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
APRIL 29, 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 April 29, 1999 and filed with
the Securities and Exchange Commission (the "Commission") on May 12, 1999,
Nucleus, Inc. ("Nucleus" or the "Company") acquired Comp-Pro Computer, Inc.
("Comp-Pro") pursuant to a Stock Purchase Agreement dated as of April 29, 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
Comp-Pro:
Report to Independent Auditor
Balance Sheet as of December 31, 1998
Statement of Operations for the year ended December 31, 1998
Statement of Shareholders' Deficit for the year ended
December 31, 1998
Statement of Cash Flows for the year ended December 31, 1998
Notes to Financial Statements
2
<PAGE>
To the Shareholders and Board of Directors
Comp-Pro Computer, Inc.
12323 South Harlem Avenue
Palos Heights, Illinois 60463
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
We have audited the accompanying balance sheets of Comp-Pro Computer,
Inc. as of December 31, 1998 and the related statements of operations,
shareholders' equity, and cash flows for the year 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 of these statements 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, and 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 Comp-Pro Computer,
Inc. as of December 31, 1998 and the results of its operations, shareholders'
equity, and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
BUJAN & ASSOCIATES, LTD.
July 1, 1999
3
<PAGE>
COMP-PRO COMPUTER, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1998
ASSETS
Current assets:
Cash..................................................... $ 1,867
Accounts receivable (Note 6)............................. 42,364
Inventory................................................ 23,164
--------
Total current assets........................................ 67,395
Property, plant & equipment--net cost (Note 3).............. 14,503
Other assets................................................ 1,795
--------
Total assets................................................ $ 83,693
========
LIABILITIES & SHAREHOLDERS' DEFICIT
Current liabilities:
Bank overdraft........................................... $ --
Accounts payable......................................... 29,087
Accrued expenses......................................... 7,721
Loans from shareholders (Note 4)......................... 68,637
--------
Total current liabilities................................... 105,445
--------
Total liabilities........................................... 105,445
--------
SHAREHOLDERS' DEFICIT
Common shares no par value
Authorized issued & outstanding shares--100 shares....... 10,000
Retained deficit......................................... (31,752)
--------
Total shareholders' deficit................................. (21,752)
--------
Total liabilities & shareholders' deficit................... $ 83,693
========
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
COMP-PRO COMPUTER, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
Total revenues (Note 6)................................... $481,176
Cost of revenues.......................................... 423,252
Selling, general & administrative expenses................ 81,188
--------
(Loss) income from operations............................. (23,264)
--------
Provisions for income taxes............................... 0
--------
Net loss.................................................. $(23,264)
========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
COMP-PRO COMPUTER, INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
Common shares
Balance at beginning of year................................ $ 10,000
No changes.................................................. --
--------
Balance at end of year...................................... $ 10,000
--------
Retained deficit
Balance at beginning of year................................ $ (8,488)
Net loss.................................................... (23,264)
--------
Balance at end of year...................................... (31,752)
--------
Total shareholders' deficit................................. $(21,752)
========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
COMP-PRO COMPUTER, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
Cash flows from operating activities
Net loss......................................................... $(23,264)
--------
Adjustments to reconcile net loss from continuing operations to
net cash from operating activities:
Depreciation & amortization................................... 4,480
Decrease (increase) in net receivables........................ (41,564)
Decrease (increase) in inventory.............................. 14,836
Decrease (increase) in other assets........................... (795)
Increase (decrease) in bank overdrafts........................ (2,123)
Increase (decrease) in accounts payable....................... 57,087
Increase (decrease) in accrued liabilities.................... 7,126
--------
Net cash provided (used) by operating activities.................... $ 15,783
--------
Cash flows from financing activities
Payment of stockholders loan..................................... (13,916)
--------
Net cash (used) by financing activities............................. (13,916)
Net increase in cash................................................ 1,867
Cash
Beginning of year................................................ --
--------
End of year...................................................... 1,867
--------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
COMP-PRO COMPUTER, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
Note 1 -- Description of Business
- ---------------------------------
Comp-Pro Computer, Inc. (the "Company") was incorporated in Illinois
in August 1995 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 Chicago metropolitan area.
Note 2 -- Summary of Significant Accounting Policies
- ----------------------------------------------------
Inventory:
---------
Inventory is valued at the lower of cost or market on a first-in
first-out basis and consists primarily of finished goods including complete
computer systems, spare parts and related equipment held for retail sale.
Property, Plant and Equipment:
-----------------------------
Property, plant and equipment are recorded at cost and are depreciated
based upon estimated useful lives using the 200% declining balance 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.
Cash:
----
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Estimates:
---------
The preparation of the Company's financial statements 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.
Warranty Expense and Reserve:
----------------------------
The Company warranties all parts to its customers for the same length
of time as the manufacturer warranties the parts. Therefore, the only cost that
is absorbed by the Company is the labor to install the parts, which is minimal.
Advertising and Promotional Costs:
---------------------------------
Advertising and promotional costs are charged to operations as
incurred or when the advertising first takes place. Advertising costs charged to
operations were $4,568 in 1998.
8
<PAGE>
Fair value of financial instruments:
-----------------------------------
The Company's short-term financial instruments consist of cash and
cash equivalents, accounts receivable, and payables and accruals. The carrying
amounts of these financial instruments approximate fair value because of 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. The Company does not hold or issue financial
instruments for trading purposes nor does it hold or issue interest rate or
leveraged derivative financial instruments.
Income Taxes:
------------
The Company accounts for income taxes in accordance with SFAS No. 109,
in which deferred income taxes may arise from temporary differences resulting
from income and expense items reported for financial accounting and tax purposes
in different periods.
The Company had net tax operating loss carry forwards against which
full valuation allowances were recorded due to the Company's historical
recurring operating losses. The Company has net tax operating loss carry
forwards of approximately $32,000 as of December 31, 1998.
The amounts shown for income taxes in the statements of income differ
from the amounts computed at federal statutory rates due to the utilization of
these net tax operating loss carry forwards.
Note 3 -- Property, Plant and Equipment
- ---------------------------------------
Property, plant and equipment consists of the following at December
31, 1998:
Furniture, fixtures & improvements............................. $ 14,125
Computer equipment............................................. 16,200
--------
Total property, plant & equipment.............................. 30,325
Less accumulated depreciation.................................. (15,822)
--------
Net cost ...................................................... $ 14,503
--------
Note 4 -- Loans from Shareholders
- ---------------------------------
The shareholder loans are unsecured and non-interest bearing.
Note 5 -- Commitments and Contingencies
- ---------------------------------------
The Company leases space from month to month in Palos Heights,
Illinois. The current rent is $9,000 annually ($750 per month) with an annual
adjustment for real estate taxes.
From time to time, the Company is also subject to occasional lawsuits,
investigations and claims arising out of the normal conduct of business.
Management does not believe the outcome of any pending claims will have a
material adverse impact on the Company's financial position or results of
operations.
Note 6 -- Concentration of Credit Risk:
- --------------------------------------
As of December 31, 1998 and during the year then ended, one customer
accounted for 80% of accounts receivable and 34% of revenue.
9
<PAGE>
Note 7 -- Nucleus, Inc. Transaction:
- -----------------------------------
In June 1998, the Company entered into a 90-day joint agreement ending
September 30, 1998 with Nucleus, Inc. (Nucleus) whereby the Company will conduct
computer repair, installation of hardware and software and upgrade and
maintenance services. In conjunction with this agreement, the Company will
furnish all technical and repair personnel, services, facilities and equipment.
Nucleus is required to provide all marketing and customer service personnel,
advertising, parts, procurement and delivery of customer computer systems. Under
the terms of the agreement, the Company and Nucleus have agreed to share
revenues equally.
On April 29, 1999 the Company entered into a purchase agreement with
Nucleus, Inc. (Nucleus) whereby all of the outstanding shares of the Company
would be acquired by Nucleus for $225,000. The agreement has been approved by
the Company's Board of Directors and shareholders.
10
<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 acquisition of Comp-Pro.
The unaudited pro forma condensed combined 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 acquisition 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. Both the acquisition of Comp-Pro
(accounted for as a purchase) and the merger transaction are treated as if they
had occurred on March 31, 1999, in the pro forma balance sheet and 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 and Comp-Pro for the year then ended. The
unaudited pro forma condensed combined 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 and Comp-Pro, 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 acquisition 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 acquisition of Comp-Pro 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 Comp-Pro, which are also included within this
Form 8-K/A.
11
<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>
12
<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 ADJUSTMENTS PRO FORMA
---------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenue.................................. $ 747,144 $2,827,428 $481,176 $ -- $4,055,748
Cost of revenues......................... 769,754 1,747,403 423,252 -- 2,940,409
Selling, general, & administrative
expense............................... 455,857 1,147,135 81,188 20,093(4) 1,704,273
--------- ---------- -------- -------- ----------
Operating loss........................... (478,467) (67,110) (23,264) (20,093) (588,934)
Other (expense) income................... (13,902) 35,008 -- -- 21,106
--------- ---------- -------- -------- ----------
Loss before tax benefit.................. (492,369) (32,102) (23,264) (20,093) (567,828)
Tax benefit.............................. 25,820 -- -- -- 25,820
--------- ----------- -------- -------- ----------
Net loss before extraordinary item....... $(466,549) $ (32,102) $(23,264) $ 20,093 $ (542,008)
========= ========== ======== ======== ==========
Diluted loss per share before
extraordinary item................. $ (0.42) $ ( 32.10) $ (0.08)
========= ========== ==========
Diluted weighted average shares
outstanding........................ 1,106,056 1,000 5,306,109(3) 6,413,165
========= ===== ========= =========
</TABLE>
13
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------- PRO FORMA
NUCLEUS(1) HOLDING(1) COMP-PRO ADJUSTMENTS PRO FORMA
---------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenue............................... $ 11,787 $ 620,556 $149,178 $ -- $ 781,521
Cost of revenues...................... 13,136 431,506 125,329 -- 569,971
Selling, general, & administrative
expense............................ 32,606 384,272 22,848 5,023(4) 444,749
-------- --------- -------- ------- ---------
Operating (loss) income............... (33,955) (195,222) 1,001 (5,023) (233,199)
Other (expense) income................ (5,210) (24,694) -- -- (29,904)
-------- --------- -------- ------- ---------
(Loss) income before taxes............ (39,165) (219,916) 1,001 (5,023) (263,103)
Income taxes.......................... -- -- 220 -- 220
-------- --------- -------- ------- ---------
Net (loss) income..................... $(39,165) $(219,916) $ 781 $(5,023) $(263,323)
======== ========= ======== ======= =========
Diluted loss per share............. $ (0.03) $ (219.92) $ (0.04)
======== ========= ==========
Diluted weighted average shares
outstanding..................... 1,129,827 1,000 5,306,109(3) 6,436,936
========= ===== ========= ==========
</TABLE>
14
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------- PRO FORMA
NUCLEUS(1) HOLDING(1) COMP-PRO ADJUSTMENTS PRO FORMA
---------- ---------- -------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash................................... $ -- $ 13,480 $ 236 $ -- $ 13,716
Accounts receivable.................... -- 229,438 41,080 (106,080)(5) 164,438
Unbilled revenue....................... -- 144,727 -- -- 144,727
Inventory.............................. 34,489 118 18,566 -- 53,173
Other current assets................... -- 76,402 -- -- 76,402
----------- ---------- -------- ----------- -----------
Total current assets................ 34,489 464,165 59,882 (106,080) 452,456
----------- ---------- -------- ----------- -----------
Property, plant and equipment, net........ 19,000 38,359 13,003 -- 70,362
----------- ---------- -------- ----------- -----------
Other assets.............................. -- -- 1,795 -- 1,795
----------- ---------- -------- ----------- -----------
Intangibles, net.......................... 19,598 -- -- 201,400(6) 220,998
----------- ---------- -------- ----------- -----------
Total assets........................ $ 73,087 $ 502,524 $ 74,680 $ 95,320 $ 745,611
=========== ========== ======== =========== ===========
Liabilities & Stockholders' Deficit
Current liabilities:
Due to officers........................ $ 200,104 $ 33,317 $ 17,637 $ (17,637)(5) $ 233,421
Current portion of long-term debt...... 4,138 -- -- -- 4,138
Accounts payable....................... 171,385 668,237 $ 7,799 (7,799)(5) 839,622
Accrued expenses....................... 16,950 282,206 5,215 4,785(5)(7) 309,156
Due to former owners................... -- -- -- 160,000(8) 160,000
Due to Capital One, Inc................ -- 65,000 65,000 (65,000)(5) 65,000
----------- ---------- -------- ----------- -----------
Total current liabilities........... 392,577 1,048,760 95,651 74,349 1,611,337
----------- ---------- -------- ----------- -----------
Long-term liabilities..................... 8,314 -- -- -- 8,314
----------- ---------- -------- ----------- -----------
Stockholders' deficit:
Common stock and paid in capital....... 2,780,657 3,000 10,000 (10,000) 2,783,657
Accumulated deficit.................... (3,108,461) (549,236) (30,971) 30,971(5) (3,657,697)
----------- ---------- -------- ----------- -----------
Total stockholders' deficit......... (327,804) (546,236) (20,971) 20,971 (874,040)
----------- ---------- -------- ----------- -----------
Total liabilities and stockholders'
deficit........................... $ 73,087 $ 502,524 $ 74,680 $ 95,320 $ 745,611
=========== ========== ======== =========== ===========
</TABLE>
15
<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. The pro forma weighted average shares outstanding for basic and
diluted loss per share gives effect to the issuance of 5,307.109
shares of Holding stock for each of the 1,000 shares of Nucleus common
stock outstanding for all periods presented, weighted for the period
such shares were actually outstanding.
4. Represents additional amortization expense associated with the
Comp-Pro acquisition resulting from the amortization of goodwill over
an estimated useful life of 15 years and the covenant not to compete
over three years.
5. The Company has accounted for the Comp-Pro acquisition as a purchase.
The purchase price has been allocated to the acquired assets and
assumed liabilities based upon their estimated relative fair values as
follows:
Total purchase price, including expenses............ $235,000
Current assets...................................... 18,802
Other assets........................................ 14,798
Liabilities assumed................................. --
--------
Excess purchase price over net assets acquired...... $201,400
Pro forma adjustments have been reflected to record the purchase
price as described above.
6. To record the allocation of excess purchase price over net assets
acquired of $201,400 ($176,400 of goodwill and $25,000 covenant not to
compete).
7. Includes a $10,000 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.
16
<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: July 13, 1999 By: /s/ J. Theodore Hartley
--------------------------------
J. Theodore Hartley,
Executive Vice President and
Chief Financial Officer
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