Securities and Exchange Commission
Washington, D.C. 20549
------------------------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 9, 1998
QUIKBIZ INTERNET GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-25276 88-0320364
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
6801 Powerline Road
Ft. Lauderdale, Florida 33309
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (954) 970-3553
<PAGE>
Item 2. Acquisition or Disposition of Assets
On July 9, 1998, the acquisition by the Registrant of QuikBIZ Media
Centers, Inc. (formerly QuikLAB Multimedia Centers, Inc.) ("QuikBIZ Media"), a
Florida corporation, was completed. QuikBIZ Media is in the business of
providing Internet and multimedia services, has been in business since 1991 and
is located in Ft. Lauderdale, Florida. QuikBIZ Media provides services in the
development of Internet and intranet sites, CD-ROM based programs, video and
audio production, interactive kiosks, video and audio encoding, animation,
video/audio/CD duplication, and media package design.
David Bawarsky, the registrant's President, CEO, CFO, director and a
principal shareholder, was the owner of QuikBIZ Media. All of the outstanding
stock of QuikBIZ Media was acquired by the registrant in consideration for the
issuance to Mr. Bawarsky of options to acquire 200,000 shares of common stock of
the registrant at a price of $.002 per share. The options are exercisable for
two years. In addition, if QuikBIZ Media doubles its net revenue within three
years, the registrant will issue to Mr. Bawarsky options to acquire an
additional 2,800,000 shares of common stock of the registrant exercisable at
$.002 per share. The options will be exercisable for a period of three years
from the date of issue.
A five-year employment agreement between David Bawarsky and QuikBIZ Media,
dated June 16, 1998, provides that Mr. Bawarsky is to receive a salary of
$175,000 per year which is to be increased by 20% per year commencing on January
1, 1999; an annual non-accountable expense account of $25,000, in addition to
reimbursement of necessary, customary and usual expenses incurred on behalf of
QuikBIZ Media; a performance incentive bonus, based upon net profits; and two
motor vehicles or, at Mr. Bawarsky's option the financial equivalent. QuikBIZ
Media is to pay for the insurance and all maintenance on the motor vehicles. As
part of the acquisition agreement, the registrant approved and guaranteed the
employment agreement, and agreed to give Mr. Bawarsky the option to take up to
$50,000 of his gross annual compensation in the form of common stock of the
registrant, on a pro rata quarterly basis. Any shares so issued will be valued
at the bid price of the registrant's common stock at the end of the quarter.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired.
See Financial Statements of QuikBIZ Multimedia Centers, Inc.,
f/k/a Video QuikLAB of South Florida, Inc., as of December 31,
1997, 1996 and 1995 and for the years ended December 31, 1997,
1996 and 1995.
(b) Pro Forma Financial Information.
See Unaudited Pro Forma Combined Financial Information of QuikBIZ
Internet Group, Inc. as of and for the six months ended June 30,
1998 and for the year ended December 31, 1997.
-2-
<PAGE>
(c) Exhibits.
2.3 Acquisition Agreement between QuikBIZ Internet Group, Inc. and
QuikBIZ Media Centers, Inc. (f/k/a QuikBIZ Multimedia Centers,
Inc.) dated June 25, 1998 (previously filed).
10.5 Employment Agreement between QuikBIZ Media Centers, Inc. (f/k/a
QuikBIZ Multimedia Centers, Inc.) and David Bawarsky, dated June
16, 1998.
-3-
<PAGE>
SIGNATURE
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.
QUICKBIZ INTERNET GROUP, INC.
/s/ David B. Bawarsky
-----------------------------
Name: David B. Bawarsky
Title: Chief Executive Officer
and President
Date: March 20, 2000
-4-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Financial Statements of QuikBIZ Media Centers, Inc.
Report of Gerson, Preston & Company, P.A.....................................................................F-2
Balance Sheet, December 31, 1997.............................................................................F-3
Statement of Operations and Retained Earnings, Year Ended December 31, 1997..................................F-4
Statement of Cash Flows, Year Ended December 31, 1997........................................................F-5
Notes to Financial Statements ...............................................................................F-6
Report of M.A. Cabrera & Company, P.A........................................................................F-9
Balance Sheets, December 31, 1996 and 1995..................................................................F-10
Statements of Operations and Retained Earnings
For the Years Ended December 31, 1996 and 1995.....................................................F-11
Statements of Cash Flows For the Years Ended December 31, 1996 and 1995.....................................F-12
Notes to Financial Statements...............................................................................F-13
Pro Forma Combined Financial Information of
QuikBIZ Internet Group, Inc.
Introduction to Pro Forma Combined Financial Information....................................................F-19
QuikBIZ Internet Group, Inc. and Subsidiaries Pro Forma Balance Sheet
as of June 30, 1998................................................................................F-20
Pro Forma Condensed Combined Statements of Operations
for the Year Ended December 31, 1997...............................................................F-21
Pro Forma Condensed Combined Statements of Operations
for the Six Months Ended June 30, 1998.............................................................F-22
Notes to Pro Forma Condensed Combined Financial Information.................................................F-23
</TABLE>
F-1
<PAGE>
Gerston, Preston & Company, P.A.
Certified Public Accountants
To the Board of Directors and Officer
QuikLAB Multimedia Centers, Inc.
Fort Lauderdale, Florida
INDEPENDENT AUDITORS' REPORT
We have audited the balance sheet of QuikLAB Multimedia Centers, Inc. (A Florida
Sub-Chapter S corporation) as of December 31, 1997 and the related statements of
operations, retained earnings 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 our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of QuikLAB Multimedia Centers,
Inc. as of December 31, 1997 and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
February 15, 1999
Miami Beach, Florida
/s/ Gerston Preston & Company, P.A.
-----------------------------------
Gerston Preston & Company, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
F-2
<PAGE>
QuikLAB Multimedia Centers, Inc.
BALANCE SHEET
At December 31, 1997
ASSETS
Current assets:
Cash $ 59,882
Accounts receivable, all deemed collectible 125,272
Inventories, stated at lower of cost or market 28,771
--------
Total current assets 213,925
Depreciable property
Equipment 299,819
Leasehold improvements 50,906
Furniture and fixtures 19,244
---------
369,969
Less accumulated depreciation, provided by straight-line
methods 199,947
---------
Depreciated cost 170,022
Other assets 5,201
---------
Total assets $ 389,148
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $109,018
Current maturities of long-term debt 40,866
--------
Total current liabilities 149,884
Long-term debt, net of current maturities 148,688
--------
Total liabilities 298,572
Commitments and contingencies (Note 3)
Shareholders' equity:
Common stock, $0.01 par value per share;
1,000,000 shares authorized; 500,000
shares issued and outstanding 5,000
Additional paid-in capital 48,957
Retained earnings 36,619
--------
Total shareholder's equity 90,576
---------
Total liabilities and shareholder's equity $ 389,148
=========
The notes which follow all of the financial statements must be read for a more
informed use, understanding and interpretation of this financial statement.
F-3
<PAGE>
QuikLAB Multimedia Centers, Inc.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Year Ended December 31, 1997
Sales $ 1,344,459
Cost of sales 535,767
-----------
Gross profit on sales 808,692
-----------
Expenses:
Advertising 43,066
General and administrative 219,907
Payroll and related costs 317,677
Rents 115,776
----------
Total 696,426
----------
Income from operations before other expense 112,266
Other expenses:
Depreciation and amortization 30,239
Interest expense 8,179
Officer's salary and expenses 134,034
-----------
Total 172,452
-----------
Net loss (60,186)
Retained earnings, beginning of year 105,688
Distributions to shareholder (8,883)
-----------
Retained earnings, end of year $ 36,619
===========
The notes which follow all of the financial statements must be read for a more
informed use, understanding and interpretation of this financial statement.
F-4
<PAGE>
QuikLAB Multimedia Centers, Inc.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1997
<TABLE>
<S> <C>
Operating activities:
Cash inflow from customers $ 1,263,502
Cash outflows:
Vendors and suppliers 534,710
General and administrative 199,104
Payroll and related costs 451,711
Interest 8,179
--------------------
Total cash outflows 1,193,704
--------------------
Net cash inflow from operating activities 69,798
--------------------
Investing activities:
Cash outflows:
Distributions to shareholder 8,883
Purchase of property and equipment 27,541
--------------------
Total cash outflows for investing activities 36,424
--------------------
Financing activity:
Cash inflow from notes payable 15,000
--------------------
Net cash inflow from all activities 48,374
Cash, beginning of the year 11,508
--------------------
Cash, end of the year $ 59,882
====================
Reconciliation of net loss to net cash inflow from operating activities
Net loss $ (60,186)
--------------------
Add:
Depreciation, not requiring cash 30,239
Bad debt expense, not requiring cash 49,000
Decrease in inventories 8,021
Decrease in other assets 6,751
Increase in accounts payable and other accrued expenses 116,930
--------------------
Total 210,941
Deduct:
Increase in accounts receivable 80,957
Net cash inflow from operating activities $ 69,798
====================
</TABLE>
The notes which follow all of the financial statements must be read for a more
informed use, understanding and interpretation of this financial statement.
F-5
<PAGE>
QuikLAB Multimedia Centers, Inc.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity. The Company, which was founded in 1991, specializes in a
"one-stop shopping" concept for hundreds of multimedia services and
products at its one South Florida location. These services and products
include animation, authoring, interactive multimedia programs, audio, video
and CD (compact disks) duplication, digital audio and video encoding,
scanning, video and CD ROM production, interactive kiosk design and
production, and custom designed audio/video/CD ROM packages.
Income Taxes. The Company will file a consolidated corporate tax return for
the year ending December 31, 1997 as an "S" corporation with its parent,
Telephonetics International, Inc. Under Sub-Chapter "S" of the Internal
Revenue Code, income tax benefits are attributable to the individual
shareholder.
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 disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could vary from the
estimates that were used.
F-6
<PAGE>
QuikLAB Multimedia Centers, Inc.
NOTES TO FINANCIAL STATEMENTS
2. LONG-TERM DEBT
Long-term debt at December 31, 1997, consist of the following:
Due to Telephonetics International, Inc. (shareholder); subsequent
to December 31, 1997, the Company entered into a subordinated
debt agreement which settled all existing indebtedness between
the two companies; the maturity date is October 13, 2000;
interest begins accruing on May 13, 1999 at prime plus one
percent and is due at maturity $ 110,000
Note payable, bank credit line; interest variable (10% at
December 31, 1997); collateralized by accounts receivable,
inventory and property and equipment guaranteed by
shareholder; subsequent to December 31, 1997, $20,000 was
paid off and line was extended to September 5, 2001 with
monthly principal and interest payments of $956 commencing
October 5, 1998 50,000
Note payable; interest at 8%, payable in monthly installments
of $1,500; matures August, 1999 26,554
Demand note payable to a related party; interest at 12%;
unsecured 3,000
----------
Total $ 189,554
===========
The aggregate maturities of debt for the years ended December 31 are as follows:
Year Amount
---------------------
1998 $ 40,866
1999 20,248
2000 120,227
2001 8,213
--------------------
$ 189,554
=====================
F-7
<PAGE>
QuikLAB Multimedia Centers, Inc.
NOTES TO FINANCIAL STATEMENTS
3. COMMITMENTS AND CONTINGENCIES
Leases. The Company has entered into several long-term leases for offices,
its retail location and an equipment lease with monthly payments ranging
from $617 to $6,848. These leases are classified as operating leases.
The future minimum rental payments required under long-term non-cancelable
leases during the years ended December 31, are summarized as follows:
1998 $ 93,249
1999 87,786
2000 89,032
2001 93,460
2002 95,690
Thereafter 308,218
--------------------
$ 767,435
====================
The Company also leases video production equipment on a month-to-month
basis.
Total rental expense for the year ended December 31, 1997 was $115,776.
4. PLAN OF MERGER AND SUBSEQUENT EVENTS
During 1997, the Company entered into a stock exchange agreement with
Telephonetics International, Inc. ("Telephonetics"), a Florida corporation.
The terms of the agreement called for Telephonetics to acquire all of the
Company's authorized shares. On May 12, 1998, the Company entered into an
agreement with Telephonetics which terminated the stock exchange agreement.
The Company's previous shareholder reacquired all of the Company's
authorized shares. In addition, the Company entered into a subordinated
debenture agreement with Telephonetics in the amount of $110,000
representing all of the advances made by Telephonetics to the Company.
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
QuikLAB Multimedia Centers, Inc.
F/K/A Video QuikLAB of South Florida, Inc.
We have audited the accompanying balance sheets of QuikLAB Multimedia Centers,
Inc. F/K/A Video QuikLAB of South Florida, Inc. (a Florida corporation and a
Subchapter S corporation) as of December 31, 1996 and 1995, and the related
statements of operations, retained earnings, and cash flows 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 audit.
We have 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 QuikLAB Multimedia Centers,
Inc. F/K/A Video QuikLAB of South Florida, Inc. as of December 31, 1996 and
1995, and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ M. A. Cabrera & Company, P.A.
Plantation, Florida
March 6, 1997
F-9
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab of South Florida, Inc.
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
<TABLE>
1996 1995
--------------------------------------
<S> <C> <C>
Current Assets:
Cash $ 11,508 $ 51,384
Accounts receivable 93,315 49,260
Inventories 36,792 14,400
--------------------------------------
Total current assets 141,615 115,044
Property and Equipment, Net 172,720 111,092
Other Assets 11,952 14,325
--------------------------------------
Total assets $ 326,287 $ 241,461
======================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 39,500 $ 3,000
Accounts payable 71,142 43,499
Accrued expenses 56,000 -
--------------------------------------
Total current liabilities 166,642 46,499
Commitments and Contingencies
Stockholders' Equity:
Common stock, $0.01 par value per share
1,000,000 shares authorized, 500,000 shares issued and
outstanding 5,000 5,000
Additional paid-in capital 48,957 28,663
Retained earnings 105,688 161,299
--------------------------------------
Total stockholder's equity 159,645 194,962
--------------------------------------
Total liabilities and stockholder's equity $ 326,287 $ 241,461
=====================================
</TABLE>
See Independent Auditors' Report.
The accompanying Notes to Financial Statements are an integral part of these
statements.
F-10
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab of South Florida, Inc.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the years ended December 31, 1996 and 1995
<TABLE>
1996 1995
--------------------------------------
<S> <C> <C>
Sales $ 1,232,343 $ 1,109,284
Cost of Sales 465,359 434,950
------------------ ------------------
Gross Profit on Sales 766,984 674,334
Expenses:
Payroll and related costs 291,748 215,673
Rents 82,420 59,159
Advertising 43,797 52,528
General and administrative 149,477 116,719
--------------------------------------
Total expenses 567,442 444,079
--------------------------------------
Income from operations before officer's salary, depreciation
and other income (expense) 199,542 230,255
Officer's Salary, Depreciation, Other Income (Expense):
Officer's salary and expenses (119,592) (109,656)
Depreciation and amortization (44,147) (39,086)
Provision for sales tax assessment and related costs (61,000) -
Costs of merger (25,815) -
Interest expense (2,236) -
Franchise fees - 2,109
--------------------------------------
Total officer's salary, depreciation, other income (expense) (252,790) (146,633)
--------------------------------------
Net Earnings (Loss) (53,248) 83,622
Retained Earnings, beginning 161,299 111,590
Distributions to stockholder (2,363) (33,913)
--------------------------------------
Retained Earnings, ending $ 105,688 $ 161,299
======================================
</TABLE>
See Independent Auditors' Report.
The accompanying Notes to Financial Statements are an integral part of these
statements.
17666.2
F-11
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab of South Florida, Inc.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996 and 1995
<TABLE>
1996 1995
------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (53,248) $ 83,622
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities:
Depreciation and amortization 44,147 39,086
(Increase) Decrease in:
Accounts receivable (44,055) (33,460)
Inventories (22,392) (9,800)
Other assets 4,849 21,181
Increase (Decrease) in:
Accounts payable 12,643 29,551
Accrued expenses 56,000 (24,116)
------------------------------------
Net Cash Provided (Used) by Operating Activities (2,056) 106,064
------------------------------------
Cash Flows from Investing Activities:
Purchase of property and equipment (71,957) (35,797)
------------------------------------
Net Cash (Used) by Investing Activities (71,957) (35,797)
------------------------------------
Cash Flows from Financing Activities:
Proceeds from notes payable 38,000 -
Payments on note payable (1,500) (7,000)
Distributions to shareholder (2,363) (33,913)
------------------------------------
Net Cash Provided (Used) by Financing Activities 34,137 (40,913)
------------------------------------
Net Increase (Decrease) (39,876) 29,354
Cash at the Beginning of the Year 51,384 22,030
------------------------------------
Cash at the End of the Year $ 11,508 $ 51,384
====================================
Supplemental Disclosures:
Cash paid during the year for:
Interest $ 2,236 $ -
====================================
Non-cash investing and financing activities:
Acquisition of Videotape Supply Company, Inc.
Equipment $ 33,818 $ -
Other assets 1,476 -
Liabilities assumed (15,000) -
Contribution of stockholder's interest as capital (20,294) -
------------------------------------
Cash paid to acquire Videotape Supply Company, Inc. $ - $ -
====================================
</TABLE>
See Independent Auditors' Report.
The accompanying Notes to Financial Statements are an integral part of these
statements.
F-12
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab South Florida, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies of QuikLAB Multimedia Centers,
Inc. F/K/A Video Quiklab of South Florida, Inc. (the Company) is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management, who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the accompanying financial statements.
Business Activity
The Company specializes in a "one-stop shopping" concept for hundreds
of multimedia services and products. These services and products
include animation, authoring, interactive multimedia programs, audio,
video and CD (compact disks) duplication, digital audio and video
encoding, scanning, video and CD ROM production, interactive kiosk
design and production, and custom designed audio/video/CD ROM
packages.
Organization and Formulation
The Company was incorporated in 1991. The Stockholder contributed
assets consisting of cash, accounts receivable, inventory, deposits,
video equipment in the amount of $46,346 less liabilities assumed of
$12,683 for a net contribution of $33,663. Of this contribution,
$5,000 was for the issuance of 500,000 shares of stock at par value
and $28,663 placed as additional paid in capital.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash and/or cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventories at
December 31, 1996 and 1995, consist of:
1996 1995
---- ----
Video Tape $33,646 $13,228
Packaging Materials 3,146 1,172
--------- ---------
$36,792 $14,400
======== =========
F-13
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab of South Florida, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are carried at cost. The cost of property and
equipment is depreciated over the estimated useful lives of the
related assets. The costs of leasehold improvements are depreciated
(amortized) over the lesser of the length of the related leases or the
estimated useful lives of the assets. Depreciation is computed on the
straight-line method for financial reporting purposes and on the
accelerated cost recovery system method for income tax purposes.
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to expense as incurred.
Organizational costs are amortized over five years.
Income Taxes
The Company, with the consent of all of its shareholders, has elected
to be taxed under the provisions of Subchapter S of the Internal
Revenue Code. Under those provisions, the Company does not provide for
or pay Federal and certain State corporate income taxes on its taxable
income. Instead, the stockholders are liable for individual Federal
and State income taxes, if any, on their share of the Company's
taxable income. Also, see Note G.
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 disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Bad Debts
Bad debts are accounted for using the direct write-off method. Expense
is recognized only when a specific account is determined to be
uncollectible. The effects of using this method approximate those of
the allowance method.
Reclassifications
Certain reclassifications have been made to 1995 amounts to conform to
the 1996 presentation.
F-14
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab of South Florida, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE B - PROPERTY AND EQUIPMENT
The components of property and equipment at December 31, 1996 and 1995 are as
follows:
1996 1995
---- ----
Equipment $280,096 $193,946
Leasehold improvements 45,759 29,017
Furniture and fixtures 16,573 13,246
---------- ----------
342,428 236,209
Accumulated depreciation 169,708 125,117
--------- ---------
$172,720 $111,092
========= =========
NOTE C - OTHER ASSETS
The components of other assets at December 31, 1996 and 1995 are as follows:
1996 1995
---- ----
Deposits $ 10,964 $ 10,975
Capitalized costs - 4,350
Prepaid rent 988 -
--------- ---------
$ 11,952 $ 15,325
======== ========
NOTE D - NOTES PAYABLE
At December 31, 1996 and 1995, notes payable are as follows:
1996 1995
---- ----
Note Payable, related party, due in monthly
installments of $1,000, principal plus
interest at 10%, due April 1995, unsecured $ 3,000 $ 3,000
Note Payable - officer, due in monthly
installments of $530, including principal
and interest at 11%, due March 1, 1997, unsecured 1,500 -
Note Payable - bank line-of-credit (maximum)
borrowings of $50,000), interest only payable
monthly at prime rate plus 1.5%, principal payments
on demand, collateralized by accounts receivable,
inventory furniture and personal guarantee of the
stockholder 35,000 -
--------- --------
$ 39,500 $ 3,000
======== ========
F-15
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab of South Florida, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE D - NOTES PAYABLE (CONTINUED)
Principal payments on note payable are as follows:
Years ending
December 31, Amount
- ------------ ------
1997 $ 39,500
========
NOTE E - RELATED PARTIES
Videotape Supply Company, Inc.
The Company invested $25,530 in 1994 and an additional $2,000 in 1995
for a 42.5% interest in Videotape Supply Company, Inc. During 1995,
management elected to distribute this investment to the stockholder of
the Company as a Subchapter S distribution. The carrying value for
this investment and distribution has been at cost. The effects of
using this method approximate those of the equity method.
During 1995, Videotape Supply Company, Inc. was a major vendor to the
Company for blank tape inventory. Total purchases during 1995 were
$194,045.
In February of 1996, the company assumed operations of the Videotape
Supply Company, Inc. and acquired the assets of the Company by
contributing the Stockholder's basis in the amount of $20,294 as
additional paid in capital and by assuming debt of no greater than
$15,000. The purchase was broken down as equipment of $33,818, prepaid
rent of $988 and security deposit of $488 assumption of liability
equaling $15,000 and contributed capital of $20,294, totaling $35,294.
Notes Payable
During 1994, the father-in-law of the stockholder loaned monies to the
Company. The loan was established with specific terms and collateral.
(See Note D.) Since the signing of this note, the father-in-law has
passed away and his estate is in control of the note. A moratorium of
payments have been placed on this note until the estate is settled.
The Stockholder has personally guaranteed the debt of the Company,
including the note to related party as well as the subsequent line of
credit to a bank after the balance sheet date.
F-16
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab of South Florida, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE F - COMMITMENTS AND CONTINGENCIES
Leases
The Company has entered into several long-term leases for offices, its
retail location and various equipment leases with monthly payments
ranging from $488 to $5,764. These leases are classified as operating
leases.
The future minimum rental payments required under long-term
non-cancelable leases during the years ended December 31, are
summarized as follows:
1997 $ 85,520
1998 83,568
1999 83,568
2000 69,168
2001 and thereafter 207,504
---------
$ 529,328
================
The Company also leases video production equipment on a month to month
basis.
Total rental expense for the years ended December 31, 1996 and 1995
amount to $82,420 and $59,159 respectively.
Sales Tax Assessment
During 1995, the Company became subject to a routine audit for sales,
use and intangible taxes for the five year period of January 1, 1991
through April 30, 1995, by the Department of Revenue of the State of
Florida. Subsequent to the balance sheet date, the examination was
finalized on February 21, 1997. The Company and the Department of
Revenue agreed upon an assessment approximating $56,000. This
assessment is payable with an initial payment of $20,000 and monthly
payments of $1,500 plus interest at 8% for a term of twenty four
months.
Management has booked a provision of $56,000 and believes that this
provision will adequately cover this examination.
F-17
<PAGE>
QuikLAB Multimedia Centers, Inc.
F/K/A Video Quiklab of South Florida, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE G - PLAN OF MERGER AND SUBSEQUENT EVENTS
During 1996, the Company entered into a failed agreement and plan of merger with
Digimedia, USA, Inc. f/k/a International Training and Education Corporation.
Digimedia is a five year old public company that develops interactive multimedia
training and education programs for criminal justice and public safety
environments. This plan called for each share of the company (QuikLAB) to be
converted into the right to 79 and 3/4 shares of newly issued common stock of
Digimedia. It was the expressed intent of the parties that existing QuikLAB
shareholders own 85% of the outstanding common stock of Digimedia.
This plan of merger did not take place and the Stockholder of the Company
(QuikLAB) brought litigation against Digimedia for compensation of loss. This
suit was settled by the parties and the stockholder was awarded shares in
Digimedia as compensation for the losses incurred.
Subsequent to the balance sheet date, the Company has entered into an agreement
and plan of merger with QuikLAB Multimedia Centers, Inc., a Nevada corporation
which is a newly formed subsidiary of Digimedia, U.S.A., Inc. The terms of the
merger call for each share of the company (QuikLAB) to be converted into the
right to receive 27 and 3/4 shares of the common stock of QuikLAB - Nevada. It
is the expressed intent of the parties that existing QuikLAB - Florida
shareholders shall own immediately after closing 87.5% of the common stock of
QuikLAB - Nevada. It is the intention of both companies' management that QuikLAB
- - Nevada will be spun off from Digimedia and file with the Security Exchange
Commission to be a public company. When this plan of merger is finalized, the
Company (QuikLAB - Florida) will cease to exist.
F-18
<PAGE>
Introduction to Pro Forma Combined Financial Information of QuikBIZ Internet
Group, Inc.
The following unaudited pro forma combined condensed financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the combined financial position or results of operations for future periods or
the results of operations of financial position that actually would have been
realized had QuikBIZ Internet Group, Inc. (QuikBIZ) and QuikBIZ Media Centers,
Inc. (formerly, QuikBIZ Multimedia Centers, Inc.) (QuikBIZ Media) been a
combined company during the specified periods. The unaudited pro forma combined
condensed financial statements, including related notes, are qualified in their
entirety by reference to, and should be read in conjunction with, the historical
consolidated financial statements and related notes thereto of QuikBIZ, included
in its filings with the Securities and Exchange Commission, and QuikBIZ Media,
included elsewhere in this filing.
The following unaudited pro forma combined condensed financial statements give
effect to the acquisition of QuikBIZ Media using the purchase method of
accounting. The pro forma combined condensed financial statements are based on
the respective historical audited and unaudited consolidated financial
statements and related notes of QuikBIZ and QuikBIZ Media. The pro forma
adjustments are preliminary and are based on management's estimates of the value
of tangible and intangible assets acquired.
The actual adjustments may differ materially from those presented in these pro
forma financial statements. A change in the pro forma adjustments would result
in a reallocation of the purchase price affecting the value assigned to the
long-term tangible and intangible assets or, in some circumstances, result in a
charge to the statement of operations. The effect of these changes on the
statement of operations will depend on the nature and amounts of the assets and
liabilities adjusted.
The unaudited pro forma combined condensed balance sheet assumes that the
acquisition took place on June 30, 1998, and combines QuikBIZ's unaudited June
30, 1998 consolidated balance sheet with QuikBIZ Media's unaudited June 30, 1998
balance sheet. The pro forma combined condensed statements of operations assume
all of the acquisition completed through the date of this report took place
January 1, 1997 and combines QuikBIZ's audited consolidated statement of
operations for the year ended December 31, 1997 and unaudited consolidated
statement of operations for the six months ended June 30, 1998 with QuikBIZ
Media's audited statement of operations for the year ended December 31, 1997 and
unaudited statement of operations for the six months ended June 30, 1998,
respectively.
F-19
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Pro Forma Balance Sheet
as of June 30,1998
<TABLE>
QuikBIZ QuikBIZ Pro Forma
Historical - Media (a) - Adjustments Pro Forma
-------------------- -------------------- ------------------ ----------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash $ 52,570 $ 76,312 - $ 128,882
Accounts receivable 198,017 113,723 - 311,740
Other 32,560 20,202 - 52,762
------------------------------------------------------------------------
Total current assets 283,147 210,237 - 493,384
Property and Equipment
Furniture and equipment 45,848 319,063 (253,400) (2) 111,511
Leasehold improvements - 50,906 (50,906) (2) -
-----------------------------------------------------------------------
45,848 369,969 (304,306) 111,511
Less accumulated depreciation (14,259) (216,956) 216,956 (2) (14,259)
-----------------------------------------------------------------------
Depreciated cost 31,589 153,013 (87,350) 97,252
Intangible assets 835,515 - - 835,515
Other assets - - - -
-----------------------------------------------------------------------
Total assets 1,150,251 363,250 (87,350) 1,426,151
=======================================================================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued expenses 448,239 93,900 - 542,139
Current maturities of long-term debt - 30,000 - 30,000
-----------------------------------------------------------------------
Total current liabilities 448,239 123,900 - 572,139
Long-term debt 414,713 110,000 - 524,713
----------------------------------------------------------------------
Total liabilities 862,952 233,900 - 1,096,852
Shareholders' equity
Preferred stock 10,208 - - 10,208
Common stock 22,640 5,000 (5,000) (2) 22,640
Additional paid-in-capital 2,171,342 48,957 (6,957) (2) 2,213,342
Accumulated deficit (1,799,331) 75,393 (75,393) (2) (1,799,331)
Unearned compensation on restricted stock (117,560) - - (117,560)
-----------------------------------------------------------------------
Total shareholders' equity 287,299 129,350 (87,350) 329,299
-----------------------------------------------------------------------
Total liabilities and shareholders' equity 1,150,251 363,250 (87,350) 1,426,151
----------------------------------------------------------------------
</TABLE>
(a) Balance sheet presented as of June 30,1998.
F-20
<PAGE>
QuikBIZ Internet Group, Inc and Subsidiaries
Pro Forma Condensed Combined Statements of Operations
For the year ended December 31, 1997
<TABLE>
QuikBIZ QuikBIZ Pro Forma
Historical Media (b) Adjustments Pro Forma
-------------------- -------------------- ------------- -------------
<S> <C> <C>
Revenue
Advertising $ 140,355 - - $ 140,355
Multimedia services and products - 1,344,459 - 1,344,459
-----------------------------------------------------------------------
Total revenue 140,355 1,344,459 - 1,484,814
Operating expenses
Direct costs 126,703 535,767 - 662,470
Selling, general and administrative 127,635 830,460 - 958,095
Depreciation and amortization 74,687 30,239 (17,470) (1) 87,456
---------------------------------------------------------------------
Total operating expenses 329,025 1,396,466 (17,450) 1,708,021
---------------------------------------------------------------------
Income (Loss) from operations (188,670) (52,007) 17,470 (223,207)
Interest expense 1,608 8,179 - 9,787
---------------------------------------------------------------------
Net income (loss) $ (190,278) $ (60,186) $ 17,470 $ (232,994)
======================================================================
Weighted average number of common
shares outstanding 6,841,017 6,841,017
Basic (loss) per common share $ (0.028) $ (0.028)
</TABLE>
(b) The Pro Forma Combined Statement of Operations for the twelve months ended
December 31, 1997 includes the results of operations for QuikBIZ Media for the
twelve months ended December 31, 1997.
F-21
<PAGE>
QuikBIZ Internet Group, Inc and Subsidiaries
Pro Forma Condensed Combined Statements of Operations
For the six months ended June 30, 1998
<TABLE>
QuikBIZ QuikBIZ Pro Forma
Historical Media (c) Adjustments Pro Forma
--------------------------------------------------------------------------------
<S> <C> <C>
Revenue
Advertising $ 708,136 - - $ 708,136
Multimedia services and products - 809,440 - 809,440
------------------------------------------------------------------------------
Total revenue 708,136 809,440 - 1,517,576
Operating expenses
Direct costs 430,871 258,300 - 689,171
Selling, general and administrative 387,165 488,626 - 875,791
Depreciation and amortization 74,662 17,009 (8,735) (1) 82,936
------------------------------------------------------------------------------
Total operating expenses 892,698 763,935 (8,735) 1,647,898
-----------------------------------------------------------------------------
Income (Loss) from operations (184,562) 45,505 8,735 (130,322)
Interest expense 5,411 3,094 - $ 8,505
------------------------------------------------------------------------------
Net income (loss) $ (189,973) $ 42,411 $ 8,735 (138,827)
==============================================================================
Weighted average number of common
shares outstanding 12,820,561 12,820,561
Basic (loss) per common share $ (0.015) $ (0.011)
</TABLE>
(c) The Pro Forma Combined Statement of Operations for the six months ended
June 30, 1998 includes the results of operations for QuikBIZ Media for the
six months ended June 30, 1998.
F-22
<PAGE>
QuikBIZ Internet Group, Inc. and Subsidiaries
Notes to Pro Forma Condensed Combined Financial Information
The following adjustments were applied to QuikBIZ's Consolidated Financial
Statements and the financial data of the company acquired by QuikBIZ since
January 1, 1997 to arrive at the unaudited Pro Forma Combined Financial
Information.
(1) The acquisition of QuikBIZ Media was accounted for by the purchase method
of accounting. Under purchase accounting the total purchase price was
allocated to the tangible and intangible assets acquired and liabilities
assumed of QuikBIZ Media based upon their respective fair values as of
closing date of the acquisition. The following presents the effects of the
purchase adjustments:
Six Months
Ended Year Ended
June 30, 1998 December 31, 1997
------------- -----------------
Depreciation $8,735 $17,470
The adjustment for estimated pro forma depreciation is based on the
estimated useful lives of five years.
(2) To reflect the purchase consideration consisting of the issuance of options
to purchase 200,000 shares of common stock at par value, exercisable over a
period of two years, valued at $42,000, the elimination of acquired
company's net equity and the reduction of the fair value of the property
and equipment received in the acquisition.
(3) There is no provision for income taxes included in the historical
statements of operations of QuikBIZ Media, as QuikBIZ Media was a
Subchapter S corporation. Consequently, income taxes were the
responsibility of the individual shareholders. No pro forma adjustment for
income taxes is required because there is a consolidated pro forma net
loss.
F-23
