-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tfm8NKiCr3EdzU5nHhbiLUy49QDDhxNb8WWufzAIoqrV2EjMjNe1fAg9IfB1wL+T E12kHw4LlLoLy1xxrJZnZQ== 0001017062-98-000458.txt : 19980305 0001017062-98-000458.hdr.sgml : 19980305 ACCESSION NUMBER: 0001017062-98-000458 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971219 ITEM INFORMATION: FILED AS OF DATE: 19980304 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JAVELIN SYSTEMS INC CENTRAL INDEX KEY: 0001021917 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 521945748 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-21477 FILM NUMBER: 98557443 BUSINESS ADDRESS: STREET 1: 1881 LANGLEY AVE CITY: IRVINE STATE: CA ZIP: 92614 BUSINESS PHONE: 7142235130 MAIL ADDRESS: STREET 1: 1881 LANGLEY AVE CITY: IRVINE STATE: CA ZIP: 92614 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K/A DATED DECEMBER 19, 1997 Securities and Exchange Commission Washington, D.C. 20549 Form 8-K/A Current Report (Amendment No. 1) Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 December 19, 1997 ------------------------------------------------ Date of Report (Date of earliest event reported) JAVELIN SYSTEMS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 0-21477 52-1945748 - ------------------------------- ------------ ------------------- (State or other jurisdiction of (Commission (I.R.S. Employer incorporation) File Number) Identification No.) 1881 Langley Avenue Irvine, CA 92614 ---------------------------------------- (Address of principal executive offices) (714) 223-5130 ---------------------------------------------------- (Registrant's telephone number, including area code) The undersigned hereby amends Item 7 of its Current Report on Form 8-K filed with the Commission on December 30, 1997 to read as follows: Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Independent Auditors Report Balance Sheet as of October 31, 1997 Statement of Operations for the twelve months ended October 31, 1997 Statement of Stockholders' Deficit for the twelve months ended October 31, 1997 Statement of Cash Flows for the twelve months ended October 31, 1997 Notes to Financial Statements (b) Introduction to Pro Forma Financial Statements Pro Forma Combined Balance Sheet (Unaudited) as of December 31, 1997 Pro Forma Combined Statement of Operations (Unaudited) for the year ended June 30, 1997 Pro Forma Combined Statement of Operations (Unaudited) for the six months ended December 31, 1997 Notes to Pro Forma Combined Financial Statement (Unaudited) (c) Exhibit No. Description ----------- ----------- 2.1 Amendment to Purchase Agreement dated January 23, 1998 by and between Javelin Systems, Inc., and Mark LeMay, as Agent for Paul R. Amestoy, Greg Kosin, Mark LeMay and Ralph E. Rudzik, Jr. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Javelin Systems, Inc. Dated: March 4, 1998 By: /s/ HORACE HERTZ -------------------------- Horace Hertz Chief Financial Officer POSNET COMPUTERS, INC. FINANCIAL STATEMENTS As Of October 31, 1997 and for the Twelve-Month Period Ended October 31, 1997 with INDEPENDENT AUDITORS' REPORT THEREON INDEX TO FINANCIAL STATEMENTS ----------------------------- Independent Auditors' Report............................................... 1 Financial Statements: Balance Sheet as of October 31, 1997..................................... 2 Statement of Operations for the twelve-month period ended October 31, 1997........................................... 3 Statement of Stockholders' Deficit for the twelve-month period ended October 31, 1997........................................... 4 Statement of Cash Flows for the twelve-month period ended October 31, 1997........................................... 5 Notes to Financial Statements............................................ 6 - 12
INDEPENDENT AUDITORS' REPORT ---------------------------- Board of Directors Posnet Computers, Inc. We have audited the accompanying balance sheet of Posnet Computers, Inc. (the "Company") as of October 31, 1997, and the related statements of operations, stockholders' deficit and cash flows for the twelve-month period 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 Posnet Computers, Inc. as of October 31, 1997, and the results of its operations and its cash flows for the twelve-month period then ended in conformity with generally accepted accounting principles. CORBIN & WERTZ Irvine, California January 21, 1998 - -------------------------------------------------------------------------------- POSNET COMPUTERS, INC. BALANCE SHEET As of October 31, 1997 - ------------------------------------------------------------------------------- ASSETS (Note 4)
Current assets: Cash $ - Accounts receivable, net of allowance for doubtful accounts of $30,000 729,537 Inventories 126,905 Prepaid expenses 7,951 ---------- Total current assets 864,393 Property and equipment, net (Note 2) 62,644 Other assets (Note 3) 49,000 ---------- $ 976,037 ========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Bank overdraft $ 120,751 Accounts payable and accrued expenses 716,355 Customer deposits 60,618 Bank line-of-credit and equipment line-of-credit (Note 4) 95,134 Notes payable - stockholders (Note 6) 49,200 ---------- Total current liabilities 1,042,058 ---------- Commitments and contingencies (Note 7) Stockholders' deficit (Note 8): Common stock, no par value; 100,000 shares authorized; 4,000 shares issued and outstanding 121,622 Accumulated deficit (187,643) ---------- Total stockholders' deficit (66,021) ---------- $ 976,037 ==========
- ------------------------------------------------------------------------------- See accompanying notes to financial statements Page 2 - ------------------------------------------------------------------------------- POSNET COMPUTERS, INC. STATEMENT OF OPERATIONS For The Twelve-Month Period Ended October 31, 1997 - ------------------------------------------------------------------------------- Net sales $4,813,501 Cost of sales 2,804,806 ---------- Gross profit 2,008,695 Salaries and related expenses 1,371,752 Selling, general and administrative expenses 648,503 ---------- Loss from operations (11,560) Interest expense 15,602 ---------- Loss before provision for income taxes (27,162) Provision for income taxes (Note 5) 800 ---------- Net loss $ (27,962) ==========
- -------------------------------------------------------------------------------- See accompanying notes to financial statements Page 3 - -------------------------------------------------------------------------------- POSNET COMPUTERS, INC. STATEMENT OF STOCKHOLDERS' DEFICIT For the Twelve-Month Period Ended October 31, 1997 - -------------------------------------------------------------------------------
Common Stock ----------------- Accumulated Shares Amount Deficit Total ------ -------- ----------- --------- Balances, November 1, 1996 4,000 $121,622 $(159,681) $(38,059) Net loss - - (27,962) (27,962) ----- -------- --------- -------- Balances, October 31, 1997 4,000 $121,622 $(187,643) $(66,021) ===== ======== ========= ========
- -------------------------------------------------------------------------------- See accompanying notes to financial statements Page 4 - -------------------------------------------------------------------------------- POSNET COMPUTERS, INC. STATEMENT OF CASH FLOWS For The Twelve-Month Period Ended October 31, 1997 - --------------------------------------------------------------------------------
Cash flows from operating activities: Net loss $ (27,962) Adjustments to reconcile net loss to net cash used in operating activities: Bad debt expense 50,000 Depreciation and amortization 26,425 Impairment loss on other asset 10,000 Changes in operating assets and liabilities: Accounts receivable (208,133) Inventories (65,035) Prepaid expenses 7,864 Accounts payable and accrued expenses 243,827 Customer deposits (78,860) --------- Net cash used in operating activities (41,874) --------- Cash flows from investing activities: Purchase of property and equipment (11,007) Advances to stockholders (18,213) --------- Net cash used in investing activities (29,220) --------- Cash flows from financing activities: Net payments on bank line-of-credit and equipment line-of-credit (56,878) Increases in notes payable - stockholders 25,000 Bank overdraft 102,972 --------- Net cash provided by financing activities 71,094 --------- Net change in cash - Cash at beginning of year - --------- Cash at end of year $ - ========= Supplemental disclosure of cash flow information - Cash paid during year for: Interest $ 15,602 ========= Income taxes $ 4,807 =========
Supplemental disclosure of non-cash investing and financing activities - See notes to the financial statements for certain non-cash transactions entered into during the twelve-month period ended October 31, 1997. - -------------------------------------------------------------------------------- See accompanying notes to financial statements Page 5 - ------------------------------------------------------------------------------- POSNET COMPUTERS, INC. NOTES TO FINANCIAL STATEMENTS For The Twelve-Month Period Ended October 31, 1997 - ------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - ----------------------------------------------------- Organization and Nature of Operations - ------------------------------------- Posnet Computers, Inc. (the "Company") was incorporated in the state of California in July 1992. The Company sells new and refurbished point-of-sales systems within the hospitality industry, primarily to restaurants. The Company recently expanded to include value-added services, including system integration and specialized reporting capabilities, for its customers located in the United States. These financial statements are presented as of October 31, 1997 and for the twelve-month period ended October 31, 1997 (the "Period"). Risks, Uncertainties and Concentrations - --------------------------------------- Cash Cash balances are maintained at one bank. Accounts at this institution are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000. During fiscal 1997, the Company had cash balances in this bank which exceeded the FDIC limit. Customers The majority of the Company's sales are to customers throughout the Western United States. Credit is extended based on an evaluation of each customer's financial condition and collateral is not required. The Company establishes an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other information. During the Period, the Company received a significant portion of its business from one customer. During the Period, sales to this customer totaled 22%. As of October 31, 1997, amounts due from this customer totaled 22% of net accounts receivable. As of October 31, 1997, another customer accounted for 13% of net accounts receivable. If the relationship between the Company and these customers was altered, the future results of operations and financial condition could be affected. Suppliers During the Period, the Company purchased a significant portion of its goods from three suppliers. During the Period, purchases from these suppliers totaled 24%, 21% and 11% of total purchases, respectively. As of October 31, 1997, amounts due to these suppliers totaled 42%, - -------------------------------------------------------------------------------- Page 6 - ------------------------------------------------------------------------------- POSNET COMPUTERS, INC. NOTES TO FINANCIAL STATEMENTS For The Twelve-Month Period Ended October 31, 1997 - ------------------------------------------------------------------------------- 18% and 12% of accounts payable. If the relationship between the Company and these suppliers was altered, the future results of operations and financial condition could be affected. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, continued - ---------------------------------------------------------------- Fair Value of Financial Instruments - ----------------------------------- The accompanying balance sheet includes financial instruments whereby the fair market value of the financial instruments could be different than that recorded on a historical basis. The Company's financial instruments consist of its cash, accounts receivable, accounts payable, lines-of-credit and notes payable - stockholders. The carrying amounts of the Company's financial instruments generally approximate their fair values at October 31, 1997. The fair value of the notes payable - stockholders was not readily determinable as market comparables were not available for such an instruments. Use of Estimates in the Preparation of Financial Statements - ----------------------------------------------------------- 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 the 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. Significant estimates made by management are, among others, provisions for losses on accounts receivable and provisions for slow moving and obsolete inventories. Actual results could materially differ from those estimates. Inventories - ----------- Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out ("FIFO") method. Costs include only materials; there are no direct labor or overhead components. The Company operates in an industry in which its products are subject to design changes and are manufactured based on customer specifications. Accordingly, should either design requirements change significantly or orders cancel or decline, the ultimate realizability of its inventories could be less than their carrying values. As of October 31, 1997, management believes that inventories are carried at their net realizable value. Property and Equipment - ---------------------- Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets, ranging from three to seven years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. - -------------------------------------------------------------------------------- Page 7 - ------------------------------------------------------------------------------- POSNET COMPUTERS, INC. NOTES TO FINANCIAL STATEMENTS - CONTINUED For The Twelve-Month Period Ended October 31, 1997 - ------------------------------------------------------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, continued - ---------------------------------------------------------------- The Company assesses the recoverability of property and equipment by determining whether the depreciation and amortization of property and equipment over its remaining life can be recovered through projected undiscounted future cash flows. The amount of property and equipment impairment, if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. As of October 31, 1997, management believes that there is no impairment of property and equipment. Warranty Accrual - ---------------- The Company grants warranties on certain computer products for periods ranging from ninety days to one year, commencing from the time of sale. For most computer products sold, the Company receives a manufacturers warranty. As such, the repair costs or rework costs are ultimately borne by the manufacturer. Accordingly, no provision for warranties have been included in the accompanying financial statements. Revenue Recognition and Deferred Revenues - ----------------------------------------- Revenues are recognized upon shipment of products and as services are rendered to customers. Nonrefundable deposits received pursuant to certain contracts are deferred as unearned revenues until the products are shipped or until such time that the services are rendered to customers. Advertising - ----------- The Company reports the costs of all advertising as expense in the period in which those costs are incurred. Income Taxes - ------------ The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be recovered. - -------------------------------------------------------------------------------- Page 8 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES, continued - ---------------------------------------------------------------- New Disclosure Standard - ----------------------- In June 1997, SFAS No. 130, "Comprehensive Income," ("SFAS 130") was issued which becomes effective in fiscal 1998 and requires reclassification of earlier financial statements for comparative purposes. SFAS 130 requires that changes in the amounts of certain items, including foreign currency translation adjustments and gains and losses on certain securities, be shown in the financial statements. SFAS 130 does not require a specific format for the financial statement in which comprehensive income is reported, but does require that an amount representing total comprehensive income be reported in that statement. The Company does not expect that the implementation of SFAS 130 will have a material effect upon the Company's financial statements. NOTE 2 - PROPERTY AND EQUIPMENT - ------------------------------- Property and equipment (see Note 4) consists of the following as of October 31, 1997:
Office and computer equipment $ 65,823 Trucks and automobiles 45,076 Furniture and fixtures 15,884 Tools and test equipment 22,777 -------- 149,560 Less accumulated depreciation and amortization (86,916) -------- $ 62,644 ========
During the Period, depreciation and amortization expense totaled $26,425 and has been reflected in selling, general and administrative expense in the accompanying statement of operations. NOTE 3 - OTHER ASSETS - --------------------- Other assets consist of the following as of October 31, 1997:
Investment in restaurant $10,000 Shareholder advances 39,000 ------- $49,000 =======
As of October 31, 1997, the Company has a $10,000 (or a 0.75% ownership interest) investment in a restaurant located in Southern California. The investment in the restaurant is carried at cost. During the Period, the Company recorded an impairment loss on this asset totaling $10,000. Stockholder advances are due on demand and are non-interest bearing. - -------------------------------------------------------------------------------- Page 9 NOTE 4 - BANK LINE-OF-CREDIT AND EQUIPMENT LINE-OF CREDIT - --------------------------------------------------------- Bank Line-of-Credit - ------------------- The Company has a $200,000 revolving line-of-credit (the "Line") with Wells Fargo Bank which expires on February 10, 1998. Borrowings pursuant to the Line ($90,079 as of October 31, 1997) accrue interest at Wells Fargo Bank's prime rate, as defined, plus 3.00% (11.50% as of October 31, 1997), and are personally guaranteed by all of the Company's stockholders. The Line is secured by substantially all of the assets of the Company. The Line provides for various warranties, covenants and restrictions requiring compliance on a continuing basis. Default on any warranty, covenant or restriction could effect the bank's commitment to lend, and if not waived or corrected, could accelerate the maturity of any borrowings outstanding under the Line. Subsequent to October 31, 1997, the Company was acquired (see Note 8). The Line has a provision which requires repayment upon such an event. The Line is currently due and has not yet been repaid. Equipment Line-of-Credit - ------------------------ The Company has a $100,000 equipment line-of-credit (the "Equipment Line") with Wells Fargo Bank which expires on March 5, 1998. Equipment purchase advances, pursuant to the Equipment Line ($5,055 as of October 31, 1997), accrue interest at either of the following two options: (1) fixed on the date of a particular disbursement at 4.25% above the Treasury Rate, as defined, in effect at the close of business on the Thursday of the week preceding such disbursement; or, (2) prime rate, as defined, plus 2.00%. The principal of each equipment advance shall be amortized over a period of not less than 24 months nor more than 96 months (depending on the type of equipment purchased), as agreed by the Company and Wells Fargo Bank at the time of such equipment advance. In August 1996, the Company borrowed $10,200, pursuant to the Equipment Line. The Company elected option #1 (see above). The equipment purchase advance is due in equal monthly installments of $482 over a 24 month period. The equipment purchase advance bears interest at a fixed rate of 12.35% per annum The equipment purchase advance is secured by the related equipment purchased (see Note 2). - -------------------------------------------------------------------------------- Page 10 NOTE 5 - INCOME TAXES - --------------------- The provision for taxes consists of the following for the Period:
Federal State Total Current $ - $800 $800 Deferred - - - ------- ---- ---- $ - $800 $800 ======= ==== ====
During the Period, the provision for taxes totaled $800, and differs from the amount computed by applying the U.S. Federal income tax rate of 34% to income attributable to continuing operations as a result of the following significant reconciling items: meals and entertainment, keyman life insurance and an increase in the valuation account. As of October 31, 1997, the significant components of the Company's net deferred tax assets are as follows:
Deferred tax assets: Net operating losses $ 45,000 Allowance for bad debts 12,000 Other 4,000 -------- 61,000 Valuation allowance (61,000) -------- Deferred tax assets $ - ========
During the Period, the valuation allowance increased $5,000. As of October 31, 1997, the Company has net operating loss carryforwards ("NOLs") for Federal and state reporting purposes of approximately $112,000 and $111,000, respectively, which expire in various years through 2012. The Federal and state tax codes provide for restrictive limitations on the annual utilization of NOLs to offset taxable income when the stock ownership of a company significantly changes, as defined. In light of the Company's sale (see Note 8), certain NOLs may currently, or in the foreseeable future, be subject to such annual limitations. As such, an uncertainty exists as to the ultimate NOLs that the Company will have to offset future taxable income. The Company's management has recorded a valuation allowance to reflect for this uncertainty. - -------------------------------------------------------------------------------- Page 11 NOTE 6 - RELATED PARTY TRANSACTIONS - ----------------------------------- Notes Payable - Stockholders - ---------------------------- As of October 31, 1997, the Company had notes with two stockholders totaling $49,200. The notes are due on demand and bear interest at a rate of 10% per annum. Subsequent to year end all principal and accrued interest pursuant to these notes was repaid. Other Matters - ------------- See discussion in Note 3 for other related party transactions. NOTE 7 - COMMITMENTS AND CONTINGENCIES - -------------------------------------- Operating Leases - ---------------- The Company leases its facilities (located in Huntington Beach and the San Francisco Bay Area) under two operating leases. The operating leases are month- to-month. During the Period and pursuant to these operating leases, the Company incurred rent expense totaling $49,000. Royalty Agreement - ----------------- In October 1994, the Company entered into a license agreement (the "License Agreement") with an individual (the "Licensor") whereby the Licensor performs repairs, maintenance and testing of RMS equipment on certain customers' equipment (on behalf of the Company). As consideration, the Company is required to pay the Licensor 7.5% of the total invoices billed to customers for theses services. During the Period, the Company incurred royalty expense totaling $9,900 pursuant to the License Agreement. NOTE 8 - SUBSEQUENT EVENTS - -------------------------- In December 19, 1997, all of the Company's shareholders (the "Selling Shareholders") entered into a stock purchase agreement (the "SPA") with Javelin Systems, Inc. (the "Purchaser"). Pursuant to the SPA and in exchange for 100% of the Company's outstanding common stock, the Selling Shareholders received 225,000 shares of the Purchaser's common stock (the "Initial Consideration"). In addition to the Initial Consideration and upon certain events, as defined, the Selling Shareholders may earn additional shares of the Purchaser's common stock. The Purchaser is a public company traded on the NASDAQ SmallCap market (NASDAQ:JVLN). Other Matters - ------------- See discussion of other subsequent events in Notes 4 and 6. - -------------------------------------------------------------------------------- Page 12 INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION On December 19, 1997, Javelin Systems, Inc. (the "Company") acquired all of the outstanding capital stock of POSNET Computers, Inc. ("Posnet") pursuant to the terms of a Stock Purchase Agreement by and among the Company, Posnet and the selling shareholders of Posnet. Posnet sells, installs and maintains point-of- sale (POS) systems and turnkey retail automation systems. The purchase price for the Posnet stock consisted of 225,000 shares of the Common Stock of the Company. The Company may be required to issue an additional 75,000 shares of its Common Stock in 1998 and shares of its Common Stock with a market value of $500,000 in each of 1999 and 2000 based upon the cumulative net profits (as defined in the Stock Purchase Agreement) of Posnet during the three years ending December 31, 2000. The acquisition has been accounted for by the purchase method, and accordingly, the results of operations of Posnet will be included with those of the Company beginning January 1, 1998. The purchase price of $1,580,727 (including acquisition costs of $81,977) was based on the quoted market price of the Company's Common Stock at the date of acquisition discounted by 25% due to restrictions on liquidity. The purchase price resulted in excess of acquisition costs over net assets of $1,678,453. Such excess (which will increase for any contingent payments) is being amortized on a straight-line basis over 25 years. On December 22, 1997, Javelin Systems, Inc. (the "Company") acquired all of the outstanding capital stock of CCI Group, Inc. ("CCI") pursuant to the terms of a Plan of Reorganization and Stock Purchase Agreement by and among the Company, CCI and the selling shareholders of CCI. CCI sells, installs and maintains POS systems and turnkey retail automation systems. The purchase price for the CCI stock consisted of 670,000 shares of the Common Stock of the Company. The acquisition has been accounted for by the purchase method, and accordingly, the results of operations of CCI will be included with those of the Company beginning January 1, 1998. The purchase price of $4,490,930 (including acquisition costs of $125,461) was based on the quoted market price of the Company's Common Stock at the date of acquisition discounted by 25% due to restrictions on liquidity. The purchase price resulted in excess of acquisition costs over net assets of $4,111,626. Such excess is being amortized on a straight-line basis over 25 years. The following Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 1997, combines the historical balance sheets of Javelin, CCI and Posnet as if the acquisitions had occurred on December 31, 1997, after giving effect to certain adjustments described in the attached Notes to Unaudited Pro Forma Condensed Financial Information. The Unaudited Pro Forma Condensed Combined Statements of Income for the year ended June 30, 1997 and for the six months ended December 31, 1997 present the combined results of operations of Javelin, CCI and Posnet as if the acquisitions had occurred on July 1, 1996, after giving effect to certain adjustments described in the attached Notes to Unaudited Pro Forma Condensed Financial Information. The combined company expects to achieve merger benefits in the form of operating cost savings. The pro forma earnings, which do not reflect any direct costs or potential savings, which are expected to result from the consolidation of operations of CCI and Posnet, are not indicative of the results of future operations. No assurances can be given with respect to the ultimate levelof expense savings. This report on Form 8-K contains forward looking statements which are subject to risks and uncertainties, including the risk that the combined companies will not achieve operating cost and expense savings and risks described in the Company's periodic reports and other filings with the Securities Exchange Commission. PRO FORMA CONDENSED COMBINED BALANCE SHEET December 31, 1997 (Unaudited)
ASSETS JAVELIN CCI POSNET ADJUSTMENTS CONSOLIDATED Current Assets: Cash $ 525,188 $ 793,509 $(93,677) $ 1,225,021 Accounts receivable 3,735,843 1,197,299 546,663 $ (546,438) (1) 4,933,367 Allowance for doubtful accounts (98,000) (98,000) Inventories 1,841,318 1,196,848 381,341 3,419,508 Other current assets 335,038 36,755 50,010 (200,000) (2) 221,803 ----------- ---------- -------- ----------- ----------- Total current assets 6,339,387 3,224,411 884,338 (746,438) 9,701,697 ----------- ---------- -------- ----------- ----------- Furniture, fixtures and equipment: Computer equipment 175,222 104,014 32,546 311,782 Furniture and fixtures 258,151 61,591 2,447 322,189 Test equipment 1,273 1,273 Vehicles - 8,904 13,605 22,509 Assets under operating leases 58,838 58,838 Leasehold improvements 77,689 77,689 ----------- ---------- -------- ----------- ----------- Total 511,062 233,347 49,871 - 794,280 Accumulated depreciation (90,538) (90,538) ----------- ---------- -------- ----------- ----------- Furniture, fixtures and equipment, net 420,524 233,347 49,871 - 703,742 ----------- ---------- -------- ----------- ----------- Other assets: Investments 6,071,657 (6,071,657) (3) - Goodwill 20,000 5,790,078 (3) 5,810,078 Other 37,247 - 7,546 44,793 ----------- ---------- -------- ----------- ----------- Total other assets 6,108,904 - 27,546 (281,579) 5,854,871 ----------- ---------- -------- ----------- ----------- TOTAL ASSETS $12,868,816 $3,457,757 $961,755 $(1,028,017) $16,260,310 =========== ========== ======== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Lines of credit $ 1,000,000 $ 365,000 $ 3,755 $ 1,368,755 Loans payable to shareholders 185,478 44,200 229,678 Accounts payable 1,990,974 651,296 617,281 $ (546,438) (1) 2,713,113 Accrued expenses 172,704 189,200 67,866 429,790 Billings in excess of costs 1,479,413 126,379 1,605,792 Income taxes payable 199,666 -- 199,666 ----------- ---------- ---------- ----------- ----------- Total current liabilities 3,163,678 3,070,073 859,481 (546,438) 6,546,794 Deferred income taxes 8,379 8,379 Deferred rent 3,177 3,177 Loan payable to Javelin 200,000 (200,000) (2) -- ----------- ---------- ---------- ----------- ----------- 3,166,856 3,078,452 1,059,481 (746,438) 6,558,351 ----------- ---------- ---------- ----------- ----------- Stockholders' equity: Common stock 40,347 1,000 121,622 (122,622) (3) 40,347 Additional paid-in-capital 10,488,350 -- -- 10,488,350 Deferred compensation (59,259) -- (59,259) Accumulated deficit (767,478) 378,305 (219,348) (158,957) (3) (767,478) ----------- ---------- ---------- ----------- ----------- Total stockholders' equity 9,701,960 379,305 (97,726) (281,579) 9,701,960 ----------- ---------- ---------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,868,816 $3,457,757 $ 961,755 $(1,028,017) $16,260,311 =========== ========== ========== =========== ===========
JAVELIN SYSTEMS, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1997 (Unaudited)
CONSOLIDATING JAVELIN CCI POSNET TOTAL ADJUSTMENTS CONSOLIDATED REVENUES: HARDWARE AND SOFTWARE $7,014,571 $6,844,542 $2,871,162 $16,730,275 $16,730,275 SERVICES - $1,396,132 $1,335,821 $ 2,731,953 $ 2,731,953 TOTAL $7,014,571 $8,240,674 $4,206,983 $19,462,228 - $19,462,228 COST OF SALES: HARDWARE AND SOFTWARE $5,499,490 $5,955,019 $2,038,029 $13,492,538 $13,492,538 SERVICES - $1,041,945 $ 215,561 $ 1,257,506 $ 1,257,506 TOTAL $5,499,490 $6,996,964 $2,253,590 $14,750,044 - $14,750,044 GROSS MARGIN $1,515,081 $1,243,711 $1,953,393 $ 4,712,185 - $ 4,712,185 OPERATING EXPENSES: SELLING, GENERAL AND ADMINISTRATIVE $1,250,697 $1,205,555 $1,996,860 $ 4,453,112 $ 231,604 (4) $ 4,684,716 RESEARCH AND DEVELOPMENT $ 396,365 - - $ 396,365 $ 396,365 TOTAL $1,647,062 $1,205,555 $1,996,860 $ 4,849,477 $ 231,604 $ 5,081,081 OPERATING INCOME (LOSS) $ (131,981) $ 38,155 $ (43,467) $ (137,293) $(231,604) $ (368,897) OTHER INCOME (EXPENSE) $ (694,905) $ (18,963) $ (19,690) $ (733,558) $ (733,558) INCOME (LOSS) BEFORE INCOME TAXES $ (826,886) $ 19,192 $ (63,157) $ (870,851) $(231,604) $(1,102,455) PROVISION FOR INCOME TAXES - $ 7,792 $ 800 $ 8,592 - $ 8,592 NET INCOME (LOSS) $ (826,886) $ 11,400 $ (63,957) $ (879,443) $(231,604) $(1,111,047) WEIGHTED AVERAGE SHARES OUTSTANDING 3,677,535 EARNINGS (LOSS) PER SHARE $ (0.30)
JAVELIN SYSTEMS, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (Unaudited)
CONSOLIDATING JAVELIN CCI POSNET TOTAL ADJUSTMENTS CONSOLIDATED REVENUES: HARDWARE AND SOFTWARE $7,402,335 $3,718,255 $1,949,809 $13,070,399 $13,070,399 SERVICES - $ 925,145 $ 711,722 $ 1,636,867 $ 1,636,867 TOTAL $7,402,335 $4,643,400 $2,661,531 $14,707,266 - $14,707,266 COST OF SALES: HARDWARE AND SOFTWARE $5,696,306 $3,049,018 $1,179,630 $ 9,924,954 $ 9,924,954 SERVICES - $ 652,461 $ 370,257 $ 1,022,718 $ 1,022,718 TOTAL $5,696,306 $3,701,479 $1,549,887 $10,947,672 - $10,947,672 GROSS MARGIN $1,706,029 $ 941,921 $1,111,644 $ 3,759,594 - $ 3,759,594 OPERATING EXPENSES: SELLING, GENERAL AND ADMINISTRATIVE $1,231,653 $ 862,467 $1,058,444 $ 3,152,564 $ 115,802 (5) $ 3,268,366 RESEARCH AND DEVELOPMENT $ 306,724 - - $ 306,724 $ 306,724 TOTAL $1,538,377 $ 862,467 $1,058,444 $ 3,459,289 $ 115,802 $ 3,575,091 OPERATING INCOME (LOSS) $ 167,651 $ 79,454 $ 53,200 $ 300,305 $(115,802) $ 184,503 OTHER INCOME (EXPENSE) $ 5,288 $ (6,240) $ 2,997 $ 2,045 $ 2,045 INCOME (LOSS) BEFORE INCOME TAXES $ 172,939 $ 73,214 $ 56,196 $ 302,350 $(115,802) $ 186,548 PROVISION FOR INCOME TAXES $ 59,189 $ 29,725 $ 800 $ 89,714 - $ 89,714 NET INCOME (LOSS) $ 113,750 $ 43,489 $ 55,396 $ 212,636 $(115,802) $ 96,834 WEIGHTED AVERAGE SHARES OUTSTANDING 4,104,315 EARNINGS (LOSS) PER SHARE $ 0.02
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION NOTE 1-BASIS OF PRESENTATION On December 19, 1997, Javelin Systems, Inc. (the "Company") acquired all of the outstanding capital stock of POSNET Computers, Inc. ("Posnet") pursuant to the terms of a Stock Purchase Agreement by and among the Company, Posnet and the selling shareholders of Posnet. Posnet sells, installs and maintains POS systems and turnkey retail automation systems. The purchase price for the Posnet stock consisted of 225,000 shares of the Common Stock of the Company. The Company may be required to issue an additional 75,000 shares of its Common Stock in 1998 and shares of its Common Stock with a market value of $500,000 in each of 1999 and 2000 based upon the cumulative net profits (as defined in the Stock Purchase Agreement) of Posnet during the three years ending December 31, 2000. The acquisition has been accounted for by the purchase method, and accordingly, the results of operations of Posnet will be included with those of the Company beginning January 1, 1998. The purchase price of $1,580,727 (including acquisition costs of $81,977) was based on the quoted market price of the Company's Common Stock at the date of acquisition discounted by 25% due to restrictions on liquidity. The purchase price resulted in excess of acquisition costs over net assets of $1,678,453. Such excess (which will increase for any contingent payments) is being amortized on a straight-line basis over 25 years. On December 22, 1997, Javelin Systems, Inc. (the "Company") acquired all of the outstanding capital stock of CCI Group, Inc. ("CCI") pursuant to the terms of a Plan of Reorganization and Stock Purchase Agreement by and among the Company, CCI and the selling shareholders of CCI. CCI sells, installs and maintains POS systems and turnkey retail automation systems. The purchase price for the CCI stock consisted of 670,000 shares of the Common Stock of the Company. The acquisition has been accounted for by the purchase method, and accordingly, the results of operations of CCI will be included with those of the Company beginning January 1, 1998. The purchase price of $4,490,930 (including acquisition costs of $125,461) was based on the quoted market price of the Company's Common Stock at the date of acquisition discounted by 25% due to restrictions on liquidity. The purchase price resulted in excess of acquisition costs over net assets of $4,111,626. Such excess is being amortized on a straight-line basis over 25 years. The Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 1997, combines the historical balance sheets of Javelin, CCI and Posnet as if the acquisitions had occurred on December 31, 1997, after giving effect to certain adjustments described in the attached Notes to Unaudited Pro Forma Condensed Financial Information. The Unaudited Pro Forma Condensed Combined Statements of Income for the year ended June 30, 1997 and for the six months ended December 31, 1997 present the combined results of operations of Javelin, CCI and Posnet as if the acquisitions had occurred on July 1, 1996, after giving effect to certain adjustments described in the attached Notes to Unaudited Pro Forma Condensed Financial Information. The Unaudited Pro Forma Condensed Financial Information should be read in conjunction with the historical financial statements and the related notes thereto of Javelin Systems, Inc. NOTE 2 The unaudited Pro Forma Financial Information reflects the acquisition of Posnet and CCI using the purchase method of accounting. Purchase accounting adjustments related to the foregoing acquisitions reflected in the Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 1997 are summarized as follows: (1) Accounts Payable $ 546,438 Accounts Receivable $ 546,438 To eliminate intercompany balances (2) Note Payable $ 200,000 Other current assets $ 200,000 To eliminate intercompany loan from Javelin to Posnet (3) Goodwill $5,790,078 Common stock $ 122,622 Accumulated deficit $ 158,957 Investments $6,071,657 To eliminate investments in subsidiaries No adjustment was necessary to eliminate intercompany profits from inventory as such amount is not significant. Purchase accounting adjustments related to the foregoing acquisitions reflected in the Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended June 30, 1997 are summarized as follows: (4) Amortization of goodwill $ 231,604
No adjustment to the provision for income taxes is required since the amortization of goodwill is not deductible for income tax purposes. Purchase accounting adjustments related to the foregoing acquisitions reflected in the unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended December 31, 1997 are summarized as follows: (5) Amortization of goodwill $115,802
No adjustment to the provision for income taxes is required since the amortization of goodwill is not deductible for income tax purposes. INDEX TO EXHIBITS ----------------- EXHIBIT 2.1 Amendment to Purchase Agreement dated January 23, 1998 by and between Javelin Systems, Inc. and Mark LeMay, as Agent for Paul R. Amestoy, Greg Kosin, Mark LeMay and Ralph E. Rudzik, Jr. EX-2.1 2 AMENDMENT TO PURCHASE AGREEMENT DATED 01/28/98 EXHIBIT 2.1 JAVELIN SYSTEMS, INC. AMENDMENT TO PURCHASE AGREEMENT THIS AMENDMENT TO PURCHASE AGREEMENT (the "AMENDMENT") is made as of January 23, 1998 between Javelin Systems, Inc., a Delaware corporation (the "COMPANY") and Mark LeMay, as agent ("AGENT") for the following individuals (the "SELLING SHAREHOLDERS"): Paul R. Amestoy, Greg Kosin, Mark LeMay and Ralph E. Rudzik, Jr. WHEREAS, the Company, the Agent, the Selling Shareholders and Posnet Computers, Inc. entered into that certain Stock Purchase Agreement dated as of December 19, 1997 (the "PURCHASE AGREEMENT") (capitalized terms used but not defined herein shall have the meaning assigned to them in the Purchase Agreement); and WHEREAS, the Company and Agent desire to amend the Purchase Agreement as provided below. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and conditions set forth below, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties to this Amendment hereby agree as follows: AMENDMENT 1. Section 1.1(c) of the Purchase Agreement is hereby amended so as to add a second paragraph thereto as follows: "Notwithstanding anything herein to the contrary, unless permitted by the applicable rules and regulations of The Nasdaq SmallCap Market (or the principal securities exchange on which the Purchaser Common Stock shall be listed or traded if changed from The Nasdaq SmallCap Market), the aggregate number of shares of Purchaser Common Stock issued or issuable under Sections 1.1(a), (b) or (c) hereof shall not exceed the number of shares of Purchaser Common Stock that Purchaser is permitted to issue in accordance with Nasdaq Marketplace Rule 4310(c)(25)(H) without the necessity of obtaining approval by Purchaser's stockholders. In the event that, as a result of the foregoing sentence, Purchaser is precluded from paying any portion of the First Annual Earnout Amount or the Second Annual Earnout Amount in shares of Purchaser Common Stock, Purchaser shall pay to each Selling Shareholder a sum of cash equal to such Selling Shareholder's Pro Rata Percentage of the portion of the First Annual Earnout Amount or the Second Annual Earnout Amount, as the case may be, not paid in shares of Purchaser Common Stock." 2. Except as modified by this Amendment, the Purchase Agreement shall remain in full force and effect. This Amendment shall be deemed an amendment to the Purchase Agreement and shall become effective when executed and delivered by the Company and the Agent as provided under Section 6.14 of the Purchase Agreement. The foregoing Amendment is hereby executed as of the date first above written. THE COMPANY: JAVELIN SYSTEMS, INC. By: /s/ Richard Stack ---------------------------------- Title: Chief Executive Officer ------------------------------- AGENT: /s/ Mark LeMay - ------------------------------------- MARK LEMAY -----END PRIVACY-ENHANCED MESSAGE-----