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Previous: BIRMINGHAM STEEL CORP, 4, 1999-01-27 |
Next: OFFICELAND INC, 3, 1999-01-27 |
<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 of earliest event reported): November 13, 1998
OFFICELAND INC.
(Exact name of registrant as specified in its charter)
Ontario, Canada
(State or other jurisdiction of incorporation)
86732971
(Canadian Federal Tax Account No.)
312 Dolomite Drive, Suite 212
Downsview, Ontario M3J 2N2
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (416) 736-4000
<PAGE>
Item 2 Acquisition of Assets
Pursuant to a Stock Purchase Agreement dated October 9, 1998, Officeland
Inc. ("Officeland") acquired the stock of Telecom Corporation of Chicago on
November 13, 1998 for the aggregate consideration of $3,100,000 in cash and
750,000 shares of Officeland common stock, plus an additional earn-out amount
payable in cash or common shares subject to Telecom's future earnings. The
acquisition was completed after Officeland received financing from investors
associated with International Capital Partners, Inc., a Connecticut based
investment management company. Telecom is a leading re-manufacturer and
marketer of used fax machines, small copiers and printers.
Item 7 Financial Statements and Exhibits
Exhibit 1. Press release of Officeland Inc. dated November 16, 1998
announcing the acquisition of Telecom Corporation of Chicago
(previously filed).
(a) Financial Statements of businesses acquired.
Exhibit 2. Audited Financial Statements of Telecom Corporation of
Chicago for the years ended December 31, 1997, 1996 and 1995,
including the Independent Auditors' Report of Manning
Silverman & Company dated October 27, 1998.
Exhibit 3. Consent of Independent Auditors
(b) Pro forma financial information.
Exhibit 4. Pro forma financial information showing combined results for
Telecom Corporation of Chicago and Officeland Inc.
Additional exhibits and financial information will be filed by amendment.
<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.
OFFICELAND INC.
(Registrant)
Dated: January 27, 1999 By: /s/ Marvyn A. Budd
--------------------------------
Marvyn A. Budd,
Chief Executive Officer and President
<PAGE>
Exhibit 2
Audited Financial Statements of Telecom Corporation of Chicago for the years
ended December 31, 1997, 1996 and 1995, including the Independent Auditors'
Report of Manning Silverman & Company dated October 27, 1998.
<PAGE>
TELECOM CORPORATION
OF CHICAGO
Report on Audited Pro-Forma Balance
Sheets, Statements of Income and Retained
Earnings
DECEMBER 31, 1995, 1996 and 1997
MANNING SILVERMAN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
(847) 459-8850
<PAGE>
TABLE OF CONTENTS
Independent Auditor's Report 1
Balance Sheet 2
Statement of Income & Expenses and Supporting Schedules 3 - 7
Statement of Retained Earnings 8
Statement of Cash Flows 9
Notes to Financial Statements 10 - 13
<PAGE>
[Manning Silverman & Company Letterhead]
Board of Directors
Telecom Corporation of Chicago
Wauconda, Illinois
We have audited the accompanying pro-forma balance sheets of Telecom
Corporation of Chicago as of December 31, 1995, 1996, and 1997, and the related
pro-forma statements of income and retained earnings for the years then ended.
These pro-forma financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these pro-forma
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.
We have previously reported on the Company's balance sheets as of December 31,
1995, 1996 and 1997, and the related statements of income and retained earnings
for the years then ended. Those financial statements included revenues,
expenses, assets and liabilities arising from barter transactions (see Note 1).
The accounting principles applied in valuing those barter transactions were not
in conformity with generally accepted accounting principles and, accordingly,
our opinion was qualified as to the effect of those transactions on the
financial statements. These pro-forma financial statements report barter
transactions in conformity with generally accepted accounting principles.
Also, the Company's balance sheet as of December 31, 1995, 1996 and 1997, and
related statements of income and retained earnings for the years then ended
includes expenses, assets and liabilities resulting from certain transactions
pertaining to the Company and its sole stockholder (see Note 2). These
transactions have been eliminated from the pro-forma financial statements.
The cash flows and required disclosures accompanying the previously reported
financial statements have not been restated and included with these pro-forma
financial statements.
<PAGE>
In our opinion, except for the omission of the respective statements of cash
flow and required disclosures, the pro-forma financial statements referred to
above present fairly, in all material respects, the pro-forma financial
position of Telecom Corporation of Chicago as of December 31, 1995, 1996 and
1997, and the pro-forma results of operations for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Manning Silverman & Company
- ----------------------------------
Manning Silverman & Company
Certified Public Accountants
October 27, 1998
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO-FORMA BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C> <C> <C>
Current Assets Current Liabilities
Cash $ 88,908 Accounts Payable $ 945,970
-------------- Accrued Wages 25,362
Accounts Receivable 509,814 Accrued Sales Tax 9,856
Allowance for Doubtful Accounts (25,000) Accrued Interest Payable 3,476
-------------- Accrued 401K Withholdings 4,762
Accrued Liabilities 106,044
Loans Payable 331,405
Accounts Receivable Net 484,814 -------------
--------------
Total Current Liabilities 1,426,875
-------------
Parts Receivable 142,000
Employee Advances 1,417 Long-Term Liabilities
Loan Receivable - Other 24,948 Barter Overdrafts 973,555
Inventory 1,345,172 Less: Allowance Barter Overdrafts (486,778)
Prepaid Corporate Income Tax 36,615 Loans Payable 28,984
Due from Drive Express 11,316 -------------
Due from Expotech 267,089
Allowance for Due from Expotech (178,980) Total Long-Term Liabilities 515,761
-------------- -------------
Total Current Assets 2,223,299 Stockholder's Equity
-------------- Common Stock, no par value (1,000 shares 1,000
authorized, 1,000 shares issued
Property & Equipment and outstanding)
Equipment 169,120
Furniture & Fixtures 34,963
Vehicles 118,808 Retained Earnings 768,975
Corporate Boat 0 -------------
Less: Accumulated Depreciation (175,726)
-------------- Total Stockholder's Equity 769,975
-------------
Total Property & Equipment 147,165
-------------- Total Liabilities & Stockholder's Equity $ 2,712,611
=============
Other Assets
Note Receivable - Stockholder 226,233
Deposit on Building (Barter) 111,331
Security Deposits 4,583
--------------
Total Other Assets 342,147
--------------
Total Assets $ 2,712,611
==============
</TABLE>
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO-FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues $ 8,173,166
Cost of Sales 5,505,282
-------------
Gross Profit 2,667,884
Operating Expenses
Selling Expenses 1,586,658
General & Administrative Expenses 786,803
Depreciation Expense 57,301
------------
Total Operating Expenses 2,430,762
-------------
Operating Income 237,122
Other Income & Expenses
Fines & Penalties (523)
Interest Income 29
Interest Expense (42,479)
------------
Total Other Income & Expenses (42,973)
-------------
Income Before Barter Related Expenses 194,149
Barter Related Expenses
Barter Interest Expense (4,390)
Barter Transaction Fees (69,964)
------------
Total Barter Related Expenses (74,354)
-------------
Income Before Taxes 119,795
Corporate Income Taxes (9,193)
-------------
Net Income $ 110,602
=============
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO-FORMA STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
Retained Earnings, January 1, 1995 $ 859,397
Adjustment for Non-Recurring Expenses (252,608)
Prior Period Adjustment 51,584
Net Income - For the Year Ended December 31, 1995 110,602
--------------
Retained Earnings, December 31, 1995 $ 768,975
==============
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO-FORMA BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C> <C>
Current Assets Current Liabilities
Accounts Receivable $ 551,576 Line of Credit $ 839,350
Allowance for Doubtful Accounts (28,000) Current Maturities Long-Term Debt 9,785
------------- Bank Overdraft 122,305
Accounts Payable 672,461
Accounts Receivable Net 523,576 Due to Expo-Micro 7,378
Accrued Expenses 68,896
Employee Advances 3,292 Accrued Income Taxes 2,294
Inventory 1,527,273 -------------
Allowance for Inventory Obsolescence (15,000)
------------- Total Current Liabilities 1,722,469
-------------
Total Current Assets 2,039,141 Long-Term Liabilities
------------- Barter Overdrafts 362,338
Less: Allowance Barter Overdraft (181,170)
Property & Equipment Loans Payable 27,339
Equipment 169,951 Less: Current Maturities (9,785)
Furniture & Fixtures 49,180 -------------
Vehicles 118,808
Less: Accumulated Depreciation (242,339) Total Long-Term Liabilities 198,722
------------- -------------
Total Property & Equipment 95,600 Stockholder's Equity
------------- Common Stock, no par value (1,000 shares 1,000
authorized, 1,000 shares issued
Other Assets and outstanding)
Note Receivable - Stockholder 263,329
Security Deposits 4,800 Retained Earnings 480,679
------------- -------------
Total Other Assets 268,129 Total Stockholder's Equity 481,679
------------- -------------
Total Assets $ 2,402,870 Total Liabilities & Stockholder's Equity $ 2,402,870
============= =============
</TABLE>
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
Revenues $ 7,880,345
Cost of Sales 5,131,870
------------
Gross Profit 2,748,475
Operating Expenses
Selling Expenses 1,306,160
General & Administrative Expenses 1,453,179
Depreciation Expense 66,613
------------
Total Operating Expenses 2,825,952
------------
Operating Income (77,477)
Other Income & Expenses
Fines & Penalties (1,073)
Interest Expense (45,708)
Other Income 18,910
------------
Total Other Income & Expenses (27,871)
------------
(Loss) Before Barter Related Expenses (105,348)
Barter Related Expenses
Barter Transaction Fees 874
------------
Total Barter Related Expenses 874
------------
(Loss) Before Taxes (104,474)
Corporate Income Taxes (10,403)
------------
Net (Loss) $ (114,877)
============
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO-FORMA STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
Retained Earnings, January 1, 1996 $ 768,975
Adjustments for Non-Recurring Expenses (173,419)
Net Loss - For the Year Ended December 31, 1996 (114,877)
---------------
Retained Earnings, December 31, 1996 $ 480,679
===============
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO-FORMA BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C> <C> <C>
Current Assets Current Liabilities
Cash $ 3,653 Line of Credit $ 1,029,350
------------- Current Maturities Long-Term Debt 9,588
Accounts Receivable 734,480 Accounts Payable 636,320
Allowance for Doubtful Accounts (28,000) Accrued Expenses 97,597
------------- Accrued Income Taxes 50,290
Accrued Real Estate Taxes 20,426
Accounts Receivable -- Net 706,480 -------------
-------------
Total Current Liabilities 1,843,571
Employee Advances 4,056 -------------
Inventory 1,473,861 Long-Term Liabilities
Due from Digital Docusource 14,534 Barter Overdrafts 150,000
Prepaid Expenses 11,892 Less: Allowance Barter Overdraft (75,000)
------------ Notes Payable - Officers 100,026
Total Current Assets 2,214,426 Loans Payable 16,290
------------- Less: Current Maturities (9,588)
-------------
Property & Equipment
Equipment 176,742 Total Long-Term Liabilities 181,728
Furniture & Fixtures 47,333 -------------
Vehicles 120,670
Less: Accumulated Depreciation (279,801) Stockholder's Equity
------------- Common Stock, no par value (1,000 shares 1,000
authorized, 1,000 shares issued
Total Property & Equipment 64,944 and outstanding)
-------------
Other Assets Retained Earnings 257,921
Security Deposits 4,800 -------------
-------------
Total Stockholder's Equity 258,921
Total Other Assets 4,800 -------------
-------------
Total Liabilities & Stockholder's Equity $ 2,284,220
Total Assets $ 2,284,220 =============
=============
</TABLE>
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO-FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
Revenues $ 8,144,146
Cost of Sales 5,055,318
-------------
Gross Profit 3,088,828
Operating Expenses
Selling Expenses 1,389,550
General & Administrative Expenses 1,609,151
Depreciation Expense 51,209
-----------
Total Operating Expenses 3,049,910
-------------
Operating Income 38,918
Other Income (Expenses)
Interest Expense (77,752)
Other Income 19,390
Settlement of Litigation (75,000)
-----------
Total Other Income (Expenses) (133,362)
-------------
(Loss) Before Barter Related Expenses (94,444)
Barter Related Expenses
Barter Interest Expense (9)
Barter Transaction Fees (35,614)
-----------
Total Barter Related Expenses (35,623)
-------------
Net (Loss) (130,067)
=============
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
TELECOM CORPORATION OF CHICAGO
PRO-FORMA STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1997
Retained Earnings, January 1, 1997 (As previously stated) $ 480,679
Adjustments for Non-Recurring Expenses (92,691)
Net (Loss) - For the Year Ended December 31, 1997 (130,067)
------------
Retained Earnings, December 31, 1997 $ 257,921
============
See Independent Auditor's Report.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
TELECOM CORPORATION OF CHICAGO
NOTES TO PRO-FORMA FINANCIAL STATEMENTS
1. Barter Transactions
The originally issued balance sheets, statements of income and retained
earnings reflected barter transactions through both organized trade
associations and direct transactions. These barter transactions were
recorded at full face value in accordance with United States income tax
laws. This was not in conformity with generally accepted accounting
principles.
These pro-forma financial statements reflect these barter transactions
at management's estimates of fair market value.
2. Transactions Pertaining to the Company Stockholder
During the years 1995, 1996 and 1997, Telecom Corporation of Chicago
was owned by a single stockholder. As a closely held company,
transactions were entered into for the benefit of the stockholder and
these transactions do not affect the continuing operations of the
company. These transactions were included in the originally issued
balance sheets, statements of income and retained earnings. These
transactions have been eliminated and are not included in these
pro-forma financial statements.
These transactions include expenses related to other companies that
were owned by the stockholder, and other transactions that the
corporation entered into at the stockholder's request.
13
<PAGE>
Exhibit 3
Consent of Independent Auditors
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the filing by Officeland Inc. with the U.S. Securities
and Exchange Commission of our Independent Auditor's Report dated October 27,
1998 and the accompanying financial statements for the years ending 1997,
1996 and 1995.
/s/ MANNING SILVERMAN & COMPANY
Lincolnshire, Illinois
January 27, 1999
<PAGE>
Exhibit 4
Pro forma financial information showing combined
results for Telecom Corporation of
Chicago and Officeland Inc.
<PAGE>
Pro Forma Condensed Consolidated Statement of Earnings
Officeland Inc., and Subsidiaries
Nine months ending August 31, 1998
<TABLE>
<CAPTION>
Telecom Corporation Pro Forma Pro Forma
Officeland Inc. of Chicago Adjustments Consolidated
--------------- ------------------- ----------- ------------
<S> <C> <C> <C> <C>
Net Sales $16,556,251 $11,204,087 $ - (b) $27,760,338
Cost of Sales 13,437,256 7,285,977 - (b) 20,723,233
----------- ----------- ---------- -----------
Gross profit 3,118,995 3,918,110 - 7,037,105
Expenses
General and administrative 1,620,824 2,814,882 - 4,435,706
Selling 946,543 1,611,469 - 2,558,012
Depreciation and amortization 60,985 42,072 128,536 (a) 231,593
----------- ----------- ---------- -----------
Earnings before the following 490,643 (550,313) (128,536) (188,206)
Interest income (39,900) 93,873 28,988 (c) 82,961
Income taxes 188,104 (314,900) - (126,796)
----------- ----------- ---------- -----------
Net earnings $ 342,439 $ (329,286) $ (157,523) $ (144,371)
=========== ============ ========== ===========
Net earnings per common share $ 0.06 $ (0.03)
=========== ===========
Fully diluted net earnings per
common share $ 0.04 $ (0.02)
=========== ===========
Weighted average number of
common shares - basic 5,411,588 0 5,411,588
=========== ========== ===========
Weighted average number of
common shares - fully diluted 7,433,022 750,000 8,183,022
=========== ========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Pro Forma Condensed Consolidated Balance Sheet
Officeland Inc., and Subsidiaries
August 31, 1998
<TABLE>
<CAPTION>
Telecom Corporation Pro Forma Pro Forma
Officeland Inc. of Chicago Adjustments Consolidated
--------------- ------------------- ----------- ------------
<S> <C> <C> <C> <C>
Assets
Current
Cash $ 2,612,987 $ 370,691 $ 2,396,300 (b) $ 1,360,378
(4,019,600) (a)
Receivables 3,671,458 629,134 - 4,300,592
Inventory 3,382,681 1,648,526 - 5,031,207
Prepaids 1,090,073 107,728 - 1,197,801
Deferred Income Tax Benefit 109,936 309,200 - 419,136
----------- ---------- ----------- -----------
10,867,135 3,065,279 (1,623,300) 12,309,114
Investments 168,750 - 168,750
Capital Assets 212,860 184,068 - 396,928
Deferred Income Tax Benefits 318,786 - - 318,786
Goodwill 3,661,769 - 6,855,246 (a) 10,517,015
----------- ---------- ----------- -----------
$15,229,300 $3,249,347 $ 5,231,946 $23,710,593
=========== ========== =========== ===========
Liabilities
Accounts Payable $ 2,942,509 $2,300,629 $ - $ 5,243,138
Income Taxes Payable 304,153 - - 304,153
Deferred Revenue 54,774 - - 54,774
Note Payable - - 773,000 (a) 773,000
Convertible Debenture 2,800,000 - 2,396,300 (b) 5,196,300
Line of Credit - 1,408,369 - 1,408,369
----------- ---------- ----------- -----------
6,101,436 3,708,998 3,169,300 12,979,734
(a)
Common Stock 15,127,598 1,546 1,602,995 (a) 16,730,593
(1,546) (a)
Retained Earnings (5,999,734) (461,197) 461,197 (5,999,734)
----------- ---------- ----------- -----------
$15,229,300 $3,249,347 $ 5,231,946 $23,710,593
=========== ========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Notes to Pro Forma Condensed Consolidated Financial Statements
Officeland Inc. and Subsidiaries
Note 1 - Basis of Presentation
Officeland Inc. has estimated the adjustments required to allocate
the aggregate purchase price over the net assets to be acquired of Telecom
Corporation of Chicago. Such allocations are subject to final determinations
based on independent appraisals and other evaluations of fair value as of the
date of the transactions. Therefore, the allocations reflected in the pro forma
condensed consolidated financial information may differ from the amounts
ultimately determined. Differences between the amounts included herein and the
final allocations are not expected to have a material effect on the pro forma
statements.
Unless otherwise noted, all references to dollar amounts in the Pro
Forma Statements are stated in Canadian dollars. The noon buying rate on October
9, 1998 in New York City for cable transfers in foreign currencies as certified
for customs purposes by the Federal Reserve Bank in New York was $1.00 US =
$1.5460 CDN. Whenever amounts stated herein are expressed in US dollars the
foregoing exchange rate has been applied. The October 9, 1998 exchange rate has
been applied as the appropriate exchange rate since the purchase occurred on
October 9, 1998 and had the August 31, 1998 exchange rate been applied the
effect on the pro forma financial statements would have been immaterial.
Note 2 - Pro Forma Condensed Consolidated Balance Sheet Adjustments
Adjustments to the Pro Forma Condensed Balance Sheet were made to reflect that:
(a) Officeland Inc. has purchased all of the outstanding capital stock
of Telecom Corporation of Chicago for consideration of $4,019,000
$CDN in cash ($2,600,000 $US), a $773,000 $CDN note payable
($500,000 $US) and 750,000 shares of Officeland Inc. common stock to
be issued over time.
(b) Officeland Inc. issued new three year senior subordinated unsecured
convertible notes to private investors in the amount of $2,396,300
$CDN ($1,550,000 $US) to partially fund the purchase of Telecom
Corporation of Chicago. The notes are convertible by the holder into
shares of Class B Stock at $3.40 $US plus one Dollar Fifty Warrant
and one Two Dollar Warrant for each share of Class B stock.
A 24 day market average of Officeland Inc. common stock is used to value the
Telecom Corporation of Chicago transaction.
The following table describes the allocation of the purchase price to the
individual categories of assets and liabilities acquired in the transaction:
Purchase price $ 6,395,595
===========
Total assets 1,531,778
Total liabilities (1,991,429)
-----------
(459,651)
Goodwill 6,855,245
-----------
$ 6,395,595
===========
Note 3 - Pro Forma Condensed Consolidated Statement of Earnings Adjustments
Adjustments to the Pro Forma Condensed Statement of Earnings were made to:
(a) Record amortization of goodwill resulting from the purchase of
Telecom Corporation of Chicago over 40 years.
(b) Intercompany sales were immaterial during the periods presented, and
accordingly no elimination entry is required.
(c) Record interest expense on the note payable at the rate of 5% per
annum.
(d) Reflect that Officeland Inc. has achieved the pro rata results
necessary such that the Convertible Notes would be automatically
converted into Units and has therefore not accrued any interest
relating to the Convertible Notes.
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