<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) March 19, 1997
--------------
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 or organization) Identification Number)
-------------------------------
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 Wickersham Printing Company, Inc. Page No.
--------------------------------------------------------- --------
Independent Auditors' Report F-1
Balance Sheets at December 31, 1996 and 1995 F-2
Statements of Income for the Years Ended
December 31, 1996 and 1995 F-4
Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1996 and 1995 F-5
Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995 F-6
Notes to the Financial Statements F-7
(b) Pro Forma Financial Information
-------------------------------
Basis of Presentation F-15
Unaudited Pro Forma Consolidated Statement of Operations for
the Year Ended December 31, 1996 F-16
Notes to Unaudited Pro Forma Consolidated Financial Statements F-17
(c) Exhibits
--------
23 Consent of Walz, Deihm, Geisenberger, Bucklen & Tennis
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
LANCASTER, PENNSYLVANIA
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
<PAGE>
C O N T E N T S
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report F-1
Balance Sheets F-2
Statements of Income F-3
Statements of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-14
</TABLE>
<PAGE>
Walz, Deihm, Geisenberger,
Bucklen & Tennis P.C.
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
Board of Directors
Wickersham Printing Company, Inc.
Lancaster, Pennsylvania
We have audited the accompanying balance sheets of Wickersham Printing
Company, Inc. as of December 31, 1996 and 1995 and the related statements of
income, changes in stockholders' equity 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 Wickersham Printing Company,
Inc. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/S/ WALZ, DEIHM, GEISENBURGER, BUCKLEN & TENNIS
WALZ, DEIHM, GEISENBERGER,
BUCKLEN & TENNIS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
LANCASTER, PENNSYLVANIA
FEBRUARY 18, 1997
F-1
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Accounts Receivable $1,022,012 $1,221,426
Inventory 341,504 486,698
Prepaid Expenses 37,524 38,735
---------- ----------
TOTAL CURRENT ASSETS 1,401,040 1,746,859
---------- ----------
PROPERTY AND EQUIPMENT
Plant Equipment 2,350,589 2,350,589
Office Furniture and Fixtures 91,717 91,717
Data Processing Equipment 258,768 258,768
Automobiles and Trucks 84,073 84,073
Leasehold Improvements 265,180 265,180
---------- ----------
3,050,327 3,050,327
Less: Accumulated Depreciation 2,425,654 2,272,476
---------- ----------
NET PROPERTY AND EQUIPMENT 624,673 777,851
---------- ----------
OTHER ASSETS
Deposits 13,361 12,117
---------- ----------
TOTAL ASSETS $ 2,039,074 $ 2,536,827
========= =========
</TABLE>
_______________
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash Overdraft $ 89,253 $ 211,342
Demand Notes Payable - Finance Company 577,742 812,882
Accounts Payable - Related Company 82,998 0
Accounts Payable - Investment Holding Company 52,825 0
Accounts Payable - Trade 920,871 888,609
Accrued Payroll Taxes and Amounts Withheld 10,901 11,164
Accrued Retirement 749 8,466
Accrued Wages and Vacation Pay 139,313 73,323
Dividends Payable 9,375 0
Other Accrued Expenses 41,716 102,182
Current Portion of Long-Term Debt 256,432 365,058
Current Portion of Capital Lease Obligations 0 8,991
Current Portion of Vendor Notes Payable 42,089 185,192
---------- ----------
TOTAL CURRENT LIABILITIES 2,224,264 2,667,209
---------- ----------
LONG-TERM DEBT
Long-Term Debt - Less Current Portion 0 17,735
Vendor Notes Payable - Less Current Portion 50,660 197,131
---------- ----------
TOTAL LONG-TERM DEBT 50,660 214,866
---------- ----------
TOTAL LIABILITIES 2,274,924 2,882,075
---------- ----------
STOCKHOLDERS' EQUITY
Preferred Stock - Series A - par value $1,000 per share; 10,000
shares authorized, 250 shares issued and outstanding 250,000 0
Common Stock - par value $.01 per share; 7,000,000 shares
and 2,000,000 shares authorized, 2,000,000 shares issued
and outstanding 20,000 20,000
Additional Paid-in Capital 350,425 350,425
Retained Earnings (Deficit) (560,037) (419,678)
---------- ----------
60,388 (49,253)
Less: Treasury Stock, 719,939 shares at December 31, 1996
and 719,075 shares at December 31, 1995 296,238 295,995
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (235,850) (345,248)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,039,074 $2,536,827
========== ==========
</TABLE>
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
1996 1995
---- ----
<TABLE>
<CAPTION>
<S> <C> <C>
SALES $5,713,228 $8,394,229
COST OF GOODS SOLD 5,100,141 7,537,732
---------- ----------
GROSS PROFIT 613,087 856,497
---------- ----------
SELLING EXPENSES 511,805 541,610
ADMINISTRATIVE EXPENSES 610,920 510,090
---------- ----------
TOTAL SELLING AND
ADMINISTRATIVE EXPENSES 1,122,725 1,051,700
---------- ----------
OPERATING INCOME (LOSS) (509,638) (195,203)
OTHER INCOME 22,026 54,492
OTHER EXPENSES (139,373) (142,314)
---------- ----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES AND
EXTRAORDINARY ITEM (626,985) (283,025)
PROVISION FOR INCOME TAXES 0 0
---------- ----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (626,985) (283,025)
EXTRAORDINARY ITEM - Extinguishment of Debt 496,001 131,574
---------- ----------
NET INCOME (LOSS) $ (130,984) $ (151,451)
========== ==========
</TABLE>
- -----------------
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED
--------------- ------------ PAID-IN EARNINGS TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) STOCK
------ ------ ------ ------ ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1994 0 $ 0 2,000,000 $20,000 $350,425 $(268,227) $(295,995)
Net Income (Loss) 0 0 0 0 0 (151,451) 0
------ -------- --------- ------- -------- --------- ---------
December 31, 1995 0 0 2,000,000 20,000 350,425 (419,678) (295,995)
Purchase of Stock from Former
Participant in the Wickersham
Printing Company, Inc. Employee
Stock Ownership Plan 0 0 0 0 0 0 (243)
Issuance of 250 Shares of Series A
Convertible Voting Participating
Redeemable Preferred Stock and
Increase in the Number of
Authorized Shares of Common
Stock 250 250,000 0 0 0 0 0
Accrued Preferred Stock Dividends 0 0 0 0 0 (9,375) 0
Net Income (Loss) 0 0 0 0 0 (130,984) 0
------ -------- --------- ------- -------- --------- --------
DECEMBER 31, 1996 250 $250,000 2,000,000 $20,000 $350,425 $(560,037) $(296,238)
====== ======== ========= ======= ======= ======== ========
</TABLE>
- -----------------
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $(130,984) $(151,451)
Add Expenses Not Using Working Capital:
Depreciation 153,178 168,702
Less Non-Operating Gains:
Cancellation of Vendor Notes Payable (157,844) (131,574)
Cancellation of Long-Term Debt (138,012) 0
Cancellation of Accounts Payable (200,145) 0
--------- ---------
WORKING CAPITAL PROVIDED BY (USED
IN) OPERATING ACTIVITIES (473,807) (114,323)
Add (Deduct) Changes in Working Capital:
Accounts Receivable 199,414 (127,632)
Inventory 145,194 (50,921)
Accounts Payable - Trade 232,407 165,856
Accounts Payable - Related Parties 145,199 0
Other Accrued Expenses (2,456) 59,121
Other Assets (33) (1,782)
--------- ---------
NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES 245,918 (69,681)
--------- ---------
INVESTING ACTIVITIES
Purchase of Property and Equipment 0 (60,137)
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 0 (60,137)
--------- ---------
FINANCING ACTIVITIES
Proceeds from Issuance of Preferred Stock 250,000 0
Purchase of Treasury Stock (243) 0
Net Change in Demand Notes Payable - Bank 0 (349,500)
Net Change in Demand Notes Payable - Finance Company (235,140) 812,882
Dividends Payable (9,375) 0
Net Change in Demand Note Payable - Other 0 (39,719)
Principal Payments on Capital Lease Obligations (8,991) (28,269)
Proceeds from Issuance of Long-Term Debt 178,215 0
Principal Payments on Long-Term Debt (166,564) (266,557)
Principal Payments on Vendor Notes Payable (131,731) (63,999)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (123,829) 64,838
--------- ---------
NET INCREASE (DECREASE) IN CASH 122,089 (64,980)
CASH (OVERDRAFT) - BEGINNING (211,342) (146,362)
--------- ---------
CASH (OVERDRAFT) - ENDING $ (89,253) $(211,342)
========= =========
</TABLE>
- ---------------
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY OPERATIONS
The Company, located in Lancaster, Pennsylvania, is in the business of
printing and binding of books and other publications. Pre-press services are
also performed. The Company grants credit to customers, substantially all of
whom are located within a 250 mile radius.
EQUITY INFUSION
In May 1996, a publicly traded investment holding company with other
interests in the printing and binding segments of the graphic arts industry,
made an investment in Wickersham Printing Company, Inc. The investor
structured the transaction as an investment directly into Wickersham, rather
than an acquisition of existing shares. At the time of the investment a new
board of directors was elected and a new president was installed.
A $250,000 investment was made into the Company in exchange for 250 shares
of Series A Convertible Participating Redeemable Preferred Stock in January,
1997. The investment holding company also entered into agreements with
Wickersham's common stockholders which allows the holding company to issue its
own stock in exchange for all outstanding shares of Wickersham stock. As of
our report date, the Company had not finalized the exchange of stock.
INVENTORY
Inventory consists of materials and work in process. The materials
inventory, which consists of paper, plates, film, ink and packaging materials
is valued at the lower of cost (first-in, first-out) or market value. Work in
process inventory is valued using a budgeted hourly cost method.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation of property and
equipment is determined using straight line and accelerated methods for
financial statement purposes at rates based on the following estimated useful
lives:
Plant Equipment 3 - 10 years
Office Furniture and Fixtures 3 - 10 years
Data Processing Equipment 3 - 7 years
Automobiles and Trucks 3 - 5 years
Leasehold Improvements 5 - 39 years
Depreciation expense charged to operations amounted to $153,178 and
$168,702 for the years ended December 31, 1996 and 1995, respectively.
Included in depreciation expense is amortization of assets resulting from
capital lease obligations. Such amortization amounted to $11,621 for the year
ended December 31, 1996 and 1995.
Expenditures for major improvements that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
(CONTINUED)
F-6
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(CONTINUED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH FLOW INFORMATION
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
Cash paid for interest and income taxes for the years ended December 31,
1996 and 1995 is as follows:
1996 1995
---- ----
Interest (Net of Amount Capitalized) $ 116,706 $137,655
======= =======
Income Taxes - State $ 10,116 $ 0
======== =======
INCOME TAXES
Depreciation expense is recognized for income tax purposes in different
periods from those in which it is recognized for financial reporting
purposes.
NOTE B - SUMMARY OF SIGNIFICANT ESTIMATES, RISKS AND UNCERTAINTIES
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 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.
CERTAIN SIGNIFICANT ESTIMATES
REALIZABILITY OF A DEFERRED TAX ASSET
The Company has federal and state net operating loss carryforwards which
expire in varying amounts through the year ended December 31, 2011. The loss
carryforwards could produce deferred tax assets which may be realized if
sufficient taxable income is generated in future years. Management has
elected not to record a deferred tax asset on the balance sheet since
realization is not assured.
(CONTINUED)
F-7
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(CONTINUED)
NOTE B - SUMMARY OF SIGNIFICANT ESTIMATES, RISKS AND UNCERTAINTIES (CONTINUED)
VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
CUSTOMERS
Two customers accounted for approximately 29% and 34% of net revenue for
the years ended December 31, 1996 and 1995 and approximately 31% and 30% of
the accounts receivable balance at December 31, 1996 and 1995. All
transactions with the customer were conducted on an arm's length basis.
NOTE C - DEMAND NOTES PAYABLE - FINANCE COMPANY
In April 1995, the Company signed an agreement to secure financing from an
asset based lender. Under the terms of the agreement, the Company pledges
accounts receivable to the lender and receives eighty-percent of their face
value. Customers are instructed to make payments directly to the lender.
The lender sets up a reserve account for the twenty-percent portion of the
receivable that was not funded at the time of purchase. The lender charges
the reserve account for interest and administrative fees and remits the
balance to the Company on a weekly basis.
The total amount funded under the agreement cannot exceed $1,000,000.
Interest on the unpaid balance is charged at a variable rate of prime plus 2%.
The note is collateralized by accounts receivable and inventory. The balances
on the note as of December 31, 1996 and 1995 were $577,742 and $812,882,
respectively.
NOTE D - LONG-TERM DEBT
During the year ended December 31, 1996, the Company was unable to meet
the monthly obligation to repay a variable rate term loan to a bank. In May,
1996, the investor assisted in negotiating an agreement to repay the remaining
principal balance on the loan as part of its strategy to invest in Wickersham
Printing Company, Inc. The principal balance at that time was $219,935. The
renegotiated loan is shown as loan #1 in the schedule below. The original
variable rate term loan is shown as loan #2.
(CONTINUED)
F-8
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(CONTINUED)
NOTE D - LONG-TERM DEBT
Other long-term debt was also renegotiated by the investor and resulted in
income through extinguishment of debt. Loans #3, #5 and #6 were settled at an
amount less than the amount carried on the books.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
(1) Installment loan payable to a bank, $15,000 paid by
Wickersham Printing Company, Inc. in May, 1996,
followed by 18 monthly installments of $5,000 beginning
June, 1996 and one final balloon payment in December,
1997. The loan is collateralized by accounts receivable,
inventory, machinery and equipment, contract rights,
the personal guarantee of a company officer and a
mortgage against the residence of a company officer. $ 184,935 $ 0
(2) Variable rate term loan payable to a bank in 12 monthly
installments of $6,000 plus interest at 10.25% followed by
60 monthly installments of $18,181 including interest at
1 3/4% above the bank's prime rate. The loan is collateralized
by accounts receivable, inventory, machinery and equipment,
contract rights, the personal guarantee of a company officer
and a mortgage against the residence of a company officer.
The bank agreed to renegotiate the pay off of this loan as
noted above. 0 229,935
(3) Installment loan payable to the Company's landlord for past
due rent. The loan was payable in 40 monthly installments
of $885. The loan was unsecured and non-interest bearing.
The loan balance was renegotiated to $7,000 and paid off
during the year ended December 31, 1996. 0 14,161
(4) Installment loan payable to a finance company in 36 monthly
installments of $11,746 including interest at 10.90%,
collateralized by a printing press. These terms were
renegotiated effective December, 1994. Monthly payments
were extended to December, 1995. The monthly
installments were decreased to $7,919 including interest at
10.90%. This loan was repaid in full during the year ended
December 31, 1996. 0 7,848
(5) Unsecured installment loan payable to an equipment supplier.
The Company and the supplier agreed to restructure certain
accounts payable invoices into a promissory note in an effort
to support the cash flow needs of the Company. The loan is
payable in 36 monthly installments of $3,258 including
interest at 8.5%. The investor negotiated a settlement with
the supplier which is more fully discussed in Loan #7 0 54,454
</TABLE>
(CONTINUED)
F-9
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(CONTINUED)
NOTE D - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
(6) Unsecured installment loan payable to an equipment supplier.
The Company and the supplier agreed to restructure certain
accounts payable invoices into a promissory note in an effort
to support the cash flow needs of the Company. The loan
was payable in 36 monthly installments of $3,611 including
interest at 9.5%. The investor negotiated a settlement with
the supplier which is more fully discussed in Loan #7. 0 76,395
(7) Unsecured installment loan of $387,828 payable to an
equipment supplier, $254,896 paid in May, 1996,
followed by 4 quarterly payments of $33,233 beginning
June, 1996. The total loan balance of $387,828 was
a negotiated balance that was based on all liabilities
owed to the equipment supplier. The liabilities included
loans #5 and #6 as well as regular trade payables which the
Company was unable to pay as they came due. 66,466 0
(8) Unsecured installment note payable to a finance company.
$11,321 down payment followed by 9 monthly payments
of $5,227 including interest at 9.24% beginning May, 1996. 5,031 0
-------- --------
256,432 382,793
Less: Current portion of long-term debt 256,432 365,058
-------- --------
LONG-TERM DEBT $ 0 $ 17,735
======== ========
</TABLE>
The following table summarizes the aggregate maturities of long-term debt:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1997 $ 256,432
=======
NOTE E - CAPITAL LEASES
The Company has capitalized assets resulting from capital lease
obligations in the amount of $107,406 as of December 31, 1996 and 1995.
(CONTINUED)
F-10
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(CONTINUED)
NOTE E - CAPITAL LEASES (CONTINUED)
Lease liabilities corresponding to the above mentioned capital items as of
December 31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
----- -------
<S> <C> <C>
Stacker/Drill with Leasing Company, $2,215 per month
including interest at 15.09% payable until February, 1996. $ 0 $8,991
Less: Current portion of capital lease obligations 0 8,991
----- ------
LONG-TERM CAPITAL LEASE OBLIGATIONS $ 0 $ 0
===== ======
</TABLE>
Interest expense on the above capital lease obligations for the periods
ended December 31, 1996 and 1995 is $1,508, and $4,323, respectively.
NOTE F - VENDOR NOTES PAYABLE
Certain major creditors of the Company rejected the offer to renegotiate
their outstanding account balance. A summary of these vendor notes payable as
of December 31, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Total Vendor Notes Payable $92,749 $382,323
Less: Current Portion of Vendor Notes Payable 42,089 185,192
------- --------
LONG-TERM PORTION OF VENDOR
NOTES PAYABLE $50,660 $197,131
======= ========
</TABLE>
The following is a schedule showing the future minimum payments under the
agreed upon payment plan as of December 31, 1996.
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------- --------
<S> <C>
1997 $42,089
1998 22,021
1999 22,021
2000 6,618
-------
$92,749
========
</TABLE>
(CONTINUED)
F-11
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(CONTINUED)
NOTE G - OPERATING LEASES
The Company leases its building at 2959 Old Tree Drive, Lancaster,
Pennsylvania, from a company officer/shareholder. The lease agreement began
December 31, 1986 and expires December 31, 2001. The agreement provides for
an aggregate annual rental of $86,400 for the first 60 months. Every 30
months thereafter the payment is adjusted based on the increase in the
Consumer Price Index. The monthly payment is currently $9,958. The aggregate
annual rental at $9,958 per month is $119,496. The lease is at fair market
value.
The Company leases warehouse and office space at 310-C Running Pump Road,
Lancaster, Pennsylvania under a 19 month lease that was renewed in November,
1995. The aggregate rental during this period will be $77,823.
The following is a schedule of future minimum rental payments required
under the above operating leases as of December 31, 1996.
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, BUILDING WAREHOUSE TOTAL
- -------------- ---------- --------- ----------
<S> <C> <C> <C>
1997 $119,496 $ 49,152 $168,648
1998 119,496 20,480 139,976
1999 119,496 119,496
2000 119,496 119,496
2001 119,496 119,496
-------- -------- --------
$597,480 $ 69,632 $667,112
======= ======= =======
</TABLE>
Total rental expense charged to operations for the fiscal years ended
December 31, 1996 and 1995 was $241,792 and $539,528, respectively.
NOTE H - RELATED PARTY TRANSACTIONS
Prior to the investment discussed in Note A, Wickersham Printing Company,
Inc. provided docutech printing services for its customers. This work was
done on leased equipment. After the investment was made, the equipment was
purchased by a company that is also owned by the investment holding company.
Wickersham Printing Company, Inc. kept the equipment on its premises and
continued to provide docutech printing services. However, the company that
purchased the equipment established an operational agreement with Wickersham
Printing Company, Inc. regarding docutech printing jobs. The purchasing
company bills Wickersham Printing Company, Inc. for the aggregate amount of
docutech work during any monthly period. In turn, Wickersham Printing Company
Inc. bills its customers for such work. As of December 31, 1996, Wickersham
Printing Company, Inc. owes the purchasing company $82,998 which represents
the amount of docutech work for the period August 1, 1996 through December 31,
1996.
(CONTINUED)
F-12
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(CONTINUED)
NOTE H - RELATED PARTY TRANSACTIONS (CONTINUED)
Wickersham Printing Company, Inc. has declared preferred stock dividends
which have not been paid as of December 31, 1996. Wickersham Printing
Company, Inc. has also agreed to reimburse the investment holding company for
expenses that have been paid for its benefit. The amount of this liability is
$62,200 as of December 31, 1996.
The corporation leases a building from a company officer/shareholder, as
discussed in Note G.
NOTE I - INCOME TAXES
The accompanying balance sheets include the following amount of deferred
tax assets and liabilities at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred Tax Asset $ 238,791 $ 379,765
Valuation Allowance (187,071) (301,128)
Deferred Tax Liability (51,720) (78,637)
--------- ---------
NET DEFERRED TAX ASSET (LIABILITY) $ 0 $ 0
========= =========
</TABLE>
Deferred taxes result from temporary differences in the recognition of
income and expenses for income tax and financial statement purposes. The
amounts of these temporary differences as of December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Excess of Tax Over Book Depreciation $287,109 $314,672
Excess of Book Over Tax Vacation Pay (71,832) 0
Excess of Book Over Tax Contributions (8,313) (9,928)
-------- --------
TOTAL TEMPORARY DIFFERENCES $206,964 $304,744
======== ========
</TABLE>
The Company has federal loss carryforwards totaling $117,420 that may be
offset against future federal taxable income and investment credits totaling
$53,044 that may be offset against future federal income taxes. If not used,
the loss carryforwards will expire in the year ended December 31, 2010. The
investment tax credits will expire in the year ended June 30, 2004.
The Company also has state loss carryforwards totalling $1,796,054 that
may be offset against state taxable income. The net operating loss
carryforwards will be subject to a use limitation that cannot exceed
$1,000,000 in any year. If not used, the loss carryforwards will expire in
various amounts until the year 1999.
(CONTINUED)
F-13
<PAGE>
WICKERSHAM PRINTING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(CONTINUED)
NOTE J - RETIREMENT PLAN
The Company provides a 401(K) retirement savings plan for all employees
who meet the minimum qualifications specified in the plan. The Company also
may make annual profit sharing contributions to the plan. For the years ended
December 31, 1996 and 1995, the Company did not make a profit sharing
contribution. However, the Company provided a matching contribution on
certain employee contributions to the plan. The amounts of the Company's
matching contributions for the years ended December 31, 1996 and 1995 were
$12,466 and $13,616, respectively.
NOTE K - HEALTH INSURANCE
The Company provides health insurance benefits to its employees under a
self-funded health insurance plan and a fully insured plan administered by a
health maintenance organization. Employees are given the option to choose one
of the two plans.
For an employee who elects coverage under the self-funded plan, the
Company will pay claims for the employee up to a limit of $10,000. The
liability for claims in excess of $10,000 is covered by an outside insurance
carrier. The Company pays a regular monthly premium to its plan administrator
for the coverage over and above the individual stop-loss of $10,000.
- ------------------
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
THE EASTWIND GROUP, INC.
------------------------
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
----------------------------------------
BASIS OF PRESENTATION
---------------------
The accompanying unaudited pro forma consolidated statement of operations has
been prepared by management of The Eastwind Group, Inc. ("Eastwind" or "the
Company") and should be read in conjunction with the Company's historical
consolidated financial statements and notes thereto filed with the Company's
annual report on Form 10-KSB for the year ended December 31, 1996 and the
quarterly report of Form 10-QSB for the quarter ended March 31, 1997, which have
been previously filed and the historical financial statements and notes thereto
of Wickersham Printing Company, Inc. ("Wickersham") filed herewith pursuant to
item 7(a) of this report on Form 8-K/A.
The accompanying unaudited pro forma consolidated statement of operations for
the year ended December 31, 1996 gives effect to the acquisition of Wickersham
by Eastwind as if it had occurred at the beginning of the period presented. The
pro forma consolidated statement of operations is based on certain assumptions
and preliminary estimates which are subject to change. The pro forma results are
not necessarily indicative of results of operations had the acquisition taken
place at the beginning of the year.
F-15
<PAGE>
THE EASTWIND GROUP, INC.
------------------------
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
EASTWIND CENTENNIAL IVY WICKERSHAM PRO FORMA
HISTORICAL HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS
(NOTE 1) (NOTE 2) (NOTE 2) (NOTE 2) (NOTE 2) PRO FORMA
------------ ------------- --------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $23,633,000 $13,550,000 $7,425,000 $5,713,000 $ -- $50,321,000
(70,000)(A)
(268,000)(D)
(20,000)(E)
COST OF GOODS SOLD 17,794,000 10,673,000 5,431,000 5,100,000 (141,000)(F) 38,499,000
------------ ------------- --------- ----------- ------------- -----------
Gross profit 5,839,000 2,877,000 1,994,000 613,000 499,000 11,822,000
(28,000)(A)
SELLING, GENERAL AND 261,000 (B)
ADMINISTRATIVE EXPENSE 4,795,000 3,620,000 2,216,000 1,123,000 (471,000)(D) 11,516,000
------------ ------------- --------- ----------- ------------- -----------
Operating income (loss) 1,044,000 (743,000) (222,000) (510,000) 737,000 306,000
60,000 (C)
INTEREST EXPENSE, net 466,000 382,000 161,000 117,000 9,000 (F) 1,195,000
------------ ------------- --------- ----------- ------------- -----------
Income (loss) before
extraordinary item and
tax benefit 578,000 (1,125,000) (383,000) (627,000) 668,000 (889,000)
INCOME TAXES (BENEFIT) 262,000 -- (8,000) -- (98,000)(G) 156,000
------------ ------------- --------- ----------- ------------- -----------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ 316,000 $(1,125,000) $ (375,000) $ (627,000) $ 766,000 $(1,045,000)
============ ============= ========= =========== ============= ===========
PREFERRED STOCK DIVIDENDS 99,000 41,000 (H) 140,000
------------ ------------- -----------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM
ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ 217,000 $ 725,000 $(1,185,000)
============ ============ ===========
EARNINGS (LOSS) PER
COMMON SHARE BEFORE
EXTRAORDINARY ITEM $ .11 $ (.55)
============ ===========
SHARES USED IN COMPUTING
EARNINGS (LOSS) PER
COMMON SHARE BEFORE
EXTRAORDINARY ITEM 1,971,137 2,145,924
============ ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-16
<PAGE>
THE EASTWIND GROUP, INC.
------------------------
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
-----------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
1. EASTWIND HISTORICAL:
--------------------
The historical balances represent the results of operations for the year ended
December 31, 1996, as reported in the Company's Form 10-KSB.
2. ACQUISITIONS OF CENTENNIAL PRINTING CORPORATION,
TYGART MOULDING CORPORATION
AND WICKERSHAM PRINTING COMPANY, INC.:
--------------------------------------
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 $2,850,000, compromised of 182,232 shares of the Company's
Common Stock, 9,000 shares of the Company's Series B Redeemable Preferred Stock
and $450,000 in cash. The acquisition has been accounted for using the purchase
method of accounting, whereby the purchase price was allocated to the assets and
liabilities acquired based on the fair 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 value of the net assets acquired by approximately $6,000,000, which has
been recorded as goodwill and will be amortized on a straight-line basis over 20
years. The unaudited pro forma consolidated statement of operations for the year
ended December 31, 1996 reflects Centennial's historical operating results for
the nine months ended September 30, 1996, which were included in a previously
filed 8-K/A dated December 31, 1996. The consolidated historical operating
results of Eastwind for the years ended December 31, 1996 includes the results
of operations of Centennial from the date of acquisition (October 17,
1996)through (December 31, 1996).
On December 31, 1996, a majority-owned subsidiary of the Company acquired
substantially all of the assets and assumed certain liabilities of Tygart
Moulding Corporation ("Ivy"). The total consideration paid by the Company was
$3,764,000, of which $3,304,000 was financed through debt. The acquisition has
been accounted for using the purchase method of accounting. The purchase price
was allocated to the assets and liabilities acquired based on the fair values at
the acquisition date. Such allocation has been based on estimates that may be
revised at a later date. The fair value of the net assets was recorded based on
the carrying value for monetary net assets, with the remaining portion of the
purchase price allocated to property, plant and equipment. The pro forma
consolidated statement of operations for the year ended December 31, 1996
reflects Ivy's historical operating results for the year then ended.
On January 2, 1997, the Company acquired 100% of the capital stock of Wichersham
Printing Company, Inc. ("Wickersham") in exchange for 30,000 shares of the
Company's Common stock. The acquisition has been accounted for using the
purchase method of accounting. The purchase price was allocated to the assets
and liabilities acquired based on the fair values at the acquisitions date. The
purchase price was allocated to the assets and liabilities acquired based on the
fair values at the acquisition date. The purchase price, including estimated
transaction costs of $300,000, exceeded the fair value of the net assets
acquired by approximately
F-17
<PAGE>
$630,000, which has been recorded as goodwill and will be amortized on a
straight-line basis over 20 years. The unaudited pro forma consolidated
statement of operations for the year ended December 31, 1996 reflects
Wickersham's historical operating results for the year then ended.
Unaudited Pro Forma Adjustments to Consolidated Statement of Operations
- ------------------------------------------------------------------------
The following pro forma adjustments for the acquisitions of Centennial, Ivy,
and Wickersham are reflected in the pro forma consolidated statement of
operations for the year ended December 31, 1996 as if the acquisitions had
occurred on January 1, 1996:
A. Net reduction in depreciation expense of $98,000 for the adjustments to
property, plant and equipment recorded in connection with the acquisitions of
Centennial and Ivy. Additional depreciation expense of $45,000 based on the
write up of Centennial's property, plant and equipment was offset by a
reduction in depreciation expense of $143,000 based on the write down of
Ivy's property, plant and equipment.
B. Amortization expense of $261,000 for the goodwill and covenant not to compete
recorded in connection with the acquisitions of Centennial, Ivy, and
Wickersham.
C. Total increase in interest expense of $60,000 to account for interest of
$31,000 on the cash used in the acquisition of Centennial an increase in
interest expense (of $29,000 on) the debt incurred in the acquisition of Ivy.
D. Reduction in salary expense of $739,000 resulting from the elimination of
officer/shareholder compensation at Centennial of $425,000 and a reduction in
payroll expense of Ivy of $429,000 resulting from the termination of
employees in connection with the acquisition, offset by new management
compensation at Ivy of $115,000.
E. Elimination of rent expense of $20,000 related to a facility lease not
assumed by the Company.
F. In August 1996, a wholly owned subsidiary of the Company entered into a
capital lease obligation to purchase docutech printing equipment which had
previously been leased by Wickersham under an operating lease. The pro forma
statement of operations for the year ended December 31, 1996 reflects the
elimination of rent expense of $167,000, offset by interest expense of $9,000
and depreciation expense of $26,000.
G. Reflects elimination of the net historical federal tax provisions of $98,000
based on the pro forma loss before income taxes for the year ended December
31, 1996.
H. Dividends of $41,000 on the Series B Preferred stock issued in connection
with the acquisition of Centennial.
Unaudited Pro Forma Loss Per Share
- ----------------------------------
Pro forma loss per share is computed by dividing pro forma net loss attributable
to Common stockholders by Eastwind's weighted average number of shares
outstanding after giving effect to the shares issued in connection with the
acquisition of Centennial and Wickersham.
F-18
<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: June 2, 1997 /s/ WILLIAM B. MILLER
-----------------------------
William B. Miller
Senior Vice President and
Chief Financial Officer
F-19
<PAGE>
EXHIBIT 23
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
As certified public accountants, we hereby consent to the incorporation of our
report included in this Form 8-K/A, into The Eastwind Group, Inc.'s previously
filed Form S-8 Registration Statement File No. 333-28103.
/s/ Walz, Deihm, Geisenberger, Bucklen & Tennis
-------------------------------------------
WALZ, DEIHM, GEISENBERGER,
BUCKLEN & TENNIS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Lancaster, Pennsylvania
June 2, 1997
