SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K/A-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): October 29, 1998
DERMA SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 1-31070 23-2328753
(State or other jurisdiction (Commission (IRS employer
of incorporation) File Number) identification number)
214 Carnegie Center, Suite 100
Princeton, NJ 08540
(609) 514-4744
(Address including zip code and telephone
number, of principal executive offices)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Current Report amends the Company's Current Report on Form 8-K
filed November 13, 1998 and amended January 12, 1999, concerning the acquisition
by the Company of Sunshine Products, Inc. ("Sunshine"). The purpose of the
current amendment is the addition of note 1 to the Pro Forma Combined Condensed
Balance Sheet required by Form 8-K Item 7(b).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
The audited financial statements of Sunshine for the Twelve Months Ended
June 30, 1998 are filed herewith as Exhibit 99.1.
(b) Pro Forma Financial Information
The Unaudited Pro Forma Combined Condensed Balance Sheets at September
30, 1998 and the Unaudited Pro Forma Combined Condensed Statements of Operations
for the Nine Months ended September 30, 1998 and the year ended December 31,
1997 are filed herewith as Exhibit 99.2.
(c) Exhibits:
99.1 Financial Statements of Sunshine Products, Inc.
for the Twelve Months Ended June 30, 1998.
99.2 Pro Forma Financial Information. Unaudited
Pro Forma Combined Condensed Balance Sheets at September
30, 1998 and Unaudited Pro Forma Combined Condensed
Statements of Operations for the Nine Months ended
September 30, 1998 and the years Ended December 31,
1997.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
DERMA SCIENCES, INC.
Date: February 11, 1999 By: /s/ Stephen T. Wills
--------------------------
Stephen T. Wills, CPA, MST
Vice President and Chief
Financial Officer
Financial Statements
Sunshine Products, Inc.
Twelve months ended June 30, 1998
with Report of Independent Auditors
<PAGE>
Sunshine Products, Inc.
Financial Statements
Twelve months ended June 30, 1998
CONTENTS
Report of Independent Auditors ........................... 1
Financial Statements
Balance Sheet ............................................ 2
Statement of Income ...................................... 3
Statement of Stockholders' Equity ........................ 4
Statement of Cash Flows .................................. 5
Notes to Financial Statements ............................ 6
<PAGE>
Report of Independent Auditors
Board of Directors
Sunshine Products, Inc.
We have audited the accompanying balance sheet of Sunshine Products, Inc. as of
June 30, 1998 and the related statements of income, stockholders' equity, and
cash flows for the twelve months ended June 30, 1998. 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 Sunshine Products, Inc. at June
30, 1998 and the results of its operations and its cash flows for the twelve
months ended June 30, 1998 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
St. Louis, Missouri
October 9, 1998
1
<PAGE>
Sunshine Products, Inc.
Balance Sheet
June 30, 1998
ASSETS
Current assets:
Cash and cash equivalents $ 18
Accounts receivable, less allowance of $15,359 240,624
Inventories 199,508
Deferred income taxes 13,600
Prepaid expenses and other current assets 6,248
----------
Total current assets 459,998
Property and equipment, net 142,903
----------
Total assets $ 602,901
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ 26,789
Line of credit 52,803
Accounts payable 170,346
Accrued expenses 116,902
Income taxes payable 37,374
Notes payable 36,100
Notes payable - officers 24,060
----------
Total current liabilities 464,374
Deferred income taxes 26,800
Stockholders' equity:
Preferred stock, $1 par value; 30,000 shares authorized;
5,678 shares issued 5,678
Common stock, $1 par value; 9,000 shares authorized;
6,200 shares issued 6,200
Additional paid-in capital 22,657
Retained earnings 117,143
----------
151,678
Less treasury stock at cost:
Common stock - 2,300 shares (10,735)
Preferred stock - 5,573 shares (29,216)
----------
(39,951)
----------
Total stockholders' equity 111,727
----------
Total liabilities and stockholders' equity $ 602,901
==========
See accompanying notes.
2
<PAGE>
Sunshine Products, Inc.
Statement of Income
Twelve months ended June 30, 1998
Net sales $ 2,854,053
Cost of sales 1,478,855
------------
Gross profit 1,375,198
Operating expenses:
Selling and marketing 768,014
General and administrative 486,705
------------
Total operating expenses 1,254,719
------------
Operating income 120,479
Other income (expense):
Investment income 8,274
Gain on sale of securities 11,717
Interest expense (11,105)
Other (1,278)
------------
Income before income taxes 128,087
Provision for income taxes 45,000
------------
Net income $ 83,087
============
See accompanying notes.
3
<PAGE>
Sunshine Products, Inc.
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
TREASURY STOCK
ADDITIONAL UNREALIZED ----------------------
PREFERRED COMMON PAID-IN RETAINED GAIN ON PREFERRED COMMON STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS SECURITIES STOCK STOCK EQUITY
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 $5,678 $6,200 $22,657 $34,056 $ 12,322 $ (9,048) $(10,735) $ 61,130
Change in unrealized gain on securities
available for sale -- -- -- -- (12,322) -- -- (12,322)
Redemption of 3,667 shares of preferred
stock -- -- -- -- -- (20,168) -- (20,168)
Net income -- -- -- 83,087 -- -- -- 83,087
-----------------------------------------------------------------------------------------
Balance at June 30, 1998 $5,678 $6,200 $22,657 $117,143 $ -- $(29,216) $(10,735) $111,727
=========================================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
Sunshine Products, Inc.
Statement of Cash Flows
Twelve months ended June 30, 1998
OPERATING ACTIVITIES
Net income $ 83,087
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 28,714
Deferred income taxes 2,300
Gain on sale of securities (11,717)
Changes in operating assets and liabilities:
Accounts receivable (29,241)
Inventories (44,192)
Prepaid expenses and other current assets 9,676
Accounts payable (37,703)
Accrued expenses (7,395)
Income taxes payable 37,374
---------
Net cash provided by operating activities 30,903
INVESTING ACTIVITIES
Purchases of property and equipment (2,413)
Proceeds from sale of available-for-sale securities 41,060
---------
Net cash provided by investing activities 38,647
FINANCING ACTIVITIES
Bank overdraft (7,200)
Net repayments on line of credit (9,332)
Principal payments of notes payable (14,559)
Principal payments of notes payable - officers (18,273)
Redemption of preferred stock (20,168)
---------
Net cash used in financing activities (69,532)
---------
Net increase in cash and cash equivalents 18
Cash and cash equivalents, beginning of period --
---------
Cash and cash equivalents, end of period $ 18
=========
See accompanying notes.
5
<PAGE>
Sunshine Products, Inc.
Notes to Financial Statements
June 30, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Sunshine Products, Inc. (the Company) is engaged in the development, marketing,
and sale of general purpose and specialized skin care products. The Company
markets its products principally through independent distributors, mainly to
health care agencies throughout the United States.
BASIS OF PRESENTATION
The Company has a December 31 fiscal year-end. In connection with the sale of
the Company as discussed in Note 11, the Company has prepared the accompanying
financial statements as of and for the twelve months ended June 30, 1998.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying value of
these investments approximates fair value.
BANK OVERDRAFT
The bank overdraft in the accompanying balance sheet consists of issued and
outstanding checks that have not cleared the bank and are in excess of the
related bank account balance as of the balance sheet date.
INVENTORIES
Inventories are stated at the lower of cost (using the first-in, first-out
method) or market.
6
<PAGE>
Sunshine Products, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is recorded using the
straight-line method over the estimated useful lives ranging from three to ten
years.
REVENUE RECOGNITION
The Company's products are primarily sold to independent distributors. Sales are
recorded when products are shipped.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for the twelve
months ended June 30, 1998 totaled $18,663.
INCOME TAXES
The Company accounts for income taxes under the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
INVESTMENTS
The Company accounts for its short-term investments in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." Management determines the appropriate
classification of its investments in debt and equity securities at the time of
purchase and reevaluates such determination at each balance sheet date. Costs of
investments are determined on a first-in, first-out method.
FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and accounts receivable. The cash is held
by a high credit quality financial institution. The Company sells almost all of
its products to medical supply companies and health care providers. Accordingly,
primarily all of the Company's accounts receivable are from companies in the
health care industry. For accounts
7
<PAGE>
Sunshine Products, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK (CONTINUED)
receivable, the Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral. Other financial
instruments consist of accounts payable and notes payable. The carrying values
of such amounts reported at the balance sheet date approximate their fair
values.
For the twelve months ended June 30, 1998, one customer, a distributor,
accounted for 24 percent of net sales, and the same customer accounted for 14
percent of accounts receivable as of June 30, 1998.
2. INVESTMENTS
At July 1, 1997, the Company held available-for-sale equity securities with a
cost of $29,343 and an unrealized gain of $12,322. During the twelve months
ended June 30, 1998, the Company sold these securities, which resulted in
proceeds of $41,060 and a realized gain of $11,717. At June 30, 1998, the
Company had no investments in debt or equity securities.
3. INVENTORIES
At June 30, 1998, inventories consisted of the following:
Raw materials $ 35,421
Packaging materials 95,706
Finished goods 68,381
========
$199,508
========
4. PROPERTY AND EQUIPMENT
At June 30, 1998, property and equipment consisted of the following:
Machinery and equipment $304,479
Furniture and fixtures 9,966
--------
314,445
Less accumulated depreciation 171,542
========
$142,903
========
8
<PAGE>
Sunshine Products, Inc.
Notes to Financial Statements (continued)
5. DEBT
LINE OF CREDIT
The Company maintains a $100,000 revolving line of credit with a bank which
expires on April 1, 1999. The line of credit is secured by accounts receivable,
inventories, the Company's United States patents and trademarks, and the
personal guarantees of certain stockholders of the Company. Borrowings on the
line of credit are due on demand and bear interest, which is payable monthly, at
the bank's base rate plus 1 percent (9.5 percent at June 30, 1998). At June 30,
1998, borrowings under this line of credit were $52,803, and available
borrowings were $47,197.
NOTES PAYABLE
At June 30, 1998, notes payable consisted of the following:
Demand note payable to bank, monthly installments
of $794 (including interest at 8.25%) through
maturity in February 1999 $ 6,138
Demand note payable to bank, monthly installments
of $786 (including interest at 8.75%) with a
final payment of $17,125 at maturity in
February 2000 29,962
-----------
$36,100
===========
The notes payable are secured by substantially all of the Company's assets and
personal guarantees of certain common stockholders. In addition, because the
above notes are due on demand, such notes have been classified as current
liabilities.
NOTES PAYABLE - OFFICERS
The officers of the Company have made various loans to the Company. All loans
and subsequent repayments have been made equally by the three officers. The
notes bear interest at various rates ranging from 7 percent to 8 percent. At
June 30, 1998, notes payable outstanding to these officers totaled $24,060. For
the twelve months ended June 30, 1998, interest expense totaled $3,445. At June
30, 1998, accrued interest of $5,208 on these notes payable to officers has been
included in accrued expenses in the accompanying balance sheet.
9
<PAGE>
Sunshine Products, Inc.
Notes to Financial Statements (continued)
5. DEBT (CONTINUED)
Interest paid on debt for the twelve months ended June 30, 1998 was $14,115.
6. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases its office and manufacturing facility and automobiles under
noncancelable operating lease agreements that expire at various dates through
June 2000. Rent expense for the twelve months ended June 30, 1998 was $122,241.
Future minimum lease payments under noncancelable operating leases as of June
30, 1998 are $135,739 and $34,893 for the twelve months ended June 30, 1999 and
2000, respectively.
CONTINGENCIES
Various claims or notices have been or may be asserted against the Company in
the ordinary course of business pertaining to state and local tax issues. In the
opinion of management, after consultation with legal counsel, resolution of
these matters will not have a material effect on the accompanying financial
statements.
7. INCOME TAXES
The components of the provision for income taxes for the twelve months ended
June 30, 1998 are as follows:
Current:
Federal $36,300
State 6,400
---------
42,700
Deferred:
Federal 2,000
State 300
---------
2,300
=========
$45,000
=========
10
<PAGE>
Sunshine Products, Inc.
Notes to Financial Statements (continued)
7. INCOME TAXES (CONTINUED)
A reconciliation of the difference between the federal statutory tax rate and
effective tax rate as a percentage of net income for the twelve months ended
June 30, 1998 is as follows:
U.S. federal statutory tax rate 30.0%
State income taxes, net of federal tax benefit 3.7
Other, net 1.4
==========
35.1%
==========
The tax effect of temporary differences that give rise to the deferred tax
assets and liabilities is as follows:
Deferred tax assets:
Accrued vacation pay $ 4,300
Allowances for discounts 5,200
Allowance for obsolete inventory 4,100
---------
13,600
Deferred tax liabilities:
Depreciation expense 26,800
---------
Net deferred tax liabilities $13,200
=========
8. EMPLOYEE BENEFIT PLAN
The Company sponsors a Savings Incentive Match Plan for Employees of Small
Employers. The Company matches eligible employees' contributions up to a maximum
of 3 percent of the employees' compensation for the calendar year. During the
twelve months ended June 30, 1998, the Company's matching contribution totaled
$15,173.
9. PREFERRED STOCK
The Company's preferred stock, which is nonvoting, ranks senior to the common
stock with respect to payment of dividends and distribution of assets upon
liquidation. In the event of liquidation, as defined, the holders of the
preferred stock are entitled to up to five times of the amount available for
distribution to the common stockholders plus any unpaid dividends. Although
dividends on preferred stock are noncumulative, if the Company declares or pays
dividends on its common stock, the holders of preferred stock
11
<PAGE>
Sunshine Products, Inc.
Notes to Financial Statements (continued)
9. PREFERRED STOCK (CONTINUED)
are entitled to receive a dividend twice such amount. The Company may, with the
approval of the Board of Directors, redeem the preferred stock at any time at a
price equal to the original sales price plus 10 percent of the original sales
price and any unpaid dividends.
10. YEAR 2000 (UNAUDITED)
Based on the Company's assessment, it determined that it will not be required to
modify or replace significant portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter. The Company presently believes the year 2000 issue will not pose
significant operational problems for its computer systems or other
computer-based equipment.
11. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS' REPORT
On October 29, 1998, the Company and its stockholders entered into a definitive
agreement with Derma Sciences, Inc. which, among other things, resulted in the
sale of all issued and outstanding stock of the Company for $1.5 million in
cash.
12
DERMA SCIENCES, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
September 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS
Sunshine Pro Forma Consolidated
Derma Sciences Products Adjustments Pro Forma
_______________________________________________________________
CURRENT ASSETS
Cash and cash equivalents 5,465,839 23 -1,500,000 3,965,862
Accounts receivable, net 952,094 254,933 0 1,207,027
Inventory 1,528,595 151,506 0 1,680,101
Prepaid expenses and other current assets 337,131 19,848 -13,600 343,379
__________ ________ __________ _________
Total Current Assets 8,283,659 426,310 -1,513,600 7,196,369
PROPERTY AND EQUIPMENT, NET 236,996 147,622 200,000 584,618
GOODWILL 0 0 1,114,404 1,114,404
OTHER ASSETS NET: 377,853 0 0 377,853
__________ ________ __________ _________
Total Assets 8,898,508 573,932 -199,196 9,273,244
========== ======== ========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit 689,000 46,298 0 735,298
Accounts payable 1,374,208 144,710 0 1,518,918
Accrued expenses and other current liabilities 1,042,244 210,528 -26,800 1,225,972
__________ ________ __________ _________
Total Current Liabilities 3,105,452 401,536 -26,800 3,480,188
__________ ________ __________ _________
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, authorized 15,000,000 shares,
issued and outstanding 6,261,247 shares 62,612 6,200 -6,200 62,612
Convertible preferred stock, $.01 par value, authorized 5,083,333
shares, issued and outstanding 5,070,833 50,708 5,678 -5,678 50,708
Treasury stock - common 0 -10,735 10,735
Treasury stock - preferred 0 -29,216 29,216
Additional paid-in capital 10,741,436 22,657 -22,657 10,741,436
Accumulated earnings , (deficit) -5,061,700 177,812 -177,812 -5,061,700
__________ ________ __________ _________
Total Shareholders' Equity 5,793,056 172,396 -172,396 5,793,056
__________ ________ __________ _________
Total Liabilities and Shareholders' Equity 8,898,508 573,932 -199,196 9,273,244
========== ======== ========== =========
</TABLE>
<PAGE>
DERMA SCIENCES, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Derma Pro Forma Consolidated
Sciences Sunshine Adjustments Pro Forma
____________________________________________________
NET SALES $6,512,346 $2,254,459 - $8,766,805
COST OF SALES 1,450,844 1,172,319 - 2,623,163
__________ __________ ___________ __________
GROSS PROFIT 5,061,502 1,082,140 - 6,143,642
OPERATING EXPENSES 5,084,130 1,003,234 - 6,087,364
__________ __________ ___________ __________
LOSS FROM OPERATIONS (22,628) 78,906 - 56,278
OTHER INCOME (EXPENSE)
Interest income/(expense), net 55,363 (9,281) - 46,082
Merger Costs (198,024) 0 - (198,024)
Restructuring Costs (550,000) 0 - (550,000)
Litigation settlement (819,353) 0 - (819,353)
__________ __________ ___________ __________
Total Other Income (Expense) (1,512,014) (9,281) - (1,521,295)
__________ __________ ___________ __________
LOSS BEFORE INCOME TAXES (1,534,642) 69,625 - (1,465,017)
Income taxes 0 0 - 0
__________ __________ ___________ __________
NET LOSS ($1,534,642) $ 69,625 - ($1,465,017)
============ ========== =========== ============
NET LOSS PER COMMON SHARE
BASIC AND DILUTED ($0.25) $17.85 - ($0.23)
============ ========== =========== ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,253,181 3,900 - 6,253,181
============ ========== =========== ============
</TABLE>
<PAGE>
DERMA SCIENCES, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Derma Sunshine Pro Forma Consolidated
Sciences Products Adjustments Pro Forma
__________ __________ ___________ ____________
NET SALES $6,601,524 $2,839,811 - $9,441,335
COST OF SALES $1,884,192 1,465,342 - 3,349,534
__________ __________ ___________ ____________
GROSS PROFIT $4,717,332 1,374,469 - $6,091,801
OPERATING EXPENSES $7,069,314 1,272,235 - 8,341,549
_____________ __________ ___________ ____________
LOSS FROM OPERATIONS ($ 2,351,982) 102,234 - (2,249,748)
OTHER INCOME (EXPENSE)
Interest income/(expense), net $93,329 (7,224) - $86,105
Merger Costs $0 0 - $0
Restructuring Costs $0 0 - $0
Litigation settlement $0 0 - $0
_____________ __________ ___________ ____________
Total Other Income (Expense) $93,329 (7,224) - 86,105
_____________ __________ ___________ ____________
LOSS BEFORE INCOME TAXES ($ 2,258,653) 95,010 - ($ 2,163,643)
Income taxes $0 0 - $0
_____________ __________ ___________ ____________
NET LOSS ($ 2,258,653) $ 95,010 - ($2,163,643)
============= ========== =========== ============
NET LOSS PER COMMON SHARE
BASIC AND DILUTED ($0.34) $24.36 - ($0.33)
============= ========== =========== ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 6,553,315 3,900 - 6,557,215
============= ========== =========== ============
</TABLE>
<PAGE>
Derma Sciences, Inc.
Note To Unaudited Pro Forma Consolidated Condensed Balance Sheet
September 30, 1998
1. PRELIMINARY ALLOCATION OF PURCHASE PRICE.
On October 31, 1998, all of the outstanding stock of Sunshine Products, Inc.
("Sunshine Products") was acquired by Derma Sciences, Inc. for total
consideration paid by Derma Sciences, Inc. of $1.5 million. The acquisition has
been accounted for under the purchase method. Pursuant to the terms of the
purchase agreement, certain property, equipment, intangible assets, other assets
and working capital were acquired and certain liabilities were assumed for
consideration of approximately $1.5 million in cash. The preliminary allocation
of the purchase price is as follows:
Property and equipment $ 347,622
Current assets acquired 412,710
Excess cost over fair market value
of net assets acquired 1,114,404
Other liabilities (374,736)
------------
$1,500,000
============
