<PAGE>
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
Date of Report (Date earliest event reported): September 27, 1995
GOLD SECURITIES CORPORATION
(Exact name of registrant as specified in its charter)
IDAHO
(State or other Jurisdiction of Incorporation)
1-8958 91-1224178
(Commission File No.) (I.R.S. Employer Identification No.)
65 Railroad Avenue, Ridgefield, New Jersey 07657
(Address of principal executive offices) (zip code)
Registrant's telephone number including area code (201) 941-6550
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
Complete audited financial statements for DCI's Zoo Borns
Division for its fiscal year ended April 30, 1995 are filed
herewith
(b) Pro Forma Financial Information
Pro forma financial information is filed herewith.
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
FINANCIAL STATEMENTS
APRIL 30, 1995
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
APRIL 30, 1995
CONTENTS
Page
----
Independent Auditors' Report 1
Balance Sheets 2
Statements of Operations and Accumulated Deficit 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 7
<PAGE>
[Letterhead of Bederson & Company LLP]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Direct Connect International Inc.
and Subsidiary
Midland Park, New Jersey
We have audited the accompanying balance sheet of the Zoo Borns Division (as
defined in Note 1) of Direct Connect International Inc. and Subsidiary as of
April 30, 1995 and the related statements of operations and accumulated deficit,
and cash flows for the year then ended. These financial statements are the
responsibility of 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 the Zoo Borns Division of
Direct Connect International Inc. and Subsidiary as of April 30, 1995, and the
results of its operations and its cash flows for the year ended April 30, 1995
in conformity with generally accepted accounting principles.
BEDERSON & COMPANY LLP
/s/ Bederson & Company LLP
West Orange, New Jersey
November 22, 1995
(1)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
BALANCE SHEETS
ASSETS
September 26, April 30,
1995 1995
------------- ---------
(Unaudited)
CURRENT ASSETS:
Inventories $ - $ 40,367
Prepaid royalties 10,000 10,000
------------ -----------
TOTAL CURRENT ASSETS 10,000 50,367
MOLDS, MACHINERY AND EQUIPMENT, at cost,
less accumulated depreciation of
$7,151 and $3,151 84,228 32,446
------------ -----------
TOTAL ASSETS $ 94,228 $ 82,813
============ ===========
LIABILITIES AND ACCUMULATED DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 160,434 $ 185,846
Due to owner 1,062,013 1,139,636
------------ -----------
TOTAL LIABILITIES 1,222,447 1,325,482
ACCUMULATED DEFICIT (1,128,219) (1,242,669)
------------ -----------
TOTAL LIABILITIES AND ACCUMULATED
DEFICIT $ 94,228 $ 82,813
============ ===========
The accompanying notes are an integral part
of these financial statements.
(2)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
May 1, 1995
Through
September 26, Year Ended
1995 April 30, 1995
------------- --------------
(Unaudited)
SALES $ 1,071,922 $ 1,389,923
----------- -----------
COSTS AND EXPENSES:
Cost of goods sold 543,724 662,599
Royalties/licensing fees 84,817 110,898
Advertising and promotion 65,881 758,142
Depreciation 4,000 3,151
General and administrative expenses 259,050 552,600
Product development costs - 545,202
----------- -----------
TOTAL COSTS AND EXPENSES 957,472 2,632,592
----------- -----------
NET INCOME (LOSS) 114,450 (1,242,669)
ACCUMULATED DEFICIT - beginning (1,242,669) -
----------- -----------
ACCUMULATED DEFICIT - ending $(1,128,219) $(1,242,669)
=========== ===========
The accompanying notes are an integral part
of these financial statements.
(3)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
STATEMENTS OF CASH FLOWS
May 1, 1995
Through
September 26, Year Ended
1995 April 30, 1995
------------- --------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 114,450 $(1,242,669)
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation 4,000 3,151
(Increase) decrease in assets:
Inventories 40,367 (40,367)
Prepaid royalties - (10,000)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses (25,412) 185,846
Due to owner (77,623) 1,139,636
---------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 55,782 35,597
---------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of molds, machinery
and equipment (55,782) (35,597)
---------- -----------
NET INCREASE IN CASH - -
CASH - beginning - -
---------- -----------
CASH - ending $ - $ -
========== ===========
The accompanying notes are an integral part
of these financial statements.
(4)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
NOTES TO FINANCIAL STATEMENTS
THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED)
AND THE YEAR ENDED APRIL 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization, Business and Basis of Presentation
The accompanying financial statements present the financial position,
results of operations and changes in accumulated deficit and cash flows
of the rights and interest to the Zoo Borns product line, Tea Bunnies
product line and Kidsview name (collectively the Zoo Borns Division )
of Direct Connect International Inc. and Subsidiary (the Company). The
financial statements are prepared for Evolutions, Inc., in connection
with its acquisition of the Zoo Borns Division (Note 5). Certain
amounts in the accompanying financial statements have been allocated in
a reasonable and consistent manner in order to depict the financial
position, results of operations and cash flows of the Zoo Borns
Division on a stand-alone basis.
The Zoo Borns Division, which commenced operations during the year
ended April 30, 1995, is engaged in the business of designing,
developing, marketing, and distributing a variety of infant, preschool
and general soft toy products. Substantially, all of the Company s
purchases are from suppliers in the Far East.
The accompanying balance sheet reflects a working capital deficiency of
$1,212,447 at September 26, 1995 (unaudited) and $1,275,115 at April
30, 1995 and the statement of operations for the year ended April 30,
1995 reflects a net loss of $1,242,669. The management of the Company
believes the subsequent events described in Note 5, will provide
sufficient funds to meet the Zoo Borns Division s operating needs
during the next twelve (12) months, assuming no material change in the
level of its business operations.
Inventories
Inventories are valued at the lower of cost (first-in, first-out
method) or market and consist principally of finished goods held for
resale.
Prepaid Royalties
The Company has entered into license agreements and royalty
arrangements for the use of certain characters for its toys and is
obligated to pay nonrefundable advances over the terms of these
agreements, which are recoupable by the Company to the extent of the
royalties earned on products sold. In order to match revenues with
expenses, these minimum guarantees are treated as prepaid expenses and
are charged against income as the products are sold. Any minimum
guaranty paid in excess of earned royalties is charged against income
at such point that it is known that earned royalties will not cover
minimum royalties.
Molds, Machinery and Equipment
Molds, Machinery and equipment, stated at cost less accumulated
depreciation, is depreciated using the straight-line method over a five
year period.
(5)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
NOTES TO FINANCIAL STATEMENTS
THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED)
AND THE YEAR ENDED APRIL 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Certain income and expense items are accounted for in different periods
for income tax purposes than for financial reporting purposes.
Provisions for deferred income taxes are made in recognition of these
temporary differences.
Deferred income tax assets as of April 30, 1995 have been reduced to
zero by a valuation allowance of approximately $500,000 due to
uncertainties concerning their realization.
Interim Financial Statements
The unaudited financial statements reflects all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results for the
period. The results of operations are not necessarily indicative of
the results expected for the fiscal year.
NOTE 2 - RELATED PARTY TRANSACTIONS
During the period May 1, 1995 through September 26, 1995 (unaudited)
and year ended April 30, 1995, the Zoo Borns Division purchased
products totaling approximately $-0- and $266,986, respectively, from a
corporation which is owned and operated by a principal stockholder and
executive vice president of the Company. During the year ended April
30, 1995, Zoo Borns Division incurred product development expenses of
$49,000 payable to this corporation.
NOTE 3 - LICENSE AGREEMENTS
The Company has the right to use product names and designs under
license agreements with designers. These agreements require the
Company to pay royalties ranging from five percent to ten percent of
sales. The Company is obligated to make minimum annual cash royalty
payments aggregating $15,000 for the fiscal year ending April 30, 1996,
with respect to the Tea Bunnies product line.
NOTE 4 - MAJOR CUSTOMERS
The Zoo Borns Division had ninety six percent of its sales to two
customers during the period May 1, 1995 through September 26, 1995
(unaudited) and seventy-eight percent of its sales to two customers
during the year ended April 30, 1995.
(6)
<PAGE>
DIRECT CONNECT INTERNATIONAL INC.
AND SUBSIDIARY
ZOO BORNS DIVISION
NOTES TO FINANCIAL STATEMENTS
THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED)
AND THE YEAR ENDED APRIL 30, 1995
NOTE 5 - SUBSEQUENT EVENTS (Unaudited)
On September 27, 1995, the Company entered into an agreement with
Evolutions, Inc. ( Evo ), an unaffiliated public company, whereby the
Company transferred all rights and interests to its Zoo Borns product
line, Tea Bunnies product line and Kidsview name to Evo for $750,000
and shares of common stock of Evo equivalent to approximately seven
percent of Evo s then outstanding common stock. The Company also has
the right to receive additional shares of Evo s common stock,
equivalent to approximately fifteen percent of the then outstanding
common stock based on certain performance levels of the Zoo Borns
Division over the next three years.
As part of the agreement, the Company will manage these product lines
for Evo, and will receive an amount equal to its monthly operating
costs, up to $100,000, for such period of time as the Company is
managing such product lines. The Company will provide the services of
Peter Schneider, president of the Company, for such management, and he
has so agreed. This management arrangement may terminate after one
year, but could be extended for up to two additional years depending on
certain performance levels of such product lines.
As an inducement for Evo to enter into this agreement, the Company
issued to Evo warrants to purchase 300,000 shares of common stock of
the Company at exercise prices of $.10 per share with respect to
100,000 shares and $.20 per share with respect to 200,000 shares. In
anticipation of consummating the agreement, Evo and the Company entered
into a lending arrangement under which the Company signed a promissory
note in March 1995 for $750,000 with interest at the annual rate of
twelve percent. Such note was secured by 133,973 shares of common
stock of Glasgal Communications, Inc. held by the Company and by an
interest in certain amounts receivable and is due on September 1, 1996.
Subsequently, the Company also signed promissory notes totalling
$350,000 with interest at the annual rate of twelve percent. Such
notes were due on October 31, 1995. Upon consummation of the
agreement, all notes were cancelled with $1,100,000 applied to the
purchase price and management fees. Under certain circumstances and at
the Company s option on or before December 31, 1995, the Company can
reacquire the product lines but will be obligated to pay to Evo
$1,100,000 and deliver to Evo the shares of Evo common stock previously
issued to the Company.
The Company recognized a gain of approximately $1,000,000 as a result
of the sale of the Zoo Borns Division.
(7)
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
On July 24, 1995, Gold Securities Corporation ("Gold") acquired
Evolutions, Inc. ("EVI") by merging a wholly-owned subsidiary, GSC Acquisition
Corporation, into EVI. The holders of EVI stock received an aggregate of
10,000,000 shares of Gold common stock and the right to receive an additional
88,851,174 shares upon shareholder approval to increase Gold's authorized number
of shares.
Although in the form of a merger, the transaction is, in substance, an
acquisition of Gold by EVI as the control of Gold will transfer from the
management of Gold to the management of EVI. For purposes of the pro forma
financial statements, the value of the record assets and liabilities of EVI, as
being the most indicative measurement. Such value aggregated $2,495,316 at June
30, 1995.
On September 27, 1995, Kidsview, Inc., a wholly owned subsidiary of EVI
("Kidsview"), purchased certain assets of Direct Connect International, Inc.
("DCI"), consisting primarily of a line of toy animals marketed under the
tradenames Zoo Borns and Tea Bunnies. In consideration for the purchase, EVI,
among other things, conditionally released DCI of $750,000 in indebtedness to
EVI. In addition, the Company agreed to issue to DCI 1,500,000 shares of Gold
common stock, which issuance is contingent upon shareholder approval to increase
Gold's authorized number of shares. Up to an additional 4,000,000 shares of Gold
common stock ("Contingent Shares") will be issued to DCI if over a period of
three years certain net sales and earnings tests are met in connection with the
business acquired from DCI.
DCI was also indebted to EVI under a $350,000 note payable. Under the
terms of the agreement between EVI and DCI, Kidsview and DCI entered into a
management agreement pursuant to which DCI will continue to manage the business
relating to the toy animals for a monthly fee of up to $100,000. The first
$150,000 of management fees incurred will be offset against this note. DCI was
conditionally released from the balance of the note, which has been attributed
to additional consideration for the acquired assets.
<PAGE>
GOLD SECURITIES CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 AND
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
The pro forma combined statements of operations for the year ended
December 31, 1994 includes the statement of operations of EVI for the period
from inception (January 21, 1994) to December 31, 1994, the statement of
operations of Gold for the year ended December 31, 1994, and the statement of
operations of the acquired product line of DCI for the twelve months January 31,
1995. The statement of operations of the acquired product line of DCI for the
twelve month period ended January 31, 1995 was derived by deducting the
statement of operations data for the three months ended April 30, 1995 from the
statement of operations data for the year ended April 30, 1995 and adding the
statement of operations data for the three months ended April 30, 1994.
The pro forma combined statements of operations for the nine months ended
September 30, 1995 includes the statement of operations of EVI for the nine
months ended September 30, 1995, the statement of operations of Gold from
January 1, 1995 through July 24, 1995 (date of merger) and the statement of
operations of the acquired product line DCI for the nine months ended September
30, 1995. The statement of operations of the acquired product line of DCI from
the nine months ended September 30, 1995 was derived by adding the statement of
operations for the eight months ended September 30, 1995 with the statement of
operations for the one month ended January 31, 1995.
The pro forma combined statements of operations have been prepared as if the
merger and acquisition transactions had been consummated as of January 21, 1994
and January 1, 1995, respectively. The pro forma results of operations do not
purport to be indicative of the results of operations that actually would have
resulted had such transactions been consummated on such dates.
Combination of Gold and EVI
(1) To record additional amortization of goodwill arising from the
acquisition, assuming an amortization period of 10 years.
(2) To record write down of assets to fair value based upon purchase
accounting.
Acquisition of DCI Product Line
(3) To record amortization of intangible assets arising from the
acquisition, assuming an amortization period of 7 years.
(4) To record monthly management fee due to DCI under the Management
Agreement dated September 27, 1995. The Agreement provides for a
monthly fee equal to the lesser of $100,000 or DCI's documented
operating costs in performing its services. The pro forma
statements of operations assume a monthly fee of $100,000.
(5) To deduct selling, general, and administrative costs of DCI, as
such costs will be covered by the monthly management fee described
in Note 4.
<PAGE>
GOLD SECURITIES CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Gold
Evolutions Securities Pro forma Direct Pro forma
Inc. Corporation Adjustments Subtotal Connect Adjustments Total
---------- ----------- ----------- -------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES $ 124,281 $ 924 $ - $ 125,205 $1,331,853 $ - $ 1,457,058
--------- --------- --------- --------- ---------- ---------- -----------
COSTS AND EXPENSES:
Cost of goods sold 216,389 - - 216,389 635,329 - 851,718
Selling, general
and administrative 227,245 30,830 (1) 27,000 285,075 701,036 (5) (701,036) 431,475
(3) 146,400
Management fee - - - - - (4) 1,200,000 1,200,000
--------- --------- --------- --------- ---------- ---------- -----------
443,634 30,830 27,000 501,464 1,336,365 645,364 2,483,193
--------- --------- --------- --------- ---------- ---------- -----------
OPERATING LOSS (319,353) (29,906) (27,000) (376,259) (4,512) (645,364) (1,026,135)
--------- --------- --------- --------- ---------- ---------- -----------
OTHER:
Loss on sale of
securities 60,874 - - 60,874 - - 60,874
Abandoned mining
claims - 226,325 (2) (226,325) - - - -
Interest expense 3,573 - - 3,573 - - 3,573
Interest income (42,262) - - (42,262) - - (42,262)
--------- --------- --------- --------- ---------- ---------- -----------
22,185 226,325 (226,325) 22,185 - - 22,185
--------- --------- --------- --------- ---------- ---------- -----------
NET (LOSS) INCOME $(341,538) $(256,231) $ 199,325 $(398,444) $ (4,512) $ (645,364) $(1,048,320)
========= ========= ========= ========= ========== ========== ===========
LOSS PER SHARE $(0.00) $(0.01)
====== ======
WEIGHTED AVERAGE
NUMBER OF SHARES 107,457,363 108,957,363
=========== ===========
</TABLE>
See notes to pro forma combined statements of operations
<PAGE>
GOLD SECURITIES CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Gold
Evolutions Securities Pro forma Direct Pro forma
Inc. Corporation Adjustments Subtotal Connect Adjustments Total
---------- ----------- ----------- -------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
NET REVENUES $ 309,910 $ - $ - $ 309,910 $1,904,696 $ - $2,214,606
--------- --------- --------- --------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of goods sold 229,822 - - 229,822 947,579 - 1,177,401
Selling, general
and administrative 188,301 - (1) 18,700 207,001 1,275,062(5) (1,275,062) 317,001
(3) 110,000
Management fee - - - - - (4) 900,000 900,000
--------- --------- --------- --------- ---------- ---------- ----------
418,123 - 18,700 436,823 2,222,641 (265,062) 2,394,402
--------- --------- --------- --------- ---------- ---------- ----------
OPERATING (LOSS) INCOME (108,213) - (18,700) (126,913) (317,945) 265,062 (179,796)
--------- --------- --------- --------- ---------- ---------- ----------
OTHER:
Loss on sale of
securities 49,697 - - 49,697 - - 49,697
Interest expense 37,794 - - 37,794 - - 37,794
Interest income (26,917) - - (26,917) - - (26,917)
--------- --------- --------- --------- ---------- ---------- ----------
60,574 - - 60,574 - - 60,574
--------- --------- --------- --------- ---------- ---------- ----------
NET (LOSS) INCOME $(168,787) $ - $(18,700) $(187,487) $ (317,945) $ 265,062 $ (240,370)
========= ========= ======== ========= ========== ========== ==========
LOSS PER SHARE $(0.00) $(0.00)
====== ======
WEIGHTED AVERAGE
NUMBER OF SHARES 107,457,363 108,957,363
=========== ===========
</TABLE>
See notes to pro forma combined statements of operations
<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 thereunto duly authorized.
GOLD SECURITIES CORPORATION
By /s/ Michael Nafash
---------------------------
Michael Nafash, President
Date: December 7, 1995
