SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event report) March 11, 1996
SCAN-GRAPHICS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 0-15864 95-4091769
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
700 ABBOTT DRIVE, BROOMALL, PENNSYLVANIA 19008-4373
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 610-328-1040
Not Applicable
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
SCAN-GRAPHICS, INC.
ITEM #7
On January 12, 1996, under Form 8K, Scan-Graphics, Inc. reported that
an agreement was entered into between Scan-Graphics, Inc., and the
shareholder of Tangent Engineering, Inc., whereby Scan-Graphics, Inc.
acquired and the shareholders of Tangent Engineering, Inc. transferred
all the issued and outstanding stock in a transaction intended to
qualify as a reorganization within the meaning of Section 365(a)(i)B of
Code. It was reported on January 12, 1996 under Item #7 that the
Audited Financial Statements of the acquired business would be filed.
Enclosed are the audited financial statements of the acquired business
and the consolidated proforma financial statements as follows:
o Audited Financial Statements of Tangent Engineering,
Inc. for 1995, 1994 and 1993.
o Scan-Graphics, Inc. consolidated proforma Balance
Sheet for 1995.
o Scan-Graphics, Inc. consolidated income statements
for 1995, 1994 and 1993.
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Consolidated Financial Statements
and Independent Auditors' Report
December 31, 1995, 1994, and 1993
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Table of Contents
Page
----
Independent Auditors' Report................................................ 1
Consolidated Financial Statements
Consolidated Balance Sheets......................................... 2
Consolidated Statements of Income .................................. 3
Consolidated Statements of Stockholders' Equity......................4
Consolidated Statements of Cash Flows............................... 5
Notes to Consolidated Financial Statements.................................. 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Tangent Engineering, Inc. and Subsidiary
Denver, Colorado
We have audited the accompanying consolidated balance sheets of Tangent
Engineering, Inc. and subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three year period ended December 31, 1995. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tangent Engineering,
Inc. and Subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
Ehrhardt Keefe Steiner & Hottman PC
March 4, 1996
Denver, Colorado
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1995 1994
-------------- ---------------
<S> <C> <C>
Assets
Current assets
Cash $ 20,931 $ 191,978
Accounts receivable, net of $5,000 allowance for doubtful accounts 371,661 407,379
Inventories (Note 2) 662,565 485,188
Deferred income taxes (Note 4) 30,430 23,430
Prepaid expenses 4,446 4,736
-------------- --------------
Total current assets 1,090,033 1,112,711
-------------- --------------
Property and equipment
Equipment under capital lease (Note 9) 269,387 269,387
Machinery and equipment 341,702 220,516
Automobiles 33,416 -
Computer equipment 220,209 193,769
Furniture and fixtures 37,206 37,206
Leasehold improvements 19,523 19,523
Research and development equipment 21,344 19,411
-------------- --------------
942,787 759,812
Less accumulated depreciation and amortization (394,692) (201,378)
-------------- --------------
548,095 558,434
-------------- --------------
Other assets
Software rights, net (Note 12) 7,500 67,500
Deposits and other 8,325 6,780
Deferred income taxes (Note 4) 3,300 2,333
-------------- --------------
19,125 76,613
-------------- --------------
$ 1,657,253 $ 1,747,758
============== ==============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 250,936 $ 76,972
Accrued expenses 85,043 86,546
Accrued bonuses - 400,000
Income taxes payable (Note 4) 17,948 10,652
Current portion of long-term debt (Note 8) 67,614 51,871
Current portion of capital lease obligation (Note 9) 87,631 81,014
Deferred revenue (Note 7) 41,902 54,205
Notes payable - officers (Note 6) 259,241 78,567
-------------- --------------
Total current liabilities 810,315 839,827
-------------- --------------
Long-term debt, less current portion (Note 8) 182,301 224,244
Capital lease obligation (Note 9) 42,391 130,022
Deferred revenue (Note 7) 6,097 60,836
-------------- --------------
Total long-term liabilities 230,789 415,102
-------------- --------------
Commitments (Notes 5, 10, and 13)
Stockholders' equity
Common stock, no par value; 1,000 shares authorized, 720 shares issued
and outstanding 100 100
Retained earnings 616,049 492,729
-------------- --------------
Total stockholders' equity 616,149 492,829
-------------- --------------
$ 1,657,253 $ 1,747,758
============== ==============
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------
1995 1994 1993
--------------- -------------- ---------------
<S> <C> <C> <C>
Revenue
Manufacturing $ 2,465,613 $ 2,229,969 $ 1,225,274
Maintenance 401,858 276,264 407,007
Lease 155,538 124,726 -
-------------- -------------- --------------
Total revenue 3,023,009 2,630,959 1,632,281
-------------- -------------- --------------
Operating expenses
Manufacturing cost of sales 1,323,917 804,835 952,248
General and administrative 1,354,493 1,512,147 337,663
Research and development 202,456 369,866 320,561
-------------- -------------- --------------
Total operating expenses 2,880,866 2,686,848 1,610,472
-------------- -------------- --------------
Income (loss) from operations 142,143 (55,889) 21,809
-------------- -------------- --------------
Other income (expense)
Gain on sale of assets - 106,712 -
Interest expense (31,758) (28,778) -
Other income 45,286 7,380 7,347
-------------- -------------- --------------
Total other income 13,528 85,314 7,347
-------------- -------------- --------------
Income before income taxes 155,671 29,425 29,156
Income taxes (Note 4) 32,351 1,648 723
-------------- -------------- --------------
Net income $ 123,320 $ 27,777 $ 28,433
============== ============== ==============
Net income per common share $ 171 $ 39 $ 39
============== ============== ==============
Weighted average number of common shares outstanding 720 720 720
============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Common Stock Retained
Shares Amount Earnings Total
-------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Balance - December 31, 1992 720 $ 100 $ 436,519 $ 436,619
Net income for the year - - 28,433 28,433
-------- ---------- -------------- -------------
Balance - December 31, 1993 720 100 464,952 465,052
Net income for the year - - 27,777 27,777
-------- ---------- -------------- -------------
Balance - December 31, 1994 720 100 492,729 492,829
Net income for the year - - 123,320 123,320
-------- ---------- -------------- -------------
Balance - December 31, 1995 720 $ 100 $ 616,049 $ 616,149
======== ========== ============== =============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------
1995 1994 1993
--------------- --------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 123,320 $ 27,777 $ 28,433
-------------- -------------- --------------
Adjustments to reconcile net income to cash (used by)
provided by operating activities
Depreciation and amortization 253,314 131,137 43,959
Deferred income taxes (7,967) (17,989) (7,774)
Gain on sale of assets - (106,712) -
Equipment disposed - 21,970 -
Change in assets and liabilities -
Accounts receivable 35,718 (251,416) 64,935
Inventories (264,545) (379,653) (230,061)
Prepaid expenses 290 (1,400) 5,762
Deposits and other assets (1,545) (2,942) -
Income taxes payable 7,296 9,449 1,203
Accounts payable 173,964 32,438 18,762
Accrued expenses (1,503) 26,773 (12,222)
Accrued bonuses (400,000) 400,000 137,036
Deferred revenue (67,042) 115,041 -
-------------- -------------- -------------
(272,020) (23,304) 21,600
-------------- -------------- --------------
Net cash (used by) provided by operating
activities (148,700) 4,473 50,033
-------------- -------------- --------------
Cash flows from investing activities
Proceeds from sale of assets - 97,060 -
Additions to property and equipment (62,391) (110,872) (130,097)
-------------- -------------- --------------
Net cash used by investing activities (62,391) (13,812) (130,097)
-------------- -------------- --------------
Cash flow from financing activities
Payments on capital lease obligations (81,014) (58,350) -
Proceeds from long-term debt - 281,828 -
Payments on long-term debt (59,616) (25,101) -
Proceeds from notes payable - officers 387,278 - -
Payments on notes payable - officers (206,604) (58,469) -
-------------- -------------- -------------
Net cash provided by financing activities 40,044 139,908 -
-------------- -------------- -------------
Net (decrease) increase in cash (171,047) 130,569 (80,064)
Cash at beginning of year 191,978 61,409 141,473
-------------- -------------- --------------
Cash at end of year $ 20,931 $ 191,978 $ 61,409
============== ============== ==============
</TABLE>
Supplemental disclosures of cash flow information
Cash paid during the year for income taxes was $10,250, $10,254, and
$7,050, respectively for 1995, 1994 and 1993.
Cash paid during the year for interest was $31,758, $28,778 and $122,
respectively, for 1995, 1994 and 1993.
Supplemental schedule of noncash investing and financing activities:
During 1995 and 1994, the Company transferred inventory with a cost of
$136,975 and $180,296, respectively, to equipment in fixed assets. Also
during 1995, the Company transferred fixed assets with a net book value
of $49,807 into inventory upon termination of a lease.
During 1995, the Company purchased a vehicle through a note payable of
$33,416.
During 1994, the Company exchanged scanning and copying equipment for
software rights valued at $90,000. The transaction resulted in a $50,000
gain.
See notes to consolidated financial statements.
-5-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Business
Tangent Engineering, Inc. (the "Company") was incorporated in 1987 and is a
manufacturer and developer of high technology scanning and copying equipment. In
1994, the Company formed a wholly owned subsidiary, Tangent Financial
Corporation, to lease scanning and copying equipment.
Principles of Consolidation
The Company's consolidated financial statements include the accounts of Tangent
Engineering, Inc. and its wholly owned subsidiary, Tangent Financial
Corporation. All significant intercompany accounts and transactions have been
eliminated.
Concentration of Credit Risk
At December 31, 1995 and 1994, the Company had a bank balance at a financial
institution which was approximately $0 and $92,000, respectively, in excess of
federally insured amounts.
Accounts Receivable
In the normal course of business, the Company grants credit to its customers,
consisting primarily of governmental agencies and large corporate entities,
located throughout the United States. Four customers accounted for approximately
$280,000 and $400,000 of the accounts receivable balance at December 31, 1995
and 1994, respectively.
Inventories
Inventories are stated at the lower of cost, determined on the first-in,
first-out (FIFO) method, or market. Material, labor and manufacturing overhead
are included in the cost of work-in-process and finished goods inventory.
Property and Equipment
Property and equipment are stated at cost. Major additions and improvements that
materially extend the life of the assets are capitalized. Depreciation is
computed using straight-line and accelerated methods over the estimated useful
lives of the assets. Estimated useful lives range from 5-7 years. Equipment
under capital leases is being depreciated using the straight-line method over
the term of the related lease.
-6-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies (continued)
Net Income Per Common Share
Net income per common share is computed using the weighted average number of
common shares outstanding.
Income Taxes
The Company recognizes deferred tax liabilities and assets based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect. The measurement of deferred tax
assets is reduced, if necessary, by the amount of any tax benefits that, based
on available evidence, are not expected to be realized.
Revenue Recognition
Sales revenue is recognized on products when they are shipped to the customer.
Lease revenue is recognized monthly when invoiced.
Research and Development
Research and development expenses are charged to expense as incurred.
Deferred Revenue
Deferred revenue consists of a deferred gain and maintenance agreement revenue
paid in advance of services. Deferred revenue is recognized as earned, pro rata
on a monthly basis, over the life of the lease or agreement.
Software Rights
The software rights are amortized over the estimated useful life of 18 months.
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 and disclosure of
contingent 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.
-7-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies (continued)
Reclassifications
Certain amounts in the 1993 and 1994 financial statements have been reclassified
to conform with the 1995 presentation.
Note 2 - Inventories
Inventories consist of the following:
December 31,
--------------------------------------
1995 1994
-------------- --------------
Raw materials $ 314,580 $ 183,600
Work-in-process 86,027 127,247
Finished goods 261,958 174,341
-------------- --------------
$ 662,565 $ 485,188
============== ==============
Note 3 - Leased Equipment
The Company's leasing operations consist principally of the leasing of scanning
and copying equipment and maintenance agreements. The leases are classified as
operating leases. Lease terms range from one to five years. At December 31, 1995
and 1994, machinery and equipment included $301,082 and $180,296 of leased
equipment, respectively, and accumulated depreciation of $56,899 and $18,029,
respectively.
The following is a schedule of the minimum future rentals on noncancelable
operating leases as of December 31, 1995:
Year Ending December 31,
------------------------
1996 $ 178,855
1997 124,815
1998 114,650
1999 40,424
--------------
$ 458,744
==============
-8-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 4 - Income Taxes
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1995 1994 1993
------------- -------------- ------------
<S> <C> <C> <C>
Current tax provision
Federal $ 33,313 $ 14,139 $ 6,118
State 7,005 5,498 2,379
Deferred tax (benefit)
Federal (6,613) (12,952) (5,597)
State (1,354) (5,037) (2,177)
------------ -------------- -----------
$ 32,351 $ 1,648 $ 723
============ ============== ===========
</TABLE>
The net deferred tax assets in the accompanying balance sheets consist of the
following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1995 1994
------------- -------------
<S> <C> <C>
Current deferred tax asset (liaiblity)
Capitalized inventory costs $ 28,580 $ 24,930
Bad debts 1,850 (1,500)
------------- ------------
$ 30,430 $ 23,430
============= ============
Long-term deferred tax asset (liability)
Deferred revenue $ 11,280 $ 17,864
Depreciation and amortization (7,980) (15,531)
------------- ------------
$ 3,300 $ 2,333
============= ============
</TABLE>
No valuation allowance has been provided against the net deferred tax
assets at December 31, 1995 and 1994 due to historical profitable operations
by the Company.
The items comprising deferred income tax (benefit) are as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------
1995 1994 1993
------------- ------------- ------------
<S> <C> <C> <C>
Deferred revenue $ (6,696) $ (20,850) $ -
Capitalized inventory costs (1,351) (9,485) (12,500)
Depreciation and amortization (2,224) 12,180 5,826
Bad debts 2,304 - (1,100)
------------ ------------ ------------
$ (7,967) $ (18,155) $ (7,774)
============ ============ ============
</TABLE>
-9-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 4 - Income Taxes (continued)
The difference between the Company's effective income tax rate and the United
States statutory rate is as follows:
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1995 1994 1993
----------- -------- --------
<S> <C> <C> <C>
United States statutory rate 26% 15% 15%
State income tax 5% 5% 5%
Permanent differences and tax credits (10)% (14)% (18)%
---------- -------- --------
21% 6% 2%
========== ======== ========
</TABLE>
Note 5 - Profit-Sharing Plan
The Company has a qualified profit sharing/401(k) plan (the Plan) for those
employees who meet certain eligibility requirements set forth in the Plan.
Employees become eligible to participate in the Plan after one year of service.
The Plan does permit voluntary contributions by participants. Contributions to
the 401(k) portion of the Plan are matched by the Company equal to 100% of
voluntary contributions by individual participants, limited to 3% of the
individual participant's annual pay. Annual profit sharing contributions to the
Plan are at the discretion of the Board of Directors. Vested benefits are
distributed upon death, disability or termination of employment according to the
following vested schedule:
Years of Service Percentage
---------------- ----------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
The total amount charged to operations under the plan was $83,289, $91,515,
and $48,558 for the years ended December 31, 1995, 1994, and 1993,
respectively.
-10-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 6 - Notes Payable - Officers
Notes payable to officers accrue interest at 5% per annum, are due on demand and
are without collateral. At December 31, 1995 and 1994, the balance was $259,241
and $78,567, respectively, and interest paid on the notes during the years ended
December 31, 1995, 1994 and 1993 totaled $12,862, $4,171, and 0, respectively.
Note 7 - Deferred Revenue on Sale and Leaseback
In 1994, under a sale and leaseback agreement, the Company sold equipment and
leased it back under a five year agreement. The transaction produced a gain of
$73,164 which was deferred and is being amortized over the life of the lease.
For the years ended December 31, 1995 and 1994, the Company recognized income of
$29,061 and $13,618, respectively.
Note 8 - Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Note payable, payable in monthly principal and
interest payments of $6,171 through July 1999.
Interest rate is 8.75%. This note payable is
non-recourse to the Company, is based upon the
credit standing of a customer of the Company
and is further collateralized by the equipment. $ 225,056 $ 276,115
Note payable, payable in monthly principal and
interest payments of $1,704 through January
1998. Interest rate is 9.5%; collateralized
by an automobile. 24,859 -
----------- -----------
249,915 276,115
Less current portion (67,614) (51,871)
----------- -----------
$ 182,301 $ 224,244
=========== ===========
</TABLE>
Maturities of long-term debt are as follows:
Year Ending December 31,
------------------------
1996 $ 67,614
1997 73,869
1998 69,103
1999 39,329
---------
$ 249,915
=========
-11-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 9 - Capital Lease Obligation
At December 31, 1995 and 1994, equipment with a net book value of $112,245 and
$219,387, respectively, (net of accumulated amortization of $157,142 and
$50,000, respectively) has been leased under capital leases.
Future minimum annual lease payments are as follows:
Year Ending December 31,
------------------------
1996 $ 93,227
1997 48,307
------------
Total minimum lease payments 141,534
Less amount representing interest (11,512)
------------
Net minimum lease payments 130,022
Less current portion (87,631)
------------
$ 42,391
============
Note 10 - Commitments
The Company has entered into various lease agreements for facility and equipment
use through May 31, 1999. Rent expense for the years ended December 31, 1995,
1994 and 1993 totaled $75,045, $61,590 and $35,850, respectively. Future minimum
lease payments under these leases are as follows:
Year Ending December 31,
------------------------
1996 $ 59,557
1997 57,939
1998 58,914
1999 24,547
-----------
$ 200,957
===========
Note 11 - Major Customer
During the year ended December 31, 1995, 1994, and 1993, sales to two customers
accounted for approximately 20%, 25%, and 13%, respectively, of the Company's
total sales revenue.
-12-
<PAGE>
TANGENT ENGINEERING, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
Note 12 - Software rights
In 1994 the Company exchanged scanning and copying equipment for software rights
from an entity which has developed cartographic software to be used in
conjunction with the Company's scanning and copying equipment. The software
rights were valued at $90,000 which was the sales price of the equipment
exchanged. The Company recognized a gain of $50,000 on the exchange of assets
which is being recognized as income on a straight-line basis over the term of
the lease. Accumulated amortization was $82,500 and $22,500 at December 31, 1995
and 1994, respectively.
Note 13 - Agreement to Reorganize
Effective December 29, 1995, the shareholders of the Company entered into a plan
of reorganization with an unaffiliated company whereby all of the issued and
outstanding shares of the Company were exchanged for 1,000,000 voting shares of
common stock of the unaffiliated company. Pursuant to the reorganization, the
Company entered into an agreement whereby the unaffiliated company will provide
funding for working capital, as needed, up to a maximum of $300,000 through
December 31, 1996. In addition, in conjunction with the reorganization, the
shareholders and one director entered into employment contracts with the Company
for a period of three years to be renewed automatically until terminated as
provided in the agreements.
-13-
<PAGE>
SCAN-GRAPHICS, INC.
CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
<PAGE>
PRO FORMA FINANCIAL STATEMENTS SCANGRAPHICS, INC.
CONSOLIDATED FINANCIALS
DECEMBER 31, 1995
BALANCE SHEET
CASH $ 189,401
ACCOUNTS RECEIVABLE 1,045,443
ALLOWANCE FOR D/A (45,804)
INVENTORY 1,454,247
OTHER CURRENT ASSETS 57,018
TOTAL CURRENT ASSETS $ 2,700,305
PROPERTY AND EQUIPMENT $ 756,399
LESS ACCUM DEPR/AMORT
OTHER ASSETS
PRODUCT ACQUISITION COST, LESS ACCUM. AMORT $ 0
SOFTWARE PURCHASE LESS ACCUM. AMORT 556,118
OTHER NON-CURRENT ASSETS 71,016
TOTAL OTHER ASSETS $ 627,134
TOTAL ASSETS $ 4,083,838
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 945,325
ACCRUED BONUSES 0
LOANS PAYABLE - RELATED PARTIES 54,455
NOTES PAYABLE - OFFICERS 259,241
ADVANCED BILLINGS 155,123
DIVIDEND PAYABLE 158,467
OTHER CURRENT ASSETS 17,948
CURRENT PORITON CAPITAL LEASE OBLIGATION 87,631
CURRENT MATURITIES LTD 69,402
TOTAL CURRENT LIABILITIES $ 1,747,592
LONG TERM DEBT $ 182,301
CAPITAL LEASE OBLIGATION 42,391
DEFERRED REVENUE 6,097
TOTAL LONG-TERM LIABILITIES $ 230,789
STOCKHOLDERS'EQUITY
CLASS A PREFERRED STOCK SERIES A $ 1,000,000
CLASS A PREFERRED STOCK SERIES B 1,250,000
COMMON STOCK 10,183
ADD'L PAID IN CAPITAL 8,678,066
DEFICIT (8,832,792)
TOTAL STOCKHOLDERS' EQUITY $ 2,105,457
TOTAL STOCKHOLDERS' EQUITY & LIABILITIES $ 4,083,838
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA FINANCIAL STATEMENTS SCANGRAPHICS, INC. SCANGRAPHICS, INC. SCANGRAPHICS, INC.
CONSOLIDATED FINANCIALS CONSOLIDATED FINANCIALS CONSOLIDATED FINANCIALS
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
INCOME STATEMENT
<S> <C> <C> <C>
REVENUES
SALES $ 5,048,342 $ 4,734,155 $ 3,335,371
LICENSE AND ROYALTY FEES 120,928 333,079 503,469
TOTAL REVENUES $ 5,169,270 $ 5,067,234 $ 3,838,840
COST OF GOODS SOLD $ 3,247,605 $ 2,189,948 $ 2,382,289
GROSS PROFIT $ 1,921,665 $ 2,877,286 $ 1,456,551
EXPENSES
RESEARCH AND DEVELOPMENT $ 585,347 $ 783,384 $ 769,684
SALES AND MARKETING 724,627 836,277 1,057,865
GENERAL AND ADMINISTRATIVE 1,793,606 2,149,391 1,432,156
TOTAL OPERATING EXPENSES $ 3,103,580 $ 3,769,052 $ 3,259,705
INCOME (LOSS) BEFORE OTHER (EXPENSE) INCOME ($ 1,181,915) ($ 891,766) ($ 1,803,154)
OTHER (EXPENSE) INCOME
LITIGATION LEGAL FEES $ 1,271 ($ 42,086) ($ 38,864)
INTEREST EXPENSE (43,904) (34,702) (10,049)
OTHER EXPENSES (27,277) (30,199) (23,812)
GAIN (LOSS) ON SALE OF ASSETS 0 106,712 0
INTEREST INCOME 2,233 4,718 4,943
OTHER INCOME 45,286 13,180 7,347
TOTAL OTHER (EXPENSE) INCOME ($ 22,341) $ 17,623 ($ 60,435)
NET (LOSS) INCOME BEFORE INCOME TAXES ($ 1,204,256) ($ 874,143) ($ 1,863,589)
(BENEFITS)
INCOME TAXES(BENEFIT) $ 32,351 $ 14,961 ($ 7,820)
NET(LOSS) INCOME ($ 1,236,607) ($ 889,104) ($ 1,855,769)
PREFERRED DIVIDENDS $ 158,467 $ 120,000 $ 120,000
BALANCE APPLICABLE TO COMMON STOCK ($ 1,395,074) ($ 1,009,104) ($ 1,975,769)
NET(LOSS)INCOME PER COMMON SHARE ($ 0.14) ($ 0.10) ($ 0.21)
WEIGHTED AVERAGE NUMBER OF COMMON 10,183,812 9,718,812 9,218,477
</TABLE>
<PAGE>
SIGNATURE
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 thereunto duly authorized.
SCAN-GRAPHICS, INC.
BY: /S/ ANDREW E. TROLIO
------------------------------
Andrew E. Trolio
President
March 11, 1996
(Date)
