<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO.2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 8, 1997
------------------------------
VERDANT BRANDS, INC.
- --------------------------------------------------------------------------------
(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
--------------------------
RINGER CORPORATION
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
This Current Report on Form 8-K/A of Ringer Corporation (the "Registrant")
relates to the merger of the Registrant with Southern Resources, Inc. and
Subsidiaries ("SRI") as described in Item 1 and Item 2 of the Registrant's
December 22, 1997 Form 8-K and in Item 7 of the Registrants's February 22, 1998
Form 8-K/A (SEC File No. 0-18921). The pro forma financial information
originally filed in the Company's Amended Current Report on Form 8-K/A referred
to above reflected the pooling-of-interest method of accounting for the merger
with SRI. This Current Report on Form 8-K/A presents the financial statements
and the pro forma financial information with changes to the pro forma financial
information to reflect a change in the method of accounting for the merger with
SRI from the pooling-of-interest method to the purchase method. The change in
accounting methods was required because of management's decision to dispose of
certain assets and activities of the combined business entities. Such changes
preclude the pooling of interest method of accounting.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The following audited consolidated financial statements of Southern
Resources Inc. and Subsidiaries for the fiscal years ended October 3,
1997 and September 27, 1996 are included in a separate section of this
report following the signature page:
Independent Public Auditor's Report
Consolidated Balance Sheets at October 3, 1997 and September 27,
1996.
Consolidated Statements of Income and Retained Earnings for the
fiscal years ended October 3, 1997 and September 27, 1996.
Consolidated Statements of Cash Flows for the fiscal years ended
October 3, 1997 and September 27, 1996.
Notes to Consolidated Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION
The following pro forma financial information is included with the
financial statements in a separate section of this report following
the signature page:
Pro Forma Statements of Operation for the fiscal year ended
September 30, 1997
Pro Forma Statements of Operation for the three months ended
December 31, 1997
2
<PAGE>
(c) EXHIBITS
The following exhibit was filed with the Registrant's December 1997
Form 8-K and is incorporated by reference herein.
Exhibit Number and Description
------------------------------
2.1 Amended and Restated Agreement and Plan of Merger (incorporated by
reference to the Company's Current Report on Form 8-K filed in December 1997,
SEC file no. 0-18921).
3
<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.
RINGER CORPORATION
Dated: September 29, 1998 By /S/ Mark G. Eisenschenk
------------------------ -
Mark G. Eisenschenk
Executive Vice President and Chief Financial
Officer
(principal financial officer)
4
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AUDITED FINANCIAL STATEMENTS OF SOUTHERN RESOURCES, INC.
- --------------------------------------------------------
AND SUBSIDIARIES PAGE
- ---------------- ----
<S> <C>
INDEPENDENT AUDITORS' REPORT 6
CONSOLIDATED BALANCE SHEETS 7-8
CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS 9
CONSOLIDATED STATEMENTS OF CASH FLOWS 10-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12-18
</TABLE>
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
- --------------------------------------------
PRO FORMA STATEMENT OF OPERATIONS
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1997 AND
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 19-20
5
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- ----------------------------
Board of Directors
Southern Resources, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Southern
Resources, Inc. and Subsidiaries as of October 3, 1997 and September 27, 1996,
and the related consolidated statements of income and retained earnings and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements preparation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Southern Resources,
Inc. and Subsidiaries at October 3, 1997 and September 27, 1996, and the results
of operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 6, the Company is a party to a governmental action and
lawsuit related to contamination discovered on and near the Company's plant
site. Management believes that the contamination arose prior to the purchase of
the plant site by the company from an unaffiliated predecessor corporate owner.
The former owner of the plant site has cooperated with governmental authorities
and initiated remedial activities. Management believes that the governmental and
legal actions should not result in loss to the Company. Accordingly, no
provision for losses related to these actions have been made in the accompanying
consolidated financial statements.
As discussed in Note 9, all of the outstanding common stock of Southern
Resources, Inc. has been exchanged for common stock of a publicly traded
corporation subsequent to October 3, 1997.
SMITH & HOWARD, P.C.
Atlanta, Georgia
November 14, 1997, except for Note 9 as to which the date is December 8, 1997
6
<PAGE>
SOUTHERN RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 3, 1997 AND SEPTEMBER 27, 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
---- ----
<S> <C> <C>
Current Assets
Cash $ 2,780 $ 119,820
Accounts receivable - trade, less allowance for doubtful
accounts of $15,816 and $12,265 in 1997 and 1996,
respectively (Notes 4 and 5) 3,726,946 3,327,662
Inventories (Notes 2, 3, 4 and 5) 4,800,043 5,059,878
Prepaid expenses 260,067 295,324
Deferred income taxes (Note 7) 64,677 118,184
Prepaid income taxes 19,403 -
Other 159,971 99,749
----------- -----------
Total Current Assets 9,033,887 9,020,617
Property and Equipment, at Cost (Notes 3 and 5)
Land 43,879 43,879
Buildings and improvements 482,428 482,428
Machinery and equipment 2,989,961 2,833,509
----------- -----------
3,516,268 3,359,816
Less accumulated depreciation (1,589,848) (1,242,613)
----------- -----------
1,926,420 2,117,203
Other Assets (Note 3)
Trademarks, less accumulated amortization
of $40,540 and $30,000 in 1997 and 1996, respectively 111,952 120,000
Product registrations, less accumulated amortization
of $80,000 and $60,000 in 1997 and 1996, respectively 220,000 240,000
Deferred loan fees, less accumulated amortization
of $151,431 and $75,605 in 1997 and 1996, respectively 168,207 237,566
Deferred income taxes (Note 7) 12,646 -
Other 160,209 81,985
----------- -----------
686,214 679,551
----------- -----------
$11,633,321 $11,817,371
=========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
7
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current Liabilities
Accounts payable $ 3,884,607 $ 3,269,190
Accrued expenses and other current liabilities 445,161 546,969
Borrowings under lines of credit (Note 4) 3,859,355 -
Current portion of long-term debt (Note 5) 1,668,243 1,208,084
Due to stockholders (Note 8) 170,892 356,268
Income taxes payable - 9,539
----------- -----------
10,028,258 5,390,050
Borrowings Under Lines of Credit (Note 4) - 3,917,464
Long-Term Debt, Net of Current Portion (Note 5) 1,566,840 1,991,459
Note and Accrued Interest Payable - Stockholder
(Note 8) 327,127 232,372
Deferred Income Taxes (Note 7) - 165,748
Contingencies (Note 6)
Stockholders' Equity
Common stock - par value $1, authorized 100,000
shares, issued and outstanding 500 shares 500 500
Additional paid-in capital 500 500
Retained earnings (accumulated deficit) (289,904) 119,278
----------- -----------
(288,904) 120,278
----------- -----------
$11,633,321 $11,817,371
=========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
8
<PAGE>
SOUTHERN RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED OCTOBER 3, 1997 AND SEPTEMBER 27, 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Sales $25,034,085 $20,791,647
Cost of Sales 20,786,922 17,097,731
----------- -----------
Gross Profit 4,247,163 3,693,916
Selling, General and Administrative Expenses 3,846,877 2,612,536
----------- -----------
Income from Operations 400,286 1,081,380
Other Income (Expense)
Interest expense (926,919) (688,607)
Loss on disposal of equipment - (1,543)
Other (7,436) 10,522
----------- -----------
(934,355) (679,628)
----------- -----------
Income (Loss) before Income Taxes (534,069) 401,752
Provision (Credit) for Income Taxes (Note 7)
Current - 12,373
Deferred (124,887) 125,538
----------- -----------
(124,887) 137,911
----------- -----------
Net Income (Loss) (409,182) 263,841
Retained Earnings (Accumulated Deficit) at
Beginning of Year 119,278 (144,563)
----------- -----------
Retained Earnings (Accumulated Deficit) at
End of Year $ (289,904) $ 119,278
=========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
9
<PAGE>
SOUTHERN RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 3, 1997 AND SEPTEMBER 27, 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Cash received from customers $ 24,584,235 $ 20,663,058
Cash paid to suppliers and employees (23,436,561) (18,735,049)
Income taxes (paid) refunded (28,942) 2,077
Interest paid (854,308) (635,423)
Other income (expense) (7,436) 10,522
------------ ------------
Net Cash Provided by Operating Activities 256,988 1,305,185
------------ ------------
Cash Flows from Investing Activities
Cash paid in acquisition of Rigo/Black Leaf - (2,335,000)
Acquisitions of property and equipment (156,452) (111,457)
(Increase) decrease in other assets (173,838) (109,072)
------------ ------------
Net Cash Required by Investing Activities (330,290) (2,555,529)
------------ ------------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 649,235 -
Principal payments on long-term debt (657,008) (318,603)
Borrowings (repayments) under lines of credit, net (58,109) 1,592,605
Increase in note payable - stockholder 22,144 56,854
------------ ------------
Net Cash Provided (Required) by
Financing Activities (43,738) 3,172,928
------------ ------------
Net Increase (Decrease) in Cash (117,040) 80,512
Cash at Beginning of Year 119,820 39,308
------------ ------------
Cash at End of Year $ 2,780 $ 119,820
============ ============
</TABLE>
(Continued)
The accompanying notes are an integral part of this financial statement.
10
<PAGE>
SOUTHERN RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 3, 1997 AND SEPTEMBER 27, 1996
(Continued)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Reconciliation of Net Income (Loss) to Net Cash
Provided By Operating Activities
Net Income (Loss) $(409,182) $ 263,841
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities:
Bad debts expense 50,566 80,161
Depreciation and amortization 583,569 413,884
Interest expense accrued as long-term debt 72,611 53,184
Loss on disposal of equipment - 1,543
Provision (credit) for deferred income taxes (124,887) 125,538
Increase in accounts receivable (449,850) (128,589)
Decrease in inventories 259,835 831,719
Increase in prepaid expenses and other current assets (24,965) (157,708)
(Increase) decrease in prepaid income taxes (19,403) 4,911
Increase (decrease) in accounts payable 615,417 (261,897)
Increase (decrease) in accrued liabilities (101,808) 69,059
Decrease in due to stockholders (185,376) -
Increase (decrease) in income taxes payable (9,539) 9,539
--------- ----------
Total Adjustments 666,170 1,041,344
--------- ----------
Net Cash Provided by Operating Activities $ 256,988 $1,305,185
========= ==========
</TABLE>
Supplementary Schedule of Non-Cash Investing and Financing Activities:
During the year ended October 3, 1997 the Company refinanced outstanding long-
term debt in the amount of $987,782 with a portion of the proceeds from a
$1,650,000 term note payable.
Further, the Company issued long-term debt of $2,177,072 bearing interest at 8%
as partial payment for the acquisition of the Rigo/Black Leaf consumer pesticide
division of Wilbur Ellis Company. The long-term debt calls for monthly principal
payments of $67,000 plus accrued interest.
During the year ended September 27, 1996, the Company financed the acquisition
of equipment through a capital lease in the amount of $68,452.
The accompanying notes are an integral part of this financial statement.
11
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Business Operations
---------------------------------------------
The accompanying consolidated financial statements include the accounts of
Southern Resources, Inc. and its wholly-owned subsidiaries SureCo, Inc. and
Peach County Property, Inc., collectively referred to herein as the
Company. All material inter-company transactions and balances have been
eliminated in consolidation.
The Company is engaged in the manufacture and marketing of specialty
pesticide products to consumer and commercial users and provides packing
services for companies marketing their own brands of consumer and
commercial pesticides. The Company's principal markets are throughout North
America and the Caribbean.
During the year ended October 3, 1997, 17% and 14% of the Company's sales
were to two separate customers, and 16% of the Company's purchases were
from one vendor.
Fiscal Year
-----------
The Company's fiscal year ends on the Friday nearest September 30. The
accompanying consolidated financial statements include results of
operations for fifty-three weeks for the year ended October 3, 1997 and
fifty-two weeks for the year ended September 27, 1996.
Inventories
-----------
Inventories are valued at the lower of cost, determined on a first-in,
first-out basis, or market.
Property and Equipment
----------------------
Property and equipment are recorded at cost, less accumulated depreciation.
When the assets are retired or otherwise disposed of, the costs less
accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in income.
Depreciation and amortization are provided over the estimated useful lives
using the straight-line method for financial reporting purposes and
primarily accelerated methods for income tax reporting purposes.
NOTE 2 - INVENTORIES
Inventories consisted of the following at October 3, 1997 and September 27,
1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw materials $2,421,544 $2,506,802
Finished goods 2,378,499 2,553,076
---------- ----------
$4,800,043 $5,059,878
========== ==========
</TABLE>
NOTE 3 - ACQUIRED ASSETS
In April 1996, the Company acquired the inventories, certain equipment and
product registrations of the Rigo/Black Leaf division of Wilbur-Ellis
Company (Rigo/Black Leaf) for a total purchase price of
12
<PAGE>
NOTE 3 - ACQUIRED ASSETS (Continued)
$4,177,072. The purchase price was allocated to the inventories
($3,827,013), equipment ($119,092), and prepaid product registration cost
($230,967) based upon book values, which estimated their fair values, at
the acquisition date. The total purchase price for the aforementioned
assets was satisfied with a cash payment of $2,000,000 and the Company's
note payable to the seller for $2,177,072 (see Note 5). Included in the
assets purchased were inventories (products, labels, and packaging) used in
connection with the seller's seed treatment products. The seller must
repurchase, at the Company's cost, all such unused inventories at the
earlier of the satisfaction of the Company's note payable to the seller or
April 1999.
The acquisition was accounted for as a purchase business combination.
Rigo/Black Leaf operations are included in the Company's consolidated
statement of income from the effective date of the acquisition of April 28,
1996. The following table sets forth unaudited pro forma sales, income
before taxes and net income (loss) for the Company as if the Company and
Rigo/Black Leaf had been combined at the beginning of the periods shown.
This pro forma financial information is provided for illustrative purposes
only. It is not necessarily indicative of results which may be obtained in
the future (000s).
<TABLE>
<CAPTION>
(Unaudited)
Fiscal Year Ended
September 27, 1996
-------------------
<S> <C>
Net sales $28,209
Income before taxes 377
Income (loss) 229
</TABLE>
In connection with the Rigo/Black Leaf acquisition, four shareholders of
the Company owning all of the outstanding shares of the Company
collectively agreed to sell 20% of their shares of Company stock to an
employee who was previously employed by Rigo/Black Leaf's prior owner
which, if purchased by the employee, would result in his owning 20% of the
Company's outstanding common stock. As a condition precedent to purchase
such stock, the employee would be required to enter into certain agreements
under which the employee would be subject to cross guarantees and
indemnities to which the other shareholders are obligated. The purchase
price for such stock is initially $700,000 as of April 1996 and increases
thereafter by a factor of 6% per annum compounded monthly for each month of
time passing until the purchase date, which cannot be later than the date
at which there has been a change of control or April 1998 whichever is
later. For accounting purposes, the share purchase is a variable option
which is being accounted for over the period of the agreement. Management
believes the prescribed purchase price of the stock represented its
estimated fair market value as of April 1996 and September 1996.
NOTE 4 - LINES OF CREDIT
During 1996 the Company arranged a new $7,000,000 working capital facility,
increased to $8,000,000 during 1997, with another commercial finance
corporation which replaced its $2,500,000 line and provided funding in the
amount of $2,000,000 used to acquire assets (see Note 3). Advances under
the lines are limited to 80% of eligible trade accounts receivable and 60%
of eligible inventories, with advances related to inventories limited to
$2,600,000. Borrowings under the lines bear interest at the commercial
financial corporation's reference rate plus 2.25% (an effective interest
rate of 10.75% at October 3, 1997), are secured by accounts receivable,
inventories, and certain intangible assets including product registrations
and trademarks and are guaranteed by the stockholders of the Company. Since
the line of credit agreement is not subject to review until April 1998,
outstanding borrowings under the lines of $3,917,464 are classified as a
noncurrent liability at September 27, 1996, while outstanding borrowings
under the lines of $3,859,355 are classified as a current liability at
October 3, 1997.
13
<PAGE>
NOTE 4 - LINES OF CREDIT (Continued)
The lines of credit include covenants which limit management compensation
increases, loans to stockholders or employees and annual capital
expenditures. The Company was in compliance with the covenants for the year
ended October 3, 1997.
NOTE 5 - LONG-TERM DEBT
Long-term debt consisted of the following as of October 3, 1997 and
September 27, 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Term loan with a commercial lending company in the
amount of $1,650,000 secured by the Company's
machinery and equipment and securities pledged by one
of the Company's stockholders and guaranteed by the
Company and the Company's stockholders; principal and
interest payable monthly through October 2004.
Interest on the term loan is at a rate of the 13-week
Treasury Bills plus 5.5%. $ 1,650,000 $ -
Term loan in the amount of $2,177,072 issued in
connection with acquired assets (see Note 3); secured
by inventories and accounts receivable; monthly
principal installments of $67,000 plus interest at 8%
due through March 1998 with all remaining unpaid
principal ($703,072) and accrued interest due April
1998. This note is subject to a subordination
agreement in favor of the Company's working capital
lender which provides, among other things, that
service of this indebtedness can occur only after the
Company is current on the payment of all of its other
obligations for borrowed monies. 1,334,190 1,909,072
Term loan in the amount of $1,000,000 assumed in
connection with acquired assets of a Company in
October - 500,000 1993. Terms modified during 1996 to
provide that the loan be secured by certain
production equipment; monthly principal installments
of $8,333 plus accrued interest from January 1997
through December 1997, monthly principal installments
of $16,667 plus accrued interest from January 1998
through December 1999. Interest on the term loan is
at a rate of 10%. Outstanding principal and accrued
interest satisfied with a portion of the proceeds
received from the $1,650,000 term loan executed
during 1997. - 500,000
</TABLE>
14
<PAGE>
NOTE 5 - LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Term loan with bank secured by machinery and equipment;
principal and interest payments, $12,503 at September 27,
1996, due monthly through December 1998. Interest on the
term loan is at a rate of prime plus 1.5% adjusted quarterly
for changes in the prime rate. Outstanding principal and
accrued interest satisfied with a portion of the proceeds
received from the $1,650,000 term loan executed during
1997. - 302,020
Term loan with bank secured by machinery and equipment;
principal and interest payments, $1,723 at September 27,
1996, due monthly through October 2002. Interest on the
term loan is at a rate of prime plus 2% adjusted quarterly
for changes in the prime rate. Outstanding principal and
accrued interest satisfied with a portion of the proceeds
received from the $1,650,000 term loan executed during
1997. - 92,368
Term loan with bank secured by machinery and equipment;
principal and interest payments, $3,061 at September 27,
1996, due monthly through July 1999. Interest on the term
loan is at a rate of prime plus 2% adjusted quarterly for
changes in the prime rate. Outstanding principal and accrued
interest satisfied with a portion of the proceeds received from
the $1,650,000 term loan executed during 1997. - 87,690
Term loan with bank secured by real property; principal and
interest payments, $3,071 at September 27, 1996, due
monthly through February 2000. Interest on the loan is at a
rate of 10.5%. 74,931 102,938
Term loan with bank secured by securities pledged by one
of the Company's stockholders and guaranteed by the
Company's stockholders. Interest to be paid on the principal
balance at a rate of 10.5% through December 1997 when
loan is due in full. 100,100 -
Term loan with financial institution secured by equipment;
principal and interest payments, $1,269 at September 27,
1996, due monthly through February 2000. Interest on the
loan is at a rate of 11.6%. Outstanding principal and
accrued interest satisfied with a portion of the proceeds
received from the $1,650,000 term loan executed during
1997. - 41,964
Capital lease; principal and interest (at 12.52%) payments
totaling $1,541 due monthly through November 2000. 47,090 59,250
</TABLE>
15
<PAGE>
NOTE 5 - LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Capital lease; principal and interest (at 10.4%) payments
totaling $2,998 due monthly through September 1998.
Outstanding principal and accrued interest satisfied with a
portion of the proceeds received from the $1,650,000 term
loan executed during 1997. - 64,812
Capital lease; principal and interest (at 17.29%) payments
totaling $851 due monthly through April 2000. Outstanding
principal and accrued interest satisfied with a portion of the
proceeds received from the $1,650,000 term loan executed
during 1997. - 27,139
Other 28,772 12,290
----------- -----------
$3,235,083 $3,199,543
=========== ===========
</TABLE>
The above is categorized as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Senior Long-Term Debt $1,900,893 $1,290,471
Subordinated Long-Term Debt 1,334,190 1,909,072
---------- ----------
3,225,083 3,199,543
Less: Current Portion 1,668,243 1,208,084
---------- ----------
$1,566,840 $1,991,459
========== ==========
</TABLE>
Aggregate maturities of long-term debt by fiscal year are as follows:
<TABLE>
<S> <C>
1998 $ 1,668,243
1999 238,501
2000 239,314
2001 234,224
2002 260,372
Thereafter 594,429
-----------
$ 3,235,083
===========
</TABLE>
The Company is subject to financial covenants under its term loan agreement
with a commercial lending company. Such covenants relate to working capital,
current ratio, and a ratio of net worth to total liabilities. The Company was
not in compliance with one of the covenants at October 3, 1997; however, the
lender has waived such noncompliance until March 31, 1998.
NOTE 6 - CONTINGENCIES
In August 1990 the United States Environmental Protection Agency (EPA) added
to its National Priorities List a site which is constituted in part by the
land on which the Company's Fort Valley, Georgia facility is located. In July
1993 the EPA advised the Company that it may be responsible for certain
contamination discovered both on and off this site. The Company denied
responsibility and advised the EPA that the Company did not cause the
contamination and that it had indemnities from the former owner who has since
cooperated with the EPA in completing the investigative activities and
initiating the remedial activities required by the EPA.
16
<PAGE>
NOTE 6 - CONTINGENCIES (Continued)
In August 1993 the Company and its affiliates were named co-defendants in a
lawsuit filed by neighbors of the site seeking unspecified monetary and
injunctive relief alleging property damage arising out of chemical formulation
activities at the Fort Valley, Georgia facility. Since the alleged property
damage arose prior to the facility being owned by the Company or its
affiliates, management of the Company denies any liability to the plaintiffs
and contends that any damage suffered by the plaintiffs arose out of action of
the prior owners of the facility.
The Company believes that the above actions are without merit and is
vigorously defending its position. Accordingly, no provision for losses or
expenses related to the above actions has been made in the accompanying
financial statements.
NOTE 7 - INCOME TAXES
Deferred income taxes are provided with respect to certain items which are
recognized in one period for financial reporting purposes and another period
for income tax purposes. Such temporary differences relate primarily to
depreciation of property and equipment, trademarks and product registration
costs, allowance for doubtful accounts, inventory reserves and carrying costs
and certain expense accruals.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's net deferred income tax (asset) liability as of October 3,
1997 and September 27, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred Income Tax (Asset) Liability:
Tax over book depreciation $ 338,671 $ 336,651
Trademarks and product registration costs 13,200 27,093
Net operating loss carryforwards (300,556) (134,035)
Alternative minimum tax credit carryforwards (63,961) (63,961)
---------- ----------
(12,646) 165,748
---------- ----------
Deferred Income Tax Asset:
Allowance for doubtful accounts 3,922 3,046
Inventory reserves 12,400 12,400
Inventory carrying costs 54,878 35,135
Expense accruals - 67,603
Other (6,523) -
---------- ----------
64,677 118,184
---------- ----------
Net Deferred Income Tax (Asset) Liability $ (77,323) $ 47,564
========== ==========
</TABLE>
17
<PAGE>
NOTE 7 - INCOME TAXES (Continued)
Significant components of the provision (credit) for income taxes in the
accompanying consolidated statement of income for the years ended October 3,
1997 and September 27, 1996, are as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Current
Federal $ - $ 10,826
State - 1,547
--------- --------
$ - $ 12,373
========= ========
Deferred
Federal $ (92,508) $ 92,990
State (32,379) 32,548
--------- --------
$(124,887) $125,538
========= ========
</TABLE>
The components of the net provision (credit) for deferred income taxes are as
follows for the years ended October 3, 1997 and September 27, 1996:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Tax over book depreciation $ 2,020 $ 45,488
Trademarks and product registration costs (13,893) (54)
Benefits of operating loss carryforwards (166,521) 26,016
Allowance for doubtful accounts (876) 5,093
Inventory reserves - (2,046)
Inventory carrying costs (19,743) (7,081)
Expense Accruals 67,603 70,495
Alternative minimum tax credit carryforwards - (12,373)
Other 6,523 -
--------- --------
$(124,887) $125,538
========= ========
</TABLE>
NOTE 8 - RELATED PARTY TRANSACTIONS
Due to stockholders at October 3, 1997 and September 27, 1996 of $170,892 and
$356,268, respectively, represents cumulative management fees due two of the
Company's stockholders at September 30, 1994. Such amounts are noninterest
bearing and due on demand but have no specified payment dates.
The note and accrued interest payable - stockholder is due on demand and
includes interest at the same rate as the Company incurs under its lines of
credit (see Note 4). Since the noteholder's intent is not to demand payment
within twelve months, the amounts are included as noncurrent liabilities in
the accompanying consolidated balance sheets as of October 3, 1997 and
September 27, 1996.
NOTE 9 - SUBSEQUENT EVENT
During 1997, the Company entered into a letter of intent to exchange all of
the outstanding shares of the Company's common stock for those of Ringer
Corporation, a publicly-traded corporation in Bloomington, Minnesota. The
transaction was effected on December 8, 1997. As a result, the Company
continues as an independently operated, but wholly owned, subsidiary or Ringer
Corporation.
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined statements of operations
combine the historical statements of operations of Verdant Brands, Inc. for the
year ended September 30, 1997 and the three months ended December 31, 1997 and
Southern Resources, Inc. for the year ended October 3, 1997 and the three months
ended December 31, 1997 after giving effect to certain adjustments described in
the notes to the unaudited pro forma condensed combined statements of
operations. The unaudited pro forma condensed combined statements of operations
present the combined results of operations of the Company and SRI as if the
Merger had occurred on October 1, 1996. The acquisition, which occurred in
December 1997, was accounted for as a purchase business combination. 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 that would actually have occurred had the
acquisition been in effect during the periods presented.
The unaudited pro forma condensed combined statements of operations also reflect
the acquisition by the Company of substantially all of the assets of Dexol
Industries, Inc. (Dexol), a manufacturer and marketer of consumer pesticides.
The acquisition, completed in March 1997, was accounted for as a purchase
business combination. (See "Dexol Industries, Inc." in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 1997.) The operating
results of Dexol are included in the Company's historical amounts beginning
March 1, 1997. The pro forma information for fiscal 1997 below includes the
operations of Dexol as if the acquisition had occurred on October 1, 1996.
The unaudited pro forma condensed combined statements of operations should be
read in conjunction with the historical financial statements, including the
respective notes thereto, of the Company appearing in the Company's 10-KSB/A,
amendment 2, for the year ended September 30, 1997, and of SRI appearing
elsewhere in this Form 8-K/A. The unaudited pro forma condensed combined
statements of operations should also be read in conjunction with the Company's,
Form 10-QSB for the transition period from October 1, 1997 through December 31,
1997, filed on February 17, 1998, which contains a balance sheet that reflects
the merger transaction and a statement of operations that includes operations of
SRI beginning December 1, 1997, the effective date of the merger for accounting
purposes.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
VERDANT SRI PRO FORMA VERDANT CONSEP PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTED HISTORICAL ADJUSTMENTS COMBINED
----------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 4,767 $ 1,411 $ (67)(B) $ 6,111 $ 4,951 $ -- $ 11,062
Cost of revenues 3,131 1,936 (67)(B) 5,000 4,442 9,442
----------- ---------- ---------- --------- ---------- ---------- ----------
Gross margins 1,636 (525) -- 1,111 509 -- 1,620
Operating Expenses 2,768 1,862 59(C) 4,689 2,521 --(A) 7,210
----------- ---------- ---------- --------- ---------- ---------- ----------
Loss from operations (1,132) (2,387) (74) (3,578) (2,012) -- (5,590)
Other expense (65) (215) -- (280) (33) (313)
----------- ---------- ---------- --------- ---------- ---------- ----------
Loss before taxes (1,197) (2,602) (74) (3,858) (2,045) -- (5,903)
Provision for taxes -- -- -- -- -- -- --
----------- ---------- ---------- --------- ---------- ---------- ----------
Net loss $ (1,197) $ (2,602) $ (74) $ (3,858) $ (2,045) $ -- $ (5,903)
=========== ========== ========== ========= ========== ========== ==========
Loss per share -
basic and diluted $ (0.09) $ (0.22) $ (0.22) $ (0.22)
=========== ========= ========== ==========
Weighted Average
Shares - basic and diluted 13,313 4,500 17,813 9,451 9,164(F) 26,997
=========== ========== ========= ========== ========== ==========
</TABLE>
19
<PAGE>
Unaudited Pro Forma Condensed Combined Statements of Operations
Fiscal Year Ended September 30, 1997
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Verdant Dexol Pro forma Verdant SRI Pro forma Pro forma
Historical Historical Adjustments Adjusted Historical Adjustments Combined
----------- ----------- ------------ ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $18,820 $2,973 $ $21,793 $25,034 $ (67) [B] $46,760
Cost of goods sold 10,255 2,030 12,285 20,787 (67) [B] 33,005
----------- ----------- ------------ ---------- ----------- ------------ ---------
Gross profit 8,565 943 0 9,508 4,247 0 13,755
Selling, general, and (42) [D]
administrative expenses 9,090 1,486 53 [C] 10,587 3,847 336 [C] 14,770
----------- ----------- ------------ ---------- ----------- ------------ ---------
Income (loss) from
operations (525) (543) (11) (1,079) 400 (336) (1,015)
Other income (expenses)
Interest income
(expense), net (80) (78) 28 [E] (130) (927) (1,057)
Other 59 59 (7) 52
----------- ----------- ------------ ---------- ----------- ------------ ---------
Total other income
(expenses) (21) (78) 28 (71) (934) 0 (1,005)
----------- ----------- ------------ ---------- ----------- ------------ ---------
Income (loss) before
provision for
(benefit from) income
taxes (546) (621) 17 (1,150) (534) (336) (2,020)
Provision for (benefit
from) income taxes (125) 125
----------- ----------- ------------ ---------- ----------- ------------ ---------
Net loss $ (546) $ (621) $ 17 $(1,150) $ (419) $ (461) $(2,020)
=========== =========== ============ ========== =========== ============ =========
Net loss per share - basic
and diluted $(.05) $(.13)
=========== =========
Shares used to calculate
basic and diluted
loss per share 11,541 4,500 [F] 16,041
=========== ============ =========
</TABLE>
(A) Amortization over 20 years of the excess of purchase price over the net
assets acquired in the Consep merger (less than $1,000).
(B) Elimination of sales to Verdant by SRI for the three month transition
period ended December 31, 1997 and fiscal year ended September 30,
1997.
(C) Amortization of excess of purchase price over net assets acquired at
the SRI merger and Dexol acquisition and amortization of intangible
assets valued at the SRI merger for the three month transition period
ended December 31, 1997 and fiscal year ended September 30, 1997.
(D) Elimination of portion of Dexol business not acquired.
(E) Reduction in interest expense on notes to Dexol shareholdres not
assumed by Verdant.
(F) Issuance of Verdant stock at merger.
20
