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
MAY 21, 1999
Date of report (Date of earliest event reported)
NUCLEUS, INC.
(Exact Name of Registrant as Specified in its Charter)
0-14039 11-2714721
(Commission File Number) (I.R.S. Employer Identification No.)
150 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60601
(Address of Principal Executive Offices) (Zip Code)
312/683-9000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
As previously reported on Form 8-K dated May 21, 1999 and filed with the
Securities and Exchange Commission (the "Commission") on June 7, 1999, Nucleus,
Inc. ("Nucleus" or the "Company") acquired Telos Distributing, Inc. ("Telos")
pursuant to an Agreement and Plan of Merger dated as of May 21, 1999 (the
"Agreement"). This Form 8-K/A is being filed in accordance with the Commission's
rules to include the required historical and pro forma financial information
relating to the transaction which was not available at the time of the initial
filing on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Nucleus files herewith the following financial statements of
Telos:
Report of Independent Public Accountants
Balance Sheets as of December 31, 1998 and
March 31, 1999 (unaudited)
Statements of Operations for the years ended December 31,
1997 and 1998 and the three months ended
March 31, 1998 (unaudited) and 1999 (unaudited)
Statements of Cash Flows for the years ended December 31,
1997 and 1998 and the three months ended March 31,
1998 (unaudited) and 1999 (unaudited)
Notes to Financial Statements
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
Board of Directors and Shareholders
Telos Distributing, Inc.
We have audited the balance sheet of Telos Distributing, Inc. as of December
31, 1998, and the related statements of operations and cash flows for each of
the years in the two year period ended December 31, 1998. 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 Telos Distributing, Inc. as of
December 31, 1998, and the results of its operations and cash flows for
each of the years in the two year period ended December 31, 1998, in conformity
with generally accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
May 12, 1999
3
<PAGE>
TELOS DISTRIBUTING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1998 1999
- ------ ------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 773 $ 438
Accounts receivable, trade.......................... 116,598 35,505
Note receivable current portion..................... 5,027 5,075
Inventory........................................... 19,626 30,219
-------- --------
Total current assets............................. 142,024 71,237
Property and equipment, at cost, net of
accumulated depreciation............................ 335 84
Note receivable....................................... 19,222 18,592
Other assets.......................................... 1,812 1,812
Goodwill, net of amortization......................... 19,756 19,245
-------- --------
$183,149 $110,970
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Accounts payable.................................... $124,245 $ 67,456
Accrued expenses.................................... 2,933 1,527
Accrued salaries - officers......................... 15,000 5,153
-------- --------
Total current liabilities........................ 142,178 74,136
-------- --------
Stockholders' equity:
Common stock, no par value, 200,000 shares
authorized, 79,500 shares issued and
outstanding...................................... 400 400
Retained earnings.................................... 40,571 36,434
-------- --------
40,971 36,834
-------- --------
$183,149 $110,970
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
TELOS DISTRIBUTING, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------------------- --------------------------
1997 1998 1998 1999
---------------- --------------- ------------ --------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Total revenues........................... $1,085,977 $1,300,648 $332,040 $185,268
Cost of revenues......................... 735,558 952,288 26,926 93,693
Selling, general & administrative
expenses................................ 313,502 287,742 70,323 95,712
---------- ---------- -------- --------
Income from operations................... 36,917 60,618 34,791 (4,137)
Other income (expense)................... 597 (203) -- --
---------- ---------- -------- --------
Income (loss) before taxes............... 37,514 60,415 34,791 (4,137)
Provisions for income taxes.............. 7,618 12,761 6,700 --
---------- ----------- -------- --------
Net income (loss)........................ $ 29,896 $ 47,654 $ 28,091 $ (4,137)
========== ========== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
TELOS DISTRIBUTING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------- -------------------------------
1997 1998 1998 1999
--------------- ------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss)........................... $ 29,896 $ 47,654 $ 28,091 $ (4,137)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization........... 3,277 2,198 511 762
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable.............................. 33,823 (93,661) (103,864) 81,093
(Increase) decrease in inventory.......... (11,510) 11,827 (3,829) (10,593)
Decrease in deposits...................... -- 1,470 -- --
Increase (decrease) in accounts
payable and accrued expenses............ (91,249) 42,112 93,165 (73,195)
Increase (decrease) in accrued
income taxes............................ 6,165 (6,165) (6,165) 5,153
-------- -------- --------- --------
Total adjustments....................... (59,494) (42,219) (20,182) 3,220
-------- -------- --------- --------
Net cash provided by (used in) operating
activities................................ (29,598) 5,435 7,909 (917)
-------- -------- --------- --------
Cash flows from investing activities:
Repayment of notes receivable............. 38,042 3,247 582
Acquisition of plant and equipment.......... (430) -- -- --
-------- -------- --------- --------
Net cash provided by investing activities... 37,612 3,247 582
-------- -------- --------
Cash flows from financing activities:
Repayment of long-term debt............... (10,091) (7,909) (7,909) --
-------- -------- --------- --------
Net cash (used in) financing activities... (10,091) (7,909) (7,909) --
-------- -------- --------- --------
Increase (decrease) in cash................. (2,077) 773 -- (335)
Cash and cash equivalents, beginning of
period.................................... 2,077 -- -- 773
-------- -------- --------- --------
Cash and cash equivalents, end of
period.................................... $ -- $ 773 $ -- $ 438
======== ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
TELOS DISTRIBUTING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------------------- ----------------------------
1997 1998 1998 1999
---------------- --------------- ------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Supplement cash flow information:
Cash paid for interest.................. $ -- $ 203 $ -- $ --
Cash paid for income taxes.............. -- 7,500 -- --
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
TELOS DISTRIBUTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 1. Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
The Company was incorporated in Colorado in August 1991 and has elected to
be taxed as a "C" corporation. The Company provides computer equipment, software
and service to business and individual customers in the Denver metropolitan
area. The Company distributes its products through a service facility in Arvada,
CO.
Inventory:
---------
Inventory consisting primarily of finished goods including complete
computer systems, spare parts and related equipment held for retail sale is
valued at the lower of cost or market on a first-in first-out basis.
Property, Plant and Equipment:
-----------------------------
Property, plant and equipment is recorded at cost and is depreciated based
upon estimated useful lives using the straight-line method. Estimated useful
lives range from 3 to 5 years for furniture and fixtures and from 5 to 10 years
for equipment.
Revenue Recognition:
-------------------
Revenue is recognized at the time the product is delivered or the service
is performed. Revenue related to long term service contracts is recognized on a
pro rata basis over the term of the contract. Provision for sales returns are
estimated based on the Company's historical return experience.
Intangible Assets:
-----------------
Intangible assets consist of goodwill related to an asset acquisition made
during 1993. Goodwill is being amortized using the straight line method over a
period of 15 years. Amortization expense amounted to $2,044 for both of the
years ended December 31, 1998 and 1997.
The Company makes reviews for the impairment of long-lived assets and
certain identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Under SFAS
No. 121, an impairment loss would be recognized when estimated future cash flows
expected to result from the use of the asset and its eventual disposition is
less than its carrying amount. No such impairment losses have been identified by
the Company for the 1998 and 1997 fiscal years.
Cash:
----
Cash and cash equivalents include deposits in banks and debt instruments
purchased with a maturity of three months or less.
Estimates:
---------
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
8
<PAGE>
TELOS DISTRIBUTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Advertising costs:
-----------------
Advertising costs are charged to operations when the advertising first
takes place. Advertising costs charged to operations were $6,510 and $5,486 in
1998 and 1997, respectively.
Concentration of Risks:
----------------------
The Company's short-term financial instruments consist of cash and cash
equivalents; accounts and loans receivable; and payables and accruals. The
carrying amounts of these financial instruments approximates fair value due to
their short-term maturities. Financial instruments that potentially subject the
Company to a concentration of credit risk consist principally of cash and
accounts receivable, trade. During the year the Company did not maintain cash
deposits at financial institutions in excess of the $100,000 limit covered by
the Federal Deposit Insurance Corporation. The Company had a major customer in
1998, (see Note 7) the loss of which may have a material negative impact upon
the Company in 1999.
Stock-based Compensation:
------------------------
The Company adopted Statement of Financial Accounting Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's first
quarter of 1996. Upon adoption of FAS 123, the Company continued to measure
compensation expense for its stock-based employee compensation plans using the
intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to
Employees. The Company did not pay stock based compensation during the years
ended December 31, 1998 and 1997.
Note 2. Property, Plant and Equipment
-----------------------------
Property, plant and equipment consists of the following at
December 31, 1998:
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Office furniture and equipment............ $ 21,291 $ 19,910
Vehicle................................... 3,500 3,500
-------- --------
24,791 23,410
Less accumulated depreciation............. (22,921) (23,075)
-------- --------
$ 1,870 $ 335
======== ========
</TABLE>
Depreciation charged to operations was $154 and $1,233 for the years ended
December 31, 1998 and 1997 respectively.
Note 3. Goodwill
--------
Amortization of goodwill amounted to $2,044 for each of the years ended
December 31, 1998 and 1997 and was computed using the straight line method over
a fifteen-year period. Goodwill recorded by the Company represents the excess of
the purchase price and liabilities assumed over the fair value of the assets of
Mile High Clone Supply, Inc., d/b/a EDW Computers (EDW) which amounted to
$30,657 at the purchase date (August 11, 1993). The Company continues to utilize
the EDW name to advertize and market its products and services.
9
<PAGE>
TELOS DISTRIBUTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 4. Note Receivable
---------------
During the year ended December 31, 1997, the Company converted an aggregate
of $30,194 of trade accounts receivable due from one customer to a note with
interest at 13.25%. During October 1998, the note was restructured to provide
for monthly payments of $440 with interest at 8.5% per year increasing to 10.5%
at October 15, 1999 and 15% at October 15, 2000. Should the note be paid in full
by October 15, 2000, the Company has agreed to a discount of the remaining
principal balance of $4,731. The term of the note extends through October 15,
2003. During the years ended December 31, 1998 and 1997, $3,247 and $2,698,
respectively, was repaid on the note.
Note 5. Income Taxes
------------
Income taxes are determined under the methodology as required by
Statement of Financial Accounting Standard No. 109 "Accounting for Income
Taxes."
The amounts shown for income taxes in the statements of operations differ
from the amounts computed at federal statutory rates. The following is a
reconciliation of those differences.
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997
-------- ---------
Tax at federal statutory rates................. 34% 34%
Surtax exemption............................... (18) (18)
State income taxes............................. 5 5
--- ---
21% 21%
=== ===
Note 6. Leases
------
Operating leases:
----------------
The Company leases its facilities under an operating lease expiring
September 30, 1999. Minimum future rentals payable under the lease are $17,900
for 1999.
Rent expense amounted to $23,748 and $29,252 for the years ended December
31, 1998 and 1997, respectively.
Note 7. Sales to major customers
------------------------
During the years ended December 31, 1998 and 1997, the Company recorded
revenue for goods or services provided to client companies that comprise greater
than 10% of total revenues as follows:
1998 1997
---- ----
Center Partners....................... $479,124 $ --
CEI Automation........................ 123,937 --
H.M. Brown............................ -- 108,034
Denver Zoological Society............. -- 112,997
10
<PAGE>
TELOS DISTRIBUTING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
At December 31, 1998 the Company had balances due from CEI Automation and
Center Partners amounting to $73,423 and $2,100, respectively, which were paid
in full subsequent to that date.
Note 8. Planned merger transaction
--------------------------
On May 21, 1999 the Company entered into a merger agreement with Nucleus,
Inc. (Nucleus) whereby all of the outstanding shares of the Company would be
exchanged for newly issued shares of Nucleus. The merger is expected to be
completed in mid-1999 and has been approved by the Company's Board of Directors.
11
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma combined financial statements of Nucleus
give effect to (1) the merger of Nucleus Holding Corporation ("Holding") and
Nucleus and (2) the acquisitions of Comp-Pro and Telos.
The unaudited pro forma condensed balance sheet as of March 31, 1999 and
the pro forma condensed combined statements of operations for the year ended
December 31, 1998 and the three months ended March 31, 1999 have been prepared
to illustrate the effect of the merger and the acquisitions described above. The
merger was accounted for as a pooling of interests and is treated as if it had
occurred on January 1, 1997 for the pro forma statement of operations for the
year ended December 31, 1997. The acquisitions (both accounted for as purchases)
and the merger transaction are treated as if they had occurred on March 31,
1999, for the pro forma balance sheet as of March 31, 1999, as of January 1,
1998, for the pro forma statement of operations for the year ended December 31,
1998 and as of January 1, 1999 for the three months ended March 31, 1999. The
unaudited pro forma condensed combined statement of operations for the year
ended December 31, 1998, was prepared from the audited historical statements of
operations of Nucleus, Holding, Comp-Pro and Telos for the year then ended. The
unaudited pro forma condensed balance sheet as of March 31, 1999, and the
statement of operations for the three months ended March 31, 1999, was prepared
from the unaudited historical balance sheets and statements of operations of
Nucleus, Holding, Comp-Pro and Telos, respectively.
The pro forma condensed combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of the combined
financial positions or combined results of operations of Nucleus that would have
been reported had the merger and the acquisitions described above occurred on
the dates indicated, nor do they represent a forecast of the combined financial
position of Nucleus at any future date or the combined results of operations of
Nucleus for any future period. Furthermore, no effect has been given in the pro
forma combined statements of operations for synergies or cost savings, if any,
that may be realized. The unaudited pro forma condensed financial statements
reflect the acquisitions using the purchase method of accounting.
The following unaudited pro forma condensed combined financial statements
and accompanying notes are qualified in their entirety by reference to, and
should be read in conjunction with Nucleus' Management's Discussion and Analysis
of Financial Condition and Results of Operations included in its Annual Report
on Form 10-KSB for the year ended December 31, 1998, as amended, and its
Quarterly Report on Form 10-Q for the period ended March 31, 1999, and the
audited financial statements of Telos, which are also included within this Form
8-K/A.
12
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL
---------------------------- PRO FORMA
NUCLEUS(1) HOLDING(1)(2) ADJUSTMENTS PRO FORMA
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue....................................... $ 721,745 $ 956,810 $ -- $1,678,555
Cost of revenues.............................. 690,064 615,229 -- 1,305,293
Selling, general, & administrative
expense...................................... 429,212 638,799 -- 1,068,011
--------- --------- ---------- ----------
Operating loss................................ (397,531) 297,218) -- (694,749)
Other expense................................. (33,390) -- -- (33,390)
--------- --------- ---------- ----------
Net loss...................................... $(430,921) $(297,218) $ -- $ (728,139)
========= ========= ========== ==========
Diluted loss per share...................... $ (0.45) $ (297.22) $ (0.16)
========= ========= ==========
Diluted weighted average shares
outstanding............................... 950,622 1,000 3,537,073(3) 4,488,695
========= ========= ========== ==========
</TABLE>
13
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------- PRO FORMA
NUCLEUS(1) HOLDING(1) COMP-PRO TELOS ADJUSTMENTS PRO FORMA
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................... $ 747,144 $2,827,428 $ 481,176 $1,300,648 $ -- $5,356,396
Cost of revenues........................... 769,754 1,747,403 423,252 952,288 -- 3,892,697
Selling, general, & administrative
expenses................................. 455,857 1,147,135 81,188 287,742 -- 1,971,922
Amortization expense....................... -- -- -- -- 100,803(4) 100,803
---------- ---------- --------- ---------- --------- ----------
Income (loss) from operations.............. (478,467) (67,110) (23,264) 60,618 (100,803) (609,026)
Other income (expense)..................... (13,902) 35,008 -- (203) -- 20,903
---------- ---------- --------- ---------- --------- ----------
Income (loss) before taxes................. (492,369) (32,102) (23,264) 60,415 (100,803) (588,123)
Income tax expense (benefit)............... (25,820) -- -- 12,761 -- (13,059)
---------- ---------- --------- ---------- --------- ----------
Income (loss) before extraordinary item.... (466,549) (32,102) (23,264) 47,654 (100,803) (575,064)
Extraordinary item (net of tax benefit of
$25,820)................................. 50,125 -- -- -- -- 50,125
---------- ---------- --------- ---------- --------- ----------
Net income (loss).......................... $ (416,424) $ (32,102) $ (23,264) $ 47,654 $(100,803) $ (524,939)
========== ========== ========= ========== ========= ==========
Diluted income per share before
extraordinary item.................... $ (0.42) $ (32.10) $ (0.09)
========== ========== ==========
Diluted income per share................. $ (0.37) $ (32.10) $ (0.08)
========== ========== ==========
Diluted weighted average shares
outstanding............................ 1,106,056 1,000 5,606,109(3) 6,713,165
========== ========== ========= ==========
</TABLE>
14
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------- PRO FORMA
NUCLEUS(1) HOLDING(1) COMP-PRO TELOS ADJUSTMENTS PRO FORMA
------------ ----------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue............................. $ 11,787 $ 620,556 $149,178 $185,268 $ -- $ 966,789
Cost of revenues.................... 13,136 431,506 125,329 93,693 -- 663,664
Selling, general, &
administrative expenses........... 32,606 384,272 22,848 95,712 -- 535,438
Amortization expense................ -- -- -- -- 25,201(4) 25,201
---------- --------- -------- -------- ---------
Income (loss) from operations....... (33,955) (195,222) 1,001 (4,137) (25,201) (257,514)
Other income (expense).............. (5,210) (24,694) -- -- -- (29,904)
---------- --------- -------- -------- ---------
Income (loss) before taxes.......... (39,165) (219,916) 1,001 (4,137) (25,201) (287,418)
Income tax expense (benefit)........ -- -- 220 -- (220)(5) --
---------- --------- -------- -------- ---------
Net income (loss)................... $ (39,165) $(219,916) $ 781 $ (4,137) $ (24,981) $(287,418)
========== ========= ======== ======== ========= =========
Diluted loss income per
share........................... $ (0.03) $ (219.92) $ (0.04)
========== ========= =========
Diluted weighted average
shares outstanding.............. 1,129,827 1,000 5,606,109(3) 6,736,936
========== ========= ========== =========
</TABLE>
15
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------- PRO FORMA
NUCLEUS(1) HOLDING(1) COMP-PRO TELOS ADJUSTMENTS PRO FORMA
------------ ------------ ---------- --------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents......... $ -- $ 13,480 $ 236 $ 438 $ -- $ 14,154
Accounts receivable............... -- 229,438 41,080 35,505 (106,080)(6) 99,943
Unbilled revenue.................. -- 144,727 -- -- -- 144,727
Inventory......................... 34,489 118 18,566 30,219 -- 83,392
Other current assets.............. -- 76,402 -- 5,075 -- 81,477
----------- ---------- -------- -------- ----------- -----------
Total current assets............ 34,489 464,165 59,882 71,237 (106,080) 523,693
Property, plant and equipment,
net................................ 19,000 38,359 13,003 84 -- 70,446
Other assets........................ -- -- 1,795 20,404 -- 22,199
Intangibles, net.................... 19,598 -- -- 19,245 1,412,066(6) 1,450,909
----------- ---------- -------- -------- ----------- -----------
Total assets...................... $ 73,087 $ 502,524 $ 74,680 $110,970 $ 1,305,986 2,067,247
=========== ========== ======== ======== =========== ===========
Current liabilities:
Due to officers................... $ 200,104 $ 33,317 $ 17,637 $ -- $ (17,637)(6) $ 233,421
Current portion of long-term
debt........................... 4,138 -- -- -- -- 4,138
Accounts payable.................. 171,385 668,237 7,799 67,456 7,799(6) 907,078
Accrued expenses.................. 16,950 282,206 5,215 6,680 14,785(6)(7) 325,836
Due to former owners.............. -- -- -- -- 160,000(6)(8) 160,000
Due to Capital One, Inc........... -- 65,000 65,000 -- (65,000)(6) 65,000
----------- ---------- -------- -------- ----------- -----------
Total current liabilities...... 392,577 1,048,760 95,651 74,136 84,349 1,695,473
----------- ---------- -------- -------- ----------- -----------
Notes payable....................... 8,314 -- -- -- -- 8,314
----------- ---------- -------- -------- ----------- -----------
Stockholders' equity/(deficit):
Common stock and paid in
capital......................... 2,780,657 3,000 10,000 400 1,227,100 4,021,157
Retained earnings/(deficit)....... (3,108,461) (549,236) (30,971) 36,434 (5,463)(6) (3,657,697)
----------- ---------- -------- -------- ----------- -----------
Total stockholders'
equity/(deficit)............. (327,804) (546,236) (20,971) 36,834 1,221,637 363,460
----------- ---------- -------- -------- ----------- -----------
Total liabilities and
stockholders' equity/
(deficit)equity.............. $ 73,087 $ 502,524 $ 74,680 $110,970 $ 1,305,986 $ 2,067,247
=========== ========== ======== ======== =========== ===========
</TABLE>
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
1. Under terms of the merger agreement, Holding was merged with and into
Nucleus, with Nucleus becoming the surviving corporation (the "Merger"). On
April 15, 1999, the Merger was approved by the Board of Directors of both
Holding and Nucleus, and required the holder of Nucleus Common Stock
receive 5,307.109 shares of Holding Common Stock for each of its 1,000
outstanding shares. Accordingly, the pro forma condensed combined balance
sheet as of March 31, 1999 gives effect to the issuance of 5,307,109
Holding common shares to consummate the Merger.
2. The historical results of operations of Holding for the year ended December
31, 1997, reflect the operations of Holding since April 30, 1997 (its
inception).
3. Represents the issuance of 300,000 shares to consummate the acquisition of
Telos and 5,307.109 shares for each share of Holding stock outstanding to
consummate the merger. For diluted income/(loss) per share purposes, these
shares have been weighted for the period such shares were actually
outstanding.
4. Represents amortization expense associated with good will totalling
$1,387,066 recorded in connection with the acquisitions amortized over 15
years and the Comp-Pro covenant-not-to-compete of $25,000 amortized compete
over three years.
5. Represents the tax benefit available to the combined company's income from
the operating losses applied to previously taxable income.
6. Nucleus has accounted for the acquisitions as purchases. The purchase
prices have been allocated to the acquired assets and assumed liabilities
based upon their estimated relative fair values based upon preliminary
determination as follows:
Total purchase price, including expenses................... $1,482,500
Current assets............................................. 90,039
Other assets............................................... 54,531
Liabilities assumed........................................ 74,136
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Excess purchase price over net assets acquired............. $1,412,066
Pro forma adjustments above have been reflected to record the purchase
price as described above.
7. Includes a $20,000 adjustment to accrue for acquisition costs.
8. Includes an adjustment to record $225,000 due to the former owners of
Comp-Pro for the purchase. At March 31, 1999, Capital One, Inc. had
advanced Holding $65,000 which was used to fund a portion of the purchase
price.
(c) EXHIBITS.
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
NUCLEUS, INC.
(Registrant)
Date: August 16, 1999 By: /s/ J. Theodore Hartley
----------------------------------
J. Theodore Hartley
Executive Vice President and Chief
Financial Officer
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