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
JUNE 15, 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 60601
CHICAGO, ILLINOIS (Zip Code)
(Address of Principal Executive Offices)
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 June 15, 1999 and filed with
the Securities and Exchange Commission (the "Commission") on August 16, 1999,
Nucleus, Inc. ("Nucleus" or the "Company") acquired Young Data Systems, Inc.
("YDS") pursuant to an Agreement and Plan of Merger dated as of June 15, 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 YDS:
Report to Independent Auditor
Balance Sheets as of December 31, 1997 and 1998 and March
31, 1999 (unaudited)
Statements of Income and Retained Earnings for the years
ended December 31, 1997 and 1998 and the three-month
periods ending March 31, 1998 (unaudited) and 1999
(unaudited)
Statements of Cash Flows for the years ended December 31,
1997 and 1998 and the three-month periods ending March
31, 1998 (unaudited) and 1999 (unaudited)
Notes to Financial Statements
2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
YOUNG DATA SYSTEMS, INC.
We have audited the accompanying balance sheets of YOUNG DATA SYSTEMS, INC. as
of December 31, 1998 and 1997 and the related statements of income and retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 YOUNG DATA SYSTEMS, INC. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
O'NEILL & GASPARDO
3
<PAGE>
YOUNG DATA SYSTEMS, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1998 1997 1999
-------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $ -- $ -- $ 1,415
Accounts receivable ............................... 7,275 21,333 11,464
Inventory ......................................... 15,375 30,405 29,965
Prepaid taxes ..................................... 2,326 2,326 --
Shareholder loan .................................. -- 8,655 --
-------- -------- --------
Total current assets ........................... 24,976 62,719 42,844
Fixed assets:
Equipment and furniture ........................... 21,161 21,161 21,161
Less: Accumulated depreciation .................... (15,336) (10,987) (16,423)
-------- -------- --------
Total fixed assets ............................. 5,825 10,174 5,825
-------- -------- --------
Total assets ...................................... $ 30,801 $ 72,893 $ 47,582
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................. $ 45,379 $ 48,939 $ 56,330
Shareholder plan .................................. 10,386 -- 12,971
-------- -------- --------
Total current liabilities ...................... 55,765 48,939 69,301
Shareholders' equity:
Common stock - 100 shares authorized,
issued and outstanding at no par value ......... 1,000 1,000 1,000
Retained earnings ................................. (25,964) 22,954 (22,719)
-------- -------- --------
Total shareholders' equity ..................... (24,964) 23,954 (20,632)
-------- -------- --------
Total liabilities and shareholders' equity ........ $ 30,801 $ 72,893 $ 47,582
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE>
YOUNG DATA SYSTEMS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
----------------------- --------------------
1998 1997 1999 1998
-------- ---------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Revenue................................................... $522,725 $1,036,123 $156,016 $122,296
Cost of revenue........................................... 439,479 765,020 124,080 91,753
Selling, general & administration expenses................ 132,545 285,794 28,697 38,046
-------- ---------- -------- --------
Income (loss) from operations............................. (49,299) (14,691) 3,239 (7,503)
Other income (Expense):
Interest and finance charge income....................... 381 1,936 6 227
-------- ---------- -------- --------
Net income (loss)......................................... (48,918) (12,755) 3,245 (7,276)
Retained earnings/(deficit), beginning.................... 22,954 35,709 (25,964) 22,954
-------- ---------- -------- --------
Retained earnings/(deficit), end.......................... $(25,964) $ 22,954 $(22,719) $ 15,678
======== ========== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
YOUNG DATA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------------- --------------------
1998 1997 1999 1998
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ..................................... $(48,918) $(12,755) $ 3,245 $ (7,276)
Adjustment to reconcile net income to net cash provided
by operating activities:
Depreciation ....................................... 4,349 2,706 1,087 677
Accounts receivable ................................ 14,058 (6,782) (4,189) (2,212)
Inventory .......................................... 15,030 22,158 (14,590) (4,094)
Prepaid taxes ...................................... -- (2,326) 2,326 2,326
Accounts payable ................................... (3,560) 18,726 10,950 2,754
-------- -------- -------- --------
Net cash provided (used) by operating activities (19,041) 21,727 (1,171) (7,825)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets ............................. -- (12,880) -- --
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of shareholder loan ......................... 8,655 (2,293) -- --
Loan to shareholder ................................... -- (8,655) -- --
Proceeds from shareholder loan ........................ 10,386 -- 2,586 8,655
-------- -------- -------- --------
Net cash provided (used) by financing activities ... 19,041 (10,948) 2,586 8,655
Net increase (decrease) in cash ....................... -- (2,101) 1,415 830
Cash - beginning ...................................... -- 2,101 -- --
-------- -------- -------- --------
Cash - ending ......................................... $ -- $ -- $ 1,415 $ 830
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
YOUNG DATA SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1. NATURE OF THE BUSINESS
- --------------------------------
Young Data Systems, Inc. ("Company") sells microcomputer products and
services to small businesses in the Chicagoland area. The Company was
incorporated in 1994 and is located in Orland Park, IL.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------
Cash and cash equivalents
-------------------------
The Company considers all highly liquid investments with a maturity of
three months or less at date of acquisition to be cash equivalents.
Accounts Receivable
-------------------
The Company charges directly to operations all accounts receivable which
are doubtful of collection. Management estimates the amount of uncollectible
accounts to be immaterial.
Fixed Assets
------------
Equipment is recorded at cost and depreciation is provided using the double
declining method.
Revenue Recognition
-------------------
Revenue is recognized upon delivery or acceptance of product by customers
or as services are performed.
Advertising
-----------
The Company expenses advertising costs as incurred.
Inventory
---------
Inventory is stated at the lower of cost or market determined by the
average cost or market.
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.
Deferred Taxes
--------------
The Company has available unused operating loss carryforwards of $51,178
and $2,055 at December 31, 1998 and 1997, respectively that may be applied
against future taxable income and that expire in various years from 2012 to
2018. Utilization of the estimated deferred tax assets of $11,259 and $452 at
December 31, 1998 and 1997, respectively is dependent on future taxable profits.
Management has elected not to record a deferred tax asset.
7
<PAGE>
NOTE 3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
- ----------------------------------------------------------
1998 1997
---- ----
Supplemental Disclosure:
Interest Paid ......... $4,016 $2,544
====== ======
Income Taxes Paid ..... $ 0 $1,000
====== ======
NOTE 4. RELATED PARTY
- -----------------------
At December 31, 1997 the Company's sole shareholder owed $8,655 to the
Company. This amount was received in 1998.
At December 31, 1998 the Company owed $10,386 to its sole shareholder.
NOTE 5. YEAR 2000 ISSUE
- -------------------------
The year 2000 issue is the result of shortcomings in many electronic data
processing systems and other electronic equipment that may adversely affect the
operations as early as 1999.
The Company inventoried its computer systems and electronic equipment that
may be affected by the year 2000 issue and is in the process of upgrading any
deficient equipment. The Company has made major progress in its remediation
plan. It is unknown as of August 10, 1999, what effects, if any, failing to
remediate any such systems will have upon operations and financial reporting.
Also, potential customer liabilities related to equipment or services sold by
the Company are unknown and cannot be estimated at this time.
Because of the unprecedented nature of the year 2000 issue, its effects and
the success of related remediation efforts will not be fully determinable until
the year 2000 and thereafter. Management cannot assure that the Company is or
will be year 2000 ready, that its remediation efforts will be successful in
whole or in part, or that parties with whom the Company does business will be
year 2000 ready.
NOTE 6. SUBSEQUENT EVENT
- --------------------------
On June 15, 1999, the Company's shareholder entered into a purchase
agreement with Nucleus, Inc. whereby all of the outstanding shares of the
Company's common stock were acquired by Nucleus, Inc.
8
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma combined financial statements of Nucleus
give effect to the acquisition of Comp-Pro Computing, Inc. ("Comp-Pro"), Telos
Data Systems, Inc. ("Telos") and YDS.
The unaudited pro forma condensed combined statements of operations for the
years ended December 31, 1998 and the six months ended June 30, 1999 have been
prepared to illustrate the effect of the merger and the acquisitions described
above. The acquisitions (accounted for as purchases) are treated as if they had
occurred as of January 1, 1998, for the pro forma statement of operations for
the year ended December 31, 1998 and January 1, 1999 for the six months ended
June 30, 1999. The unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1998 was prepared from the historical
statements of operations of Nucleus, Comp-Pro, Telos and YDS for the year then
ended. The unaudited pro forma condensed combined statement of operations for
the six months ended June 30, 1999, was prepared from the unaudited historical
statements of operations of Nucleus, Comp-Pro, Telos and YDS, 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 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 combined 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-QSB for the period ended June 30, 1999, and the
audited financial statements of YDS, which are also included within this Form
8-K/A.
9
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------- PRO FORMA
NUCLEUS(1) COMP-PRO(2) TELOS(2) YDS(2) ADJUSTMENTS PRO FORMA
----------- ----------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue ............................ $ 1,297,628 $ 185,684 $ 253,288 $ 258,585 $ -- $ 1,995,185
Cost of revenue .................... 987,467 158,931 162,912 200,878 -- 1,510,188
Selling, general, and administrative
expenses .......................... 1,220,905 31,495 100,735 65,335 -- 1,418,470
Amortization expenses .............. 13,503 -- -- -- 54,234(4) 67,737
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from operations ...... (924,247) (4,742) (10,359) (7,628) (54,234) (1,001,210)
Other income (expense) ............. 8,680 13 (5,710) (2,434) -- 549
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before taxes ......... (915,567) (4,729) (16,069) (10,062) (54,234) (1,000,661)
Income tax expense (benefit) ....... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) .................. $ (915,567) $ (4,729) $ (16,069) $ (10,062) $ (54,234) $(1,000,661)
=========== =========== =========== =========== =========== ===========
Diluted loss per share ............ $ (0.14) $ (0.14)
=========== ===========
Diluted weighted average shares
outstanding ..................... 6,560,380 386,164(3) 6,946,544
=========== =========== ===========
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------- PRO FORMA
NUCLEUS(1) COMP-PRO TELOS YDS ADJUSTMENTS PRO FORMA
----------- -------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue ............................ $3,574,572 $481,176 $1,300,648 $522,725 $ -- $5,879,121
Cost of revenue .................... 2,517,157 423,252 952,288 439,479 -- 4,332,176
Selling, general, and administrative
expenses .......................... 1,602,992 81,188 287,742 132,545 -- 2,104,467
Amortization expense ............... -- -- -- -- 142,140(4) 142,140
---------- -------- ---------- -------- --------- ----------
Income (loss) from operations ...... (545,577) (23,264) 60,618 (49,299) (142,140) (699,662)
Other income (expense) ............. 21,106 -- (203) 381 -- 21,284
---------- -------- ---------- -------- --------- ----------
Income (loss) before taxes ......... (524,471) (23,264) 60,415 (48,918) (142,140) (678,378)
Income tax expense (benefit) ....... (25,820) -- 12,761 -- -- (13,059)
----------- -------- ---------- -------- --------- ----------
Income (loss) before extraordinary
item .............................. $ (498,651) $(23,264) $ 47,654 $(48,918) $(142,140) $ (665,319)
=========== ======== ========== ======== ========= ==========
Diluted income per share before
extraordinary item ............. $ (0.08) $ (0.10)
=========== ==========
Diluted weighted average shares
outstanding .................... 6,413,165 425,000(3) 6,838,165
=========== ========= ==========
</TABLE>
11
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
1. On April 15, 1999, Nucleus Holdings Corporation ("Holdings") was merged
with and into Nucleus, with Nucleus becoming the surviving corporation.
The merger was approved by the board of directors of both Holdings and
Nucleus, and required the holder of Nucleus common stock receive
5,307.109 shares of Holdings common stock for each of its 1,000
outstanding shares. This transaction was accounted for as a pooling of
interests.
2. The historical results of operations of Comp-Pro for the six months
ended June 30, 1999, reflect the operations of Comp-Pro from January
1, 1999 to April 30, 1999 (date of acquisition). The historical
results of operations of Telos for the six months ended June 30, 1999,
reflect the operations of Telos from January 1, 1999 to May 20, 1999
(date of acquisition). The historical results of operations of YDS for
the six months ended June 30, 1999, reflect the operations of YDS from
January 1, 1999 to June 15, 1999 (date of acquisition).
3. Represents the issuance of 300,000 and 125,000 shares to consummate the
acquisitions of Telos and YDS, respectively, and 5,307,109 shares 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. Nucleus has accounted for the Telos, Comp-Pro and YDS acquisitions as
purchases. The purchase prices have been allocated to the acquired
assets and assumed liabilities based upon their estimated relative fair
values as follows:
Total purchase price, including expenses...... $2,020,125
Current assets................................ 196,992
Other assets.................................. 55,960
Liabilities assumed........................... 264,934
-----------
Excess purchase price over net assets
acquired................................. $2,032,107
==========
Pro forma adjustments above have been reflected to record the purchase
price as described above. Included is a covenant not to compete of $25,000 which
is being amortized over its three year life. Goodwill is being amortized over a
15-year period.
(c) EXHIBITS.
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
NUCLEUS, INC.
(Registrant)
Date: August 26, 1999 By: /s/ J. Theodore Hartley
-----------------------------------
J. Theodore Hartley,
Executive Vice President and
Chief Financial Officer
13
