<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 20, 1996
ADVANTAGE MARKETING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
OKLAHOMA 33-25701 33-0296193
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2601 NORTHWEST EXPRESSWAY, SUITE 1210W
OKLAHOMA CITY, OKLAHOMA 73112-7293
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 842-0131
1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to a Stock Purchase Agreement having an effective date of May
31, 1996 (the "Purchase Agreement"), the Advantage Marketing Systems, Inc. (the
"Company") acquired all of the issued and outstanding capital stock of Miracle
Mountain International, Inc., a Colorado corporation ("MMI"), and MMI became a
wholly-owned subsidiary of the Company (the "MMI Acquisition"). The MMI
Acquisition was closed on June 20, 1996. MMI is a multi-level marketer of
various third-party manufactured nutritional supplement products. Pursuant to
the Purchase Agreement and in connection with the MMI Acquisition, the Company
issued and delivered to the shareholders of MMI 160,000 shares of Common Stock.
In addition, the Company agreed to issue and deliver an additional 40,000 shares
of Common Stock to the shareholders of MMI on or before December 17, 1996,
pending determination of certain liabilities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS AND EXHIBITS.
The following financial statements of Miracle Mountain International,
Inc. are filed herewith and appear at the pages indicated:
MIRACLE MOUNTAIN INTERNATIONAL, INC. AUDITED FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report................................................................. F-1
Balance Sheet as of December 31, 1995........................................................ F-2
Statement of Operations for the Year Ended December 31, 1995................................. F-3
Statement of Stockholders' Deficiency for the Year Ended December 31, 1995................... F-4
Statement of Cash Flows for the Year Ended December 31, 1995................................. F-5
Notes to Financial Statements for the Year Ended December 31, 1995........................... F-6
MIRACLE MOUNTAIN INTERNATIONAL, INC. UNAUDITED FINANCIAL STATEMENTS:
Balance Sheets as of March 31, 1996 and December 31, 1995 (Unaudited)........................ F-8
Statements of Operations for the Three Months Ended March 31, 1996 and 1995 (Unaudited)...... F-9
Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995 (Unaudited)...... F-10
Notes to Financial Statements................................................................ F-11
</TABLE>
(b) PRO FORMA FINANCIAL INFORMATION.
The following financial statements of Miracle Mountain International,
Inc. are filed herewith and appear at the pages indicated:
<TABLE>
<CAPTION>
<S> <C>
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1996.......................... F-12
Unaudited Pro Forma Consolidated Statement of Operations for the Year
Ended December 31, 1995.............................................................. F-13
Unaudited Pro Forma Consolidated Statement of Operations
for the Three Months Ended March 31, 1996............................................ F-14
Notes to Unaudited Pro Forma Consolidated Financial Statements............................... F-15
</TABLE>
(c) EXHIBITS.
--------
2.1 Stock Purchase Agreement having an effective date of May 31, 1996,
between Advantage Marketing Systems, Inc., Miracle Mountain
International, Inc., Richard Seaton, Gene Burson, Kaye Jennings,
Daryl Burson, and James Rogers is incorporated by reference to
Exhibit 4.13 of the Company's Amendment No. 1 to the Registration
Statement on Form SB-2 (No.33-80629), as filed with the Commission
on July 1, 1996.
2
<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.
ADVANTAGE MARKETING SYSTEMS, INC.
(Registrant)
By: /s/ ROGER P. BARESEL
----------------------------------------
Roger P. Baresel. President
Date: November 8, 1996
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Miracle Mountain International, Inc.
Colorado Springs, Colorado
We have audited the accompanying balance sheet of Miracle Mountain
International, Inc. (the "Company") as of December 31, 1995 and the related
statements of operations, stockholders' deficiency 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, such financial statements present fairly, in all material
respects, the financial position of Miracle Mountain International, Inc. at
December 31, 1995 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
June 21, 1996
F-1
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
BALANCE SHEET
DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS:
<S> <C>
Cash...................................................... $ 3,334
Inventory................................................. 2,186
---------
Total current assets.............................. 5,520
PROPERTY AND EQUIPMENT, net................................. 39,898
OTHER ASSETS................................................ 725
---------
TOTAL....................................................... $ 46,143
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable.......................................... 1,558
Accrued commissions....................................... 16,477
Accrued payroll taxes..................................... 2,346
Interest payable.......................................... 1,318
Notes payable to related parties.......................... 62,418
---------
Total current liabilities......................... 84,117
STOCKHOLDERS' DEFICIENCY:
Common stock - no par value; authorized 1,000,000 shares;
issued and outstanding 200,000 shares................... 92,655
Accumulated deficit....................................... (130,629)
---------
Total stockholders' deficiency.................... (37,974)
---------
TOTAL....................................................... $ 46,143
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-2
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
TOTAL REVENUE......................... $ 277,366
---------
COSTS AND EXPENSES:
Programs............................ 103,217
Selling............................. 145,650
General and administrative.......... 157,725
Interest expense.................... 1,403
---------
Total expenses.............. 407,995
---------
NET LOSS.............................. $(130,629)
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' DEFICIENCY
YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
COMMON ACCUMULATED STOCKHOLDERS'
SHARES STOCK DEFICIT DEFICIENCY
------- ------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995...... - $ - $ - $ -
Capital contributions......... 200,000 92,655 - 92,655
Net loss for the year ended
December 31, 1995........... - - (130,629) (130,629)
------- ------- ----------- ------------
BALANCE, DECEMBER 31, 1995.... 200,000 $92,655 $(130,629) $ (37,974)
======= ======= =========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C>
Net loss........................................................... $(130,629)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization.................................. 1,926
Changes in assets and liabilities which provided (used) cash:
Inventory.................................................... (2,186)
Other assets................................................. (725)
Accounts payable............................................. 1,558
Accrued expenses............................................. 18,823
Interest payable............................................. 1,318
---------
Net cash used in operating activities...................... (109,915)
---------
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property and equipment................................ (41,824)
---------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from capital contributions................................ 92,655
Proceeds from notes payable........................................ 65,253
Payment on notes payable........................................... (2,835)
---------
Net cash provided by financing activities.................. 155,073
---------
NET INCREASE IN CASH................................................. 3,334
BEGINNING CASH BALANCE............................................... -
---------
ENDING CASH BALANCE.................................................. $ 3,334
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest............................. $ 85
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-5
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - The Company is engaged in marketing nutritional
supplements through a multi-level sales organization of independent sales
associates developed by the Company. During the first three months of
operations, the Company primarily paid start-up expenses relating to
organization and recruitment of sales associates. The Company did not have
significant sales until April of 1995.
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.
REVENUE RECOGNITION - Revenue is recognized when goods are shipped.
INVENTORY - Inventory consists of consumer product inventory. Inventory is
stated at the lower of cost or market. Cost is determined on a first-in,
first-out method.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Property and equipment are depreciated over five years using a straight-line
basis.
INCOME TAXES - The Company recognizes an asset and liability approach for
accounting for income taxes. Deferred income taxes are recognized for the
tax consequences of temporary differences and carryforwards by applying
enacted tax rates applicable to future years to differences between the
financial statement amounts and the tax bases of existing assets and
liabilities. A valuation allowance is to be established if it is more likely
than not that some portion of the deferred tax asset will not be realized.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Office furniture, fixtures, and equipment........ $41,824
Accumulated depreciation and amortization........ (1,926)
Total property, net.............................. $39,898
=======
</TABLE>
3. NOTES PAYABLE TO STOCKHOLDERS
The Company has a note payable to a stockholder and director in the amount
of $56,253 as of December 31, 1995. This note is due on demand and bears
interest at 9.0%. No principal or interest payments were made on the note
during the year ended December 31, 1995.
The Company is also making note payments to a bank on behalf of a
stockholder and director in exchange for an advance of $9,000. The principal
balance of the note at December 31, 1995 is $6,165. Payments of principal
and interest totaling $2,835 and $85, respectively, were made during the
year. No written agreement exists between the parties.
4. LEASE AGREEMENTS
The Company leases office space under a cancelable operating lease. The
Company can cancel the lease with 30 days written notice. The lease terms
provide for monthly payments of $825.
F-6
<PAGE>
Additionally, the Company leases office equipment under separate operating
leases. The leases are cancelable at any time by the Company. The lease
terms provide for combined monthly payments of $441.
Rental expense under operating leases for the year ended December 31, 1995
was $16,535.
5. RELATED PARTIES
Certain stockholders and directors receive commissions on revenue of the
Company. Such commissions are recognized as compensation to the stockholders
and directors and are included in selling expense. Total commissions paid to
stockholders and directors during 1995 totaled approximately $27,000.
6. INCOME TAXES
The Company experienced a net loss for the year ended December 31, 1995 and
consequently paid no income tax.
The Company has a net operating loss carryforward at December 31, 1995
totaling approximately $130,000 which is available to reduce Federal income
tax in future periods and will expire in 2010. Management has determined
that it is not more likely than not that the Company will be able to realize
the tax benefits from the net operating loss carryforward and has,
therefore, provided a valuation allowance of approximately $44,000 to fully
reserve the net deferred tax asset.
7. SUBSEQUENT EVENTS
On June 20, 1996, the Company's stockholders exchanged 100% of their
outstanding stock in the Company for a total of 200,000 shares of common
stock of Advantage Marketing Systems, Inc. ("AMS"). As part of the
agreement, AMS withheld 40,000 shares which will be delivered 120 days after
closing, provided that liabilities of the Company, which will be assumed by
AMS, do not exceed $19,000. Upon delivery, the shares withheld will be
reduced by one share for every $.88 of liabilities in excess of $19,000.
Also, the agreement provides that certain officers, directors and
stockholders will not compete with AMS for a limited time .
* * * * * *
F-7
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
BALANCE SHEETS, MARCH 31, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash....................................................... $ - $ 3,334
Inventory.................................................. 3,193 2,186
--------- ---------
Total current assets................................... 3,193 5,520
--------- ---------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $4,017 in 1996 and $1,926 in 1995.......... 37,807 39,898
OTHER ASSETS................................................... 725 725
--------- ---------
TOTAL ASSETS................................................... $ 41,725 $ 46,143
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Bank overdrafts............................................ $ 513 $ -
Accounts payable........................................... 8,238 1,558
Accrued expenses........................................... 16,284 -
Accrued commissions........................................ - 16,477
Accrued payroll taxes...................................... - 2.346
Interest payable........................................... 2,584 1,318
Notes payable to related parties........................... 62,174 62,418
--------- ---------
Total current liabilities.......................... 89,793 84,117
STOCKHOLDERS' DEFICIENCY:
Common stock - no par value; authorized 1,000,000 shares;
issued and outstanding 200,000 shares.................. 92,655 92,655
Accumulated deficit........................................ (140,723) (130,629)
--------- ---------
Total stockholders' deficiency......................... (48,068) (37,974)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................... $ 41,725 $ 46,143
========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-8
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
REVENUE.............................. $122,248 $ 18,446
EXPENSES:
Products......................... 39,602 8,016
Selling.......................... 67,343 18,120
General and administrative....... 24,131 24,852
Interest expense................. 1,266 118
-------- --------
Total........................ 132,342 51,106
-------- --------
NET LOSS............................. $(10,094) $(32,660)
======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-9
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1996 1995
-------- --------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss............................................................ $(10,094) $(32,660)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization................................... 2,091 151
Changes in assets and liabilities which provided (used) cash:
Inventory................................................... (1,007) (4,435)
Other assets................................................ - (725)
Interest payable............................................ 1,266 113
Accounts payable and accrued expenses....................... 4,654 3,955
-------- --------
Net cash used by operating activities........................... (3,090) (33,601)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment.................................. - (3,022)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable......................................... - 5,000
Payment on note payable............................................. (244) -
Proceeds from capital contributions................................. - 32,655
-------- --------
Net cash provided (used) by financing activities................ (244) 37,655
-------- --------
NET INCREASE (DECREASE) IN CASH..................................... (3,334) 1,032
BEGINNING CASH BALANCE.............................................. 3,334 -
-------- --------
ENDING CASH BALANCE................................................. $ - $ 1,032
========= ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Property and equipment acquired by capital lease.................... $ 6,700 $ 42,815
======== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-10
<PAGE>
MIRACLE MOUNTAIN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited financial statements and related notes have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to such
rules and regulations. The accompanying financial statements and related
notes should be read in conjunction with the audited financial statements of
the Company, and notes thereto, for the fiscal year ended December 31, 1995.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the results of the interim periods presented. Operating
results of the interim period are not necessarily indicative of the amounts
that will be reported for the fiscal year ending December 31, 1996.
2. ACCOUNTING POLICIES ADOPTED
The Company has adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), Accounting for Stock-
Based Compensation. SFAS 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages, but does not
require, compensation costs to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply APB Opinion No. 25, which recognizes compensation cost based on the
intrinsic value of the equity instrument awarded. The Company will continue
to apply APB Opinion No. 25 to its stock-based compensation awards to
employees and will disclose the required proforma effect on net income and
earnings per share. No options or warrants were issued during the first
quarter of 1996.
The Company has adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
SFAS 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill related to such
assets. Management does not believe this pronouncement will have a material
effect on the Company's financial statements.
3. SUBSEQUENT EVENTS
Pursuant to a Stock Purchase Agreement having an effective date of May 31,
1996 (the "Purchase Agreement"), the Company was acquired by Advantage
Marketing Systems, Inc., an Oklahoma corporation ("AMS") and became a
wholly-owned subsidiary of AMS. All liabilities of the Company, other than
commissions payable to associates, were assumed by certain of the Company's
former shareholders, and certain officers, directors and stockholders were
required to sign agreements not to compete with AMS.
F-11
<PAGE>
ADVANTAGE MARKETING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
ADVANTAGE
MARKETING MIRACLE MOUNTAIN
SYSTEMS, INC. INTERNATIONAL ,INC.
-------------- --------------------
MARCH 31, MARCH 31, PRO FORMA PRO FORMA
1996 1996 ADJUSTMENTS COMBINED
-------------- -------------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash............................................. $ 223,775 $ - $ - $ 223,775
Receivables - net of allowance of $27,434........ 22,365 - - 22,365
Receivable from affiliate........................ 59,757 - - 59,757
Inventory........................................ 160,572 3,193 - 163,765
Prepaid expenses................................. 4,810 - - 4,810
----------- --------- -----------
Total current assets......................... 471,279 3,193 - 474,472
----------- --------- --------- -----------
COMMISSION ADVANCES TO RELATED
PARTIES - NONCURRENT............................. 1,790 - - 1,790
RECEIVABLES - NONCURRENT............................. 20,972 - - 20,972
PROPERTY AND EQUIPMENT, net.......................... 159,136 37,807 - 196,943
OTHER ASSETS......................................... 84,148 725 - 84,873
GOODWILL............................................. - - 99,413 (a) 99,413
COVENANT NOT TO COMPETE.............................. - - 60,000 (a) 60,000
----------- --------- --------- -----------
TOTAL ASSETS......................................... $ 737,325 $ 41,725 $ 159,413 $ 938,463
=========== ========= ========= ===========
LIABILITIES & STOCKHOLDERS'
- ---------------------------
EQUITY (DEFICIENCY)
-------------------
CURRENT LIABILITIES:
Bank overdrafts.................................. $ - $ 513 $ $ 513
Accounts payable................................. 145,187 8,238 153,425
Accrued expenses................................. 225,318 16,284 241,602
Accrued interest expense......................... - 2,584 (2,584) (b) -
Accrued promotion expense........................ 108,990 - - 108,990
Notes payable:
Stockholder.................................. 64,648 62,174 (62,174) (b) 64,648
Other........................................ 12,370 - - 12,370
Current obligations under capital lease.......... 23,839 - - 23,839
----------- --------- --------- -----------
Total current liabilities................ 580,352 89,793 (64,758) 605,387
LONG-TERM LIABILITIES:
Notes payable - other............................ 26,232 - - 26,232
Capital lease.................................... 74,265 - - 74,265
----------- --------- --------- -----------
Total long-term liabilities.............. 100,497 - - 100,497
----------- --------- --------- -----------
TOTAL LIABILITIES.................................... 680,849 89,793 (64,758) 705,884
----------- --------- --------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock - $.0001 par value; authorized
5,000,000 shares; none issued................ - - - -
Common stock - $.0001 par value; authorized
495,000,000 shares; 16,985,524 shares
issued and outstanding....................... 1,698 92,655 64,758 (b)
(157,413) (a)
16 (c) 1,714
Paid-in capital.................................. 1,858,396 - 176,087 (c) 2,034,483
Accumulated deficit.............................. (1,803,618) (140,723) 140,723 (a) (1,803,618)
----------- --------- --------- -----------
Total stockholders' equity (deficiency)...... 56,476 (48,068) 224,171 232,579
----------- --------- --------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY............................. $ 737,325 $ 41,725 $ 159,413 $ 938,463
=========== ========= ========= ===========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
F-12
<PAGE>
ADVANTAGE MARKETING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
ADVANTAGE MIRACLE
MARKETING MOUNTAIN
SYSTEMS, INC. INTERNATIONAL, INC. PRO FORMA PRO FORMA
DECEMBER 31, 1995 DECEMBER 31, 1995 ADJUSTMENTS COMBINED
----------------- -------------------- ------------ -----------
Note 2
<S> <C> <C> <C> <C>
REVENUES:
Programs....................................... $ 4,382,935 $ 277,366 $ - $ 4,660,301
Promotional material........................... 109,733 - - 109,733
Other.......................................... 25,535 - - 25,535
----------- --------- ----------- -----------
Total revenues....................... 4,518,203 277,366 - 4,795,569
----------- --------- ----------- -----------
COSTS AND EXPENSES:
Programs....................................... 1,094,157 103,217 - 1,197,374
Promotional material........................... 92,087 - - 92,087
Selling........................................ 2,201,510 145,650 - 2,347,160
General and administration..................... 857,743 157,725 27,534 (d) 1,043,002
Interest expense............................... 22,998 1,403 - 24,401
----------- --------- ----------- -----------
Total expenses....................... 4,268,495 407,995 27,534 4,704,024
----------- --------- ----------- -----------
NET INCOME (LOSS)................................ $ 249,708 $(130,629) $(27,534) $ 91,545
=========== ========= =========== ===========
Weighted average common shares outstanding....... 21,301,441 160,000 (c) 21,461,441
Net income per common share...................... $0.01 NIL
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
F-13
<PAGE>
ADVANTAGE MARKETING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
ADVANTAGE MIRACLE
MARKETING MOUNTAIN
SYSTEMS, INC. INTERNATIONAL, INC. PRO FORMA PRO FORMA
MARCH 31, 1996 MARCH 31, 1996 ADJUSTMENTS COMBINED
-------------- -------------------- ------------ -----------
Note 2
<S> <C> <C> <C> <C>
REVENUES:
Programs.................................... $ 1,255,889 $122,248 $ - $ 1,378,137
Promotional material........................ 62,684 - - 62,684
Other....................................... 13,876 - - 13,876
----------- -------- ----------- -----------
Total revenues.................... 1,332,449 122,248 - 1,454,697
----------- -------- ----------- -----------
COSTS AND EXPENSES:
Programs.................................... 302,879 39,602 - 342,481
Promotional material........................ 35,745 - - 35,745
Selling..................................... 683,164 67,343 - 750,507
General and administration.................. 221,598 24,131 6,883 (d) 252,612
Interest expense............................ 7,359 1,266 - 8,625
----------- -------- ----------- -----------
Total expenses.................... 1,250,745 132,342 6,883 1,389,970
----------- -------- ----------- -----------
NET INCOME (LOSS)............................. $ 81,704 $(10,094) $ (6,883) (c) $ 64,727
=========== ======== =========== ===========
Weighted average common shares outstanding.... 24,588,424 160,000 24,748,424
Net income per common share................... NIL NIL
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
F-14
<PAGE>
ADVANTAGE MARKETING SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
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1. BASIS FOR PRESENTATION
The pro forma balance sheet and statement of income present the pro forma
effects of the acquisition by the Company of the issued and outstanding
capital stock of Miracle Mountain International, Inc., a Colorado
corporation ("MMI"), and MMI became a wholly-owned subsidiary of the Company
(the "MMI Acquisition"), pursuant to a Stock Purchase Agreement with an
effective date of May 31, 1996, (the "Purchase Agreement"). MMI is a multi-
level marketer of various third-party manufactured nutritional supplement
products. Pursuant to the Purchase Agreement and in connection with the MMI
Acquisition, the Company issued and delivered to the shareholders of MMI
160,000 shares of Common Stock. In addition, the Company agreed to issue and
deliver an additional 40,000 shares of Common Stock to the shareholders of
MMI on or before December 17, 1996, pending determination of certain
liabilities.
The accompanying unaudited pro forma statement of income is presented
assuming the MMI Acquisition occurred or was consummated on the first day of
the period presented. The unaudited pro forma consolidated balance sheet as
of March 31, 1996, is presented assuming the MMI Acquisition occurred or was
consummated on such date. The historical information presented for the
Company and MMI as of December 31, 1995, is derived from the audited
financial statements of the Company and MMI as of such date.
The pro forma financial information presented in the unaudited pro forma
financial statements is not necessarily indicative of the financial position
and results of operations that would have been achieved had the assets and
liabilities been owned by a single corporate entity. The results of
operations presented in the unaudited pro forma statement of income are not
necessarily indicative of the consolidate results of future operations of
the Company following consummation of the MMI Acquisition.
2. ADJUSTMENTS
The accompanying unaudited pro forma consolidated financial statements have
been adjusted to record and give effect to the following:
(a) The excess of the purchase price of $176,103, which includes $56,103 of
transaction costs, over the $16,690 fair market value of assets of MMI,
net of liabilities, has been allocated $99,413 to goodwill and $60,000
to the covenant not to compete, amortizable over a seven year and four
and one-half year period, respectively;
(b) Conversion of $62,174 shareholder note payable and associated accrued
interest to common stock of MMI prior to consummation of the MMI
Acquisition;
(c) Issuance of 160,000 shares of Common Stock of the Company in exchange
for the issued and outstanding capital stock of MMI;
(d) Amortization of goodwill over seven years, $14,201 and $3,550 for the
year ended December 31, 1995, and for the three months ended March 31,
1996, respectively. Amortization of the covenant not to compete over
4.5 years, $13,333 and $3,333 for the year ended December 31, 1995, and
for the three months ended March 31, 1996, respectively.
3. NET INCOME PER SHARE
Pro forma per share calculations for the Company are based upon the number
of shares of Common Stock to be outstanding after giving effect to the MMI
Acquisition.
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