<PAGE>
UNITED STATES
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): March 29, 1999
OFFICELAND INC.
(Exact name of registrant as specified in its charter)
Ontario, Canada
(State or other jurisdiction of incorporation)
103976668
(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. Acquisitions of Assets
Acquisition of Eastern Equipment Brokers, Inc.
Pursuant to a Stock Purchase Agreement made effective January 1, 1999,
Officeland Inc. ("Officeland") acquired all of the capital stock of Eastern
Equipment Brokers, Inc., a closely-held Connecticut corporation ("EEB"), for the
aggregate consideration of U.S. $1,400,000 in cash and 675,000 shares of
Officeland common shares, plus an additional earn-out amount payable in common
shares subject to EEB'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. EEB
is in the business of purchasing and reselling used photocopiers,
re-manufacturing used Xerox and Canon copiers for resale, and selling copier
supplies.
Acquisition of Digital Document Solutions, Inc.
Pursuant to an Asset Purchase Agreement made effective January 1, 1999,
Officeland Inc. ("Officeland") acquired all of the assets of Digital Document
Solutions, Inc., a closely-held Connecticut corporation ("DDS"), for the
aggregate consideration of U.S. $665,000 in cash. DDS is in the business of
selling copier supplies, as well as, renting, leasing, selling and servicing
re-manufactured Xerox and Canon copiers to end users.
Item 7 Financial Statements and Exhibits
Exhibit 1. Press release of Officeland Inc. dated March 29, 1999
announcing the acquisition of Eastern Equipment Brokers, Inc.,
and Digital Document Solutions, Inc. (previously filed).
(a) Financial Statements of businesses acquired.
Exhibit 2. Audited Financial Statements of Eastern Equipment Brokers,
Inc., for the years ended December 31, 1998 and 1997 including
the Independent Auditors' Report of Weinstein & Anastasio
dated May 7, 1999.
Exhibit 3. Consent of Independent Auditors
Exhibit 4. Financial Statements of Digital Document Solutions, Inc., for
the years ended December 31, 1998 and 1997 compiled by
Weinstein & Anastasio dated may 7, 1999.
(b) Pro forma financial information.
Exhibit 5. Pro forma financial information showing combined results for
Eastern Equipment Brokers, Inc., Digital Document Solutions,
Inc., 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: June 11, 1999 By: /s/ Marvyn A. Budd
------------------
Marvyn A. Budd.
Chief Executive Officer and President
<PAGE>
EXHIBIT 1 PRESS RELEASE DATED MARCH 29, 1999.
Company Press Release - Monday March 29, 8:31 am Eastern Time
SOURCE: Officeland Inc.
Officeland Inc. Completes Purchase of Eastern Equipment Brokers, Inc.
TORONTO, March 29/PRNewswire/--Officeland Inc. (Nasdaq: OFLD - news, OFLDU -
news) announced today that it has completed the acquisitions of all of the
outstanding shares of Eastern Equipment Brokers, Inc. ("EEB"), and all of the
assets of Digital Document Solutions, Inc. ("DDS"), both of Bridgeport,
Connecticut. EEB is a leading wholesaler and re-manufacturer of used
photocopiers. DDS is engaged in the business of selling, leasing and servicing
re-manufactured Xerox and Canon photocopiers. EEB and DDS have combined annual
revenue of approximately $7.6 million. Officeland paid a combination of cash and
Officeland's common shares for the outstanding capital stock of EEB and all of
the assets of DDS.
Marvyn Budd, President of Officeland Inc., stated "In addition to an immediate
contribution of revenue and gross profits, these acquisitions provide Officeland
with new sales channels plus additional sources of product, and also allow us to
integrate within our family of companies a re-manufacturing capability that we
currently outsource".
John O'Connor, President of EEB and DDS, added, "We are very pleased to join the
Officeland group of companies. Officeland's extensive range of products and
services combined with Officeland's diverse channels of distribution, including
e-commerce, should ensure a dominant position in our industry".
Officeland Inc. is a leading reseller of used photocopiers in North America,
selling to original equipment manufacturer (OEM) dealer networks, commercial,
professional and institutional users, and other wholesalers of photocopiers. To
facilitate both buying and selling used copiers the company maintains strategic
relationships with Xerox, Ricoh, Canon, Konica, Minolta, and other major
industry players.
Forward-looking statements and comments in this press release are made pursuant
to the safe-harbor provisions of Section 21E of the Securities Exchange Act of
1934. Such statements relating to, among other things, the prospects for the
company to increase the level of sales and maintain profitability, are
necessarily subject to risks and uncertainties, come of which are significant in
scope and nature, including risks related to the demand for used photocopiers,
competition, availability of capital and continuation of sales levels. These
risks are further discussed in the periodic reports and registration statements
filed by the company from time to time with the Securities and Exchange
Commission.
<PAGE>
Exhibit 2
Audited Financial Statements of Eastern Equipment Brokers, Inc., for the
years ended December 31, 1998 and 1997 including the Independent
Auditors' Report of Weinstein & Anastasio dated May 7, 1999.
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
-------------------------------
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
-------------------------------
CONTENTS
--------
Page No.
--------
Independent Auditor's Report....................................... 1
Exhibits:
A Balance Sheets............................................... 2 - 3
B Statements of Income and Retained Earnings................... 4
C Statements of Cash Flows..................................... 5
Notes to Financial Statements...................................... 6 - 14
Supplementary Information:
Independent Auditor's Report on Supplementary Information........ 15
Schedules:
1 Selling Expenses............................................. 16
2 General and Administrative Expenses.......................... 17
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Eastern Equipment Brokers, Inc.
10 Island Brook Avenue
Bridgeport, Connecticut 06606
We have audited the accompanying balance sheets of Eastern Equipment
Brokers, Inc. as of December 31, 1998 and 1997 and the related statements of
income, retained earnings 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 audits.
We conducted our audits 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 audits provide 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 Eastern Equipment
Brokers, Inc. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Woodbridge, Connecticut WEINSTEIN & ANASTASIO, P.C.
May 7, 1999
Page 1
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
---- ----
Current Assets
Cash $ 42,311 $ 22,629
Accounts Receivable 312,102 222,097
Inventory 438,979 583,094
Prepaid Expenses 14,174 10,245
----------- ----------
Total Current Assets 807,566 838,065
----------- ----------
Fixed Assets
Furniture & Fixtures 37,180 20,460
Computer & Office Equipment 71,959 71,606
----------- ----------
109,139 92,066
Less Accumulated Depreciation (57,370) (43,104)
----------- ----------
Total Fixed Assets - Net 51,769 48,962
----------- ----------
Other Assets
Officer Loan Receivable 107,245
Due from Affiliate 450,768
Security Deposits 23,595 6,320
Deferred Income Taxes 19,000
Intangibles 1,981
----------- ----------
Total Other Assets 42,595 566,314
----------- ----------
Total Assets $ 901,930 $1,453,341
=========== ==========
The notes are an integral part of these financial statements.
Exhibit: A - Page 2
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
LIABILITIES AND STOCKHOLDER'S EQUITY
1998 1997
---- ----
Current Liabilities
Bank Overdraft in Excess of Depository Balance $ 99,359
Note Payable - Demand $ 350,000 385,000
Accounts Payable 657,913 504,090
Accrued Expenses 28,917 12,537
Customer Deposits 23,600 30,875
---------- ----------
Total Current Liabilities 1,060,430 1,031,861
---------- ----------
Stockholder's Equity
Capital Stock 1,000 1,000
Paid-In Capital 27,960 27,960
Retained Earnings (187,460) 392,520
---------- -----------
Total Stockholder's Equity (158,500) 421,480
---------- -----------
Total Liabilities and Stockholder's Equity $ 901,930 $1,453,341
========== ==========
The notes are an integral part of these financial statements.
Exhibit: A - Page 3
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales $5,401,147 $6,575,562
Cost of Sales 4,328,805 5,393,149
---------- ----------
Gross Profit 1,072,342 1,182,413
---------- ----------
Operating Expenses
Selling Expenses 278,385 374,055
General and Administrative Expenses 1,221,265 813,367
---------- ----------
Total Operating Expenses 1,499,650 1,187,422
---------- ----------
Loss from Operations (427,308) (5,009)
---------- ----------
Other Income (Expense)
Interest Income 30,175
Interest Expense (38,338) (7,520)
Loss on Asset Disposal (1,396) (3,160)
---------- ----------
Total Other Income (Expense) (39,734) 19,495
---------- ----------
Income (Loss) Before Provision for (Recovery of) Income Taxes (467,042) 14,486
Provision for (Recovery of) Income Taxes (18,847) 690
---------- ----------
Net Income (Loss) (448,195) 13,796
---------- ----------
Retained Earnings
Beginning, January 1 as Previously Reported 392,520 190,889
Prior Period Adjustment 187,835
Beginning, January 1 as Adjusted 392,520 378,724
Dividends Paid 131,785
Ending $ (187,460) $ 392,520
========== ==========
</TABLE>
The notes are an integral part of these financial statements.
Exhibit: B - Page 4
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net Income (Loss) $ (448,195) $ 13,796
Adjustments to Reconcile Net Income to Net Cash
Used by Operating Activities:
Depreciation 14,692 15,336
Deferred Income Taxes (19,000)
Loss on Disposal of Fixed Assets 1,396 3,160
Changes in Operating Assets & Liabilities
Increase in Accounts Receivable (90,005) (157,208)
(Increase) Decrease in Inventories 144,115 (30,540)
(Increase) Decrease in Prepaid Expenses (3,929) 2,025
Increase in Accounts Payable 153,823 122,364
Increase (Decrease) in Accrued Expenses 16,380 (41,328)
Decrease in Income Taxes Payable (6,700)
Decrease in Customer Deposits (7,275) (48,580)
----------- ----------
Net Cash Used by Operating Activities (237,998) (127,675)
----------- ----------
Cash Flows from Investing Activities
Purchase of Fixed Assets (18,895) (35,843)
(Increase) Decrease in Due from Affiliate 450,768 (138,411)
(Increase) Decrease in Officer Loan Receivable 107,245 (158,061)
(Increase) Decrease in Other Assets (15,294) 17,149
----------- ----------
Net Cash Provided (Used) by Investing Activities 523,824 (315,166)
----------- ----------
Cash Flows from Financing Activities
Increase (Decrease) in Bank Overdraft (99,359) 99,359
Proceeds from Line-of-Credit 665,000 1,645,000
Principal Payments on Line-of-Credit (700,000) (1,300,000)
Dividends Paid (131,785)
----------- ----------
Net Cash Provided (Used) by Financing Activities (266,144) 444,359
----------- ----------
Net Increase in Cash 19,682 1,518
Cash - Beginning 22,629 21,111
----------- ----------
Cash - Ending $ 42,311 $ 22,629
=========== ==========
</TABLE>
The notes are an integral part of these financial statements.
Exhibit: C - Page 5
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 1 - Summary of Significant Accounting Policies
A. Nature of Operations
The Company buys and sells both used and reconditioned office
equipment, primarily copiers and facsimile machines, with wholesalers and
dealers predominantly throughout the United States and Canada. The Company
also obtains equipment on consignment from leasing companies. Sales are
made in approximately the following proportions:
Consignments from Leasing Companies 15%
Trade-In Programs 40%
Miscellaneous 45%
B. Inventory
Inventory, consisting of finished goods, is valued at the lower of
cost or market.
C. Fixed Assets and Depreciation
Fixed assets are recorded at cost. Depreciation over the estimated
useful lives of the fixed assets is determined principally on the
straight-line method. Estimated useful lives are as follows:
Asset Life
----- ----
Furniture & Fixtures 5 - 7 Years
Computer & Office Equipment 5 Years
Depreciation expense for the years ended December 31, 1998 and 1997
was $14,692 and $15,336, respectively.
Page 6
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 1 - Summary of Significant Accounting Policies (continued)
D. Income Taxes
The provision for income taxes represents current and deferred state
income taxes. There is no provision for federal income taxes since the
Company has elected Subchapter S status under the Internal Revenue Code
of 1986.
The Company has a State of Connecticut net operating loss of
approximately $457,000 to reduce future state taxable income through
2003.
E. 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 period. Actual results could differ from the estimates.
F. Advertising Costs
Advertising costs are expensed as incurred. Advertising costs charged
to operations totaled $13,780 in 1998 and $29,776 in 1997.
Note 2 - Cash
The Company maintains its cash accounts at a Connecticut bank. The
total cash balance is insured by the FDIC up to $100,000. A summary of
the total insured and uninsured amounts at December 31, 1998 are as
follows:
Total Cash Held at Banks $143,226
Portion Secured by FDIC 100,000
--------
Uninsured Cash Balances $ 43,226
========
Page 7
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 3 - Accounts Receivable
A. Concentration of Credit Risk
The Company is exposed to credit losses in the event of
non-performance by its customers. Concentrations of credit risk arise
due to the Company's sale of products predominantly throughout the
United States and Canada. The Company anticipates, however, that its
customers will be able to satisfy their obligations under the contracts
fully. The Company does not obtain collateral or other security to
support financial instruments subject to credit risk but monitors the
credit standings of its customers.
At December 31, 1998, approximately 34% of the accounts receivable
were due from one major customer.
At December 31, 1997, approximately 96% of the accounts receivable
were due from four major customers, ranging from 13% to 39%.
B. Net Realizable Value
Accounts receivable are stated at their net realizable value as
follows:
1998 1997
---- ----
Accounts Receivable $316,471 $226,466
Less Allowance for Doubtful Accounts (4,369) (4,369)
-------- --------
Accounts Receivable - Net $312,102 $222,097
======== ========
Page 8
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 4 - Note Payable - Demand
The Company had available a $500,000 line-of-credit with Fleet
National Bank which was secured by substantially all of the assets of
the Company and the personal guarantee of its President and sole
shareholder. The note was due on demand and bore interest at 1/2% above
the bank's prime rate. The line was to expire on March 31, 1999.
On January 22, 1999, the line-of-credit was refinanced with Fleet
National Bank into two separate loans. The first was a line-of-credit of
$300,000. The new line-of-credit bore interest at 1 3/4% over the bank's
prime rate and was guaranteed by its President and sole shareholder and
a company related by common control and management. All other terms
remained the same.
The second loan was a term loan of $200,000. Monthly installments of
$4,280 included principal and interest at 10.17%. The loan was secured
by substantially all the assets of the Company and the personal
guarantee of its President and sole shareholder and a company related by
common control and management. The loan was to mature in January 2004.
Both loans were paid in March 1999.
Note 5 - Lease Commitments
The Company leased its facility in Orange, Connecticut, under a
lease which began in April 1997 and was to expire in March 2000, with
two options to extend for an additional three years each. During the
original term, the monthly rate was $0.90 for each square foot of space
used during the month. The rate under the first option was to be $0.95
per square foot. The rate for the additional option was subject to a
cost of living increase as published in the Wall Street Journal. The
lease obligated the Company for 4,455 square feet of office space.
Warehouse space was determined monthly based on the actual square
footage used for that month. The average monthly square footage of
warehouse space used was 9,700 for 1997.
Page 9
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 5 - Lease Commitments (continued)
In December 1998, the Company terminated the above lease without
penalty and moved to a facility in Bridgeport, Connecticut. The new
lease expires in October 2003, with two options to extend for an
additional three years each. During the original term, the monthly rate
is $9,917. The monthly rate under the first option will be $10,500. The
monthly rate under the additional option will be $10,733.
In January 1998, the Company leased storage space in Long Island,
New York on a month-to-month basis. The average monthly rate is
approximately $1,000.
The Company also leased an automobile under an operating lease which
expired in January 1998.
Rental expense under all operating leases was $129,483 and $155,704
for the years ended December 31, 1998 and 1997, respectively.
At December 31, 1998, the future minimum payments under
non-cancelable operating leases are as follows:
Year Ending Amount
----------- --------
1999 $119,000
2000 119,000
2001 119,000
2002 119,000
2003 99,167
--------
Total $575,167
========
Page 10
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 6 - Related Party Transactions
A. Officer Loan Receivable
Represented unsecured advances to an officer of the Company. The
advances had no formal repayment schedule and bore interest at 7%. Under
the terms of the Purchase and Sale Agreement (see Note 14), the
outstanding balance was treated as a dividend to the shareholder.
B. Due from Affiliate
Represented unsecured advances to a company related by common
ownership and management. The advances had no formal repayment schedule
and bore interest at 7%. Sales to this affiliate were $275,266 in 1998
and $331,845 in 1997. Under the terms of the Purchase and Sale Agreement
(see Note 14), the outstanding receivable balance was forgiven by the
affiliate and is included as a bad debt expense.
Note 7 - Employee Benefits
A. Profit Sharing Plan
The Company has a profit sharing plan which covers all eligible
employees. Employees must be full-time and have completed one year of
service. The Company may contribute up to a maximum amount allowable as
a deduction to the Company under the provisions of the Internal Revenue
Code. The Company made no contributions in 1998 and 1997.
B. Retirement Plan
The Company has a qualified cash or deferred compensation plan under
Section 401(k) of the Internal Revenue Code. Eligible employees are
those that are full-time, over 21 years of age and have completed six
months of service. Under the Plan, eligible employees may elect to
defer up to ten percent (10%) of their salary, subject to Internal
Revenue Service limits. The Company contributes a maximum of a 1% match
of the employees' contributions. The Company made contributions of
$1,201 in 1998 and $2,525 in 1997.
Page 11
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 8 - Major Suppliers
The Company purchased approximately 30% of its products from one
major supplier in 1998 and 32% of its products from two major suppliers
in 1997. Although there are a limited number of manufacturers of the
particular products, management believes that other suppliers could
provide similar products on comparable terms. However, a change in
suppliers could cause a delay, but management feels that it would not
adversely affect results of operations.
Note 9 - Statements of Cash Flows
Supplemental Disclosure on Cash Flow Information
Cash paid during the period for:
1998 1997
---- ----
Interest $38,338 $ 7,520
Income Taxes $ 2,000 $13,200
Note 10 - Capital Stock
Capital stock consists of common stock as follows:
No Par Value
Shares Authorized 5,000
Shares Issued and Outstanding 100
Page 12
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 11 - Deferred Income Taxes
SFAS No. 109 requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have
been recognized in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax
bases of assets and liabilities using enacted tax rates in effect in
the years in which the differences are expected to reverse. Differences
between financial reporting and tax bases arise primarily from
differences in timing expense recognition of (1) fixed asset
depreciation and (2) net operating loss carryforward.
The provision for (recovery of) income taxes consists of the
following:
1998 1997
---- ----
State - Current $ 153 $ 690
- Deferred (19,000) 0
--------- -------
Total $(18,847) $ 690
======== =======
The components of deferred tax assets at December 31, 1998 are as
follows:
Deferred Tax Assets - Long-Term
Fixed Assets $(2,000)
Net Operating Loss Carryforward 21,000
-------
Total $19,000
=======
Page 13
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
Note 12 - Commitment
A. Trade-In Programs
The Company has agreements with two suppliers whereby they commit
quarterly to purchase trade-in equipment at set prices.
Note 13 - Prior Period Adjustment
Certain errors in classification, resulting in both the
overstatement and understatement of assets, stockholder's equity, and
expenses in prior years were corrected in 1997. The changes to retained
earnings as of January 1, 1997 is summarized as follows:
As previously reported, January 1, 1997 $190,889
Accounts Receivable and Accounts Payable
Cutoff adjustments 160,216
Capitalization of freight costs in inventory 11,379
Interest income on an intercompany loan 16,240
--------
As adjusted, January 1, 1997 $378,724
========
Note 14 - Subsequent Events
Effective January 1, 1999, the sole shareholder of Eastern Equipment
Brokers, Inc. sold all of the issued and outstanding shares of capital
stock of the Company to Officeland, Inc. Terms of the sale included
provisions for forgiveness of related party advances from affiliate and
treatment of officer loan receivable as dividends (see Note 6).
The sole shareholder of the Company entered into an employment
agreement with the Company and Officeland, Inc. for a period of three
years commencing on March 24, 1999. The agreement provides for, among
other things, a stipulated base salary and discretionary increases at
each anniversary based on performance.
Page 14
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
Eastern Equipment Brokers, Inc.
10 Island Brook Avenue
Bridgeport, Connecticut 06606
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information included in the following
schedules, on pages 16 and 17, is presented for purposes of additional analysis
and is not a required part of the basic financial statements. Such information
has not been subjected to the auditing procedures applied in the audits of the
basic financial statements and, accordingly, we express no opinion on it.
Woodbridge, Connecticut
May 7, 1999
Page 15
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
SCHEDULES OF SELLING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
Advertising $ 13,780 $ 29,776
Automobile Expenses 4,739 4,141
Employee Benefits 7,183 5,464
Payroll Taxes 22,998 21,824
Professional Development 2,146
Salaries & Commissions 203,623 244,239
Telephone 19,068 47,233
Trade Show Expenses 8,261
Travel & Entertainment 6,994 10,971
----------- ----------
Total Selling Expenses $ 278,385 $ 374,055
=========== ==========
See accountant's report on supplementary information.
Schedule: 1 - Page 16
<PAGE>
EASTERN EQUIPMENT BROKERS, INC.
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
Bad Debts $ 589,894
Computer Expenses 923 $ 2,699
Depreciation 14,692 15,336
Dues & Subscriptions 1,301 1,866
Employee Benefits 9,257 5,367
Insurance 13,998 9,125
Miscellaneous Expenses 611 4,245
Moving Expenses 3,663
Office Expense 9,799 9,690
Office Salaries 63,135 64,262
Officer's Salaries 284,000 502,000
Other Taxes 465 1,050
Outside Services 1,079 7,161
Payroll Taxes 5,404 12,094
Pension Expense 1,201 2,525
Postage 3,479 6,279
Professional Fees 87,287 9,251
Rent 127,483 152,495
Repairs & Maintenance 437 4,445
Utilities 1,671 2,441
Travel & Entertainment 1,486 1,036
---------- ----------
Total General and Administrative Expenses $1,221,265 $ 813,367
========== ==========
See accountant's report on supplementary information.
Schedule: 2 - Page 17
<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 May 7, 1999 and
the accompanying financial statements for the years ending 1998 and 1997.
/S/ WEINSTEIN & ANASTASIO
-------------------------
Woodbridge, Connecticut
June 9, 1999
<PAGE>
Exhibit 4
Financial Statement of Digital Document Solutions, Inc., for the
years ended December 31, 1998 and 1997 compiled by
Weinstein & Anastasio dated May 7, 1999.
<PAGE>
DIGITAL DOCUMENT SOLUTIONS, INC.
--------------------------------
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
DIGITAL DOCUMENT SOLUTIONS, INC.
CONTENTS
Page No.
--------
Compilation Report............................................. 1
Exhibits:
A Balance Sheets........................................ 2 - 3
B Statements of Income and Retained Earnings............ 4
C Statements of Cash Flows.............................. 5
Schedules:
1 Selling Expenses...................................... 6
2 General and Administrative Expenses................... 7
<PAGE>
Digital Document Solutions, Inc.
10 Island Brook Avenue
Bridgeport, Connecticut 06606
We have compiled the accompanying balance sheets of Digital Document
Solutions, Inc. as of December 31, 1998 and 1997, and the related statements of
income, retained earnings, and cash flows for the years then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have not
audited or reviewed the accompanying financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles. If the omitted
disclosures were included in the financial statements, they might influence the
user's conclusions about the Company's financial position, results of
operations, and cash flows. Accordingly, these financial statements are not
designed for those who are not informed about such matters.
WEINSTEIN & ANASTASIO, P.C.
May 7, 1999
Page 1
<PAGE>
DIGITAL DOCUMENT SOLUTIONS, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
---- ----
Current Assets
Cash $ 221,215 $ 50,472
Accounts Receivable 234,850 210,500
Less Allowance for Doubtful Accounts (4,718) (4,718)
Inventories 392,054 295,990
Prepaid Expenses 250
Prepaid Income Taxes 3,009
Other Receivables 3,410
----------- ----------
Total Current Assets 847,061 555,253
----------- ----------
Property and Equipment
Furniture & Fixtures 3,353
Computer & Office Equipment 15,376 15,376
----------- ----------
Total 15,376 18,729
Less Accumulated Depreciation (6,062) (3,382)
----------- ----------
Net Property and Equipment 9,314 15,347
----------- ----------
Equipment Under Operating Leases - Net of
Accumulated Depreciation of $86,449 102,017 82,305
----------- ----------
Other Assets
Deferred Income Taxes 18,000
Total Assets $ 958,392 $ 670,905
=========== ==========
See accountant's compilation report
Exhibit: A - Page 2
<PAGE>
DIGITAL DOCUMENT SOLUTIONS, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
LIABILITIES AND STOCKHOLDER'S EQUITY
1998 1997
---- ----
Current Liabilities
Accounts Payable $ 35,565 $ 73,730
Officer Loan Payable 257,237 257,237
Due to Affiliate 450,768
Deferred Service Cost 31,809 57,271
Accrued Expenses 49,343 43,368
Income Taxes Payable 30,500
---------- ----------
Total Liabilities 404,454 882,374
---------- ----------
Stockholder's Equity
Common Stock 1,000 1,000
Retained Earnings 553,438 (211,969)
---------- ----------
Total 554,438 (210,969)
Less Treasury Stock - At Cost (500) (500)
---------- ----------
Total Stockholder's Equity 553,938 (211,469)
---------- ----------
Total Liabilities and Stockholder's Equity $ 958,392 $ 670,905
========== ==========
See accountant's compilation report.
Exhibit: A - Page 3
<PAGE>
DIGITAL DOCUMENT SOLUTIONS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales $1,775,324 $1,482,865
Cost of Sales 1,169,000 1,078,682
---------- ----------
Gross Profit 606,324 404,183
---------- ----------
Operating Expenses
Selling Expenses 215,173 249,846
General and Administrative Expenses 185,178 493,769
---------- ----------
Total Operating Expenses 400,351 743,615
---------- ----------
Income (Loss) from Operations 205,973 (339,432)
---------- ----------
Other Income (Expense)
Other Income 587,319
Rental Income 68,278 82,547
Depreciation (44,658) (33,343)
Loss on Disposal of Assets (2,005)
---------- ----------
Total Other Income (Expense) 608,934 49,204
---------- ----------
Income (Loss) Before Provision for (Recovery of) Income Taxes 814,907 (290,228)
Provision for (Recovery of) Income Taxes 49,500 (18,409)
---------- ----------
Net Income (Loss) 765,407 (271,819)
---------- ----------
Retained Earnings
Beginning, January 1 as Previously Reported (211,969) 76,090
Prior Period Adjustment (16,240)
Beginning, January 1 as Adjusted (211,969) 59,850
---------- ----------
Ending $ 553,438 $ (211,969)
========== ==========
</TABLE>
See accountant's compilation report.
Exhibit: B - Page 4
<PAGE>
DIGITAL DOCUMENT SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net Income (Loss) $ 765,407 $ (271,819)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities:
Depreciation & Amortization 48,686 36,747
Loss on Disposal of Fixed Assets 2,005
Deferred Income Taxes 18,000 (18,000)
Changes in Operating Assets & Liabilities
(Increase) Decrease in Accounts Receivable (24,350) 203,828
Increase in Inventory (96,064) (201,011)
(Increase) Decrease in Prepaid Expenses (250) 3,400
(Increase) Decrease in Prepaid Income Taxes 3,009 (3,009)
Increase in Other Receivables (3,410)
Increase (Decrease) in Accounts Payable (38,165) 41,336
Increase (Decrease) in Accrued Expenses 5,974 (32,878)
Increase (Decrease) in Income Taxes Payable 30,500 (3,600)
Decrease in Deferred Service Revenue (25,462) (1,345)
----------- -----------
Net Cash Provided (Used) by Operating Activities 685,880 (246,351)
----------- -----------
Cash Flows from Investing Activities
Purchase of Fixed Assets (17,119)
Net Increase in Leased Equipment (64,369) (40,991)
----------- -----------
Net Cash Used by Investing Activities (64,369) (58,110)
----------- -----------
Cash Flows from Financing Activities
Increase in Officer Loan Payable 202,973
Increase (Decrease) in Due to Affiliate (450,768) 143,575
----------- -----------
Net Cash Provided (Used) by Financing Activities (450,768) 346,548
----------- -----------
Increase in Cash 170,743 42,087
Cash Balance - Beginning 50,472 8,385
----------- -----------
Cash Balance - Ending $ 221,215 $ 50,472
=========== ===========
</TABLE>
See accountant's compilation report.
Exhibit: C - Page 5
<PAGE>
DIGITAL DOCUMENT SOLUTIONS, INC.
SCHEDULES OF SELLING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
Advertising $ 7,366 $ 13,416
Auto Expense 7,910 18,206
Employee Benefits 3,726 4,560
Salaries & Commissions 163,664 168,493
Payroll Taxes 14,310 17,728
Telephone 10,749 11,951
Travel & Entertainment 7,448 15,492
----------- -----------
Total Selling Expenses $ 215,173 $ 249,846
=========== ===========
See accountant's compilation report.
Schedule: 1 - Page 6
<PAGE>
DIGITAL DOCUMENT SOLUTIONS, INC.
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Bad Debt Expense $ 2,876 $ 68
Contributions 1,834
Depreciation & Amortization 4,028 3,404
Dues & Subscriptions 1,335 3,500
Employee Benefits 5,712 6,990
Insurance 3,562
Interest Expense 271 33,019
Miscellaneous Expense 2,520 3,324
Office Expense 5,856 6,072
Officer Salaries 82,800
Other Taxes 32
Outside Service 1,081 976
Pension Expense 1,277 790
Postage 2,493 1,705
Professional Fees 3,085 6,885
Repairs & Maintenance 84
Store Expenses 5,244
Temporary Help 2,248
Travel & Entertainment 722 6,295
Utilities 190
Administrative Expenses In 144,512 334,157
----------- -----------
Total General and Administrative Expenses $ 185,178 $ 493,769
=========== ===========
</TABLE>
See accountant's compilation report.
Schedule: 2 - Page 7
<PAGE>
Exhibit 5
Pro forma financial information showing combined results for
Eastern Equipment Brokers, Inc., Digital Document Solutions Inc. and
Officeland Inc.
<PAGE>
Pro Forma Condensed Consolidated Statement of Earnings
Officeland Inc., and Subsidiaries
Twelve months ending November 30, 1998
<TABLE>
<CAPTION>
Eastman Equipment
Brokers & Digital Pro Forma Pro Forma
Officeland Inc. Document Solutions Adjustments Consolidated
--------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Net Sales $16,931,096 $ 7,244,746 $ -- $24,175,842
Cost of Sales 12,682,097 5,542,454 -- 18,224,551
----------- ----------- ----------- -----------
Gross profit 4,248,999 1,702,292 -- 5,951,291
Expenses
General and administrative 2,247,804 813,757 (106,000) (c)(d) 2,955,561
Selling 1,222,869 483,613 -- 1,706,482
Depreciation and amortization 111,513 18,720 107,307 (a) 237,540
----------- ----------- ----------- -----------
Earnings before the following 666,813 386,202 (1,307) 1,051,708
Foreign exchange remeasurement
loss (gain) 245,162 -- -- 245,162
Interest on debt 30,951 38,338 -- 69,289
Interest income (39,563) -- -- (39,563)
----------- ----------- ----------- -----------
236,550 38,338 -- 274,888
----------- ----------- ----------- -----------
Net earnings before income taxes 430,263 347,864 (1,307) 776,820
Income taxes 48,832 22,653 115,970 (e) 187,455
----------- ----------- ----------- -----------
Net earnings $ 381,431 $ 325,211 $ (117,277) $ 589,365
=========== =========== =========== ===========
Net earnings per common share $ 0.07 $ 0.09
=========== ===========
Fully diluted net earnings per
common share $ 0.06 $ 0.07
=========== ===========
Weighted average number of
common shares - basic 5,446,507 1,058,026 6,505,333
=========== =========== ===========
Weighted average number of
common shares - fully diluted 6,701,073 1,733,826 8,434,899
=========== =========== ============
</TABLE>
See accompanying notes.
<PAGE>
Pro Forma Condensed Consolidated Balance Sheet
Officeland Inc., and Subsidiaries
November 30, 1998
<TABLE>
<CAPTION>
Eastman Equipment
Brokers & Digital Pro Forma Pro Forma
Officeland Inc. Document Solutions Adjustments Consolidated
--------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Assets
Current
Cash $ 72,649 $ 263,526 $(2,090,511) (a)(b) $ (464,336)
1,200,000 (c)
90,000 (d)
Receivables 4,768,790 392,234 -- 5,161,024
Income tax receivable 234,730 -- -- 234,730
Inventory 3,413,157 933,049 -- 4,346,206
Prepaids 218,077 41,428 -- 259,505
Future Income Taxes 360,229 19,000 -- 379,229
----------- ----------- ----------- -----------
9,067,632 1,649,237 (800,511) 9,916,358
Investments 118,521 -- -- 118,521
Capital Assets 256,592 61,083 -- 317,675
Future Income Taxes 242,151 -- -- 242,151
Other assets 504,284 -- -- 504,284
Goodwill 6,639,851 -- 3,048,961 (a) 9,688,812
-- -- (117,194) (a) (117,194)
----------- ----------- ----------- -----------
$16,829,031 $ 1,710,320 $ 2,131,256 $20,670,607
=========== =========== =========== ===========
Liabilities
Bank credit facilities $ 1,346,349 $ 350 ,000 $ -- $ 1,696,349
Accounts payable 4,242,498 1,114,884 196,856 (a)(e) 5,554,238
Current portion of long term debt 302,435 -- -- 302,435
----------- ----------- ----------- -----------
5,891,282 1,464,884 196,856 7,553,022
Long term debt 216,751 -- -- 216,751
----------- ----------- ----------- -----------
6,108,033 1,464,884 196,856 7,769,773
----------- ----------- ----------- -----------
Shareholders' Equity
Convertible Debt 5,351,218 -- 1,200,000 (c) 6,551,218
Capital Stock 9,442,747 28,960 1,107,000 (a) 10,549,747
(28,960) (a)
(9,970) (c)(d)(e)
(117,194) (a)
Deficit (4,072,967) 216,476 (216,476) (a) (4,200,131)
----------- ---------- ----------- -----------
10,720,998 245,436 1,934,400 12,900,834
---------- ---------- ----------- -----------
$16,829,031 $1,710,320 $2,131,?56 $20,670,607
=========== ========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
Notes to the 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 Eastern
Equipment Brokers, Inc. and Digital Document Solutions, Inc. 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. The pro forma
consolidated financial statements were prepared using Officeland's audited
financial statements for November 30, 1998 (previously filed), Eastern Equipment
Brokers, Inc., and Digital Document Solutions, Inc. financial statements, for
year ended December 31, 1998.
Unless otherwise noted, all references to dollar amounts in the Pro
Forma Statements are stated in U.S. dollars.
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 Eastern Equipment Brokers, Inc., for consideration of
$1,400,000 in cash and 675,000 shares of Officeland Inc. common
stock to be issued over time.
(b) Officeland Inc. has purchased substantially all of the assets and
liabilities of Digital Document Solutions, Inc. for consideration
of $665,000 in cash.
(c) Officeland Inc. issued new three year senior subordinated
unsecured convertible notes to private investors in the amount of
$1,200,000 to partially fund the purchase of Eastern Equipment
Brokers, Inc.
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
Eastern Equipment Brokers, Inc. and Digital Document Solutions, Inc.
transactions.
The following tables describe the allocation of the purchase price to the
individual categories of assets and liabilities acquired in the Eastern
Equipment Brokers, Inc. transaction and the allocation of the purchase price to
the assets and liabilities purchased in the Digital Documents Solutions, Inc.
transaction.
Purchase Price $ 2,603,886 Purchase Price $ 690,511
=========== ===========
Total assets 901,930 Assets purchased 808,390
Total liabilities 1,060,430 Liabilities purchased 404,454
----------- ----------
(158,500) 403,936
Goodwill 2,762,386 Goodwill 286,575
$ 2,603,886 $ 690,511
=========== ==========
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
Eastern Equipment Brokers, Inc. and Digital Document Solutions,
Inc.
(b) Intercompany sales were immaterial during the periods presented,
and accordingly no elimination entry is required.
<PAGE>
(c) Eliminate the non-recurring professional fees associated with
the purchase and sale transaction.
(d) Normalize the compensation expense to reflect the new employment
agreements in effect.
(e) The tax provision to reflect the state and federal statutory tax
rates.
(f) 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.
