<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 25, 1997
APPAREL TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-23138 95-4374952
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation or Organization) File Number) Identification No.)
2300 SOUTH EASTERN AVENUE, CITY OF COMMERCE, CALIFORNIA 90040
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 725-4955
FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT:
AMERICAN CINEMASTORES INC.
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This Amendment is being filed by Apparel Technologies, Inc. (the
"Registrant"), to present the audited financial statements and pro forma
financial information required by Item 7 as of the result of the acquisition,
through its wholly owned French subsidiary, of substantially all of the
assets and certain liabilities of Cactus Europe SARL, a French corporation
("Cactus"), on November 25, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Included herein are the audited financial statements of Cactus for the
periods required by Regulation S-B.
(b) Pro Forma Financial Information.
Included herein is the pro forma financial information relating to the
acquisition of Cactus as required by Regulation S-B.
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.
APPAREL TECHNOLOGIES, INC.
(Registrant)
Date: February 9, 1998 By: /s/ Barry Hall
---------------------------
Barry Hall
Chief Financial Officer
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Cactus Europe SARL
We have audited the accompanying balance sheet of Cactus Europe SARL as
of October 31, 1997 and the related statements of operations, changes in
stockholders' deficit and cash flows for the ten months 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 Cactus Europe
SARL as of October 31, 1997, and the results of their operations and cash
flows for the ten months then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1, the
Company had a working capital deficiency of FF 5,827,000 and a
shareholders' deficit of FF 4,821,000 as of October 31, 1997. These
matters raise substantial doubt as to the Company's ability to continue
as a going concern. The Company's financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
BDO GENDROT, LLP
Saint Cloud, France
February 6, 1998
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CACTUS EUROPE SARL
BALANCE SHEETS
<TABLE>
<CAPTION>
-------------- ---------------- -------------- ----------------
Informational -- Informational
OCTOBER 31, Conversion DECEMBER 31 Conversion
1997 to U.S. Dollars 1996 to U.S. Dollars
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents FF -- $ -- FF 287,000 $ 55,192
Accounts receivable, net of allowance 450,000 77,855 1,296,000 249,231
for doubtful accounts of FF238,000 and
FF73,000
Prepaid and other 141,000 24,394 313,000 60,192
Inventory (Note 2) 566,000 97,924 941,000 180,962
------------ ------------ ------------ ----------
Total current assets 1,157,000 200,173 2,837,000 545,577
------------ ------------ ------------ ----------
PROPERTY AND EQUIPMENT
Preliminary expenses 96,000 16,609 96,000 18,462
Office Furnishings and equipment 127,000 21,972 115,000 22,115
Leasehold improvements 190,000 32,872 196,000 37,692
Demonstration equipment 1,323,000 228,893 1,317,000 253,269
---------- ---------- ------------ ----------
1,736,000 300,346 1,724,000 331,538
Less accumulated depreciation and (730,000) (126,298) (456,000) (87,692)
modification
---------- ---------- ------------ ----------
Property and equipment, net 1,006,000 174,048 1,268,000 243,846
---------- ---------- ------------ ----------
Total assets FF 2,163,000 $ 374,221 FF 4,105,000 $ 789,423
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
4
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CACTUS EUROPE SARL
BALANCE SHEETS
<TABLE>
<CAPTION>
-------------- ---------------- -------------- ----------------
Informational Informational
OCTOBER 31, Conversion DECEMBER 31 Conversion
1997 to U.S. Dollars 1996 to U.S. Dollars
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT (unaudited)
CURRENT LIABILITIES
Accounts payable and accrued expenses FF 2,553,000 $ 441,696 FF 6,792,000 $1,306,154
Checks issued against future deposits 333,000 57,612 -- --
Due to related party (Note 3) 4,098,000 708,997 -- --
------------ ----------- ------------ -----------
TOTAL CURRENT LIABILITIES 6,984,000 1,208,304 6,792,000 1,306,154
------------ ----------- ------------ -----------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
STOCKHOLDERS' DEFICIT
Common stock FF49 nominal value,
1,021 shares authorized, issued and outstanding 50,000 8,651 50,000 9,615
Accumulated deficit (4,871,000) (842,734) (2,737,000) (526,346)
------------ ----------- ------------ -----------
TOTAL STOCKHOLDERS' DEFICIT (4,821,000) (834,083) (2,687,000) (516,731)
------------ ----------- ------------ -----------
TOTAL CURRENT LIABILITIES & STOCKHOLDERS' DEFICIT FF 2,163,000 $ 374,221 FF 4,105,000 $ 789,423
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
5
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CACTUS EUROPE SARL
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Informational YEAR ENDED Informational
10 MONTHS ENDED Conversion to DECEMBER 31, Conversion to
OCTOBER 31, 1997 U.S. Dollars 1998 U.S. Dollars
-------------------- -------------------- --------------- --------------------
<S> <C> <C> <C> <C>
(unaudited)
SALES FF2,983,000 $ 516,090 FF10,414,000 $ 2,002,692
COST OF SALES 1,405,000 (243,080) 7,163,000 (1,377,500)
-------------------- -------------------- --------------- --------------------
GROSS PROFIT 1,578,000 273,010 3,251,000 625,192
-------------------- -------------------- --------------- --------------------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,176,000 549,481 4,508,000 866,923
-------------------- -------------------- --------------- --------------------
OPERATING LOSS FROM CONTINUING
OPERATIONS (1,598,000) (276,471) (1,257,000) (241,731)
-------------------- -------------------- --------------- --------------------
OTHER INCOME (EXPENSE)
INTEREST INCOME -- -- 9,000 192
INTEREST EXPENSE (67,000) (11,592) (21,000) (4,038)
OTHER INCOME (EXPENSE) (469,000) (81,142) (100,000) (19,231)
-------------------- -------------------- --------------- --------------------
TOTAL OTHER INCOME (EXPENSE) (536,000) (92,734) (120,000) (23,077)
-------------------- -------------------- --------------- --------------------
NET LOSS FF (2,134,000) $ (369,204) FF (1,377,000) $ (264,808)
-------------------- -------------------- --------------- --------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
6
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CACTUS EUROPE SARL
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
10 months Year
ended October ended
31, 1997 December 31,
1996
------------- --------------
<S> <C> <C>
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss FF (2,134,000) FF(1,377,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 272,000 430,000
Provision for bad debt 141,000 4,000
Provision for obsolete inventory 19,000 150,000
Increase (decrease) from changes in:
Accounts receivable 705,000 963,000
Inventory 356,000 (308,000)
Prepaid and other 172,000 714,000
Accounts payable and accrued (138,000) (690,000)
expenses
--------------- --------------
Net cash used in operating activities (607,000) (114,000)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (13,000) (427,000)
--------------- --------------
Net cash used in investing activities (13,000) (427,000)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Checks issued against future deposits 333,000 --
--------------- --------------
Net cash from financing activities 333,000 --
--------------- --------------
Net decrease in cash and cash equivalents (287,000) (541,000)
Cash & cash equivalents at beginning of period 287,000 828,000
--------------- --------------
Cash and cash equivalents at end of period FF -- FF 287,000
--------------- --------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
7
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CACTUS EUROPE SARL
STATEMENT OF CHANGES
IN STOCKHOLDERS' EQUITY DEFICIT
<TABLE>
<CAPTION>
Common Stock Accumulated Total
Deficit stockholders'
--------------------- equity deficit
Shares Amount
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance 1,021 FF 50,000 FF (1,360,000) FF (1,310,000)
December 31, 1995
Net loss (unaudited) (1,377,000) (1,377,000)
-------------------------------------------------------------
Balance 1,021 50,000 (2,737,000) (2,687,000)
December 31, 1996
Net loss (2,134,000) (2,134,000)
-------------------------------------------------------------
Balance 1,021 FF 50,000 FF (4,871,000) FF (4,821,000)
October 31, 1997
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND
NOTES TO FINANCIAL STATEMENTS.
8
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CACTUS EUROPE SARL
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT AND PRESENTATION AND ORGANIZATION
Cactus Europe SARL (the Company), a French corporation created in April,
1994, is a value added reseller of computer hardware and software.
The financial statements have been prepared in accordance with United
States generally accepted accounting principles and issued in the
Company's native currency, French Francs. A separate column translating
the French Francs to U.S. Dollars at the market conversion rate at
each balance sheet date, which was 5.78 and 5.2 French Francs per U.S.
Dollar at October 31, 1997 and December 31, 1996, has been included
for the balance sheets and statements of operations for information purposes
only.
SUMMARY OF ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in
first-out basis, or market.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and properties are stated at cost. Depreciation of equipment is
provided using the straight line method over the estimated useful lives of
the related assets which range from three to ten years.
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REVENUE RECOGNITION POLICY
The Company recognizes revenue at the time products are delivered to the
customers.
INCOME TAXES
The Company provides for income taxes in accordance with STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 109 ("SFAS 109"), ACCOUNTING FOR INCOME TAXES. SFAS
109 employs an asset and liability approach in accounting for income taxes, the
objective of which is to recognize the amounts of current and deferred tax
payable at the date of the financial statements using the provisions of enacted
tax laws.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
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Note 1. Going Concern
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As of October 31, 1997, the
Company had a working capital deficiency of FF 5,827,000 and a shareholders'
deficit of FF 4,821,000. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Subsequent to October 31,
1997, as discussed in Note 6, the Company sold all of its assets and
substantially all of its liabilities to Apparel Technologies, Inc., a United
States company. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts
or the amount of liabilities that might be necessary should the Company be
unable to continue in existence.
Note 2. Inventory
The Company's inventory consists of computer hardware and software finished
goods. The inventory is net of reserves for obsolescence of FF169,000
and FF150,000 as of October 31 ,1997 and December 31, 1996.
Note 3. Due to related party
The Company has an unsecured payable to its president of FF4,098,000 as of
October 31, 1997. This liability does not bear interest and is due on demand.
Note 4. Commitments and Contingencies
LEASE
The Company leases its facilities on a six month contract basis. Rent expense
included in the statements of operations are FF125,000 and FF150,000 for the
ten months ended October 31, 1997 and year ended December 31, 1996.
LAWSUITS
The Company is, from time to time, involved in various lawsuits generally
incidental to its business operations. In the opinion of management, the
ultimate resolution of these matters, if any, will not have a significant
effect on the financial position, operations or cash flows of the Company.
Note 5. Income Taxes
The Company has incurred losses since inception. The Company has net
operating loss carryforwards of approximately FF4,871,000 as of October 31,
1997. Approximately FF4,000,000 of these carryforwards expire in the years
1999 to 2002, while the remaining amount is considered permanent net
operating loss carryforwards by the French government and do not expire.
Due to management not being able to conclude that it is more likely than not
that the deferred tax asset will be realized, a valuation allowance has been
recorded for the full amount of this asset.
Note 6. Subsequent event
In November, 1997, all of the assets and a significant amount of the
liabilities of the Company were sold to Apparel Technologies, Inc., a United
States corporation, for $20,000 and 40,000 shares of restricted stock.
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ITEM 7.b.
Pro Forma Condensed Combined Statement of Operations
For the Six Month Period ended November 30, 1997 for
Apparel Technologies, Inc. (Unaudited) and Cactus Europe SARL (Unaudited)
<TABLE>
<CAPTION>
APPAREL PRO FORMA PRO FORMA
TECHNOLOGIES CACTUS COMBINED ADJUSTMENTS COMBINED
------------ ----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net Sales 1,399,558 393,667 1,793,225 - 1,793,225
Cost of Sales (936,123) (138,164) (1,074,287) - (1,074,287)
------------ ----------- ----------- ----------- -----------
Gross Profit 463,435 255,503 718,938 - 718,938
Selling, General &
Administrative expenses 2,760,206 393,336 3,153,542 8,782(2) 3,162,324
------------ ----------- ----------- ----------- -----------
Loss from Operations (2,296,771) (137,833) (2,434,604) (8,782) (2,443,386)
------------ ----------- ----------- ----------- -----------
Other Expense (782,763) - (782,763) - (782,763)
------------ ----------- ----------- ----------- -----------
Net Loss (3,079,534) (137,833) (3,217,367) (8,782) (3,226,149)
------------ ----------- ----------- ----------- -----------
Loss per share (0.23) (0.24)
Weighted average
shares of 13,401,387 13,441,387
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS
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FOR THE TWELVE MONTH PERIOD ENDED MAY 31, 1997 FOR
APPAREL TECHNOLOGIES (AUDITED) SUSAN BURROWES, LTD. (UNAUDITED) AND CACTUS
EUROPE SARL (UNAUDITED)
<TABLE>
<CAPTION>
APPAREL SUSAN PRO FORMA PRO FORMA
TECHNOLOGIES BURROWES CACTUS COMBINED ADJUSTMENTS COMBINED
------------ ----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,675,350 $12,188,000 $1,256,995 $15,120,245 $ -- $15,120,245
Cost of Sales 1,072,509 8,501,000 724,403 10,297,912 -- 10,297,912
------------ ----------- ---------- ----------- ---------- ----------
Gross Profit 602,841 3,687,000 532,592 4,822,333 -- 4,822,333
Selling, general and administrative
expenses 2,182,040 4,128,000 657,809 6,967,849 132,567(2) 7,100,416
------------ ----------- ---------- ----------- ---------- ----------
Loss from operations (1,579,199) (441,000) (125,217) (2,145,516) (132,567) (2,278,083)
Other expense 112,381 380,000 91,173 583,554 -- 583,554
------------ ----------- ---------- ----------- ---------- ----------
Net income (loss):
from operations (1,691,580) (821,000) (216,390) (2,729,070) (132,567) (2,861,637)
------------ ----------- ---------- ----------- ---------- ----------
Dividends to preferred shareholder 512,633 -- -- 512,733 -- 512,733
------------ ----------- ---------- ----------- ---------- ----------
Net loss allocable to common
shareholders $2,204,213 $ 821,000 $ 216,390 $ 3,241,803 $ 132,567 $ 3,374,370
------------ ----------- ---------- ----------- ---------- ----------
Net loss per share $ (0.30) $ (0.29)
Weighted average common shares
outstanding 7,314,943 11,554,943
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENTS OF OPERATIONS.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
1. BASIS OF PRESENTATION. The pro forma condensed combined historical
statements of operations are based on the acquisition of Cactus Europe SARL,
a French Corporation ("Cactus") by Apparel Technologies, Inc. ("Company"),
through the acquisition of all of the assets and substantially all of the
liabilities of Cactus in exchange for 40,000 restricted shares of Company
stock and a cash payment of $20,000. These statements also reflect, to the
extent amounts are not already present in the historical statements of
operations of the Company, the effect of the acquisition of Susan Burrowes,
Ltd. ("SBL") by the Company. As these statements are being filed subsequent
to the Company's 10-QSB, which include the acquired assets and liabilities of
Cactus, no pro forma balance sheet has been presented.
2. S,G+A. Adjustment to reflect the amortization of goodwill over its 15
year life for SBL and Cactus for the year ended May 31, 1997 and Cactus for the
six months ended November 30, 1997.
13
