<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 21, 1997
Byron Preiss Multimedia Company, Inc.
(Exact name of registrant as specified in its charter)
New York 1-13084 13-3676574
State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
24 West 25th Street, New York, New York 10010
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 989-6252
Not Applicable
(Former name or former address, if changed since last report.)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS
In connection with the acquisition by Byron Preiss Multimedia Company,
Inc. (the "Company") of all of the issued and outstanding capital stock of
Dolphin, Inc., a New Jersey corporation ("Dolphin") (such acquisition, the
"Dolphin Acquisition"), the Company's Current Report on Form 8-K, filed on or
about March 27, 1997, is hereby amended to include the following financial
statements and pro forma financial information, which were previously omitted
from such Current Report on Form 8-K.
(a) Financial Statements of Business Acquired.
The following financial statements for Dolphin, are submitted herewith:
Independent Auditor's Report
Balance Sheet - December 31, 1996
Statements of Income - December 31, 1996
Statements of Cash Flows - December 31, 1996
Notes to Financial Statements
(b) Pro Forma Financial Information.
The following unaudited pro forma income statements for the year ended
December 31, 1996 gives effect to the Dolphin Acquisition on March 21, 1997.
These unaudited pro forma financial statements may not be indicative of
the results that actually would have occurred if the transactions referred to
above had been in effect on the dates indicated or the results that may be
obtained in the future.
Pro Forma Balance Sheet - December 31, 1996
Pro Forma Statement of Operations for the year
ended December 31, 1996
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Signatures.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BYRON PREISS MULTIMEDIA COMPANY, INC.
By: /s/ James R. Dellomo
---------------------------------
Name: James R. Dellomo
Title: Chief Financial Officer
Date: June 2, 1997
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DOLPHIN, INC.
AT DECEMBER 31, 1996
TABLE OF CONTENTS
Page
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Balance Sheet 2 - 3
Statement of Income 4 - 5
Statement of Stockholder's Equity 6
Statement of Cash Flows 7
Notes to Financial Statements 8 - 12
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[LETTERHEAD OF JAMES F. LEONE & CO.]
Report of Independent Public Accountants
To the Board of Directors
Dolphin, Inc.
Gibbsboro, NJ
We have audited the accompanying balance sheet of Dolphin, Inc.
as of December 31, 1996, and the related statements of income,
stockholder's equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We have conducted the audit in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Dolphin, Inc. as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
As discussed in Note 11, the Company entered into a stock
purchase agreement on March 21, 1997.
Haddonfield, New Jersey
April 24, 1997
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DOLPHIN, INC.
Balance Sheet
December 31, 1996
Assets
Current assets
Cash $ 61,646
Accounts receivable (Note 2) 369,485
Prepayments (Note 3) 12,264
-----------
Total current assets 443,395
-----------
Property and equipment (Note 1)
Equipment 219,624
Computers and furniture 104,425
Improvements 23,175
-----------
347,224
Less: accumulated depreciation 179,500
-----------
Net property and equipment 167,724
-----------
Non-current assets
Security deposit - Rent (Note 8) 1,584
-----------
Total assets $ 612,703
===========
The accompanying notes are an integral part of these financial
statements.
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DOLPHIN, INC.
Balance Sheet
December 31, 1996
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable $ 3,354
Accrued expenses (Note 4) 31,296
State income taxes payable 150
Deferred income taxes (Note 1) 3,776
Accrued pension expense (Note 1) 46,000
Deferred revenue (Note 6) 167,787
Reserve for warranties (Note 7) 1,500
Loan due shareholder 11,587
-----------
Total current liabilities 265,450
-----------
Long term liabilities
Deferred income taxes (Note 1) 276
-----------
Total liabilities 265,726
-----------
Stockholder's equity
Common stock, no par value; 18,000 shares
authorized, 100 shares issued and
outstanding 1,000
Retained earnings - unappropriated 345,977
-----------
Total stockholder's equity 346,977
-----------
Total liabilities and
stockholder's equity $ 612,703
===========
The accompanying notes are an integral part of these financial
statements.
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DOLPHIN, INC.
Statement of Income
For The Year Ended December 31, 1996
Income
Revenue $ 1,856,356
-----------
Development Costs
Consulting 96,740
Salaries 608,239
Officer salary 383,473
Payroll taxes 70,090
Pension (Note 1) 41,630
Rent (Note 8) 51,123
Depreciation (Note 1) 55,225
Warranty expense 1,500
Vacation pay 3,631
-----------
Total development costs 1,311,651
-----------
Gross Profit 544,705
-----------
General and administrative expenses
Administrative salaries 106,989
Officer salary 25,000
Vacation pay 381
Shareholder interest 811
Payroll taxes 7,357
Rent (Note 8) 12,781
Office supplies/expense 36,927
Travel & entertainment 53,377
Operating expense 1,931
Telephone 17,387
Insurance 56,341
Automobile 8,701
Professional fees 58,222
Repairs and maintenance 4,697
Postage and delivery 6,300
Conference 1,550
Dues and subscriptions 2,538
Gifts 8,665
Outside services 3,482
Lease expense - auto (Note 9) 8,812
Bank charges 101
Advertising 6,287
Pension (Note 1) 4,370
Taxes - other 529
Equipment rental (Note 10) 2,973
Continuing education 1,155
-----------
Total general & administrative expenses 437,664
-----------
Income from operations 107,041
-----------
The accompanying notes are an integral part of these financial
statements.
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DOLPHIN, INC.
Statement of Income (Continued)
For The Year Ended December 31, 1996
Income from operations $ 107,041
Other income
Interest income 4,683
-----------
Total other income 4,683
-----------
Income before income taxes (Note 1) 111,724
Income taxes - Current 150
- Deferred 2,185
--------
Total income taxes 2,335
-----------
Net income $ 109,389
===========
Net income per share $ 1,093.89
===========
The accompanying notes are an integral part of these financial
statements.
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DOLPHIN, INC.
Statement of Stockholder's Equity
For The Year Ended December 31, 1996
Retained Earnings
----------------------
Common Appro- Unappro-
Stock priated priated Total
------- --------- --------- ---------
Balance,
January 1, 1996 $ 1,000 $ -0- $ 236,588 $ 237,588
------- --------- --------- ---------
Net income for
the period -0- -0- 109,389 109,389
------- --------- --------- ---------
Balance,
December 31, 1996 $ 1,000 $ -0- $ 345,977 $ 346,977
======= ========= ========= =========
The accompanying notes are an integral part of these financial
statements.
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DOLPHIN, INC.
Statement of Cash Flows
For The Year Ended December 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 109,389
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation $ 55,225
(Increase) Decrease in:
Accounts receivable (139,705)
Prepayments (1,980)
Increase (Decrease) in:
Accounts payable 3,354
Deferred income taxes payable 3,172
Accrued pension (9,462)
Current income taxes payable (837)
Accrued expenses (11,889)
Reserve for warranties (8,500)
Deferred revenue 21,287
----------
Total adjustments (89,335)
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 20,054
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (50,159)
----------
NET CASH USED BY INVESTING ACTIVITIES (50,159)
----------
NET DECREASE IN CASH (30,105)
CASH AT JANUARY 1, 1996 91,751
----------
CASH AT DECEMBER 31, 1996 $ 61,646
==========
The accompanying notes are an integral part of these financial
statements.
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DOLPHIN, INC.
Notes To Financial Statements
December 31, 1996
Note 1 - Summary of Significant Accounting Policies
Business Activity
The Company was incorporated in the State of New Jersey on
February 5, 1990. Dolphin, Inc. is a service company which
develops computer software in the educational and marketing
areas.
Method of Accounting
The Company prepares its financial statements on the accrual
basis of accounting.
Recognition of Revenue
The Company's method of recognizing revenue is the
accrual method. In most instances, customer billings are
prepared when the work completed reaches a certain level
which is designated as a "milestone". As a general
rule, about 10% of the most recent customer billing on a
contract is an advance billing. This advance portion of
billings is reflected as a liability, and is designated
in the financial statements as deferred revenue.
In those instances where customer billings do not
reflect "milestones" the proper adjustments are made to
properly match revenues and expenses.
All costs and expenses, incurred in connection with the
development of products, are charged to operations.
The Company records a reserve for warranties equal to
approximately 1% of the contract amount.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
provided on the straight-line method over the estimated lives
of the respective assets.
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DOLPHIN, INC.
Notes to the Financial Statements (Continued)
December 31, 1996
Income Taxes
The Company, with the consent of its shareholders has elected
under the Internal Revenue Code to be an "S" corporation. In
lieu of federal corporate income taxes, the shareholders of an
"S" corporation are taxed on their proportionate share of the
Company's taxable income. Therefore, no provision or
liability for federal income taxes has been included in these
financial statements. Also, effective January 1, 1994 the
Company elected S status for the State of New Jersey,
therefore the provision of state income taxes has been
significantly decreased.
Deferred state income taxes in the accompanying financial
statements reflect temporary differences in reporting results
of operations for income tax and financial accounting
purposes.
Employee Benefits
The Company has a qualified profit sharing plan. Annual
contributions to the plan are made at the discretion of the
Board of Directors. Employees become participants upon
completing one year of service and attaining age 21.
Participants are fully vested upon completion of their sixth
year of service. The 1996 pension contribution is $ 46,000.
Note 2 - Accounts Receivable
The accounts receivable at December 31, 1996 consist of:
Billed $ 287,785
Unbilled 81,700
---------
$ 369,485
=========
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DOLPHIN, INC.
Notes to the Financial Statements (Continued)
December 31, 1996
Note 3 - Prepayments
The prepayments at December 31, 1996 are summarized below:
Rent $ 5,828
Insurance 2,594
State corporation taxes 3,842
--------
$ 12,264
========
Note 4 - Accrued Expenses
The details at December 31, 1996 of the accrued expenses are
summarized below:
Consultants $ 15,900
Vacation pay 15,396
--------
$ 31,296
========
Note 5 - Credit Line
The Company has a revolving line of credit in the amount of
$200,000 with Commerce Bank. At December 31, 1996, all of the
$200,000 line of credit was available for use. The terms of the
credit line include an interest rate of prime plus 1% and monthly
principal payments in the amount of $ 250 or 1/36th of the
outstanding principal balance whichever is greater. The credit line
expires on June 1, 1997 and is secured by a first lien on all
business assets and a $ 100,000 life insurance policy on Mr.
Andrew Gardner naming Commerce Bank payee.
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DOLPHIN, INC.
Notes to the Financial Statements (Continued)
December 31, 1996
Note 6 - Deferred Revenue
The Company's policy is to bill customers when the work
completed reaches milestones specified in the contract. The
milestones reflect completed work as indicated in the contract
schedule. Generally, a liability of 10% of the most recent
customer billings on work in process contracts is reflected as
deferred revenue. In certain instances, the deferred revenue
may be greater or less than the 10% noted above. The liability
at December 31, 1996 is $ 167,787.
Note 7 - Reserve for Warranties
The Company records a reserve for warranties equal to
approximately 1% of the contract amount. The warranty period
for completed work is six months. The reserve balance at
December 31, 1996 is $1,500.
Note 8 - Rent Expense
The Company leases its office facilities, located in Gibbsboro,
New Jersey, from The Paint Works Corporate Center. During the
year ending December 31, 1996, the Company leased 5,014 square
feet at an annual rental of $63,904. The security deposit in
the amount of $1584.12 is being held by the landlord. This
deposit will be refunded upon termination of the lease.
On January 13, 1997, the Company agreed to an amendment of its
current lease. The square feet increased from 5,014 to 6,584.
The monthly rent under the terms of the amended lease increased
to the following amounts:
February 1, 1997 to May 31, 1997 $ 6,962.58
June 1, 1997 to May 31, 1999 $ 7,681.33
June 1, 1999 to May 31, 2000 $ 7,950.18
Note 9 - Lease Expense - Auto
The Company leases a 1993 Lexus Series LS400 from Lexus
Financial Services. The lease commenced on May 1, 1993,
and extends for a four year period with monthly payments of
$734.33.
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DOLPHIN, INC.
Notes to the Financial Statements (Continued)
December 31, 1996
Note 10 - Equipment Rental
The Company leases a Canon NP6025 copier from Canon Financial
Services. The lease commenced on October 1, 1994, and extends
for a three year period with monthly payments of $230.02.
Note 11 - Subsequent Events
On March 21, 1997, Mr. Andrew Gardner (Sole Shareholder)
entered into a stock purchase agreement ("Purchase Agreement")
with Byron Preiss Multimedia Company, Inc. ("Company"),
providing for a 100% ownership of Dolphin, Inc. Under the
terms of the purchase agreement, dated March 21, 1997, the
Company purchased all the authorized capital stock of Dolphin,
Inc., which consisted of 18,000 shares of common stock, without
par value, of which 100 shares were issued and outstanding. On
March 21, 1997, the transaction was completed and Mr. Andrew
Gardner received $500,000 in cash, a convertible note in the
principal amount of $1,750,000 and 395,947 shares of
unregistered Company common stock.
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BYRON PREISS MULTIMEDIA COMPANY, INC.
PROFORMA BALANCE SHEET
(Unaudited)
December 31,
1996
-----------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 843,644
Accounts receivable, net 2,418,796
Inventory 394,000
Other current assets 53,440
-----------
Total current assets 3,709,880
PREPUBLICATION COSTS AND RIGHTS PURCHASED 2,745,216
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 710,930
EXCESS OF PURCHASE PRICE OVER ASSETS 2,414,316
OTHER ASSETS 213,957
-----------
Total assets $ 9,794,299
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,895,216
Deferred income 807,784
Other current liabilities 136,425
-----------
Total current liabilities 2,839,425
ROYALTY PAYABLE 300,000
DEFERRED TAXES 276
CONVERTIBLE NOTE 1,750,000
-----------
Total liabilities 4,889,701
-----------
SHAREHOLDERS' EQUITY:
Preferred Stock, 5,000,000 shares authorized, -
-0- shares issued and outstanding
Common stock, 30,000,000 shares authorized, 4,662
4,261,875 shares issued and outstanding,
.001 par value -
Additional paid-in capital 11,189,041
Retained deficit (6,289,105)
-----------
Total shareholders' equity 4,904,598
-----------
Total liabilities and shareholders' equity $ 9,794,299
===========
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BYRON PREISS MULTIMEDIA COMPANY, INC.AND SUBSIDIARIES
PROFORMA STATEMENT OF OPERATIONS
(Unaudited)
1996
-----------
NET REVENUES $ 8,747,661
COST OF REVENUES 8,260,688
-----------
Gross profit 486,973
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,072,726
-----------
Loss from operations (3,585,753)
OTHER INCOME, net 137,610
-----------
Net loss $(3,448,143)
===========
NET LOSS PER WEIGHTED
AVERAGE SHARES OUTSTANDING $ (0.74)
===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,661,875
===========
