SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8K/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) December 8, 1997
Celerity Solutions, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-20102 52-1283993
(State of Jurisdiction) (Commission File Number) (IRS Employer ID No.)
200 Baker Avenue, Suite 300
Concord, MA 01742
(Address of Principle Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (508) 287-5888
------------------------------------------------------------------------
Former Name or Former Address, if Changed Since Last Report
<PAGE>
Item 2: Acquisition or Disposition of Assets
On December 8, 1997, Celerity Solutions, Inc. (Celerity or Company)
acquired Somerset Automation, Inc. (Somerset), a California-based,
privately-held developer and integrator of warehouse management software for
approximately $5,557,918. The consideration consisted of $2,496,163 in cash and
other assets, 1,958,233 shares of unregistered common stock of Celerity, valued
at $2,313,848 and 23 separate promissory notes with an aggregate principal and
interest amount of $747,907. The promissory notes are payable in three equal
aggregate payments of $250,000 due on April 1, 1999, July 1, 1999, and October
1, 1999, and a final payment due on October 1, 2000, subject to adjustments for
prepayments and are secured by selected assets of Somerset. Celerity completed
the acquisition through a merger of Somerset with a newly formed, wholly owned
subsidiary of Celerity, Somerset, Inc.
In determining the purchase price for the acquisition, the Company
considered the nature and characteristics of the professional software market,
as well as the market opportunities present in the warehouse management software
market. The purchase price was also determined by several factors, including,
without limitation, the valuation of recent similar acquisitions; comparable
industry multiples; potential product development; sales and marketing synergies
between the two companies; combined revenue and earnings potential based on past
and projected business; and the recent price for the Company's outstanding
securities. The funds for the acquisition were obtained from available cash
reserves, and operating cash flow from the combined businesses.
All of the shareholders of Somerset received a pro rata share of proceeds
from the purchase based on their percent ownership of Somerset. Two of the
twenty-three shareholders, Mr. Ringuette, CEO of Somerset, and Michael Brewer,
President of Somerset, owned 60.3% and 10.2% of the Somerset stock,
respectively. The registrant hereby incorporates by reference hereto the
information contained as Exhibit C - Luc Ringuette's Consulting Agreement to
Exhibit 2.7 - Agreement and Plan of Reorganization By and Between Celerity
Solutions, Inc., Somerset, Inc., and Somerset Automation, Inc., dated December
8, 1997, whereby Mr. Ringuette agrees to provide consulting services to Somerset
for at least a one-year period. Michael Brewer will remain in his position of
President of Somerset.
Page 1
<PAGE>
Item 7: Financial Statements and Exhibits
(b.) Pro Forma Financial Statements
The registrant hereby amends the pro forma financial statements in response to a
request for additional information from the SEC related to the combined pro
forma financial statements for Celerity Solutions, Inc. (Celerity), Client
Server Technologies, Inc. (CSTI), and Somerset Automation, Inc. (Somerset) as
follows:
1. Pro Forma Balance Sheet as of September 30, 1997, - assuming the
acquisition of Somerset was consummated on September 30, 1997.
2. Pro Forma Combined Statement of Operations for the year ended March 31,
1997, - providing the operating results of Celerity, CSTI, and Somerset
separately, and assuming the acquisitions of CSTI and Somerset were
consummated on April 1, 1996.
3. Pro Forma Combined Statement of Operations for the six months ended
September 30, 1997, - assuming the acquisition of Somerset was consummated
on April 1, 1997.
(c.) Exhibits
23.1 Consent of Independent Auditors
The registrant hereby files amended pro forma financial statements as
follows:
Page 2
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Celerity Solutions, Inc.
Pro Forma Combined Balance Sheet
As of September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Celerity/Somerset Pro Forma
Celerity Somerset Pro Forma Adj. Combined
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $3,344,576 $ 860,938 ($2,619,550)(1) $1,585,964
Short-term investments 249,140 249,140
Accounts receivable, net of allowance for 982,325 698,588 1,680,913
doubtful accounts
Notes and guaranteed royalties receivable 250,000 250,000
Prepaid expenses and other current assets 136,935 41,329 178,264
------------------------------------------------------------------------
Total current assets 4,962,976 1,600,855 (2,619,550) 3,944,281
Property and equipment 955,207 414,062 1,369,269
Less: accumulated depreciation (581,908) (225,568) (807,476)
------------------------------------------------------------------------
Net Property and equipment 373,299 188,494 561,793
Notes and guaranteed royalties receivable 1,111,112 1,111,112
Investment in subsidiary
Goodwill, net of accumulated amortization 785,823 409,115(2) 1,194,938
Software development costs, net of accumulated 22,174 689,880(3) 712,054
amortization
Other long term assets 195,942 123,387(4) 319,329
------------------------------------------------------------------------
Total assets $7,429,152 $1,811,523 ($1,397,168) $7,843,507
========================================================================
</TABLE>
See accompanying notes.
Page 3
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Celerity Solutions, Inc.
Pro Forma Combined Balance Sheet
As of September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Celerity/Somerset Pro Forma
Celerity Somerset Pro Forma Adj. Combined
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 442,838 $ 234,010 $ 676,848
Unearned revenue and other current liabilities 402,785 458,526 861,311
------------------------------------------------------------------------
Total current liabilities 845,623 692,536 1,538,159
Notes payable to related parties 1,552,069 5,031 747,907(5) 2,305,007
Deferred income taxes 50,738 50,738
Deferred rent 77,582 77,582
------------------------------------------------------------------------
Total liabilities 2,475,274 748,305 747,907 3,971,486
Shareholders' equity:
Common stock, $.10 par value, Celerity 685,715 166,732 29,091(6) 881,538
Additional paid-in capital 16,747,202 2,118,025(7) 18,865,227
Dividends
Accumulated earnings (deficit) (10,428,695) 896,486 (4,292,191)(8) (13,824,400)
------------------------------------------------------------------------
7,004,222 1,063,218 (2,145,075) 5,922,365
Less Treasury stock, at cost, 825,088 shares at (2,050,344) (2,050,344)
September 30, 1997
------------------------------------------------------------------------
Total shareholders' equity 4,953,878 1,063,218 (2,145,075) 3,872,021
------------------------------------------------------------------------
Total liabilities and shareholders' equity $7,429,152 $1,811,523 ($1,397,168) $7,843,507
========================================================================
</TABLE>
See accompanying notes.
Page 4
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Celerity Solutions, Inc.
Pro Forma Combined Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Celerity CSTI Somerset Celerity/
Year Ended Twelve Month Twelve Month CSTI/Somerset Pro Forma
Period Ended Period Ended
March 31, 1997 March 31, 1997 March 31, 1997 Pro Forma Adj. Combined
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $1,925,913 $3,652,591 $3,642,872 $9,221,376
------------------------------------------------------------------------------
Cost of Revenue
Services 1,650,475 2,134,246 3,784,721
------------------------------------------------------------------------------
Gross profit 1,925,913 2,002,116 1,508,626 5,436,655
------------------------------------------------------------------------------
Operating expenses:
Research and development 2,181,457 729,943 2,911,400
General and administrative 1,523,682 450,362 515,736 2,489,780
Sales and marketing 443,170 444,782 887,952
Depreciation and amortization 200,633 268,557 107,620 319,140(9) 895,950
In process research and development
Consolidation expenses 462,567 462,567
------------------------------------------------------------------------------
Total operating expenses 4,368,339 1,892,032 1,068,138 319,140 7,647,649
------------------------------------------------------------------------------
Operating income (loss) (2,442,426) 110,084 440,488 (319,140) (2,210,994)
------------------------------------------------------------------------------
Other Income (Expense):
Other income 13,689 50,573 64,262
Interest income 257,021 24,417 20,873 (247,856)(10) 54,455
Gain (loss) on disposition of assets (37,983) (37,983)
------------------------------------------------------------------------------
Income (loss) before taxes ($2,209,699) $185,074 461,361 (566,996) (2,130,260)
Provision for income taxes -- -- 148,111 (148,111)(12)
Net income (loss) ($2,209,699) $185,074 $313,250 ($418,885) ($2,130,260)
==============================================================================
Net income (loss) per share ($0.46) ($0.27)
==============================================================================
Weighted avg. number of shares 4,832,065 3,158,233(11) 7,990,298
outstanding
==============================================================================
</TABLE>
See accompanying notes.
Page 5
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Celerity Solutions, Inc.
Pro Forma Combined Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Celerity Somerset Celerity/Somerset
Six Months Ended Six Months Ended Pro Forma Pro Forma
Sept. 30, 1997 Sept. 30, 1997 Adjustments Combined
------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $2,057,968 $2,381,821 $4,439,789
------------------------------------------------------------------------------
Cost of Revenue
Services 1,103,082 1,041,138 2,144,220
------------------------------------------------------------------------------
Gross profit 954,886 1,340,683 2,295,569
------------------------------------------------------------------------------
Operating expenses:
Research and development 404,376 404,376
General and administrative 654,965 576,562 1,231,527
Sales and marketing 329,824 146,674 476,498
Depreciation and amortization of 61,360 54,838 98,208(9) 214,406
goodwill
In process research and development
Consolidation expenses
------------------------------------------------------------------------------
Total operating expenses 1,450,525 778,074 98,208 2,326,807
------------------------------------------------------------------------------
Operating income (loss) (495,639) 562,609 (98,208) (31,238)
------------------------------------------------------------------------------
Other Income ( Expense):
Interest income 137,942 5,101 (21,200)(10) 121,843
Interest (expense) (95,304) (2,216) (97,520)
Other income (1,904) 5,527 3,623
Gain (loss) on disposition of assets
------------------------------------------------------------------------------
Income (loss) before taxes (454,905) 571,021 (119,408) (3,292)
Provision for income taxes 242,475 (213,924)(12) 28,551
------------------------------------------------------------------------------
Net income (loss) ($454,905) $ 328,546 $94,516 ($31,843)
==============================================================================
Net (loss) per share ($0.08) ($0.00)
==============================================================================
Weighted average number of shares 6,032,065 1,958,233(11) 7,990,298
outstanding
==============================================================================
</TABLE>
See accompanying notes.
Page 6
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Celerity Solutions, Inc.
Notes to Pro Forma Combined Financial Statements
(Unaudited)
These pro forma combined financial statements are qualified in their entirety by
and should be read in conjunction with the consolidated historical financial
statements and related notes thereto of Celerity, CSTI, and Somerset. The pro
forma information is presented for illustrative purposes only and does not
purport to be indicative of the operating results or financial position that
would actually have occurred if the acquisition of CSTI and Somerset had
occurred on the dates indicated, nor is it indicative of future operating
results or financial position. The purchase price accounting entries were
derived from the results of third party valuations of developed technology,
in-process research and development and goodwill, as well as a valuation of the
Celerity stock issued as consideration for the purchases.
The operating data for CSTI was derived from the audited financial statements
prepared by Ernst & Young LLP. The operating data for Somerset for the twelve
months ending March 31, 1997 and the six months ending September 30, 1997 was
derived from Somerset's internal monthly financial results adjusted with audit
adjustments identified through Ernst & Young LLP's audits.
Note 1. Adjustment to cash to reflect the cash used to complete the transaction
($2,496,163) and cash provided to Somerset shareholders ($123,387) as
loans to exercise Somerset stock options just prior to completing the
transaction.
Note 2. Represents the goodwill ($409,115) recorded for Somerset based on
third-party valuations related to trademarks, tradenames, assembled
workforce, and customer list. Amortization period for Somerset's
goodwill is 7 years
Note 3. Represents the capitalized software ($689,880) recorded for Somerset
for the value of developed technology based on third-party valuations
of the intangible assets acquired in conjunction with the Somerset
transaction. Amortization period for Somerset's capitalized software is
5 years.
Note 4. Entry to record loans ($123,387) made to shareholders of Somerset.
Note 5. Entry made to record the promissory notes ($747,907) issued in
conjunction with the Somerset transaction.
Note 6. Entry made to eliminate common stock recorded on Somerset's balance
sheet of $166,732 and to record the par value of 1,958,233 shares of
Celerity common stock of $195,823 = $29,091.
Note 7. Additional paid-in capital represents 1,958,233 share at $1.1816 (70%
of the closing price of Celerity's stock on December 8, 1997 ($1.688)
based on a third-party valuation of Celerity's common stock), or
$2,313,025 less that par value of the shares issued ($195,823) =
$2,118,025.
Page 7
<PAGE>
Note 8. Accumulated deficit represents the estimated write-off associated with
the Somerset transaction for in-process R&D ($3,208,744), less the
elimination of accumulated earnings of Somerset ($896,486) prior to
the acquisition, and the adjustment needed to account for the change
in Somerset's net asset balance from September 30, 1997 to December 8,
1997 ($186,961).
Note 9. Represents the amortization of goodwill and capitalized software for
both CSTI ($122,724 ) and Somerset ($196,416 ) for the twelve months
ending March 31, 1997 and for Somerset ($98,208) for the six months
ending September 30, 1997. The amortization period for goodwill is
assumed to be 10 years for CSTI and 7 years for Somerset. The
amortization period for capitalized software is assumed to be 5 years
for both CSTI and Somerset.
Note 10. Estimation of the net change in interest income in connection with this
transaction as a result of the lower cash balance of the combined
businesses.
Note 11. The adjusted weighted average shares outstanding for the twelve months
ending March 31, 1997 include the 1,200,000 shares issued to CSTI
shareholders and the 1,958,233 shares issues to Somerset shareholders.
The adjusted weighted average shares outstanding for the six months
ending September 30, 1997 include the 1,958,233 shares issued to
Somerset shareholders.
Note 12. The adjusted income taxes for the twelve months ending March 31, 1997
reflect the elimination of a federal tax liability because of the
consolidated loss incurred by Celerity. The adjusted income taxes for
the six months ending September 30, 1997 reflect the elimination of a
federal tax liability because of the consolidated loss incurred by
Celerity.
Page 8
<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.
CELERITY SOLUTIONS, INC.
(Registrant)
Date: July 17, 1998 By: /s/ Edward Terino
---------------------------------------
Edward Terino
Chief Financial Officer, Treasurer, and
Secretary
Page 9
<PAGE>
EXHIBIT INDEX
Number Description of Exhibits Page
- ------ ----------------------- ----
23.1 Consent of Independent Auditor 11
Page 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the 1991 Non-Qualified Employee Stock Option Plan and the
1992 Non-qualified Non-Employee Director Stock Option Plan of Celerity
Solutions, Inc. (formerly Capitol Multmedia, Inc.) of our report dated December
3, 1997, with respect to the financial statements of Somerset Automation, Inc.
included in the report on Form 8-KA filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Boston, Massachusetts
July 16, 1998
Page 11
