<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-K/A
AMENDMENT NO. 2 TO
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
______________
Date of Report (Date of earliest event reported): APRIL 15, 1999
--------------
SIGHT RESOURCE CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 0-21068 04-3181524
- --------------- ------------------------ -------------------
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
</TABLE>
100 JEFFREY AVENUE, HOLLISTON, MASSACHUSETTS 01746
-------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 429-6916
--------------
<PAGE>
SIGHT RESOURCE CORPORATION
INDEX
<TABLE>
<CAPTION>
<S> <C>
Item Page No.
- ---- --------
Item 2. Acquisition or Disposition of Assets 3
Item 5. Other Events 3
Item 7. Financial Statements and Exhibits 4
Item 8. Change in Fiscal Year 5
Signatures 6
Exhibit Index 7
</TABLE>
2
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 22, 1999, a wholly-owned subsidiary of the Registrant, Kent
Acquisition Corporation ("KAC"), completed its acquisition of all of the issued
and outstanding shares of capital stock of Kent Optical Company, a Michigan
corporation ("Kent"), Custom Optics, Inc., a Michigan corporation ("Custom"),
Kent-N.W. Grand Rapids, Inc., a Michigan corporation ("Kent-N.W."), Kent-
Hackley, Inc., a Michigan corporation ("Kent-Hackley"), Source Optical Supply,
Inc., a Michigan corporation ("Source," and collectively with Kent, Custom,
Kent-N.W. and Kent-Hackley, the "Companies"), pursuant to a Stock Purchase and
Sale Agreement (the "Purchase Agreement") by and among KAC, the Registrant, the
Companies and the stockholders of the Companies dated as of April 1, 1999 (the
"Acquisition"). In consideration for all the issued and outstanding stock of
the Companies, KAC paid $5,200,000 in cash provided pursuant to a term loan from
Fleet National Bank, more particularly described in Item 5 to this Form 8-K,
issued promissory notes in the aggregate amount of $1,000,000 and arranged for
the issuance of 160,000 unregistered shares of Common Stock of the Registrant.
The Companies are privately held primary eye care chains that operate eye care
centers in Michigan. The Registrant intends to continue the business operated
by the Companies. The purchase price for the Acquisition was determined by
negotiation between the parties based , in part, upon a multiple of the
Companies' earnings. This Acquisition was accounted for under the purchase
method of accounting. The Purchase Agreement and the press release dated April
23, 1999, filed as Exhibits 2.1 and 99.8, respectively, are incorporated herein
by reference.
ITEM 5. OTHER EVENTS.
On April 15, 1999, the Registrant entered into a Loan Agreement (the "Loan
Agreement") with Fleet National Bank (the "Bank") pursuant to which the
Registrant may borrow up to $7,000,000 on a term loan basis, up to $3,000,000 on
a revolving credit basis and up to $10,000,000 on an acquisition credit basis,
subject to certain performance criteria, which loans are secured by all of the
assets of the Registrant and its wholly-owned subsidiaries.
On April 22, 1999, the Registrant borrowed $7,000,000 pursuant to the term
loan and $975,000 pursuant to the revolving line of credit to refinance existing
debt and finance the acquisition of the Companies by KAC, a wholly owned
subsidiary of the Registrant. Other amounts borrowed under the Loan Agreement
in the future are expected to be used to finance future acquisitions, provide
ongoing working capital and for other general corporate purposes.
The Loan Agreement and the press release dated April 23, 1999, filed as
Exhibits 99.1 and 99.9, respectively, are incorporated herein by reference.
3
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired. Attached as Exhibit 99.10 is
-------------------------------------------
the audited combined balance sheet of the Companies as of March 31, 1999,
and the related combined statements of operations, retained earnings and
cash flows for the nine month period then ended.
(b) Pro forma financial information. Attached as Exhibit 99.11 is the
-------------------------------
unaudited pro forma consolidated balance sheet as of March 27, 1999 and the
unaudited pro forma consolidated statements of operations for the twelve
months ended December 31, 1998 and for the three months ended March 27,
1999.
(c) Exhibits.
--------
Exhibit No. Description
- ----------- -----------
2.1* Stock Purchase and Sale Agreement by and among Kent Optical
Company, Custom Optics, Inc., Kent-N.W. Grand Rapids, Inc., Kent-
Hackley, Inc., Source Optical Supply, Inc., the stockholders of
such companies, Kent Acquisition Corporation and Sight Resource
Corporation, dated as of April 1, 1999.
99.1* Loan Agreement by and between Sight Resource Corporation and
Fleet National Bank, dated as of April 15, 1999.
99.2* $7,000,000 Term Loan Note between Sight Resource Corporation and
Fleet National Bank, dated as of April 15, 1999.
99.3* $3,000,000 Secured Revolving Line Note between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.4* $10,000,000 Secured Acquisition Term Note between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.5* Borrower Security Agreement by and between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.6* Borrower Stock Pledge Agreement by and between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.7* Trademark Security Agreement by and between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
4
<PAGE>
99.8* Press Release dated April 23, 1999, re: Acquisition.
99.9* Press Release dated April 23, 1999, re: Loan Agreement.
99.10 Audited combined balance sheet of the Companies as of March 31,
1999, and the related combined statements of operations, retained
earnings and cash flows for the nine month period then ended.
99.11 Unaudited pro forma consolidated balance sheet as of March 27,
1999 and the unaudited pro forma consolidated statements of
operations for the twelve months ended December 31, 1998 and for
the three months ended March 27, 1999.
- ------------
* Incorporated herein by reference to the corresponding exhibit in the
Company's Form 8-K filed with the Securities and Exchange Commission on May 6,
1999.
ITEM 8. CHANGE IN FISCAL YEAR.
On April 22, 1999, the Board of Directors of the Registrant authorized a
change in the Registrant's fiscal year end from the end of the calendar year
(December 31) to the last Saturday of the calendar year which, for the current
fiscal year, will be December 25, 1999. The transition period covering such
change in fiscal year end will be covered by the Registrant's Form 10-Q for the
first quarter of 1999.
5
<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.
SIGHT RESOURCE CORPORATION
Date: August 26, 1999 By:/s/ William T. Sullivan
-----------------------
William T. Sullivan
President
6
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------- -----------
2.1* Stock Purchase and Sale Agreement by and among Kent Optical
Company, Custom Optics, Inc., Kent-N.W. Grand Rapids, Inc., Kent-
Hackley, Inc., Source Optical Supply, Inc., the stockholders of
such companies, Kent Acquisition Corporation and Sight Resource
Corporation, dated as of April 1, 1999.
99.1* Loan Agreement by and between Sight Resource Corporation and
Fleet National Bank, dated as of April 15, 1999.
99.2* $7,000,000 Term Loan Note between Sight Resource Corporation and
Fleet National Bank, dated as of April 15, 1999.
99.3* $3,000,000 Secured Revolving Line Note between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.4* $10,000,000 Secured Acquisition Term Note between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.5* Borrower Security Agreement by and between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.6* Borrower Stock Pledge Agreement by and between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.7* Trademark Security Agreement by and between Sight Resource
Corporation and Fleet National Bank, dated as of April 15, 1999.
99.8* Press Release dated April 23, 1999, re: Acquisition.
99.9* Press Release dated April 23, 1999, re: Loan Agreement.
99.10 Audited combined balance sheet of the Companies as of March 31,
1999, and the related combined statements of operations, retained
earnings and cash flows for the nine month period then ended.
99.11 Unaudited pro forma consolidated balance sheet as of March 27, 1999 and
the unaudited pro forma consolidated income statements for the twelve
months ended December 31, 1998 and for the three months ended March 27,
1999.
- ------------
* Incorporated herein by reference to the corresponding exhibit in the
Company's Form 8-K filed with the Securities and Exchange Commission on May 6,
1999.
1
<PAGE>
EXHIBIT 99.10
Independent Auditors' Report
Board of Directors and Shareholders
Kent Optical Co. and Affiliates:
We have audited the accompanying combined balance sheet of Kent Optical Co. and
Affiliates (the "Company"), as of March 31, 1999, and the related combined
statements of operations, retained earnings (accumulated deficit), and cash
flows for the nine-month period then ended. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined 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 combined financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Kent Optical Co. and
affiliates as of March 31, 1999, and the results of its operations and its cash
flows for the nine-month period then ended, in conformity with generally
accepted accounting principles.
KPMG, L.L.P.
Boston, Massachusetts
July 2, 1999
1
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Combined Balance Sheet
March 31, 1999
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents $ 199,840
Accounts receivable, net of allowance of $256,500 747,580
Inventories 898,898
Prepaid expenses and other current assets 34,214
----------
Total current assets 1,880,532
----------
Property and equipment, net 400,891
Other assets:
Intangible assets, net 525,295
----------
$2,806,718
==========
</TABLE>
See accompanying notes to combined financial statements.
2
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Combined Balance Sheet
March 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
Current liabilities:
Current portion of long term debt $ 225,394
Line of credit 120,000
Accounts payable 549,402
Accrued expenses 277,641
----------
Total current liabilities 1,172,437
Long term debt, less current maturities 1,176,076
Stockholders' equity:
Common stock 36,840
Additional paid-in capital 433,136
Accumulated deficit (11,771)
----------
458,205
----------
$2,806,718
==========
</TABLE>
3
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Combined Statement of Operations
For the nine-month period ended March 31, 1999
<TABLE>
<S> <C> <C>
Net revenue $7,650,041
Cost of revenue 2,785,638
----------
Gross margin 4,864,403
Selling, general and administrative expense 4,830,651
----------
Operating income 33,752
Other income (expense):
Interest expense (100,586)
Other income 13,899
----------
Total other expense (86,687)
Loss before income taxes (52,935)
Income tax expense --
----------
Net loss $ (52,935)
==========
Pro forma information (unaudited):
Net loss, as reported (52,935)
Pro forma earnings of "S" corporations $280,000
Pro forma income taxes on earnings of "S" corporations (95,200)
----------
Pro forma net loss $ (148,135)
==========
</TABLE>
See accompanying notes to combined financial statements.
4
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Combined Statement of Retained Earnings (Accumulated Deficit)
For the nine-month period ended March 31, 1999
<TABLE>
<S> <C>
Retained earnings (accumulated deficit) at beginning of period $405,806
Net loss (52,935)
Distributions 364,642
--------
Retained earnings (accumulated deficit) at end of period $(11,771)
</TABLE>
5
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Combined Statement of Cash Flows
For the nine-month period ended March 31, 1999
<TABLE>
<S> <C>
Operating activities:
Net loss $ (52,935)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 97,959
Provision for doubtful accounts 92,000
Changes in operating assets and liabilities:
Accounts receivable (26,290)
Inventories (26,453)
Prepaid expenses and other current assets 23,207
Accounts payable and accrued expenses 275,259
---------
Net cash provided by operating activities 382,747
Investing activities:
Purchases of property and equipment 43,024
---------
Net cash used in investing activities 43,024
Financing activities:
Net proceeds from line of credit 120,000
Principal payments on long-term debt (240,356)
Noncash distributions to shareholders of convertible demand note receivables (234,460)
---------
Net cash used in financing activities (354,816)
Increase in cash and cash equivalents 70,955
Cash and cash equivalents, beginning of period 128,885
---------
Cash and cash equivalents, end of period $ 199,840
=========
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest $ 73,939
=========
Income taxes $ 14,731
=========
Noncash distributions $ 130,182
=========
</TABLE>
See accompanying notes to combined financial statements.
6
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
(1) PRINCIPLES OF COMBINATION AND PRESENTATION
Kent Optical Co. and Affiliates (the "Company") manufacture, distribute, and
sell eyewear and related products and services. The combined financial
statements include the accounts of Kent Optical Co. and affiliated companies
after elimination of material intercompany accounts and transactions. Kent
Optical Co. and affiliated companies are owned and managed by a common
shareholder group who have entered into shareholder agreements restricting
the transfer of shares outside the group and who have agreed to make
decisions in unison. The companies include:
CUSTOM OPTICS, INC.
An affiliated company which manufactures eyewear.
KENT OPTICAL CO., SOURCE OPTICAL SUPPLY, INC., KENT-NW GRAND RAPIDS
INC., AND KENT-HACKLEY, INC.
Companies which sell eyewear and related products and services.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash and cash equivalents
consist of cash in banks.
(b) FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair value because of
the short maturity of these items. The carrying amount of other long-
term maturities approximates fair value. The carrying amount of the
Company's line of credit approximated fair value because the borrowing
rate changes with market interest rates.
(c) REVENUE RECOGNITION
Revenue and the related costs from the sale of eyewear are recognized at
the time an order is complete. Revenue from eye care services is
recognized when the service is performed. The Company has fee for
service arrangements with most of its third party payors. Revenue is
reported net of contractual allowances.
(d) INVENTORIES
Inventories primarily consist of the costs of eyeglass frames, contact
lenses, ophthalmic lenses, sunglasses and other optical products and are
valued at the lower of cost (using first-in, first-out method) or market.
(Continued)
7
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
(e) ADVERTISING
Advertising costs are expensed as incurred.
(f) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. The Company provides for
depreciation at the time the property and equipment is placed in service.
The straight-line method is used over the estimated useful life of the
assets ranging from 3 to 10 years. The Company reviews property and
equipment for impairment whenever events or changes in circumstances
indicate that the carrying amount of may not be recoverable.
Recoverability of property and equipment is measured by a comparison of
the carrying amount of the related asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
(g) INTANGIBLE ASSETS
Intangible assets resulting from business acquisitions consist of non-
competition agreements, customer lists, goodwill and tradenames.
Intangible assets are amortized on a straight-line basis over a period of
5 to 15 years. The Company assesses the recoverability of unamortized
intangible assets on an on-going basis by comparing anticipated operating
profits and future, undiscounted cash flows to net book value. In
performing this analysis, management considers such factors as current
results, trends, and future prospects, in addition to other economic
factors.
(h) INCOME TAXES
Kent Optical Co.and Source Optical Supply, Inc. are subject to federal
income taxes. The remaining affiliated companies are taxed as S
corporations under provisions of the Internal Revenue Code, which
provides that, in lieu of corporation income taxes, the shareholders are
taxed on their proportionate share of the Company's taxable income
Therefore, no provision or liability for federal income taxes is
presented in these combined financial statements for the remaining
affiliated companies.
(i) USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Actual results may differ from those estimates.
(Continued)
8
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Leasehold improvements $ 259,373
Equipment 671,860
Office equipment 329,103
Transportation equipment 30,276
Computers and software 101,016
----------
1,391,628
Less accumulated depreciation (990,737)
----------
Net property and equipment $ 400,891
==========
(4) INTANGIBLE ASSETS
Intangible assets consists of the following:
Non-competition agreements $ 285,087
Customer lists 150,250
Goodwill 243,090
Tradenames 95,000
----------
773,427
Less accumulated amortization (248,132)
----------
Net intangible assets $ 525,295
==========
(5) INCOME TAXES
Income tax benefit attributable to loss from operations differed from the
amounts computed by applying the U.S. federal income tax rate of 34 percent
as a result of the following:
NINE-MONTHS ENDED 3/31/99
- ------------------------------------------------------------ ---------
Computed "expected" tax benefit $ 16,963
Increase in tax benefit resulting from:
"S" corporation earnings excluded from Income 127,975
Decrease in tax benefit resulting from:
Other (14,805)
Increase in valuation allowance for deferred
tax assets (130,133)
---------
$ --
=========
(Continued)
9
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
The tax effects of temporary differences that give rise to significant
portions of the net deferred tax asset are presented below:
NINE-MONTHS ENDED 3/31/99
- ------------------------------------------------------------ ---------
Deferred tax assets:
Net operating loss carryforwards $ 88,922
Bad debt reserve 85,000
Amortization differences 18,194
---------
Gross deferred tax assets 192,116
Valuation allowance under SFAS 109 (161,201)
---------
Net deferred tax assets 30,915
Less deferred tax liabilities: (30,915)
---------
Net deferred tax $ --
=========
A valuation allowance in the amount of $161,201 was established on March 31,
1999. This allowance has been established due to the uncertainty in the
ability of the Company to benefit from the net deferred tax assets.
The net operating loss carryforwards ("NOLs") for federal tax purposes at
March 31, 1999 are approximately $262,000 and expire in various amounts
through 2019.
(6) LINE OF CREDIT
Kent Optical Co. has a $250,000 line of credit with a bank at prime plus one
half percent (8.50% at March 31, 1999). The outstanding balance under the
line of credit was $120,000 at March 31, 1999 and is due September 1999.
Assets of the Company and personal guarantees of the shareholders secure the
line of credit.
(7) ACCRUED EXPENSES
Accrued expenses consist of the following:
Accrued sales tax $ 72,088
Payroll and related costs 70,739
Other 134,814
--------
Total accrued expenses $277,641
========
(Continued)
10
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
(8) DEBT
<TABLE>
<S> <C>
8.35% bank note payable in monthly installments of $6,185 including interest;
final payment of $142,300 due October 2003 $ 373,238
9.5% bank note payable in monthly installments of $2,424 including interest;
final payment due March 2002 70,574
9.5% bank note payable in monthly installments of $2,515 including interest;
final payment due July 2001 62,861
7.9%-10.5% equipment notes payable in monthly installments of $1,944 including
interest; final payments due through September 2002 29,406
10% capital leases payable in monthly installments of $918 including interest;
final payments due through December 2000 11,407
8% promissory note due to individual, payable in monthly installments of $3,579
including interest; final payment due April 2007 255,062
8.00% - 10% promissory notes due to individuals, payable in monthly installments
of $3,141 including interest; final payments due through November 2007 213,777
8.0% promissory notes due to unaffiliated company, payable in monthly installments
of $2,230 including interest; final payments due through January 2003 82,139
9% shareholder note payable in monthly installments of $3,000 plus interest;
final payment due January 2002 102,000
Note payable with imputed interest at 9% in connection with the purchase of the
assets of a retail optical business due 2006 41,345
Notes payable with imputed interest at 9% in connection with non-competition
agreements with monthly installments of $2,200; final payments due through
August 2010 159,661
----------
1,401,470
Less current maturities 225,394
----------
Long term debt, less current maturities $1,176,076
==========
</TABLE>
Long-term debt is secured by substantially all the assets of the Company and
is guaranteed by the shareholders of the Company.
(Continued)
11
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
Aggregate maturities of long-term debt for the years ended March 31, 1999
through 2004 and thereafter are as follows:
YEAR ENDING
MARCH 31, AMOUNT
----------- ----------
2000 $ 225,394
2001 200,331
2002 221,353
2003 176,502
2004 244,660
Thereafter 333,230
----------
Total long-term debt $1,401,470
==========
(9) SHAREHOLDERS' EQUITY
The following is a schedule of corporate stock authorized and issued and
outstanding at March 31, 1999:
<TABLE>
<CAPTION>
COMMON STOCK SHARES
----------------------------------
ISSUED AND
AUTHORIZED OUTSTANDING PAR VALUE
----------------------------------
<S> <C> <C> <C>
Kent Optical Co. 50,000 21,840 $1
Custom Optics, Inc. 60,000 2,000 --
Source Optical Supply, Inc. 3,000 3,000 --
Kent NW Grand Rapids, Inc. 50,000 10,000 1
Kent Hackley, Inc. 50,000 10,000 --
</TABLE>
During the nine-month period ended March 31, 1999, the shareholders made
contributions to capital in the amount of $33,640.
(Continued)
12
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
(10) COMMITMENTS AND RELATED PARTY TRANSACTIONS
(a) RELATED PARTY LEASES
The Company conducts certain operations in facilities owned by real
estate partnerships controlled by the shareholders of the Company. The
rental agreements expire at various dates through May 2003 and provide
for monthly rentals of $14,500 plus occupancy expenses. Rent expense for
the nine months ended March 31, 1999 was approximately $130,500.
In addition, the Company leases a facility owned by a relative of the
Company shareholder. This lease expires November 2007 and requires
monthly rentals of $7,000 plus occupancy expenses. Rent expense for the
nine months ended March 31, 1999 was $63,000.
(b) OTHER LEASES
The Company leases additional facilities from unrelated parties. These
leases expire at various dates through October 2003 and require monthly
rentals of approximately $34,300 plus occupancy expenses. Rent expense
for these facilities for the nine months ended March 31, 1999 was
approximately $308,500.
(c) MINIMUM LEASE PAYMENTS
The following is a schedule of future minimum lease payments required
under the above operating leases as of March 31, 1999:
<TABLE>
<CAPTION>
YEAR ENDING RELATED OTHER
MARCH 31 TOTAL PARTIES LEASES
----------- ------- ------- ------
<S> <C> <C> <C>
2000 $848,416 258,000 590,416
2001 597,975 221,700 376,275
2002 475,261 211,800 263,461
2003 311,303 192,000 119,303
2004 147,369 102,000 45,369
Thereafter 308,000 308,000 --
---------- --------- ---------
$2,688,324 1,293,500 1,394,824
========== ========= =========
</TABLE>
(Continued)
13
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
(d) CONTINGENT LEASES
Some of the lease agreements provide for contingent rental payments based
upon 20-25 percent of revenues. Rent expense attributed to these leases
for the nine months ended March 31, 1999 was approximately $213,000.
(11) PENSION PLAN
The Company maintains a 401(k) profit-sharing plan, covering substantially
all employees, which provides for partial matching contributions of
employee elective deferrals. A matching contribution of approximately
$6,300 was made for the nine months ended March 31, 1999.
(12) CONTINGENCIES
(a) SALES TAX
The State of Michigan completed an examination of Kent Optical Co., Kent
NW Grand Rapids, Inc. and Kent Hackley, Inc. (Kent) tax returns for
prior fiscal years ending through April 30, 1996, and the State of
Michigan made a determination that Kent was liable for approximately
$65,000 in sales tax and interest. Kent disagreed with the audit
determination and requested an informal conference with a Department of
Treasury referee. Kent received an unfavorable decision from the
Department of Treasury referee. Kent has filed an appeal for which a
hearing date has yet to be scheduled. The Company has provided for the
aforementioned liability at March 31, 1999.
(b) PURCHASE AGREEMENT
The Company entered into an agreement dated August 1, 1996 to purchase
the assets of a retail optical business. Terms of the agreement state
that payments to the seller begin ten (10) years from the date of the
contract and continue for one hundred twenty (120) months. The purchase
price is determined through a formula based on the three calendar years
immediately preceding the commencement of monthly payments. The seller
can accelerate the start of monthly payments, but such payments shall not
commence sooner than sixty (60) months from the date of the contract.
The agreement states the total purchase price based upon the formula,
shall in no event be less than $72,195. Also, until the purchase price
is paid in full, the Company cannot engage in certain transactions if it
would reduce the gross receipts for purposes of the above formula,
including but not limited to, merging or consolidating with any other
corporation or reorganizing its capital structure. These transactions
could cause the entire purchase price to become immediately due. Based
upon the above formula, for the period August 1, 1996 through March 31,
1999, the liability currently reported as $72,195 would be approximately
$116,775 if the purchase price became immediately due.
(Continued)
14
<PAGE>
KENT OPTICAL CO. AND AFFILIATES
Notes to Combined Financial Statements
March 31, 1999
(13) CONCENTRATION OF CREDIT RISK
The Company sells its products and services to customers primarily in
West Michigan. The Company performs ongoing credit evauluations of it
significant commercial customers and, generally, requires no collateral
from its customers.
The Company maintains its cash balances in one financial institution
located in West Michigan. The balances are insured by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000. The Company's uninsured cash
balances, per bank records, may exceed the FDIC limit from time to time.
(14) STOCK PURCHASE AGREEMENTS
There are various agreements between Kent Optical Co. and affiliates, the
majority shareholders, and the minority shareholders regarding the
purchase and/or sale of the outstanding stock of the companies in the
event of death or disability. The agreements provide for a purchase price
and payment terms over a period of five to seven years. The Company has
life insurance to reduce its obligations under these agreements. The
agreement also restricts the sale, transfer, pledge, or other disposal of
the Company's stock by its shareholders.
(15) SUBSEQUENT EVENT
On April 22, 1999, Sight Resource Corporation (Sight) purchased all the
stock of the Company for approximately $7,000,000. As a result, Sight
assumed all of the assets and liabilities of the Company. The financial
statements do not reflect any adjustments related to the acquisition.
15
<PAGE>
EXHIBIT 99.11
On April 22, 1999 Sight Resource Corporation ("SRC") purchased through its
wholly owned subsidiary all the capital stock of the Kent Optical Co. and its
affiliates. The total purchase price of approximately $7.7 million for this
acquisition consisted of $5.2 million in cash, $1.0 million in notes payable in
annual substantially equal installments commencing April, 2000 and continuing
until April, 2002, 160,000 shares of common stock of SRC valued at $5.00 per
share, for a total value of the common stock of $0.8 million, $0.3 million of
acquisition liabilities, $0.266 million of asset adjustments for market value,
and $0.115 million of acquisition reserves. The acquisition was accounted for
using the purchase method of accounting.
The following unaudited pro forma income statement gives effect to the
acquisition as if it had occurred on January 1, 1998. The following unaudited
pro forma balance sheet at March 27, 1999, gives effect to the acquisition as if
it had occurred on March 27, 1999.
SIGHT RESOURCE CORPORATION
PROFORMA CONSOLIDATED BALANCE SHEET
MARCH 27, 1999
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
SRC PURCHASE PRO FORMA
CONSOLIDATED KENT ADJUSTMENTS(1) CONSOLIDATED
------------ ------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 954 $ 200 $ 385 $ 1,539
Accounts receivable, net of allowance
of $1,395 3,386 748 4,134
Inventories 5,007 899 (100) 5,806
Prepaid expenses and other current assets 560 34 594
-------- ------ --------
Total current assets 9,907 1,881 285 12,073
-------- ------ ------ --------
Property and equipment 14,748 1,392 16,140
Less accumulated depreciation (8,700) (991) (9,691)
-------- ------ --------
Net property and equipment 6,048 401 0 6,449
-------- ------ ------ --------
Other Assets:
Intangible assets, net 17,278 511 6,883 24,672
Other assets 967 14 981
-------- ------ --------
Total other assets 18,245 525 6,883 25,653
-------- ------ ------ --------
$ 34,200 $2,807 $7,168 $ 44,175
======== ====== ====== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Revolver notes payable $ 745 $ 120 $ 275 $ 1,140
Current portion of long term debt 388 225 593 1,206
Current portion of capital leases 49 49
Accounts payable 2,618 550 3,168
Accrued expenses 3,540 278 565 4,383
-------- ------ ------ --------
Total current liabilities 7,340 1,173 1,433 9,946
-------- ------ ------ --------
Non-current liabilities:
Long term debt, less current maturities 763 1,176 5,580 7,519
Capital leases 19 19
Other liabilities 166 166
-------- --------
Total non-current liabilities 948 1,176 5,580 7,704
-------- ------ ------ --------
Series B redeemable convertible preferred stock
1,452,119 shares issued 6,535 6,535
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 5,000,000
shares; no shares of Series A issued and outstanding.
Common stock, $.01 par value. Authorized 20,000,000
shares; issued 9,091,552. 91 37 (35) 93
Additional paid-in capital 37,518 433 439 38,151
Treasury stock at cost, 30,600 shares. (137) (137)
Unearned compensation (17) (17)
Accumulated earnings/(deficit) (18,078) (12) (249) (18,100)
-------- ------ ------ --------
Total stockholders' equity 19,377 458 155 19,990
-------- ------ ------ --------
$ 34,200 $2,807 $7,168 $ 44,175
======== ====== ====== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
The above unaudited pro forma financial information reflects certain
adjustments, including amortization of goodwill, interest expense from
acquisition-related debt, and an increase in the weighted average shares
outstanding. This pro forma information does not necessarily reflect the results
of operations that would have occurred had the acquisition taken place at the
beginning of 1998 and is not necessarily indicative of results that may be
obtained in the future.
<PAGE>
SIGHT RESOURCE CORPORATION
PROFORMA INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 27, 1999
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
SRC PURCHASE PRO FORMA
CONSOLIDATED KENT ADJUSTMENTS CONSOLIDATED
------------- ------------ ------------------ -------------
<S> <C> <C> <C> <C>
Net Revenue $15,764 $2,555 $18,319
Cost of Revenue 5,013 1,128 6,141
------- ------ -------
Gross Margin 10,751 1,427 0 12,178
Selling, General and Admin Expenses 10,194 1,878 70 (2) 12,142
------- ------ ------- -------
Income/(Loss) from Operations 557 (451) (70) 36
Other Income (Expense):
Interest Income 42 42
Interest Expense (82) (36) (114)(3) (232)
Write Off of Deferred Financing Costs (323) (323)
------- ------ ------- -------
Total Other Income (363) (36) (114) (513)
------- ------ ------- -------
Income/(Loss) Before Income Taxes 194 (487) (184) (477)
Income Tax Expense 21 0 0 (4) 21
Net Income/(Loss) $ 173 $ (487) $ (184) $ (498)
======= ====== ======= =======
Basic Loss Per Common Share $ 0.02 $ (0.05)
======= =======
Weighted Average Number of Common
Shares Outstanding 9,061 160 (5) 9,221
======= ======= =======
Three Months Ended
March 27, 1999
------------------
Net income/(loss) as reported $ 173
=======
pro forma $ (498)
=======
Net earnings/(loss) per share - basic and diluted as reported $ 0.02
=======
pro forma $ (0.05)
=======
</TABLE>
See accompanying notes to the consolidated financial statements.
The above unaudited pro forma financial information reflects certain
adjustments, including amortization of goodwill, interest expense from
acquisition-related debt, and an increase in the weighted average shares
outstanding. This pro forma information does not necessarily reflect the
results of operations that would have occurred had the acquisition taken
place at the beginning of 1998 and is not necessarily indicative of results
that may be obtained in the future.
<PAGE>
SIGHT RESOURCE CORPORATION
PROFORMA INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998
(In Thousands, Except for Per Share Amounts)
<TABLE>
<CAPTION>
SRC PURCHASE PRO FORMA
CONSOLIDATED KENT ADJUSTMENTS CONSOLIDATED
------------- -------- --------------- -------------
<S> <C> <C> <C> <C>
Net Revenue $ 54,971 $10,206 $65,177
Cost of Revenue 18,991 3,534 22,525
-------- ------- -------
Gross Margin 35,980 6,672 0 42,652
Selling, General and Admin Expenses 37,036 6,179 282 (2) 43,497
Income/(Loss) from Operations (1,056) 493 (282) (845)
Other Income (Expense):
Interest Income 184 184
Interest Expense (201) (129) (457)(3) (787)
Gain on Sale of Assets 158 158
-------- -------
Total Other Income 141 (129) (457) (445)
-------- ------- ------- -------
Income/(Loss) Before Income Taxes (915) 364 (739) (1,290)
Income Tax Expense 70 10 0 (4) 80
Net Income/(Loss) $ (985) $ 354 $ (739) $(1,370)
======== ======= ======= =======
Basic Loss Per Common Share $(0.11) $ (0.15)
======== =======
Weighted Average Number of Common
Shares Outstanding 8,867 160 (5) 9,027
======== ======= =======
1998
------------
Net loss as reported ($ 985)
============
pro forma ($1,370)
============
Net loss per share as reported ($ 0.11)
============
pro forma ($ 0.15)
============
</TABLE>
See accompanying notes to the consolidated financial statements. The above
unaudited pro forma financial information reflects certain adjustments,
including amortization of goodwill, interest expense from acquisition-
related debt, and an increase in the weighted average shares outstanding.
This pro forma information does not necessarily reflect the results of
operations that would have occurred had the acquisition taken place at the
beginning of 1998 and is not necessarily indicative of results that may be
obtained in the future.
<PAGE>
SIGHT RESOURCE CORPORATION
NOTES TO PROFORMA FINANCIAL STATEMENTS
(1) To record the acquisition of Kent Optical. The additional paid-in capital
and accumulated earnings/(deficit) amounts for Kent have been adjusted to
reclassify $0.239 million of undistributed earnings of Kent Sub-S entities
from accumulated earnings/(deficit) to additional paid-in capital pursuant
to Staff Accounting Bulletin 4-B.
(2) To record an estimate of the amortization of the excess of purchase price
over the fair market value of assets acquired of approximately $7.03
million. Based on this estimate and a potential useful life of 25 years,
the annual amortization expense would be $0.282 million, or $0.07 million
quarterly. However, the excess of purchase price over the fair market value
of assets acquired may be recognized as the value of goodwill, trademarks,
patient lists, records and workforce in place. These intangible assets would
be assigned useful lifes of 5 - 25 years and may result in additional
amortization expense for the periods presented.
(3) To record the interest expense on approximately $6.2 million of debt
used to finance the acquisition. The estimated annual interest rate on a
$5.2 million term loan facility is 7.325%. The annual interest rate on a
$1.0 million note is 7.5%. Based on these interest rates, the annual
interest expense is estimated to be $0.457 million and the quarterly
interest expense is estimated to be $0.114 million.
(4) Any pro forma taxes would primarily relate to state taxes as the Company has
loss carryforwards and Kent Optical was an S Corporation. Estimate is
minimal.
(5) To record additional shares issued in the acquisition as outstanding since
the beginning of the period presented.
