<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): JUNE 23, 1997
Commission file number 0-22464
-------
KOALA CORPORATION
------------------------------------
(Exact name of small business issuer
as specified in its charter)
Colorado 84-1238908
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11600 E 53rd Ave. Unit D, Denver, CO 80239
------------------------------------------
(Address of principal executive offices)
(303) 574-1000
---------------------------
(Issuer's telephone number)
Not Applicable
-----------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
The following financial statements of the business acquired are filed
herewith:
Financial Statements of Delta Play, Ltd. as of March 31, 1997 and 1996 and
for the years then ended.
Auditors' Report.
Balance Sheets as of March 31, 1997 and 1996.
Statements of Income and Retained Earnings for the years ended March
31, 1997 and 1996.
Statements of Changes in Financial Position for the years ended March
31, 1997 and 1996.
Notes to Financial Statements.
(b) Pro Forma Financial Information.
The following pro forma financial statements of the registrant are filed
herewith:
Unaudited Pro Forma Consolidated Financial Statements of Koala Corporation
for the three months ended March 31, 1997 and for the year ended December
31, 1996.
Unaudited Pro Forma Consolidated Financial Statements - Introduction.
Unaudited Pro Forma Consolidated Balance Sheet as of March 31,
1997.
Unaudited Pro Forma Consolidated Statement of Income for the year
ended December 31, 1996.
Unaudited Pro Forma Consolidated Statement of Income for the three
months ended March 31, 1997.
Notes to Unaudited Pro Forma Consolidated Financial Statements.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(continued)
(c) Exhibits.
2.1* Agreement for Sale and Purchase of Assets dated June 23, 1997 among
the Company, Delta Play, Ltd., Safeplay Designs, Inc., Dan Buchanan, 401566
B.C., Ltd., Steven Lee, Darci Forbes, Bonnie Buchanan and Delta Play Company.
4.1* Registration Rights Agreement dated June 23, 1997 between the Company
and Delta Play, Ltd.
* FILED WITH THE FORM 8-K ON JULY 8, 1997.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this ammendment to be signed on its behalf by the
undersigned thereunto duly authorized.
KOALA CORPORATION
Date: September 8, 1997 By: /s/ Mark A. Betker
------------------------------------
Mark A. Betker, President and Chief
Executive Officer
3
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SEQUENTIAL
DESCRIPTION PAGE NO.
----------- --------
Financial Statements of Delta Play, Ltd. as of March 31, 1997
and 1996 and for the years then ended........................ F-1 to F-14
Unaudited Pro Forma Consolidated Financial Statements of
Koala Corporation for the three months ended March 31, 1997
and for the year ended December 31,1996...................... F-15 to F-21
<PAGE>
FINANCIAL STATEMENTS
DELTA PLAY LTD.
(in Canadian dollars)
MARCH 31, 1997
F-1
<PAGE>
AUDITORS' REPORT
To the Shareholders of
DELTA PLAY LTD.
We have audited the balance sheets of DELTA PLAY LTD. as at March 31, 1997 and
1996 and the statements of income and retained earnings and changes in financial
position for the years then ended. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at March 31, 1997 and 1996
and the results of its operations and the changes in its financial position for
each of the years in the two year period ended March 31, 1997 in accordance with
accounting principles generally accepted in Canada. As required by the British
Columbia Company Act, we report that, in our opinion, these principles have been
applied on a consistent basis.
Vancouver, Canada, /s/ Ernst & Young
June 11, 1997 Chartered Accountants
(except as to note 9 which is
as of June 23, 1997).
F-2
<PAGE>
DELTA PLAY LTD.
Incorporated under the laws of British Columbia
BALANCE SHEETS
As at March 31 (in Canadian dollars)
<TABLE>
<CAPTION>
1997 1996
$ $
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash -- 403,379
Accounts receivable [notes 3 and 6] 344,604 317,947
Prepaid expenses and deposits 35,143 30,122
Inventory [note 4] 823,613 616,091
- ---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,203,360 1,367,539
- ---------------------------------------------------------------------------
Fixed assets [note 5] 115,097 105,931
Due from related parties [note 6] 462,129 83,666
- ---------------------------------------------------------------------------
1,780,586 1,557,136
- ---------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Bank overdraft 8,266 --
Accounts payable and accrued liabilities [note 6] 450,314 138,330
Customer deposits 140,749 274,864
Bonuses payable [note 6] 550,000 345,000
Income taxes payable 99,119 74,000
- ---------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,248,448 832,194
- ---------------------------------------------------------------------------
Deferred income taxes 62,000 62,000
Due to related parties [note 6] 188,703 306,237
- ---------------------------------------------------------------------------
TOTAL LIABILITIES 1,499,151 1,200,431
- ---------------------------------------------------------------------------
Contingencies [note 8]
SHAREHOLDERS' EQUITY
Share capital [note 7] 102 101
Retained earnings 281,333 356,604
- ---------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 281,435 356,705
- ---------------------------------------------------------------------------
1,780,586 1,557,136
- ---------------------------------------------------------------------------
</TABLE>
See accompanying notes
On behalf of the Board:
Director Director
F-3
<PAGE>
DELTA PLAY LTD.
STATEMENTS OF INCOME AND RETAINED EARNINGS
Years ended March 31 (in Canadian dollars)
<TABLE>
<CAPTION>
1997 1996
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
SALES 6,257,104 3,662,645
Cost of goods sold [schedule 1] [note 6] 3,828,135 2,260,355
- --------------------------------------------------------------------------------
Gross profit 2,428,969 1,402,290
- --------------------------------------------------------------------------------
EXPENSES
Sales expenses [schedule 2] [note 6] 538,305 446,233
Administrative expenses [schedule 3] [note 6] 696,415 559,228
Management, employee bonuses and other fees [note 6] 730,000 420,000
- --------------------------------------------------------------------------------
1,964,720 1,425,461
- --------------------------------------------------------------------------------
Income (loss) before income taxes 464,249 (23,171)
- --------------------------------------------------------------------------------
Income tax provision
- current 138,019 74,000
- deferred -- (75,000)
- --------------------------------------------------------------------------------
138,019 (1,000)
- --------------------------------------------------------------------------------
NET INCOME (LOSS) FOR THE YEAR 326,230 (22,171)
Retained earnings, beginning of year 356,604 614,040
Dividends [note 7] (401,501) (95,292)
Redemption of shares [note 7] -- (139,973)
- --------------------------------------------------------------------------------
RETAINED EARNINGS, END OF YEAR 281,333 356,604
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-4
<PAGE>
DELTA PLAY LTD.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
Year ended March 31 (in Canadian dollars)
<TABLE>
<CAPTION>
1997 1996
$ $
- ---------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) for the year 326,230 (22,171)
Add charges not requiring a current cash payment
Depreciation and amortization 27,158 30,827
Deferred income taxes -- (75,000)
Net change in non-cash working capital balances related
to operations 168,488 83,327
- ---------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 521,876 16,983
- ---------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of fixed assets (38,499) --
Proceeds from sale of assets [note 6] 2,475 --
- ---------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (36,024) --
- ---------------------------------------------------------------------------------
FINANCING ACTIVITIES
Dividends (401,501) (95,292)
Redemption of shares [note 7] -- (140,000)
Due from (to) related parties (495,996) 43,800
- ---------------------------------------------------------------------------------
CASH USED IN FINANCING ACTIVITIES (897,497) (191,492)
- ---------------------------------------------------------------------------------
DECREASE IN CASH DURING YEAR (411,645) (174,509)
Cash (bank overdraft), beginning of year 403,379 577,888
- ---------------------------------------------------------------------------------
CASH (BANK OVERDRAFT), END OF YEAR (8,266) 403,379
- ---------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-5
<PAGE>
DELTA PLAY LTD.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 in Canadian dollars
1. BUSINESS OPERATIONS
The Company is incorporated under the laws of the province of British Columbia.
The Company designs and manufactures modular soft playgrounds and accessories.
2. ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada which conform in all material respects
to United States accounting principles as required by the United States
Securities and Exchange Commission. These financial statements have been
prepared in Canadian dollars unless otherwise stated.
The following is a summary of the significant accounting policies used in the
preparation of these financial statements.
INVENTORY
Inventory is valued at the lower of cost, determined on a first in first out
basis, and net realizable value for work in progress and replacement cost for
materials.
DEPRECIATION AND AMORTIZATION
Fixed assets are recorded at cost and are depreciated over their estimated
useful lives on a declining balance basis at the following annual rates:
Automotive equipment 30%
Computer equipment 30%
Office furniture 20%
Tools 20%
Plant equipment 20%
MANAGEMENT'S ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Management believes that the estimates utilized in preparing its financial
statements are reasonable and prudent. Actual results could differ from those
estimates.
F-6
<PAGE>
DELTA PLAY LTD.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 in Canadian dollars
2. ACCOUNTING POLICIES (CONT'D)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of financial instruments approximate carrying values unless
otherwise indicated.
FOREIGN EXCHANGE
The Company follows the temporal method of accounting for the translation of
foreign currency amounts into Canadian dollars. Under this method, all monetary
assets and liabilities expressed in foreign currencies are translated at rates
of exchange in effect at the year end, and non-monetary assets and liabilities
are translated at historical rates of exchange. Revenue and expense items
expressed in foreign currencies are translated at the rate of exchange
prevailing on the date of the transaction.
Gains and losses arising on foreign currency translation are included in income.
REVENUE RECOGNITION
Revenues from product sales are recorded upon shipment.
<TABLE>
<CAPTION>
3. ACCOUNTS RECEIVABLE
1997 1996
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
Trade 288,804 276,448
Other 55,800 41,499
- --------------------------------------------------------------------------------
344,604 317,947
- --------------------------------------------------------------------------------
</TABLE>
While the Company sells its products to many customers, four customers [1996 -
three customers] represent approximately 71% [1996 - 52%] of the year end
balance of trade accounts receivable.
F-7
<PAGE>
DELTA PLAY LTD.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 in Canadian dollars
<TABLE>
<CAPTION>
4. INVENTORY
1997 1996
$ $
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Materials 628,812 578,091
Work in progress 194,801 38,000
- ----------------------------------------------------------------------------
823,613 616,091
- ----------------------------------------------------------------------------
5. FIXED ASSETS
ACCUMULATED
DEPRECIATION AND NET BOOK
COST AMORTIZATION VALUE
$ $ $
- ----------------------------------------------------------------------------
1997
Automotive equipment 41,097 30,570 10,527
Computer equipment 13,607 8,246 5,361
Office furniture 23,549 11,994 11,555
Tools 4,867 4,346 521
Plant equipment 153,815 66,682 87,133
- ----------------------------------------------------------------------------
236,935 121,838 115,097
- ----------------------------------------------------------------------------
1996
Automotive equipment 41,097 26,058 15,039
Computer equipment 15,207 5,606 9,601
Office furniture 24,124 9,033 15,091
Tools 4,867 4,215 652
Plant equipment 115,316 49,768 65,548
- ----------------------------------------------------------------------------
200,611 94,680 105,931
- ----------------------------------------------------------------------------
</TABLE>
F-8
<PAGE>
DELTA PLAY LTD.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 in Canadian dollars
6. RELATED PARTY TRANSACTIONS
[a] Amounts due from related parties and due to related parties are without
interest or stated terms of repayment and comprise the following:
<TABLE>
<CAPTION>
1997 1996
$ $
-----------------------------------------------------------------
<S> <C> <C>
Due from related parties
401566 B.C. Ltd. - controlling shareholder 462,129 --
Wash-a-Ball Solutions -- 83,666
-----------------------------------------------------------------
462,129 83,666
-----------------------------------------------------------------
Due to related parties
Safeplay Designs Inc. 188,488 255,163
Director 215 51,074
-----------------------------------------------------------------
188,703 306,237
-----------------------------------------------------------------
</TABLE>
The amounts due from 401566 B.C. Ltd. include an amount of U.S. $317,195.
Safeplay Designs Inc. is a company whose shareholder is related to a
director of the Company.
As the amounts are not expected to be repaid within the next twelve months,
they have been classified as non-current assets and liabilities,
respectively.
As collateral for any amounts borrowed from 401566 B.C. Ltd. in the future,
the Company has provided a Security Agreement providing a charge against
all assets of the Company.
[b] On May 1, 1996, the Company sold its design business and certain fixed
assets to Safeplay Designs Inc. for $2,476, using the provisions of Section
85 of the Income Tax Act (Canada). As consideration, the Company received a
non-interest bearing demand promissory note in the amount of $2,475 and one
Class E, non-voting preferred share of Safeplay Designs Inc. No gain or
loss resulted on the sale transaction.
During the year, the Company was charged $528,215 [1996 - $60,000] by
Safeplay Designs Inc. for design services rendered and is included in cost
of goods sold - labour. At March 31, 1997, $140,400 remains outstanding and
is included in accounts payable and accrued liabilities. In addition, the
Company was charged $23,750 [1996 - $Nil] by Safeplay Designs Inc. for
accounting services. The Company charged Safeplay Designs Inc. $23,837
[1996- $Nil] for various administrative services and $13,750 [1996 - $Nil]
for rental of office space, of which $19,713 remains outstanding and is
included in accounts receivable.
F-9
<PAGE>
DELTA PLAY LTD.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 in Canadian dollars
6. RELATED PARTY TRANSACTIONS (CONT'D)
[c] Included in accounts payable and accrued liabilities at March 31, 1997 is
an amount of $13,008 [March 31, 1996 - $11,303] due to a director for
reimbursement of various costs.
[d] During the year the Company provided bonuses aggregating $730,000 [1996 -
$420,000] to officers and employees of which $550,000 [1996 - $345,000]
remains outstanding as at March 31, 1997.
7. SHARE CAPITAL
<TABLE>
<CAPTION>
1997 1996
$ $
- -------------------------------------------------------------------------------------
<S> <C> <C>
AUTHORIZED
100,000 Class A, voting non-participating common shares without
par value
90,000 Class B, non-voting participating common shares without
par value
90,000 Class C, non-voting participating common shares without
par value
90,000 Class D, non-voting participating common shares without
par value
90,000 Class E, non-voting participating common shares without
par value
90,000 Class F, non-voting participating common shares without
par value
90,000 Class G, non-voting participating common shares without
par value
90,000 Class H, non-voting participating common shares without
par value
90,000 Class I, non-voting participating common shares without
par value
90,000 Class J, non-voting participating common shares without
par value
90,000 Class K, non-voting participating common shares without
par value
100,000 Class L, non-voting participating common shares with a
par value of $0.01 each
ISSUED AND OUTSTANDING
55 [1996 - 55] Class A shares 55 55
16 [1996 - 16] Class B shares 16 16
24 [1996 - 24] Class D shares 24 24
3 [1996 - 3] Class F shares 3 3
3 [1996 - 3] Class G shares 3 3
16 [1996 - Nil] Class L shares 1 --
- -----------------------------------------------------------------------------------
102 101
- -----------------------------------------------------------------------------------
</TABLE>
F-10
<PAGE>
DELTA PLAY LTD.
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 in Canadian dollars
7. SHARE CAPITAL (CONT'D)
During the year ended March 31, 1996, the Company redeemed 11 Class A common
shares and 16 Class E common shares for $140,000. The excess of the redemption
amount over the par value of the shares, aggregating $139,973, was charged to
retained earnings.
On November 22, 1996, the Company amended its authorized share capital to
include 100,000 Class L, non-voting participating common shares with a par value
of $0.01 each.
On November 28, 1996, the Company declared and paid a stock dividend on the
Class D, non-voting participating common shares in the amount of $0.01 per
share. The stock dividend was paid by allotting and issuing as fully paid, 16
Class L, non-voting participating common shares with a par value of $0.01 each.
The Class A common shares are not entitled to dividends. Dividends may be paid
on a class of participating shares to the exclusion of any or all of the other
participating shares. In the event of liquidation, dissolution or winding up of
the Company, the distribution of assets will be made first to the holders of the
Class A shares to the extent of their paid-in amount, secondly to holders of the
Class D common shares, thirdly to the holders of the Class L common shares and
thereafter, pari passu to the holders of the remaining classes of participating
shares. The amounts to be paid will include any declared but unpaid dividends.
8. CONTINGENCIES
The Company is involved in a legal action against a third party for collection
of an account receivable arising in the normal course of business. The third
party has initiated a counter claim for an unspecified amount alleging
misrepresentation with respect to the contract price.
The Company has commenced foreclosure proceedings against a third party for
collection of an accounts receivable arising in the normal course of business.
The third party has commenced a legal action against the Company for
approximately $140,000 alleging misrepresentation with respect to the contract
price.
The outcome of these claims is not determinable at this time and the amount of
liability, if any, cannot be reasonably estimated. Accordingly, no provision
has been recorded in these financial statements.
9. SUBSEQUENT EVENTS
On June 23, 1997, the Company sold its assets and business undertakings to Koala
Corporation, a publicly traded company based in Denver, Colorado. The purchase
price was approximately cash of U.S. $4.1 million and shares of Koala
Corporation with a value of approximately U.S. $0.6 million.
F-11
<PAGE>
DELTA PLAY LTD. SCHEDULE 1
SCHEDULE OF COST OF GOODS SOLD
Years ended March 31 in Canadian dollars
<TABLE>
<CAPTION>
1997 1996
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
Freight and duty 209,805 91,747
Labour [note 6] 1,524,870 834,976
Materials 1,659,988 988,502
Overhead [note 6] 433,472 345,130
- --------------------------------------------------------------------------------
TOTAL COST OF GOODS SOLD 3,828,135 2,260,355
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-12
<PAGE>
DELTA PLAY LTD. SCHEDULE 2
SCHEDULE OF SALES EXPENSES
Years ended March 31 in Canadian dollars
<TABLE>
<CAPTION>
1997 1996
$ $
- --------------------------------------------------------------------------------
<S> <C> <C>
Advertising 117,949 100,513
Bad debt expense 30,332 109,819
Commission 84,194 10,900
Promotion 42,113 77,581
Salaries 94,448 98,208
Telephone 35,754 23,838
Travel 133,515 25,374
- --------------------------------------------------------------------------------
TOTAL SALES EXPENSES 538,305 446,233
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-13
<PAGE>
DELTA PLAY LTD. SCHEDULE 3
SCHEDULE OF ADMINISTRATIVE EXPENSES
Years ended March 31 in Canadian dollars
<TABLE>
<CAPTION>
1997 1996
$ $
- ------------------------------------------------------------------------
<S> <C> <C>
Bank charges 2,964 1,507
Cost recovery [note 6] (23,837) --
Courier 24,245 7,738
Depreciation and amortization 27,158 30,827
Insurance 106,725 66,278
Interest income (17,885) (36,731)
Management salaries -- 64,988
Miscellaneous 1,270 2,617
Office 90,221 65,636
Postage 5,906 4,249
Professional fees [note 6] 56,311 48,518
Travel 52,005 14,844
Wages and benefits 313,398 255,278
Workers' compensation 57,934 33,479
- ------------------------------------------------------------------------
TOTAL ADMINISTRATIVE EXPENSES 696,415 559,228
- ------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-14
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - INTRODUCTION
The accompanying unaudited pro forma consolidated financial statements reflect
the consolidated results of operations of Koala Corporation for the year ended
December 31, 1996, and the three months ended March 31, 1997 after giving pro
forma effect to the purchase of Delta Play, Ltd. and its related party Safeplay
Designs, Inc. The unaudited pro forma consolidated financial statements
should be read in conjunction with the Company's "Management's Discussion
-----------------------
and Analysis of Financial Condition and Results of Operations" and the
- -------------------------------------------------------------
respective historical financial statements of the Company contained in the
Company's Form 10-KSB for the year ended December 31, 1996 and Forms 10-QSB for
the quarters ended March 31, 1997 and June 30, 1997. The unaudited pro forma
information does not purport to be indicative of actual results that
would have been achieved had the acquisitions actually been completed as of
the dates indicated on the following pages nor which may be achieved in the
future.
F-15
<PAGE>
KOALA CORPORATION
- --------------------------------------------------------------------------------
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET [ALL AMOUNTS IN US DOLLARS]
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
KOALA DELTA PLAY SAFEPLAY PRO FORMA CONSOLIDATED
CORPORATION LTD. DESIGNS INC. ADJUSTMENTS AS ADJUSTED
------------- ----------- ------------ ------------ ---------------
ASSETS (a) (b) (c)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $4,155,552 $0 $83,871 ($4,129,921)(d) $109,502
Accounts receivable, net of allowance
for doubtful accounts 1,545,647 250,950 108,321 (240,104)(e) 1,664,814
Refundable income taxes 46,279 0 0 0 46,279
Inventory 511,092 599,776 0 0 1,110,868
Prepaid expenses 231,939 25,592 1,076 (21,349)(e) 237,258
Deferred income taxes 10,900 0 0 0 10,900
------------- ------------ ---------- ------------- --------------
Total current assets 6,501,409 876,318 193,268 (4,391,374) 3,179,621
------------- ------------ ---------- ------------- --------------
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION 849,781 83,817 23,978 0 957,576
------------- ------------ ---------- ------------- --------------
OTHER ASSETS
Intangibles and patents, net of accumulated
amortization 3,652,755 0 0 4,562,751 (f) 8,215,506
Due from related parties 0 336,534 185,816 (522,350)(e) 0
------------- ------------ ---------- ------------- --------------
Total other assets 3,652,755 336,534 185,816 4,040,401 8,215,506
------------- ------------ ---------- ------------- --------------
$11,003,945 $1,296,669 $403,062 ($350,973) $12,352,703
============= ============ ========== ============= ==============
LIABILITIES & SHAREHOLDERS' EQUITY
- ---------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued expenses $452,785 $436,448 7,270 $305,040 (d)(e) $1,201,543
Accrued management bonuses 0 400,524 0 (400,524) (e) 0
Accrued income taxes 0 72,181 (33,382) (38,799) (g) 0
------------- ------------ ---------- ------------- --------------
Total current liabilities 452,785 909,153 (26,112) (134,283) 1,201,543
------------- ------------ ---------- ------------- --------------
LONG-TERM LIABILITIES-DUE TO RELATED PARTY 0 137,418 62,197 (199,615) (e) 0
------------- ------------ ---------- ------------- --------------
DEFERRED INCOME TAXES 242,200 45,150 0 (45,150) (g) 242,200
------------- ------------ ---------- ------------- --------------
SHAREHOLDERS' EQUITY
Preferred stock 0 0 0 0 0
Common stock 248,126 74 1 3,925 (d)(h) 252,126
Additional paid in capital 4,651,884 0 0 596,000 (d)(h) 5,247,884
Retained earnings 5,408,950 204,874 366,976 (571,850) (i) 5,408,950
------------- ------------ ---------- ------------- --------------
Total shareholders' equity 10,308,960 204,948 366,977 28,075 10,908,960
------------- ------------ ---------- ------------- --------------
$11,003,945 $1,296,669 $403,062 ($350,973) $12,352,703
============= ============ ========== ============= ==============
</TABLE>
See notes to unaudited pro forma consolidated financial statements
F-16
<PAGE>
KOALA CORPORATION
- -------------------------------------------------------------------------------
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME [ALL AMOUNTS IN US DOLLARS}
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
KOALA DELTA PLAY, PRO FORMA CONSOLIDATED
CORPORATION LTD. ADJUSTMENTS AS ADJUSTED
------------- ----------- ------------- --------------
(j) (k)
<S> <C> <C> <C> <C>
Net sales $8,938,282 $4,588,620 $0 $13,526,902
Cost of sales 3,241,328 2,807,346 (293,338)(l) 5,755,336
------------- ----------- ------------- ------------
Gross profit 5,696,954 1,781,274 293,338 7,771,566
------------- ----------- ------------- ------------
Selling, general and administrative expenses 2,892,095 905,477 0 3,797,572
Management, employee bonuses and other fees 0 535,342 0 (n) 535,342
------------- ----------- ------------- ------------
Operating income 2,804,859 340,455 293,338 3,438,652
------------- ----------- ------------- ------------
Other (income) expenses 129,463 0 (29,463)(m) 100,000
Relocation expenses (288,923) 0 0 (288,923)
Amortization of intangibles and patents (105,677) 0 (182,829)(o) (288,506)
------------- ----------- ------------- ------------
Income before provision
for income taxes 2,539,722 340,455 81,046 2,961,223
Provision for income taxes 644,182 101,216 48,417 (p) 793,815
------------- ----------- ------------- ------------
Net income $1,895,540 $239,239 $32,629 $2,167,408
============= =========== ============= ============
Net income per share $ 0.74 $0.84
============= ============
Weighted average shares outstanding 2,549,438 (q) 2,589,438
============= ============
</TABLE>
See notes to unaudited pro forma consolidated financial statements
F-17
<PAGE>
KOALA CORPORATION
- --------------------------------------------------------------------------------
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME [ALL AMOUNTS IN US DOLLARS}
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
KOALA DELTA PLAY, PRO FORMA CONSOLIDATED
CORPORATION LTD. ADJUSTMENTS AS ADJUSTED
------------ ------------ -------------- ------------
(r) (s)
<S> <C> <C> <C> <C>
Net sales $2,251,172 $451,991 $0 $2,703,163
Cost of sales 723,114 275,715 (27,000)(t) 971,829
------------ ------------ -------------- ------------
Gross profit 1,528,058 176,276 27,000 1,731,334
------------ ------------ -------------- ------------
Selling, general and administrative expenses 720,786 36,159 0 756,945
Management, employee bonuses and other fees 0 54,239 0 (v) 54,239
------------ ------------ -------------- ------------
Operating income 807,272 85,878 27,000 920,150
------------ ------------ -------------- ------------
Other (income) expenses 41,352 0 (20,000)(u) 21,352
Amortization of intangibles and patents (26,313) 0 (45,707)(w) (72,020)
------------ ------------ -------------- ------------
Income before provision
for income taxes 822,311 85,878 (38,707) 869,482
Provision for income taxes 291,921 30,487 (13,741)(x) 308,667
------------ ------------ -------------- ------------
Net income $530,390 $55,391 ($24,966) $560,815
============ ============ ============== ============
Net income per share $0.21 $0.22
============ ============
Weighted average shares outstanding 2,515,088 (y) 2,555,088
============ ============
</TABLE>
See notes to unaudited pro forma consolidated financial statements
F-18
<PAGE>
KOALA CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated balance sheet reflects the financial
position of Koala Corporation as of March 31, 1997, as if the acquisition of
Delta Play, Ltd. and its related party Safeplay Designs, Inc. (collectively
"Delta Play") occurred on that date. The unaudited pro forma consolidated
statement of income for the year ended December 31, 1996 gives effect to the
consolidated results of operations for the year ended December 31, 1996, as if
the acquisition of Delta Play occurred on January 1, 1996. The unaudited pro
forma consolidated statement of income for the three months ended March 31, 1997
gives effect to the consolidated results of operations for the three months
ended March 31, 1997, as if the acquisition of Delta Play occurred on January 1,
1997. These results are not necessarily indicative of the consolidated results
of operations of the Company as they may be in the future, or as they might
have been had these events been effective at January 1, 1996 and 1997,
respectively. The unaudited pro forma consolidated financial statements should
be read in conjunction with the historical financial statements of the Company
and Delta Play and the related notes thereto.
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH
31, 1997 ARE AS FOLLOWS:
(a) Represents the balance sheet of Koala Corporation as of March 31, 1997.
(b) Represents the balance sheet of Delta Play, Ltd as of March 31, 1997, with
all dollar amounts translated to U.S. currency at a rate of .72823, the
exchange rate on March 31, 1997.
(c) Represents the balance sheet of Safeplay Designs, Inc. as of March 31,
1997, with all dollar amounts translated to U.S. currency at a rate of
.72823, the exchange rate on March 31, 1997.
(d) The preliminary acquisition cost based on contractual consideration
pursuant to the purchase agreement and direct costs incurred to consummate
the transaction is summarized as follows:
Purchase price-cash portion $4,129,921
Purchase price-stock portion 600,000
Direct costs of acquisition (accounts payable) 438,724
-----------
Total acquisition costs (preliminary) $5,168,645
===========
(e) Represents elimination of assets excluded and liabilities not assumed
pursuant to the terms of the asset purchase agreement.
(f) Represents the allocation to intangible assets of the cost over fair value
of net assets acquired as a result of the preliminary purchase price
allocation.
(g) Elimination of income tax accruals not assumed in accordance with the terms
of the purchase agreement.
(h) Represents issuance of 40,000 shares of Koala Corporation common stock for
payment of the stock portion of the purchase price.
F-19
<PAGE>
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE
YEAR ENDED DECEMBER 31, 1996 ARE AS FOLLOWS:
(i) Elimination of retained earnings of Delta Play, Ltd. and Safeplay Designs,
Inc. for proper reflection of pro forma retained earnings as if the
purchase occurred on March 31, 1997.
(j) Represents the results of operations of Koala Corporation for the year
ended December 31, 1996.
(k) Represents the results of operations of Delta Play, Ltd. for the year ended
March 31, 1997, with all amounts translated to U.S. currency at a rate of
.73335, which represents the average exchange rate over the 12 month
period.
(l) Represents the adjustment to remove the profit component of related party
charges from Safeplay Designs, Inc. A separate statement of income for
Safeplay is not included in the accompanying unaudited pro forma
consolidated statement of income since Delta Play, Ltd. was Safeplay's
sole customer and the majority of payments to Safeplay for design costs are
recorded in cost of sales.
(m) Represents the adjustment to reflect lower interest income because of the
cash payment of $4,129,921 for the cash portion of the purchase price.
(n) Represents management bonuses utilized for tax planning purposes that will
no longer be paid pursuant to the terms of the employment agreement
executed at the closing of the purchase.
(o) Represents the increase to amortization expense for the amortization of
cost over fair value of net assets acquired over 25 years as a result of
the preliminary purchase price allocation.
(p) Reflects applicable income tax effects of adjustments.
(q) Reflects the increase to common stock equivalents using the treasury stock
method for 40,000 shares issued in connection with the acquisition.
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 1997 ARE AS FOLLOWS:
(r) Represents the results of operations of Koala Corporation for the three
months ended March 31, 1997.
(s) Represents the results of operations of Delta Play, Ltd. for the three
months ended March 31, 1997, with all amounts translated to U.S. currency
at a rate of .73326, which represents the average exchange rate over the
three month period.
F-20
<PAGE>
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 1997 ARE AS FOLLOWS (CONTINUED):
(t) Represents the adjustment to remove the profit component of related party
charges from Safeplay Designs, Inc. A separate statement of income for
Safeplay is not included in the accompanying unaudited pro forma
consolidated statement of income since Delta Play, Ltd. was Safeplay's sole
customer and the majority of payments to Safeplay for design costs are
recorded in cost of sales.
(u) Represents the adjustment to reflect lower interest income because of the
payment of $4,129,921 in cash for the cash portion of the purchase price.
(v) Represents management bonuses utilized for tax planning purposes that will
no longer be paid pursuant to the terms of the employment agreement
executed at the closing of the purchase.
(w) Represents the increase to amortization expense for the amortization of the
cost over fair value of net assets acquired over 25 years as a result of
the preliminary purchase price allocation.
(x) Reflects applicable income tax effects of adjustments.
(y) Reflects the increase to common stock equivalents using the treasury stock
method for 40,000 shares issued in connection with the acquisition.
F-21
