<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-KA
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 12, 1998
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Colorado 0-21821 93-0962072
- -------------------------------- ----------- ------------------
State or Other Jurisdiction Commission IRS Employer
of Incorporation or Organization File Number Identification No.
410 17th Street, Suite 400, Denver, Colorado 80202
---------------------------------------------------
Address of Principal Executive Offices and Zip Code
Registrant's telephone number, including area code (888) 313-8051
--------------
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Business Acquired.
<TABLE>
<CAPTION>
CAPITOL METALS CO., INC. Page
----
<S> <C>
Report of Independent Public Accountants 3
Report of Independent Public Accountants 4
Balance Sheets at December 31, 1997 and December 31, 1996 5
Statements of Operations and Accumulated Deficit for the
Years Ended December 31, 1997 and December 31, 1996 7
Statements of Cash Flows for the Years Ended December 31, 1997
and December 31, 1996 8
Notes to Financial Statements 9
(b) Pro Forma Financial Information.
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
Description of Acquisition Transaction 15
Unaudited Pro Forma Combined Balance Sheet at December 31, 1997 16
Unaudited Pro Forma Combined Statement of Operations for the
Year Ended December 31, 1997 18
Notes to Unaudited Pro Forma Combined Financial Statements
for the Year Ended December 31, 1997 19
</TABLE>
2
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Capitol Metals Co., Inc.:
We have audited the accompanying balance sheet of Capitol Metals Co., Inc. (the
"Company") as of December 31, 1996, and the related statements of operations and
accumulated deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Capitol Metals Co., Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As described in Note 1 of the financial statements, the Company filed for
protection under Chapter 11 of the Bankruptcy Code on October 7, 1997. On
November 26, 1997, the Bankruptcy Court entered an order establishing the
procedures for the sale of substantially all of the assets of the Company (see
note 12). It is not presently determinable whether the amounts realizable from
the disposition of the remaining assets or the amounts that creditors agree to
accept in settlement of the obligations due them will differ materially from the
amounts shown in the accompanying financial statements. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Gumbiner, Savett, Finkel, Fingleson & Rose, Inc.
May 7, 1997, except for Notes 1 and 12
as to which the date is January 12, 1998
3
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Capitol Metals Co., Inc.:
We have audited the accompanying balance sheet of Capitol Metals Co., Inc. (the
"Company") as of December 31, 1997, and the related statements of operations and
accumulated deficit and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Capitol Metals Co., Inc. as of
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As described in Note 1 of the financial statements, the Company filed for
protection under Chapter 11 of the Bankruptcy Code on October 7, 1997. On
November 26, 1997, the Bankruptcy Court entered an order establishing the
procedures for the sale of substantially all of the assets of the Company (see
note 12). It is not presently determinable whether the amounts realizable from
the disposition of the remaining assets or the amounts that creditors agree to
accept in settlement of the obligations due them will differ materially from the
amounts shown in the accompanying financial statements. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Arthur Andersen LLP
Los Angeles, California
March 24, 1998
4
<PAGE> 5
CAPITOL METALS CO., INC.
BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
---- ----
<S> <C> <C>
Current Assets
Cash $ 25,720 $ 15,533
Accounts receivable, less allowance
for doubtful accounts of $145,000 and
$100,000 in 1997 and 1996, respectively 1,489,625 3,141,946
Inventories 2,372,916 6,681,605
Prepaids and other current assets 126,462 370,458
----------- -----------
Total current assets 4,014,723 10,209,542
----------- -----------
Property and Equipment, at cost
net of accumulated depreciation 1,005,090 968,474
----------- -----------
Other Assets
Deposits 51,681 129,440
Intangibles -- 335,813
----------- -----------
Total other assets 51,681 465,253
----------- -----------
Total Assets $ 5,071,494 $11,643,269
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
CAPITOL METALS CO., INC.
BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S DEFICIT
1997 1996
---- ----
<S> <C> <C>
Current Liabilities
Short-term borrowings $ 4,649,789 $ 8,749,352
Current portion of long-term debt 18,453 26,403
Accounts payable 5,713,157 5,423,776
Accrued expenses 294,292 357,304
Due to stockholder 60,000 --
Due to affiliates 336,502 54,055
Loan payable 600,000 250,000
------------ ------------
Total current liabilities 11,672,193 14,860,890
------------ ------------
Long-term Debt 10,000 28,453
------------ ------------
Subordinated Debt to Stockholder 2,714,952 2,714,952
------------ ------------
Commitments and Contingencies (Note 9)
Stockholder's Deficit
Common stock, no par value:
Authorized, 100,000 shares
Outstanding, 10,000 shares 500,000 500,000
Paid in capital 692,966 692,966
Liabilities assumed in excess of assets acquired
in related party acquisition (3,079,930) (3,079,930)
Accumulated deficit (7,438,687) (4,074,062)
------------ ------------
Total stockholder's deficit (9,325,651) (5,961,026)
------------ ------------
Total Liabilities and Stockholder's Deficit $ 5,071,494 $ 11,643,269
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
CAPITOL METALS CO., INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net Sales $ 20,485,843 $ 28,650,588
Cost of Sales 18,800,676 25,027,828
------------ ------------
Gross Profit 1,685,167 3,622,760
------------ ------------
Operating Expenses
General and administrative 1,001,067 963,443
Salaries 949,709 1,153,040
Rent 747,453 671,589
Insurance 398,776 310,349
Professional fees 499,528 340,640
Loan fees 316,704 65,286
------------ ------------
Total operating expenses 3,913,237 3,504,347
------------ ------------
(Loss) Income from Operations (2,228,070) 118,413
Interest Expense 1,136,555 1,551,903
------------ ------------
Net Loss (3,364,625) (1,433,490)
Accumulated Deficit, beginning of year (4,074,062) (2,640,572)
------------ ------------
Accumulated Deficit, end of year $ (7,438,687) $ (4,074,062)
============ ============
Basic Loss Per Share $ (336.46) $ (143.35)
============ ============
Common Shares Outstanding 10,000 10,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
CAPITOL METALS CO., INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(3,364,625) $(1,433,490)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 149,286 185,327
Write-off of intangibles 267,421 --
Provision for doubtful accounts 45,000 --
Changes in assets and liabilities:
Accounts receivable 1,607,321 70,440
Inventories 4,308,689 2,898,551
Prepaids and other assets 323,861 (187,833)
Accounts payable and accrued expenses 226,369 (33,190)
Due to affiliates 282,447 25,332
Due to stockholder 60,000 --
----------- -----------
Net cash provided by operating activities 3,905,769 1,525,137
----------- -----------
Cash Flows from Investing Activities:
Purchases of property and equipment (84,616) (237,475)
----------- -----------
Net cash used in investing activities (84,616) (237,475)
----------- -----------
Cash Flows From Financial Activities:
Proceeds from loan payable 600,000 250,000
Payments of short-term borrowings and loan payable (4,349,563) (1,395,082)
Proceeds from long-term debt -- 166,667
Payments of long-term debt (26,403) (309,044)
Payments of loan fees (35,000) (5,917)
----------- -----------
Net cash used in financing activities (3,810,966) (1,293,376)
----------- -----------
Net increase (decrease) in cash 10,187 (5,714)
Cash, beginning of year 15,533 21,247
----------- -----------
Cash, end of year $ 25,720 $ 15,533
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 1,040,234 $ 1,418,269
Income taxes $ 800 $ 800
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE> 9
CAPITOL METALS CO., INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1: BUSINESS AND OPERATIONS
Capitol Metals Co., Inc., a California corporation (the "Company"), is
a supplier and processor of flat rolled steel for use in the
manufacture of consumer goods. Its customers are steel suppliers and
manufacturers throughout the United States.
The Company incurred losses for the years ended December 31, 1997 and
1996, has a stockholder's deficit of $9,325,651 and a negative working
capital of $7,657,470 as of December 31, 1997.
The Company filed for protection under Chapter 11 of the Bankruptcy
Code on October 7, 1997. On November 26, 1997, the Bankruptcy Court
entered an order establishing the procedures for the sale of
substantially all of the Company's assets pursuant to the Asset
Purchase Agreement dated December 1, 1997 between the Company and
Angeles Acquisition Corp. ("Angeles"), a wholly owned subsidiary of
Consolidated Capital of North America, Inc. ("Consolidated"). The sale
was consummated on January 12, 1998 (see note 12). The plan for the
disposition of the remaining assets and settlement of liabilities is to
be filed by July 22, 1998 with the Bankruptcy Court. A hearing on the
proposed plan is expected to occur prior to the end of 1998. It is not
presently determinable whether the amounts realizable from the
disposition of the remaining assets or the amounts that creditors agree
to accept in settlement of the obligations due them will differ
materially from the amounts shown in the accompanying financial
statements. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Inventories:
Inventories are stated at the lower of cost (specific identification)
or market and consist primarily of raw materials.
b. Property and equipment:
Depreciation is computed principally on the straight-line method based
on the estimated useful lives of the assets, generally as follows:
<TABLE>
<S> <C>
Furniture, fixtures and office equipment 5-7 years
Machinery and equipment 5-15 years
Transportation equipment 5 years
Leasehold improvements 20 years
</TABLE>
9
<PAGE> 10
CAPITOL METALS CO., INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
c. Intangibles:
Intangible assets consist of reorganization costs and loan fees which
are being amortized over five-year and seven-year periods,
respectively. During 1997, it was determined that there was no
continuing value to these intangible assets and the remaining costs of
$267,421 were written off.
d. Income taxes:
The Company and its sole stockholder have made the election for the
Company to be taxed as an S Corporation. Therefore, corporate income is
taxed directly as income to the stockholder. Accordingly, federal and
state income taxes are liabilities of the stockholder and not of the
Company, except that California levies a 1.5% corporate tax on electing
S corporations.
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 revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
f. Revenue recognition:
The Company recognizes revenue upon shipment.
g. Reclassifications:
Certain amounts in the 1996 financial statements have been reclassified
to conform with the 1997 presentation.
10
<PAGE> 11
CAPITOL METALS CO., INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 3: PROPERTY AND EQUIPMENT
As of December 31, 1997 and 1996, property and equipment consisted of
the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Furniture, fixtures and office equipment $ 229,625 $ 229,625
Machinery and equipment 1,692,167 1,616,313
Transportation equipment 48,052 48,052
Leasehold improvements 240,192 231,432
----------- -----------
2,210,036 2,125,422
Less accumulated depreciation
and amortization (1,204,946) (1,156,948)
----------- -----------
$ 1,005,090 $ 968,474
=========== ===========
</TABLE>
NOTE 4: INTANGIBLES
As of December 31, 1997 and 1996, intangibles consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Reorganization costs $ -- $165,658
Loan fees -- 463,489
-------- --------
-- 629,147
Less accumulated amortization -- 293,334
-------- --------
$ -- $335,813
======== ========
</TABLE>
NOTE 5: SHORT-TERM BORROWINGS
The Company had a credit facility with a financial institution, which
expired on October 31, 1997. This debt was repaid on January 12, 1998
in connection with the establishment of a new financing facility for
Angeles. The new facility consists of a $1,500,000 term loan, payable
$25,000 per month, and a revolving line of credit not to exceed $10
million, less certain reserves as defined in the new agreement. The
maximum borrowings permitted under the new revolving line of credit
facility are determined as a percentage of eligible accounts receivable
and eligible inventories, as defined in the agreement. Interest is
payable monthly at the bank's prime rate plus 0.75% per annum (9.25% at
December 31, 1997). All advances under the new facility are
collateralized by all of the assets of Angeles and are also guaranteed
by Consolidated and its other subsidiaries.
11
<PAGE> 12
CAPITOL METALS CO., INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
The new financing facility contains various covenants including a
minimum adjusted net worth, as defined in the agreement. Angeles is in
compliance with the new covenants.
NOTE 6: LONG-TERM DEBT
As of December 31, 1997 and 1996, long-term debt consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note, collateralized by transportation equipment, payable $866 per
month through December, 1997, including interest at 8.8% per
annum $ -- $ 9,833
Contract, collateralized by computer equipment,
payable $1,719 per month through June, 1999,
including interest at 10.8% per annum 28,453 45,023
------- -------
$28,453 $54,856
======= =======
Current portion $18,453 $26,403
======= =======
Noncurrent portion $10,000 $28,453
======= =======
</TABLE>
Maturities of long-term debt during 1998 and 1999 are $18,453 and
$10,000, respectively.
NOTE 7: LOAN PAYABLE
In May 1997, the Company entered into a $600,000 loan agreement with an
unrelated third party, the terms of which were revised subsequent to
year end. The new loan (i) bears interest at 10% per annum, (ii) is
collateralized by substantially all of Angeles' assets (subordinated to
the primary lender) (see note 5), and (iii) is due in 1998.
NOTE 8: SUBORDINATED DEBT
As of December 31, 1997 and 1996, subordinated debt (subject to
subordination agreements entered into with the primary lender, which
prohibit principal reductions without the consent of the primary
lender) (see note 5), consisted of the following:
12
<PAGE> 13
CAPITOL METALS CO., INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note payable to sole stockholder, uncollateralized,
interest payable monthly at prime plus 2% per annum
(10.5% at December 31, 1997) or $30,000 per month,
whichever is greater, and due on demand $2,714,952 $2,714,952
========== ==========
</TABLE>
The Company paid $30,000 per month in interest through June 1997 and
accrued $60,000 of additional interest expense through August 1997. As
a result of the bankruptcy filing and sale of the Company (see notes 1
and 12), no additional amounts have been accrued.
NOTE 9: COMMITMENTS AND CONTINGENCIES
a. Leases:
The Company leases its facilities on a month-to-month basis from a
partnership which is partially owned by the Company's sole stockholder.
Total rent expense amounted to $747,453 and $671,589 in 1997 and 1996,
respectively.
b. Litigation:
The Company is a defendant in a suit in the United States District
Court which seeks to recover damages for environmental cleanup at the
Operating Industries Superfund site in Monterey Park, California. The
Company was a party to the Second and Third Consent Decrees executed in
this action. Under the Second Consent Decree, the Company paid
approximately $108,000. Under the Third Consent Decree, the Company was
required to pay an additional $197,100 over an extended time period.
Quarterly payments of approximately $4,100 were required until
December, 1997.
13
<PAGE> 14
CAPITOL METALS CO., INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 10: RELATED PARTY TRANSACTIONS
The Company bought and sold steel from an affiliated entity. The
Company leased its facilities from a partnership which is partially
owned by its sole stockholder and utilized a trucking company which is
owned by its sole stockholder. During the years ended December 31, 1997
and 1996, such transactions aggregated:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Sales $208,183 $184,726
Purchases $672,847 $526,332
Freight expense $213,222 $293,547
Rent expense $747,453 $671,589
Interest expense $240,000 $360,000
</TABLE>
As of December 31, 1997 and 1996, $392,502 and $54,055, respectively,
were payable by the Company to these affiliated entities.
The Company's credit facility, which expired on October 31, 1997, was
guaranteed to the lender by the Company's sole stockholder (see note 5).
NOTE 11: EMPLOYEE BENEFIT PLAN
The Company sponsors an employee benefit plan for eligible employees.
Eligibility begins after completion of one year of eligible service.
Under the plan, the Company's contributions are discretionary and it
may elect to make a matching contribution at any time. There were no
contributions for the plan years ended December 31, 1997 and 1996.
NOTE 12: SUBSEQUENT EVENTS
On January 12, 1998, Consolidated through its wholly-owned subsidiary,
Angeles, purchased substantially all of the assets of the Company out
of bankruptcy.
The transaction was accounted for using the purchase method of
accounting. The total consideration was approximately $8,100,000,
consisting of $336,000 in cash, $1,500,000 in promissory notes (bearing
interest at 9%, due in installments through 1999), $300,000 (269,349
Common Shares) of Common Stock of Consolidated, the assumption of an
outstanding note and interest of $626,000 (see note 7), the repayment
of $4,764,000 of the Company's then existing senior debt and the
assumption of approximately $574,000 of costs and expenses associated
with the acquisition.
14
<PAGE> 15
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED STATEMENTS
December 31, 1997
(unaudited)
On January 12, 1998, Consolidated Capital of North America, Inc.
("Consolidated") through its wholly-owned subsidiary, Angeles Acquisition
Corp. ("Angeles"), purchased substantially all the assets of Capitol Metals
Co., Inc. (the "Company").
The Company filed for protection under Chapter 11 of the Bankruptcy Code on
October 7, 1997. On November 26, 1997, the Bankruptcy Court entered an
order establishing the procedures for the sale of substantially all of the
Company's assets pursuant to the Asset Purchase Agreement dated December 1,
1997 between the Company and Consolidated.
The transaction was accounted for using the purchase method of accounting
and the total consideration was approximately $8,100,000, consisting of
$336,000 in cash, $1,500,000 in promissory notes (bearing interest at 9%
due in installments through 1999), $300,000 (269,349 Common Shares) of
Consolidated Common Stock, the assumption of an outstanding note and
interest of $626,000 (see note 7), the repayment of $4,764,000 of the
Company's then existing senior debt and the assumption of approximately
$574,000 of cost and expenses associated with the acquisition.
The following unaudited pro forma balance sheet information gives effect of
the acquisition and related transactions as if they had occurred on
December 31, 1997. The unaudited pro forma statement of operations gives
effect to such transactions as if they had occurred on January 1, 1997.
The purchase price was allocated as follows:
<TABLE>
<S> <C>
Accounts receivable $1,576,967
Inventories 2,156,512
Other current assets 194,537
Property and equipment 3,713,814
Other assets 462,332
----------
$8,104,162
==========
</TABLE>
15
<PAGE> 16
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED BALANCE SHEET
December 31, 1997
(unaudited)
<TABLE>
<CAPTION>
Consolidated Capitol
Capital of North Metals Co., Pro Forma Pro Forma
America, Inc. Inc. Adjustments Consolidated
---------------- ------------- ------------ ------------
Current Assets Increase
(Decrease)
<S> <C> <C> <C> <C> <C>
Cash $ 14,304 $ 25,720 (2) $ (25,720) $ 14,304
Loan fees -- - (3) 850,000 850,000
Accounts receivable, net 1,587,035 1,489,625 (2) 87,342 3,164,002
Inventories, net 1,193,208 2,372,916 (2) (216,404) 3,349,720
Prepaid expenses 32,879 126,462 (2) 78,075 237,416
------------ ------------ ------------ ------------
Total current assets 2,827,426 4,014,723 773,293 7,615,442
------------ ------------ ------------ ------------
Property and Equipment 2,269,219 2,210,036 (1) 1,503,778 5,983,033
Less accumulated
depreciation and
amortization (216,004) (1,204,946) (1) 1,204,946 (216,004)
------------ ------------ ------------ ------------
2,053,215 1,005,090 2,708,724 5,767,029
------------ ------------ ------------ ------------
Other Assets
Excess purchase price over
net assets acquired, net of
amortization of $225,995 2,133,013 -- -- 2,133,013
Other 692,629 51,681 (2) (275,278) 879,683
(2) 410,651
------------ ------------ ------------ ------------
2,825,642 51,681 135,373 3,012,696
------------ ------------ ------------ ------------
Total Assets $ 7,706,283 $ 5,071,494 $ 3,617,390 $ 16,395,167
============ ============ ============ ============
</TABLE>
16
<PAGE> 17
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED BALANCE SHEET (CONTINUED)
December 31, 1997
(unaudited)
<TABLE>
<CAPTION>
Consolidated
Capital of
North Capitol Pro Forma Pro Forma
America, Inc. Metals Co., Inc. Adjustments Consolidated
------------- ---------------- ----------- ------------
Current Liabilities Increase
(Decrease)
<S> <C> <C> <C> <C> <C>
Current portion of long-term debt $ 320,738 $ 18,453 (2) $ 731,547 $ 1,070,738
Short-term borrowings -- 4,649,789 (2) (2,450,358) 2,199,431
Notes payable to affiliates 225,000 336,502 (2) (336,502) 225,000
Accounts payable 3,872,397 5,713,157 (2) (5,502,157) 4,083,397
Accrued liabilities 290,618 294,292 (2) (294,292) 290,618
Other 61,545 -- (2) 28,453 89,998
Due to stockholder -- 60,000 (2) (60,000) --
Notes payable -- -- (2) 300,000 300,000
Loan payable -- 600,000 -- 600,000
Note payable to related party -- -- (3) 1,750,000 1,750,000
------------ ------------ ------------ ------------
Total current liabilities 4,770,298 11,672,193 (5,833,309) 10,609,182
------------ ------------ ------------ ------------
Long-term Debt 2,928,133 2,724,952 (2) (774,952) 4,878,133
------------ ------------ ------------ ------------
Stockholders' Equity
Preferred stock 1,193,000 -- -- 1,193,000
Common stock 1,599 500,000 (2) (500,000) 1,776
(3) 150
(4) 27
Additional paid-in capital 2,070,313 692,966 (2) 1,107,034 2,970,136
(3) 599,850
(3) (1,500,000)
(4) (300,000)
(4) 299,973
Liabilities assumed in excess
of assets acquired in
related party acquisition -- (3,079,930) (2) 3,079,930 --
Accumulated deficit (3,257,060) (7,438,687) (2) 7,438,687 (3,257,060)
------------ ------------ ------------ ------------
Total stockholders'
equity 7,852 (9,325,651) 10,225,651 907,852
------------ ------------ ------------ ------------
Total Liabilities and
Stockholders' Equity $ 7,706,283 $ 5,071,494 $ 3,617,390 $ 16,395,167
============ ============ ============ ============
</TABLE>
17
<PAGE> 18
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
(unaudited)
<TABLE>
<CAPTION>
Consolidated
Capital of Capitol Pro Forma
North Metals Co., Pro Forma Consolidated
America, Inc. Inc. Adjustments Statements
------------ ------------ ------------ ------------
Increase
(Decrease)
<S> <C> <C> <C> <C> <C>
Net Sales $ 16,989,478 $ 20,485,843 $ -- $ 37,475,321
Cost of Sales 14,021,110 18,800,676 (5) 158,276 32,980,062
------------ ------------ ------------ ------------
Gross Profit 2,968,368 1,685,167 (158,276) 4,495,259
------------ ------------ ------------ ------------
Operating Expenses
Selling and shipping 2,324,103 -- -- 2,324,103
General and administrative 2,270,866 3,763,951 -- 6,034,817
Depreciation and
amortization 434,637 149,286 (6) 850,000 1,464,068
(5) 30,145
------------ ------------ ------------ ------------
Total operating expenses 5,029,606 3,913,237 880,145 9,822,988
------------ ------------ ------------ ------------
(Loss) from Operations (2,061,238) (2,228,070) (1,038,421) (5,327,729)
Other Income (Expense)
Interest expense (582,713) (1,136,555) (7) 210,000 (1,273,052)
(8) (656,216)
Other income 165,374 -- -- 165,374
------------ ------------ ------------ ------------
Net Loss $ (2,478,577) $ (3,364,625) $ (592,205) $ (6,435,407)
============ ============ ============ ============
Basic Loss Per Share $ (.17) $ (336.46) $ (.33) $ (.38)
============ ============ ============ ============
Weighted Average
Shares of Common
Stock 14,980,423 10,000 1,769,349 16,749,772
============ ============ ============ ============
</TABLE>
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CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO PRO FORMA COMBINED STATEMENTS
December 31, 1997
(unaudited)
Below are explanations for the numerical notes in the Pro Forma Statements:
Balance Sheet - Pro Forma Adjustments
1. Represents the increase in property and equipment, based on an appraisal by
an unrelated third party.
2. To record the purchase price of $8,100,000, which was allocated to the
assets and liabilities assumed in the acquisition, and the elimination of
the Company's shareholder's equity.
3. To record $1,500,000 of note proceeds received by Consolidated from a
related party, as evidenced by a convertible promissory note in the amount
of $1,750,000, with a 12% per annum interest rate. This note is due in one
year or sooner in the event of a $25,000,000 equity issuance by
Consolidated. As additional consideration for the loan, Consolidated issued
1,500,000 shares of restricted Common Stock to the related party. For the
purposes of this pro forma entry, it was assumed that the loan will be
repaid in one year and the restricted Common Stock was valued at $.40 per
share, as determined by Consolidated's Board of Directors.
4. To record the $300,000 in value of Consolidated Common Stock issued in
connection with the Asset Purchase Agreement.
Income Statement - Pro Forma Adjustments
5. To adjust for additional depreciation resulting from the revaluation of
assets as determined by appraisal. Assets are depreciated over their useful
lives using the straight-line method.
6. Amortization of loan fees attributable to the new subordinated debt over a
period of one year.
7. To record interest at 12% on the new subordinated debt for the year.
8. To record interest expense on new debt incurred to finance this purchase,
less reduction for the interest on the old debt.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
By: /s/ Carl Casareto
-----------------
Carl Casareto
Chief Financial Officer
Date: March 27, 1998
20
