<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
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)
October 29, 1999
EMAGISOFT TECHNOLOGIES, INC.
(Formerly known as Manatee-American Financial Corp.)
----------------------------------------------------
Exact name of registrant as specified in charter)
FLORIDA
----------------------------------------------
(State or Other Jurisdiction of Incorporation)
33-67766-A 65-0422273
- ------------------------ ---------------------------------
(Commission file number) (IRS employer identification no.)
405 Central Avenue, 2nd Floor, St. Petersburg, FL 33701
- ------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(727) 898-0688
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Effective October 29, 1999, the Registrant acquired all of the
outstanding capital stock of Emagisoft Corporation f/k/a Net Advantage, Inc.,
a privately held Florida corporation ("Emagisoft"), through an exchange of
shares of the Registrant for all of the outstanding capital stock of Emagisoft
(the "Acquisition"). The Registrant issued 10,000,000 shares of restricted
common stock, $.0001 par value (the "Common Stock") to the former stockholders
of Emagisoft in exchange for an aggregate of 10,000,000 shares of Class A
Voting Common Stock of Emagisoft. As part of the Acquisition, the Registrant
also acquired Emagisoft's wholly-owned subsidiary, Interactive Media Solutions,
Inc. ("Interactive").
Pursuant to a Share Exchange Agreement (the "Agreement") effective as
of October 29, 1999, by and between the Registrant and Emagisoft and all of
the stockholders of Emagisoft (the "Agreement"), the sole director and officer
of the Registrant resigned upon consummation of the Acquisition. Kyle Jones,
the sole director and president of Emagisoft immediately prior to the
Acquisition, was elected a director and appointed the sole officer of the
Registrant and retained his positions with Emagisoft.
Upon consummation of the Acquisition, the former stockholders of
Emagisoft beneficially owned, in the aggregate, approximately 81.63% of the
voting securities of the Registrant. A trust established by Kyle Jones, the
former majority stockholder of Emagisoft, acquired ownership of 5,552,260
shares of Common Stock of the Registrant, representing approximately 45.32% of
the voting securities of the Registrant. Mr. Jones was elected director (and
became the sole director) and appointed sole officer of the Registrant. As a
result of the Acquisition, Mr. Jones acquired control of the Registrant. The
source of the consideration used in the Acquisition were the shares of
Emagisoft stock owned prior to the Acquisition that were acquired by the
Registrant in exchange for the Common Stock issued by the Registrant.
All of the above transactions, including the change in control of the
Registrant, are subject to the occurrence of the following condition in the
Agreement: that the Common Stock of the Registrant be listed for trading on the
Over the Counter Bulletin Board (OTCBB) within ninety (90) days of consummation
of the Acquisition. The Agreement provides that in the event this condition is
not met, the transactions consummated under the Agreement will be unwound so as
to place the Registrant, Emagisoft and the stockholders of Emagisoft in the
same positions they were in had the Acquisition not been consummated. This
would result in control of the Registrant reverting back to that which existed
immediately prior to the Acquisition.
Except as set forth in the foregoing paragraph, Registrant is not aware
of any arrangements which may at a subsequent date result in a change of
control of the Registrant.
2
<PAGE> 3
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As a result of the Acquisition effective October 29, 1999, the
Registrant acquired all of the assets of Emagisoft and its subsidiary,
Interactive. These assets primarily consist of computer equipment and software
and were used prior to the Acquisition in the respective businesses operated by
Emagisoft and Interactive. Emagisoft is a computer network integration,
hardware and software sales and Internet service providing firm, and
Interactive is engaged in the web site design business, focusing on providing
web site design services for electronic commerce companies and non-commercial
customers. As a result of the Acquisition, Emagisoft is now a wholly-owned
subsidiary of the Registrant. The Registrant intends to operate Emagisoft and
Interactive in the same manner and to continue in the same businesses that
Emagisoft and Interactive engaged in prior to the Acquisition. Prior to the
Acquisition, no material relationship existed between the Emagisoft and/or any
of its affiliates and the Registrant and/or any of its affiliates, any director
or officer of the Registrant, or any associate of any such director or officer.
The amount of consideration given by the Registrant for the Emagisoft stock was
negotiated between and determined by the respective management of the
Registrant and of Emagisoft.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Effective November 10, 1999, the Registrant dismissed its independent
accountant, Rachlin Cohen & Holtz ("Rachlin Cohen"), and engaged Arthur
Andersen LLP as its new independent accountant. The change in the Registrant's
certifying accountant resulted from the change in control of the Registrant.
Prior to the Acquisition, Arthur Andersen was engaged as Emagisoft's accountant
and audited the financial statements of Emagisoft and Interactive. The decision
to dismiss Rachlin Cohen and engage Arthur Andersen as the Registrant's
independent accountant was made by Kyle Jones, the sole director of the
Registrant, and was not the result of any disagreement with Rachlin Cohen.
Rachlin Cohen's reports on the financial statements for the years ended
December 31, 1997 and 1998, did not contain an adverse opinion or disclaimer,
and were not qualified or modified as to uncertainty, audit scope, or
accounting principles, except that the reports for both years (for
Manatee-American Financial Corp. before the Acquisition and its change of name)
contained a going concern paragraph.
The Registrant is not aware of any disagreements with Rachlin Cohen
during the two years ended December 31, 1997 and 1998 or in any subsequent
interim period on any matters of accounting principles or practices, financial
statement disclosures, or auditing scope or procedure,
3
<PAGE> 4
which disagreement, if not resolved to the satisfaction of Rachlin Cohen, would
have caused it to make reference to the subject matter of the disagreement in
connection with its report.
ITEM 5. OTHER EVENTS.
In contemplation of the Acquisition, the Registrant filed Articles of
Amendment to its Articles of Incorporation on October 27, 1999, changing its
name to Emagisoft Technologies, Inc. and increasing its authorized shares of
common stock to 50,000,000.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
Pursuant to the terms of the Agreement, the sole director of the
Registrant resigned as a director upon consummation of the Acquisition. The
resignation was tendered in light of the issuance of a majority of the
Registrant's voting securities to the Emagisoft stockholders and the change in
control of the Registrant. The resigning director did not resign due to a
disagreement with the Registrant on any matter relating to the operations,
policies or practices of the Registrant.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
Report of Independent Certified Public Accountants
Balance Sheets of Net Advantage, Inc. as of December 31, 1998
and 1997
Statements of Operations of Net Advantage, Inc. for the years
ended December 31, 1998 and 1997, and for the period from
inception (June 21, 1996) through December 31, 1996
Statements of Stockholder's (Deficit) Equity of Net Advantage,
Inc. for the years ended December 31, 1998 and 1997, and
the for the period from inception (June 21, 1996) through
December 31, 1996
Statements of Cash Flows of Net Advantage, Inc. for the years
ended December 31, 1998 and 1997, and for the period from
inception (June 21, 1996) through December 31, 1996
Notes to Financial Statements of Net Advantage, Inc.
Report of Independent Certified Public Accountants
Balance Sheets of Interactive Media Solutions, Inc. as of
December 31, 1998 and 1997
Statements of Operations of Interactive Media Solutions, Inc.
for the years ended December 31, 1998, 1997 and 1996
4
<PAGE> 5
Statements of Stockholder's Equity of Interactive Media
Solutions, Inc. for the years ended December 31, 1998, 1997
and 1996
Statements of Cash Flows of Net Advantage, Inc. for the years
ended December 31, 1998, 1997 and 1996
Notes to Financial Statements of Interactive Media Solutions,
Inc.
Unaudited Consolidated Balance Sheets of Emagisoft Corporation
as of September 30, 1999
Unaudited Consolidated Statement of Operations of Emagisoft
Corporation for the nine months ended September 30, 1999
Unaudited Consolidated Statement of Cash Flows of Emagisoft
Corporation for the nine months ended September 30, 1999
(b) Pro Forma Financial Information
Introduction to Unaudited Pro Forma Combined Financial
Statements
Unaudited Pro Forma Combined Balance Sheet as of December 31,
1998
Unaudited Pro Forma Combined Statement of Operations for the
year ended December 31, 1998
Unaudited Pro Forma Combined Balance Sheet as of September 30,
1999
Unaudited Pro Forma Combined Statement of Operations for the
nine months ended September 30, 1999
Notes to Unaudited Pro Forma Combined Financial Statements
(c) Exhibits.
2.1 Share Exchange Agreement dated as of October 29, 1999, by
and between the Registrant, Emagisoft Corporation and all
of the stockholders of Emagisoft Corporation
3.1 Articles of Amendment to the Articles of Incorporation of
the Registrant
16.1 Letter of Rachlin Cohen & Holtz LLP addressed to the U.S.
Securities and Exchange Commission dated November 15, 1999
23.1 Consent of Rachlin Cohen & Holtz LLP dated November 15,
1999
99.1 Report of Independent Certified Public Accountants
Balance Sheet of Manatee American Financial Corp. as of
December 31, 1998
5
<PAGE> 6
Statements of Operations of Manatee-American Financial Corp.
for the years ended December 31, 1998 and 1997, and from
inception (February 24, 1993) to December 31, 1998
Statements of Stockholders' Deficiency of Manatee-American
Financial Corp. for the years ended December 31, 1998 and
1997, and from inception (February 24, 1993) to December
31, 1998
Statements of Cash Flows of Manatee-American Financial Corp.
for the years ended December 31, 1998 and 1997, and for the
period from inception (February 24, 1993) to December 31,
1998
Notes to Financial Statements of Manatee-American Financial
Corp.
ITEM 8. CHANGE IN FISCAL YEAR.
Not Applicable.
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.
EMAGISOFT TECHNOLOGIES, INC.
Date: November 15, 1999 By: /s/ Kyle E. Jones
----------------------------
Kyle E. Jones, President
6
<PAGE> 7
NET ADVANTAGE, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997,
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE> 8
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholder of
Net Advantage, Inc.:
We have audited the accompanying balance sheets of Net Advantage, Inc. (a
Florida corporation) as of December 31, 1998 and 1997, and the related
statements of operations, stockholder's (deficit) equity and cash flows for the
years ended December 31, 1998 and 1997, and for the period from inception (June
21, 1996) through December 31, 1996. 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 audits.
We conducted our audits 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 audits provide 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 Net Advantage, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years ended December 31, 1998 and 1997, and the period from
inception (June 21, 1996) through December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
September 8, 1999
<PAGE> 9
NET ADVANTAGE, INC.
BALANCE SHEETS -- DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 25,596 $ 25,128
Prepaid insurance -- 141
Current portion of deferred tax asset 9,407 --
--------- ---------
Total current assets 35,003 25,269
--------- ---------
PROPERTY AND EQUIPMENT:
Furniture and fixtures 10,060 8,661
Computer equipment 107,222 103,640
Software 45,160 45,160
--------- ---------
162,442 157,461
Less- Accumulated depreciation (102,852) (59,474)
--------- ---------
Property and equipment, net 59,590 97,987
--------- ---------
DEFERRED TAX ASSET, less current portion 16,069 34,317
--------- ---------
Total assets $ 110,662 $ 157,573
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,547 $ 18,639
Accrued liabilities 27,304 17,586
Deferred revenue -- 24,440
--------- ---------
Total current liabilities 41,851 60,665
--------- ---------
DUE TO STOCKHOLDER -- 43,750
--------- ---------
STOCKHOLDER'S EQUITY:
Common stock, $.001 par value; 1,000 shares authorized,
issued and outstanding 1 1
Additional paid-in capital 111,034 110,034
Accumulated deficit (42,224) (56,877)
--------- ---------
Total stockholder's equity 68,811 53,158
--------- ---------
Total liabilities and stockholder's equity $ 110,662 $ 157,573
========= =========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 10
NET ADVANTAGE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND THE
PERIOD FROM INCEPTION (JUNE 21, 1996) THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
Year Ended
December 31, Period Ended
---------------------------- December 31,
1998 1997 1996
--------- --------- ------------
<S> <C> <C> <C>
REVENUES:
Hardware and software sales and support $ 194,590 $ 127,808 $ 101,560
Internet provider services 21,787 25,379 --
Other professional services -- 25,059 --
--------- --------- ---------
Total revenues 216,377 178,246 101,560
DIRECT COSTS 102,816 164,407 101,867
--------- --------- ---------
Gross profit 113,561 13,839 (307)
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Sales and marketing 201 5,005 1,829
General and administrative 89,866 86,995 10,898
--------- --------- ---------
Total operating costs and expenses 90,067 92,000 12,727
--------- --------- ---------
NET INCOME (LOSS) BEFORE PROVISION FOR
(BENEFIT FROM) INCOME TAXES 23,494 (78,161) (13,034)
PROVISION FOR (BENEFIT FROM) INCOME TAXES 8,841 (29,413) (4,905)
--------- --------- ---------
NET INCOME (LOSS) $ 14,653 $ (48,748) $ (8,129)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 11
NET ADVANTAGE, INC.
STATEMENTS OF STOCKHOLDER'S (DEFICIT) EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND THE
PERIOD FROM INCEPTION (JUNE 21, 1996) THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
Total
Common Stock Additional Stockholder's
------------------------ Paid-in Accumulated (Deficit)
Shares Amount Capital Deficit Equity
------ --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, June 21, 1996 -- $ -- $ -- $ -- $ --
Issuance of common stock 1,000 1 2,874 -- 2,875
Net loss -- -- -- (8,129) (8,129)
----- --------- --------- --------- ---------
BALANCE, December 31, 1996 1,000 1 2,874 (8,129) (5,254)
Contribution of property
and equipment -- -- 107,160 -- 107,160
Net loss -- -- -- (48,748) (48,748)
----- --------- --------- --------- ---------
BALANCE, December 31, 1997 1,000 1 110,034 (56,877) 53,158
Contribution of property
and equipment -- -- 1,000 -- 1,000
Net income -- -- -- 14,653 14,653
----- --------- --------- --------- ---------
BALANCE, December 31, 1998 1,000 $ 1 $ 111,034 $ (42,224) $ 68,811
===== ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 12
NET ADVANTAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND THE
PERIOD FROM INCEPTION (JUNE 21, 1996) THROUGH DECEMBER 31, 1996
<TABLE>
<CAPTION>
Year Ended
December 31, Period Ended
------------------------------ December 31,
1998 1997 1996
--------- ---------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 14,653 $ (48,748) $ (8,129)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation 43,378 58,753 721
Deferred income taxes 8,841 (29,412) (4,905)
Changes in operating assets and liabilities-
Prepaid insurance 141 (141) --
Accounts payable (4,092) 5,616 13,023
Accrued liabilities 9,718 32,648 9,378
Deferred revenue (24,440) -- --
--------- --------- ---------
Net cash provided by
operating activities 48,199 18,716 10,088
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,981) (3,616) (2,135)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of due to stockholder (43,750) (800) --
Issuance of common stock -- -- 2,875
--------- --------- ---------
Net cash (used in) provided by
financing activities (43,750) (800) 2,875
--------- --------- ---------
NET INCREASE IN CASH 468 14,300 10,828
CASH, beginning of period 25,128 10,828 --
--------- --------- ---------
CASH, end of period $ 25,596 $ 25,128 $ 10,828
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Contribution of property and equipment $ 1,000 $ 107,160 $ --
Equipment financed by due to stockholder $ -- $ 44,550 $ --
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 13
NET ADVANTAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. DESCRIPTION OF BUSINESS:
Net Advantage, Inc. (the Company), a Florida corporation, is a privately held
computer network integration, hardware and software sales and internet service
providing firm. The Company, which conducts its operations from St. Petersburg,
Florida, was incorporated on June 21, 1996, through the issuance of 1,000
shares of common stock with a par value of $.001 per share, under the laws of
the State of Florida.
On June 25, 1999, the Company amended the articles of incorporation to change
the authorized capital stock to 20,000,000 shares of common stock having a par
value of $.001 per share, consisting of 10,000,000 shares of Class A voting
common stock and 10,000,000 shares of Class B non-voting common stock, and
10,000,000 shares of preferred stock having a par value of $.001 per share.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company's revenues are recognized as follows:
Hardware and Software Sales and Support
Revenues from hardware sales related to network installations are recognized in
accordance with the provisions of Statement of Position (SOP) 81-1, "Accounting
for Performance of Construction-Type and Certain Production-Type Contracts,"
using the completed contract method.
Revenue from a support contract related to a network installation is recognized
monthly as amounts are billed over the term of the annual service period.
Revenues from the sale of third-party software are recognized in accordance
with the provisions of SOP 97-2, "Software Revenue Recognition." All events
necessary for revenue recognition under SOP 97-2 typically occur when the
third-party software is delivered. As of December 31, 1997, the Company had
$24,440 of deferred revenue in the accompanying balance sheet related to sales
of third-party software that had not yet been delivered.
<PAGE> 14
-2-
Internet Provider Services
Revenues from the hosting of web sites are recognized monthly over the hosting
period. The Company customarily bills for these services on a monthly basis.
Other Professional Services
Other professional services consists of hardware repair and miscellaneous
custom programming. Revenues were recognized once services were performed.
Deferred Revenue
Deferred revenue primarily represents advanced payments by customers for
third-party software not yet delivered.
Significant Concentrations
For the years ended December 31, 1998, 1997 and for the period from inception
(June 21, 1996) through December 31, 1996, approximately 65 percent, 40 percent
and 60 percent of sales, respectively, were attributable to three customers.
Any change in the relationship with these customers could have a potentially
adverse effect on the Company's financial position. No such change is
anticipated by management.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation of furniture and fixtures and computer equipment is computed using
the double declining balance method over the estimated useful lives of the
assets, which is typically seven and five years, respectively. The software is
being depreciated over an estimated useful life of three years using the
straight-line method. Maintenance and repairs are charged to expense as
incurred. Depreciation on property and equipment totaled $43,378 and $58,753
for the years ended December 31, 1998 and 1997, respectively, and $721 for the
period from inception (June 21, 1996) through December 31, 1996, and is
included in general and administrative expenses in the accompanying statements
of operations.
Income Taxes
The Company accounts for income taxes under the liability method, as required
by Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." The liability method requires income taxes to be recognized
based on income taxes currently payable and the change in deferred taxes.
Deferred taxes are recognized based on the temporary differences between the
financial statement and tax bases of assets and liabilities at enacted tax
rates as of the dates the differences are expected to reverse.
<PAGE> 15
-3-
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures 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.
Fair Value of Financial Instruments
As of December 31, 1998 and 1997, the carrying amounts of the Company's
financial instruments, which include cash, accounts payable, accrued
liabilities and due to stockholder, are recorded at amounts which approximate
fair value because of the short maturity of these instruments.
3. ACCRUED LIABILITIES:
Accrued liabilities consists of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Accounting fees $24,999 $16,666
Sales taxes 2,305 920
------- -------
$27,304 $17,586
======= =======
</TABLE>
4. INCOME TAXES:
The provision for (benefit from) income taxes consists of the following for the
years ended December 31, 1998 and 1997, and for the period from inception (June
21, 1996) through December 31, 1996:
<TABLE>
<CAPTION>
Year Ended
December 31, Period Ended
--------------------------- December 31,
1998 1997 1996
-------- -------- ------------
<S> <C> <C> <C>
Current:
Federal $ -- $ -- $ --
State -- -- --
-------- -------- --------
-- -- --
-------- -------- --------
Deferred:
Federal 8,354 (27,794) (4,635)
State 487 (1,619) (270)
-------- -------- --------
8,841 (29,413) (4,905)
-------- -------- --------
Total income tax provision
(benefit) $ 8,841 $(29,413) $ (4,905)
======== ======== ========
</TABLE>
<PAGE> 16
-4-
The components of the deferred tax assets consisted of the following at
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss (NOL) carryforwards $16,069 $28,046
Accrued expenses 9,407 6,271
------- -------
Total deferred tax asset $25,476 $34,317
======= =======
</TABLE>
The provision for income taxes for the years ended December 31, 1998 and 1997,
and for the period from inception (June 21, 1996) through December 31, 1996,
differs from the amount computed, by applying the U.S. Federal corporate tax
rate of 34 percent to net income before provision for income taxes, primarily
as a result of state income taxes.
At December 31, 1998 and 1997, the Company had NOL carryforwards for tax
purposes of approximately $43,000 and $75,000, respectively, which are
available to offset future taxable income and expire during the years 2016
through 2018.
5. RELATED-PARTY TRANSACTIONS:
Kyle Jones, the President of the Company, donated approximately $1,000 and
$107,000 of property and equipment during 1998 and 1997, respectively. In
addition, Mr. Jones sold approximately $45,000 of property and equipment in
exchange for a note. During 1998, Kyle Jones took draws from the Company in the
amount of the outstanding note, leaving a zero balance due to stockholder at
December 31, 1998.
6. SUBSEQUENT EVENTS:
On July 20, 1999, the Company acquired Interactive Media Solutions, Inc. (IMS)
by purchasing 100 percent of the issued and outstanding common stock. IMS was
purchased for $50,000 cash and the issuance of 143,000 shares of Class A voting
common stock of the Company valued at $143,000, for a total purchase price of
$193,000. Prior to 1998, IMS derived most of its revenues from architectural
design. During 1998, IMS began to generate revenues through designing web
sites.
During the months of July and August of 1999, the Company raised additional
equity financing through the sale of 1,250,000 shares of Class A voting common
stock for $1,250,000.
<PAGE> 17
INTERACTIVE MEDIA SOLUTIONS, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997,
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE> 18
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholder of
Interactive Media Solutions, Inc.:
We have audited the accompanying balance sheets of Interactive Media Solutions,
Inc. (a Florida corporation) as of December 31, 1998 and 1997, and the related
statements of operations, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide 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 Interactive Media Solutions,
Inc. as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
September 8, 1999
<PAGE> 19
INTERACTIVE MEDIA SOLUTIONS, INC.
BALANCE SHEETS -- DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 7,551 $ 3,119
Accounts receivable 9,397 10,458
Due from stockholder 5,163 --
Deposits 1,225 555
Prepaid taxes -- 151
Current portion of deferred tax asset 5,981 1,603
-------- --------
Total current assets 29,317 15,886
-------- --------
PROPERTY AND EQUIPMENT:
Furniture and fixtures 5,905 5,568
Computer equipment 33,680 33,680
-------- --------
39,585 39,248
Less- Accumulated depreciation (32,363) (26,549)
-------- --------
Property and equipment, net 7,222 12,699
-------- --------
DEFERRED TAX ASSET, less current portion -- 1,392
-------- --------
Total assets $ 36,539 $ 29,997
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,577 $ 8,195
Accrued liabilities 26,219 16,757
-------- --------
Total current liabilities 27,796 24,952
-------- --------
DEFERRED TAX LIABILITY 1,167 --
-------- --------
STOCKHOLDER'S EQUITY:
Common stock, no par value; 1,000 shares authorized,
500 shares issued and outstanding 500 500
Retained earnings 7,076 4,525
-------- --------
Total stockholder's equity 7,576 5,025
-------- --------
Total liabilities and stockholder's equity $ 36,539 $ 29,977
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 20
INTERACTIVE MEDIA SOLUTIONS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
REVENUES $ 221,521 $ 127,732 $ 132,379
DIRECT COSTS 166,568 89,337 84,636
--------- --------- ---------
Gross profit 54,953 38,395 47,743
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Sales and marketing 10,126 8,305 11,282
General and administrative 40,515 38,009 44,256
--------- --------- ---------
Total operating costs and expenses 50,641 46,314 55,538
--------- --------- ---------
NET INCOME (LOSS) BEFORE PROVISION FOR
(BENEFIT FROM) INCOME TAXES 4,312 (7,919) (7,795)
PROVISION FOR (BENEFIT FROM) INCOME TAXES 1,761 (2,949) (2,841)
--------- --------- ---------
NET INCOME (LOSS) $ 2,551 $ (4,970) $ (4,954)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 21
INTERACTIVE MEDIA SOLUTIONS, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Total
------------------------- Retained Stockholder's
Shares Amount Earnings Equity
------- -------- -------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 1,000 $ 1,000 $ 16,949 $ 17,949
Purchase and cancellation of
common stock (500) (500) (2,500) (3,000)
Net loss -- -- (4,954) (4,954)
----- -------- -------- --------
BALANCE, December 31, 1996 500 500 9,495 9,995
Net loss -- -- (4,970) (4,970)
----- -------- -------- --------
BALANCE, December 31, 1997 500 500 4,525 5,025
Net income -- -- 2,551 2,551
----- -------- -------- --------
BALANCE, December 31, 1998 500 $ 500 $ 7,076 $ 7,576
===== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 22
INTERACTIVE MEDIA SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,551 $(4,970) $(4,954)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation 5,814 7,140 6,790
Deferred income taxes (1,819) (3,563) (3,331)
Changes in assets and liabilities-
Accounts receivable 1,061 1,038 2,000
Due from stockholder (5,163) -- --
Deposits (670) -- --
Prepaid taxes 151 441 --
Accounts payable (6,618) (1,451) 4,918
Accrued expenses 9,462 6,026 4,067
------- ------- -------
Net cash provided by operating activities 4,769 4,661 9,490
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (337) (3,627) (9,239)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of common stock -- -- (3,000)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 4,432 1,034 (2,749)
CASH, beginning of year 3,119 2,085 4,834
------- ------- -------
CASH, end of year $ 7,551 $ 3,119 $ 2,085
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Taxes paid $ 151 $ 247 $ 194
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 23
INTERACTIVE MEDIA SOLUTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. DESCRIPTION OF BUSINESS:
Interactive Media Solutions, Inc. (the Company), a Florida corporation, is a
privately-held web site design firm, focused on providing web site design
services for electronic commerce companies as well as non-commercial customers.
The Company, which conducts its operations from St. Petersburg, Florida, was
incorporated on August 22, 1994, through the issuance of 1,000 shares of common
stock with no par value, under the laws of the State of Florida. Revenues from
1994 to 1997 were primarily derived from architectural design and drafting
services, reselling of third-party architectural construction and drafting
software, and selling of hardware supporting the third-party software.
Beginning in 1998, the Company redirected its efforts, deriving most of its
revenues from web site design services.
On November 12, 1996, the Company repurchased 500 of its own common shares,
representing 50 percent of all common shares outstanding, for $3,000 and
appropriately cancelled them under the guidance of the Florida Business
Corporations Act.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company's revenues are recognized as follows:
Architectural Graphics and Design Services
Revenues from architectural graphics and design services are recognized in
accordance with the provisions of Statement of Position (SOP) 81-1, "Accounting
for Performance of Construction-Type and Certain Production-Type Contracts,"
using the completed contract method.
Third-party Software
Revenues from the sale of third-party software are recognized in accordance
with the provisions of SOP 97-2, "Software Revenue Recognition." Revenues are
recognized when the software is delivered.
<PAGE> 24
-2-
Web Site Development and Design
Revenues from web site development and design are recognized ratably as the
services are performed, typically up to one week in length. The Company
customarily bills for these services at the end of the project.
Significant Concentrations
For the years ended December 31, 1998 and 1997, approximately 25 percent and 30
percent of sales were attributable to one and two customers, respectively.
During the year ended December 31, 1996, approximately 40 percent of sales were
attributable to one customer. Any change in the relationship with these
customers could have a potentially adverse effect on the Company's financial
position. No such change is anticipated by management.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation of furniture and fixtures and computer equipment is computed using
the double declining balance method over the estimated useful lives of the
assets, which is typically seven and five years, respectively. Maintenance and
repairs are charged to expense as incurred. Depreciation on property and
equipment totaled $5,814, $7,140 and $6,790 for the years ended December 31,
1998, 1997 and 1996, respectively, and are included in general and
administrative expenses in the accompanying statements of operations.
Income Taxes
The Company accounts for income taxes under the liability method as required by
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." The liability method requires income taxes to be recognized
based on income taxes currently payable and the change in deferred taxes.
Deferred taxes are recognized based on the temporary differences between the
financial statement and tax bases of assets and liabilities at enacted tax
rates as of the dates the differences are expected to reverse.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE> 25
-3-
Fair Value of Financial Instruments
As of December 31, 1998 and 1997, the carrying amounts of the Company's
financial instruments, which include cash, accounts receivable, due from
stockholder, accounts payable and accrued liabilities are recorded at amounts
which approximate fair value because of the short maturity of these
instruments.
3. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Accounting fees $15,000 $10,000
Employee payroll 2,589 2,642
Taxes 8,630 4,115
------- -------
$26,219 $16,757
======= =======
</TABLE>
4. INCOME TAXES:
The provision for (benefit from) income taxes consisted of the following for
the years ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ 2,438 $ 419 $ 333
State 1,142 195 157
------- ------- -------
3,580 614 490
------- ------- -------
Deferred:
Federal (1,235) (2,423) (2,264)
State (584) (1,140) (1,067)
------- ------- -------
(1,819) (3,563) (3,331)
------- ------- -------
Total income tax provision (benefit) $ 1,761 $(2,949) $(2,841)
======= ======= =======
</TABLE>
<PAGE> 26
-4-
The components of deferred tax assets and liabilities consisted of the
following at December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Accrued expenses $ 5,645 $ 3,763 $ 1,882
Other 336 1,603 485
------- ------- -------
5,981 5,366 2,367
Deferred tax liability:
Depreciation (1,167) (2,371) (2,935)
------- ------- -------
Net deferred tax asset (liability) $ 4,814 $ 2,995 $ (568)
======= ======= =======
</TABLE>
The provision for (benefit from) income taxes for the years ended December 31,
1998, 1997 and 1996, differs from the amount computed by applying the U.S.
Federal corporate tax rate of 34 percent to net income before provision for
income taxes, primarily as a result of state income taxes.
5. RELATED-PARTY TRANSACTIONS:
Roger Finefrock, the President of the Company, personally financed the purchase
of a vehicle. During 1998, the Company made principal and interest payments on
Mr. Finefrock's vehicle loan of approximately $5,200. These payments have been
treated as advances to Mr. Finefrock by the Company and are included in due
from stockholder in the accompanying balance sheet.
6. SUBSEQUENT EVENT:
On July 20, 1999, the Company was acquired by Net Advantage, Inc. (Net
Advantage). Net Advantage purchased 100 percent of the common stock issued and
outstanding for $50,000 cash and 143,000 shares of Class A voting common stock
of Net Advantage valued at $143,000, for a total purchase price of $193,000.
Net Advantage derives revenues from the sale of third-party software, sale of
related hardware, ongoing maintenance and support and web site design and
hosting.
<PAGE> 27
EMAGISOFT CORPORATION
CONSOLIDATED BALANCE SHEETS -- SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 619,104
Accounts receivable 82,048
Deposits 4,225
Deferred tax asset 15,388
-----------
Total current assets 720,765
-----------
PROPERTY AND EQUIPMENT:
Furniture and fixtures 74,125
Computer equipment 368,663
Software 51,532
-----------
494,320
Less-Accumulated depreciation (227,537)
-----------
266,783
-----------
DEFERRED TAX ASSETS 16,069
-----------
Total assets $ 1,003,617
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 21,460
Accrued liabilities 33,981
-----------
Total current liabilities 55,441
-----------
DEFERRED TAX LIABILITY 1,167
-----------
STOCKHOLDER'S EQUITY
Common stock, $.001 par value; 10,000,000 shares authorized,
issued and outstanding 10,000
Additional paid-in capital 1,331,535
Retained earnings (394,526)
-----------
Total stockholder's equity 947,009
-----------
Total liabilities and stockholder's equity $ 1,003,617
===========
</TABLE>
<PAGE> 28
EMAGISOFT CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
REVENUES $ 353,551
DIRECT COSTS 146,104
---------
Gross profit 207,447
---------
OPERATING COSTS AND EXPENSES:
General and administrative 548,276
---------
Total operating costs 548,276
NET LOSS BEFORE PROVISION FOR INCOME TAXES (340,829)
---------
PROVISION (BENEFIT) FOR INCOME TAXES --
NET LOSS $(340,829)
=========
</TABLE>
<PAGE> 29
EMAGISOFT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (359,378)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation 92,322
Changes in operating assets and liabilities-
Accounts receivable (67,488)
Deposits (3,000)
Accounts payable 5,336
Accrued expenses (19,542)
-----------
(84,694)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (292,293)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,230,000
-----------
NET INCREASE IN CASH 585,957
CASH, beginning of year 33,147
-----------
CASH, September 30, 1999 $ 619,104
===========
</TABLE>
<PAGE> 30
Emagisoft Technologies, Inc.
(formally known as Manatee American Financial Corporation)
Unaudited Pro Forma Combined Statement of Operations
For the period ended September 30, 1999
<TABLE>
<CAPTION>
Unaudited
Unaudited Unaudited Emagisoft
Emagisoft Emagisoft Pro Forma Technologies, Inc.
Technologies, Inc. Corporation Adjustments Pro Forma
------------------ ----------- ----------- ------------------
<S> <C> <C> <C> <C>
REVENUES $ -- $ 353,551 $ -- $ 353,551
COST OF GOODS SOLD -- 146,104 -- 146,104
--------- --------- --------- ---------
Gross Profit -- 207,447 -- 207,447
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 8,598 548,276 -- 548,276
AMORTIZATION OF GOODWILL AND OTHER
INTANGIBLE ASSETS -- -- 4,636 c 4,636
--------- --------- --------- ---------
Income from operations (8,598) (340,829) (4,636) (345,465)
OTHER INCOME (EXPENSE), NET -- -- -- --
--------- --------- --------- ---------
(Loss) income before provision (benefit)
for income taxes (8,598) (340,829) (4,636) (345,465)
INCOME TAX PROVISION (BENEFIT) -- -- -- --
--------- --------- --------- ---------
(Loss) income before participating
rights and minority interest (8,598) (340,829) (4,636) (345,465)
Net (loss) income $ (8,598) $(340,829) $ (4,636) $(345,465)
========= ========= ========= =========
Net Income (loss) per common share $ (0) $ (0) $ (0)
Weighted average common shares outstanding 2,250,000 10,000,000 12,250,000
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements
<PAGE> 31
Emagisoft Technologies, Inc.
(formally known as Manatee American Financial Corporation)
Unaudited Pro Forma Combined Balance Sheet
As of September 30, 1999
<TABLE>
<CAPTION>
Unaudited
Unaudited Unaudited Emagisoft
Emagisoft Emagisoft Pro Forma Technologies, Inc.
Technologies, Inc. Corporation Adjustments Pro Forma
------------------ ----------- ----------- ------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 114 $ 619,104 $ 619,218
Accounts receivable, net - 74,437 74,437
Due from stockholder - 7,611 7,611
Deposits - 4,225 4,225
Current portion of deferred tax asset - 15,388 15,388
-------- ----------- -----------
Total current assets 114 720,765 720,879
======== =========== ===========
PROPERTY, PLANT AND EQUIPMENT, net - 266,783 266,783
Deferred tax asset, less current portion - 16,069 16,069
Goodwill, net of amortization - - 174,607 a 174,607
-------- ----------- -----------
Total assets $ 114 $ 1,003,617 $ 1,178,338
======== =========== ===========
CURRENT LIABILITIES:
Accounts payable $ - $ 21,460 $ 21,460
Accrued expenses and other current
liabilities 49,736 33,981 83,717
-------- ----------- -----------
Total current liabilities 49,736 55,441 105,177
Deferred tax liability - 1,167 1,167
STOCKHOLDER'S EQUITY:
Common shares 225 10,000 (9,000) d 1,225
Paid-in capital 1,535 1,331,535 188,243 a 1,521,313
Retained earnings (deficit) (51,382) (394,526) (4,636) c (450,544)
-------- ----------- -----------
Total stockholders' equity (49,622) 947,009 1,071,994
-------- ----------- -----------
Total liabilities and stockholders' equity $ 114 $ 1,003,617 $ 1,178,338
======== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements
<PAGE> 32
Emagisoft Technologies, Inc.
(formally known as Manatee American Financial Corporation)
Unaudited Pro Forma Combined Statement of Operations
For the year ended December 31,1998
<TABLE>
<CAPTION>
Emagisoft Corporation (EC) Unaudited
------------------------------------------------------------ Emagisoft
Unaudited Technologies
Audited Audited Audited Pro Forma EC Pro Forma Inc.
Manatee Net Advantage IMS Adjustments Pro Forma Adjustments Pro Forma
--------- ------------- -------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ -- $216,377 $221,521 $ -- $437,898 $ -- $ 437,898
COST OF GOODS SOLD -- 102,816 166,568 -- 269,384 -- 269,384
--------- -------- -------- -------- -------- -------- ----------
Gross Profit -- 113,561 54,953 -- 168,514 -- 168,514
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,557 90,067 50,641 -- 140,708 -- 143,265
AMORTIZATION OF GOODWILL AND OTHER
INTANGIBLE ASSETS -- -- -- 6,181 6,181 -- 6,181
--------- -------- -------- -------- -------- -------- ----------
Income from operations (2,557) 23,494 4,312 (6,181) 21,625 -- 19,068
OTHER INCOME (EXPENSE), NET 12,500 -- -- -- -- -- 12,500
--------- -------- -------- -------- -------- -------- ----------
(Loss) income before provision
(benefit) for income taxes 9,943 23,494 4,312 (6,181) 21,625 -- 31,568
INCOME TAX PROVISION (BENEFIT) -- 8,841 1,761.00 -- 10,602 -- 10,602
--------- -------- -------- -------- -------- -------- ----------
(Loss) income before participating
rights and minority interest 9,943 14,653 2,551 (6,181) 11,023 -- 20,966
Net (loss) income $ 9,943 $ 14,653 $ 2,551 $ (6,181) $ 11,023 $ -- $ 20,966
========= ======== ======== ======== ======== ======== ==========
Net Income (loss) per common share $ 0.00 $ 15 $ 5 -- $ 0 $ 0
Weighted average common shares
outstanding 2,250,000 1,000 500 144,000 12,250,000
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements
<PAGE> 33
Emagisoft Technologies, Inc.
(formally known as Manatee American Financial Corporation)
Unaudited Pro Forma Combined Balance Sheet
As of December 31, 1998
<TABLE>
<CAPTION>
Emagisoft Corporation (EC) Unaudited
------------------------------------------------------------ Emagisoft
Unaudited Technologies
Audited Audited Audited Pro Forma EC Pro Forma Inc.
Manatee Net Advantage IMS Adjustments Pro Forma Adjustments Pro Forma
--------- ------------- -------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,968 $ 25,596 $ 7,551 - $ 33,147 $ - $ 35,115
Accounts receivable, net - - 9,397 9,397 - 9,397
Due from stockholder 5,163 5,163 5,163
Deposits - - 1,225 1,225 - 1,225
Current portion of deferred tax asset - 9,407 5,981 15,388 - 15,388
-------- --------- -------- -------- -------- ---------
Total current assets 1,968 35,003 29,317 64,320 - 66,288
PROPERTY, PLANT AND EQUIPMENT, net - 59,590 7,222 66,812 - 66,812
Deferred tax asset, less
current portion - 16,069 - 16,069 - 16,069
Goodwill, net of amortization - - - 179,243 a 179,243 - 179,243
-------- --------- ------- -------- -------- ---------
Total assets $ 1,968 $ 110,662 $36,539 $326,444 $ - $ 328,412
======== ========= ======= ======== ======== =========
CURRENT LIABILITIES:
Accounts payable $ - $ 14,547 $ 1,577 $ 16,124 $ - $ 16,124
Accrued expenses and other
current liabilities 42,992 27,304 26,219 53,523 - 96,515
-------- --------- ------- -------- -------- ---------
Total current liabilities 42,992 41,851 27,796 69,647 - 112,639
Deferred tax liability - - 1,167 1,167 - 1,167
STOCKHOLDER'S EQUITY:
Common shares 225 1 500 (357) b 144 856 d 1,225
Paid-in capital 1,535 111,034 - 192,857 a,b 303,891 (43,640)d 261,786
Retained earnings (deficit) (42,784) (42,224) 7,076 (13,257) a,c (48,405) 42,784 e (48,405)
-------- --------- ------- -------- -------- ---------
Total stockholders' equity (41,024) 68,811 7,576 255,630 - 214,606
-------- --------- ------- -------- -------- ---------
Total liabilities and
stockholders' equity $ 1,968 $ 110,66 $36,539 $326,444 $ - $ 328,412
========= ========= ======= ======== ======== =========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements
<PAGE> 34
EMAGISOFT TECHNOLOGIES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) To reflect purchase accounting adjustments for allocation of purchase
price for the acquisition of Interactive Media Solutions, Inc. (IMS) by
Net Advantage, Inc (NA).
(b) To reflect the elimination IMS's 500 shares of issued and outstanding
shares and to reflect the issuance of 143,000 shares of NA $.001 par
value common stock for the acquisition of IMS by NA.
(c) To reflect the increase in amortization expense related to the goodwill
recorded under the purchase method of accounting. The Company amortized
goodwill over thirty years.
(d) To reflect the elimination of Emagisoft Corporation (EC), f/k/a NA,
common stock as a result of the purchase of EC and its wholly owned
subsidiary, IMS, by Emagisoft Technologies, Inc. (ETI), f/k/a Manatee
American Financial Corporation, and the issuance of 10,000,000 shares
of ETI common stock.
(e) To reflect the elimination of ETI's accumulated deficit as a result of
reverse acquisition accounting related to the ETI purchase of EC.
<PAGE> 1
Exhibit 2.1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement") is entered into as of
the 29th day of October, 1999, by and between MANATEE-AMERICAN FINANCIAL CORP.,
a Florida corporation ("Manatee"), and EMAGISOFT CORPORATION f/k/a NET
ADVANTAGE, INC., a Florida corporation ("Emagisoft"), and the present owners of
all of the issued and outstanding shares of the capital stock of Emagisoft (the
"Emagisoft Stockholders").
W I T N E S S E T H:
WHEREAS, the Emagisoft Stockholders, as set forth on the attached
Exhibit "A", own all of the issued and outstanding shares of the capital stock
of Emagisoft, which is comprised of Ten Million (10,000,000) shares of Class A
Voting Common Stock, having a par value of $.001 per share (the "Emagisoft
Shares"). Manatee desires to acquire all of the Emagisoft Shares solely in
exchange for common stock of Manatee, making Emagisoft a wholly-owned
subsidiary of Manatee; and
WHEREAS, the Emagisoft Stockholders desire to acquire common stock of
Manatee in exchange for the Emagisoft Shares, as more fully set forth herein.
NOW, THEREFORE, for the mutual consideration set out herein, and other
good and valuable consideration, the receipt and legal sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. SHARE EXCHANGE. The Emagisoft Stockholders are the present owners
of all of the issued and outstanding Emagisoft Shares. It is hereby agreed that
all of the Emagisoft Shares shall be acquired by Manatee in exchange solely for
shares of common stock of Manatee, having a par value of $.0001 per share (the
"Manatee Shares").
2. DELIVERY OF SHARES. Manatee and the Emagisoft Stockholders agree
that on the Closing Date or at the Closing as hereinafter defined, the
Emagisoft Shares shall be delivered to Manatee in exchange for the Manatee
Shares.
(a) The Manatee Shares shall be delivered to the Emagisoft
Stockholders in exchange for their Emagisoft Shares on the basis of one (1)
Manatee Share for one (1) Emagisoft Share.
(b) At Closing, Manatee shall, subject to the conditions set forth
herein, issue Ten Million (10,000,000) Manatee Shares to the Emagisoft
Stockholders and/or their designee(s) in accordance
<PAGE> 2
with Exhibit "A". The certificates representing such Manatee Shares shall bear
the following or similar restrictive transfer legend:
The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act") and may not be offered, sold, assigned, pledged, hypothecated
or otherwise transferred unless (1) they are registered under the Act
or (2) the holder has delivered to the issuer an opinion of counsel,
which opinion shall be satisfactory to the issuer, to the effect that
there is an available exemption from registration under the Act and
any applicable state securities laws or that registration is otherwise
not required.
(c) Unless otherwise agreed to by Manatee, Emagisoft and the
Emagisoft Stockholders, the transactions contemplated hereunder shall close
only in the event Manatee is able to acquire at least eighty percent (80%) of
the Emagisoft Shares. In the event Manatee acquires at least eighty percent
(80%) but less than all of the Emagisoft Shares, the Manatee Shares to be
issued and delivered hereunder shall be reduced proportionately.
3. OUTSTANDING SECURITIES. On the Closing Date:
(a) Each one (1) Emagisoft Share issued and outstanding immediately
prior to the Closing shall be exchanged for one (1) Manatee Share. Thereafter,
all such Emagisoft Shares shall be deemed to be owned by Manatee. The holders
of certificates evidencing the Emagisoft Shares outstanding immediately prior
to the Closing shall cease to have any rights with respect to such Emagisoft
Shares except as otherwise provided herein or by law.
(b) Two Million Two Hundred Fifty Thousand (2,250,000) shares of
common stock of Manatee previously issued and outstanding prior to the Closing
will remain outstanding.
4. POST-ACQUISITION EVENTS. The parties agree that as soon as
practicable after the Closing Date the following shall occur:
(a) The acceptance of the resignation of the sole existing Manatee
officer and director and the election and appointment of new officers and
directors.
(b) Manatee shall cause to be prepared a Current Report on Form 8-K
to be filed with the U.S. Securities and Exchange Commission ("SEC"), and
Emagisoft and Manatee shall reasonably assist SEC counsel who they may utilize
for the preparation of the Form 8-K and any other required SEC filings.
(c) Manatee shall file an amendment to its Articles of
Incorporation changing its name to "Emagisoft Technologies, Inc."
(d) Manatee and Emagisoft with the assistance of SEC counsel who
they may each utilize, shall cooperate in causing a broker-dealer which is a
member of the National Association of Securities Dealers, Inc. ("NASD") to file
a Form 211 with the NASD to list for trading purposes the common stock of
Manatee on the OTC Bulletin Board ("OTCBB"). In
<PAGE> 3
connection with said preparation and filing of a Form 211 with the NASD,
Manatee and Emagisoft agree to cooperate in providing and explaining certain
corporate and other information with respect to the transactions contemplated
hereunder, including: (i) a complete description of the history and background
of Manatee, (ii) a complete description of Emagisoft's business, (iii) audited
financial statements of Manatee and Emagisoft as of December 31, 1998, and (iv)
biographical and other information concerning the new officers and directors of
Manatee. In the event the common stock of Manatee is not listed for trading on
the OTCBB within ninety (90) days of the Closing Date, Manatee shall purchase,
acquire and accept the Manatee Shares received by the Emagisoft Stockholders
hereunder in exchange for the Emagisoft Shares transferred to Manatee
hereunder, the result of which shall be to place Manatee, Emagisoft and the
Emagisoft Stockholders in the same position they would have been in if the
transactions contemplated under this Agreement had not been consummated.
5. OTHER MATTERS.
(a) Prior to the Closing, there shall be no change in the current
outstanding capital structure of Manatee or Emagisoft and, in connection
therewith, there shall be no issuance of shares, options, warranties or other
securities, stock split, recapitalization, or exchange of shares with respect
to or rights issued in respect of, the capital stock of Manatee or Emagisoft
after the date hereof, and there shall be no dividends paid on the capital
stock of Manatee or Emagisoft.
(b) Manatee and Emagisoft shall have received all requisite
stockholder approval of the transactions contemplated under this Agreement.
6. SURRENDER AND ISSUANCE OF SECURITIES. On the Closing Date:
(a) The Emagisoft Stockholders shall surrender for cancellation
certificates representing their Emagisoft Shares duly endorsed for transfer to
Manatee.
(b) Manatee shall issue and deliver certificates representing the
Manatee Shares in accordance with Exhibit "A".
7. REPRESENTATIONS AND WARRANTIES OF THE EMAGISOFT STOCKHOLDERS. The
Emagisoft Stockholders hereby represent and warrant to the best of their
knowledge and belief as follows, which warranties and representations shall
also be true as of the Closing Date:
(a) The Emagisoft Shares are free from claims, liens, or other
encumbrances, and the Emagisoft Stockholders have good title and the
unqualified right to transfer and dispose of such Emagisoft Shares.
(b) The Emagisoft Stockholders are the sole registered holders of
the issued and outstanding Emagisoft Shares as set forth in Exhibit "A".
<PAGE> 4
(c) The Emagisoft Stockholders have no present intent to sell or
dispose of the Manatee Shares to be acquired hereunder and are under no binding
obligation, formal commitment, or existing plan to sell or otherwise dispose of
the Manatee Shares.
8. REPRESENTATIONS AND WARRANTIES OF EMAGISOFT. Emagisoft hereby
represents and warrants to the best of its knowledge and belief as follows,
which warranties and representations shall also be true as of the Closing Date:
(a) The Emagisoft Stockholders listed on the attached Exhibit "A"
are the sole owners of record and beneficially own all of the issued and
outstanding Emagisoft Shares.
(b) Emagisoft has the corporate power to enter into this Agreement
and to perform its obligations hereunder. The execution and performance of this
Agreement will not constitute a breach of any material agreement, indenture,
mortgage, license or other instrument or document to which Emagisoft is a party
or by which it or its properties is bound, and will not violate any judgment,
decree, order, writ, or applicable rule, statute, or regulation. The execution
and performance of this Agreement will not violate or conflict with any
provision of the Articles of Incorporation or Bylaws of Emagisoft.
(c) Emagisoft has one wholly-owned subsidiary corporation,
Interactive Media Solutions, Inc. ("Interactive"), a Florida corporation.
(d) The audited financial statements of Emagisoft and Interactive
as of and for the periods ending December 31, 1996, 1997 and 1998, and the
unaudited financial statements of Emagisoft and Interactive for the six month
period ended June 30, 1999, which have been delivered to Manatee (hereinafter
referred to as the "Emagisoft Financial Statements") present fairly, in all
material respects, the financial condition of Emagisoft and Interactive as of
the dates thereof and the results of operations and changes in financial
position of Emagisoft and Interactive for the periods covered. Emagisoft and
Interactive have good title to all assets shown on the Emagisoft Financial
Statements subject only to dispositions and other transactions in the ordinary
course of business, the disclosures set forth therein and liens and
encumbrances of record. The Emagisoft Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis, except as may be indicated therein or in notes thereto, and
meet or can be made to meet SEC financial reporting requirements.
(e) Since June 30, 1999, there have not been any material adverse
changes in the financial position of Emagisoft or Interactive except changes
arising in the ordinary course of business which changes will in no event
materially and adversely affect the financial position of Emagisoft or
Interactive.
(f) The authorized capital stock of Emagisoft consists of: (i)
10,000,000 shares of Class A Voting Common Stock, $.001 par value, (ii)
10,000,000 shares of Class B Non-Voting Common Stock, $.001 par value, and
(iii) 10,000,000 shares of Preferred Stock, $.001 par value. All outstanding
shares of the capital stock of Emagisoft are validly issued, fully paid and
nonassessable. There are no existing options, calls, warrants, preemptive
rights or
<PAGE> 5
commitments of any character relating to the issued or unissued capital stock
or other securities of Emagisoft, other than as described in Exhibit "B"
attached hereto.
(g) Neither Emagisoft nor Interactive is a party to any material
litigation or any governmental investigation or proceeding.
(h) Emagisoft and Interactive are duly organized, validly existing
and in good standing under the laws of the jurisdiction of their incorporation,
and presently has and at the Closing shall have the corporate power to own
their properties and to carry on their business as then being conducted and
shall be duly qualified to do business in any jurisdiction where so required
except where the failure to so qualify would have no material negative impact.
(i) Emagisoft and Interactive have (or, by the Closing Date, will
have) filed all federal, state, county and local income, excise, property and
other tax, governmental and/or related returns, forms or reports (or extensions
thereof) which are due or required to be filed by them prior to the Closing,
and/or have (or will have) paid or made adequate provisions for the payment of
all taxes, fees or assessments which have or may become due pursuant to such
returns or pursuant to any assessments received. Neither Emagisoft nor
Interactive is delinquent for any tax, penalty, interest, assessment or charge.
(j) Emagisoft has not breached, and there is no pending or
threatened claim that Emagisoft has breached any of the terms or conditions of
any agreement to which it is a party or by which it or its properties is bound.
Emagisoft has previously given Manatee copies of or access to all material
commitments and/or agreements to which Emagisoft is a party, including all
relationships or dealings with related parties or affiliates.
(k) Emagisoft has delivered to Manatee, in addition to the
documents delivered under this Agreement, a true and complete copy of its: (i)
Federal and Florida tax returns for the years 1998, 1997 and 1996, (ii)
Confidential Business Plan, (iii) a current stockholders list, and (iv) copies
of the Articles of Incorporation, as amended, Bylaws and corporate minutes and
resolutions.
(l) Emagisoft has made its corporate and financial records, minute
book, stock register and other corporate and financial documents available for
review to present management of Manatee prior to the Closing, during reasonable
business hours and on reasonable notice.
(m) All information regarding Emagisoft, Interactive and the
Emagisoft Stockholders which is set forth herein or which has otherwise been
provided to Manatee is true and accurate in all material respects.
9. REPRESENTATION AND WARRANTIES OF MANATEE. Manatee hereby represents
and warrants to the best of its knowledge and belief as follows, which
representations and warranties shall also be true as of the Closing Date:
<PAGE> 6
(a) The Manatee Shares to be issued and delivered to the Emagisoft
Stockholders in accordance with Exhibit "A" will, when so issued and delivered,
constitute duly authorized, validly and legally issued Manatee Shares, fully
paid and nonassessable.
(b) Manatee has the corporate power to enter into this Agreement
and to perform its obligations hereunder. The execution and performance of this
Agreement will not constitute a breach of any material agreement, indenture,
mortgage, license or other instrument or document to which Manatee is a party
or by which it or its properties is bound, and will not violate any judgment,
decree, order, writ, or applicable rule, statute, or regulation. The execution
and performance of this Agreement will not violate or conflict with any
provision of the Articles and Incorporation or Bylaws of Manatee.
(c) The audited financial statements of Manatee as of and for the
periods ending December 31, 1996, 1997 and 1998, and the unaudited financial
statements of Manatee for the three month periods ended March 31, 1999, and
June 30, 1999, which have been delivered to Emagisoft (hereinafter referred to
as the "Manatee Financial Statements") present fairly, in all material
respects, the financial condition of Manatee as of the dates thereof and the
results of its operations and changes in financial position for the periods
covered. Manatee has good title to all assets shown on the Manatee Financial
Statements subject only to dispositions and other transactions in the ordinary
course of business, the disclosures set forth therein and liens and
encumbrances of record. The Manatee Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, except as may be indicated therein or in notes thereto, and
meet or can be made to meet SEC financial reporting requirements.
(d) Since June 30, 1999, there have not been any material adverse
changes in the financial position of Manatee except change arising in the
ordinary course of business, which changes will in no event materially and
adversely affect the financial position of Manatee.
(e) The authorized capital stock of Manatee consists of: (i)
20,000,000 shares of common stock, $.0001 par value, and (ii) 5,000,000 shares
of preferred stock, $.0001 par value. All outstanding shares of the capital
stock of Manatee are validly issued, fully paid and nonassessable. No shares of
preferred stock are issued and outstanding. No shares of preferred stock are
issued and outstanding. There are no existing options, calls, warrants,
preemptive rights or commitments of any character relating to the issued or
unissued capital stock or other securities of Manatee.
(f) Manatee is not a party to any material litigation or any
governmental investigation or proceeding.
(g) Manatee is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and presently
has and at the Closing shall have the corporate power to own its property and
to carry on its business as then being conducted and shall be duly qualified to
do business in any jurisdiction where so required except where the failure to
so qualify would have no material negative impact.
<PAGE> 7
(h) Manatee has filed all federal, state, county and local income,
excise, property and other tax, governmental and/or related returns, forms, or
reports, which are due or required to be filed by it prior to the date hereof
and has paid or made adequate provision for the payment of all taxes, fees, or
assessments which have or may become due pursuant to such returns or pursuant
to any assessments received. Manatee is not delinquent or obligated for any
tax, penalty, interest, delinquency or charge.
(i) Manatee has not breached, and there is no pending or threatened
claim that Manatee has breached any of the terms or conditions of any agreement
to which it is a party or by which it or its properties is bound. Manatee is
not a party to any material commitment or agreement, and it has disclosed to
Emagisoft and the Emagisoft Stockholders any relationships or dealings with
related parties or affiliates.
(j) Manatee has delivered to Emagisoft, in addition to the
documents delivered under this Agreement, a true and complete copy of its: (i)
Prospectus dated September 21, 1994, as declared effective by the SEC, (ii)
Quarterly reports on Form 10-QSB for the periods ended June 30, 1999, March 31,
1999, March 31, 1997, September 30, 1996, June 30, 1996 and March 31, 1996, as
filed with the SEC, (iii) Annual Report on Form 10-KSB for the year ended
December 31, 1997, as filed with the SEC, (iv) Federal and Florida tax returns
for the years 1998, 1997, 1996 and 1995, (v) a current stockholders list, and
(vi) copies of the Articles of Incorporation, as amended, Bylaws and corporate
minutes and resolutions. As of their respective dates, to the best knowledge
and belief of Manatee, the foregoing documents filed with the SEC did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statement therein,
in light of the circumstance under which they are made, not misleading.
(k) Manatee has no subsidiaries.
(l) Manatee has made its corporate and financial records, minute
book, stock register and other corporate and financial documents available for
review to present management of Emagisoft prior to the Closing, during
reasonable business hours and on reasonable notice.
(m) All information regarding Manatee which is set forth herein or
has otherwise been provided by Manatee to Emagisoft and the Emagisoft
Stockholders is true and accurate in all material respects.
(n) Manatee is current in and in compliance with its reporting
obligations under the Securities Exchange Act of 1934, as amended, and all
reports filed by Manatee with the SEC are true, complete and accurate in all
material respects, and there is no information or event required to be
disclosed that has not been disclosed in any of Manatee's public filings as of
the Closing Date.
10. CLOSING. The Closing of the transactions contemplated herein shall
take place on such date (the "Closing" or Closing Date") as mutually determined
by the parties hereto when all conditions precedent have been met and all
required documents have been delivered, which
<PAGE> 8
Closing is expected to be on or about October 20, 1999, but not later than
October 29, 1999, unless extended by mutual consent of all parties hereto.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE EMAGISOFT
STOCKHOLDERS. All obligations of the Emagisoft Stockholders under this
Agreement are subject to the fulfillment of each of the following conditions:
(a) The representations and warranties of Manatee contained in this
Agreement or in any certificate or document delivered pursuant to the
provisions hereof shall be true in all material respects at and as of the
Closing Date as though such representations and warranties were made at and as
of such time.
(b) Manatee shall have performed and complied with, in all material
respects, all covenants, agreements, and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing, and shall
have executed and delivered all documents required by this Agreement to be
executed and delivered by it prior to or at the Closing.
(c) On or before the Closing, the Board of Directors and the
shareholders of Manatee shall have authorized and approved the execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereunder.
(d) At the Closing, the sole existing officer and director of
Manatee shall have resigned in writing from all positions as a director and
officer of Manatee.
(e) The Manatee Shares to be issued to the Emagisoft Stockholders
at Closing will be validly issued, nonassessable and fully paid under
applicable corporation law and will be issued in compliance with all federal,
state and applicable securities laws.
12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MANATEE. All obligations
of Manatee under this Agreement are subject to the fulfillment, of each of the
following conditions:
(a) The representations and warranties of the Emagisoft
Stockholders and Emagisoft contained in this Agreement or in any certificate or
document delivered pursuant to the provisions hereof shall be true in all
material respects at and as of the closing as though such representations and
warrantees were made at and as of such time.
(b) The Emagisoft Stockholders and Emagisoft shall have performed
and complied with, in all material respects, all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing, and shall have executed and delivered all documents
required by this Agreement to be executed and delivered by them prior to or at
the Closing.
(c) On or before the Closing, the Board of Directors and the
shareholders of Emagisoft shall have authorized and approved the execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereunder.
<PAGE> 9
(d) The Emagisoft Stockholders shall deliver a letter commonly
known as an "Investment Letter," in substantially the form attached hereto and
made a part hereof as Exhibit "C", acknowledging that the Manatee Shares are
being acquired for investment purposes.
13. COVENANTS.
(a) CONDUCT OF BUSINESS. At all times prior to the Closing, Manatee
and Emagisoft agree to conduct their respective businesses in accordance with
the ordinary, ususal and normal course of business heretofore conducted by
each, and there shall be no adverse material change in the business of Manatee
or Emagisoft from the date hereof through the Closing Date.
(b) ACCESS. At all times prior to the Closing, Manatee and
Emagisoft shall: (i) give to the other and its authorized representatives
reasonable access to all facilities and properties of Manatee or Emagisoft, as
the case may be, and to its books and records and those of its subsidiaries,
(ii) permit the other to make inspections thereof upon reasonable request, and
(iii) furnish the other with such financial and operating data and other
information with respect its business and properties and those of its
subsidiaries.
(c) EXCLUSIVITY. From the date hereof until the earlier of the
Closing or the termination of this Agreement, Manatee shall not solicit,
negotiate or enter into any agreement or arrangement with any other person or
organization with respect to or in furtherance of any merger, share exchange or
other business combination involving the issuance of capital stock of Manatee
or the sale of assets of Manatee (except in the ordinary course of business),
other than the exchange of Manatee Shares for Emagisoft Shares hereunder.
(d) PUBLICITY. From the date hereof until the Closing, Manatee and
Emagisoft shall discuss and mutually agree upon any public filing or
announcement concerning the transactions contemplated hereunder.
(e) CONFIDENTIALITY. Prior to the Closing, or at any time if the
Closing does not occur, Manatee and Emagisoft shall not disclose to any person
(other than their employees, attorneys, accountants and advisors) or use
(except in connection with the transactions contemplated hereby) all non-public
information obtained pursuant to Section 13. (b). In the event the Closing does
not occur, Manatee and Emagisoft shall return to the other, or destroy, all
information it shall have received from the other in connection with this
Agreement and the transactions contemplated hereunder, together with any
summaries thereof or extracts therefrom.
14. INDEMNIFICATION. For a period of two (2) years from the Closing,
Manatee agrees to indemnify and hold harmless the Emagisoft Stockholders and
Emagisoft, and the Emagisoft Stockholders and Emagisoft agree to indemnify and
hold harmless Manatee, against and in respect of any liability, damage or
deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses including attorney's fees, resulting from any material
misrepresentation made by an indemnifying party to an indemnified party, an
indemnifying party's material breach of a covenant, representation or warranty,
or an
<PAGE> 10
indemnifying party's nonfulfillment of any agreement hereunder, or from any
material misrepresentation in or omission from any certificate furnished or to
be furnished hereunder.
15. NATURE AND SURVIVAL OF REPRESENTATIONS. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereunder for two
(2) years from the Closing. All of the parties hereto are executing and
carrying out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement and not upon any investigation upon which it might have made or any
representation, warranty, agreement, promise or information, written or oral,
made by the other party or any other person other than as specifically set
forth herein.
16. DOCUMENTS AT CLOSING. At the Closing, the following documents shall
be delivered:
(a) Emagisoft and the Emagisoft Stockholders will deliver, or will
cause to be delivered, to Manatee the following:
(i) the stock certificates described in Section 6.(a) above.
(ii) a certificate executed by Emagisoft to the effect that to
the best of its knowledge and belief all representations and warranties of
Emagisoft in this Agreement are true and correct as of the Closing the same as
though originally given to Manatee on said date;
(iii) a certificate executed by the Emagisoft Stockholders to
the effect that to the best of their knowledge and belief all representations
and warranties of the Emagisoft Stockholders in this Agreement are true and
correct as of the Closing the same as though originally given to Manatee on
said date;
(iv) an Investment Letter in the form attached hereto as
Exhibit "C" executed by each of the Emagisoft Stockholders;
(v) a copy of a corporate resolution of Emagisoft authorizing
and approving the execution, delivery and performance of this Agreement and
consummation of the transactions contemplated in this Agreement;
(vi) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement;
(vii) all other items, the delivery of which is a condition
precedent to the obligations of Manatee, as set forth herein; and
(b) Manatee will deliver or cause to be delivered to the Emagisoft
and the Emagisoft Stockholders:
(i) the stock certificates described in Section 6.(b) above;
<PAGE> 11
(ii) a certificate executed by Manatee, to the effect that all
representations and warranties of Manatee in this Agreement are true and
correct as of the Closing, the same as though originally given to Emagisoft and
the Emagisoft Stockholders on said date;
(iii) a copy of a corporate resolution of Manatee authorizing
and approving the execution, delivery and performance of this Agreement and
consummation of the transactions contemplated in this Agreement;
(iv) such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement;
(v) the resignation of the sole existing officer and director
of Manatee; and
(vi) all other items, the delivery of which is a condition
precedent to the obligations of the Emagisoft Stockholders, as set forth
herein.
17. BROKER'S OR FINDER'S FEES. Manatee represents and warrants to the
Emagisoft Stockholders and Emagisoft, and the Emagisoft Stockholders and
Emagisoft represent and warrant to Manatee, that none of them, or any party
acting on their behalf, has incurred any liability, either express or implied,
to any "broker" or "finder" or similar person in connection with this Agreement
or any of the transactions contemplated hereby. Manatee on the one hand, and
the Emagisoft Stockholders and Emagisoft, jointly and severally, on the other
hand, will indemnify and hold the other harmless from any claim, loss, costs or
expense whatsoever (including reasonable fees and disbursements of counsel)
from or relating to any such express or implied liability.
18. MISCELLANEOUS.
(a) FURTHER ASSURANCES. At any time, and from time to time, after
the Closing Date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
take title to any property transferred hereunder or otherwise to carry out the
intent and purposes of this Agreement.
(b) WAIVER. Any failure on the part of any party hereto to comply
with any of its obligations, agreements or conditions hereunder may be waived
in writing by the party to whom such compliance is owed.
(c) TERMINATION. All obligations hereunder may be terminated at the
discretion of either Manatee's or Emagisoft's board of directors if (i) the
closing conditions specified in Sections 11 and 12 are not met by October 29,
1999, unless extended, or (ii) any of the representations and warranties made
herein have been materially breached.
(d) AMENDMENT. This agreement may be amended only in writing as
agreed to by all the parties hereto.
<PAGE> 12
(e) NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given if delivered in person, or
sent by telex or facsimile (with receipt confirmed), or sent by prepaid first
class registered or certified mail, return receipt requested, as follows:
If to Manatee: 1825 N.E. 164th Street
Suite 1
North Miami Beach, FL 33162
Facsimile No: (305) 944-2432
Attn: Marc B. Tescher, President
With a copy to: Kipnis Tescher Lippman
& Valinsky
100 Northeast Third Avenue
Suite 610
Fort Lauderdale, FL 33301-1156
Facsimile No: (954) 467-2264
Attn: Jay Valinsky, Esq.
If to Emagisoft 405 Central Ave.
and the Emagisoft Second Floor
Stockholders: St. Petersburg, FL 33701
Facsimile No: (727) 822-7858
Attn: Kyle Jones, President
With a copy to: Edwin Kagan, Esq.
2709 Rocky Point Dr., #102
Tampa, FL 33607
Facsimile No: (813) 288-0428
(f) HEADINGS. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) BINDING EFFECT. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) ENTIRE AGREEMENT. This Agreement and the attached Exhibits
constitute the entire agreement of the parties covering everything agreed upon
or understood with respect to the subject matter hereof. There are no oral
promises, conditions, representations,
<PAGE> 13
understandings, interpretations or terms of any kind as conditions or
inducements to the execution hereof.
(j) TIME. Time is of the essence.
(k) SEVERABILITY. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
(l) RESPONSIBILITY AND COSTS. All fees, expenses and out-of-pocket
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred by the parties hereto
shall be borne solely and entirely by the party that has incurred such costs
and expenses unless such party has agreed otherwise with any such person.
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Share Exchange
Agreement as of the day and year first above written.
WITNESSES: MANATEE-AMERICAN
FINANCIAL CORP.,
a Florida corporation
By: /s/ Marc B. Tescher
--------------------------
Marc B. Tescher, President
EMAGISOFT CORPORATION,
a Florida corporation
By: /s/ Kyle E. Jones
--------------------------
Kyle E. Jones, President
<PAGE> 15
EXHIBIT "A"
EMAGISOFT CORPORATION
<TABLE>
<CAPTION>
NAME ADDRESS NUMBER OF SHARES
- ---- ------- ----------------
<S> <C> <C>
The Betterment Trust 10460 Roosevelt Boulevard 5,552,260
Kyle E. Jones, Trustee Apt. 111
St. Petersburg, FL 33716
Jimmy Dowda 1982 Shannon Lane 50,000
Apopka, FL 32703
William H. Egge, IV 11555 Tradewinds Boulevard 398,080
Largo, FL 33773
Roger W. Finefrock 1146 17th Avenue North 143,000
St. Petersburg, FL 33704
Richard W. Groner 2033 Main Street 500,000
Suite 403
Sarasota, FL 34237
Stephen Guarino 3 Downe Circle 500,000
Medford, NJ 08055
Bob Havemeister 700 Lake Avenue 30,000
Maitland, FL 32751
David Hollis 10353 Abbotsford Drive 199,040
Tampa, FL 33626
Brian Keith Jones 10460 Roosevelt Boulevard 25,000
Apt. 111
St. Petersburg, FL 33716
Deidre R. Jones 5026 Dickens Avenue 10,000
Tampa, FL 33629
Harold and Wanda Faye Jones Rt #1, Box 496 174,230
JTWROS Gray, KY 40734
Robert Stacey Jones 3106 Treetrail Parkway 10,000
Norcross, GA 30093
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
NAME ADDRESS NUMBER OF SHARES
- ---- ------- ----------------
<S> <C> <C>
William Tal Jones P.O. Box 219 10,000
Barbourville, KY 40906
Steven H. Kerr 917 Stillwell Lane 10,000
Lake Mary, FL 32746
Richard M. Konsens, MD 1696 Bridgewater Drive 10,000
Heathrow, FL 32746
Mark Lauter 4870 Bay Heron Place 5,000
Apt. 321
Tampa, FL 33616
Frederick A. Lenz 113 Hattaway Drive 10,000
Altamonte Springs, FL 32701
Lighthouse Holdings, Inc. P.O. Box 97 150,000
Clayton Been, Director Caribbean Place
Leeward Highway
Providenciales, Turks &
Caicos Islands
Darin McManaway 11601 4th Street North 25,000
Apt. 4413
St. Petersburg, FL
James Neader 396 Coffee Pot Riviera N.E. 25,000
St. Petersburg, FL 33704
James Neader Profit 396 Coffee Pot Riviera N.E. 15,000
Sharing Plan & Trust St. Petersburg, FL 33704
Chong Park 311 N. Knowles Avenue 10,000
Winter Park, FL 32789
James L. Rhodes C/F 18914 Rogers Road 10,000
Gwyndolyn Heather Rhodes, Odessa, FL 33556
UGMA/FL
David and Doris Rothschild 8027 Palomino Avenue 477,680
JTWROS Naples, FL 34113
Frank P. Rothschild, Inc. P.O. Box 17325 100,000
Clearwater, FL 33762
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
NAME ADDRESS NUMBER OF SHARES
- ---- ------- ----------------
<S> <C> <C>
Geneva-Roth Investment P.O. Box 17325 377,680
Trust Clearwater, FL 33762
Frank P. Rothschild,
Trustee
Sherry L. Shaw 540 Carillon Parkway 199,040
Unit 204
St. Petersburg, FL 33716
Roger Tichenor 1749 Bridgewater Drive 645,530
Heathrow, FL 32746
Peter VanSon 4661 Laurel Oak Lane N.E. 318,460
St. Petersburg, FL 33703
Ronnie L. Williams, Sr. 1826 South Ridge Avenue 10,000
Edgewater, FL 32141
TOTAL 10,000,000
</TABLE>
<PAGE> 18
EXHIBIT "B"
OPTIONS TO ACQUIRE CLASS A VOTING COMMON STOCK
OF EMAGISOFT CORPORATION
<TABLE>
<CAPTION>
CURRENT PERFORMANCE LONGEVITY
HOLDER OWNERSHIP(1) OPTIONS(2) OPTIONS(3)
- ------ ------------ ----------- ----------
<S> <C> <C> <C>
Kyle Jones 100,000 1,000,000 100,000
Peter VanSon 50,000 500,000 50,000
Frank Rothschild 50,000 500,000 50,000
William Egge, IV 50,000 500,000 50,000
Roger Tichenor 50,000 500,000 50,000
David Hollis -0- 500,000 50,000
------- --------- -------
TOTAL 300,000 3,500,000 350,000
</TABLE>
- ----------
1 Represents the number of options granted at the time of execution of
employment agreement. The options are exercisable at a price of $1.50 per
share.
2 Represents the maximum number of options that can be granted during
employment in the event Emagisoft attains certain specified annualized gross
revenues. The options are exercisable at a price of $1.75 per share.
3 Represents the number of options to be granted per each year of employment.
The options are exercisable at a price of $2.00 per share.
<PAGE> 19
EXHIBIT "C"
INVESTMENT LETTER
TO THE BOARD OF DIRECTORS OF MANATEE-AMERICAN FINANCIAL CORP.
The undersigned hereby represents to Manatee-American Financial Corp.
(the "Corporation") that (1) the shares of the Corporation's commons stock (the
"Securities") which are being acquired by the undersigned are being acquired
for his own account and for investment and not with a view to the public resale
or distribution thereof; (2) the undersigned will not sell, transfer or
otherwise dispose of the securities except in compliance with the Securities
Act of 1933, as amended (the "Act"); and (3) the undersigned is aware that the
Securities are "restricted securities" as that term is defined in Rule 144 or
the General Rules and Regulations under the Act.
The undersigned hereby agrees and acknowledges that he will not sell
the Securities outside of the United States in any manner which will allow the
Securities to become nonrestricted except upon registration in the United
States.
The undersigned further acknowledges that he or she has had an
opportunity to ask questions of and receive answers from duly designated
representatives of the Corporation concerning the terms and conditions pursuant
to which the Securities are being acquired. The undersigned acknowledges that
he has been afforded an opportunity to examine such documents and other
information which he or she has requested for the purpose of verifying the
information set forth in said documents.
The undersigned acknowledges and understands that the Securities are
unregistered and must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available.
The undersigned further acknowledges that he is fully aware of the
applicable limitations on the resale of the Securities. These restrictions for
the most part are set forth in Rule 144. The Rule permits sales of "restricted
securities" upon compliance with the requirements of such Rule. If the Rule is
available to the undersigned, the undersigned may make only routine sales of
securities, in limited amounts, in accordance with the terms and conditions of
that Rule.
Any and all certificates representing the Securities, and any and all
Securities issued in replacement thereof or in exchange therefore, shall bear
the following legend, which the undersigned has read and understands:
The Securities represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is defined in Rule 144 under the
Act. The Securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement
under the Act or pursuant to an exemption from registration under the
Act, the availability of which is to be established to the
satisfaction of the Corporation.
<PAGE> 20
The undersigned further agrees that the Corporation shall have the
right to issue stop-transfer instructions to its transfer agent and
acknowledges that the Corporation has informed the undersigned of its intention
to issue such instructions.
Very truly yours,
____________________________
Date: ________________, 1999
<PAGE> 1
Exhibit 3.1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MANATEE-AMERICAN FINANCIAL CORP.
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act, the Articles of Incorporation of MANATEE-AMERICAN FINANCIAL
CORP. (the "Corporation") shall be amended as follows:
ARTICLE I. NAME of the Articles of Incorporation of the Corporation
shall be amended in its entirety to read as follows:
ARTICLE I. NAME
The name of the Corporation shall be EMAGISOFT TECHNOLOGIES,
INC.
The address of the principal office of the Corporation shall
be 405 Central Avenue, Second Floor, St. Petersburg, Florida 33701,
and the mailing address of the Corporation shall be the same.
ARTICLE II. CAPITAL STOCK of the Articles of Incorporation of
the Corporation shall be amended in its entirety to read as
follows:
ARTICLE III. CAPITAL STOCK
The maximum number of shares of stock that the Corporation
shall be authorized to issue and have outstanding at any one time
shall be 55,000,000 shares, which are to be divided into two classes
as follows:
50,000,000 shares of common stock, par value $.0001
per share, and
5,000,000 shares of preferred stock, par value $.0001 per
share.
The preferred stock may be created and issued, from time to
time, in one or more series and with such designations, rights,
preferences, conversion rights, privileges and restrictions as shall
be stated and expressed in the resolution or resolutions providing for
the creation and issuance of such preferred stock as may be adopted
from time to time in the sole discretion of the Board of Directors
pursuant to the authority given in this paragraph.
The foregoing amendments to the Articles of Incorporation of the
Corporation were approved and adopted by the sole director of the Corporation
and by the shareholders of the
-1-
<PAGE> 2
Corporation entitled to vote on the amendments on the 20th day of October,
1999. The number of votes cast for the amendments was sufficient for approval.
IN WITNESS WHEREOF, the undersigned President of the Corporation has
executed these Articles of Amendment to the Articles of Incorporation of the
Corporation this 20th day of October, 1999.
MANATEE-AMERICAN FINANCIAL CORP.
By: /s/ Marc B. Tescher
--------------------------------
Marc B. Tescher, President
STATE OF FLORIDA
COUNTY OF BROWARD
The foregoing instrument was acknowledged before me this 20th day of
October, 1999, by Marc B. Tescher, as President of Manatee-American Financial
Corp.
/s/ Carol W. Heckler
-------------------------------
NOTARY PUBLIC
My Commission Expires:
April 24, 2002
Personally known [X]
----
or Produced Identification
-------------------------------
Type of Identification Produced:
-------------------------------
-2-
<PAGE> 1
Exhibit 16.1
November 15, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: EMAGISOFT TECHNOLOGIES, INC.
Gentlemen:
We were previously accountants for Manatee-American Financial Corp. and on
August 16, 1999, we reported on the consolidated financial statements of
Manatee-American Financial Corp. as of December 31, 1998 and for each of the
two years in the period ended December 31, 1998 and for the period from
inception to December 31, 1998 (which report contained an explanatory paragraph
referring to an uncertainty as to the ability of the company to continue as a
going concern). On November 10, 1999, we were dismissed as principal
accountants of Manatee-American Financial Corp. We have read the statements
included under Item 4 of Form 8-K of Emagisoft Technologies, Inc. (the new name
of the company) for November 15, 1999, and we agree with such statements.
Very truly yours,
Rachlin Cohen & Holtz LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Form 8-K of Emagisoft Technologies, Inc. of
our report dated August 16, 1999 (which report contains an explanatory
paragraph that describes a condition that raises substantial doubt as to the
ability of the Company to continue as a going concern) relating to the
financial statements of Manatee-American Financial Corp.
appearing in such Form 8-K.
RACHLIN COHEN & HOLTZ LLP
Miami, Florida
November 15, 1999
<PAGE> 1
Exhibit 99.1
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE> 2
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS:
Balance Sheet 2
Statements of Operations 3
Statements of Stockholders' Deficiency 4
Statements of Cash Flows 5
Notes to Financial Statements 6-10
</TABLE>
<PAGE> 3
(Rachlin Cohen & Holtz LLP Letterhead)
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Manatee-American Financial Corp.
(A Development Stage Enterprise)
North Miami Beach, Florida
We have audited the accompanying balance sheet of Manatee-American Financial
Corp. (A Development Stage Enterprise) as of December 31, 1998, and the related
statements of operations, stockholders' deficiency and cash flows for each of
the two years in the period ended December 31, 1998 and from inception
(February 24, 1993) to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 audits provide 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 Manatee-American Financial
Corp. (A Development Stage Enterprise) as of December 31, 1998, and the results
of its operations and its cash flows for each of the two years in the period
ended December 31, 1998 and from inception (February 24, 1993) to December 31,
1998, 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 more fully discussed in Note 2 to
the financial statements, the Company is in the development stage and has
incurred net losses and reflects a deficit accumulated during the development
stage and stockholders' deficiency as of and for the periods ended December 31,
1998. This condition raises substantial doubt as to the ability of the Company
to continue as a going concern. Management's plans with regard to this matter
are also described in Note 2 to the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ RACHLIN COHEN & HOLTZ LLP
-----------------------------
Miami, Florida
August 16, 1999
-1-
<PAGE> 4
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash $ 1,968
--------
Total current assets 1,968
--------
$ 1,968
========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accrued liabilities, primarily professional fees $ 42,992
--------
Total current liabilities 42,992
--------
Commitments and Other Matters --
Stockholders' Deficiency:
Preferred stock, $.0001 par value; authorized
5,000,000 shares; none issued --
Common stock, $.0001 par value; authorized
20,000,000 shares; issued and outstanding
2,250,000 shares 225
Capital in excess of par 1,535
Deficit accumulated during the development stage (42,784)
--------
(41,024)
--------
$ 1,968
========
</TABLE>
See notes to financial statements.
-2-
<PAGE> 5
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Inception
Year Ended (February 24,
December 31, 1993) to
-------------------------- December 31,
1998 1997 1998
-------- -------- ------------
<S> <C> <C> <C>
Revenues:
Operating revenue $ -- $ -- $ --
Other income 12,500 -- 12,500
-------- -------- --------
12,500 -- 12,500
-------- -------- --------
Costs and Expenses:
General and administrative 2,557 13,796 33,654
Offering costs in excess of proceeds
from initial public offering -- -- 21,630
-------- -------- --------
2,557 13,796 55,284
-------- -------- --------
Income (Loss) before Income Taxes 9,943 (13,796) (42,784)
Income Taxes -- -- --
-------- -------- --------
Net Income (Loss) $ 9,943 $(13,796) $(42,784)
======== ======== ========
Net Income (Loss) per Common Share $ -- $ --
======== ========
</TABLE>
See notes to financial statements.
-3-
<PAGE> 6
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Deficit
Capital Accumulated
Common Stock in During the
------------------------- Excess Development
Shares Amount of Par Stage Total
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
From Inception (February 24, 1993) to
December 31, 1993:
Issuance of common stock ($.002 per share) 2,250,000 $ 225 $ 4,775 $ -- $ 5,000
Net loss -- -- -- (1,717) (1,717)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1993 2,250,000 225 4,775 (1,717) 3,283
Year Ended December 31, 1994:
Sales of common stock in public offering ($.08 per
share), net of allocated offering costs 45,000 5 (5) -- --
Net loss -- -- -- (21,939) (21,939)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1994 2,295,000 230 4,770 (23,656) (18,656)
Year Ended December 31, 1995:
Net loss -- -- -- (5,466) (5,466)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1995 2,295,000 230 4,770 (29,122) (24,122)
Year Ended December 31, 1996:
Refund of net proceeds of public offering
and retirement of common stock (45,000) (5) (3,235) -- (3,240)
Net loss -- -- -- (9,809) (9,809)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1996 2,250,000 225 1,535 (38,931) (37,171)
Year Ended December 31, 1997:
Net loss -- -- -- (13,796) (13,796)
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1997 2,250,000 225 1,535 (52,727) (50,967)
Year Ended December 31, 1998:
Net income -- -- -- 9,943 9,943
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1998 2,250,000 $ 225 $ 1,535 $ (42,784) $ (41,024)
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
-4-
<PAGE> 7
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Inception
Year Ended (February 24,
December 31, 1993) to
------------------------ December 31,
1998 1997 1998
-------- -------- -------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ 9,943 $(13,796) $(42,784)
Adjustments to reconcile net income (loss) to net cash required:
Increase in accrued liabilities 1,010 11,662 22,879
Offering costs in excess of proceeds from initial public offering -- -- 21,630
-------- -------- --------
Net cash provided by (used in) operating activities 10,953 (2,134) 1,725
-------- -------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock -- -- 8,600
Deferred offering costs, net of accrued liabilities -- -- (5,117)
Loans from stockholders -- 1,975 9,450
Refund of net proceeds of public offering -- -- (3,240)
Repayment of stockholder loans (9,450) -- (9,450)
-------- -------- --------
Net cash provided by (used in) financing activities (9,450) 1,975 243
-------- -------- --------
Net Increase (Decrease) in Cash 1,503 (159) 1,968
Cash, Beginning 465 624 --
-------- -------- --------
Cash, Ending $ 1,968 $ 465 $ 1,968
======== ======== ========
</TABLE>
See notes to financial statements.
-5-
<PAGE> 8
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CAPITALIZATION
Manatee-American Financial Corp. (the "Company") was incorporated
under the laws of the State of Florida on February 24, 1993. The
Company's articles of incorporation, as amended in 1997 (see below),
provide for the issuance of 20,000,000 shares of common stock, with
a par value of $.0001 per share, and 5,000,000 shares of preferred
stock, with a par value of $.0001 per share.
Series of the preferred stock may be created and issued from time to
time, with such designations, preferences, conversion rights and
other rights, including voting rights, as adopted by the Board of
Directors.
STOCK SPLIT
On February 11, 1997, the sole director and all of the stockholders
authorized a 75 for 1 forward stock split, thereby increasing the
corporation's authorized capital stock to 25,000,000 shares to be
divided into two classes, 20,000,000 shares of common stock, par
value $.0001 per share, and 5,000,000 shares of preferred stock, par
value $.0001 per share. All references in the accompanying financial
statements to the number of shares of common and preferred stock and
per share amounts for all periods have been retroactively restated
to reflect the stock split.
BUSINESS
The Company's business is to seek one or more potential business
combinations that may, in the opinion of management, merit the
Company's involvement. In seeking to attain its business objectives,
the Company will not restrict its search to any particular industry.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.
DEVELOPMENT STAGE ENTERPRISE
As noted above, the Company was incorporated on February 24, 1993.
To date, the Company has been principally engaged in organizational
activities and raising capital. Accordingly, the Company is
considered to be in the development stage, and the accompanying
financial statements represent those of a development stage
enterprise.
-6-
<PAGE> 9
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
OFFERING COSTS
Costs incurred in connection with the Company's initial public
offering, consisting of professional fees directly associated with
the offering amounted to $25,230 (see Note 3). Of this total, an
amount equal to the net proceeds realized ($3,600) has been charged
against stockholders' equity; the balance ($21,630) has been charged
to operations in 1994 as offering costs in excess of proceeds from
initial public offering.
NET INCOME (LOSS) PER COMMON SHARE
Net loss per common share has been computed based upon the weighted
average number of shares of common stock outstanding during the
periods. The number of shares used in the computation was 2,250,000
shares for 1998 and 1997. Retroactive effect has been given to the
number of outstanding shares for the stock split effected on
February 11, 1997.
NOTE 2. BASIS OF PRESENTATION
As disclosed above, the Company was incorporated on February 24, 1993,
and is in the development stage and has no meaningful operating
history. Accordingly, the Company is considered to be in the
development stage, and the accompanying financial statements represent
those of a development stage enterprise.
The accompanying financial statements have been presented in accordance
with generally accepted accounting principles, which assume the
continuity of the Company as a going concern. However, as discussed
above, the Company is in the development stage and, therefore has
generated no operating revenue to date. As reflected in the
accompanying financial statements, the Company reflects a deficit
accumulated during the development stage and a stockholders' deficiency
as of December 31, 1998. This condition raises substantial doubt as to
the ability of the Company to continue as a going concern.
Management's plans with regard to this matter encompass the successful
completion of the Company's business plan and the attainment of
profitable operations, which is dependent upon future events, including
obtaining adequate financing to fulfill its business plan and
identifying one or more potential businesses that may merit the
Company's involvement.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
-7-
<PAGE> 10
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3. PUBLIC OFFERING
The Company raised additional equity through a Blank Check Offering of
its securities. The offering, which was declared effective on September
21, 1994, contemplated the sale of 750,000 shares of common stock at a
price of $.08 per share, for gross proceeds of $60,000, before offering
costs. The public offering expired on February 17, 1995. Through
December 31, 1994, the Company received subscriptions for the sale of
45,000 shares of common stock for proceeds of $3,600. Payment for these
subscriptions was received in February 1995. Of these proceeds, the
Company retained 10%, or $360, for working capital purposes and
deposited the balance ($3,240) into an escrow account pending the
consummation of future business combinations.
During 1996, the Company determined that it had not made the
acquisition of any business enterprise in the time frame prescribed by
the rules and regulations of the Securities and Exchange Commission
applicable to Blank Check Companies. Accordingly, the Company refunded
all funds received from the sale of common stock received in 1994 from
the Company's initial public offering, less the 10% allowed to be used
for administrative purposes, together with accrued interest, and
retired the shares of common stock issued in connection with the
initial public offering. The amount refunded ($3,240) has been charged
to additional paid-in capital during 1996, and the refund of the
accrued interest has been charged to expense during 1996.
NOTE 4. RELATED PARTY TRANSACTIONS
LOANS PAYABLE, STOCKHOLDERS AND OTHER RELATED PARTIES
The Company's stockholders and other related parties have, from time
to time, loaned the Company funds to meet its obligations. All loans
were repaid during 1998.
PROFESSIONAL FEES
The Company has incurred legal fees in connection with the initial
public offering and continuing legal services with a law firm whose
principals were stockholders of the Company, and presently certain
stockholders to the Company are related to certain principals of the
law firm. Such professional fees amounted to $910 and $8,098 for the
years ended December 31, 1998 and 1997, respectively. As of December
31, 1998, unpaid fees to the law firm amounted to approximately
$38,000 and are included in accrued liabilities in the accompanying
financial statements.
ADMINISTRATIVE FACILITIES
The Company presently leases office space on a month-to-month basis
from a relative of the Company's president, its major stockholder,
at no cost.
-8-
<PAGE> 11
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 4. RELATED PARTY TRANSACTIONS (Continued)
ADMINISTRATIVE FACILITIES (Continued)
It is anticipated that the Company will maintain its administrative
facilities in leased premises owned by a relative of one of the
major stockholders of the Company. Such costs, if any, that may be
charged for the use of these facilities, as well as any
administrative services that may be provided, will be charged to
operations at the time of such determination.
NOTE 5. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes. SFAS No. 109 is an asset and liability approach for computing
deferred income taxes.
The provision for income taxes for the year ended December 31, 1998 was
comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Currently payable income taxes $ 2,000
Less benefit of operating loss carryforwards 2,000
---------
Net income tax expense $ --
=========
</TABLE>
As of December 31, 1998, the Company had a net operating loss
carryforward for Federal and state income tax reporting purposes
amounting to approximately $42,000, which expires in varying amounts
and years through 2013.
The Company presently has no significant temporary differences between
financial reporting and income tax reporting. The components of the
deferred tax asset as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Benefit of net operating loss carryforwards $ 6,300
Less valuation allowance 6,300
--------
Net deferred tax asset $ --
========
</TABLE>
As at December 31, 1998, sufficient uncertainty exists regarding the
realizability of these operating loss carryforwards and, accordingly, a
valuation allowance of $6,300, which related to the net operating
losses, has been established.
In accordance with certain provisions of the Tax Reform Act of 1986, a
change in ownership of greater than 50% of a corporation within a three
year period will place an annual limitation on the Company's ability to
utilize its existing tax benefit carryforwards. The Company's
utilization of its tax benefit carryforwards may be further restricted
in the event of subsequent changes in the ownership of the Company.
-9-
<PAGE> 12
MANATEE-AMERICAN FINANCIAL CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6. PROPOSED ACQUISITION
On July 28, 1998, the Company entered into a letter of intent, which
was subsequently extended through January 15, 1999, with an
unaffiliated entity to effect a business combination, subject to
mutually satisfactory due diligence on the part of both parties and
other contingencies. In connection therewith, such entity paid the
Company a non-refundable deposit of $12,500 which funds were utilized
primarily to repay shareholder loans to the Company and for
professional fees. On February 9, 1999, the Company and such entity
determined not to proceed further with any business combination. The
Company has recorded the receipt of these non-refundable funds as other
income during the year ended December 31, 1998.
-10-
