SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
TO
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) MAY 18, 1996
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DISC GRAPHICS, INC.
-------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-22696 13-3678012
- ------------------------------ ----------- ---------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) ID Number)
10 GILPIN AVENUE, HAUPPAUGE, NEW YORK 11788
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (516) 234-1400
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(Former name or former address, if changed since last report)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
Item 7(b) of the Registrant's Current Report on Form 8-K dated
May 31, 1996 is hereby amended in accordance with Rule 12b-15 of the Securities
Exchange Act of 1934, as amended, by filing the Pro Forma Condensed Combined
Financial Statements of the Registrant and Pointille, Inc. which were not
available to be filed with the Registrant's Current Report on Form 8-K dated May
31, 1996.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
DISC GRAPHICS, INC.
AND
POINTILLE, INC.
The following pro forma condensed combined financial statements give effect
to the acquisition (the "Acquisition") of substantially all of the assets and
certain liabilities of Pointille, Inc. ("Pointille") by Disc Graphics, Inc. (the
"Company") pursuant to the Asset Purchase Agreement dated as of May 17, 1996
(the "Agreement") which was included as an exhibit to the Company's Current
Report on Form 8-K dated May 31, 1996 which was filed with the Securities and
Exchange Commission (the "Commission") on June 3, 1996 (the "June Current
Report").
These pro forma condensed combined financial statements are based on the
estimates and assumptions set forth below and in the notes to such statements
which include pro forma adjustments. The pro forma condensed combined financial
statements were prepared utilizing the historical financial statements of the
Company and Pointille and should be read in conjunction with the Company's
Transition Report on Form 10-K for the period ended December 31, 1995 which was
filed with the Commission on April 1, 1996 and the Company's Quarterly Report on
Form 10-Q for the first quarter of 1996 which was filed with the Commission on
May 15, 1996. The historical financial statements of Pointille for February 29,
1996 are included in the disclosure schedule to the Agreement and were filed
with the June Current Report. The pro forma adjustments are based upon available
information as well as assumptions that management believes are reasonable.
The Acquisition was accounted for using the purchase method of accounting and in
accordance with generally accepted accounting principles. Pursuant to the
Agreement, the Company acquired substantially all the assets and certain
liabilities of Pointille as of May 17, 1996. The net worth of Pointille as of
May 17, 1996 has not yet been determined; therefore, an estimate of the
allocation of the purchase price was made on the basis of currently available
information. For purposes of the pro forma condensed combined financial
statements the purchase price has been allocated to assets and liabilities as of
February 29, 1996. The final allocation of the purchase price may be different
from that reflected in the pro forma condensed combined financial statements.
Any differences would result from changes in the final valuation of assets and
assumed liabilities as set forth in section 3.7 of the Agreement. Upon final
determination, the Company's purchase price will be allocated to the assets and
liabilities acquired based on their fair market values at the date of the
Acquisition.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
DISC GRAPHICS, INC.
AND
POINTILLE, INC.
The following pro forma condensed combined balance sheet combines, on a purchase
basis of accounting, the consolidated balance sheet of the Company and its
subsidiaries as of March 31, 1996 and the balance sheet of Pointille as of
February 29, 1996. The pro forma combined information is not necessarily
indicative of the actual or future financial position that would have occurred
or will occur as a result of the Acquisition.
<PAGE>
<TABLE>
<CAPTION>
DISC GRAPHICS, INC.
AND
POINTILLE, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1996
HISTORICAL PRO FORMA
------------------------------- -------------------------------
DISC GRAPHICS POINTILLE ADJUSTMENTS COMBINED
------------- --------- ----------- --------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $1,226,004 39,151 (39,151) (a) $1,226,004
Accounts receivable, net 7,664,100 1,464,918 - 9,129,018
Notes receivable from officer - 267,064 (267,064) (a) -
Inventories 1,660,040 196,853 - 1,856,893
Prepaid expenses and other
current assets 586,119 85,730 (69,664) (a) 602,185
Current maturities of notes
receivable 92,237 - - 92,237
---------- --------- ---------- ---------
Total current assets 11,228,500 2,053,716 (375,879) 12,906,337
Plant and equipment, net 8,455,445 505,738 (147,416) (b) 8,813,767
Notes receivable, less current 59,937 58,587 - 118,524
maturities
Cost in excess of assets acquired - - 984,540 (b) 984,540
Other assets 238,559 5,000 (5,000) (a) 238,559
---------- --------- --------- ----------
Total assets 19,982,441 2,623,041 456,245 23,061,727
---------- --------- --------- ---------
LIABITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of equipment
notes payable 402,064 - - 402,064
Current maturities of capital lease
obligations 821,637 14,668 - 836,305
Bank lines of credit - 1,035,488 (1,035,488) (c) -
Accounts payable and accrued
expenses 3,091,403 682,849 (52,627) (a/b) 3,721,625
---------- --------- --------- ---------
Total current liabilities 4,315,104 1,733,005 (1,088,115) 4,959,994
Notes payable to bank 3,000,000 116,673 1,810,488 (b/c) 4,927,161
Note payable to officer - 306,868 (306,868) (a) -
Promissory note - - 299,700 (b) 299,700
Equipment notes payable, less
current maturities 2,335,620 - - 2,335,620
Capitalized lease obligations
payable, less current maturities 2,556,086 32,535 - 2,588,621
Deferred income taxes 366,406 - - 366,406
---------- --------- --------- ---------
Total liabilities 12,573,216 2,189,081 715,205 15,477,502
Stockholders' equity:
Preferred stock - - - -
Common stock 49,622 200,000 (199,259) (a/b) 50,363
Additional paid-in capital 4,913,119 - 174,259 (b) 5,087,378
Retained earnings 2,446,484 233,960 (233,960) (a) 2,446,484
---------- --------- --------- ---------
Total stockholders' equity 7,359,603 433,960 (258,960) 7,533,862
---------- --------- --------- ---------
Total liabilities and
stockholders' equity $19,982,441 2,623,041 456,245 $23,061,727
========== ========= ======= ==========
SEE NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
DISC GRAPHICS, INC.
AND
POINTILLE, INC.
The following pro forma condensed combined income statement combines, on a
purchase basis of accounting, the income statement of the Company for the three
months ended March 31, 1996 and the income statement of Pointille for the three
months ended May 30, 1996. The pro forma combined information is not necessarily
indicative of the actual or future financial position that would have occurred
or will occur as a result of the Acquisition.
DISC GRAPHICS, INC.
AND
POINTILLE, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
AS OF MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------- -------------------------------
DISC GRAPHICS POINTILLE ADJUSTMENTS COMBINED
------------- --------- ----------- --------
<S> <C> <C> <C> <C>
Sales $8,304,328 2,031,179 - $10,335,507
Cost of sales 6,572,176 1,626,725 - 8,198,901
--------- --------- -------- ---------
Gross profit 1,732,152 404,454 - 2,136,606
Operating expenses:
Selling and shipping expenses 656,168 146,427 45,900 (i) 848,495
General and administrative expenses 867,304 374,108 5,786 (j/k) 1,247,198
--------- --------- -------- ---------
Operating income (loss) 208,680 (116,081) (51,686) 40,913
Interest expense (178,679) (17,362) 27,200 (j/l) (168,841)
----------- ---------
Income (loss) before provision
for income taxes 30,001 (133,443) (24,486) (127,928)
--------- --------- -------- ---------
Provision for income taxes 12,897 - - 12,897
--------- --------- -------- ---------
Net Income (loss) $ 17,104 (133,443) (24,486) ($140,825)
========= ========== =========== ==========
Net Income (loss) per share $0.00 ($0.03)
========== ==========
Weighted average number of 4,962,188 5,036,262
shares outstanding ========== =========
SEE NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
DISC GRAPHICS, INC.
AND
POINTILLE, INC.
The following pro forma condensed combined income statement combines, on a
purchase basis of accounting, the income statement of the Company for the twelve
months ended December 31, 1995 and the income statement of Pointille for the
twelve months ended February 29, 1996. The pro forma condensed combined income
statement gives effect to the acquisition of Pointille as if it had occurred on
January 1, 1995. The pro forma combined information is not necessarily
indicative of the actual or future financial position that would have occurred
or will occur as a result of the Acquisition.
<PAGE>
<TABLE>
<CAPTION>
DISC GRAPHICS, INC.
AND
POINTILLE, INC.
PRO FORMA CONDENSED COMBINED INCOME STATEMENT
AS OF DECEMBER 31, 1995
HISTORICAL PRO FORMA
------------------------------------ -----------------------------------
DISC GRAPHICS POINTILLE ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
Sales $36,149,096 7,734,344 - $43,883,440
Cost of Sales 28,668,506 5,971,468 - 34,639,974
---------- --------- ----------- ----------
Gross Profit 7,480,590 1,762,876 - 9,243,466
Operating Expenses:
Selling and shipping expenses 2,775,768 635,295 63,400 (d) 3,474,463
General and administrative expenses 2,957,253 1,013,220 34,120 (e/f) 4,004,593
---------- --------- --------- ---------
Operating income (loss) 1,747,569 114,361 (97,520) 1,764,410
Professional fees related to a
transaction in process for the
sale of assets - 74,778 (74,778) (e) -
Interest Expense 838,263 144,584 62,900 (e/g) 1,045,747
Gain on disposal of equipment 40,777 - - 40,777
---------- --------- --------- ----------
Income (loss) before provision 868,529 (105,001) (85,642) 677,886
for income taxes
Provision for income taxes 368,000 56,616 (136,316) (e/h) 288,300
---------- --------- --------- ----------
Net income (loss) $ 500,529 (161,617) 50,674 $389,586
========== =========== ========== ==========
Net income per share $ 0.18 $0.14
========== ==========
Weighted average number of
shares outstanding 2,714,229 2,788,303
========== ==========
SEE NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
DISC GRAPHICS, INC.
AND
POINTILLE, INC.
The pro forma condensed combined financial statements of Disc Graphics, Inc. and
Pointille, Inc. give effect to the following pro forma adjustments and
assumptions:
Adjustments for Pro Forma Condensed Combined Balance Sheet dated March 31, 1996:
(a) The Company acquired substantially all the assets and certain liabilities of
Pointille; an adjustment has been made to eliminate the assets and liabilities
which were not acquired by the Company in accordance with the Agreement.
(b) This adjustment records the purchase price of the Acquisition which
consisted of payment of $775,000 in cash (paid from borrowings under the
Company's Financing Agreement with Fleet Bank), the issuance of 74,074 shares of
the Company's Common Stock, $.01 par value per share, and the issuance of a
promissory note in the amount of $330,000 (principal and interest), payable in
36 equal monthly installments of principal and interest beginning on June 17,
1996. The Company recorded the value of the shares of the Company's Common Stock
at the estimated fair value at the date of the Acquisition.
Purchase Price
Cash $775,000
Promissory note (present value) 299,700
Common stock 175,000
Transaction costs 114,730
---------
1,364,430
Pointille's net assets, at cost $527,306
Fair value adjustment of
property, plant and equipment (147,416)
Net assets 379,890
---------
Excess of cost over fair value of business acquired $ 984,540
=======
(c) This adjustment records the repayment of the Pointille's bank line of credit
and notes payable to Pacific Bank. The cash used to repay Pointille's bank line
of credit and notes payable to Pacific Bank was obtained from borrowings under
the Company's Financing Agreement with Fleet Bank.
Adjustments for Pro Forma Condensed Combined Income Statement for the year ended
December 31, 1995:
(d) This adjustment reflects the incremental increase to selling expenses due to
the Employment Agreements entered into between the Company and the former
principals of Pointille.
Reduction of payroll and employee benefits ($389,000)
Increase in commissions expense 452,800
--------
Total incremental increase $ 63,400
======
(e) The Company acquired substantially all the assets and certain liabilities of
Pointille; an adjustment has been made to eliminate the assets and liabilities
and certain expenses associated therewith which were not acquired by the
Company.
(f) This adjustment records the amortization over a period of 15 years of the
excess of cost over the current market value of net assets acquired. The Company
estimates 15 years as the useful life of this intangible asset.
(g) This adjustment records the incremental increase in interest expense related
to the pro forma adjustments (b) and (c). The elimination of the Pointille's
interest expense related to its bank line of credit and notes payable to Pacific
Bank was offset by the Company's interest expense related to cash obtained from
borrowings under the Company's Financing Agreement with Fleet Bank for the
payment of the purchase price and the repayment of Pointille's bank line of
credit and notes payable to Pacific Bank. The adjustment has been calculated on
the basis of the interest rate available for borrowing under the Company's
Financing Agreement with Fleet Bank as of May 17, 1996.
The Company
Purchase price of $775,000 at 9.25% per annum $ 71,700
Repayment of Pointille's debt assumed
$1,152,161 at 9.25% per annum 106,600
Promissory note 16,400
--------
Total interest expense 194,700
Pointille
Interest expense on debt assumed
and repaid in (c) (104,900)
--------
Total incremental increase in
interest expense $ 89,800
=======
(h) This adjustment records the income tax effect on the combined financial
results using the Company's historical effective tax rate.
Adjustments for Pro Forma Condensed Combined Income Statement for the three
month period ended March 31, 1996:
(i) This adjustment reflects the incremental increase to selling expenses due to
the Employment Agreements entered into between the Company and the former
principals of Pointille.
Reduction of payroll and employee benefits ($63,100)
Increase in commissions expense 109,000
-------
Total incremental increase $ 45,900
======
(j) The Company acquired substantially all the assets and certain liabilities of
Pointille; an adjustment has been made to eliminate the assets and liabilities
and certain expenses associated therewith which were not acquired by the
Company.
(k) This adjustment records the amortization over a period of 15 years of the
excess of cost over the current market value of net assets acquired. The Company
estimates 15 years as the useful life of this intangible asset.
(l) This adjustment records the incremental increase in interest expense related
to the pro forma adjustments (b) and (c). The elimination of the Pointille's
interest expense related to its bank line of credit and notes payable to Pacific
Bank was offset by the Company's interest expense related to cash obtained from
borrowings under the Company's Financing Agreement with Fleet Bank for the
purchase price and the repayment of Pointille's bank line of credit and notes
payable to Pacific Bank. The adjustment has been calculated on the basis of the
interest rate available for borrowing under the Company's Financing Agreement
with Fleet Bank as of May 17, 1996.
The Company
Purchase price of $775,000 at 9.25% per annum $ 17,900
Repayment of Pointille's debt assumed
$1,152,161 at 9.25% per annum 26,600
Promissory note 4,600
-------
Total interest expense 49,100
Pointille
Interest expense on debt assumed
and repaid in (c) (18,100)
Total incremental increase in -------
interest expense $ 31,000
======
(c) Exhibits:
*2 Asset Purchase Agreement dated as of May 17, 1996, by and
among Disc Graphics, Inc., Pointille, Inc. and the Shareholder
of Pointille, Inc.
*99 Press Release dated May 23, 1996
- --------
*Previously filed with the Registrant's Current Report on Form 8-K
dated May 31, 1996.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DISC GRAPHICS, INC.
BY:/s/ Donald Sinkin
----------------------
Name: Donald Sinkin
Title: President
Dated: July 26, 1996
<PAGE>
Exhibit No. Description Page No.
*2 Asset Purchase Agreement dated as of May
17, 1996, by and among Disc Graphics, Inc.,
Pointille, Inc. and the Shareholder of
Pointille, Inc.
*99 Press Release dated May 23, 1996
- -------------------------
* Previously filed with the Registrant's Current Report on
Form 8-K dated May 31, 1996.
