ad Art.
NOTE 2 PRO FORMA ADJUSTMENTS
(1) In conjunction with the acquisition of Ad Art, the Company received
$3,395,000 (net of debt issue costs totaling $105,000) in exchange
for debentures issued as discussed in pro forma adjustment (6)
below. In addition, the Company sold 231,482 shares of common stock
for total cash proceeds of $970,000 (net of $30,000 of issuance
costs) as discussed in pro forma adjustment (7) below.
(2) The Company paid cash totaling $3,242,550 in connection with the
acquisition of Ad Art. These payments included $3,000,000 paid to
retire notes payable to certain of the prior shareholders of Ad
Art. The remaining $242,550 represents legal and consulting fees
and other costs of the acquisition.
(3) The adjustment to property, plant and equipment is to adjust Ad
Art=s property to estimated fair market value as of the date of the
acquisition.
(4) This adjustment to intangibles represents the goodwill acquired in
the acquisition. The acquisition was recorded using the purchase
method of accounting. Accordingly, the purchase price was allocated
to the net assets acquired based upon their estimated fair market
values. The excess of the purchase price over the estimated fair
value of the net assets acquired has been accounted for as goodwill
and will be amortized over its estimated life of 40 years.
(5) This adjustment to intangibles represents capitalized loan costs
associated with the debt incurred as discussed in pro forma
adjustment (6) below. Total loan costs included cash fees of
$105,000 (see pro forma adjustment (1) above) and stock purchase
warrants with a fair market value of $73,000 (see pro forma
adjustment (9) below).
(6) In connection with the acquisition of Ad Art, the Company issued
$3,500,000 of 8.75% subordinated convertible dentures. Interest on
the debentures is payable monthly with monthly principal payments
beginning March 2001 at a rate of 1% of the outstanding balance
with a final balloon payment due March 2005. The debentures are
convertible into La-Man Corporation common stock at a rate of $4.75
per share, subject to certain adjustments.
4
<PAGE>
LA-MAN COMPORATION AND SUBSIDIARIES
Notes to Unaudited Pro Forma Consolidated Financial Statements
NOTE 2 PRO FORMA ADJUSTMENTS (continued)
(7) In connection with the acquisition, 810,000 shares of the Company=s
$.001 par value common stock were issued to certain of the prior
shareholders of Ad Art. In addition, a total of 231,482 shares of
the Company's $.001 par value common stock were sold to third
parties for cash proceeds of $1,000,000 (see pro forma adjustment
(1) above) to assist in financing the acquisition.
(8) This adjustment to common stock and retained earnings is to
eliminate Ad Art's equity accounts prior to the acquisition. The
acquisition was recorded using the purchase method of accounting.
Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair market values. The excess
of the purchase price over the estimated fair value of the net
assets acquired has been accounted for as goodwill.
(9) Pro forma adjustments to paid in capital consist of the following:
<TABLE>
<S> <C>
Fair market value in excess of par value of
810,000 shares of the Company's $.001 par
value common stock issued to certain of the
prior shareholders of Ad Art (see pro forma
adjustment (7) above) $3,336,390
Fair market value in excess of par value (net
of issuance costs) of 231,482 shares of the
Company's $.001 par value common stock sold
to finance acquisition (see pro forma
adjustment (7) above) 969,769
Fair market value of warrants to purchase
200,000 shares of the Company's $.001 par
value common stock at $4.32 per share; issued
to pay debt issuance costs (see pro forma
adjustment (5) above) 73,000
Fair market value of warrants to purchase
75,000 shares of the Company's $.001 par
value common stock at $4.32 per share; issued 35,250
to pay fees associated with the acquisition ----------
$4,414,409
==========
</TABLE>
(10) The pro forma adjustment to operating expenses includes the
amortization of debt issue costs over the 7 year term of the
related debt (see pro forma adjustment (5) above), the additional
depreciation on the adjustment of Ad Art's property and equipment
to fair market value (see pro forma adjustment (3) above), and the
amortization of goodwill acquired over its estimated useful life
of 40 years (see pro forma adjustment (4) above.
(11) The pro forma adjustment to interest expense represents interest
expense incurred on the 8.75% subordinated convertible note
payable (see pro forma adjustment (6) above).
(12) The pro forma adjustment to income taxes represents the cumulative
tax benefit of the other pro forma adjustments.
(13) The pro forma adjustments to basic weighted average shares
outstanding includes the 810,000 shares issued to certain of Ad
Art's prior shareholders and the 231,482 shares sold to third
parties (see proforma adjustment (7) above). The proforma
adjustments to diluted weighted average shares outstanding include
the dilutive effect of the $3,500,000, 8.75% convertible
debentures (see proforma adjustment (6) above).
5
<PAGE>
LA-MAN COMPORATION AND SUBSIDIARIES
Notes to Unaudited Pro Forma Consolidated Financial Statements
NOTE 3 EARNINGS PER SHARE
Pro forma diluted earnings per common share is calculated as follows:
<TABLE>
<CAPTION>
Year Ended 06/30/97 Six Months
----------------------------------------
Continuing Discontinued Ended
Operations Operations Net 12/31/97
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Pro forma net income as shown $1,311,309 $ (652,943) $ 658,366 $ 671,588
Add interest on convertible debt (net of tax):
$750,000 8% note convertible at $4.53 52,866 52,856 21,412
$3.5 million 8.75% debentures
convertible at $4.75 269,784 269,784 109,289
---------- ---------- ---------- ----------
Adjusted pro forma net income $1,633,949 $ (652,943) $ 981,006 $ 802,289
========== ========== ========== ==========
Basic weighted average shares outstanding 4,480,062 4,480,062 4,480,062 4,614,060
Add shares issuable upon conversion of
convertible debt 902,405 902,405 902,405 902,405
Add additional shares issuable from dilutive
options and warrants, net of treasury
stock repurchased 563,019 563,019 563,019 1,063,328
---------- ---------- ---------- ----------
Adjusted diluted weighted average shares
outstanding 5,945,486 5,945,486 5,945,486 6,579,793
========== ========== ========== ==========
Diluted earnings per common share $ 0.27 $ (0.10) $ 0.17 $ 0.12
========== ========== ========== ==========
</TABLE>
6
