SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest reported) March 15, 1999 (August 25,1998)
--------------------------------
Dynamic Health Products, Inc.
(Formerly known as Nu-Wave Health Products, Inc.)
-------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 0-23031 34-1711778
- - ---------------------------- ------------- ------------------
(State or other jurisdiction (File Number) (I.R.S. Employer
of incorporation) identification No.)
6950 Bryan Dairy Road
Largo, Florida 33777
- - ------------------------------- -----
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code 727-544-8866
------------
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Here are the financial statements and pro forma financial information, along
with exhibits, to be included on Form 8-K dated June 23, 1998 for the
acquisition of Energy Factors, Inc. and Form 8-K dated July 9, 1998 for the
acquisition of Becan Distributors, Inc.
<PAGE>
(a) Financial statements of the businesses acquired, prepared pursuant to Rule
3.05 of Regulation S-X:
<TABLE>
<CAPTION>
ITEM PAGE
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<S> <C>
Audited financial statements of U.S. Diversified Technologies, Inc. and
Subsidiary (Energy Factors, Inc.)
Report of Baum & Company, P.A., Certified Public Accountants
dated June 10, 1998
Consolidated Balance Sheet as of December 31, 1997
Consolidated Statement of Income and Retained Earnings for the
Year Ended December 31, 1997
Consolidated Statement of Cash Flows for the
Year Ended December 31, 1997
Notes to Consolidated Financial Statements
Report of Baum & Company, P.A., Certified Public Accountants
dated April 2, 1997
Consolidated Balance Sheet as of December 31, 1996
Consolidated Statement of Income and Retained Earnings for the
Year Ended December 31, 1996
Consolidated Statement of Cash Flows for the
Year Ended December 31, 1996
Notes to Consolidated Financial Statements
Audited financial statements of Becan Distributors, Inc.
Report of Shalek & Associates, CPA's Inc., Certified Public Accountants
dated February 12, 1998
Balance Sheet as of December 31, 1997
Statement of Operations from January 23, 1997 (Date of Inception)
through December 31, 1997
Statement of Retained Earnings from January 23, 1997 (Date of
Inception) through December 31, 1997
Statement of Cash Flows from January 23, 1997 (Date of Inception)
through December 31, 1997
Notes to the Financial Statements
Unaudited interim Condensed Consolidated Financial Statements of Nu-Wave
Health Products, Inc. And Subsidiaries
Condensed Consolidated Balance Sheet as of June 30, 1998
Condensed Consolidated Income Statement for the Three Months
Ended June 30, 1998
Condensed Consolidated Statement of Cash Flows for the Three
Months Ended June 30, 1998
</TABLE>
<PAGE>
(b) Pro forma financial information required pursuant to Article 11 of
Regulation S-X:
Item
Dynamic Health Products, Inc. And Subsidiaries Pro Forma Condensed Combined
Financial Statements (Unaudited)
Pro Forma Condensed Combined Statements of Operations for the
Year Ended March 31, 1998 (Unaudited)
Notes to Pro Forma Condensed Combined Financial Statements
The unaudited pro forma data presented in the unaudited pro forma
condensed combined statements of operations are included in order to illustrate
the effect on the Company's financial statements of the transactions described
below:
The unaudited pro forma condensed combined financial statement data at
March 31, 1998 present adjustments for two series of transactions.
First, adjustments are presented as if the Company had acquired Energy
Factors, Inc., accounted for as a purchase. The pro forma information is based
on historical financial statements of Energy Factors, Inc. and the Company after
giving effect to the transaction using the purchase method of accounting and the
assumptions and adjustments in the accompanying notes to the pro forma financial
statements. The Company will continue its study to determine the fair value of
the acquired assets and liabilities. The pro forma financial statements have
been prepared on the basis of preliminary estimates.
Second, adjustments are presented as if the Company had acquired Becan
Distributors, Inc., accounted for as a combination of entities under common
control and treated as if a "pooling of interests," with goodwill resulting from
the acquisition of the minority interest. The pro forma information is based on
historical financial statements of the Company and Becan Distributors, Inc.
after giving effect to the transaction (recorded in the Company's financial
statements in accordance with EITF 90-5) as a combination of entities under
common control and treated as if a "pooling of interests," with goodwill
resulting from the acquisition of the minority interest and the assumptions and
adjustments in the accompanying notes to the pro forma financial statements.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
The pro forma statements have been prepared by the Company based upon
the financial statements of U.S. Diversified Technologies, Inc. and Subsidiary
(filed with this report under Item 7 (a)) which have been provided by U.S.
Diversified Technologies, Inc. and Subsidiary and based upon the financial
statements of Becan Distributors, Inc. (filed with this report under Item 7 (a))
which have been provided by Becan Distributors, Inc. These pro forma statements
may not be indicative of the results that actually would have occurred if the
combinations had been in effect on the dates indicated or which may be obtained
in the future.
<PAGE>
The unaudited pro forma condensed combined financial statements should
be read in conjunction with the Company's Audited Consolidated Financial
Statements and the Notes thereto, and the Audited Financial Statements and Notes
of U.S. Diversified Technologies, Inc. and Subsidiary, and the Audited Financial
Statements and Notes of Becan Distributors, Inc.
(1) Control and treated as if a "pooling of interests", with goodwill resulting
from the acquisition of the minority interest.
(c) Exhibits in accordance with the provisions of Item 601 of Regulation S-K:
Exhibits
2.1 Agreement and Plan of Reorganization dated June 12, 1998, effective
June 15, 1998, by and among Nu-Wave Health Products, Inc., Nu-Wave
Acquisition, Inc., Energy Factors, Inc., U.S. Diversified Technologies,
Inc., Paul Santostasi, Chris Starkey, and Marvin Deutsch. (1)
2.2 Agreement and Plan of Reorganization dated June 26, 1998, effective
June 26, 1998, by and between Nu-Wave Health Products, Inc., buyer, and
Manju Taneja, Mihir K. Taneja, Mandeep K. Taneja, William LaGamba
custodian for Anthony LaGamba, William LaGamba custodian for Nicholl
LaGamba, William LaGamba custodian for Courtney LaGamba, Michele
LaGamba, and Phillip J. Laird and William LaGamba, each individually a
seller, each of which is a stockholder of Becan Distributors, Inc. (1)
(1) Incorporated by reference to the Company's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1998, file number
0-23031, filed in Washington, D.C.
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 here unto duly authorized.
DYNAMIC HEALTH PRODUCTS, INC.
Date: March 12, 1999 /s/ Kotha S. Sekharam
--------------- ----------------------------
Kotha S. Sekharam, President
<PAGE>
BAUM & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
1515 UNIVERSITY DRIVE - SUITE 209
CORAL SPRINGS, FLORIDA 33071
(954) 752-1712
INDEPENDENT AUDITOR'S REPORT
BOARD OF DIRECTORS
U.S. DIVERSIFIED TECHNOLOGIES, INC., AND SUBSIDIARY
LARGO, FLORIDA
We have audited the accompanying Consolidated Balance Sheet of U.S. Diversified
Technologies, Inc. and its wholly owned subsidiary Energy Factors, Inc. as of
December 31, 1997 and the related Consolidated Statements of Income and
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 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 U.S. Diversified Technologies,
Inc. and its wholly owned subsidiary Energy Factors, Inc. as of December 31,
1997 and the results of its operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
/S/ BAUM & COMPANY, P.A.
--------------------------------------
Baum & Company, P.A.
Coral Springs, Florida
June 10, 1998
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash in Bank $ 58,508
Accounts Receivable (Net of allowance
of $25,000 for doubtful account) 224,532
Inventory (Note 1) 671,239
-----------
Total Current Assets 954,279
-----------
PROPERTY, PLANT & EQUIPMENT (Net) (Note 1 and 2) 1,487,075
-----------
OTHER ASSETS
Deposits and Other Assets 17,096
Deferred Tax Asset (Note 1) 200,000
-----------
Total Other Assets 217,096
-----------
Total Assets $ 2,658,450
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt (Note 3, 4, and 5) $ 284,905
Note payable - related party (Note 8) 61,500
Current portion of capitalized leases payable (Note 6) 110,253
Advances from Customers 259,995
Accounts Payable and Accrued Expenses 765,545
-----------
Total Current Liabilities 1,482,198
-----------
LONG-TERM LIABILITIES
Long-term debt (Note 3, 4, and 5) 900,593
Capitalized Leases Payable (Note 6) 273,906
-----------
Total Long-term Liabilities 1,174,499
-----------
Total Liabilities 2,656,697
-----------
STOCKHOLDER'S EQUITY
Common Stock 40,000,000 shares
authorized; $.01 par value;
10,042,400 issued and outstanding 100,424
Retained Earnings (Deficit) (98,671)
-----------
Total Stockholders' Equity 1,753
-----------
Total Liabilities & Stockholders' Equity $ 2,658,450
===========
</TABLE>
See Accountant's Report and Accompanying Notes to Financial Statements.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Gross Sales $ 5,753,821
Cost of Goods Sold 4,558,525
-----------
Gross Profit 1,195,296
General & Administrative Expenses 1,530,973
-----------
Net (loss) before other income (expenses) (335,677)
Other Income (Expense)
Interest Expense (230,593)
-----------
Net (loss) before provision for income taxes (566,270)
Provision for Income Taxes
Deferred tax benefit (Note 1) 200,000
-----------
Net (Loss) (366,270)
Retained Earnings - Beginning 267,599
-----------
Retained Earnings (Deficit) - Ending $ (98,671)
===========
</TABLE>
See Accountant's Report and Accompanying Notes to Financial Statements.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities
Net Income (Loss) $(366,270)
Adjustments to Reconcile Net Income
to net Cash Provided by Operating Activities:
Depreciation and amortization 171,940
Deferred tax asset (200,000)
Changes in Operating Assets & Liabilities:
Decrease in accounts receivable 31,002
Decrease in inventory 268,750
Decrease in deposits and other assets 15,583
(Decrease) in accounts payable and
accrued expenses (409,472)
Increase in advances from customers 259,995
---------
Net Cash Used for Operations (228,472)
---------
Cash Flow from Investing Activities:
Acquisition of fixed assets (5,538)
---------
Cash Flow from Financing Activities:
Proceeds from note payable from related party 62,000
Principal payments on note payable from related party (500)
Proceeds from long-term debt 219,667
Principal payments on long-term debt (58,349)
Principal payments on capitalized leases payable (53,105)
---------
Net cash provided by financing activities 169,713
---------
Net (Decrease) (64,297)
Cash in Bank - Beginning of Year 122,805
---------
Cash in Bank - End of Year $ 58,508
=========
</TABLE>
See Auditor's Report and Accompanying Notes to Financial Statements.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of U.S. Diversified
Technologies, Inc. is presented to assist in understanding the
Company's financial statements. The financial statements and notes
are representations of the Company's management which is responsible
for their integrity and objectivity. The accounting policies conform
to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
BUSINESS AND ORGANIZATION
The Company, incorporated in the state of Florida on September 27,
1989, is a holding company. It's wholly-owned subsidiary consist of
Energy Factors, Inc. Energy Factors, Inc. manufactures food grade
supplements and health/diet products.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of U.S.
Diversified Technologies, Inc. and its wholly-owned subsidiary,
Energy Factors, Inc. Significant intercompany balances and
transactions have been eliminated in consolidation.
MANAGEMENT ESTIMATES
The preparation of consolidated 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 at December 31, 1997 and revenues and expenses
for the year ended. The actual outcome of the estimates could differ
from the estimates made in the preparation of the consolidated
financial statements.
INVENTORY
Inventory is valued at the lower of cost (first-in, first-out method)
or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Provision for
depreciation is computed using the straight line method over the
estimated useful lives.
Maintenance and repairs are charged to operations. Additions and
betterments which extend the useful lives of property, plant and
equipment are capitalized. Upon retirement or disposal of the
operating property and equipment, the cost and accumulated
depreciation are eliminated from the accounts and the resulting gain
or loss is reflected in operations.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
REVENUE RECOGNITION
Revenue is recoginized for the health products manufacturing
operations when the production process is complete and the merchandise
is shipped to the customer. Revenue is recognized for the mail-order
operations when the merchandise is shipped to the customer.
INCOME TAXES
The Company has incurred a net operating loss in the current year
thus no provision has been provided for income taxes. This net
operating loss may be carried back for three years or carried forward
for up to 15 years against net income.
In accordance with FASB No. 109, the Company has reflected a deferred
tax benefit of $200,000 for its net operation losses.
NOTE 2 - PROPERTY AND EQUIPMENT
As of December 31, 1997, property and equipment consists of the
following:
<TABLE>
<S> <C>
Land $ 100,000
Building and Improvements 1,064,507
Factory Equipment 990,035
Office Furniture and Equipment 82,442
Transportation Vehicle 34,901
-----------
2,271,885
Less: Accumulated Depreciation
and Amortization (784,810)
-----------
$ 1,487,075
===========
</TABLE>
NOTE 3 - MORTGAGE PAYABLE
On October 22, 1992, the Company acquired an office and manufacturing
facility for $800,000. The Company executed a purchase money mortgage
for $800,000, payable interest only for seven months, and the
remaining payments, for ten years, with interest based on the bank's
prime rate plus 4%, but never less than 10% or greater than 15%.
There is a balloon payment due and payable at the end of the ten year
period.
On June 23, 1993, the Company obtained an additional mortgage of
$235,000 to fund the costs of a building addition.
NOTE 4 - NOTE PAYABLE - BANK
Installment obligation to finance vehicle.
NOTE 5 - NOTE PAYABLE - FACTOR
The Company has entered into an factoring company to finance its
accounts receivable.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - CAPITALIZED LEASE PAYABLE
The Company has entered into various leasing arrangements to acquire
fixed assets. Its been determined that these leases are capital
leases, thus the underlying assets have been reflected on these
financial statements.
NOTE 7 - CAPITAL TRANSACTIONS
A.) In 1996, the Company officially retired all Company treasury stock
acquired since inception. Effectively, $265,000 of treasury stock has
been used to reduce additional paid-in capital and any excess to
reduction of retained earnings.
B.) On October 30, 1996, the Board of Directors approved a resolution
whereby, in consideration for the personal guarantees by certain
shareholders of approximately $1,250,000 of debt obligations of the
Company, the three stockholders would receive 1,500,000 of common
stock each.
NOTE 8 - RELATED PARTIES
The Company has employment contracts with its (2) operational
officers who are also shareholders. Compensation to these
shareholders was approximately $300,000.
As of December 31, 1997, the Company has an outstanding balance of
$61,500 on a demand promissory note.
NOTE 9 - SUBSEQUENT EVENT
On June 12, 1998, the Company's wholly-owned subsidiary Energy
Factors, Inc. was acquired by Nu-Wave Health Products, Inc.
NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<S> <C>
Interest Paid $230,593
Deferred tax benefit 200,000
</TABLE>
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 11 - CONTINGENCIES
The Company is a defendant in various lawsuits in various stages of
settlement. The outcome of the matters have been accrued. The nature
of these lawsuits are as follows:
(A) Dispute with landlord over condition of leased premises. The
litigation was settled and paid in the amount of $30,000. There
was $40,000 accrued in anticipation of the settlement.
(B) Dispute over non-payment for faulty product supplied by a vendor.
The litigation was settled and paid in the amount of $15,000.
There was $12,500 accrued in anticipation of the settlement.
(C) Dispute over non-payment for product billed by a vendor. The
litigation was settled and paid in the amount of $35,000. There
was $32,000 accrued in anticipation of the settlement.
(D) Pending litigation involving alleged sexual harassment by two of
the companies employees. The case is in the discovery stage and
there are no amounts accrued in anticipation of the settlement.
The company believes there will be a favorable ruling.
(E) Dispute over defective product supplied by the company to one of
the company's customers. The case is in the discovery stage and
there are no amounts accrued in anticipation of the settlement.
The company believes there will be a favorable ruling.
(F) Dispute over non-payment on a promissory note to one of the
company's vendors. The litigation was settled and paid in the
amount of $10,000. There was $10,000 accrued in anticipation of
the settlement.
<PAGE>
BAUM & COMPANY, P.A.
CERTIFIED PUBLIC ACCOUNTANTS
1515 UNIVERSITY DRIVE - SUITE 209
CORAL SPRINGS, FLORIDA 33071
(954) 752-1712
INDEPENDENT AUDITOR'S REPORT
BOARD OF DIRECTORS
U.S. DIVERSIFIED TECHNOLOGIES, INC., AND SUBSIDIARY
LARGO, FLORIDA
We have audited the accompanying Consolidated Balance Sheet of U.S. Diversified
Technologies, Inc. and its wholly owned subsidiary Energy Factors, Inc. as of
December 31, 1996 and the related Consolidated Statements of Income and
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 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 U.S. Diversified Technologies,
Inc. and its wholly owned subsidiary Energy Factors, Inc. as of December 31,
1996 and the results of its operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
/s/ Baum & Company, P.A.
----------------------------------
Baum & Company, P.A.
Coral Springs, Florida
April 2, 1997
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash in Bank $ 122,805
Accounts Receivable (Net) 255,534
Inventory (Note 1) 939,989
----------
Total Current Assets 1,318,328
----------
PROPERTY, PLANT & EQUIPMENT (Net) (Note 2) 1,653,477
----------
OTHER ASSETS
Deposits 32,679
----------
Total Assets $3,004,484
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Mortgage Payable - current portion $ 36,204
Note Payable - Bank 34,762
Capitalized Leases Payable - short-term 77,616
Accounts Payable and Accrued Expenses 1,175,017
----------
Total Current Liabilities 1,323,599
----------
LONG-TERM LIABILITIES
Mortgage Payable (Note 2) 953,214
Capitalized Leases Payable 359,648
----------
Total Long-term Liabilities 1,312,862
----------
Total Liabilities 2,636,461
----------
STOCKHOLDER'S EQUITY
Common Stock, 40,000,000 shares
authorized; $.01 par value;
10,042,000 issued and outstanding 100,424
Retained Earnings 267,599
----------
Total Stockholders' Equity 368,023
----------
Total Liabilities & Stockholders' Equity $3,004,484
==========
</TABLE>
See Auditor's Report and Accompanying Notes to Financial Statements.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Gross Sales $5,742,529
Cost of Goods Sold 3,971,204
----------
Gross Profit 1,771,325
General & Administrative Expenses 1,805,230
----------
Operating Loss (33,905)
Interest Income 7,752
----------
Net Loss $ (26,153)
Retained Earnings - Beginning 338,876
Reduction to reflect treasury stock
retirement (45,124)
----------
Retained Earnings - Ended $ 267,599
----------
</TABLE>
See Auditor's Report and Accompanying Notes to Financial Statements.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ (26,153)
Adjustments to Reconcile Net Income
to net Cash Provided by Operating Activities:
Depreciation and Amortization 148,462
Changes in Operating Assets & Liabilities:
Decrease in Accounts Receivable 538,100
Increase in Inventory (410,338)
Increase in Deposits (17,840)
Decrease in Accounts Payable and
Accrued Expenses (146,329)
---------
Net Cash Used for Operations 85,902
---------
Cash Flows from Investing Activities:
Reduction in Retained Earnings due to
Treasury Stock retirement 53,778
Acquisition of Fixed Assets (383,269)
---------
(329,491)
---------
Cash Flow from Financing Activities:
Increase in Capitalized Leases (Net) 288,619
Decrease in Notes Payable 4,452
Decrease in Mortgages Payable (21,452)
Reduction in Retained Earnings (53,778)
---------
217,841
---------
Net (Decrease) (25,748)
Cash in Bank - Beginning of Year 148,553
---------
Cash in Bank - End of Year $ 122,805
=========
</TABLE>
See Auditor's Report and Accompanying Notes to Financial Statements.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of U.S. Diversified
Technologies, Inc. is presented to assist in understanding the
Company's financial statements. The financial statements and notes
are representations of the Company's management which is responsible
for their integrity and objectivity. The accounting policies conform
to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
BUSINESS AND ORGANIZATION
The Company, incorporated in the state of Florida on September 27,
1989 is a holding company. It's wholly-owned subsidiary consist of
Energy Factors, Inc. Energy Factors, Inc. manufactures food grade
supplements and health/diet products.
INVENTORY
Inventory is valued at the lower of cost (first-in, first-out method)
or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Provision for
depreciation is computed using the straight line method over the
estimated useful lives.
Maintenance and repairs are charged to operations. Additions and
betterments which extend the useful lives of property, plant and
equipment are capitalized. Upon retirement or disposal of the
operating property and equipment, the cost and accumulated
depreciation are eliminated from the accounts and the resulting gain
or loss is reflected in operation.
MANAGEMENT ESTIMATES
The preparation of consolidated 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 at December 31, 1996 and revenues and expenses
for the year then ended. The actual outcome of the estimates could
differ from the estimates made in the preparation of the consolidated
financial statements.
<PAGE>
U.S. DIVERSIFIED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUES)
REVENUE RECOGNITION
Revenue is recognized for the health products manufacturing operations
when the production process is complete and the merchandise is shipped
to the customer. Revenue is recognized for the mail-order operations
when the merchandise is shipped to the customers.
INCOME TAXES
The Company has incurred a net operating loss in the current year
thus no provision has been provided for income taxes. This net
operating loss may be carried back for three years or carried forward
for up to 15 years against net income.
NOTE 2 - MORTGAGE PAYABLE
On October 22, 1992, the Company acquired an office and manufacturing
facility for $800,000. The Company executed a purchase money mortgage
for $800,000, payable interest only for seven months, and the
remaining payments, for ten years, with interest based on the bank's
prime rate plus 4%, but never less than 10% or greater than 15%.
There is a balloon payment due and payable at the end of the ten year
period.
On June 23, 1993, the Company obtained an additional mortgage of
$235,000 to fund the costs of a building addition.
NOTE 3 - NOTE PAYABLE - BANK
Installment obligation to finance vehicle.
NOTE 4 - CAPITALIZED LEASE PAYABLE
The Company has entered into various leasing arrangements to acquire
fixed assets. Its been determined that these leases are capital
leases, thus the underlying assets have been reflected on these
financial statements.
NOTE 5 - CAPITAL TRANSACTIONS
A.) In 1996, the Company officially retired all Company treasury stock
acquired since inception. Effectively, $265,000 of treasury stock has
been used to reduce additional paid-in capital and any excess to
reduction of retained earnings.
B.) On October 30, 1996, the Board of Directors approved a resolution
whereby, in consideration for the personal guarantees by certain
shareholders of approximately $1,250,000 of debt obligations of the
Company, the three stockholders would receive 1,500,000 shares of
common stock each.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $153,013
<PAGE>
Shalek & Associates, CPA's Inc.
Certified Public Accountants
6596 Brecksville Road, Suite B (216)642-9140
Independence, Ohio 44131-4837 (Fax) 216-642-3063
To the Board of Directors
Becan Distributors, Inc.
Pittsburgh, PA
We have audited the accompanying balance sheet of Becan Distributors, Inc. as
of December 31, 1997, and the related statements of operations, retained
earnings, and cash flows, and supplementary information for the period January
23, 1997 (date of inception) through December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit 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 Becan Distributors, Inc. as of
December 31, 1997 and the results of its operations and cash flows for the
period then ended in conformity with generally accepted accounting principles.
The Company, with consent of its shareholders, has elected under the Internal
Revenue Code to be an S corporation. In lieu of the corporation income taxes,
the stockholders 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.
The 1997 financial statements dated February 3, 1998 have been revised to
include an additional line of credit available to the Company as of December
31, 1997. See footnote B for details.
/s/ Shalek & Associates, CPA's Inc.
-----------------------------------
Shalek & Associates, CPA's Inc.
Independence, Ohio
February 12, 1998
Member * American Institute of Certified Public Accountants
* Ohio Society of Certified Public Accountants
<PAGE>
BECAN DISTRIBUTORS, INC.
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Accounts receivable $ 430,221.82
Inventory 416,206.69
--------------
TOTAL CURRENTS ASSETS 846,428.51
PROPERTY AND EQUIPMENT
Equipment 5,620.04
Less: accumulated depreciation (803.10)
--------------
4,816.94
OTHER ASSETS
Deposit - gas company 266.00
Deposit - rent 2,281.50
--------------
TOTAL ASSETS $ 853,792.95
==============
LIABILITIES
Accounts payable $ 496,258.01
Notes payable - affiliates 275,000.00
Accrued interest 1,634.45
Accrued payroll tax 8,433.52
--------------
TOTAL LIABILITIES 781,325.98
EQUITY
Capital stock 50,000.00
Retained earnings 22,466.97
--------------
TOTAL EQUITY 72,466.97
--------------
TOTAL LIABILITIES AND EQUITY $ 853,792.95
==============
</TABLE>
See accompanying notes and accountants' report.
2
<PAGE>
BECAN DISTRIBUTORS, INC.
STATEMENT OF OPERATIONS
FROM JANUARY 23, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
REVENUES
Sales $ 6,189,344.26 99.71%
Sales Discounts 18,011.52 0.29
---------------- ------
TOTAL REVENUES 6,207,355.78 100.00
COST OF GOODS SOLD
Cost Of Goods Sold 5,996,284.62 96.60
---------------- ------
GROSS PROFIT 211,071.16 3.40
OPERATING EXPENSES
Advertising 13,929.54 0.22
Bank service charges 198.19 0.00
Cash discounts 23.90 0.00
Donations 250.00 0.00
Equipment rental 72.00 0.00
Insurance 1,882.57 0.03
Interest expense 7,620.46 0.12
Legal and professional 6,525.51 0.11
Licenses and permits 1,320.00 0.02
Line of credit expense 286.00 0.00
Miscellaneous expense 209.31 0.00
Payroll expense 12,612.40 0.20
Postage and delivery 14,157.66 0.23
Printing 4,682.64 0.08
Outside services 5,438.27 0.09
Rent 12,548.25 0.20
Security 709.23 0.01
Supplies 4,755.29 0.08
Telephone 8,565.67 0.14
Travel 5,840.44 0.09
Utilities 2,097.16 0.03
Wages - office 14,569.00 0.23
Wages - officer 92,307.60 1.49
---------------- ------
TOTAL OPERATING EXPENSES 210,601.09 3.39
---------------- ------
OPERATING INCOME (LOSS) 470.07 0.01
OTHER INCOME (EXPENSES)
Director fees income 22,800.00 0.37
Depreciation expense (803.10) -0.01
---------------- ------
TOTAL OTHER INCOME (EXPENSES) 21,996.90 0.35
---------------- ------
NET INCOME (LOSS) $ 22,466.97 0.36%
================ ======
</TABLE>
See accompanying notes and accountants' report.
3
<PAGE>
BECAN DISTRIBUTORS, INC.
STATEMENT OF RETAINED EARNINGS
FROM JANUARY 23, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997
<TABLE>
<S> <C>
<CAPTION>
Beginning Retained earnings $0.00
Net Income 22,466.97
-----------
Ending Retained earnings $ 22,466.97
===========
</TABLE>
See accompanying notes and accountants' report.
4
<PAGE>
BECAN DISTRIBUTORS, INC.
STATEMENT OF CASH FLOWS
FROM JANUARY 23, 1997 (DATE OF INCEPTION) THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net Income (Loss) $ 22,466.97
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation expense 803.10
(Increase) Decrease in assets:
Accounts receivable (430,221.82)
Inventory (416,206.69)
Deposits (2,547.50)
Increase (Decrease) in liabilities:
Accounts payable 496,258.01
Accrued expenses 10,067.97
Net cash provided by operating activities: --------------
(319,379.96)
Cash flow from investing activities:
Purchase of equipment (5,620.04)
Cash flows from financing activities:
Increase in line of credit 200,000.00
Increase loans payable - Affiliates 75,000.00
Increase in common stock 50,000.00
--------------
Net Cash flows from investing activities: 325,000.00
--------------
Net increase in cash and cash equivalents (0.00)
Cash and cash equivalents beginning of period 0.00
--------------
Cash and cash equivalents at end of period $ 0.00
==============
Supplemental schedule of disclosures of cash flow information:
Cash paid during the period for:
Interest (net of capitalized amounts) 5,986.01
Income taxes 0.00
Disclosure of accounting policy:
For the purpose of the statement of cash flows, the company considers
cash equivalents to be all highly liquid securities with an original
maturity of three months or less.
</TABLE>
See accompanying notes and accountants' report.
5
<PAGE>
BECAN DISTRIBUTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FROM JANUARY 23, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Becan Distributors, Inc. 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 financial statements.
Business Activity
Becan Distributors, Inc. is a wholesale distributor specializing in
pharmaceuticals. The Company began operations in 1997.
Revenue Recognition
Revenue is Recognized when the merchandise is shipped to the customer.
Basis of Accounting
The Company uses the accrual basis of accounting for financial reporting
purposes and federal income tax purposes.
Accounts Receivable
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made.
Inventories
Inventories consist primarily of pharmaceuticals and are stated at the lower of
cost (first-in, first-out method) or market.
NOTE B - LINE OF CREDIT
The Company has a secured $200,000 demand line of credit with National City
Bank of Pennsylvania, renewable annually with an interest rate of 7.15%. At
December 31, 1997 the Company had borrowed $200,000 against the line of credit.
The Company has a $300,000 demand line of credit with National City Bank of
Pennsylvania. Interest is to be at 1% over prime. As of December 31, 1997 the
Company had borrowed $0.00 against the line of credit.
See accompanying accountants' report.
6
<PAGE>
BECAN DISTRIBUTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FROM JANUARY 23, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
NOTE C - NOTES PAYABLE - AFFILIATES
Note Payable - Carnegie Capital,
payable on demand. Note was repaid
in total on January 7, 1998 with
check #1465. $55,000
Note Payable - Bill Lagamba, dated
December 30, 1997. Payable on
demand. Interest rate at 10% annually. 20,000
-------
$75,000
=======
</TABLE>
See accompanying accountants' report.
7
<PAGE>
NU-WAVE HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 324,940
Accounts receivable, net 1,416,295
Inventory, net of allowance 1,404,873
Prepaids and other current assets 28,586
-----------
Total current assets 3,174,694
Property, plant and equipment, at cost, net 1,691,546
Deposits 38,238
Investment in LLC 5,000
Intangible assets, net 3,045,959
-----------
TOTAL ASSETS $ 7,955,437
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,960,865
Other payables 73,546
Notes payable 83,391
Credit line payable 630,040
Related party notes payable 332,700
Unearned revenue 181,822
Current portion of long-term liabilities 547,798
-----------
Total current liabilities 3,810,162
-----------
Long-term liabilities:
Interest payable 25,817
Capital lease obligations 439,475
Notes payable 275,912
Mortgages payable 1,163,615
Current portion of long-term liabilities (547,798)
-----------
Total long-term liabilities 1,357,021
-----------
TOTAL LIABILITIES 5,167,183
-----------
Shareholders' equity:
Common stock, at par value 27,745
Series A Preferred stock, at face value 1,550,000
Additional paid-in capital 1,836,808
Accumulated deficit (859,783)
Net income 233,484
-----------
NET SHAREHOLDERS' EQUITY 2,788,254
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,955,437
===========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
NU-WAVE HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30, 1998
-------------
<S> <C>
Revenues:
Distributor sales $ 5,830,575
Manufacturing 941,544
-----------
TOTAL REVENUES 6,745,119
-----------
Cost of goods sold:
Distributor sales 5,585,936
Manufacturing 596,724
-----------
TOTAL OF COST OF GOODS SOLD 6,182,660
-----------
GROSS PROFIT 562,459
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 308,051
-----------
OPERATING INCOME BEFORE
OTHER INCOME AND EXPENSE 254,408
Other income (expense):
Interest income 2,360
Other income and expenses, net 6,435
Interest expense (29,719)
-----------
TOTAL OTHER INCOME (EXPENSE) (20,924)
-----------
NET INCOME $ 233,484
===========
Basic income per share $ 0.13
===========
Basic weighted number of
common shares outstanding 1,833,674
===========
Diluted income per share $ 0.12
===========
Diluted weighted number of
common shares outstanding $ 1,889,474
===========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
NU-WAVE HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------
<S> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net income $ 233,484
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 22,498
Changes in operating assets and liabilities:
Accounts receivable (357,137)
Inventory (87,843)
Prepaid expenses (8,094)
Accounts payable and accrued expenses (155,161)
Unearned revenue (2,955)
---------
NET CASH USED IN OPERATING ACTIVITIES (355,208)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits 1,891
Purchases of property and equipment (127,328)
Purchase of intangible assets (1,225)
---------
NET CASH USED IN INVESTING ACTIVITIES (126,662)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 537,546
Proceeds from shareholder loan --
Distributions to stockholders (108,503)
Proceeds from issuance of common stock 50,000
Principal payments of debt and capital lease obligations (128,752)
---------
NET CASH USED IN FINANCING ACTIVITIES 350,291
---------
NET INCREASE (DECREASE) IN CASH (131,579)
CASH AT BEGINNING OF PERIOD 456,519
---------
CASH AT END OF PERIOD $ 324,940
=========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
NU-WAVE HEALTH PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
FOR THE THREE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JUNE 30, 1998
-------------
<S> <C>
Supplemental cash flow information:
Cash paid during the period for interest $ 17,386
Supplemental schedule of non-cash financing activities:
Capital lease obligations incurred for purchase of
property and equipment $ 56,147
Conversion of related party notes payable and
accrued interest to common stock $ 81,331
Acquisition of Energy Factors, Inc. through
issuance of 310,000 shares of preferred stock $ 1,550,000
Acquisition of Becan Distributors, Inc. through
issuance of 1,500,000 shares of common stock $ 2,250,000
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
Nu-Wave Health Products, Inc. And Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 1998
NOTE A-BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instruction to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1999. For further information, refer to
the consolidated financial statements and footnotes included in the Company's
Form 10-KSB/A for the year ended March 31, 1998.
The Board of Directors of the Company has authorized a one-for-three
reverse stock split of the Common Stock of the Company. The accompanying
unaudited condensed consolidated financial statements have been retroactively
adjusted, as of June 30, 1998, to reflect the one-for-three reverse stock split,
the issuance of 310,000 shares of Series A Convertible Preferred Stock, and the
issuance of the 1,500,000 shares of Common Stock following the one-for-three
reverse stock split. In conjunction with the reverse stock split, the effect of
the elimination of fractional shares (which will be cashed out at $1.50 per new
share) is not reflected in the accompanying condensed consolidated financial
statements.
Effective June 15, 1998, the Company acquired Energy Factors, Inc.
(Energy Factors), a wholly-owned subsidiary of U.S. Diversified Technologies,
Inc. At the closing, the Company acquired legal title to the net assets of
Energy Factors. The acquisition was accounted for as a purchase. U.S.
Diversified Technologies, Inc. received in exchange for its capital stock in
Energy Factors, 310,000 shares of Series A Convertible Preferred Stock of the
Company representing a fair market value of approximately $1,550,000.
The aggregate cost of this acquisition was as follows:
Assumption of liabilities $2,874,000
Issuance of preferred stock 1,550,000
----------
$4,424,000
----------
The aggregate purchase price was allocated as follows:
Accounts receivable $ 26,000
Inventory 575,000
Property, plant and equipment 1,925,000
Other assets 75,000
Goodwill 1,823,000
----------
$4,424,000
----------
Effective June 26, 1998, the Company acquired Becan Distributors, Inc.
(Becan). The merger was accounted for as a combination of entities under common
control and treated as if a "pooling of interests". The merger resulted in
goodwill of approximately $700,000 due to the acquisition of the minority
interest. The Becan shareholders received a total of 1,500,000 shares of Common
Stock of the Company representing a fair market value of approximately
$2,250,000.
The Series A Convertible Preferred Stock and the Common Stock were
issued upon the filing by the Company on August 11, 1998 of Articles of
Amendment to its Articles of Incorporation which effected a one-for-three
reverse stock split.
<PAGE>
Dynamic Health Products, Inc. And Subsidiaries
Pro Forma Condensed Combined Statements Of Operations
For the Year Ended March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
NU-WAVE BECAN PRO FORMA
HEALTH ENERGY DISTRIBUTORS, ADJUSTMENTS
PRODUCTS, INC. FACTORS, INC. INC. INCREASE PRO FORMA
MARCH 31, 1998 DECEMBER 31, 1997(a) DECEMBER 31, 1997(b) (DECREASE)(c) COMBINED
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 2,368,285 $ 5,753,821 $ 6,207,356 $ (423,439) $ 13,906,023
Cost of goods sold 1,826,665 4,558,525 5,996,285 (423,439) 11,958,036
--------------------------------------------------------------------------------------------
GROSS PROFIT 541,620 1,195,296 211,071 -- 1,947,987
Selling, general and
administrative expenses 527,609 1,530,973 211,404 (214,898) 2,055,088
--------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) BEFORE
OTHER INCOME AND EXPENSE 14,011 (335,677) (333) (214,898) (107,101)
Other income (expense):
Other income and expenses, net 15,976 -- 22,800 -- 38,776
Interest expense (18,272) (230,593) -- -- (248,865)
--------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) (2,296) (230,593) 22,800 -- (210,089)
NET INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES 11,715 (566,270) 22,467 214,898 (317,190)
Deferred tax benefit -- 200,000 -- (200,000) --
--------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 11,715 $ (366,270) $ 22,467 $ 14,898 $ (317,190)
============================================================================================
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
<PAGE>
Dynamic Health Products, Inc. And Subsidiaries
Notes To Pro Forma Condensed Combined Financial Statements (Unaudited)
March 31, 1998
(a) Reflects the 1997 historical operating results of the Energy Factors,
Inc. acquisition.
(b) Reflects the 1997 historical operating results of the Becan
Distributors, Inc. acquisition.
(c) The following pro forma adjustments are incorporated in the pro forma
condensed combined statements of operations:
<TABLE>
<CAPTION>
Year Ended
March 31, 1998
--------------
<S> <C> <C>
1. Net revenues:
Elimination of intercompany sales
from the Company to Becan $(423,439)
=========
2. Cost of goods sold:
Elimination of intercompany purchases
by Becan from the Company $(423,439)
=========
3. Selling, general and administrative expenses:
Decrease in executive salaries and related
payroll taxes, through employment contracts
and dismissals associated with Energy Factors $(230,256)
Decrease in depreciation expense due to fair
market value adjustments on assets acquired
associated with Energy Factors (46,860)
Amortization of goodwill associated with
Energy Factors 87,748
Amortization of goodwill associated with
Becan Distributors 34,470
Decrease in interest expense associated with
Energy Factors termination of factoring
agreements on accounts receivable (60,000)
---------
Total selling, general and administrative
expenses $(214,898)
=========
4. Decrease in deferred tax benefit associated
with Energy Factors $(200,000)
=========
</TABLE>
