SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 18, 1996
NOUVEAU INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-00139-A 23-2832617
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
212 Phillips Road, Exton, Pennsylvania 19341
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 524-8393
Health Management, Inc., 525 Washington Boulevard, Jersey City, New Jersey 07310
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
The Exhibit Index is on Page 4
<PAGE>
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS.
On January 29, 1996, the Registrant dismissed Laurence Mullins, C.P.A.,
(the "Former Accountants") as its certifying accountants and retained Richard A.
Eisner & Company, LLP as its certifying accountants. By resolution dated as of
January 29, 1996, the Registrant's Board of Directors approved the change in
auditors.
In connection with the report of the Former Accountants issued with
respect to the audit of the Registrant's fiscal years ended December 31, 1993
and December 31, 1994, which is the most recent fiscal year for which an audit
was performed, and for the period from December 31, 1994 to January 29, 1996,
there were no disagreements with the Former Accountants on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
the Former Accountants, would have caused them to make reference to the subject
matter of the disagreement in their report.
The report of the Former Accountants with respect to the Registrant's
financial statements for the fiscal year ended December 31, 1993 did not contain
an adverse opinion or disclaimer of opinion, nor was modified as to uncertainty,
audit scope or accounting principles.
The report of the Former Accountants with respect to the Registrant's
financial statements for the fiscal year ended December 31, 1994 contained an
explanatory paragraph describing an uncertainty affecting the Registrant. The
uncertainty related to the ability of the Registrant to continue as a going
concern as the Registrant had virtually no operations or liquid assets.
A letter from the Former Accountants addressed to the Securities and
Exchange Commission in accordance with Item 304(a)(3) of Regulation S-K stating
that they agree with the Registrant's response to Item 4 of the Registrant's
Current Report on Form 8-K, dated January 18, 1996, as amended by the
Registrant's Current Report on Form 8-K/A1, dated January 18, 1996, and by this
Report on Form 8-K/A2, is filed as an Exhibit hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
Audited balance sheets of NII and subsidiaries as at
December 31, 1995 and December 31, 1994 and related
statements of operations and cash flow for the years
then ended.
(b) Pro Forma Financial Information
Pro Forma Consolidated Balance Sheet giving effect to
(i) the acquisition of NII by the Registrant; (ii)
the issuance in a private placement of preferred
stock with warrants to purchase 112,560 shares of
common stock for an aggregate of $3,500,000 and (iii)
repayment of debt and acquisition of patent
technology from proceeds of a private placement.
(c) Exhibits
A letter from Laurence E. Mullins, C.P.A addressed to the Securities and
Exchange Commission in accordance with Item 304(a)(3) of Regulation S-K.
<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.
NOUVEAU INTERNATIONAL, INC.
BY: /S/ GARY W. BLACK, SR.
------------------------------
NAME: GARY W. BLACK, SR.
TITLE: CHIEF EXECUTIVE OFFICER
DATE: April 2, 1996
<PAGE>
EXHIBIT INDEX
10.6 Audited balance sheets of NII and subsidiaries as at December
31, 1995 and December 31, 1994 and related statements of
operations and cash flows for the years then ended.
10.7 Pro Forma Consolidated balance sheet giving effect to (i) the
acquisition of NII by the registrant, (ii) the issuance in a
private placement of preferred stock with warrants to purchase
112, 560 shares of common stock for an aggregate of $3,500,000
and (iii) repayment of debt and acquisition of patent
technology from proceeds of a private placement.
10.8 Letter from Laurence E. Mullins, C.P.A., in accordance with
Item 304(a)(3) of Regulation S-K
CPA
LAURENCE E. MULLINS
Financial Consultant
March 25, 1996
Securities and Exchange Commission
450 5th Street, NW
Washington, DC 20549
RE: Health Management, Inc.
File No. 33-00139-A
Gentlemen:
I have read Item 4 of the Form 8-K of Nouveau International, Inc. dated January
18, 1996, as amended by Form 8-K/A1 dated January 18, 1996 and Form 8-K/A2 dated
January 18, 1996, and agree with the statement contained therein.
Very truly yours,
/s/ Laurence E. Mullins
- -----------------------
201 S.E. 15th Terrace, Suite 212, Deerfield Beach,Florida 33441
Broward (954) 428-4411 (800) 379-6467 Fax (954) 428-4794
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND DECEMBER 31, 1994
<PAGE>
Richard A. Eisner & Company, LLP [LETTER HEAD]
REPORT OF INDEPENDENT AUDITORS
To the Stockholder
Nouveau International, Inc.
and Subsidiaries
We have audited the accompanying balance sheets of Nouveau
International, Inc. and subsidiaries as at December 31, 1995 and December 31,
1994 and the related statements of operations, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of Nouveau
International, Inc. and subsidiaries at December 31, 1995 and December 31, 1994,
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note L, in January 1996, the Company was acquired by
Health Management, Inc. through a reverse acquisition of stock.
/s/ Richard A. Eisner & Company, LLP
- ------------------------------------
New York, New York
February 7, 1996
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
BALANCE SHEETS
December 31,
A S S E T S 1995 1994
----------- ------ -----
(debtor-in-
possession)
Current assets:
Cash (Note B) . . . . . . . . . . . . . . . $ 376,971 $ 16,932
Accounts receivable . . . . . . . . . . . . 22,083 28,979
Inventory (Notes A[3] and C). . . . . . . . 3,174,659 621,298
Settlement receivable (Note D). . . . . . . 362,694
Due from affiliate (Note E) . . . . . . . . 32,287 32,287
----------- -----------
Total current assets . . . . . . . . 3,968,694 699,496
Property and equipment, net (Notes A[4] and F) 117,250 265,099
Settlement receivable (Note D) . . . . . . . . 448,142
Other assets . . . . . . . . . . . . . . . . . 61,474 38,508
----------- -----------
T O T A L. . . . . . . . . . . . . . $4,595,560 $ 1,003,103
=========== ===========
L I A B I L I T I E S
Current liabilities:
Current portion of prepetition liabilities
(Note G). . . . . . . . . . . . . . . . . $1,397,885 $ 5,318,371
Accounts payable, accrued expenses and
other current liabilities (Note D). . . . 349,640 49,138
Loan payable, stockholder (Note H). . . . . 183,764
--------- ---------
Total current liabilities. . . . . . 1,931,289 5,367,509
Prepetition liabilities (Note G) . . . . . . . 635,643 1,300,950
Fees payable (Note D). . . . . . . . . . . . . 100,000
---------- ----------
Total liabilities. . . . . . . . . . 2,666,932 6,668,459
---------- ----------
Commitments and contingencies (Note I)
STOCKHOLDER'S EQUITY (CAPITAL DEFICIENCY)
Common stock (Note J). . . . . . . . . . . . . 389,714 389,714
Retained earnings (deficit). . . . . . . . . . 1,538,914 (6,055,070)
----------- ------------
Total stockholder's equity
(capital deficiency) . . . . . . . 1,928,628 (5,665,356)
----------- ------------
T O T A L. . . . . . . . . . . . . . $4,595,560 $ 1,003,103
=========== ===========
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 2 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
Year Ended
December 31,
------------
1995 1994
---- ----
(debtor-in-
possession)
Revenues:
Net sales (Note K). . . . . . . . . . . . . $ 245,313 $ 943,345
Cost of goods sold. . . . . . . . . . . . . 224,282 859,287
------------ -----------
Gross profit . . . . . . . . . . . . 21,031 84,058
------------ -----------
Operating expenses:
General and administrative. . . . . . . . . 618,398 922,909
Selling . . . . . . . . . . . . . . . . . . 34,839 75,384
------------ -----------
653,237 998,293
------------ -----------
(Loss) from operations . . . . . . . . . . . . (632,206) (914,235)
------------ ------------
Other income (expenses):
Gain from settlement of lawsuit (Note D). . 5,979,459
Gain from disposition of technology
patents (Note I). . . . . . . . . . . . . 530,821
Interest income . . . . . . . . . . . . . . 105,216 23,686
Interest expense. . . . . . . . . . . . . . (32,352) (213,179)
(Loss) on abandonment and sale of property
(Note F). . . . . . . . . . . . . . . . . (92,338) (3,279)
Reorganization expense. . . . . . . . . . . (41,401) (15,000)
------------ ------------
5,918,584 323,049
------------ -----------
Income (loss) before extraordinary item. . . . 5,286,378 (591,186)
Extraordinary item:
Compromise of prepetition liabilities
(Note G). . . . . . . . . . . . . . . . . 2,307,606
-----------
NET INCOME (LOSS). . . . . . . . . . . . . . . 7,593,984 (591,186)
(Deficit) - beginning of year. . . . . . . . . (6,055,070) (5,463,884)
------------ ------------
RETAINED EARNINGS (DEFICIT) - END OF YEAR. . . $ 1,538,914 $(6,055,070)
============ ============
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 3 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Year Ended
December 31,
------------
1995 1994
---- ----
(debtor-in-
possession)
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . . $ 7,593,984 $(591,186)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Gain from sale of technology . . . . . . (530,821)
Litigation settlement. . . . . . . . . . (5,979,459)
Loss on abandonment and sale of
property . . . . . . . . . . . . . . . 92,338 3,279
Compromise of prepetition liabilities. . (2,307,606)
Depreciation . . . . . . . . . . . . . . 58,276 63,987
Interest imputed on lawsuit settlement . (97,266)
Changes in operating assets and
liabilities:
Decrease in accounts receivable. . . 6,896 14,790
Decrease in inventory. . . . . . . . 39,553 88,939
(Increase) decrease in other assets. (22,966) 5,478
Increase (decrease) in accounts
payable and accrued fees and
expenses:
Prepetition. . . . . . . . . . . (46,783) 603,434
Postpetition . . . . . . . . . . (849,498) 49,138
Proceeds from litigation settlement. 3,038,000
(Decrease) in customer deposits. . . --------- (17,542)
Net cash provided by (used in)
operating activities . . . . . . 1,525,469 (310,504)
------------ ----------
Cash flows from investing activities:
Purchase of property and equipment . . . . . (3,765) (25,444)
Proceeds from sale of asset. . . . . . . . . 1,000
------------ ----------
Net cash (used in) investing
activities . . . . . . . . . . . (2,765) (25,444)
------------ ----------
Cash flows from financing activities:
Proceeds from loans made by investor . . . . 90,169
Payment of secured prepetition liabilities . (1,346,429) (23,071)
Loans from stockholder . . . . . . . . . . . 183,764 268,616
------------ ---------
Net cash provided by (used in)
financing activities . . . . . . (1,162,665) 335,714
------------ ---------
NET INCREASE (DECREASE) IN CASH . . . . . . . . 360,039 (234)
Cash - beginning of year. . . . . . . . . . . . 16,932 17,166
------------ ---------
CASH - END OF YEAR. . . . . . . . . . . . . . . $ 376,971 $ 16,932
============ =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest . $ 29,931 $ 4,976
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 4 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Business and Summary of Significant Accounting Principles:
[1] The Company:
Nouveau International, Inc. and subsidiaries (the "Company")
manufactures and distributes hot food vending machines and related food
products. The Company uses certain proprietary machine and food technology in
the manufacture of its products.
On October 24, 1994, the Company (the "Debtor") filed
petitions for relief under Chapter 11 of the federal bankruptcy laws in the
United States Bankruptcy Court and subsequently submitted a plan of
reorganization to the court. Under Chapter 11, certain claims against the Debtor
in existence prior to the filing of the petitions for relief under the federal
bankruptcy laws were stayed while the Debtor continued business operations as
Debtor-in-possession. On December 8, 1995 the plan of reorganization (the
"Plan") was confirmed.
The Company is currently in the process of negotiating supply
and marketing agreements needed to broaden the distribution of their products.
[2] Principles of consolidation:
The consolidated financial statements of Nouveau
International, Inc. include the accounts of its wholly owned subsidiaries,
Nouveau Foods International, Inc. and Nouveau Vend International, Inc.
Intercompany balances and transactions have been eliminated in the consolidated
financial statements.
[3] Inventories:
Inventories are valued at the lower of cost (first-in,
first-out method) or market.
[4] Property and equipment:
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets (5 to 7 years).
(continued)
- 5 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Business and Summary of Significant Accounting Principles:
(continued)
[5] Income taxes:
The Company accounts for income taxes in accordance with the
provisions of SFAS No. 109 "Accounting for Income Taxes." SFAS No. 109 provides
for income taxes to be accounted for based on the difference between reported
amounts of assets and liabilities and their tax bases.
The confirmation of the plan of reorganization, has eliminated
all net operating loss carryforwards which were available to offset future
taxable income.
[6] 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.
(NOTE B) - Cash:
At December 31, 1995, cash includes $338,000 of funds received from the
lawsuit settlement referred to in Note D. These funds are being held in a
restricted escrow account and are segregated for payment to a secured creditor
and the Company's attorneys.
(NOTE C) - Inventories:
Inventories consist of the following:
December 31,
------------
1995 1994
---- ----
(debtor-in-
possession)
Component parts . . . . . . . $1,443,885 $153,560
Work-in-process . . . . . . . 151,800 55,962
Finished machines . . . . . . 1,578,974 411,776
----------- --------
T o t a l . . . . . $3,174,659 $621,298
=========== ========
(continued)
- 6 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE C) - Inventories: (continued)
Included in inventory at December 31, 1995 is approximately $900,000 of
parts and substantially all of the work-in-process and finished machines which
were received from a vendor pursuant to the litigation settlement referred to in
Note D. These goods were valued at their current replacement cost.
(NOTE D) - Litigation Settlement:
In 1995, the Company settled a lawsuit with the former supplier of its
vending machines. Under the terms of the settlement agreement, the supplier
cancelled accounts payable of $884,975 and agreed to pay the Company cash of
$3,938,000 and deliver to the Company inventory parts, work-in-process and
finished machines held by them, which were valued at $2,592,914. The Company has
received cash payments totalling $3,038,000 through December 1995; the remaining
balance is due in installments of $300,000 in March 1996, $100,000 in June 1996
and a final installment of $500,000 in June 1997.
The settlement balance receivable is shown at its net present value
discounted at an effective interest rate of 11% per annum. The bankruptcy court
ordered that a portion of the cash proceeds of the settlement be used to pay a
secured claim owed to a creditor (Note G) and attorneys' fees for services
rendered in connection with the settlement of the lawsuit. Fees payable to the
litigating attorneys amount to $300,000 at December 31, 1995. The current
portion due of $200,000 is included in accounts payable and accrued expenses in
the accompanying balance sheet.
(NOTE E) - Due From Affiliate:
Due from affiliate consists of a loan due on demand from a company
which is wholly owned by the stockholder of the Company.
(continued)
- 7 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Property and Equipment:
Property and equipment consists of the following:
December 31,
1995 1994
(debtor-in-
possession)
Machinery and equipment . . . . $228,428 $425,027
Furniture and fixtures. . . . . 23,015 23,015
Transportation equipment. . . . 10,796 7,032
------ -----
262,239 455,074
Less accumulated depreciation . 144,989 189,975
------- -------
T o t a l . . . . . . $117,250 $265,099
========= ========
In July 1995, the Company abandoned leasehold improvements with a net
book value of $90,640. In addition, the Company limited production to the
assembly of vending machines during the first three months of 1995. The Company
discontinued depreciating manufacturing equipment for the remainder of the year.
In 1996, the Company expects to resume full production and will depreciate its
manufacturing equipment over its remaining useful life.
(continued)
- 8 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Prepetition Liabilities:
Prepetition liabilities consists of the following:
December 31,
------------
1995 1994
---- ----
(debtor-in-
possession)
Secured:
Former investor. . . . . $1,700,950 $2,900,950
Bank . . . . . . . . . . 146,429
--------- ---------
1,700,950 3,047,379
--------- ---------
Priority:
Tax claims . . . . . . . 33,293 80,076
Former stockholder . . . 48,000
--------- ---------
81,293 80,076
--------- ---------
Unsecured:
Stockholders . . . . . . 22,636 226,356
Trade and other
miscellaneous claims . 132,131 2,300,333
Former investor. . . . . 96,518 965,177
--------- ---------
251,285 3,491,866
--------- ---------
T o t a l . . . . 2,033,528 6,619,321
Less current portion. . . . 1,397,885 5,318,371
----------- ----------
Noncurrent portion. . . . . $ 635,643 $1,300,950
=========== ==========
When the Company petitioned for bankruptcy in October 1994 two claims
were owed to secured creditors. The first claim was owed to a bank who was paid
in full in June of 1995. The payment amounted to $175,000 including accrued
interest of $28,571. The remaining claim is payable to a former investor in the
Company and is partly collateralized by the proceeds of the litigation
settlement referred to in Note D. Total payments made against this claim through
December 31, 1995 amount to $1,200,000.
In January 1996, the Company used a portion of the proceeds received
from the sale of preferred stock (Note L) to pay the remaining balance of
secured claims owed to the former investor of $1,700,950.
(continued)
- 9 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE G) - Prepetition Liabilities: (continued)
The plan of reorganization did not provide for the payment of interest
to the secured creditor subsequent to the date of petition. Contractual interest
on these loans was approximately 11% per annum and if it would have continued to
accrue, it would have amounted to approximately $242,000 for the year ended
December 31, 1995 and $55,000 for the period of October 24, 1994 through
December 31, 1994.
In June 1995, the Bankruptcy Court ordered the Company to pay $46,783
to the Internal Revenue Service from the proceeds of the initial payment
received from the litigation settlement. Priority claims include remaining
payroll tax liabilities owed to a state government and unpaid rent due to a
former stockholder for leased premises which were vacated in 1995.
Upon confirmation of the plan of reorganization, unsecured claims,
including those due to certain stockholders and the former investor were settled
for 10% of their prepetition amount and are payable in two equal installments of
5% each in December 1996 and December 1997. Cancellation of debt pursuant to the
plan of reorganization resulted in an extraordinary gain of $2,307,606.
Minimum payments due for all claims under the plan of reorganization
are as follows:
Secured Priority Unsecured Total
------- -------- --------- -----
1996 . . . . . . . . $1,200,950 $71,293 $125,642 $1,397,885
1997 . . . . . . . . 500,000 10,000 125,643 635,643
----------- -------- --------- ----------
$1,700,950(1) $81,293 $251,285 $2,033,528
========== ======== ========= ==========
(1) Amount paid in full using the proceeds of the sale of preferred stock (Note
J).
(NOTE H) - Loans Payable - Stockholder:
These loans were made to the Company from October to December 1995,
were secured, and were repaid in January 1996. The loans bore interest at 10%
per annum. Interest expense on these loans amounted to $2,421 for the year ended
December 31, 1995.
(continued)
- 10 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Commitments and Contingencies:
[1] The Company occupies premises pursuant to an operating lease which
expires in July 1998. In addition, the Company entered into a three year lease
in January 1996 for a building which it intends to use as a facility to assemble
and store pizza vending machines. The new lease expires on March 31, 1999. These
leases are subject to escalations for the Company's pro rata share of real
estate taxes and operating expense. Future minimum rental payments, exclusive of
escalation payments for taxes and utilities, under these leases are as follows:
Year Ending
December 31,
1996 . . . . . . . . . . . . . . . . $ 69,672
1997 . . . . . . . . . . . . . . . . 73,440
1998 . . . . . . . . . . . . . . . . 37,662
--------
T o t a l. . . . . . . . . $180,774
========
The Company also leases certain storage facilities on a
month-to-month basis. In 1995, rent expense amounted to $61,357 including
$24,668 paid to a former stockholder. In 1994 rent expense amounted to $34,105
which was paid to a former stockholder.
[2] In 1994, the Company repaid $530,281 of its secured debt upon the
foreclosure by the creditor against certain technology patents. The Company
recorded a gain of $530,281 from the disposition of its technology patents. In
January 1996, the Company used a portion of the proceeds received from the sale
of preferred stock (Note L) to repurchase these patents for its exclusive use
for $530,821.
[3] In connection with the Company's petition for relief under the
bankruptcy laws, various suits and judgements have been filed against the
Company. In the opinion of the Company's management and legal counsel, these
claims will not result in any liability to the Company.
(NOTE J) - Common Stock:
At December 31, 1995, 10,000,000 shares of $1 par common stock are
authorized, of which 2,198,992 are issued and outstanding. From inception, the
Company received payments totalling $389,714 from the sale of stock. The Company
is 100% owned by one stockholder who became the owner of all outstanding shares
upon confirmation of the Plan.
(continued)
- 11 -
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE K) - Other:
In 1995 and 1994 sales to one customer amounted to $124,638 and
$329,716 which represents 50% and 35% of net sales in each of these years,
respectively. In addition, accounts receivable due from this customer was
$21,873 at December 31, 1995.
In addition, the Company sold certain vending machines to a stockholder
in 1994 for $12,000.
(NOTE L) - Subsequent Event:
[1] In January 1996, all of the outstanding stock of the Company was
acquired by Health Management Inc. ("HMI") in exchange for 6,750,000 shares,
representing 60%, of HMI common stock. HMI was a nonoperating company and
therefore the acquisition will not be accounted for as a business combination.
Concurrent with the transaction, in a private placement, HMI sold 70 units, each
unit consisting of 1 share of 4% cumulative redeemable preferred stock and 1,608
common stock purchase warrants for $3,500,000. HMI changed its name to Nouveau
International, Inc. ("NI").
The preferred stock is mandatorily redeemable at a price per
share which is equal to the original issuance price plus accrued dividends on
the earlier of the date of a public offering of its common stock for minimum
gross proceeds of $5,000,000 or January 4, 1997. If not redeemed through the
public offering, the Company may, at its option, convert the preferred stock
into 1,125,000 shares of common stock. The preferred stock has a liquidation
value equal to the redemption value.
Each common stock purchase warrant entitles the holder to
purchase one share of the new Company's common stock at an exercise price of
$.50 per share. The warrants expire in January 1999.
[2] NI is currently in the process of attempting to raise additional
financing through a private placement of debt securities. The Company is seeking
additional sources of financing however there is no assurance that such
financing will be obtained.
[3] In February 1996, NI formed Noveau Equities, Inc. and entered into
contract for the purchase of a building in which it will construct and operate a
food processing plant. The purchase price of the building is $1,360,000. NI has
made a nonrefundable down payment of $40,000 and is currently seeking additional
financing which is needed to fund the balance of the purchase price. There is no
assurance that such financing will be obtained.
- 12 -
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1995
(Unaudited)
The following pro forma consolidated balance sheet gives effect to (i)
the acquisition of Nouveau International, Inc., by Health Management, Inc. for
60% of the common stock of HMI. Since the stockholders of Nouveau have the
majority of the outstanding shares, the transaction has been accounted for as if
Nouveau were the acquiring company. The accounts of HMI have been recorded at
book amount since it had no operations, (ii) the issuance in a private placement
of preferred stock with warrants to purchase 112,560 shares of common stock for
an aggregate of $3,500,000, (iii) repayment of debt and acquisition of patent
technology from proceeds of private placement. This statement should be read in
conjunction with the financial statements of Nouveau International, Inc.
appearing elsewhere herein. The pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of financial
position had the transactions occurred on December 31, 1995.
<TABLE>
<CAPTION>
Historical
Nouveau Health
International, Management, Pro Forma
A S S E T S Inc. Inc. Adjustments Pro Forma
----------- ------ ------ ------------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash .............................................. $ 376,971 $ 3,045,000 (B) $1,190,200
(2,231,771) (C))
Accounts receivable ............................... 22,083 22,083
Inventory ......................................... 3,174,659 3,174,659
Settlement receivable ............................. 362,694 362,694
Due from affiliate ................................ 32,287 32,287
----------- ----------- ---------
Total current assets ....................... 3,968,694 813,229 4,781,923
Property and equipment, net .......................... 117,250 117,250
Settlement receivable ................................ 448,142 448,142
Technology patents ................................... 530,821 (C) 530,821
Other assets ......................................... 61,474 (45,000) (B) 16,474
----------- ----------- ---------
T O T A L .................................. $4,595,560 $1,299,050 $5,894,610
=========== =========== ==========
L I A B I L I T I E S
Current liabilities:
Current portion of prepetition liabilities ........ $1,397,885 $(1,200,950) (C) $ 196,935
Accounts payable, accrued expenses and other
current liabilities ............................. 349,640 349,640
Loan payable, stockholder ......................... 183,764 183,764
----------- ----------- ---------
Total current liabilities .................. 1,931,289 (1,200,950) 730,339
Prepetition liabilities .............................. 635,643 (500,000) (C) 135,643
Fees payable ......................................... 100,000 100,000
----------- ----------- ---------
Total liabilities .......................... 2,666,932 (1,700,950) 965,982
----------- ----------- ---------
STOCKHOLDERS' EQUITY
Convertible preferred stock (convertible into
1,125,000 shares of common stock) ($3,500,000
liquidation preference) ........................... 3,000,000 (B) 3,000,000
Common stock ......................................... 389,714 $ 2,960 (381,424) (A) 11,250
Additional paid-in capital ........................... 784,705 378,464 (A)) 378,464
(784,705) (A))
Retained earnings (deficit) ......................... 1,538,914 (787,665) 787,665 (A) 1,538,914
----------- ----------- ----------- -----------
Total stockholders' equity ................. 1,928,628 - 0 - 3,000,000 4,928,628
----------- ----------- ----------- -----------
T O T A L .................................. $4,595,560 $ - 0 - $1,299,050 $5,894,610
=========== =========== =========== ===========
</TABLE>
F-8
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
The following pro forma consolidated statement of operations gives
effect to the acquisition of Nouveau International, Inc., for 60% of the
outstanding stock of Health Management, Inc. This statement should be read in
conjunction with the financial statements of Nouveau International, Inc. and
Health Management, Inc. appearing elsewhere herein. The pro forma financial
information is presented for illustrative purposes only and is not necessarily
indicative of the operating results or what would have occurred if the merger
had occurred, nor is it indicative of the future operating results or financial
position of the Company.
<TABLE>
<CAPTION>
Historical
-------------------------------
Nouveau Health
International, Management, Pro Forma
Inc. Inc. Adjustments Pro Forma
-------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . .$ 245,313 $ 245,313
Cost of goods sold. . . . . . . . . . . . . . . . . 224,282 224,282
------------ -----------
Gross profit . . . . . . . . . . . . . . . . 21,031 21,031
------------ -----------
Operating expenses:
General and administrative. . . . . . . . . . . . . 618,398 $ 9,022 627,420
Selling . . . . . . . . . . . . . . . . . . . . . . 34,839 34,839
------------ -------- -----------
653,237 9,022 662,259
------------ -------- -----------
Loss from operations . . . . . . . . . . . . . . . . . (632,206) (9,022) (641,228)
Gain from settlement of lawsuit. . . . . . . . . . . . 5,979,459 $(5,979,459) (1) - 0 -
Interest income. . . . . . . . . . . . . . . . . . . . 105,216 105,216
Interest expense . . . . . . . . . . . . . . . . . . . (32,352) (32,352)
------------ -------- ------------ ------------
Income (loss) before extraordinary item . . . . . . .$ 5,420,117 $(9,022) $(5,979,459) $ (568,364)
============ ======== ============ ============
Pro forma loss per share before extraordinary item . . $(.05)
======
Pro forma weighted average shares outstanding. . . . . 11,750,000
==========
</TABLE>
(1) To adjust for nonrecurring gain on settlement of lawsuit.
F-10
