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Previous: CABLEVISION SYSTEMS CORP, SC 13D/A, 1997-12-29 |
Next: DIGITAL SOLUTIONS INC, NT 10-K, 1997-12-29 |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
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) October 27, l997
Creative Technologies Corp.
___________________________________________
(Exact name of registrant as specified in its charter)
New York
_______________________________
(State or other Jurisdiction of Incorporation)
0-15754 11-2721083
_____________ ________________________
(Commission File No.) (I.R.S. Employer Identification No.)
170 53rd Street, Brooklyn, New York 11232
______________________________________________
(Address of principal executive offices) (zip code)
Registrants telephone number including area code 718-492-8400
Item. 1. Changes in Control of Registrant
This Amendment is being filed to replace in its entirety Item No.
1 to this current report on Form 8-K.
On October 27, l997, Creative Technologies Corp. (the
Company) executed and closed a transaction pursuant to an
Agreement and Plan of Merger (the Agreement) between the Company,
CTC Acquisition Corporation (Subsidiary), Ace Surgical Supply
Co., Inc. (Ace) and David Guttmann and Barry Septimus, the
stockholders (the Stockholders ) of Ace. Subsidiary is a New York
corporation which was wholly -owned by the Company. Ace was a
privately held New York corporation, which distributes medical,
janitorial and dietary products in the tri-state area from its
warehouse in Brooklyn, New York.
At the closing, Ace merged into Subsidiary in a merger
carried out pursuant to the laws of the State of New York (the
Merger). In connection with the Merger, the Stockholders of Ace
transferred l00% ownership of Ace and two affiliated companies to
the Company and Stockholders of Ace received an aggregate of
1,000,000 shares of Common Stock, $.09 par value, (the Shares) of
the Company and 3,500 1997 Series A 12% Preferred Stock (the
"1997 Preferred Stock").
The rights, preferences and conditions of the 1997 Preferred
Stock are as follows:
(a) the 1997 Preferred Stock shall have a stated
value of One Thousand Dollars ($1,000) per share;
(b) the holders of the 1997 Preferred Stock shall
be entitled to a cumulative dividend at the rate of One
Hundred Twenty Dollars ($120.00) per share per annum,
when, as and if declared by the Board of Directors of
the Company;
(c) the holders of the 1997 Preferred Stock shall
be entitled to receive One Thousand Dollars ($1,000)
per share and accrued and accumulated dividends thereon
at the rate aforesaid, if any, and no more on
liquidation of the Company before any payment is made
to the holders of Common Stock;
(d) the holders of the 1997 Preferred Stock shall
not be entitled to any vote at any meeting of the
shareholders of the Company unless the dividends are in
arrears longer than one year at which time the holders
of the 1997 Preferred Stock shall be entitled to 1,000
votes per share and shall vote along with the holders
of Common Stock as one Class;
(e) the shares of the 1997 Preferred Stock shall
not be convertible;
(f) the shares shall be redeemed for cash at a
redemption price of $1,000 per share, plus accrued, but
unpaid dividends, out of funds legally available
therefor, on the later of twenty years from issuance or
October 1, 2017.
(h) the holders of the Preferred Shares will
share pro-rata with the holders of the 1996 and 1996-A
Preferred Stock in the event of a liquidation or a
dissolution of the Company.
Prior to this transaction, the Company had approximately
2,997,444 shares of Common Stock and 1,770 shares of Preferred
Stock outstanding. As a result of the Merger, Ace became a
wholly-owned subsidiary of the Company and the former owners of
Ace control approximately 35% of a of the voting stock of the
Company.
Prior to the Merger , Mr. Guttmann owned 92,222 shares of
Common Stock of the Company, a portion of which is held for the
benefit of certain family members. In addition, he has stock
options, exercisable at $2.05 per share, to purchase l6,666
shares of Common Stock and owns 450 shares of l996 Preferred
Stock and l20 shares of l996-A Preferred Stock which are
convertible into approximately 149,850 and l92,000 shares of
Common Stock of the Company, respectively. In addition, Ace
owned 720 shares of l996-A Preferred Stock which was exercisable
to purchase l,l52,000 shares of Common Stock. Prior to the
Merger, half of such shares was distributed to Mr. Guttmann and
half to Barry Septimus. Upon the Merger , Mr. Guttmann will own
an additional 500,000 shares of Common Stock and 1,750 shares of
1997 Preferred Stock. Mr. Guttmann has been the Chief Executive
Officer and Chairman of the Board of the Company prior and
subsequent to the Merger.
Barry Septimus wife was the owner of l69,711 shares of
Common Stock and owns 100 shares of 1996-A Preferred Stock, which
are exercisable to purchase l60,000 shares of Common Stock.
Pursuant to the Merger, Mr. Septimus will own 500,000 shares of
Common Stock and 1,750 shares of 1997 Preferred Stock of the
Company. In addition, he received 360 shares of 1996-A Preferred
Stock from ACE.
The Officers and Directors of the Company prior to the
Merger will continue as the Officers and Directors of the Company
after the Merger.
Reference is made to Item 2 and the exhibits and financial
statements referenced under Item 7 hereof for additional
disclosures.
Item 2. Acquisition or Disposition of Assets.
On October 27, l997 the Company acquired Ace by merging Ace
into a subsidiary of the Company. Under the Agreement, the
holders of Ace stock received an aggregate of 1,000,000 shares
of the Company's Common Stock, $.09 par value, and 3,500 shares
of 1997 Preferred Stock. The consideration paid by the Company
was determined by negotiations between the Stockholders of Ace
and a committee made up of certain members of the Board of
Directors of the Company. The amount of Shares of 1997 Preferred
Stock received by the Stockholders of Ace was calculated by
multiplying 1,000,000 (number of shares of Common Stock issued to
them) by the average of the Bid prices of the Common Stock of the
Company for thirty days prior to the closing and subtracting such
product from 4,000,000 and dividing the sum by 1,000 (the stated
value of each of the 1997 Preferred Stock).
David Guttmann, a principal shareholder, Chief Executive
Officer and Chairman of the Company owned 50% of Ace. In
addition, the wife of Barry Septimus, the other 50% owner of Ace,
is a principal shareholder of the Company. The Company subleases
its offices and warehousing space from Ace. The Company and Ace
both have their executive offices and warehousing space at 170
53rd Street, Brooklyn, N.Y. and it is expected that the Merger of
the two companies will allow for certain expenses to be
eliminated. Furthermore, the Company and Ace each obtained a
line of credit from Century Business Credit Corporation
("Century"). Ace, Consolidated Disposables, Inc. and Universal
Medical Products Inc., companies controlled by David Guttmann and
merged along with Ace into the Subsidiary of the Company and
David Guttmann guaranteed the obligations of the Company to
Century. The Company in return, guaranteed the obligation of
Ace and Consolidated Disposables, Inc. to Century. Reference is
made to the Company's Form 10-KSB for the year ended December 31,
l996 for a description of the lease agreement with Ace and line
of credit with Century.
Ace is a distributor of medical, janitorial and dietary
products, primarily to customers in New York, New Jersey and
Connecticut. At June 30, 1997, the principal assets of Ace
consisted of inventory in the approximate amount of $549,000,
accounts receivable of approximately $3,131,000 and property,
equipment and leasehold improvements - at cost, less accumulated
depreciation and amortization of approximately $258,000. In
addition, Ace owned 720 shares of 1996-A Preferred Stock of the
Company which was distributed to its shareholders prior to the
Merger. At June 30, 1997, Ace had notes payable - financial
institutions of 2,028,000 and accounts payable and accrued
expenses of $2,104,000.
The Company has received an opinion from Chartered Capital
Advisers, Inc., independent investment advisers, that the amount
of Common Stock and Preferred Stock issued as consideration in
the Merger is fair to the Company and its stockholders from a
financial point of view.
Reference is made to Item 1 and the exhibits and financial
statements referenced under Item 7 hereof for additional
disclosures.
Item 7. Financial and Exhibits.
(a) Financial Statements of Business Acquired
Combined financial statement of Ace Surgical Supply Co.,
Inc. and affiliates as of December 31, 1996.
(b) Pro Forma Financial Information (unaudited) of
Creative Technologies Corp. and consolidated subsidiaries as at
September 30, 1997, December 31, 1996 and September 30, 1996.
(c) Exhibits - previously filed
1 Agreements and Plan of Merger dated
October 27, l997 by and among the Company, Subsidiary, Ace, David
Guttmann and Barry Septimus
2 Fairness Opinion of
Chartered Capital Advisers, Inc. Dated October 27, l997.
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.
Creative Technologies Corp.
By: Richard Helfman, President
Date: December 26, l997
</PAGE>
<PAGE>
ACE SURGICAL SUPPLY CO., INC. AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Ace Surgical Supply Co., Inc.
Brooklyn, New York
We have audited the accompanying combined balance sheet of Ace
Surgical Supply Co., Inc. and affiliates as of December 31, 1996
and the related combined statements of operations and retained
earnings and cash flows for the years ended December 31, 1996 and
1995. These combined financial statements are the responsibility
of the Companies' management. Our responsibility is to express
an opinion on these combined 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 enumerated above present
fairly, in all material respects, the combined financial position
of Ace Surgical Supply Co., Inc. and affiliates at December 31,
1996 and the combined results of their operations and their
combined cash flows for the years ended December 31, 1996 and
1995, in conformity with generally accepted accounting
principles.
Richard A. Eisner & Company, LLP
New York, New York
April 3, 1997
ACE SURGICAL SUPPLY CO., INC. AND AFFILIATES
Combined Balance Sheet
December 31, 1996
ASSETS (Note D)
Current assets:
Cash $
19,299
Accounts receivable (net of allowances for sales discounts 3,181,56
and doubtful accounts of $47,520) 0
Inventories (Note A[2]) 589,845
Prepaid expenses and other current assets
61,928
Total current assets 3,852,63
2
Investment in and advances to a related party (Note B[3]) 863,642
Property, equipment and leasehold improvements - at cost,
less accumulated depreciation
and amortization (Notes A[3] and C) 272,410
Due from stockholder 98,740
Due from affiliate (Note B[3]) 576,133
Deposits
1,668
$5,665,2
25
LIABILITIES
Current liabilities:
Note payable - financial institutions (Note D) $1,787,2
18
Notes payable - equipment 7,445
Accounts payable and accrued expenses 2,011,73
0
Loan payable - stockholder (Note B[2])
101,444
Total current liabilities 3,907,83
7
Notes payable - equipment 3,722
Subordinated notes payable - affiliates (Note B[1])
411,396
Total liabilities
4,322,95
5
STOCKHOLDERS' EQUITY (Note E)
Common stock 11,300
Retained earnings
1,330,97
0
Total stockholders' equity
1,342,27
0
$5,665,2
25
See notes to financial statements
ACE SURGICAL SUPPLY CO., INC. AND AFFILIATES
Combined Statements of Operations and Retained Earnings
Year Ended December
31,
1996 1995
Revenue:
Net sales (Note G) $12,116,7 $11,871,4
52 58
Rental income (Note B[3])
600,000 600,000
Total revenue
12,716,75 12,471,45
2 8
Expenses:
Cost of sales 9,300,995 8,861,924
Selling, general and administrative expenses
3,230,158 3,243,648
Total expenses
12,531,15 12,105,57
3 2
Income from operations 185,599 365,886
Interest expense (net of interest income of
$10,580 and $8,321, respectively)
(Note B)
(192,259) (171,788)
Income (loss) before income taxes (benefit) (6,660) 194,098
(Benefit) provision for state and local income
taxes (Note A[4]) (7,189) 35,473
Net income 529 158,625
Retained earnings - January 1
1,356,941 1,198,316
Distributions to stockholders
(26,500)
Retained earnings - December 31 $ $
1,330,970 1,356,941
See notes to financial statements
ACE SURGICAL SUPPLY CO., INC. AND AFFILIATES
Combined Statements of Cash Flows
Year Ended
December 31,
1996 1995
Cash flows from operating activities:
Net income $ $
529 158,625
Adjustments to reconcile net income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 39,207 51,471
Changes in:
Accounts receivable 500,978 (250,89
8)
Inventories 115,298 (30,583
)
Prepaid expenses and other current assets (5,773) 2,114
Accounts payable and accrued expenses (151,536 339,624
)
Loans payable - interest
21,831
Net cash provided by operating activities
520,534 270,353
Cash flows from investing activities:
Investment in related party (720,000
)
(Increase) decrease in deposits (325) 4,650
Purchase of equipment and leasehold improvements (8,205) (20,252
)
(Increase) in due from stockholder (49,660
(10,580) )
Due from affiliate 300,714 81,306
Due from related party
216,163 (359,80
5)
Net cash used in investing activities
(222,233 (343,76
) 1)
Cash flows from financing activities:
Proceeds from notes payable - bank 996,668 290,000
Repayment of notes payable - bank (1,209,4 (290,00
50) 0)
Repayment of notes payable - equipment (7,444) (8,815)
Proceeds from loan payable - stockholder 104,830
Repayment of loan payable - stockholder (38,830) (19,600
)
Distribution to stockholders
(26,500)
Net cash (used in) provided by financing
activities (285,556 76,415
)
Net increase in cash 12,745 3,007
Cash - January 1
6,554 3,547
Cash - December 31 $ $
19,299 6,554
Supplemental disclosures of cash flow information:
Interest paid $ $
256,000 221,000
Income taxes paid $ $
22,000 22,000
See notes to financial statements
ACE SURGICAL SUPPLY CO., INC. AND AFFILIATES
Notes to Financial Statements
December 31, 1996
Note A - Summary of Significant Accounting Policies
[1]Principles of combination and business activity:
The combined financial statements include the accounts of Ace
Surgical Supply Co., Inc. ("Ace"), Consolidated Disposables Inc.
and Universal Medical Products, Inc., which are commonly owned.
Intercompany transactions and balances have been eliminated in
combination.
Ace Surgical Supply Co., Inc., Consolidated Disposables Inc. and
Universal Medical Products, Inc. (collectively, the "Company")
are wholesalers of nonmedical supplies, predominantly to
hospitals and nursing homes.
[2]Inventories:
Inventories are stated at the lower of cost (first-in, first-
out) or market.
[3]Depreciation and amortization:
Depreciation and amortization are provided over the estimated
useful lives of the depreciable assets using the straight-line
method over 3 to 30 years.
[4]Income taxes:
The Company elected to be treated as an S corporation pursuant
to Section 1362 of the Internal Revenue Code. As a result of
this election, the Company's income or loss is reportable on the
federal and certain state tax returns of their stockholders.
Retained earnings of the Company of approximately $1,331,000
arising subsequent to the date of the elections may be withdrawn
by the stockholders without any further federal tax consequences
to them, however, the provisions of the note payable to the
financial institution restrict such payments. The Company is
subject to certain state and local income taxes. The income tax
benefit for the year ended December 31, 1996 is due to the
reversal of an overaccrual of the tax provision from the prior
year of approximately $27,000.
[5]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 - Related Party Transactions
[1]The notes payable to affiliates (the "Subordinated debt") are
subordinated to the financial institutions debt and bear
interest at a rate of 12% per annum. The notes are payable on
demand. Interest incurred to affiliates was $48,000 for both
the years ended December 31, 1996 and 1995, respectively.
[2]The loan payable to stockholder bears interest at 12% per annum.
Interest incurred to stockholder was $10,435 and $14,831 for the
years ended December 31, 1996 and December 31, 1995,
respectively.
Note B - Related Party Transactions (continued)
[3]The Company recorded rental income of $600,000 from Creative
Technologies Corp. ("CTC," an entity whose principal
stockholders are stockholders of the Company) for each of the
years ended December 31, 1996 and 1995. CTC owed the Company
$143,642 as of December 31, 1996.
The Company purchased 720 shares of CTC's 1996-A Preferred Stock
at $1,000 per share. As a holder of 1996-A Preferred Stock, the
Company is entitled to (i) receive cumulative dividends at the
rate of $120 per annum payable quarterly in cash or common stock
at the option of CTC, (ii) convert each share of preferred stock
into approximately 1,600 shares of common stock, subject to
adjustment, as defined, (iii) redemption of their preferred
shares on October 1, 1998 at $1,000 per share payable in cash or
shares of common stock at the option of CTC, (iv) liquidation
preferences of $1,000 per preferred share and (v) no voting
rights.
CTC, at its option, has the right to redeem all or any portion
of the 1996-A Preferred Stock at $1,100 per share plus accrued
and unpaid dividends prior to October 1, 1998.
Cumulative unpaid 1996-A Preferred Stock dividends aggregated
approximately $21,500 at December 31, 1996.
[4]The Company leases office and warehouse space in a building
owned by a partnership whose partners are the principal
stockholders of the Company. For each of the years ended
December 31, 1996 and 1995, the Company incurred rent expense of
$750,000 payable to the partnership. The Company has also
advanced additional funds to the partnership. At December 31,
1996, the partnership owed the Company $576,133.
Note C - Property and Equipment
Property and equipment at cost consists of the following at
December 31, 1996:
Furniture and fixtures $123,4
29
Computers and equipment 130,47
6
Delivery equipment 6,800
Building improvements
278,12
5
538,83
0
Less accumulated depreciation and
amortization 266,42
0
$272,4
10
Note D - Notes Payable
In December 1996, the Company and CTC entered into a two-year loan
and security agreement with Century Business Credit Corporation
("Century") whereby the Company and CTC are required to maintain an
outstanding combined loan balance of not less than $1,500,000, but
no more than $3,000,000. The loan is collateralized by
substantially all of the assets of the Company and is guaranteed by
the Company, CTC and an officer of the Company. Under the
agreement, the Company and CTC receive revolving credit advances
based on accounts receivable and inventory available and are
required to pay interest at a rate of prime plus 2.75% plus all of
the lenders out-of-pocket costs and expenses. The agreement, among
other matters, restricts the Company with respect to (i) incurring
any lien or encumbrance on its property or assets, (ii) entering
into new indebtedness, (iii) incurring capital expenditures in any
fiscal year in an amount in excess of $100,000, (iv) paying
dividends or distributions on any shares of common stock,
(v) making certain advances or loans, (vi) assuming, endorsing or
guaranteeing the debt of another and (vii) making payments with
respect to the subordinated debt and requires an officer of the
Company to maintain certain ownership percentages.
As of December 31, 1996, the Company had $1,787,218 outstanding
under this facility.
Note E - Stockholders' Equity
Common stock and retained earnings comprise the following at
December 31, 1996:
Common stock attributable to Ace Surgical $
Supply Co., Inc. 6,300
Common stock attributable to Consolidated
Disposables Inc. 5,000
$
11,300
Retained earnings attributable to Ace $1,328,9
Surgical Supply Co., Inc. 90
Retained earnings attributable to
Consolidated Disposables Inc. 1,980
$1,330,9
70
Note F - Profit Sharing Plan
The Company maintains a profit sharing plan covering eligible
employees. The Company made no contribution for the year ended
December 31, 1996 or December 31, 1995.
Note G - Major Customer
The Company's largest customer accounted for approximately 13% of
net sales for the year ended December 31, 1996, and 14% for the
year ended December 31, 1995.
Note H - Subsequent Event
During January, February and March 1997 the Company advanced CTC a
total of $100,000.
CREATIVE TECHNOLOGIES CORP. AND CONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheets as
at September 30, 1997, December 31, 1996 and September 30, 1996
and the unaudited pro forma consolidated statements of operations
for the nine months ended September 30, 1997, year ended December
31, 1996, and nine months ended September 30, 1996 include
Creative Technologies Corp. (the Company) and its wholly owned
subsidiaries IHW, Inc. (IHW) and Ace Surgical Supply Co., Inc.
(Ace). Intercompany balances and transactions have been
eliminated in consolidation.
These unaudited pro forma statements have been prepared to give
effect to an October 27, 1997 transaction pursuant to an
Agreement and Plan of Merger between Ace and various companies
owned by certain stockholders of the Company (for a full
description of the merger, see Form 8-K filed with the Securities
and Exchange Commission October 27, 1997).
For purposes of the unaudited pro forma consolidated balance
sheets and statements of operations, the transaction is deemed to
have occurred January 1, 1996. The pro forma adjustments used in
the preparation of these statements give effect to the purchase
method of accounting as described in the accompanying notes to
the pro forma financial statements.
The unaudited pro forma statements do not purport to represent
what the consolidated financial position and the results of
operations of Creative Technologies Corp. would actually have
been if the events described above had in fact occurred on
January 1, 1996 or to project the consolidated results of
operations of Creative Technologies Corp. for any future period.
The unaudited pro forma statements should be read in conjunction
with the historical financial statements of the companies
including the notes contained elsewhere herein.
<TABLE>
Creative Technologies Corp.
and Consolidated
Subsidiaries
Pro Forma Balance Sheet
September 30, 1997
Creative Ace Proform Consolidate Creative
a d
Technolog Adj Adj Consolidated
ies
Assets
Current Assets
Cash $ $ $ $ $
34,000 2,000 - - 36,000
Accounts receivable, net
1,268,000 2,560,00 - - 3,828,000
0
Inventories
1,681,000 565,000 - - 2,246,000
Prepaid expenses and other
current assets 144,000 38,000 - (55,000) 6 127,000
Due from affiliate
- 560,000 - (547,000 6 13,000
)
3,127,000 3,725,00 - (602,000 6,250,000
0 )
Property and equipment
1,477,000 543,000 - - 2,020,000
Less: Accumulated
depreciation (1,289,00 (448,000 - - (1,737,00
0) ) 0)
188,000 95,000 - - 283,000
Intangible and other assets
6,000 1,000 (5,000) 5 - 2,000
Investment in subsidiary
(385,000) - - 385,000 7 -
Goodwill
1,185,000 - (83,000 3 - 1,102,000
)
$ $ $ $
4,121,000 $3,821,0 (88,000 (217,000 7,637,000
00 ) )
See notes to pro forma
consolidated financial
statements.
Creative Technologies Corp.
and Consolidated
Subsidiaries
Pro Forma Balance Sheet
September 30, 1997
Creative Ace Proforma Consolidated Creative
Technolog Adj Adj Consolidated
ies
Liabilities and
Stockholders' Equity
Current Liabilities
Notes payable - bank $ $ $ $
483,000 $1,995,0 - - 2,478,000
00
-
others 3,889,000 - - - 3,889,000
Accounts payable and 6
accrued liabilities 3,799,000 1,642,00 - (602,000) 4,839,000
0
Loans payable -
stockholders - 169,000 - - 169,000
Notes payable - Fleet
Capital 200,000 - - - 200,000
Customer claims payable
388,000 - - - 388,000
1997 A preferred stock
dividend payable - - 735,000 4 - 735,000
8,759,000 3,806,00 735,000 (602,000) 12,698,00
0 0
Notes payable - affiliate -
subordinated - 400,000 - - 400,000
8,759,000 4,206,00 735,000 (602,000) 13,098,00
0 0
Preferred stock - 1997 A -
12% cumulative
nonconvertible, redeemable
Oct. 27, 2017 363,000 - 80,000 4 - 443,000
Stockholders' equity
Preferred stock - 1996 -
12% cumulative 600,000 - - - 600,000
-
1996A - 12% cumulative 1,170,000 - - - 1,170,000
Common stock - par value
$.09 360,000 - - - 360,000
- 7
no par - 12,000 - (12,000) -
Additional paid-in capital 7
9,406,000 (397,000 (815,000 4 397,000 8,591,000
) )
Retained
earnings/(deficit) (16,537,0 - (88,000) - (16,625,0
00) 00)
(5,001,00 (385,000 (903,000 385,000 (5,904,00
0) ) ) 0)
$ $ $ $
4,121,000 $3,821,0 (88,000) (217,000) 7,637,000
00
See notes to pro forma
consolidated financial
statements.
Creative Technologies Corp. and
Consolidated Subsidiaries
Pro Forma Statement of
Operations
For the Nine Months Ended
September 30, 1997
Creative Ace Proforma Consolidated Creative
Technolog Adj Adj Consolida
ies ted
Net sales $ $ $ $ $
6,422,000 7,741,00 - - 14,163,00
0 0
Rental income
- 450,000 - (450,000) 6 -
6,422,000 8,191,00 - (450,000) 14,163,00
0 0
Cost of sales
4,355,000 5,997,00 - - 10,352,00
0 0
Gross profit
2,067,000 2,194,00 - (450,000) 3,811,000
0
Operating Expenses
Selling, general,
administrative and warehousing 2,459,000 2,146,00 (154,000 2 (450,000) 6
0 )
- - 35,000 3 - 4,036,000
Restructuring costs
442,000 - - - 442,000
Interest
611,000 199,000 - - 810,000
3,512,000 2,345,00 (119,000 (450,000) 5,288,000
0 )
Operating (loss)/profit
(1,445,00 (151,000 119,000 - (1,477,00
0) ) 0)
Other expense - loss on
distribution of investment - (216,000 216,000 1 - -
)
Loss before provision for
income tax (1,445,00 (367,000 335,000 - (1,477,00
0) ) 0)
Provision for income tax
(22,000) 8,000 - - (14,000)
Net loss
(1,423,00 (375,000 335,000 - (1,463,00
0) ) 0)
Retained earnings (deficit) -
beginning (15,114,0 1,330,00 (1,378,0 5 - (15,162,0
00) 0 00) 00)
Distributions to shareholders
- (955,000 955,000 5 - -
)
Retained Earnings (Deficit) - $ $ $ $ $
ending (16,537,0 - (88,000) - (16,625,0
00) 00)
See notes to pro forma
consolidated financial
statements.
CREATIVE TECHNOLOGIES CORP. AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
1. Reverse loss on distribution of preferred stock in Creative
Technologies as if it occurred January 1, 1996.
2. Reverse write off of leasehold improvements abandoned at time
of merger as if it occurred January 1, 1996.
3. Amortization of Goodwill arising from purchase of Ace as if it
occurred January 1, 1996.
4. Reflects the increase in value of 1997A preferred stock
arising from reflecting at January 1, 1996 its discounted
present value and reflecting dividends payable on this stock.
5. Reverse retained earnings and shareholder distributions of Ace
to reflect in consolidated net loss and retained deficit the
actual results of operations and pro forma income adjustments
of Ace from January 1, 1996 to September 30, 1997.
6. Elimination of intercompany balances and transactions.
7. Elimination of Creative Technologies' investment in Ace.
Creative Technologies Corp.
and Consolidated
Subsidiaries
Pro Forma Balance Sheet
December 31, 1996
<CAPTION>
<S> <C> <C> <C> <C <C> <C <C>
> >
Creative Ace ProformConsolidated Creative
a
Technolog Adj Adj Consolidated
ies
Assets
Current Assets
Cash $ $ $ $ $
100,000 19,000 - - 119,000
Accounts receivable, net
631,000 3,182,00 - - 3,813,00
0 0
Inventories
1,609,000 590,000 - - 2,199,00
0
Prepaid expenses and other
current assets 201,000 62,000 - - 263,000
2,541,000 3,853,00 - - 6,394,00
0 0
Property and equipment
1,465,000 539,000 - - 2,004,00
0
Less: Accumulated
depreciation (684,000) (267,000 - - (951,000
) )
781,000 272,000 - - 1,053,00
0
Investment in subsidiary
- - (385,00 3 385,000 6 -
0)
Goodwill
- - (47,000 1 -
)
- - 1,185,0 3 - 1,138,00
00 0
Investment in Creative
Technologies - 720,000 (720,00 4 - -
0)
Due from related parties
- 818,000 (675,00 4 (143,000) 5 -
0)
Intangible and other assets
54,000 2,000 - - 56,000
54,000 1,540,00 (642,00 242,000 1,194,00
0 0) 0
$ $ $
3,376,000 $5,665,0 $(642,0 242,000 8,641,00
00 00) 0
See notes to pro forma
consolidated financial
statements.
Creative Technologies Corp.
and Consolidated
Subsidiaries
Pro Forma Balance Sheet
December 31, 1996
Creative Ace ProformaConsolidate Creative
d
Technolog Combine Adj Adj Consolidate
ies d d
Liabilities and
Stockholders' Equity
Current Liabilities
Notes payable - bank $ $ $ $
42,000 $1,788, - - 1,830,000
000
Notes payable
3,800,000 - - - 3,800,000
Accounts payable and
accrued liabilities 2,808,000 2,023,0 - (143,000) 5 4,688,000
00
Customer claims payable
435,000 - - - 435,000
Advances from customers
300,000 - - - 300,000
Due to related parties
- 113,000 332,000 4 - 445,000
1997 A preferred stock
dividend payable - - 420,000 2 - 420,000
7,385,000 3,924,0 752,000 (143,000) 11,918,00
00 0
Note payable - Fleet
Capital Corporation 200,000 - - - 200,000
Note payable - affiliate -
subordinated - 400,000 - - 400,000
7,585,000 4,324,0 752,000 (143,000) 12,518,00
00 0
Preferred stock - 1997A -
12% cumulative
non convertible,
redeemable Oct. 27, 2017 - - 44,000 2
- - 362,000 3 - 406,000
Stockholders' equity
Preferred stock - 1996 -
12% cumulative 600,000 - - - 600,000
-
1996A - 12% cumulative 1,170,000 - - - 1,170,000
Common stock - par value
$.09 235,000 - 90,000 3 - 325,000
-
no par - 11,000 1,000 4 (12,000) 6 -
Additional paid-in
capital 8,900,000 - (464,000 2 397,000 6
)
- - 348,000 3 -
- - (397,000 4 - 8,784,000
)
Retained
earnings/(deficit) (15,114,0 1,330,0 (1,378,0 - (15,162,0
00) 00 00) 00)
(4,209,00 1,341,0 (1,800,0 385,000 (4,283,00
0) 00 00) 0)
$ $ $ $
3,376,000 $5,665, (642,000 242,000 8,641,000
000 )
See notes to pro forma
consolidated financial
statements.
Creative Technologies Corp.
and Consolidated
Subsidiaries
Pro Forma Statement of
Operations
For the Year Ended December
31, 1996
Creative Ace ProformaConsolidate Creative
d
Technolog Adj Adj Consolidate
ies d
Net sales $ $ $ $
4,986,000 $12,117, - - 17,103,00
000 0
Rental income
- 600,000 - (600,000 5 -
)
4,986,000 12,717,0 - (600,000 17,103,00
00 ) 0
Cost of sales
6,563,000 9,301,00 - - 15,864,00
0 0
Gross profit
(1,577,00 3,416,00 - (600,000 1,239,000
0) 0 )
Operating Expenses
Selling, general, 1
administrative & warehousing 5,050,000 3,232,00 47,000 (600,000 5 7,729,000
0 )
Restructuring costs
1,089,000 - - - 1,089,000
Interest
793,000 192,000 - - 985,000
6,932,000 3,424,00 47,000 (600,000 9,803,000
0 )
Income (loss) before
provision for income tax (8,509,00 (8,000) (47,000) - (8,564,00
0) 0)
Provision for income tax -
current 36,000 (7,000) - - 29,000
- - deferred 445,000 - - - 445,000
Income (loss) before
extraordinary item (8,990,00 (1,000) (47,000) - (9,038,00
0) 0)
Extraordinary item
1,550,000 - - - 1,550,000
Net loss
(7,440,00 (1,000) (47,000) - (7,488,00
0) 0)
Retained earnings/(deficit) 4
- - beginning (7,674,00 1,358,00 (1,358,0 - (7,674,00
0) 0 00) 0)
Distributions to 4
shareholders - (27,000) 27,000 - -
Retained Earnings/(Deficit) $ $ $ $
- - ending (15,114,0 1,330,00 $(1,378, - (15,162,0
00) 0 000) 00)
See notes to pro forma
consolidated financial
statements.
CREATIVE TECHNOLOGIES CORP.
AND CONSOLIDATED
SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL
STATEMENTS
AS AT AND FOR THE YEAR ENDED
DECEMBER 31, 1996
1. Amortization of Goodwill
arising from purchase of Ace
as if it occurred January 1,
1996.
2. Reflects the increase in
value of 1997A preferred
stock arising from
reflecting at January 1,
1996 its discounted present
value and reflecting
dividends payable on this
stock.
3. Records Creative
Technologies' investment in
Ace.
4. Reverse retained earnings
and shareholder
distributions of Ace to
reflect in consolidated net
loss and retained deficit
the actual results of
operations and pro forma
income adjustments of Ace
from January 1, 1996 to
December 31, 1996 and to
reflect the effect of
certain transactions arising
therefrom.
5. Elimination of
intercompany balances and
transactions.
6. Elimination of Creative
Technologies' investment in
Ace.
Creative Technologies Corp.
and Consolidated
Subsidiaries
Pro Forma Balance Sheet
September 30, 1996
Creative Ace Proform Consolidat Creative
a ed
Technolog Adj Adj Consolidate
ies d
Assets
Current Assets
Cash $ $ $ $ $
37,000 11,000 - - 48,000
Accounts receivable, net
1,690,000 4,016,00 - - 5,706,000
0
Inventories
3,009,000 767,000 - - 3,776,000
Prepaid expenses and other
current assets 418,000 72,000 - - 490,000
5,154,000 4,866,00 - - 10,020,00
0 0
Property and equipment
3,711,000 541,000 - - 4,252,000
Less: Accumulated
depreciation (1,819,00 (256,000 - - (2,075,00
0) ) 0)
1,892,000 285,000 - - 2,177,000
Investment in subsidiary 3
- - (385,00 385,000 6 -
0)
Goodwill 1
- - (36,000 -
)
3
- - 1,186,0 - 1,150,000
00
Investment in Creative 4
Technologies - 720,000 (720,00 - -
0)
Due from related parties 4
- 733,000 (733,00 - -
0)
Intangible and other assets
144,000 2,000 - - 146,000
Deferred tax benefit
45,000 - - - 45,000
189,000 1,455,00 (688,00 385,000 1,341,000
0 0)
$ $ $
7,235,000 $6,606,0 $(688,0 385,000 13,538,00
00 00) 0
See notes to pro forma
consolidated financial
statements.
Creative Technologies
Corp. and Consolidated
Subsidiaries
Pro Forma Balance Sheet
September 30, 1996
Creative Ace Proform Consolidate Creative
a d
Technolo Combine Adj Adj Consolidat
gies d ed
Liabilities and
Stockholders' Equity
Current Liabilities
Note payable - bank $ $ $ $ $
- 2,000,0 - - 2,000,00
00 0
Note payable - others
3,868,00 - - - 3,868,00
0 0
Accounts payable and
accrued liabilities 1,439,00 2,544,0 - - 3,983,00
0 00 0
Due to related parties
- 91,000 300,000 4 - 391,000
1997 A preferred stock
dividend payable - - 315,000 2 - 315,000
5,307,00 4,635,0 615,000 - 10,557,0
0 00 00
Notes payable - Fleet
Capital Corporation 200,000 - - - 200,000
Notes payable - affiliate
- - subordinated - 400,000 - - 400,000
5,507,00 5,035,0 615,000 - 11,157,0
0 00 00
Preferred stock - 1997A -
12% cumulative
non convertible,
redeemable Oct. 27, 2017 - - 33,000 2 -
- - 362,000 3 - 395,000
Stockholders' equity
Preferred stock - 1996 -
12% cumulative 600,000 - - - 600,000
-
1996A - 12% cumulative 1,170,00 - - - 1,170,00
0 0
Common stock - par value
$.09 235,000 - 90,000 3 - 325,000
-
no par - 11,000 1,000 4 (12,000) 6 -
Additional paid-in
capital 8,901,00 - (348,00 2 397,000 6
0 0)
348,000 3 -
(397,00 4 - 8,901,00
0) 0
Retained
earnings/(deficit) (9,178,0 1,560,0 (1,392, - (9,010,0
00) 00 000) 00)
1,728,00 1,571,0 (1,698, 385,000 1,986,00
0 00 000) 0
$ $ $ $ $
7,235,00 6,606,0 (688,00 385,000 13,538,0
0 00 0) 00
See notes to pro forma
consolidated financial
statements.
Creative Technologies Corp.
and Consolidated Subsidiaries
Pro Forma Statement of
Operations
For the Nine Months Ended
September 30, 1996
Creative Ace Proforma Consolidated Creative
Technolog Adj Adj Consolida
ies ted
Net sales $ $ $ $ $
3,998,000 9,308,00 - - 13,306,00
0 0
Rental income
- 450,000 - (450,000) 5 -
3,998,000 9,758,00 - (450,000) 13,306,00
0 0
Cost of sales
2,235,000 6,995,00 - - 9,230,000
0
Gross profit
1,763,000 2,763,00 - (450,000) 4,076,000
0
Operating Expenses
Selling, general, 1
administrative & warehousing 3,818,000 2,408,00 34,000 (450,000) 5 5,810,000
0
Interest
563,000 139,000 - - 702,000
4,381,000 2,547,00 34,000 (450,000) 6,512,000
0
Loss before provision for
income tax (2,618,00 216,000 (34,000) - (2,436,00
0) 0)
Provision for income tax -
current 36,000 14,000 - - 50,000
- - deferred 400,000 - - - 400,000
Loss before extraordinary item
(3,054,00 202,000 (34,000) - (2,886,00
0) 0)
Extraordinary item - net of
tax 1,550,000 - - - 1,550,000
Net loss
(1,504,00 202,000 (34,000) - (1,336,00
0) 0)
Retained earnings/(deficit) - 4
beginning (7,674,00 1,358,00 (1,358,0 - (7,674,00
0) 0 00) 0)
Distributions to shareholders
- - - - -
Retained Earnings/(Deficit) - $ $ $ $
ending (9,178,00 1,560,00 $(1,392, - (9,010,00
0) 0 000) 0)
See notes to pro forma
consolidated financial
statements.
CREATIVE TECHNOLOGIES CORP. AND CONSOLIDATED SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
1. Amortization of Goodwill arising from purchase of Ace as if it
occurred January 1, 1996.
2. Reflects the increase in value of 1997A preferred stock
arising from reflecting at January 1, 1996 its discounted
present value and reflecting dividends payable on this stock.
3. Records Creative Technologies' investment in Ace.
4. Reverse retained earnings and shareholder distributions of Ace
to reflect in consolidated net loss and retained deficit the
actual results of operations and pro forma income adjustments
of Ace from January 1, 1996 to September 30, 1996 and to reflect
the effect of certain transactions arising therefrom.
5. Elimination of intercompany balances and transactions.
6. Elimination of Creative Technologies' investment in Ace.
</TABLE>
</PAGE>
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