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Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
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 6, 1995
MICROS-TO-MAINFRAMES, INC.
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(Exact name of registrant as specified in its charter)
Commission file number 0-22122
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New York 13-3354896
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
614 Corporate Way, Valley Cottage, NY 10989
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(Address of principal executive offices)
(914) 268-5000
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(Registrant's telephone number )
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
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Micros-to-Mainframes, Inc.
Report on Form 8-K
TABLE OF CONTENTS
Page
INFORMATION TO BE INCLUDED IN THE REPORT
Item 7. Financial Statements and Exhibits 3
Signatures 4
2
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Item 7. Financial Statements and Exhibits.
(a) Financial Statement of Business Acquired
Data.Com Results, Inc. Audited Financial Statement as of
December 31, 1995.
Report of Independent Accountants ............................ F1
Balance Sheet ............................................... F2
Statement of Operations and Retained Earnings (Deficit)...... F3
Statement of Cash Flows ..................................... F4
Notes to Financial Statements ............................... F5-F8
(b) Pro Forma Financial Information
(i) Unaudited Pro Forma Combined Balance Sheet as of
December 31, 1995.
(ii) Unaudited Pro Forma Combined Statement of operation for Nine months
ended December 31, 1995 and Year ended March 31, 1995.
The forgoing Pro Forma Financial Information is included on pages P1- P5
on this report.
(c) Exhibits - None
3
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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, thereunto duly authorized.
MICROS-TO-MAINFRAMES, INC.
Date : June 5, 1996 By /s/ Howard A. Pavony
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Howard A. Pavony
President (Co-Principal
Executive Officer) and Director
Date : June 5, 1996 By /s/ Steven H Rothman
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Steven H. Rothman
Vice President (Co-Principal
Executive Officer) and Director
Date : June 5, 1996 By /s/ Frank T. Wong
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Frank T. Wong
Vice President - Finance
(Principal Financial and
Accounting Officer) and
Director
4
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To the Board of Directors
Data.Com Results, Inc.
Report of Independent Accountants
We have audited the accompanying balance sheet of Data.Com Results, Inc., as
of December 31, 1995, and the related statements of operations and retained
earnings (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Data.Com Results, Inc., as of
December 31, 1995, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Blum Shapiro & Co P.C.
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March 22, 1996, except for the subsequent event discussed in Note 7, as to
which the date is May 3, 1996
F1
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DATA.COM RESULTS, INC.
(An "S" Corporation)
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Current Assets
Cash $ 21,881
Accounts receivable, net of allowance for
doubtful accounts of $9,500 945,483
Inventory 316,203
Loan receivable - stockholder 62,720
Prepaid expenses and other current assets 24,095
Deferred income taxes 12,546
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Total current assets 1,382,928
Property and Equipment
Office and computer equipment 379,134
Leasehold improvements 71,219
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450,353
Less accumulated depreciation and amortization 202,244
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Net property and equipment 248,109
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Total Assets $ 1,631,037
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 1,373,779
Customer deposits 65,624
Deferred revenue 104,550
Accrued expenses and taxes 54,543
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Total current liabilities l,598,496
Deferred Income Taxes 5,258
Stockholder's Equity
Common stock ($ 10 par value) 5,000 shares authorized;
100 shares issued and outstanding 1,000
Paid-in capital 180,000
Retained earnings (deficit) (153,717)
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Total stockholder's equity 27,283
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Total Liabilities and Stockholder's Equity $1,631,037
============
The accompanying notes are an integral part of the financial
Statement
F2
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DATA.COM RESULTS, INC.
(An "S" Corporation)
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1995
Net Revenue $5,348,060
Cost of Sales 3,252,254
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Gross Profit 2,095,806
Operating Expenses 2,259,778
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Operating Loss ( 163,972)
Interest Expense ( 99,009)
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Loss Before Income Tax Benefit ( 262,981)
Income Tax Benefit (127)
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Net Loss (262,854)
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Retained Earnings - Beginning of Year,
as Previously Stated 225,226
Prior Period Adjustment (116,089)
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Retained Earnings-Beginning of Year,as Restated 109,137
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Retained Earnings (Deficit) - End of Year $ (153,717)
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The accompanying notes are an integral part of the financial statements
F3
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DATA.COM RESULTS, INC.
(An "S" Corporation)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
Cash Flows from Operating Activities
Net loss $ (262,854)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 29,233
Loss on disposal of property and equipment 12,710
Deferred income tax benefit (777)
Bad debt expense 2,699
(Increase) decrease in operating assets:
Accounts receivable 164,541
Inventory 57,512
Prepaid expenses and other current assets 57,232
Increase (decrease) in operating liabilities:
Accounts payable (54,189)
Customer deposits 65,624
Deferred revenue (26,255)
Accrued expenses and taxes 16,070
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Net cash provided by operating activities 61,546
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Cash Flows from Investing Activities
Purchases of equipment (33,456)
Advances on stockholder loan (101,000)
Payments on stockholder loan 63,280
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Net cash used in investing activities (71,176)
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Net Decrease in Cash (9,630)
Cash - Beginning of Year 31,511
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Cash - End of Year $ 21,881
Cash Paid During the Year for
Interest $ 99,009
Income taxes 2,000
The accompanying notes are an integral part of the financial statements
F4
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DATA.COM RESULTS, INC.
(An "S" Corporation)
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting, Policies:
Nature of Business - The Company provides computer equipment and related
consulting services to a variety of industries in the Northeast, primarily on
a project basis. In the normal course of business, the Company provides credit
to customers under standard terms without collateral.
Cash - The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts or instruments. The Company believes it is not
exposed to any significant credit risk on cash.
Inventory - Inventory consisting of computer and peripheral equipment is
stated at the lower of cost or market, cost being determined using the
first-in, first-out method.
Property and Equipment - Property and equipment are stated at cost. Major
renewals and betterments are charged to the property accounts, while
replacements, maintenance and repairs that do not improve or extend the life
of the respective assets are expensed as incurred. The Company follows the
policy of providing for depreciation and amortization of property and
equipment by charging against earnings amounts sufficient to amortize the cost
of properties over their estimated useful lives as follows:
Office and computer equipment 5-10 years
Leasehold improvements 39 years
Depreciation and amortization are provided for primarily by using accelerated
methods. Depreciation and amortization expense charged to operations for the
year ended December 31, 1995 was $29,233.
Operating Leases - Rentals pertaining to noncapitalized lease agreements which
convey merely the right to use property are charged to income as incurred.
Revenue Recognition - Revenue on service maintenance contracts is recognized
on a straight-line basis over the life of the contract. The unamortized amount
at December 31, 1995 is classified on the balance sheet as deferred revenue.
F5
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Income Taxes - The Company has elected, by consent of its stockholder, to be
taxed under the provisions of Subchapter S of the Internal Revenue Code. Under
these provisions, the Company does not pay federal corporate income taxes on
its taxable income. Instead, the stockholder is liable for individual federal
income taxes on his equitable share of the Company's taxable income.
Accordingly, the financial statements reflect no provision or liability for
federal income taxes. The Company is liable for state income taxes.
Income tax expense includes state taxes currently payable and deferred taxes.
The Company provides for deferred taxes on temporary differences arising from
assets and liabilities whose bases are different for financial reporting and
income tax purposes. These differences relate primarily to different methods
of accounting for contract revenues, allowance for doubtful accounts, and
expenses reported in different periods for financial reporting and income tax
purposes.
Profit-Sharing Plan - The Company has instituted a 401(k) plan for all
eligible employees. The Company makes a matching contribution for a portion on
each employee's voluntary contribution.There was no matching contribution in
1995.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. Those estimates and assumptions affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
F6
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Note 2 - Loan Receivable - Stockholder:
Loan receivable - stockholder consists of funds advanced from the Company to
its stockholder. The loan will be paid in monthly installments beginning May
1, 1996 over a three-year period with interest charged at prime plus 1 %. The
balance at December 31, 1995 was $62,720.
Note 3 - Credit Agreement:
The Company has a revolving credit agreement with a commercial finance company
which provides a credit line up to $1,750,000. Availability under the line is
limited by the level of ineligible accounts receivable and inventory. Interest
is payable at 2.5% over the prime rate of interest and begins accruing 30 days
after the Company purchases inventory items. The Company has payment terms up
to 150 days for inventory purchased using the credit line.
Borrowings under this arrangement are secured by inventory and accounts
receivable and the guaranty of the stockholder. The amount outstanding under
this agreement at December 31, 1995 was $935,897 and is included in the
accounts payable balance.
The agreement includes certain covenants which require the Company to meet
certain ratios and levels of profitability. The Company failed to meet certain
financial ratios required under the credit agreement as of December 31, 1995.
Note 4 - Leases:
The Company leases, under noncancelable agreements, office and warehouse space
and equipment. Future minimum lease payments under these agreements, which are
accounted for as operating leases, are as follows:
Year Ending December 31
1996 $ 169,440
1997 162,181
1998 100,290
1999 49,832
Total rent expense for the year ended December 31, 1995 was $185,098.
F7
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Note 5 - Income Taxes:
The Company's deferred state tax assets and liabilities consisted of the
following at December 31,1995:
Deferred tax assets:
Gross $ 37,860
Valuation allowance 25,314
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Net Deferred Tax Assets $ 12,546
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Deferred Tax Liabilities $ 5,258
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The components of state income tax expense (benefit) were as follows for the
years ended December 31, 1995:
Taxes currently payable $ 650
Deferred tax benefit (777)
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Total State Income Tax Benefit $ (127)
=======
The Company has available at December 31, 1995 unused state operating loss
carryforwards of approximately $230,000 which may be applied against future
taxable income expiring in 2000.
Note 6 - Prior Period Adjustment:
The accompanying financial statements have been restated to recognize deferred
revenue for maintenance contracts at December 31, 1994. The effect of the
restatement was to decrease beginning retained earnings by $ 116,089, net of
$ 14,716 of income taxes.
Note 7 - Subsequent Event:
On May 3, 1996, the Company entered into an asset purchase agreement to sell
substantially all of its assets, net of liabilities, to an unrelated third
party for shares of the buyer's common stock.
F8
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Micros-to-Mainframes, Inc
Unaudited Pro Forma Combined Financial Statement
The following unaudited pro forma combined statements of operations for the
nine months ended December 31, 1995 and the year ended March 31, 1995 are
based on the historic financial statements of Micros-to-Mainframes, Inc.
contained in its Form 10-Q for the nine months ended December 31, 1995 and its
Annual Report on Form 10-KSB for the year ended March 31, 1995. The historic
information of Data.Com Results, Inc. is based on its audited financial
statement for the year ended December 31, 1995, and unaudited interim
financial information for the period April 1, 1995 to December 31, 1995 and
the twelve month period ended March 31, 1995.
The unaudited pro forma combined financial statements reflect the acquisition
of certain of Data.Com's assets pursuant to the Asset Purchase Agreement in
exchange for issuance of 87,000 shares of common stock of the Company and the
assumption of certain of Data.Com's payables (primary trade). These pro forma
combined financial statements do not recognize any contingent consideration
which may be due to the seller in the event certain earnings other goals are
met. These pro forma combined financial statements reflect a preliminary
allocation of the purchases price to the fair value of the assets acquired and
liabilities assumed. The unaudited pro forma results of operations may not be
indicative of the results that actually would have occurred if the acquisition
had been in effect on the dates indicated or which may be obtained in the
future.
P1
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<TABLE>
<CAPTION>
Micros-to-Mainframes, Inc.
Unaudited Pro Forma Combined Balance Sheet
December 31, 1995
Micros-to- Data.Com
Mainframes, Inc. Results, Inc. Adjustment Pro Forma
<S> <C> <C> <C> <C>
Asset
Current Assets
Cash $2,788,779 $21,881 ($935,897)(A) $1,874,763
Accounts receivable, net 10,851,617 945,483 11,797,100
Inventory 1,469,331 316,203 1,785,534
Prepaid expenses and other
current assets 311,782 99,361 (75,266)(D) 335,877
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Total current assets 15,421,509 1,382,928 15,793,274
Property, plant and equipment 785,761 450,353 (202,244)(E) 1,033,870
Less accumulated deprecation and amortization 453,613 202,244 (202,244)(E) 453,613
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332,148 248,109 580,257
Other Assets 20,404 100,000 (C) 120,404
Goodwill 384,000 (F) 384,000
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Total assets $15,774,061 $1,631,037 $16,877,935
==========================================================
Liabilities and Shareholders' Equity
Current liabilities:
Secured notes payable $5,000 $5,000
Accounts payable and accrued expenses 5,250,035 1,543,953 (935,897)(A) 5,946,096
88,005 (I)
Income taxes payable 141,214 54,543 (54,543)(G) 141,214
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Total current liabilities 5,396,249 1,598,496 6,092,310
Deferred Income Taxes 5,258 (5,258)(G) 0
Shareholders' Equity
Preferred stock $140,000 liquidation preference 1,400 1,400
Common stock 3,362 1,000 (1,000)(B) 4,232
870 (H)
Additional paid-in capital 7,721,584 180,000 (180,000)(B) 8,128,527
406,943 (H)
Stock subscriptions receivable (322,538) (322,538)
Retained earnings 2,974,004 (153,717) 153,717 (B) 2,974,004
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Total shareholders' equity 10,377,812 27,283 10,785,625
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Total liabilities and shareholders' equity $15,774,061 $1,631,037 $16,877,935
==========================================================
See accompanying footnotes
</TABLE>
P2
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<TABLE>
<CAPTION>
Micros-to-Mainframes, Inc.
Unaudited Pro Forma Combined Statement of Operations
For Nine Months Ended Decemebr 31, 1995
Micros-to- Data.Com
Mainframes, Inc. Results, Inc. Adjustment Pro Forma
<S> <C> <C> <C> <C>
Net sales $35,504,768 $3,771,788 $39,276,556
Costs and expenses:
Cost of products sold 30,520,307 2,288,349 32,808,656
Technical personnel salaries 801,509 405,273 1,206,782
Selling, general and administrative expenses 2,910,023 1,284,634 19,200 (J) 4,213,857
Interest expenses 5,898 72,041 77,939
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34,237,737 4,050,297 38,307,234
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Income before income taxes 1,267,031 (278,509) 969,322
Provision for income taxes 528,000 (21,925) (104,075)(K) 405,000
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Net income 739,031 (256,584) 564,322
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Net income per common share $0.26 $0.20
=============== ============
Weighted average number of common
and common equivalent shares
used in calculation 3,126,986 3,213,986
=============== ============
See accompanying footnotes
</TABLE>
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<TABLE>
<CAPTION>
Micros-to-Mainframes, Inc.
Unaudited Pro Forma Combined Statement of Operations
For Year Ended March 31, 1995
Micros-to- Data.Com
Mainframes, Inc. Results, Inc. Adjustment Pro Forma
<S> <C> <C> <C> <C>
Net sales $43,043,271 $7,388,648 $50,431,919
Costs and expenses:
Cost of products sold 37,530,399 4,842,476 42,372,875
Technical personnel salaries 777,619 527,003 1,304,622
Selling, general and administrative expenses 3,276,358 2,014,827 25,600 (J) 5,316,785
Interest expenses 39,570 96,059 135,629
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41,623,946 7,480,365 49,129,911
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Other Income 94,275 94,275
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Income before income taxes 1,513,600 (91,717) 1,396,283
Provision for income taxes 635,200 6,054 (58,254)(K) 583,000
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Net income $878,400 ($97,771) $813,283
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Net income per common share $0.40 $0.36
================ ============
Weighted average number of common
and common equivalent shares
used in calculation 2,193,991 2,280,991
================ ============
See accompanying footnotes
</TABLE>
P4
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Micros-to-Mainframes, Inc.
Notes to Unaudited Pro Forma Combined Financial Statements
(A) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to reflect the payment to IBM Credit Corp. of $935,897. The amount
due IBM Credit Corp. as of May 6, 1996 and paid on May 6, 1996 was $1,374,709.
(B) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to eliminate the capital accounts of Data.Com Results, Inc.
(C) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to include a note receivable from the seller to the Company of
$100,000.
(D) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to exclude assets not acquired relating to a loan receivable of
$62,720 and deferred income taxes of $12,546.
(E) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to reflect on a preliminary basis the fair value of the inventory
acquired, the property and equipment acquired and the elimination of
Data.Com's historical accumulated deprecation.
(F) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to reflect the excess of cost over the net assets acquired of
$500,000.
(G) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to eliminated income taxes payable that were not assumed.
(H) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to include 87,000 shares (at $ 4 11/16) of Micros-to-Mainframes, Inc.
common stock issued in the transaction.
(I) The unaudited pro forma balance sheet as of December 31, 1995 has been
adjusted to include approximately $88,000 of closing costs.
(J) The unaudited pro forma combined statement of operations for the nine
months ended December 31, 1995 and the year ended March 31, 1995 reflects the
amortization of goodwill using the straight line method over its estimated
life of 15 years.
(K) The unaudited pro forma combined statement of operations for nine months
ended December 31, 1995 and the year ended March 31, 1995 were adjusted to
reflect an income tax provision on a consolidated basis.
P5
