<PAGE>
==============================================================================
UNITED STATES
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) October 17, 1996
----------------
The Eastwind Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Delaware 0-27638 23-2732753
------------------------- ----------------------- ------------------------
(State or other jurisdiction Commission file Number (IRS Employer
of incorporation Identification Number)
or organization)
--------------------------------------
100 Four Falls Corporate Center
Suite 305
West Conshohocken, PA 19428
(610) 828-6860
--------------------------------------
(Address, including zip code, and telephone
number [including area code] of registrant's
principal executive office)
--------------------------------------
==============================================================================
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
- --------------------------------------------------------------------------
(a) Financial Statements of Centennial Printing Corporation Page No.
------------------------------------------------------- --------
Report of Certified Public Accountants F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Shareholder's Equity (Deficit) F-4
Statements of Cash Flows F-5
Notes to the Financial Statements F-6
(b) Pro Forma Financial Information
-------------------------------
Basis of Presentation F-11
Unaudited Pro Forma Consolidated Statement of Operations for
the Year Ended December 31, 1995 F-12
Unaudited Pro Forma Consolidated Statement of Operations for
the Nine Months Ended September 30, 1996 F-13
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 1996 F-14
Notes to Unaudited Pro Forma Consolidated Financial Statements F-15
(c) Exhibits
--------
2.1 Amended and Restated Agreement and Plan of Merger by and between
Centennial Printing Corporation, The Eastwind Group, Inc. and
Centennial Acquisition Corp., dated as of September 30, 1996
(previously filed in original Form 8-K).
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Officers and Directors
Centennial Printing Corporation
King of Prussia, Pennsylvania:
We have audited the accompanying balance sheets of Centennial Printing
Corporation as at December 31, 1995 and 1994 and the related statements of
operations, shareholder's 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Centennial Printing Corporation
as at December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
Laskaris & Laskaris
October 14, 1996
F-1
<PAGE>
CENTENNIAL PRINTING CORPORATION
-------------------------------
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
---------------------------------------- September 30,
1994 1995 1996
----------------- ----------------- ----------------
ASSETS (Unaudited)
------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 58,774 $ 50,516 $ 38,395
Accounts receivable, net of
allowance for doubtful accounts of $0,
$145,030 and $168,030 3,009,797 3,328,664 3,058,241
Inventories 229,694 190,808 197,176
Prepaid expenses 23,689 $ 85,597 39,413
------------------ --------------- ------------------
Total current assets 3,321,954 3,655,585 3,333,225
ADVANCES TO CORPORATE
OFFICER/LANDLORD 432,115 568,144 618,616
PROPERTY AND EQUIPMENT, NET 3,083,387 3,405,545 2,984,025
OTHER ASSETS 315,361 226,733 219,108
------------------ --------------- ------------------
$ 7,152,817 $ 7,856,007 $ 7,154,974
================== =============== ==================
LIABILITIES AND
---------------
SHAREHOLDER'S EQUITY (DEFICIT)
-----------------------------
CURRENT LIABILITIES:
Line of credit $ 2,100,000 $ 2,360,000 $ 2,950,000
Current portion of long-term debt 821,640 705,802 739,503
Accounts payable 1,209,514 1,754,239 2,192,418
Accrued expenses 582,142 784,106 658,622
------------------ --------------- ------------------
Total current liabilities 4,713,296 5,604,147 6,540,543
------------------ --------------- ------------------
LONG-TERM DEBT 1,485,481 1,959,702 1,414,872
------------------ --------------- ------------------
DEFERRED RENT 247,500 259,167 296,042
------------------ --------------- ------------------
COMMITMENTS (Note 7)
SHAREHOLDER'S EQUITY (DEFICIT):
Capital stock, no par value; 1,000 shares
authorized, 200 shares issued and
outstanding 100 100 100
Retained earnings (deficit) 706,440 32,891 (1,096,583)
------------------ --------------- -------------------
Total shareholder's
equity (deficit) 706,540 32,991 (1,096,483)
------------------ --------------- -------------------
$ 7,152,817 $ 7,856,007 $ 7,154,974
================== =============== ==================
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
CENTENNIAL PRINTING CORPORATION
-------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the
For the Year Ended Nine Months Ended
December 31, September 30,
------------------------------------- ----------------------------------
1994 1995 1995 1996
--------------- ---------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 15,382,930 $ 16,308,847 $ 12,683,312 $ 13,550,007
COST OF GOODS SOLD 10,955,804 11,906,288 9,269,380 10,672,508
--------------- ---------------- -------------- --------------
Gross profit 4,427,126 4,402,559 3,413,932 2,877,499
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 3,941,566 4,331,427 3,301,102 3,620,114
--------------- ---------------- -------------- --------------
Operating income (loss) 485,560 71,132 112,830 (742,615)
INTEREST EXPENSE 435,154 526,392 427,254 382,277
--------------- ---------------- -------------- --------------
Income (loss) before
extraordinary item 50,406 (455,260) (314,424) (1,124,892)
EXTRAORDINARY LOSS ON
EARLY EXTINGUISHMENT
OF DEBT -- (218,289) -- --
--------------- ---------------- -------------- --------------
NET INCOME (LOSS) $ 50,406 $ (673,549) $ (314,424) $ (1,124,892)
=============== ================ ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CENTENNIAL PRINTING CORPORATION
-------------------------------
STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
--------------------------------------------
<TABLE>
<CAPTION>
Total
Common Retained Shareholder's
Stock Earnings Equity
------------ ---------------- -----------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993
(as previously reported) $ 100 $ 1,242,338 $ 1,242,438
Prior period adjustment -- (548,304) (548,304)
------------ ---------------- -----------------
BALANCE, DECEMBER 31, 1993
(as restated) 100 694,034 694,134
Net income -- 50,406 50,406
Dividends -- (38,000) (38,000)
------------ ---------------- -----------------
BALANCE, DECEMBER 31, 1994 100 706,440 706,540
Net loss -- (673,549) (673,549)
------------ ------------------ ----------------
BALANCE, DECEMBER 31, 1995 100 32,891 32,991
Net loss (unaudited) -- (1,124,892) (1,124,892)
Dividends (unaudited) -- (4,582) (4,582)
------------ ------------------ ----------------
BALANCE, SEPTEMBER 30, 1996 (unaudited) $ 100 $ (1,096,583) $ (1,096,483)
============ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CENTENNIAL PRINTING CORPORATION
-------------------------------
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For the
Nine Months
For the Year Ended Ended
December 31, September 30,
----------------------------- -------------------------------
1994 1995 1995 1996
----------- ------------ -------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 50,406 $ (673,549) $ (314,424) $ (1,124,892)
Loss on early extinguishment of debt -- 218,289 -- --
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities-
Depreciation and amortization 585,155 662,319 488,688 440,718
Deferred interest and rent 49,167 22,570 8,750 36,875
Decrease (increase) in current assets--
Accounts receivable (413,012) (318,867) (302,811) 270,423
Inventories (53,081) 38,886 184,135 (6,368)
Prepaid expenses 152,821 (61,908) (57,444) 46,184
Increase (decrease) in current liabilities--
Accounts payable 84,439 544,725 296,120 438,179
Accrued expenses 121,305 127,390 340,870 (125,484)
----------- ---------- ------------ -------------
Net cash provided by (used in) operating
activities 577,200 559,855 643,884 (24,365)
----------- ---------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to corporate officer/landlord (25,212) (136,029) (130,923) (50,472)
Purchase of property and equipment (545,353) (243,279) (142,183) (19,198)
Deferred expenses (115,688) (126,962) -- --
Security and rental deposits (107,341) 60,217 128,456 7,625
Increase in cash value of officer's life insurance (18,185) (22,385) -- --
----------- ---------- ------------ -------------
Net cash used in investing activities (811,779) (468,438) (144,650) (62,045)
----------- ---------- ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 510,000 260,000 -- 590,000
Repayment of long-term debt (212,698) (359,675) (534,184) (511,129)
Dividends (38,000) -- -- (4,582)
----------- ---------- ------------ -------------
Net cash provided by (used in) financing
activities 259,302 (99,675) (534,184) 74,289
----------- ---------- ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 24,723 (8,258) (34,950) (12,121)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 34,051 58,774 58,774 50,516
----------- ---------- ------------ -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 58,774 $ 50,516 $ 23,824 $ 38,395
=========== ========== ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CENTENNIAL PRINTING CORPORATION
-------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. DESCRIPTION OF BUSINESS:
------------------------
Centennial Printing Corporation (the "Company") was organized on June 28, 1977,
and provides high-quality printing services to its clients who are located
principally in the Eastern United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Interim Financial Statements
- ----------------------------
The financial statements as of September 30, 1996, and for the nine months ended
September 30, 1995 and 1996, are unaudited and, in the opinion of management of
the Company, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for those interim
periods. The results of operations for the nine months ended September 30, 1996,
are not necessarily indicative of the results to be expected for the full year.
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.
Cash and Cash Equivalents
- -------------------------
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with an original maturity of three months
or less to be cash equivalents.
Inventories
- -----------
Inventories consist of raw materials and work in process and are stated at the
lower of cost or market, with cost determined under the first-in, first-out
method. Work in process include raw materials, direct labor and a portion of
manufacturing overhead.
F-6
<PAGE>
Property and Equipment
- ----------------------
Property and equipment is stated at cost. Depreciation and amortization for
financial reporting purposes are provided principally on the straight-line
method and for income tax purposes under accelerated methods.
Other Assets
- ------------
Other assets consist of security deposits, deferred financing costs and the cash
surrender value on a life insurance policy. Deferred financing costs are
amortized on a straight-line basis over the term of the related debt.
Income Taxes
- ------------
The Company has elected to be treated as an S Corporation for federal and state
income tax reporting purposes and, accordingly, income is passed through to the
shareholder and taxed at the individual level.
Major Customers
- ---------------
For the years ended December 31, 1994 and 1995, two customers accounted for
approximately 27% of net revenues.
Supplemental Cash Flow Information
- ----------------------------------
Interest expense paid was $388,262 and $560,634 in 1994 and 1995, respectively.
Capital lease obligations of $457,805 and $807,633 were incurred on equipment
leases entered into in 1994 and 1995, respectively.
Prior Period Adjustments
- ------------------------
In connection with the issuance of the 1995 financial statements, the Company
recorded certain adjustments which reduced the retained earnings as at
December 31, 1993. These adjustments relate primarily to the removal of overhead
costs included in inventory values and the establishment of accrued liabilities
for payroll, vacation reserve and deferred rent. In addition, as a result of the
above changes in accounting treatment, net income for the year ended December
31, 1994 was reduced by $88,929.
3. INVENTORIES:
-----------
<TABLE>
<CAPTION>
December 31,
----------------------- September 30,
1994 1995 1996
---------- ---------- -------------
(Unaudited)
<S> <C> <C> <C>
Raw materials $ 62,903 $ 9,594 $ 25,289
Work in process 166,791 181,214 171,887
---------- ---------- ----------
$ 229,694 $ 190,808 $ 197,176
========== ========== ==========
</TABLE>
F-7
<PAGE>
4. PROPERTY AND EQUIPMENT:
-----------------------
<TABLE>
<CAPTION>
December 31,
----------------------- September 30,
1994 1995 1996
----------- ----------- -------------
(Unaudited)
<S> <C> <C> <C>
Machinery and equipment $ 3,718,912 $ 4,613,655 $ 4,656,258
Office furnishings and equipment 599,232 655,830 678,352
Transportation equipment 133,673 57,497 5,807
Leasehold improvements 811,144 822,323 828,086
----------- ----------- ------------
5,262,961 6,149,305 6,168,503
Less- Accumulated depreciation (2,179,574) (2,743,760) (3,184,478)
----------- ----------- ------------
$ 3,083,387 $ 3,405,545 $ 2,984,025
=========== =========== ============
</TABLE>
5. LINE OF CREDIT:
---------------
The Company has a $2,750,000 line of credit facility with a bank. Borrowings on
the line of credit are limited to 80% of eligible accounts receivable, as
defined. At September 30, 1996, the Company had borrowed in excess of its credit
facility. The line bears interest at the banks prime rate plus 1.25%, which is
payable monthly. The line of credit is secured by a first lien on accounts
receivable, inventory and is subject to the unlimited personal surety of the
corporate officer/shareholder. The Company is required to meet certain financial
covenants. Based on its financial position and results of operations as of the
measurement dates of December 31, 1994 and June 30, 1995, the Company was in
violation of the financial covenants. However, the bank has agreed to waive the
violations and has reset such covenants for future periods, subject to certain
conditions.
6. LONG-TERM DEBT:
---------------
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1994 1995
--------------- -------------
<S> <C> <C>
Note payable to General Electric Capital
Corporation, payable in 12 monthly
installments of $65,000 and 36 monthly
installments of $57,728, including interest
at 10.6% $ -- $ 2,341,090
Notes payable to bank, interest at prime plus
1% to 1.5%, repaid in 1995 320,833 --
Capital lease obligations 1,881,288 219,414
Notes payable to individuals, interest at 12.5%
payable monthly, due February 1, 1997 105,000 105,000
--------------- --------------
2,307,121 2,665,504
Less- Current portion (821,640) (705,802)
--------------- --------------
$ 1,485,481 $ 1,959,702
=============== ==============
</TABLE>
F-8
<PAGE>
In 1995, the Company entered into a note payable with General Electric Capital
Corporation ("GECC") which proceeds thereunder were used to pay off various bank
notes and capital lease obligations. A loss on the early extinguishment of debt
in the amount of $218,289 was recorded in connection with the payoff of the
notes and capital lease obligations. The GECC note payable is collateralized by
a master security agreement.
Future maturities of long-term debt are as follows at December 31, 1995:
1996 $ 705,802
1997 700,734
1998 598,242
1999 660,726
-------------
$ 2,665,504
=============
7. COMMITMENTS:
------------
The Company leases certain plant facilities and equipment under noncancelable
operating leases that expire through June 30, 2002. Rent expense of $678,773 and
$748,957 was charged to operations in 1994 and 1995, respectively. Minimum
future rental payments required under the terms of the leases are as follows at
December 31, 1995:
1996 $ 734,684
1997 724,385
1998 600,151
1999 544,791
2000 317,500
Thereafter 635,000
-------------
$ 3,556,511
=============
8. PROFIT SHARING PLAN:
-------------------
The Company maintains a deferred compensation plan for its employees. In
addition to voluntary employee contributions, the Company may fund additional
discretionary contributions. The expense under this plan was $63,271 and $47,556
for the years ended December 31, 1994 and 1995, respectively.
9. RELATED PARTY TRANSACTIONS:
--------------------------
Advances to corporate officer/landlord
- --------------------------------------
Advances to corporate officer and the advance to landlord (which represents the
assumption by the Company of certain debt obligations of such landlord on the
former plant facilities) bear interest at the rate of 6.75% at December 31,
1995. No definite terms have been set for the repayment of principal.
F-9
<PAGE>
Leases
- ------
The Company is a party to a lease agreement with its shareholder for residential
real estate that expires June 30, 2000, and requires a minimum annual rental of
$18,000. Effective July 1, 1995, the Company is also a party to a second lease
agreement with its shareholder for another residential dwelling used for the
benefit of Company employees. The second lease term expires June 30, 2000, and
requires a minimum annual rental of $12,000. Rent expense of $18,000 and $21,000
was charged to operations in 1994 and 1995, respectively.
F-10
<PAGE>
THE EASTWIND GROUP, INC.
------------------------
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
----------------------------------------
BASIS OF PRESENTATION
---------------------
The following unaudited pro forma consolidated financial statements should be
read in conjunction with The Eastwind Group, Inc. ("Eastwind") historical
consolidated financial statements and notes thereto filed with Eastwind's annual
report on Form 10-KSB for the year ended December 31, 1995, the quarterly report
of Form 10-QSB for the quarter ended September 30, 1996, and the Form 8-K dated
October 17, 1996, and the historical financial statements and notes thereto of
Centennial Printing Corporation ("Centennial") filed pursuant to item 7(a) of
this report on Form 8-K/A.
The following unaudited pro forma consolidated statement of operations for the
year ended December 31, 1995 and the nine months ended September 30, 1996, give
effect to the acquisition of Centennial by Eastwind as if it had occurred at the
beginning of the periods presented. The unaudited pro forma condensed
consolidated balance sheet as of September 30, 1996, gives effect to the
acquisition as if it had occurred on that date. The pro forma results are not
necessarily indicative of results of operations had the acquisition taken place
at the beginning of the year.
F-11
<PAGE>
THE EASTWIND GROUP, INC.
------------------------
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31, 1995
------------------------------------------------------------------------------------
Pro Forma
Eastwind Centennial Adjustments Pro Forma
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NET SALES $ 17,902,000 $ 16,309,000 $ --- $ 34,211,000
COST OF GOODS SOLD 13,945,000 11,906,000 45,000 (D) 25,896,000
----------------- ----------------- ----------------- -----------------
Gross profit 3,957,000 4,403,000 (45,000) 8,315,000
SELLING, GENERAL AND (A,C
ADMINISTRATIVE EXPENSE 3,536,000 4,332,000 (179,000) D,E) 7,689,000
----------------- ----------------- ----------------- -----------------
Operating income 421,000 71,000 134,000 626,000
INTEREST EXPENSE 733,000 526,000 42,000 (B) 1,301,000
----------------- ----------------- ----------------- -----------------
Loss before extraordinary item
and tax benefit (312,000) (455,000) 92,000 (675,000)
EXTRAORDINARY LOSS ON
EARLY EXTINGUISHMENT OF
DEBT --- (218,000) --- (218,000)
----------------- ----------------- ----------------- -----------------
Loss before income tax benefit (312,000) (673,000) 92,000 (893,000)
INCOME TAX BENEFIT 15,000 ---- ---- 15,000
----------------- ----------------- ----------------- -----------------
NET LOSS (297,000) $ (673,000) 92,000 (878,000)
==================
PREFERRED STOCK DIVIDENDS ---- (54,000) (F) (54,000)
----------------- ----------------- -----------------
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $ (297,000) $ 38,000 $ (932,000)
================= ================= =================
EARNINGS PER COMMON
SHARE $ (.30) $ (.80)
================ ================
SHARES USED IN COMPUTING
EARNINGS PER COMMON
SHARE 985,750 1,167,982
================ ================
</TABLE>
The accompanying notes are an integral part of this statement.
F-12
<PAGE>
THE EASTWIND GROUP, INC.
-----------------------
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1996
---------------------------------------------------------------------------------
Pro Forma
Eastwind Centennial Adjustments Pro Forma
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
NET SALES $ 14,862,000 $ 13,550,000 $ --- $ 28,412,000
COST OF GOODS SOLD 11,028,000 10,673,000 34,000 (D) 21,735,000
----------------- ----------------- ----------------- -----------------
Gross profit 3,834,000 2,877,000 (34,000) 6,677,000
SELLING, GENERAL AND (A,C
ADMINISTRATIVE EXPENSES 2,702,000 3,620,000 (184,000) D,E) 6,138,000
----------------- ----------------- ----------------- -----------------
Operating income (loss) 1,132,000 (743,000) 150,000 539,000
INTEREST EXPENSE 462,000 382,000 31,000 (B) 875,000
----------------- ----------------- ----------------- -----------------
Income (loss) before income
taxes 670,000 (1,125,000) 119,000 (336,000)
INCOME TAXES 199,000 --- (79,000) (G) 120,000
----------------- ----------------- ----------------- -----------------
NET INCOME (LOSS) 471,000 $ (1,125,000) 198,000 (456,000)
=================
PREFERRED STOCK DIVIDENDS (57,000) (41,000) (F) (98,000)
----------------- ----------------- -----------------
NET INCOME (LOSS)
AVAILABLE TO COMMON
STOCKHOLDERS $ 414,000 $ 157,000 $ (554,000)
================= ================= =================
EARNINGS PER COMMON
SHARE $ 0.21 $ (.27)
================= =================
SHARES USED IN COMPUTING
EARNINGS PER COMMON
SHARE 2,994,546 2,035,628
================= =================
</TABLE>
The accompanying notes are an integral part of this statement.
F-13
<PAGE>
THE EASTWIND GROUP, INC.
-----------------------
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
--------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1996
--------------------------------------------------------------------------------
Pro Forma
Eastwind Centennial Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 2,978,000 $ 38,000 $ (799,000) $ 2,217,000
Accounts receivable 5,140,000 3,058,000 -- 8,198,000
Inventories 1,991,000 197,000 -- 2,188,000
Prepaid expenses 319,000 40,000 -- 359,000
-------------- -------------- ---------------- ----------------
Total current assets 10,428,000 3,333,000 (799,000) 12,962,000
PROPERTY, PLANT AND EQUIPMENT, NET 1,842,000 2,984,000 302,000 5,128,000
INVESTMENTS 700,000 -- -- 700,000
ADVANCES TO SHAREHOLDERS -- 619,000 (619,000) --
OTHER ASSETS 558,000 219,000 (40,000) 737,000
GOODWILL 163,000 -- 4,919,000 5,082,000
-------------- -------------- ---------------- ----------------
$ 13,691,000 $ 7,155,000 $ 3,763,000 $ 24,609,000
============== ============== ================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Lines of credit $ 507,000 2,950,000 -- 3,457,000
Current portion of long-term debt 630,000 740,000 -- 1,370,000
Accounts payable 2,140,000 2,192,000 -- 4,332,000
Accrued expenses 556,000 659,000 -- 1,215,000
Other current liabilities 191,000 -- -- 191,000
-------------- -------------- ---------------- ----------------
Total current liabilities 4,024,000 6,541,000 -- 10,565,000
-------------- -------------- ---------------- ----------------
LONG-TERM DEBT 3,127,000 1,415,000 266,000 4,808,000
-------------- -------------- ---------------- ----------------
OTHER NON-CURRENT LIABILITIES 687,000 296,000 -- 983,000
-------------- -------------- ---------------- ----------------
REDEEMABLE SERIES B PREFERRED STOCK -- -- 900,000 900,000
-------------- -------------- ---------------- ----------------
STOCKHOLDERS' EQUITY:
Common stock 214,000 -- 18,000 232,000
Warrants outstanding 1,233,000 -- -- 1,233,000
Additional paid-in capital 4,355,000 -- 1,482,000 5,837,000
Retained earnings 51,000 (1,097,000) 1,097,000 51,000
-------------- -------------- ---------------- ----------------
Total stockholders' equity 5,853,000 (1,097,000) 2,597,000 7,353,000
-------------- -------------- ---------------- ----------------
$ 13,691,000 $ 7,155,000 $ 3,763,000 $ 24,609,000
============== ============== ================ ================
</TABLE>
The accompanying notes are an integral part of this statement.
F-14
<PAGE>
THE EASTWIND GROUP, INC.
------------------------
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
1. EASTWIND HISTORICAL:
--------------------
The historical balances for the year ended December 31, 1995 represent the
results of operations after giving effect to the acquisition of The Polychem
Division of the Budd Company, which occurred on March 10, 1995, as if the
acquisition occurred on January 1, 1995, as reported in the Company's Form
10-KSB for the year ended December 31, 1995.
2. CENTENNIAL ACQUISITION:
-----------------------
On October 17, 1996, the Company acquired 100% of the capital stock of
Centennial Printing Corporation ("Centennial"). The total consideration paid by
the Company was $3,116,000, comprised of 182,232 shares of the Company's Common
Stock, 9,000 shares of the Company's Redeemable Series B Preferred Stock and
$450,000 in cash. The acquisition has been accounted for using the purchase
method of accounting, whereby the purchase price is allocated to the assets and
liabilities of Centennial based on the fair market values at the acquisition
date. Such allocation has been based on estimates that may be revised at a later
date. The purchase price, including estimated transaction costs of $300,000,
exceeded the fair market value of the net assets acquired by approximately
$5,400,000, which has been recorded as goodwill and will be amortized on a
straight-line basis over 20 years.
The unaudited pro forma consolidated statements of operations for the year ended
December 31, 1995, and the nine months ended September 30, 1996, contain the
results of Centennial for the twelve and nine months, respectively.
Unaudited Pro Forma Adjustments to Consolidated Statements of Operations
- ------------------------------------------------------------------------
A. Goodwill amortization of $256,000 and $192,000 is recorded in connection
with the purchase of Centennial in the year ended December 31, 1995 and
the nine months ended September 30, 1996, respectively.
B. Interest expense is adjusted by $42,000 and $31,000 in the year ended
December 31, 1995 and the nine months ended September 30, 1996,
respectively, to account for the cash used in the acquisition at a 9.25%
interest rate.
C. The Company paid the former shareholder of Centennial $500,000 for a 10
year non-compete agreement. Amortization expense of $50,000 and a $38,000
is recorded in the year ended December 31, 1995 and the nine months ended
September 30, 1996, respectively.
F-15
<PAGE>
D. Additional depreciation expense of $60,000 and $45,000 in the year ended
December 31, 1995 and the nine months ended September 30, 1996,
respectively, based on the write up of property and equipment by $302,000
to estimated fair market value.
E. The elimination of shareholder compensation of $500,000 and $425,000 in
the year ended December 31, 1995 and the nine months ended September 30,
1996, respectively.
F. Dividends on the Series B Preferred Stock of $54,000 and $41,000 in the
year ended December 31, 1995 and nine months ended September 30, 1996,
respectively.
G. The elimination of the Federal tax provision of $79,000 based on a pro
forma consolidated loss before income taxes for the nine months ended
September 30, 1996.
As previously stated, goodwill determined as of the acquisition date (October
17, 1996) was approximately $5,400,000. For purposes of preparing the pro forma
condensed consolidated balance sheet as of September 30, 1996, goodwill is
presented as $4,919,000, which would have been the amount of goodwill if the
transaction had occurred on that date.
Unaudited Pro Forma Loss Per Share
- ----------------------------------
Pro forma loss per share is computed by dividing pro forma loss by Eastwind's
historical weighted average number of shares outstanding after giving effect to
the shares issued in connection with the acquisition of Centennial.
F-16
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE EASTWIND GROUP, INC.
Date: December 31, 1996 /s/ WILLIAM B. MILLER
------------------------------
William B. Miller
Senior Vice President and
Chief Financial Officer
