<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 31, 1997
-----------------------------
RINGER CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Minnesota 0-18921 41-0848688
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
9555 James Avenue South, Suite 200, Bloomington, Minnesota 55431-2543
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 703-3300
----------------------------
9959 Valley View Road, Eden Prairie, Minnesota 55344
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
This Current Report on Form 8-K/A of Ringer Corporation (the "Registrant")
furnishes the financial statements and the pro forma financial information that
were omitted from the Current Report on Form 8-K of the Registrant filed with
the Securities and Exchange Commission on April 15, 1997 (the "Registrant's
April 1997 Form 8-K") in accordance with Items 7 (a) (4) and 7 (b) (2) of Form
8-K which allow the Registrant a 60-day extension of the time for the filing of
such financial statements and pro forma financial information. The financial
statements and proforma financial information included herein relate to the
acquisition by the Registrant of substantially all of the assets of Dexol
Industries, Inc. as described in Item 2 of the Registrant's April 1997 Form
8-K.
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The following audited financial statements of Dexol Industries, Inc.
for the fiscal years ended September 30, 1996 and 1995 are included in
a separate section of this report following the signature page:
Report of Independent Public Accountants
Balance Sheets at September 30, 1996 and 1995.
Statements of Operations for the fiscal years ended September
30, 1996 and 1995.
Statements of Shareholders' Equity (Deficit) for the fiscal
years ended September 30, 1996 and 1995.
Statements of Cash Flows for the fiscal years ended September
30, 1996 and 1995.
Notes to Financial Statements
The following unaudited interim financial statements of Dexol
Industries, Inc. for the five months ended February 28, 1997 are
included in a separate section of this report following the signature
page:
Condensed Balance Sheet at February 28, 1997
2
<PAGE> 3
Condensed Statement of Operations for the five months ended
February 28, 1997
Condensed Statement of Cash Flows for the five months ended
February 28, 1997
Notes to Interim Condensed Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION
The following proforma financial information is included with the
financial statements in a separate section of this report following
the signature page:
Pro Forma Statements of Operations for the fiscal year ended
September 30, 1996
Pro Forma Statements of Operations for the six months ended
March 31, 1997
(c) EXHIBITS
The following exhibit was filed with the Registrant's April 1997 Form
8-K and is incorporated by reference herein.
Exhibit Number and Description
2.1 Agreement for Purchase and Sale of Assets by and between Ringer
Corporation and Dexol Industries, Inc.
3
<PAGE> 4
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.
RINGER CORPORATION
Dated: June 16, 1997 By /S/ Mark G. Eisenschenk
---------------------------------------
Mark G. Eisenschenk
Executive Vice President and Chief
Financial Officer
(principal financial officer)
4
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS AND PRO
FORMA FINANCIAL INFORMATION
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Certified Public Accountants 6
Balance Sheets at September 30, 1996 and 1995. 7-8
Statements of Operations for the fiscal years ended
September 30, 1996 and 1995. 9
Statements of Stockholder's Equity for the fiscal years
ended September 30, 1996 and 1995. 10
Statements of Cash Flows for the fiscal years ended
September 30, 1996 and 1995. 11-12
Notes to Financial Statements 13-21
Condensed Balance Sheet at February 28, 1997 22
Condensed Statement of Operations for the five months
ended February 28, 1997 23
Statement of Cash Flows for the five months
ended February 28, 1997 24
Notes to Interim Financial Statements 25
(b) PRO FORMA FINANCIAL INFORMATION
Pro Forma Statements of Operations for the fiscal
year ended September 30, 1996 26
Pro Forma Statements of Operations for the six
months ended March 31, 1997 27
Notes to Pro Forma Statements of Operations 27
5
<PAGE> 6
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Dexol Industries, Inc.
We have audited the accompanying balance sheets of Dexol Industries, Inc. as of
September 30, 1996 and 1995, and the related statements of operations,
shareholders' equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dexol Industries, Inc. as of
September 30, 1996 and 1995, and the results of its operations and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred net losses of $969,326 and $1,894,708 and had
negative cash flows from operations of $239,124 and $2,505,680 for the years
ended September 30, 1996 and 1995, respectively. These factors, among others,
as discussed in Note 1 to the financial statements, raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
June 9, 1997
6
<PAGE> 7
DEXOL INDUSTRIES, INC.
BALANCE SHEETS
As of September 30
<TABLE>
<CAPTION>
ASSETS (Note 5)
1996 1995
------------ ------------
<S> <C> <C>
Current assets
Cash (Note 2) $ 376,922 $ 26,647
Accounts receivable, net of allowance for doubtful
accounts of $147,130 and $34,000 (Note 7) 1,731,980 2,427,699
Inventories (Note 3) 3,157,390 4,447,905
Prepaid expenses and other current assets 171,813 464,886
---------- ----------
Total current assets 5,438,105 7,367,137
Furniture and equipment, net of accumulated depreciation
of $845,211 and $771,568 (Note 4) 196,491 183,704
Investment in subsidiary (Note 10) 357,358 -
Package design costs, net of accumulated amortization of
$69,031 and $38,797 381,205 396,392
Formulae and trademarks, net of accumulated amortization
of $191,382 and $187,382 28,000 32,000
---------- ----------
Total assets $ 6,401,159 $ 7,979,233
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
DEXOL INDUSTRIES, INC.
BALANCE SHEETS (Continued)
As of September 30,
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Current liabilities
Accounts payable $ 2,630,055 $ 3,329,583
Other accrued expenses 343,835 1,305,660
Current portion of notes payable to related parties (Note 5) 2,246,597 2,160,397
------------- ------------
Total current liabilities 5,220,487 6,795,640
Notes payable to related parties, net of current portion (Note 5) 1,490,218 523,813
------------- ------------
Total liabilities 6,710,705 7,319,453
------------- ------------
Commitments and contingencies (Note 6)
Shareholders' equity (deficit)
Preferred stock, $1 par value
60,000 shares authorized,
none issued and outstanding - -
Common stock, $1 par value
240,000 shares authorized,
158,595 shares issued and outstanding 158,595 158,595
Additional paid-in capital 87,079 87,079
(Accumulated deficit) retained earnings (555,220) 414,106
------------- ------------
Total shareholders' equity (deficit) (309,546) 659,780
------------- ------------
Total liabilities and shareholders' equity (deficit) $ 6,401,159 $ 7,979,233
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
DEXOL INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
For the Years Ended September 30,
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Revenues (Note 7) $ 12,719,327 $ 20,203,448
Cost of goods sold 10,191,468 14,727,174
-------------- -------------
Gross profit 2,527,859 5,476,274
Selling, general, and administrative expenses 3,283,279 7,348,831
-------------- -------------
Loss from operations (755,420) (1,872,557)
-------------- -------------
Other income (expenses)
Interest expense (323,306) (311,059)
Equity in unconsolidated subsidiary 37,358 -
Other 72,842 (5,499)
-------------- -------------
Total other income (expenses) (213,106) (316,558)
-------------- -------------
Loss before provision for (benefit from) income taxes (968,526) (2,189,115)
Provision for (benefit from) income taxes 800 (294,407)
-------------- -------------
Net loss $ (969,326) $ (1,894,708)
============== =============
Net loss per share $ (6.11) $ (11.95)
============== =============
Weighted average shares outstanding 158,595 158,595
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 10
DEXOL INDUSTRIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For the Years Ended September 30,
<TABLE>
<CAPTION>
Retained Total
Common Stock Additional Earnings Shareholders'
---------------------------- Paid-in (Accumulated Equity
Shares Amount Capital Deficit) (Deficit)
----------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, October 1,
1994 158,595 $ 158,595 $ 87,079 $ 2,308,814 $ 2,554,488
Net loss (1,894,708) (1,894,708)
------- -------------- ------------- ----------- -----------
Balance, September 30,
1995 158,595 158,595 87,079 414,106 659,780
Net loss (969,326) (969,326)
------- -------------- ------------- ----------- -----------
Balance, September 30,
1996 158,595 $ 158,595 $ 87,079 $ (555,220) $ (309,546)
======= ============== ============= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
DEXOL INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended September 30,
<TABLE>
<CAPTION>
1996 1995
----------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (969,326) $ (1,894,708)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 149,606 115,639
Equity in unconsolidated subsidiary (37,358) -
(Increase) decrease in
Accounts receivable 695,719 (1,356,204)
Inventories 1,290,515 (1,982,890)
Prepaid expenses and other current assets 293,073 (152,823)
Increase (decrease) in
Accounts payable (699,528) 2,018,419
Other accrued expenses (961,825) 746,887
------------- ------------
Net cash used in operating activities (239,124) (2,505,680)
------------- ------------
Cash flows from investing activities
Payments for purchases of furniture and equipment (89,362) (4,746)
Increase in package design costs (53,844) (341,309)
------------- ------------
Net cash used in investing activities (143,206) (346,055)
------------- ------------
Cash flows from financing activities
Proceeds from the issuance of notes payable 850,000 2,650,000
Repayments of long-term debt (117,395) (6,028)
------------- ------------
Net cash provided by financing activities 732,605 2,643,972
------------- ------------
Net increase (decrease) in cash 350,275 (207,763)
Cash - beginning of year 26,647 234,410
------------- ------------
Cash - end of year $ 376,922 $ 26,647
============== =============
Supplemental disclosures of cash flow information
Interest paid $ 286,153 $ 219,076
============== =============
Income taxes refunded $ (295,207) $ (193,827)
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 12
DEXOL INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS (Continued)
For the Years Ended September 30,
Supplemental schedule of non-cash investing and financing activities:
In 1995, the Company entered into a note payable with a lender for machinery
and equipment in the amount of $34,210.
In 1996, the Company acquired an investment in subsidiary from a related party
in exchange for a note payable of $320,000.
In 1996, the line of credit of $2,350,000 was restructured and replaced with a
note payable in the amount of $1,500,000 and a revolving line of credit of
$850,000. As of September 30, 1996, the note payable and the line of credit
had outstanding balances of $1,485,601 and $1,397,000, respectively.
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 13
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
The Company was incorporated in 1931 as Destruxol Ltd. and changed its
name to Dexol Industries, Inc. in 1968. The Company manufactures a
variety of home and garden pesticides which are distributed throughout the
United States.
Basis of Presentation
As discussed in Note 11, the Company sold substantially all its assets to
Ringer Corporation ("Ringer") pursuant to a sales and purchase agreement
dated March 31, 1997. Accordingly, the financial statements present Dexol
Industries, Inc. on an unconsolidated basis to reflect the financial
position, results of operations, and cash flows of the operating business
purchased by Ringer. The Company's wholly-owned subsidiary, Dexol
Maryland, Inc. has been presented using the equity method as this
subsidiary was not purchased by Ringer.
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles which contemplate
continuation of the Company as a going concern. However, the Company
experienced net losses of $969,326 and $1,894,708 and had negative cash
flows from operations of $239,124 and $2,505,680 for the years ended
September 30, 1996 and 1995, respectively. These factors, among others,
raise substantial doubt about the Company's ability to continue as a going
concern.
In view of these matters, realization of a major portion of the assets in
the accompanying balance sheets is dependent upon continued operations of
the Company, which in turn is dependent upon the Company's ability to meet
its financing requirements and the success of its future operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company
be unable to continue in existence.
Revenue Recognition
Revenue from the sale of products is recognized at the time of sale to its
Customer.
Advertising
The Company expenses advertising costs as incurred. Advertising costs,
which includes co-operative advertising, for the years ended September 30,
1996 and 1995 were $1,024,484 and $1,797,779, respectively.
Package Design Costs
The Company capitalized costs associated with the production of new label
designs. The costs capitalized are being amortized over the estimated
useful lives of seven years. Amortization expense for the years ended
September 30, 1996 and 1995 was $69,031 and $38,797, respectively.
13
<PAGE> 14
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Formulae and Trademarks
Formulae and trademarks are carried at cost, less accumulated
amortization. The Company provides for amortization using the
straight-line method over the estimated useful lives of ten years.
Amortization expense for the years ended September 30, 1996 and 1995 was
$4,000 and $4,000, respectively.
Income Taxes
The Company utilizes Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized
for the tax consequences in future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts at
each year end based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable
income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The provision
for income taxes represents the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Net Loss Per Share
Net loss per share is based on the weighted average number of common and
common equivalent shares outstanding during the year.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three
months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis) or
market and consist primarily of materials, labor, and overhead. At
September 30, 1996 and 1995, the reserve for inventory obsolescence was
$71,730 and $84,280, respectively.
Furniture and Equipment
Furniture and equipment are stated at cost, less accumulated depreciation.
The Company provides for depreciation and amortization using the
straight-line method over the estimated useful lives of five to ten years
or the term of the lease, whichever is less, as follows:
Machinery and equipment 5 to 8 years
Furniture and fixtures 5 to 8 years
Truck 5 years
Leasehold improvements 5 to 10 years
14
<PAGE> 15
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Furniture and Equipment (Continued)
Maintenance, repairs, and renewals are expensed as incurred. Expenditures
for additions and major improvements are capitalized. Gains or losses on
the sale of furniture and equipment are recognized in the statements of
operations.
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
disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the
Company's financial instruments, including cash, accounts receivable,
accounts payable, and accrued expenses, the carrying amounts approximate
fair value due to their short maturities. The amounts shown for notes
payable approximate fair value because current interest rates offered to
the Company for debt of similar maturities are substantially the same.
NOTE 2 - CASH
The Company maintains cash balances at financial institutions located in
California. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured balances
aggregated to $235,919 and $310,187 at September 30, 1996 and 1995,
respectively. The Company has not experienced any losses in such accounts
and believes it is not exposed to any significant credit risk on cash and
cash equivalents.
NOTE 3 - INVENTORIES
As of September 30, inventories comprised of the following:
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Raw materials $ 1,797,846 $ 2,369,611
Finished goods 1,359,544 2,078,294
------------- ------------
Total $ 3,157,390 $ 4,447,905
============= ============
</TABLE>
15
<PAGE> 16
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 4 - FURNITURE AND EQUIPMENT
As of September 30, furniture and equipment consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Machinery and equipment $ 853,334 $ 763,732
Furniture and fixtures 69,158 69,158
Truck 31,746 31,746
Leasehold improvements 87,464 90,636
------------- ------------
1,041,702 955,272
Less accumulated depreciation 845,211 771,568
------------- ------------
Total $ 196,491 $ 183,704
============= ============
</TABLE>
NOTE 5 - NOTES PAYABLE - RELATED PARTIES
The Company and Gunlock Corporation ("Gunlock") are related parties as they
have common ownership. The following is a summary of the transactions with
the related parties:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Note payable to Gunlock dated January 20, 1995.
Interest accrues at 18% and is due and
payable in full on January 1, 1997. The note is
secured by substantially all of the assets of the
Company. $ 500,000 $ 500,000
Line of credit with Gunlock which accrues interest
at a prime rate (8.75% at September 30, 1995)
plus 5.75%. This rate is 5% over the rate
Wells Fargo Bank charges Gunlock for its
borrowing from the bank. Interest is paid
monthly. The Company was permitted to borrow
up to a maximum of $2,500,000. During the fiscal
year 1996, the line of credit was restructured
and replaced with a note payable in the amount
of $1,500,000 and a line of credit with maximum
borrowings of $1,500,000. - 2,150,000
</TABLE>
16
<PAGE> 17
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 5 - NOTES PAYABLE - RELATED PARTIES (Continued)
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Note payable in the amount of $1,500,000, payable
in monthly principal installments of $1,600 plus
interest at prime (8.25% at September 30,
1996) plus 5.75%. The note is due and
payable in full on December 15, 2000 and is
secured by substantially all the assets of the
Company. (a) $ 1,485,605 $ -
Line of credit bearing interest at prime plus 5.75%
payable monthly. The line of credit permits
borrowing up to a maximum of $1,500,000
repayable no later than December 15, 1996. (a) 1,397,000 -
Note payable to a company owned by an officer
of Gunlock, payable in 36 monthly installments
of $1,088 including interest of 9%, maturing in
December 1997. The note is secured by
certain equipment. 34,210 34,210
Note payable to an officer of Gunlock, due on
demand, dated October 1, 1995 with interest
at 8%. The note is unsecured. 320,000 -
-------------- -------------
3,736,815 2,684,210
Less current portion 2,246,597 2,160,397
-------------- -------------
Long-term portion $ 1,490,218 $ 523,813
============== =============
</TABLE>
Interest expense to all related parties was $323,306 and $311,059 for the years
ended September 30, 1996 and 1995, respectively.
(a) Subsequent to September 30, 1996, Gunlock informed the Company that
it will combine the $1,500,000 note payable and the $1,500,000 line
of credit into one note for $3,000,000. Interest payable monthly
at 5.75% over prime is due and payable in full on December 15,
2000.
17
<PAGE> 18
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 5 - NOTES PAYABLE - RELATED PARTIES (Continued)
The following is a schedule by years of future maturities of long-term
debt:
<TABLE>
<CAPTION>
Year Ending
September 30,
-------------
<S> <C>
1997 $ 2,246,597
1998 30,573
1999 31,640
2000 19,200
2001 1,408,805
-----------
Total $ 3,736,815
============
</TABLE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Leases - Related Party
The main office and production facilities in Torrance, California are
leased from Gunlock. The lease extends to July 31, 2000. Amounts due to
Gunlock relating to this lease agreement which are included in accounts
payable are $68,675 and $40,819 at September 30, 1996 and 1995,
respectively.
Minimum future rental commitments under this lease are as follows:
<TABLE>
<CAPTION>
Year Ending
September 30,
-------------
<S> <C>
1997 $ 164,820
1998 164,820
1999 164,820
2000 137,350
-----------
Total $ 631,810
============
</TABLE>
Rent expense was $250,500 and $274,882 for the years ended September 30,
1996 and 1995, respectively.
Environmental Liabilities
The Company is not aware of any environmental liabilities that would have
a material impact on the Company's financial position, results of
operations, or cash flows.
Litigation
The Company is subject to legal proceedings which arise in the ordinary
course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially
affect the financial position, results of operations or cash flows of the
Company.
18
<PAGE> 19
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 7 - SALES
Major Customers
During the year ended September 30, 1996, the Company had one major
customer which accounted for approximately 43% of net sales. At September
30, 1996, the amount due from this major customer amounted to $637,794.
During the year ended September 30, 1995, the Company had one major
customer which accounted for approximately 53% of net sales. At September
30, 1995, the amount due from this major customer amounted to $924,459.
NOTE 8 - INCOME TAXES
A reconciliation of the expected income tax computed using the federal
statutory income tax rate to the Company's effective income tax rate is as
follows:
<TABLE>
<CAPTION>
September 30,
----------------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Income tax computed at federal statutory
tax rate (34.0%) (34.0%)
Net operating loss carryforward 34.0 -
Carryback of net operating loss - 18.5
------------ -------------
Total -% (15.5%)
============ =============
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
for income taxes consist of the following:
<TABLE>
<CAPTION>
September 30,
---------------------------------------
1996 1995
-------------- ---------------
<S> <C> <C>
Deferred tax assets
Allowance for doubtful accounts $ 59,000 $ 14,000
Inventory reserves 29,000 34,000
Interest due to related party 52,000 37,000
Net operating loss carryforwards 854,000 165,000
------------ -------------
994,000 250,000
Valuation allowance (967,000) (219,000)
------------ -------------
27,000 31,000
Deferred tax liabilities
Depreciation (27,000) (31,000)
------------ -------------
NET DEFERRED TAX ASSET (LIABILITY) $ - $ -
============ =============
</TABLE>
19
<PAGE> 20
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 8 - INCOME TAXES (Continued)
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
September 30,
--------------------------------------------------
1996 1995
-------------- ---------------
<S> <C> <C>
Current
Federal $ - $ (295,207)
State 800 800
------------- --------------
800 (294,407)
Deferred
Federal - -
State - -
------------- --------------
Total $ 800 $ (294,407)
============= ==============
</TABLE>
The Company has unused net operating loss carryforwards of approximately
$2,200,000 and $990,000 for federal and state income tax purposes,
respectively, that begin to expire in 2010 and 1999, respectively.
NOTE 9 - RETIREMENT PLAN
The Company sponsors a defined contribution retirement plan covering
substantially all of its employees. Contributions are made at the
discretion of the Board of Directors. No contributions were made for the
years ended September 30, 1996 and 1995.
NOTE 10 - UNCONSOLIDATED SUBSIDIARY
On October 1, 1995, the Company purchased all of the outstanding stock of
Dexol Maryland, Inc. ("Maryland") from a related party in exchange for a
demand note in the amount of $320,000 with interest at 8%. The financial
statements of Maryland have not been consolidated into these financial
statements as discussed in Note 1.
20
<PAGE> 21
DEXOL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 10 - UNCONSOLIDATED SUBSIDIARY (Continued)
The following is selected unaudited financial data of Maryland as of and
for the year ended September 30, 1996:
<TABLE>
<S> <C>
Cash $ 993,156
Land $ 134,062
Notes payable $ 608,150
Taxes payable $ 151,645
Shareholders' equity $ 367,423
Net income $ 37,358
</TABLE>
Maryland's only activity during the year was the collection of a note
receivable with interest and payment of operating expenses.
NOTE 11 - SUBSEQUENT EVENTS
On March 31, 1997, the Company completed a transaction with Ringer
Corporation ("Ringer") whereby the Company sold substantially all of its
assets relating to its home and garden pesticide business including
patents, trademarks, customer lists, and goodwill. The proceeds from the
sale of the assets consist of Ringer assuming certain specified
liabilities of the Company, the issuance of a $1,476,000 promissory note
to the Company, and the issuance of restricted Ringer common stock.
21
<PAGE> 22
DEXOL INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
As of February 28,
<TABLE>
<CAPTION>
1997
------------
ASSETS
<S> <C>
Current assets
Cash $ 124,073
Accounts receivable 2,220,075
Inventories 2,941,354
Prepaid expenses and other current assets 228,835
------------
Total current assets 5,514,337
Furniture and equipment, net 158,140
Investment in subsidiary 357,358
Package design costs, net 365,118
Formulae and trademarks, net 26,334
------------
Total assets $ 6,421,287
============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 2,775,226
Other accrued expenses 413,029
Current portion of notes payable to related parties 2,686,160
------------
Total current liabilities 5,874,415
Notes payable to related parties, net of current portion 1,477,600
------------
Total liabilities 7,352,015
------------
Shareholders' equity (deficit)
Preferred stock, $1 par value
60,000 shares authorized,
none issued and outstanding -
Common stock, $1 par value
240,000 shares authorized,
158,595 shares issued and outstanding 158,595
Additional paid-in capital 87,079
Accumulated deficit (1,176,402)
------------
Total shareholders' equity (deficit) (930,728)
------------
Total liabilities and shareholders' equity (deficit) $ 6,421,287
============
</TABLE>
See notes to interim financial statements.
22
<PAGE> 23
DEXOL INDUSTRIES, INC.
CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
Five Months Ended February 28,
<TABLE>
<CAPTION>
1997
------------
<S> <C>
Revenues $ 2,972,694
Cost of goods sold 2,029,519
------------
Gross profit 943,175
Selling, general, and administrative expenses 1,486,437
------------
Loss from operations (543,262)
------------
Other income (expenses)
Interest expense (76,320)
Other (1,600)
------------
Total other income (expenses) (77,920)
------------
Loss before provision for (benefit from) income taxes (621,182)
Provision for (benefit from) income taxes --
------------
Net loss $ (621,182)
============
Net loss per share $ (3.92)
============
Weighted average shares outstanding 158,595
============
</TABLE>
See notes to interim financial statements.
23
<PAGE> 24
DEXOL INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
Five Months Ended February 28,
<TABLE>
<CAPTION>
1997
------------
<S> <C>
Cash flows from operating activities
Net loss $ (621,182)
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 60,511
(Increase) decrease in
Accounts receivable (488,095)
Inventories 216,036
Prepaid expenses and other current assets (57,022)
Increase (decrease) in
Accounts payable 145,171
Other accrued expenses 69,194
------------
Net cash used in operating activities (675,387)
------------
Cash flows from investing activities
Increase in package design costs (4,407)
------------
Net cash used in investing activities (4,407)
------------
Cash flows from financing activities
Proceeds from the issuance of notes payable 439,563
Repayments of long-term debt (12,618)
------------
Net cash provided by financing activities 426,945
------------
Net increase (decrease) in cash (252,849)
Cash - beginning of period 376,922
------------
Cash - end of period $ 124,073
============
Supplemental disclosures of cash flow information
Interest paid $ 110,137
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE> 25
Dexol Industries, Inc.
Notes to Financial Statements
(UNAUDITED)
February 28, 1997
Note 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information. They should be read in conjunction
with the annual financial statements included in this Form 8-K/A for
the year ended September 30, 1996. In the opinion of management, the
interim financial statements include all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of the
results for the interim periods presented. Operating results through
the five month period ended February 28, 1997 are not necessarily
indicative of the operating results for the year ending September 30,
1997.
Net loss per share is calculated using the weighted average common
shares outstanding.
Note 2. All comparative data reflect application of consistent accounting
principles and contain no prior period adjustments.
Note 3. INVENTORIES
Inventory consists of the following:
<TABLE>
<CAPTION>
February 28,
1997
-----------
<S> <C>
Raw Materials $ 1,602,864
Finished Goods 1,038,490
-----------
$ 2,641,354
===========
</TABLE>
Note 4. LONG-TERM DEBT
<TABLE>
<CAPTION>
February 28,
1997
-----------
<S> <C>
Notes payable to related parties $ 4,163,760
Less current portion 2,686,160
-----------
$ 1,477,600
===========
</TABLE>
Note 5. SUBSEQUENT EVENT
On March 31, 1997, the Company sold substantially all of its assets to
Ringer Corporation. The purchase price was comprised of the receipt of
1,059,340 shares of the Ringer Corporation restricted common stock
valued at $1,397,005, the receipt of a promissory note from Ringer
Corporation with a principal amount of $1,477,000 bearing simple
interest at an annual rate of prime plus 3/4%.
Note 6. UNCONSOLIDATED SUBSIDIARY
On October 1, 1995, the Company purchased all of the outstanding stock
of Dexol Maryland, Inc. ("Maryland") from a related party in exchange
for a demand note in the amount of $320,000 with interest at 8%. The
financial statements of Maryland have not been consolidated into these
financial statements to reflect the financial position, results of
operations, and cash flows of the operating business purchased by
Ringer Corporation as discussed in note 5.
25
<PAGE> 26
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma statements of operations combines the results
of operations of Ringer Corporation and Dexol Industries, Inc. for the year
ended September 30, 1996 and for the six months ended March 31, 1997. The pro
forma statements of operations are provided for illustrative purposes only and
are not necessarily indicative of future results of operations of the Company,
or of the results of operations the would actually have occurred had the
acquisition been in effect during the periods presented. A balance sheet in not
presented because the acquisition has been reflected in Ringer Corporation's
balance sheet as of March 31, 1997 as filed in the Company's Quarterly Report
on Form 10-QSB for the quarter ended March 31, 1997. The pro forma statements
of operations are based on the assumptions set forth in the notes following
such statements.
RINGER CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
(UNAUDITED)
Fiscal Year Ended September 30, 1996
<TABLE>
<CAPTION>
Dexol
Ringer Industries, Pro Forma Pro Forma
Corporation Inc. Adjustments Combined
---------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 14,672,784 $ 12,719,327 $ $ 27,392,111
Cost of goods sold 7,647,293 10,191,468 17,838,761
--------------- ------------ ------------ -------------
Gross profit 7,025,491 2,527,859 9,553,350
Selling, general, and (100,000)(A)
administrative expenses 7,371,206 3,283,279 71,000 (B) 10,625,485
--------------- ------------ ------------ -------------
Loss from operations (345,715) (755,420) (29,000) (1,072,135)
--------------- ------------ ------------ -----------
Other income (expenses)
Interest income (expense), net 5,616 (323,306) 65,000 (C) (252,690)
Equity of unconsolidated subsidiary 37,358 (37,358)(D) --
Other (228,020) 72,842 (155,178)
--------------- ------------ ------------ ---------------
Total other income (expenses) (222,404) (213,106) 27,642 (407,868)
--------------- ------------ ------------ ---------------
Loss before provision for
(benefit from) income taxes (568,119) (968,526) (56,642) (1,480,003)
Provision for (benefit from)
income taxes -- -- --
--------------- ------------ ------------ ---------------
Net loss $ (568,119) $ (969,526) $ (56,642) $ (1,480,003)
=============== ============= ============ ===============
Net loss per share $ (.05) $ (.12)
=============== ===============
Shares of common stock used
to compute loss per share 10,921,930 11,980,270
=============== ===============
</TABLE>
26
<PAGE> 27
RINGER CORPORATION
PRO FORMA STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended March 31, 1997
<TABLE>
<CAPTION>
Dexol
Ringer Industries, Pro Forma Pro Forma
Corporation Inc. Adjustments Combined
--------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 8,319,842 $ 2,972,694 $ $ 11,292,536
Cost of goods sold 4,302,840 2,029,519 6,332,359
-------------- ------------ ------------ -------------
Gross profit 4,017,002 943,175 4.960,177
Selling, general, and (42,000)(A)
administrative expenses 4,030,775 1,486,437 29,600 (C) 5,504,812
Loss from operations (13,773) ( 543,262) (12,400) (544,635)
-------------- ------------ ------------ -------------
Other income (expense), net 19,916 (77,920) (27,200)(B) (30,804)
-------------- ------------ ------------ -------------
Loss before provision for
(benefit from) income taxes 6,143 (621,182) (39,600) (575,439)
Provision for (benefit from)
income taxes -- -- --
-------------- ------------ ------------ -------------
Net loss $ 6,143 $ (621,182) $ (39,600) $ (575,439)
============== ============= ============ =============
Net income (loss) per share $ .00 $ (.05)
============== =============
Shares of common stock used to
compute income (loss) per share $ 10,927,815 11,987,155
============== ============
</TABLE>
Notes to Unaudited Pro Forma Statements of Operations
For the Fiscal Year Ended September 30, 1996
and the Six Months Ended March 31, 1997
Note 1. The historical operating results of Ringer Corporation ("Ringer") and
Dexol Industries, Inc. ("Dexol") includes the results of operations
from October 1, 1995 through September 30, 1996 and from October 1,
1996 through February 28, 1997, respectively. The business acquired by
Ringer from Dexol upon the acquisition by Ringer of substantially all
the assets of Dexol has been carried out by Ringer as its Dexol
Division. Results of operations of the Dexol Division has been
included in the operating results of Ringer Corporation beginning
March 1, 1997, the effective date of the acquisition for accounting
and valuation purposes.
Note 2. The unaudited proforma statements of operations reflect the following
adjustments:
(A) Elimination of expenses associated with a portion of the business
not acquired by Ringer Corporation.
(B) Reduction in accrued interest expense on notes to Dexol
shareholders not assumed by Ringer Corporation.
(C) Amortization over 20 years of the excess of the purchase price
over the net assets acquired for the five month period of October
1, 1996 through February 28, 1997
(D) Elimination of equity in unconsolidated subsidiary not acquired by
Ringer Corporation.
27
