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 3, 2000
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.)
401 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60611
(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 3, 2000 and filed with the
Securities and Exchange Commission (the "Commission") on May 18, 2000, Nucleus,
Inc. ("Nucleus" or the "Company") completed the acquisition of WebNet.com, Inc.
("WebNet") on May 11, 2000, pursuant to an Agreement and Plan of Merger dated as
of May 3, 2000 (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 WebNet:
Report to Independent Auditor
Balance Sheets as of December 31, 1999 and March 31, 2000
(unaudited)
Statements of Income and Retained Earnings for the years ended
December 31, 1999 and the three-month period ending March 31,
2000 (unaudited)
Statements of Cash Flows for the years ended December 31, 1999
and the three-month period ending March 31, 2000 (unaudited)
Notes to Financial Statements
2
<PAGE>
APRIL 3, 2000
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors
WEBNET.COM, INC.
We have audited the accompanying balance sheets of WEBNET.COM, INC. as of
December 31, 1999 and the related statements of income and retained earnings,
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 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 WEBNET.COM, INC. as of December
31, 1999, 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>
WEBNET.COM, INC.
BALANCE SHEET
--------------------------------------------------------------------------------
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
ASSETS
Current Assets:
Cash ............................................ $ 14,437 $ 2,290
Accounts receivable ............................. 39,037 10,155
Prepaid equipment lease ......................... 2,665 3,075
Shareholder loan ................................ 290 --
--------- ---------
Total current assets ......................... 56,429 15,520
Fixed Assets:
Equipment and furniture ......................... 38,165 38,960
Less: accumulated depreciation ................. (7,751) (9,858)
--------- ---------
Total fixed assets ........................... 30,414 29,102
Other Assets:
Goodwill ........................................ 36,000 36,000
Less: accumulated amortization ................. (1,800) (2,400)
--------- ---------
Total other assets ........................... 34,200 33,600
--------- ---------
Total assets ................................. $ 121,043 $ 78,222
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ................................ $ 82,757 $ 97,808
Deferred revenue ................................ 39,865 22,424
--------- ---------
Total current liabilities .................... 122,622 120,232
Shareholders' Equity:
Common Stock - 1,000,000 shares authorized,
259,375 issued, and outstanding at $0.001
par value .................................... 259 259
Additional paid in capital ...................... 17,241 17,241
Retained earnings ............................... (19,079) (59,510)
--------- ---------
Total shareholders' equity ................... (1,579) (42,010)
--------- ---------
Total liabilities and shareholders' equity ....... $ 121,043 $ 78,222
========= =========
The accompanying notes are an integral part of this statement.
4
<PAGE>
WEBNET.COM, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
--------------------------------------------------------------------------------
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
Revenue .......................................... $ 221,093 $ 69,813
Cost of sales .................................... 196,097 64,881
Selling, general and administrative expenses ..... 43,992 45,363
--------- ---------
Income (loss) from operations .................... (18,996) (40,431)
Retained earnings (deficit) - beginning .......... (83) (19,079)
--------- ---------
Retained earnings (deficit) - ending ............. $ (19,079) $ (59,510)
========= =========
The accompanying notes are an integral part of this statement.
5
<PAGE>
WEBNET.COM, INC.
STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ................................ $(18,996) $(40,431)
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation .................................. 3,392 2,107
Amortization .................................. 1,800 600
Accounts Receivable ........................... (39,037) 28,882
Prepaid Lease Exp. ............................ (2,665) (410)
Deferred Revenue .............................. 39,865 (17,441)
Accounts Payable .............................. 82,757 15,051
-------- --------
Net Cash Provided (Used) by Operating Activities .. 67,116 (11,642)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Fixed Assets ........................ (29,546) (795)
Additions to Intangible Assets ................... (36,000) --
-------- --------
Net Cash Provided (Used) by Investing Activities .. (65,546) (795)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Additional Paid in Capital ......... 17,000 --
Repayment of Shareholder Loan .................... (12,152) --
Loan to Shareholder .............................. 6,442 290
-------- --------
Net Cash Provided (Used) by Financing Activities .. 11,290 290
-------- --------
NET INCREASE (DECREASE) IN CASH ................... 12,860 (12,147)
Cash - Beginning ................................. 1,577 14,437
-------- --------
CASH - ENDING ..................................... $ 14,437 $ 2,290
======== ========
The accompanying notes are an integral part of this statement.
6
<PAGE>
WEBNET.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
--------------------------------------------------------------------------------
NOTE 1. NATURE OF THE BUSINESS
--------------------------------
WEBNET.COM, INC. (Company) is a provider of communications related services
and products. The Company was incorporated in 1998 and is located in Roswell,
GA.
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
straight-line method.
Revenue Recognition
-------------------
Revenue is recognized as services are performed.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Goodwill
--------
The cost of certain intangible assets acquired in April, 1999 for $36,000
are being amortized as goodwill on the straight-line method over 15 years.
Amortization expense charged to operations in 1999 was $1,800.
NOTE 3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
----------------------------------------------------------
1999
---------
Supplemental Disclosure:
Interest Paid......................... $ 0
=========
Income Taxes Paid..................... $ 0
=========
NOTE 4. RELATED PARTY
-----------------------
In May of 1999 the Company acquired customers and liabilities of a company
with shareholders in common. In exchange, the Company agreed to provide Internet
connectivity for no charge for a period of three years.
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<PAGE>
At December 31, 1999, a company's shareholder owed $290 to the Company.
NOTE 5. OPERATING LEASES
--------------------------
The Company has several equipment leases with various terms. The total
lease expense was $8,685 for the year ended December 31, 1999. Minimum future
lease payments for operating leases are as follows for the years ended December
31:
2000 $ 17,944
2001 14,619
2002 1,840
2003 0
2004 0
---------
$ 34,403
NOTE 6. EMPLOYMENT AGREEMENT
------------------------------
On June 14, 1999 the Company entered into an employment agreement with one
employee for a two-year period. Further information can be obtained from
Management.
NOTE 7. SUBSEQUENT EVENT
--------------------------
On November 4, 1999, the Company's shareholders 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. in exchange for 661,000
shares of Nucleus common stock and the right to receive an additional 300,000
shares of common stock if the operations reach certain financial targets. The
transaction was closed May 11, 2000.
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<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma combined financial statements of
Nucleus give effect to the acquisition of WebNet.
The unaudited pro forma condensed combined statements of operations for the
years ended December 31, 1999 and the three months ended March 31, 2000 have
been prepared to illustrate the effect of the merger and the acquisition
described above. The acquisition (accounted for as a purchase) was treated as if
it had occurred as of January 1, 1999, for the pro forma statement of operations
for the year ended December 31, 1999 and January 1, 2000 for the three months
ended March 31, 2000. The unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1999 was prepared from the audited
historical statements of operations of Nucleus and WebNet for the year then
ended. The unaudited pro forma condensed combined statement of operations for
the three months ended March 31, 2000, was prepared from the unaudited
historical statements of operations of Nucleus and WebNet.
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 acquisition described above occurred on the date
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, 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, 1999, and its Quarterly Report on
Form 10-QSB for the period ended March 31, 2000, and the audited financial
statements of WebNet, which are also included within this Form 8-K/A.
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<PAGE>
FOR UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUIRED COMPANY
-------------------------------
PRO FORMA
NUCLEUS WEBNET ADJUSTMENTS PRO FORMA
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue ..................................... $ 3,823,618 $ 69,813 $ -- $ 3,893,431
Cost of sales ............................... 3,045,166 64,881 -- 3,110,047
------------ ---------- ------------ ------------
Gross profit ............................... 778,452 4,932 -- 783,384
Operating expenses .......................... 2,055,395 45,363 -- 2,100,758
Stock based compensation expense ............ 108,500 -- -- 108,500
Depreciation and amortization expense ....... 316,906 -- 64,669(1) 381,575
------------ ---------- ------------ ------------
Operating loss ............................. (1,702,349) (40,431) (64,669) (1,807,449)
Interest and other expenses ................. (494,916) -- (494,916)
------------ ---------- ------------ ------------
Loss before income taxes .................... (2,197,265) (40,431) (64,669) (2,302,365)
Income tax benefit .......................... -- -- -- --
------------ ---------- ------------ ------------
Net loss .................................... $ (2,197,265) $ (40,431) $ (64,669) $ (2,302,365)
============ ========== ============ ============
Diluted loss per share................... $ (0.22) $ (0.21)
============ ============
Diluted weighted average shares
outstanding .......................... 10,074,177 661,000(1) 10,735,177
============ ============ ============
</TABLE>
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<PAGE>
FOR UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUIRED COMPANY
-----------------------------
PRO FORMA
NUCLEUS WEBNET ADJUSTMENTS PRO FORMA
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue..................................... $ 10,779,272 $ 221,093 $ -- $ 11,000,365
Cost of sales............................... 9,277,919 196,097 -- 9,474,016
------------ ---------- ---------- ------------
Gross profit............................... 1,501,353 24,996 -- 1,526,349
Operating expenses.......................... 5,346,859 43,992 -- 5,390,851
Stock based compensation expense............ 1,291,561 -- -- 1,291,561
Depreciation and amortization expense....... 724,582 -- 256,678(1) 981,260
------------- ---------- ---------- ------------
Operating loss............................. (5,861,649) (18,996) (256,678) (6,137,323)
Interest and other expenses................. (529,627) -- -- (529,627)
------------- ---------- ---------- ------------
Loss before income taxes.................... (6,391,276) (18,996) (256,678) (6,666,950)
Income tax benefit.......................... -- -- -- --
------------- ---------- ---------- ------------
Net loss.................................... $ (6,391,276) $ (18,996) $ (256,678) $ (6,666,950)
============= ========== ========== ============
Diluted loss per share.................. $ (0.80) $ (0.77)
============= ============
Diluted weighted average shares
outstanding.......................... 7,961,809 661,000 8,622,809
============= ========== ============
</TABLE>
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<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRO FORMA
NUCLEUS WEBNET ADJUSTMENTS(1) PRO FORMA
------------ ---------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash .................................... $ 2,417,215 $ 2,290 $ -- $ 2,419,505
Accounts receivable ..................... 1,205,049 10,155 -- 1,215,204
Other ................................... 370,208 3,075 -- 373,283
Deferred financing cost ................. 1,323,343 -- 1,323,343
------------ ------------ ------------ -----------
Total current assets ................. 5,315,815 15,520 -- 5,331,335
------------ ------------ ------------ -----------
Property and equipment ................... 208,027 29,102 -- 237,129
Goodwill ................................. 6,144,878 33,600 1,777,135 7,955,613
------------ ------------ ------------ -----------
Total assets ......................... $ 11,668,720 $ 78,222 $ 1,777,135 $ 13,524,077
============ ============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Senior notes payable .................... $ 254,333 $ -- $ -- 254,333
Debt discount ........................... -- --
Line of credit .......................... 499,444 -- -- 499,444
Notes payable ........................... 817,396 97,808 -- 915,204
Notes payable - related parties ......... -- -- --
Trade accounts payable .................. 1,925,608 22,424 -- 1,948,032
Accrued expenses ........................ 1,062,763 -- -- 1,062,763
------------ ------------ ------------ ------------
Total current liabilities ............ 4,559,544 120,232 -- 4,679,776
------------ ------------ ------------ ------------
Long term liabilities ................... -- -- -- --
------------ ------------ ------------ ------------
Total liabilities .................... 4,559,544 120,232 -- 4,679,776
------------ ------------ ------------ ------------
Redeemable common stock ................. -- -- 157,500 157,500
------------ ------------ ------------ ------------
Stockholders' equity:
Preferred stock ......................... -- -- -- --
Common stock - par value ................ 11,639 259 402 12,300
Additional paid-in capital .............. 19,009,183 17,241 1,559,723 20,586,147
Other capital accounts .................. --
Stock warrants .......................... 727,349 -- -- 727,349
Treasury stock .......................... (651,838) -- -- (651,838)
Retained earnings ....................... (11,987,157) (59,510) 59,510 (11,987,157)
------------ ------------ ------------ ------------
Total stockholders' equity ........... 7,109,176 (42,010) 1,619,635 8,686,801
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 11,668,720 $ 78,222 $ 1,777,135 $ 13,524,077
============ ============ ============ ============
</TABLE>
12
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
1. Nucleus has accounted for the WebNet acquisition as a purchase. The
purchase price of 661,000 shares of Nucleus common stock has been allocated
to the acquired assets and assumed liabilities based upon their estimated
relative fair values as follows:
Total purchase price, including expenses........ $1,735,125
Current assets.................................. 15,520
Other assets.................................... 29,102
Liabilities assumed............................. 120,232
----------
Excess purchase price over net assets acquired.. $1,810,735
==========
Pro forma adjustments above have been reflected to record the purchase
price as described above. Goodwill is being amortized over a 7-year period.
(c) EXHIBITS.
None.
13
<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 26, 2000 By: /s/ J. Theodore Hartley
--------------------------------
J. Theodore Hartley,
Executive Vice President and
Chief Financial Officer
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