-----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, DxJycIlpp6wnQiUNGOXVKZUOsxQRQXXAe7/oOOIn8dcP9FBiCtXFR8KhsEVgx7FI Z9Rj+xCFPwXrfjP/96L9Vg== 0000950144-99-013224.txt : 19991117 0000950144-99-013224.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950144-99-013224 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991029 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMAGISOFT TECHNOLOGIES INC CENTRAL INDEX KEY: 0000911355 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 650422273 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-67766-A FILM NUMBER: 99754296 BUSINESS ADDRESS: STREET 1: 405 CENTRAL AVENUE STREET 2: 2ND FLOOR CITY: ST. PETERSBURG STATE: FL ZIP: 33701 BUSINESS PHONE: 727 898 0688 MAIL ADDRESS: STREET 1: 1825 NE 164TH ST STREET 2: STE 1 CITY: NORTH MIAMI BEACH STATE: FL ZIP: 33162 FORMER COMPANY: FORMER CONFORMED NAME: MANATEE AMERICAN FINANCIAL CORP DATE OF NAME CHANGE: 19930827 8-K 1 EMAGISOFT TECHNOLOGIES, INC 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) October 29, 1999 EMAGISOFT TECHNOLOGIES, INC. (Formerly known as Manatee-American Financial Corp.) ---------------------------------------------------- Exact name of registrant as specified in charter) FLORIDA ---------------------------------------------- (State or Other Jurisdiction of Incorporation) 33-67766-A 65-0422273 - ------------------------ --------------------------------- (Commission file number) (IRS employer identification no.) 405 Central Avenue, 2nd Floor, St. Petersburg, FL 33701 - ------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (727) 898-0688 ---------------------------------------------------- (Registrant's telephone number, including area code) 2 ITEM 1. CHANGES IN CONTROL OF REGISTRANT. Effective October 29, 1999, the Registrant acquired all of the outstanding capital stock of Emagisoft Corporation f/k/a Net Advantage, Inc., a privately held Florida corporation ("Emagisoft"), through an exchange of shares of the Registrant for all of the outstanding capital stock of Emagisoft (the "Acquisition"). The Registrant issued 10,000,000 shares of restricted common stock, $.0001 par value (the "Common Stock") to the former stockholders of Emagisoft in exchange for an aggregate of 10,000,000 shares of Class A Voting Common Stock of Emagisoft. As part of the Acquisition, the Registrant also acquired Emagisoft's wholly-owned subsidiary, Interactive Media Solutions, Inc. ("Interactive"). Pursuant to a Share Exchange Agreement (the "Agreement") effective as of October 29, 1999, by and between the Registrant and Emagisoft and all of the stockholders of Emagisoft (the "Agreement"), the sole director and officer of the Registrant resigned upon consummation of the Acquisition. Kyle Jones, the sole director and president of Emagisoft immediately prior to the Acquisition, was elected a director and appointed the sole officer of the Registrant and retained his positions with Emagisoft. Upon consummation of the Acquisition, the former stockholders of Emagisoft beneficially owned, in the aggregate, approximately 81.63% of the voting securities of the Registrant. A trust established by Kyle Jones, the former majority stockholder of Emagisoft, acquired ownership of 5,552,260 shares of Common Stock of the Registrant, representing approximately 45.32% of the voting securities of the Registrant. Mr. Jones was elected director (and became the sole director) and appointed sole officer of the Registrant. As a result of the Acquisition, Mr. Jones acquired control of the Registrant. The source of the consideration used in the Acquisition were the shares of Emagisoft stock owned prior to the Acquisition that were acquired by the Registrant in exchange for the Common Stock issued by the Registrant. All of the above transactions, including the change in control of the Registrant, are subject to the occurrence of the following condition in the Agreement: that the Common Stock of the Registrant be listed for trading on the Over the Counter Bulletin Board (OTCBB) within ninety (90) days of consummation of the Acquisition. The Agreement provides that in the event this condition is not met, the transactions consummated under the Agreement will be unwound so as to place the Registrant, Emagisoft and the stockholders of Emagisoft in the same positions they were in had the Acquisition not been consummated. This would result in control of the Registrant reverting back to that which existed immediately prior to the Acquisition. Except as set forth in the foregoing paragraph, Registrant is not aware of any arrangements which may at a subsequent date result in a change of control of the Registrant. 2 3 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. As a result of the Acquisition effective October 29, 1999, the Registrant acquired all of the assets of Emagisoft and its subsidiary, Interactive. These assets primarily consist of computer equipment and software and were used prior to the Acquisition in the respective businesses operated by Emagisoft and Interactive. Emagisoft is a computer network integration, hardware and software sales and Internet service providing firm, and Interactive is engaged in the web site design business, focusing on providing web site design services for electronic commerce companies and non-commercial customers. As a result of the Acquisition, Emagisoft is now a wholly-owned subsidiary of the Registrant. The Registrant intends to operate Emagisoft and Interactive in the same manner and to continue in the same businesses that Emagisoft and Interactive engaged in prior to the Acquisition. Prior to the Acquisition, no material relationship existed between the Emagisoft and/or any of its affiliates and the Registrant and/or any of its affiliates, any director or officer of the Registrant, or any associate of any such director or officer. The amount of consideration given by the Registrant for the Emagisoft stock was negotiated between and determined by the respective management of the Registrant and of Emagisoft. ITEM 3. BANKRUPTCY OR RECEIVERSHIP. Not applicable. ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT. Effective November 10, 1999, the Registrant dismissed its independent accountant, Rachlin Cohen & Holtz ("Rachlin Cohen"), and engaged Arthur Andersen LLP as its new independent accountant. The change in the Registrant's certifying accountant resulted from the change in control of the Registrant. Prior to the Acquisition, Arthur Andersen was engaged as Emagisoft's accountant and audited the financial statements of Emagisoft and Interactive. The decision to dismiss Rachlin Cohen and engage Arthur Andersen as the Registrant's independent accountant was made by Kyle Jones, the sole director of the Registrant, and was not the result of any disagreement with Rachlin Cohen. Rachlin Cohen's reports on the financial statements for the years ended December 31, 1997 and 1998, did not contain an adverse opinion or disclaimer, and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except that the reports for both years (for Manatee-American Financial Corp. before the Acquisition and its change of name) contained a going concern paragraph. The Registrant is not aware of any disagreements with Rachlin Cohen during the two years ended December 31, 1997 and 1998 or in any subsequent interim period on any matters of accounting principles or practices, financial statement disclosures, or auditing scope or procedure, 3 4 which disagreement, if not resolved to the satisfaction of Rachlin Cohen, would have caused it to make reference to the subject matter of the disagreement in connection with its report. ITEM 5. OTHER EVENTS. In contemplation of the Acquisition, the Registrant filed Articles of Amendment to its Articles of Incorporation on October 27, 1999, changing its name to Emagisoft Technologies, Inc. and increasing its authorized shares of common stock to 50,000,000. ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS. Pursuant to the terms of the Agreement, the sole director of the Registrant resigned as a director upon consummation of the Acquisition. The resignation was tendered in light of the issuance of a majority of the Registrant's voting securities to the Emagisoft stockholders and the change in control of the Registrant. The resigning director did not resign due to a disagreement with the Registrant on any matter relating to the operations, policies or practices of the Registrant. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Businesses Acquired Report of Independent Certified Public Accountants Balance Sheets of Net Advantage, Inc. as of December 31, 1998 and 1997 Statements of Operations of Net Advantage, Inc. for the years ended December 31, 1998 and 1997, and for the period from inception (June 21, 1996) through December 31, 1996 Statements of Stockholder's (Deficit) Equity of Net Advantage, Inc. for the years ended December 31, 1998 and 1997, and the for the period from inception (June 21, 1996) through December 31, 1996 Statements of Cash Flows of Net Advantage, Inc. for the years ended December 31, 1998 and 1997, and for the period from inception (June 21, 1996) through December 31, 1996 Notes to Financial Statements of Net Advantage, Inc. Report of Independent Certified Public Accountants Balance Sheets of Interactive Media Solutions, Inc. as of December 31, 1998 and 1997 Statements of Operations of Interactive Media Solutions, Inc. for the years ended December 31, 1998, 1997 and 1996 4 5 Statements of Stockholder's Equity of Interactive Media Solutions, Inc. for the years ended December 31, 1998, 1997 and 1996 Statements of Cash Flows of Net Advantage, Inc. for the years ended December 31, 1998, 1997 and 1996 Notes to Financial Statements of Interactive Media Solutions, Inc. Unaudited Consolidated Balance Sheets of Emagisoft Corporation as of September 30, 1999 Unaudited Consolidated Statement of Operations of Emagisoft Corporation for the nine months ended September 30, 1999 Unaudited Consolidated Statement of Cash Flows of Emagisoft Corporation for the nine months ended September 30, 1999 (b) Pro Forma Financial Information Introduction to Unaudited Pro Forma Combined Financial Statements Unaudited Pro Forma Combined Balance Sheet as of December 31, 1998 Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 1998 Unaudited Pro Forma Combined Balance Sheet as of September 30, 1999 Unaudited Pro Forma Combined Statement of Operations for the nine months ended September 30, 1999 Notes to Unaudited Pro Forma Combined Financial Statements (c) Exhibits. 2.1 Share Exchange Agreement dated as of October 29, 1999, by and between the Registrant, Emagisoft Corporation and all of the stockholders of Emagisoft Corporation 3.1 Articles of Amendment to the Articles of Incorporation of the Registrant 16.1 Letter of Rachlin Cohen & Holtz LLP addressed to the U.S. Securities and Exchange Commission dated November 15, 1999 23.1 Consent of Rachlin Cohen & Holtz LLP dated November 15, 1999 99.1 Report of Independent Certified Public Accountants Balance Sheet of Manatee American Financial Corp. as of December 31, 1998 5 6 Statements of Operations of Manatee-American Financial Corp. for the years ended December 31, 1998 and 1997, and from inception (February 24, 1993) to December 31, 1998 Statements of Stockholders' Deficiency of Manatee-American Financial Corp. for the years ended December 31, 1998 and 1997, and from inception (February 24, 1993) to December 31, 1998 Statements of Cash Flows of Manatee-American Financial Corp. for the years ended December 31, 1998 and 1997, and for the period from inception (February 24, 1993) to December 31, 1998 Notes to Financial Statements of Manatee-American Financial Corp. ITEM 8. CHANGE IN FISCAL YEAR. Not Applicable. 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. EMAGISOFT TECHNOLOGIES, INC. Date: November 15, 1999 By: /s/ Kyle E. Jones ---------------------------- Kyle E. Jones, President 6 7 NET ADVANTAGE, INC. FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997, TOGETHER WITH REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 8 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholder of Net Advantage, Inc.: We have audited the accompanying balance sheets of Net Advantage, Inc. (a Florida corporation) as of December 31, 1998 and 1997, and the related statements of operations, stockholder's (deficit) equity and cash flows for the years ended December 31, 1998 and 1997, and for the period from inception (June 21, 1996) through December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Net Advantage, Inc. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years ended December 31, 1998 and 1997, and the period from inception (June 21, 1996) through December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Tampa, Florida, September 8, 1999 9 NET ADVANTAGE, INC. BALANCE SHEETS -- DECEMBER 31, 1998 AND 1997
1998 1997 --------- --------- ASSETS CURRENT ASSETS: Cash $ 25,596 $ 25,128 Prepaid insurance -- 141 Current portion of deferred tax asset 9,407 -- --------- --------- Total current assets 35,003 25,269 --------- --------- PROPERTY AND EQUIPMENT: Furniture and fixtures 10,060 8,661 Computer equipment 107,222 103,640 Software 45,160 45,160 --------- --------- 162,442 157,461 Less- Accumulated depreciation (102,852) (59,474) --------- --------- Property and equipment, net 59,590 97,987 --------- --------- DEFERRED TAX ASSET, less current portion 16,069 34,317 --------- --------- Total assets $ 110,662 $ 157,573 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable $ 14,547 $ 18,639 Accrued liabilities 27,304 17,586 Deferred revenue -- 24,440 --------- --------- Total current liabilities 41,851 60,665 --------- --------- DUE TO STOCKHOLDER -- 43,750 --------- --------- STOCKHOLDER'S EQUITY: Common stock, $.001 par value; 1,000 shares authorized, issued and outstanding 1 1 Additional paid-in capital 111,034 110,034 Accumulated deficit (42,224) (56,877) --------- --------- Total stockholder's equity 68,811 53,158 --------- --------- Total liabilities and stockholder's equity $ 110,662 $ 157,573 ========= =========
The accompanying notes are an integral part of these balance sheets. 10 NET ADVANTAGE, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND THE PERIOD FROM INCEPTION (JUNE 21, 1996) THROUGH DECEMBER 31, 1996
Year Ended December 31, Period Ended ---------------------------- December 31, 1998 1997 1996 --------- --------- ------------ REVENUES: Hardware and software sales and support $ 194,590 $ 127,808 $ 101,560 Internet provider services 21,787 25,379 -- Other professional services -- 25,059 -- --------- --------- --------- Total revenues 216,377 178,246 101,560 DIRECT COSTS 102,816 164,407 101,867 --------- --------- --------- Gross profit 113,561 13,839 (307) --------- --------- --------- OPERATING COSTS AND EXPENSES: Sales and marketing 201 5,005 1,829 General and administrative 89,866 86,995 10,898 --------- --------- --------- Total operating costs and expenses 90,067 92,000 12,727 --------- --------- --------- NET INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES 23,494 (78,161) (13,034) PROVISION FOR (BENEFIT FROM) INCOME TAXES 8,841 (29,413) (4,905) --------- --------- --------- NET INCOME (LOSS) $ 14,653 $ (48,748) $ (8,129) ========= ========= =========
The accompanying notes are an integral part of these statements. 11 NET ADVANTAGE, INC. STATEMENTS OF STOCKHOLDER'S (DEFICIT) EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND THE PERIOD FROM INCEPTION (JUNE 21, 1996) THROUGH DECEMBER 31, 1996
Total Common Stock Additional Stockholder's ------------------------ Paid-in Accumulated (Deficit) Shares Amount Capital Deficit Equity ------ --------- ---------- ----------- ------------- BALANCE, June 21, 1996 -- $ -- $ -- $ -- $ -- Issuance of common stock 1,000 1 2,874 -- 2,875 Net loss -- -- -- (8,129) (8,129) ----- --------- --------- --------- --------- BALANCE, December 31, 1996 1,000 1 2,874 (8,129) (5,254) Contribution of property and equipment -- -- 107,160 -- 107,160 Net loss -- -- -- (48,748) (48,748) ----- --------- --------- --------- --------- BALANCE, December 31, 1997 1,000 1 110,034 (56,877) 53,158 Contribution of property and equipment -- -- 1,000 -- 1,000 Net income -- -- -- 14,653 14,653 ----- --------- --------- --------- --------- BALANCE, December 31, 1998 1,000 $ 1 $ 111,034 $ (42,224) $ 68,811 ===== ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 12 NET ADVANTAGE, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997, AND THE PERIOD FROM INCEPTION (JUNE 21, 1996) THROUGH DECEMBER 31, 1996
Year Ended December 31, Period Ended ------------------------------ December 31, 1998 1997 1996 --------- ---------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 14,653 $ (48,748) $ (8,129) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Depreciation 43,378 58,753 721 Deferred income taxes 8,841 (29,412) (4,905) Changes in operating assets and liabilities- Prepaid insurance 141 (141) -- Accounts payable (4,092) 5,616 13,023 Accrued liabilities 9,718 32,648 9,378 Deferred revenue (24,440) -- -- --------- --------- --------- Net cash provided by operating activities 48,199 18,716 10,088 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (3,981) (3,616) (2,135) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of due to stockholder (43,750) (800) -- Issuance of common stock -- -- 2,875 --------- --------- --------- Net cash (used in) provided by financing activities (43,750) (800) 2,875 --------- --------- --------- NET INCREASE IN CASH 468 14,300 10,828 CASH, beginning of period 25,128 10,828 -- --------- --------- --------- CASH, end of period $ 25,596 $ 25,128 $ 10,828 ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Contribution of property and equipment $ 1,000 $ 107,160 $ -- Equipment financed by due to stockholder $ -- $ 44,550 $ --
The accompanying notes are an integral part of these statements. 13 NET ADVANTAGE, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 1. DESCRIPTION OF BUSINESS: Net Advantage, Inc. (the Company), a Florida corporation, is a privately held computer network integration, hardware and software sales and internet service providing firm. The Company, which conducts its operations from St. Petersburg, Florida, was incorporated on June 21, 1996, through the issuance of 1,000 shares of common stock with a par value of $.001 per share, under the laws of the State of Florida. On June 25, 1999, the Company amended the articles of incorporation to change the authorized capital stock to 20,000,000 shares of common stock having a par value of $.001 per share, consisting of 10,000,000 shares of Class A voting common stock and 10,000,000 shares of Class B non-voting common stock, and 10,000,000 shares of preferred stock having a par value of $.001 per share. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company's revenues are recognized as follows: Hardware and Software Sales and Support Revenues from hardware sales related to network installations are recognized in accordance with the provisions of Statement of Position (SOP) 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts," using the completed contract method. Revenue from a support contract related to a network installation is recognized monthly as amounts are billed over the term of the annual service period. Revenues from the sale of third-party software are recognized in accordance with the provisions of SOP 97-2, "Software Revenue Recognition." All events necessary for revenue recognition under SOP 97-2 typically occur when the third-party software is delivered. As of December 31, 1997, the Company had $24,440 of deferred revenue in the accompanying balance sheet related to sales of third-party software that had not yet been delivered. 14 -2- Internet Provider Services Revenues from the hosting of web sites are recognized monthly over the hosting period. The Company customarily bills for these services on a monthly basis. Other Professional Services Other professional services consists of hardware repair and miscellaneous custom programming. Revenues were recognized once services were performed. Deferred Revenue Deferred revenue primarily represents advanced payments by customers for third-party software not yet delivered. Significant Concentrations For the years ended December 31, 1998, 1997 and for the period from inception (June 21, 1996) through December 31, 1996, approximately 65 percent, 40 percent and 60 percent of sales, respectively, were attributable to three customers. Any change in the relationship with these customers could have a potentially adverse effect on the Company's financial position. No such change is anticipated by management. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation of furniture and fixtures and computer equipment is computed using the double declining balance method over the estimated useful lives of the assets, which is typically seven and five years, respectively. The software is being depreciated over an estimated useful life of three years using the straight-line method. Maintenance and repairs are charged to expense as incurred. Depreciation on property and equipment totaled $43,378 and $58,753 for the years ended December 31, 1998 and 1997, respectively, and $721 for the period from inception (June 21, 1996) through December 31, 1996, and is included in general and administrative expenses in the accompanying statements of operations. Income Taxes The Company accounts for income taxes under the liability method, as required by Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The liability method requires income taxes to be recognized based on income taxes currently payable and the change in deferred taxes. Deferred taxes are recognized based on the temporary differences between the financial statement and tax bases of assets and liabilities at enacted tax rates as of the dates the differences are expected to reverse. 15 -3- Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments As of December 31, 1998 and 1997, the carrying amounts of the Company's financial instruments, which include cash, accounts payable, accrued liabilities and due to stockholder, are recorded at amounts which approximate fair value because of the short maturity of these instruments. 3. ACCRUED LIABILITIES: Accrued liabilities consists of the following at December 31, 1998 and 1997:
1998 1997 ------- ------- Accounting fees $24,999 $16,666 Sales taxes 2,305 920 ------- ------- $27,304 $17,586 ======= =======
4. INCOME TAXES: The provision for (benefit from) income taxes consists of the following for the years ended December 31, 1998 and 1997, and for the period from inception (June 21, 1996) through December 31, 1996:
Year Ended December 31, Period Ended --------------------------- December 31, 1998 1997 1996 -------- -------- ------------ Current: Federal $ -- $ -- $ -- State -- -- -- -------- -------- -------- -- -- -- -------- -------- -------- Deferred: Federal 8,354 (27,794) (4,635) State 487 (1,619) (270) -------- -------- -------- 8,841 (29,413) (4,905) -------- -------- -------- Total income tax provision (benefit) $ 8,841 $(29,413) $ (4,905) ======== ======== ========
16 -4- The components of the deferred tax assets consisted of the following at December 31, 1998 and 1997:
1998 1997 ------- ------- Deferred tax assets: Net operating loss (NOL) carryforwards $16,069 $28,046 Accrued expenses 9,407 6,271 ------- ------- Total deferred tax asset $25,476 $34,317 ======= =======
The provision for income taxes for the years ended December 31, 1998 and 1997, and for the period from inception (June 21, 1996) through December 31, 1996, differs from the amount computed, by applying the U.S. Federal corporate tax rate of 34 percent to net income before provision for income taxes, primarily as a result of state income taxes. At December 31, 1998 and 1997, the Company had NOL carryforwards for tax purposes of approximately $43,000 and $75,000, respectively, which are available to offset future taxable income and expire during the years 2016 through 2018. 5. RELATED-PARTY TRANSACTIONS: Kyle Jones, the President of the Company, donated approximately $1,000 and $107,000 of property and equipment during 1998 and 1997, respectively. In addition, Mr. Jones sold approximately $45,000 of property and equipment in exchange for a note. During 1998, Kyle Jones took draws from the Company in the amount of the outstanding note, leaving a zero balance due to stockholder at December 31, 1998. 6. SUBSEQUENT EVENTS: On July 20, 1999, the Company acquired Interactive Media Solutions, Inc. (IMS) by purchasing 100 percent of the issued and outstanding common stock. IMS was purchased for $50,000 cash and the issuance of 143,000 shares of Class A voting common stock of the Company valued at $143,000, for a total purchase price of $193,000. Prior to 1998, IMS derived most of its revenues from architectural design. During 1998, IMS began to generate revenues through designing web sites. During the months of July and August of 1999, the Company raised additional equity financing through the sale of 1,250,000 shares of Class A voting common stock for $1,250,000. 17 INTERACTIVE MEDIA SOLUTIONS, INC. FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997, TOGETHER WITH REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 18 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholder of Interactive Media Solutions, Inc.: We have audited the accompanying balance sheets of Interactive Media Solutions, Inc. (a Florida corporation) as of December 31, 1998 and 1997, and the related statements of operations, stockholder's equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Interactive Media Solutions, Inc. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Tampa, Florida, September 8, 1999 19 INTERACTIVE MEDIA SOLUTIONS, INC. BALANCE SHEETS -- DECEMBER 31, 1998 AND 1997
1998 1997 -------- -------- ASSETS CURRENT ASSETS: Cash $ 7,551 $ 3,119 Accounts receivable 9,397 10,458 Due from stockholder 5,163 -- Deposits 1,225 555 Prepaid taxes -- 151 Current portion of deferred tax asset 5,981 1,603 -------- -------- Total current assets 29,317 15,886 -------- -------- PROPERTY AND EQUIPMENT: Furniture and fixtures 5,905 5,568 Computer equipment 33,680 33,680 -------- -------- 39,585 39,248 Less- Accumulated depreciation (32,363) (26,549) -------- -------- Property and equipment, net 7,222 12,699 -------- -------- DEFERRED TAX ASSET, less current portion -- 1,392 -------- -------- Total assets $ 36,539 $ 29,997 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable $ 1,577 $ 8,195 Accrued liabilities 26,219 16,757 -------- -------- Total current liabilities 27,796 24,952 -------- -------- DEFERRED TAX LIABILITY 1,167 -- -------- -------- STOCKHOLDER'S EQUITY: Common stock, no par value; 1,000 shares authorized, 500 shares issued and outstanding 500 500 Retained earnings 7,076 4,525 -------- -------- Total stockholder's equity 7,576 5,025 -------- -------- Total liabilities and stockholder's equity $ 36,539 $ 29,977 ======== ========
The accompanying notes are an integral part of these balance sheets. 20 INTERACTIVE MEDIA SOLUTIONS, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 --------- --------- --------- REVENUES $ 221,521 $ 127,732 $ 132,379 DIRECT COSTS 166,568 89,337 84,636 --------- --------- --------- Gross profit 54,953 38,395 47,743 --------- --------- --------- OPERATING COSTS AND EXPENSES: Sales and marketing 10,126 8,305 11,282 General and administrative 40,515 38,009 44,256 --------- --------- --------- Total operating costs and expenses 50,641 46,314 55,538 --------- --------- --------- NET INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES 4,312 (7,919) (7,795) PROVISION FOR (BENEFIT FROM) INCOME TAXES 1,761 (2,949) (2,841) --------- --------- --------- NET INCOME (LOSS) $ 2,551 $ (4,970) $ (4,954) ========= ========= =========
The accompanying notes are an integral part of these statements. 21 INTERACTIVE MEDIA SOLUTIONS, INC. STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Common Stock Total ------------------------- Retained Stockholder's Shares Amount Earnings Equity ------- -------- -------- ------------- BALANCE, December 31, 1995 1,000 $ 1,000 $ 16,949 $ 17,949 Purchase and cancellation of common stock (500) (500) (2,500) (3,000) Net loss -- -- (4,954) (4,954) ----- -------- -------- -------- BALANCE, December 31, 1996 500 500 9,495 9,995 Net loss -- -- (4,970) (4,970) ----- -------- -------- -------- BALANCE, December 31, 1997 500 500 4,525 5,025 Net income -- -- 2,551 2,551 ----- -------- -------- -------- BALANCE, December 31, 1998 500 $ 500 $ 7,076 $ 7,576 ===== ======== ======== ========
The accompanying notes are an integral part of these statements. 22 INTERACTIVE MEDIA SOLUTIONS, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 ------- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 2,551 $(4,970) $(4,954) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Depreciation 5,814 7,140 6,790 Deferred income taxes (1,819) (3,563) (3,331) Changes in assets and liabilities- Accounts receivable 1,061 1,038 2,000 Due from stockholder (5,163) -- -- Deposits (670) -- -- Prepaid taxes 151 441 -- Accounts payable (6,618) (1,451) 4,918 Accrued expenses 9,462 6,026 4,067 ------- ------- ------- Net cash provided by operating activities 4,769 4,661 9,490 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (337) (3,627) (9,239) ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Purchase of common stock -- -- (3,000) ------- ------- ------- NET INCREASE (DECREASE) IN CASH 4,432 1,034 (2,749) CASH, beginning of year 3,119 2,085 4,834 ------- ------- ------- CASH, end of year $ 7,551 $ 3,119 $ 2,085 ======= ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Taxes paid $ 151 $ 247 $ 194
The accompanying notes are an integral part of these statements. 23 INTERACTIVE MEDIA SOLUTIONS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997 1. DESCRIPTION OF BUSINESS: Interactive Media Solutions, Inc. (the Company), a Florida corporation, is a privately-held web site design firm, focused on providing web site design services for electronic commerce companies as well as non-commercial customers. The Company, which conducts its operations from St. Petersburg, Florida, was incorporated on August 22, 1994, through the issuance of 1,000 shares of common stock with no par value, under the laws of the State of Florida. Revenues from 1994 to 1997 were primarily derived from architectural design and drafting services, reselling of third-party architectural construction and drafting software, and selling of hardware supporting the third-party software. Beginning in 1998, the Company redirected its efforts, deriving most of its revenues from web site design services. On November 12, 1996, the Company repurchased 500 of its own common shares, representing 50 percent of all common shares outstanding, for $3,000 and appropriately cancelled them under the guidance of the Florida Business Corporations Act. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Revenue Recognition The Company's revenues are recognized as follows: Architectural Graphics and Design Services Revenues from architectural graphics and design services are recognized in accordance with the provisions of Statement of Position (SOP) 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts," using the completed contract method. Third-party Software Revenues from the sale of third-party software are recognized in accordance with the provisions of SOP 97-2, "Software Revenue Recognition." Revenues are recognized when the software is delivered. 24 -2- Web Site Development and Design Revenues from web site development and design are recognized ratably as the services are performed, typically up to one week in length. The Company customarily bills for these services at the end of the project. Significant Concentrations For the years ended December 31, 1998 and 1997, approximately 25 percent and 30 percent of sales were attributable to one and two customers, respectively. During the year ended December 31, 1996, approximately 40 percent of sales were attributable to one customer. Any change in the relationship with these customers could have a potentially adverse effect on the Company's financial position. No such change is anticipated by management. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation of furniture and fixtures and computer equipment is computed using the double declining balance method over the estimated useful lives of the assets, which is typically seven and five years, respectively. Maintenance and repairs are charged to expense as incurred. Depreciation on property and equipment totaled $5,814, $7,140 and $6,790 for the years ended December 31, 1998, 1997 and 1996, respectively, and are included in general and administrative expenses in the accompanying statements of operations. Income Taxes The Company accounts for income taxes under the liability method as required by Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The liability method requires income taxes to be recognized based on income taxes currently payable and the change in deferred taxes. Deferred taxes are recognized based on the temporary differences between the financial statement and tax bases of assets and liabilities at enacted tax rates as of the dates the differences are expected to reverse. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions by management in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ from those estimates. 25 -3- Fair Value of Financial Instruments As of December 31, 1998 and 1997, the carrying amounts of the Company's financial instruments, which include cash, accounts receivable, due from stockholder, accounts payable and accrued liabilities are recorded at amounts which approximate fair value because of the short maturity of these instruments. 3. ACCRUED LIABILITIES: Accrued liabilities consisted of the following at December 31, 1998 and 1997:
1998 1997 ------- ------- Accounting fees $15,000 $10,000 Employee payroll 2,589 2,642 Taxes 8,630 4,115 ------- ------- $26,219 $16,757 ======= =======
4. INCOME TAXES: The provision for (benefit from) income taxes consisted of the following for the years ended December 31, 1998, 1997 and 1996:
1998 1997 1996 ------- ------- ------- Current: Federal $ 2,438 $ 419 $ 333 State 1,142 195 157 ------- ------- ------- 3,580 614 490 ------- ------- ------- Deferred: Federal (1,235) (2,423) (2,264) State (584) (1,140) (1,067) ------- ------- ------- (1,819) (3,563) (3,331) ------- ------- ------- Total income tax provision (benefit) $ 1,761 $(2,949) $(2,841) ======= ======= =======
26 -4- The components of deferred tax assets and liabilities consisted of the following at December 31, 1998, 1997 and 1996:
1998 1997 1996 ------- ------- ------- Deferred tax assets: Accrued expenses $ 5,645 $ 3,763 $ 1,882 Other 336 1,603 485 ------- ------- ------- 5,981 5,366 2,367 Deferred tax liability: Depreciation (1,167) (2,371) (2,935) ------- ------- ------- Net deferred tax asset (liability) $ 4,814 $ 2,995 $ (568) ======= ======= =======
The provision for (benefit from) income taxes for the years ended December 31, 1998, 1997 and 1996, differs from the amount computed by applying the U.S. Federal corporate tax rate of 34 percent to net income before provision for income taxes, primarily as a result of state income taxes. 5. RELATED-PARTY TRANSACTIONS: Roger Finefrock, the President of the Company, personally financed the purchase of a vehicle. During 1998, the Company made principal and interest payments on Mr. Finefrock's vehicle loan of approximately $5,200. These payments have been treated as advances to Mr. Finefrock by the Company and are included in due from stockholder in the accompanying balance sheet. 6. SUBSEQUENT EVENT: On July 20, 1999, the Company was acquired by Net Advantage, Inc. (Net Advantage). Net Advantage purchased 100 percent of the common stock issued and outstanding for $50,000 cash and 143,000 shares of Class A voting common stock of Net Advantage valued at $143,000, for a total purchase price of $193,000. Net Advantage derives revenues from the sale of third-party software, sale of related hardware, ongoing maintenance and support and web site design and hosting. 27 EMAGISOFT CORPORATION CONSOLIDATED BALANCE SHEETS -- SEPTEMBER 30, 1999 (Unaudited)
ASSETS CURRENT ASSETS: Cash $ 619,104 Accounts receivable 82,048 Deposits 4,225 Deferred tax asset 15,388 ----------- Total current assets 720,765 ----------- PROPERTY AND EQUIPMENT: Furniture and fixtures 74,125 Computer equipment 368,663 Software 51,532 ----------- 494,320 Less-Accumulated depreciation (227,537) ----------- 266,783 ----------- DEFERRED TAX ASSETS 16,069 ----------- Total assets $ 1,003,617 =========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable $ 21,460 Accrued liabilities 33,981 ----------- Total current liabilities 55,441 ----------- DEFERRED TAX LIABILITY 1,167 ----------- STOCKHOLDER'S EQUITY Common stock, $.001 par value; 10,000,000 shares authorized, issued and outstanding 10,000 Additional paid-in capital 1,331,535 Retained earnings (394,526) ----------- Total stockholder's equity 947,009 ----------- Total liabilities and stockholder's equity $ 1,003,617 ===========
28 EMAGISOFT CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (Unaudited)
REVENUES $ 353,551 DIRECT COSTS 146,104 --------- Gross profit 207,447 --------- OPERATING COSTS AND EXPENSES: General and administrative 548,276 --------- Total operating costs 548,276 NET LOSS BEFORE PROVISION FOR INCOME TAXES (340,829) --------- PROVISION (BENEFIT) FOR INCOME TAXES -- NET LOSS $(340,829) =========
29 EMAGISOFT CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (359,378) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Depreciation 92,322 Changes in operating assets and liabilities- Accounts receivable (67,488) Deposits (3,000) Accounts payable 5,336 Accrued expenses (19,542) ----------- (84,694) ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (292,293) ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 1,230,000 ----------- NET INCREASE IN CASH 585,957 CASH, beginning of year 33,147 ----------- CASH, September 30, 1999 $ 619,104 ===========
30 Emagisoft Technologies, Inc. (formally known as Manatee American Financial Corporation) Unaudited Pro Forma Combined Statement of Operations For the period ended September 30, 1999
Unaudited Unaudited Unaudited Emagisoft Emagisoft Emagisoft Pro Forma Technologies, Inc. Technologies, Inc. Corporation Adjustments Pro Forma ------------------ ----------- ----------- ------------------ REVENUES $ -- $ 353,551 $ -- $ 353,551 COST OF GOODS SOLD -- 146,104 -- 146,104 --------- --------- --------- --------- Gross Profit -- 207,447 -- 207,447 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 8,598 548,276 -- 548,276 AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS -- -- 4,636 c 4,636 --------- --------- --------- --------- Income from operations (8,598) (340,829) (4,636) (345,465) OTHER INCOME (EXPENSE), NET -- -- -- -- --------- --------- --------- --------- (Loss) income before provision (benefit) for income taxes (8,598) (340,829) (4,636) (345,465) INCOME TAX PROVISION (BENEFIT) -- -- -- -- --------- --------- --------- --------- (Loss) income before participating rights and minority interest (8,598) (340,829) (4,636) (345,465) Net (loss) income $ (8,598) $(340,829) $ (4,636) $(345,465) ========= ========= ========= ========= Net Income (loss) per common share $ (0) $ (0) $ (0) Weighted average common shares outstanding 2,250,000 10,000,000 12,250,000
See accompanying notes to unaudited pro forma combined financial statements 31 Emagisoft Technologies, Inc. (formally known as Manatee American Financial Corporation) Unaudited Pro Forma Combined Balance Sheet As of September 30, 1999
Unaudited Unaudited Unaudited Emagisoft Emagisoft Emagisoft Pro Forma Technologies, Inc. Technologies, Inc. Corporation Adjustments Pro Forma ------------------ ----------- ----------- ------------------ CURRENT ASSETS: Cash and cash equivalents $ 114 $ 619,104 $ 619,218 Accounts receivable, net - 74,437 74,437 Due from stockholder - 7,611 7,611 Deposits - 4,225 4,225 Current portion of deferred tax asset - 15,388 15,388 -------- ----------- ----------- Total current assets 114 720,765 720,879 ======== =========== =========== PROPERTY, PLANT AND EQUIPMENT, net - 266,783 266,783 Deferred tax asset, less current portion - 16,069 16,069 Goodwill, net of amortization - - 174,607 a 174,607 -------- ----------- ----------- Total assets $ 114 $ 1,003,617 $ 1,178,338 ======== =========== =========== CURRENT LIABILITIES: Accounts payable $ - $ 21,460 $ 21,460 Accrued expenses and other current liabilities 49,736 33,981 83,717 -------- ----------- ----------- Total current liabilities 49,736 55,441 105,177 Deferred tax liability - 1,167 1,167 STOCKHOLDER'S EQUITY: Common shares 225 10,000 (9,000) d 1,225 Paid-in capital 1,535 1,331,535 188,243 a 1,521,313 Retained earnings (deficit) (51,382) (394,526) (4,636) c (450,544) -------- ----------- ----------- Total stockholders' equity (49,622) 947,009 1,071,994 -------- ----------- ----------- Total liabilities and stockholders' equity $ 114 $ 1,003,617 $ 1,178,338 ======== =========== ===========
See accompanying notes to unaudited pro forma combined financial statements 32 Emagisoft Technologies, Inc. (formally known as Manatee American Financial Corporation) Unaudited Pro Forma Combined Statement of Operations For the year ended December 31,1998
Emagisoft Corporation (EC) Unaudited ------------------------------------------------------------ Emagisoft Unaudited Technologies Audited Audited Audited Pro Forma EC Pro Forma Inc. Manatee Net Advantage IMS Adjustments Pro Forma Adjustments Pro Forma --------- ------------- -------- ----------- --------- ----------- ------------ REVENUES $ -- $216,377 $221,521 $ -- $437,898 $ -- $ 437,898 COST OF GOODS SOLD -- 102,816 166,568 -- 269,384 -- 269,384 --------- -------- -------- -------- -------- -------- ---------- Gross Profit -- 113,561 54,953 -- 168,514 -- 168,514 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,557 90,067 50,641 -- 140,708 -- 143,265 AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS -- -- -- 6,181 6,181 -- 6,181 --------- -------- -------- -------- -------- -------- ---------- Income from operations (2,557) 23,494 4,312 (6,181) 21,625 -- 19,068 OTHER INCOME (EXPENSE), NET 12,500 -- -- -- -- -- 12,500 --------- -------- -------- -------- -------- -------- ---------- (Loss) income before provision (benefit) for income taxes 9,943 23,494 4,312 (6,181) 21,625 -- 31,568 INCOME TAX PROVISION (BENEFIT) -- 8,841 1,761.00 -- 10,602 -- 10,602 --------- -------- -------- -------- -------- -------- ---------- (Loss) income before participating rights and minority interest 9,943 14,653 2,551 (6,181) 11,023 -- 20,966 Net (loss) income $ 9,943 $ 14,653 $ 2,551 $ (6,181) $ 11,023 $ -- $ 20,966 ========= ======== ======== ======== ======== ======== ========== Net Income (loss) per common share $ 0.00 $ 15 $ 5 -- $ 0 $ 0 Weighted average common shares outstanding 2,250,000 1,000 500 144,000 12,250,000
See accompanying notes to unaudited pro forma combined financial statements 33 Emagisoft Technologies, Inc. (formally known as Manatee American Financial Corporation) Unaudited Pro Forma Combined Balance Sheet As of December 31, 1998
Emagisoft Corporation (EC) Unaudited ------------------------------------------------------------ Emagisoft Unaudited Technologies Audited Audited Audited Pro Forma EC Pro Forma Inc. Manatee Net Advantage IMS Adjustments Pro Forma Adjustments Pro Forma --------- ------------- -------- ----------- --------- ----------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 1,968 $ 25,596 $ 7,551 - $ 33,147 $ - $ 35,115 Accounts receivable, net - - 9,397 9,397 - 9,397 Due from stockholder 5,163 5,163 5,163 Deposits - - 1,225 1,225 - 1,225 Current portion of deferred tax asset - 9,407 5,981 15,388 - 15,388 -------- --------- -------- -------- -------- --------- Total current assets 1,968 35,003 29,317 64,320 - 66,288 PROPERTY, PLANT AND EQUIPMENT, net - 59,590 7,222 66,812 - 66,812 Deferred tax asset, less current portion - 16,069 - 16,069 - 16,069 Goodwill, net of amortization - - - 179,243 a 179,243 - 179,243 -------- --------- ------- -------- -------- --------- Total assets $ 1,968 $ 110,662 $36,539 $326,444 $ - $ 328,412 ======== ========= ======= ======== ======== ========= CURRENT LIABILITIES: Accounts payable $ - $ 14,547 $ 1,577 $ 16,124 $ - $ 16,124 Accrued expenses and other current liabilities 42,992 27,304 26,219 53,523 - 96,515 -------- --------- ------- -------- -------- --------- Total current liabilities 42,992 41,851 27,796 69,647 - 112,639 Deferred tax liability - - 1,167 1,167 - 1,167 STOCKHOLDER'S EQUITY: Common shares 225 1 500 (357) b 144 856 d 1,225 Paid-in capital 1,535 111,034 - 192,857 a,b 303,891 (43,640)d 261,786 Retained earnings (deficit) (42,784) (42,224) 7,076 (13,257) a,c (48,405) 42,784 e (48,405) -------- --------- ------- -------- -------- --------- Total stockholders' equity (41,024) 68,811 7,576 255,630 - 214,606 -------- --------- ------- -------- -------- --------- Total liabilities and stockholders' equity $ 1,968 $ 110,66 $36,539 $326,444 $ - $ 328,412 ========= ========= ======= ======== ======== =========
See accompanying notes to unaudited pro forma combined financial statements 34 EMAGISOFT TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (a) To reflect purchase accounting adjustments for allocation of purchase price for the acquisition of Interactive Media Solutions, Inc. (IMS) by Net Advantage, Inc (NA). (b) To reflect the elimination IMS's 500 shares of issued and outstanding shares and to reflect the issuance of 143,000 shares of NA $.001 par value common stock for the acquisition of IMS by NA. (c) To reflect the increase in amortization expense related to the goodwill recorded under the purchase method of accounting. The Company amortized goodwill over thirty years. (d) To reflect the elimination of Emagisoft Corporation (EC), f/k/a NA, common stock as a result of the purchase of EC and its wholly owned subsidiary, IMS, by Emagisoft Technologies, Inc. (ETI), f/k/a Manatee American Financial Corporation, and the issuance of 10,000,000 shares of ETI common stock. (e) To reflect the elimination of ETI's accumulated deficit as a result of reverse acquisition accounting related to the ETI purchase of EC. EX-2.1 2 SHARE EXCHANGE AGREEMENT 1 Exhibit 2.1 SHARE EXCHANGE AGREEMENT THIS SHARE EXCHANGE AGREEMENT (the "Agreement") is entered into as of the 29th day of October, 1999, by and between MANATEE-AMERICAN FINANCIAL CORP., a Florida corporation ("Manatee"), and EMAGISOFT CORPORATION f/k/a NET ADVANTAGE, INC., a Florida corporation ("Emagisoft"), and the present owners of all of the issued and outstanding shares of the capital stock of Emagisoft (the "Emagisoft Stockholders"). W I T N E S S E T H: WHEREAS, the Emagisoft Stockholders, as set forth on the attached Exhibit "A", own all of the issued and outstanding shares of the capital stock of Emagisoft, which is comprised of Ten Million (10,000,000) shares of Class A Voting Common Stock, having a par value of $.001 per share (the "Emagisoft Shares"). Manatee desires to acquire all of the Emagisoft Shares solely in exchange for common stock of Manatee, making Emagisoft a wholly-owned subsidiary of Manatee; and WHEREAS, the Emagisoft Stockholders desire to acquire common stock of Manatee in exchange for the Emagisoft Shares, as more fully set forth herein. NOW, THEREFORE, for the mutual consideration set out herein, and other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties agree as follows: 1. SHARE EXCHANGE. The Emagisoft Stockholders are the present owners of all of the issued and outstanding Emagisoft Shares. It is hereby agreed that all of the Emagisoft Shares shall be acquired by Manatee in exchange solely for shares of common stock of Manatee, having a par value of $.0001 per share (the "Manatee Shares"). 2. DELIVERY OF SHARES. Manatee and the Emagisoft Stockholders agree that on the Closing Date or at the Closing as hereinafter defined, the Emagisoft Shares shall be delivered to Manatee in exchange for the Manatee Shares. (a) The Manatee Shares shall be delivered to the Emagisoft Stockholders in exchange for their Emagisoft Shares on the basis of one (1) Manatee Share for one (1) Emagisoft Share. (b) At Closing, Manatee shall, subject to the conditions set forth herein, issue Ten Million (10,000,000) Manatee Shares to the Emagisoft Stockholders and/or their designee(s) in accordance 2 with Exhibit "A". The certificates representing such Manatee Shares shall bear the following or similar restrictive transfer legend: The shares of common stock represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act") and may not be offered, sold, assigned, pledged, hypothecated or otherwise transferred unless (1) they are registered under the Act or (2) the holder has delivered to the issuer an opinion of counsel, which opinion shall be satisfactory to the issuer, to the effect that there is an available exemption from registration under the Act and any applicable state securities laws or that registration is otherwise not required. (c) Unless otherwise agreed to by Manatee, Emagisoft and the Emagisoft Stockholders, the transactions contemplated hereunder shall close only in the event Manatee is able to acquire at least eighty percent (80%) of the Emagisoft Shares. In the event Manatee acquires at least eighty percent (80%) but less than all of the Emagisoft Shares, the Manatee Shares to be issued and delivered hereunder shall be reduced proportionately. 3. OUTSTANDING SECURITIES. On the Closing Date: (a) Each one (1) Emagisoft Share issued and outstanding immediately prior to the Closing shall be exchanged for one (1) Manatee Share. Thereafter, all such Emagisoft Shares shall be deemed to be owned by Manatee. The holders of certificates evidencing the Emagisoft Shares outstanding immediately prior to the Closing shall cease to have any rights with respect to such Emagisoft Shares except as otherwise provided herein or by law. (b) Two Million Two Hundred Fifty Thousand (2,250,000) shares of common stock of Manatee previously issued and outstanding prior to the Closing will remain outstanding. 4. POST-ACQUISITION EVENTS. The parties agree that as soon as practicable after the Closing Date the following shall occur: (a) The acceptance of the resignation of the sole existing Manatee officer and director and the election and appointment of new officers and directors. (b) Manatee shall cause to be prepared a Current Report on Form 8-K to be filed with the U.S. Securities and Exchange Commission ("SEC"), and Emagisoft and Manatee shall reasonably assist SEC counsel who they may utilize for the preparation of the Form 8-K and any other required SEC filings. (c) Manatee shall file an amendment to its Articles of Incorporation changing its name to "Emagisoft Technologies, Inc." (d) Manatee and Emagisoft with the assistance of SEC counsel who they may each utilize, shall cooperate in causing a broker-dealer which is a member of the National Association of Securities Dealers, Inc. ("NASD") to file a Form 211 with the NASD to list for trading purposes the common stock of Manatee on the OTC Bulletin Board ("OTCBB"). In 3 connection with said preparation and filing of a Form 211 with the NASD, Manatee and Emagisoft agree to cooperate in providing and explaining certain corporate and other information with respect to the transactions contemplated hereunder, including: (i) a complete description of the history and background of Manatee, (ii) a complete description of Emagisoft's business, (iii) audited financial statements of Manatee and Emagisoft as of December 31, 1998, and (iv) biographical and other information concerning the new officers and directors of Manatee. In the event the common stock of Manatee is not listed for trading on the OTCBB within ninety (90) days of the Closing Date, Manatee shall purchase, acquire and accept the Manatee Shares received by the Emagisoft Stockholders hereunder in exchange for the Emagisoft Shares transferred to Manatee hereunder, the result of which shall be to place Manatee, Emagisoft and the Emagisoft Stockholders in the same position they would have been in if the transactions contemplated under this Agreement had not been consummated. 5. OTHER MATTERS. (a) Prior to the Closing, there shall be no change in the current outstanding capital structure of Manatee or Emagisoft and, in connection therewith, there shall be no issuance of shares, options, warranties or other securities, stock split, recapitalization, or exchange of shares with respect to or rights issued in respect of, the capital stock of Manatee or Emagisoft after the date hereof, and there shall be no dividends paid on the capital stock of Manatee or Emagisoft. (b) Manatee and Emagisoft shall have received all requisite stockholder approval of the transactions contemplated under this Agreement. 6. SURRENDER AND ISSUANCE OF SECURITIES. On the Closing Date: (a) The Emagisoft Stockholders shall surrender for cancellation certificates representing their Emagisoft Shares duly endorsed for transfer to Manatee. (b) Manatee shall issue and deliver certificates representing the Manatee Shares in accordance with Exhibit "A". 7. REPRESENTATIONS AND WARRANTIES OF THE EMAGISOFT STOCKHOLDERS. The Emagisoft Stockholders hereby represent and warrant to the best of their knowledge and belief as follows, which warranties and representations shall also be true as of the Closing Date: (a) The Emagisoft Shares are free from claims, liens, or other encumbrances, and the Emagisoft Stockholders have good title and the unqualified right to transfer and dispose of such Emagisoft Shares. (b) The Emagisoft Stockholders are the sole registered holders of the issued and outstanding Emagisoft Shares as set forth in Exhibit "A". 4 (c) The Emagisoft Stockholders have no present intent to sell or dispose of the Manatee Shares to be acquired hereunder and are under no binding obligation, formal commitment, or existing plan to sell or otherwise dispose of the Manatee Shares. 8. REPRESENTATIONS AND WARRANTIES OF EMAGISOFT. Emagisoft hereby represents and warrants to the best of its knowledge and belief as follows, which warranties and representations shall also be true as of the Closing Date: (a) The Emagisoft Stockholders listed on the attached Exhibit "A" are the sole owners of record and beneficially own all of the issued and outstanding Emagisoft Shares. (b) Emagisoft has the corporate power to enter into this Agreement and to perform its obligations hereunder. The execution and performance of this Agreement will not constitute a breach of any material agreement, indenture, mortgage, license or other instrument or document to which Emagisoft is a party or by which it or its properties is bound, and will not violate any judgment, decree, order, writ, or applicable rule, statute, or regulation. The execution and performance of this Agreement will not violate or conflict with any provision of the Articles of Incorporation or Bylaws of Emagisoft. (c) Emagisoft has one wholly-owned subsidiary corporation, Interactive Media Solutions, Inc. ("Interactive"), a Florida corporation. (d) The audited financial statements of Emagisoft and Interactive as of and for the periods ending December 31, 1996, 1997 and 1998, and the unaudited financial statements of Emagisoft and Interactive for the six month period ended June 30, 1999, which have been delivered to Manatee (hereinafter referred to as the "Emagisoft Financial Statements") present fairly, in all material respects, the financial condition of Emagisoft and Interactive as of the dates thereof and the results of operations and changes in financial position of Emagisoft and Interactive for the periods covered. Emagisoft and Interactive have good title to all assets shown on the Emagisoft Financial Statements subject only to dispositions and other transactions in the ordinary course of business, the disclosures set forth therein and liens and encumbrances of record. The Emagisoft Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as may be indicated therein or in notes thereto, and meet or can be made to meet SEC financial reporting requirements. (e) Since June 30, 1999, there have not been any material adverse changes in the financial position of Emagisoft or Interactive except changes arising in the ordinary course of business which changes will in no event materially and adversely affect the financial position of Emagisoft or Interactive. (f) The authorized capital stock of Emagisoft consists of: (i) 10,000,000 shares of Class A Voting Common Stock, $.001 par value, (ii) 10,000,000 shares of Class B Non-Voting Common Stock, $.001 par value, and (iii) 10,000,000 shares of Preferred Stock, $.001 par value. All outstanding shares of the capital stock of Emagisoft are validly issued, fully paid and nonassessable. There are no existing options, calls, warrants, preemptive rights or 5 commitments of any character relating to the issued or unissued capital stock or other securities of Emagisoft, other than as described in Exhibit "B" attached hereto. (g) Neither Emagisoft nor Interactive is a party to any material litigation or any governmental investigation or proceeding. (h) Emagisoft and Interactive are duly organized, validly existing and in good standing under the laws of the jurisdiction of their incorporation, and presently has and at the Closing shall have the corporate power to own their properties and to carry on their business as then being conducted and shall be duly qualified to do business in any jurisdiction where so required except where the failure to so qualify would have no material negative impact. (i) Emagisoft and Interactive have (or, by the Closing Date, will have) filed all federal, state, county and local income, excise, property and other tax, governmental and/or related returns, forms or reports (or extensions thereof) which are due or required to be filed by them prior to the Closing, and/or have (or will have) paid or made adequate provisions for the payment of all taxes, fees or assessments which have or may become due pursuant to such returns or pursuant to any assessments received. Neither Emagisoft nor Interactive is delinquent for any tax, penalty, interest, assessment or charge. (j) Emagisoft has not breached, and there is no pending or threatened claim that Emagisoft has breached any of the terms or conditions of any agreement to which it is a party or by which it or its properties is bound. Emagisoft has previously given Manatee copies of or access to all material commitments and/or agreements to which Emagisoft is a party, including all relationships or dealings with related parties or affiliates. (k) Emagisoft has delivered to Manatee, in addition to the documents delivered under this Agreement, a true and complete copy of its: (i) Federal and Florida tax returns for the years 1998, 1997 and 1996, (ii) Confidential Business Plan, (iii) a current stockholders list, and (iv) copies of the Articles of Incorporation, as amended, Bylaws and corporate minutes and resolutions. (l) Emagisoft has made its corporate and financial records, minute book, stock register and other corporate and financial documents available for review to present management of Manatee prior to the Closing, during reasonable business hours and on reasonable notice. (m) All information regarding Emagisoft, Interactive and the Emagisoft Stockholders which is set forth herein or which has otherwise been provided to Manatee is true and accurate in all material respects. 9. REPRESENTATION AND WARRANTIES OF MANATEE. Manatee hereby represents and warrants to the best of its knowledge and belief as follows, which representations and warranties shall also be true as of the Closing Date: 6 (a) The Manatee Shares to be issued and delivered to the Emagisoft Stockholders in accordance with Exhibit "A" will, when so issued and delivered, constitute duly authorized, validly and legally issued Manatee Shares, fully paid and nonassessable. (b) Manatee has the corporate power to enter into this Agreement and to perform its obligations hereunder. The execution and performance of this Agreement will not constitute a breach of any material agreement, indenture, mortgage, license or other instrument or document to which Manatee is a party or by which it or its properties is bound, and will not violate any judgment, decree, order, writ, or applicable rule, statute, or regulation. The execution and performance of this Agreement will not violate or conflict with any provision of the Articles and Incorporation or Bylaws of Manatee. (c) The audited financial statements of Manatee as of and for the periods ending December 31, 1996, 1997 and 1998, and the unaudited financial statements of Manatee for the three month periods ended March 31, 1999, and June 30, 1999, which have been delivered to Emagisoft (hereinafter referred to as the "Manatee Financial Statements") present fairly, in all material respects, the financial condition of Manatee as of the dates thereof and the results of its operations and changes in financial position for the periods covered. Manatee has good title to all assets shown on the Manatee Financial Statements subject only to dispositions and other transactions in the ordinary course of business, the disclosures set forth therein and liens and encumbrances of record. The Manatee Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as may be indicated therein or in notes thereto, and meet or can be made to meet SEC financial reporting requirements. (d) Since June 30, 1999, there have not been any material adverse changes in the financial position of Manatee except change arising in the ordinary course of business, which changes will in no event materially and adversely affect the financial position of Manatee. (e) The authorized capital stock of Manatee consists of: (i) 20,000,000 shares of common stock, $.0001 par value, and (ii) 5,000,000 shares of preferred stock, $.0001 par value. All outstanding shares of the capital stock of Manatee are validly issued, fully paid and nonassessable. No shares of preferred stock are issued and outstanding. No shares of preferred stock are issued and outstanding. There are no existing options, calls, warrants, preemptive rights or commitments of any character relating to the issued or unissued capital stock or other securities of Manatee. (f) Manatee is not a party to any material litigation or any governmental investigation or proceeding. (g) Manatee is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and presently has and at the Closing shall have the corporate power to own its property and to carry on its business as then being conducted and shall be duly qualified to do business in any jurisdiction where so required except where the failure to so qualify would have no material negative impact. 7 (h) Manatee has filed all federal, state, county and local income, excise, property and other tax, governmental and/or related returns, forms, or reports, which are due or required to be filed by it prior to the date hereof and has paid or made adequate provision for the payment of all taxes, fees, or assessments which have or may become due pursuant to such returns or pursuant to any assessments received. Manatee is not delinquent or obligated for any tax, penalty, interest, delinquency or charge. (i) Manatee has not breached, and there is no pending or threatened claim that Manatee has breached any of the terms or conditions of any agreement to which it is a party or by which it or its properties is bound. Manatee is not a party to any material commitment or agreement, and it has disclosed to Emagisoft and the Emagisoft Stockholders any relationships or dealings with related parties or affiliates. (j) Manatee has delivered to Emagisoft, in addition to the documents delivered under this Agreement, a true and complete copy of its: (i) Prospectus dated September 21, 1994, as declared effective by the SEC, (ii) Quarterly reports on Form 10-QSB for the periods ended June 30, 1999, March 31, 1999, March 31, 1997, September 30, 1996, June 30, 1996 and March 31, 1996, as filed with the SEC, (iii) Annual Report on Form 10-KSB for the year ended December 31, 1997, as filed with the SEC, (iv) Federal and Florida tax returns for the years 1998, 1997, 1996 and 1995, (v) a current stockholders list, and (vi) copies of the Articles of Incorporation, as amended, Bylaws and corporate minutes and resolutions. As of their respective dates, to the best knowledge and belief of Manatee, the foregoing documents filed with the SEC did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statement therein, in light of the circumstance under which they are made, not misleading. (k) Manatee has no subsidiaries. (l) Manatee has made its corporate and financial records, minute book, stock register and other corporate and financial documents available for review to present management of Emagisoft prior to the Closing, during reasonable business hours and on reasonable notice. (m) All information regarding Manatee which is set forth herein or has otherwise been provided by Manatee to Emagisoft and the Emagisoft Stockholders is true and accurate in all material respects. (n) Manatee is current in and in compliance with its reporting obligations under the Securities Exchange Act of 1934, as amended, and all reports filed by Manatee with the SEC are true, complete and accurate in all material respects, and there is no information or event required to be disclosed that has not been disclosed in any of Manatee's public filings as of the Closing Date. 10. CLOSING. The Closing of the transactions contemplated herein shall take place on such date (the "Closing" or Closing Date") as mutually determined by the parties hereto when all conditions precedent have been met and all required documents have been delivered, which 8 Closing is expected to be on or about October 20, 1999, but not later than October 29, 1999, unless extended by mutual consent of all parties hereto. 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE EMAGISOFT STOCKHOLDERS. All obligations of the Emagisoft Stockholders under this Agreement are subject to the fulfillment of each of the following conditions: (a) The representations and warranties of Manatee contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof shall be true in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of such time. (b) Manatee shall have performed and complied with, in all material respects, all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing, and shall have executed and delivered all documents required by this Agreement to be executed and delivered by it prior to or at the Closing. (c) On or before the Closing, the Board of Directors and the shareholders of Manatee shall have authorized and approved the execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereunder. (d) At the Closing, the sole existing officer and director of Manatee shall have resigned in writing from all positions as a director and officer of Manatee. (e) The Manatee Shares to be issued to the Emagisoft Stockholders at Closing will be validly issued, nonassessable and fully paid under applicable corporation law and will be issued in compliance with all federal, state and applicable securities laws. 12. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MANATEE. All obligations of Manatee under this Agreement are subject to the fulfillment, of each of the following conditions: (a) The representations and warranties of the Emagisoft Stockholders and Emagisoft contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof shall be true in all material respects at and as of the closing as though such representations and warrantees were made at and as of such time. (b) The Emagisoft Stockholders and Emagisoft shall have performed and complied with, in all material respects, all covenants, agreements, and conditions required by this Agreement to be performed or complied with by them prior to or at the Closing, and shall have executed and delivered all documents required by this Agreement to be executed and delivered by them prior to or at the Closing. (c) On or before the Closing, the Board of Directors and the shareholders of Emagisoft shall have authorized and approved the execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereunder. 9 (d) The Emagisoft Stockholders shall deliver a letter commonly known as an "Investment Letter," in substantially the form attached hereto and made a part hereof as Exhibit "C", acknowledging that the Manatee Shares are being acquired for investment purposes. 13. COVENANTS. (a) CONDUCT OF BUSINESS. At all times prior to the Closing, Manatee and Emagisoft agree to conduct their respective businesses in accordance with the ordinary, ususal and normal course of business heretofore conducted by each, and there shall be no adverse material change in the business of Manatee or Emagisoft from the date hereof through the Closing Date. (b) ACCESS. At all times prior to the Closing, Manatee and Emagisoft shall: (i) give to the other and its authorized representatives reasonable access to all facilities and properties of Manatee or Emagisoft, as the case may be, and to its books and records and those of its subsidiaries, (ii) permit the other to make inspections thereof upon reasonable request, and (iii) furnish the other with such financial and operating data and other information with respect its business and properties and those of its subsidiaries. (c) EXCLUSIVITY. From the date hereof until the earlier of the Closing or the termination of this Agreement, Manatee shall not solicit, negotiate or enter into any agreement or arrangement with any other person or organization with respect to or in furtherance of any merger, share exchange or other business combination involving the issuance of capital stock of Manatee or the sale of assets of Manatee (except in the ordinary course of business), other than the exchange of Manatee Shares for Emagisoft Shares hereunder. (d) PUBLICITY. From the date hereof until the Closing, Manatee and Emagisoft shall discuss and mutually agree upon any public filing or announcement concerning the transactions contemplated hereunder. (e) CONFIDENTIALITY. Prior to the Closing, or at any time if the Closing does not occur, Manatee and Emagisoft shall not disclose to any person (other than their employees, attorneys, accountants and advisors) or use (except in connection with the transactions contemplated hereby) all non-public information obtained pursuant to Section 13. (b). In the event the Closing does not occur, Manatee and Emagisoft shall return to the other, or destroy, all information it shall have received from the other in connection with this Agreement and the transactions contemplated hereunder, together with any summaries thereof or extracts therefrom. 14. INDEMNIFICATION. For a period of two (2) years from the Closing, Manatee agrees to indemnify and hold harmless the Emagisoft Stockholders and Emagisoft, and the Emagisoft Stockholders and Emagisoft agree to indemnify and hold harmless Manatee, against and in respect of any liability, damage or deficiency, all actions, suits, proceedings, demands, assessments, judgments, costs and expenses including attorney's fees, resulting from any material misrepresentation made by an indemnifying party to an indemnified party, an indemnifying party's material breach of a covenant, representation or warranty, or an 10 indemnifying party's nonfulfillment of any agreement hereunder, or from any material misrepresentation in or omission from any certificate furnished or to be furnished hereunder. 15. NATURE AND SURVIVAL OF REPRESENTATIONS. All representations, warranties and covenants made by any party in this Agreement shall survive the Closing and the consummation of the transactions contemplated hereunder for two (2) years from the Closing. All of the parties hereto are executing and carrying out the provisions of this Agreement in reliance solely on the representations, warranties and covenants and agreements contained in this Agreement and not upon any investigation upon which it might have made or any representation, warranty, agreement, promise or information, written or oral, made by the other party or any other person other than as specifically set forth herein. 16. DOCUMENTS AT CLOSING. At the Closing, the following documents shall be delivered: (a) Emagisoft and the Emagisoft Stockholders will deliver, or will cause to be delivered, to Manatee the following: (i) the stock certificates described in Section 6.(a) above. (ii) a certificate executed by Emagisoft to the effect that to the best of its knowledge and belief all representations and warranties of Emagisoft in this Agreement are true and correct as of the Closing the same as though originally given to Manatee on said date; (iii) a certificate executed by the Emagisoft Stockholders to the effect that to the best of their knowledge and belief all representations and warranties of the Emagisoft Stockholders in this Agreement are true and correct as of the Closing the same as though originally given to Manatee on said date; (iv) an Investment Letter in the form attached hereto as Exhibit "C" executed by each of the Emagisoft Stockholders; (v) a copy of a corporate resolution of Emagisoft authorizing and approving the execution, delivery and performance of this Agreement and consummation of the transactions contemplated in this Agreement; (vi) such other instruments, documents and certificates, if any, as are required to be delivered pursuant to the provisions of this Agreement; (vii) all other items, the delivery of which is a condition precedent to the obligations of Manatee, as set forth herein; and (b) Manatee will deliver or cause to be delivered to the Emagisoft and the Emagisoft Stockholders: (i) the stock certificates described in Section 6.(b) above; 11 (ii) a certificate executed by Manatee, to the effect that all representations and warranties of Manatee in this Agreement are true and correct as of the Closing, the same as though originally given to Emagisoft and the Emagisoft Stockholders on said date; (iii) a copy of a corporate resolution of Manatee authorizing and approving the execution, delivery and performance of this Agreement and consummation of the transactions contemplated in this Agreement; (iv) such other instruments and documents as are required to be delivered pursuant to the provisions of this Agreement; (v) the resignation of the sole existing officer and director of Manatee; and (vi) all other items, the delivery of which is a condition precedent to the obligations of the Emagisoft Stockholders, as set forth herein. 17. BROKER'S OR FINDER'S FEES. Manatee represents and warrants to the Emagisoft Stockholders and Emagisoft, and the Emagisoft Stockholders and Emagisoft represent and warrant to Manatee, that none of them, or any party acting on their behalf, has incurred any liability, either express or implied, to any "broker" or "finder" or similar person in connection with this Agreement or any of the transactions contemplated hereby. Manatee on the one hand, and the Emagisoft Stockholders and Emagisoft, jointly and severally, on the other hand, will indemnify and hold the other harmless from any claim, loss, costs or expense whatsoever (including reasonable fees and disbursements of counsel) from or relating to any such express or implied liability. 18. MISCELLANEOUS. (a) FURTHER ASSURANCES. At any time, and from time to time, after the Closing Date, each party will execute such additional instruments and take such action as may be reasonably requested by the other party to confirm or take title to any property transferred hereunder or otherwise to carry out the intent and purposes of this Agreement. (b) WAIVER. Any failure on the part of any party hereto to comply with any of its obligations, agreements or conditions hereunder may be waived in writing by the party to whom such compliance is owed. (c) TERMINATION. All obligations hereunder may be terminated at the discretion of either Manatee's or Emagisoft's board of directors if (i) the closing conditions specified in Sections 11 and 12 are not met by October 29, 1999, unless extended, or (ii) any of the representations and warranties made herein have been materially breached. (d) AMENDMENT. This agreement may be amended only in writing as agreed to by all the parties hereto. 12 (e) NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been given if delivered in person, or sent by telex or facsimile (with receipt confirmed), or sent by prepaid first class registered or certified mail, return receipt requested, as follows: If to Manatee: 1825 N.E. 164th Street Suite 1 North Miami Beach, FL 33162 Facsimile No: (305) 944-2432 Attn: Marc B. Tescher, President With a copy to: Kipnis Tescher Lippman & Valinsky 100 Northeast Third Avenue Suite 610 Fort Lauderdale, FL 33301-1156 Facsimile No: (954) 467-2264 Attn: Jay Valinsky, Esq. If to Emagisoft 405 Central Ave. and the Emagisoft Second Floor Stockholders: St. Petersburg, FL 33701 Facsimile No: (727) 822-7858 Attn: Kyle Jones, President With a copy to: Edwin Kagan, Esq. 2709 Rocky Point Dr., #102 Tampa, FL 33607 Facsimile No: (813) 288-0428 (f) HEADINGS. The section and subsection headings in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (g) COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (h) BINDING EFFECT. This Agreement shall be binding upon the parties hereto and inure to the benefit of the parties, their respective heirs, administrators, executors, successors and assigns. (i) ENTIRE AGREEMENT. This Agreement and the attached Exhibits constitute the entire agreement of the parties covering everything agreed upon or understood with respect to the subject matter hereof. There are no oral promises, conditions, representations, 13 understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof. (j) TIME. Time is of the essence. (k) SEVERABILITY. If any part of this Agreement is deemed to be unenforceable the balance of the Agreement shall remain in full force and effect. (l) RESPONSIBILITY AND COSTS. All fees, expenses and out-of-pocket costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred by the parties hereto shall be borne solely and entirely by the party that has incurred such costs and expenses unless such party has agreed otherwise with any such person. 14 IN WITNESS WHEREOF, the parties have executed this Share Exchange Agreement as of the day and year first above written. WITNESSES: MANATEE-AMERICAN FINANCIAL CORP., a Florida corporation By: /s/ Marc B. Tescher -------------------------- Marc B. Tescher, President EMAGISOFT CORPORATION, a Florida corporation By: /s/ Kyle E. Jones -------------------------- Kyle E. Jones, President 15 EXHIBIT "A" EMAGISOFT CORPORATION
NAME ADDRESS NUMBER OF SHARES - ---- ------- ---------------- The Betterment Trust 10460 Roosevelt Boulevard 5,552,260 Kyle E. Jones, Trustee Apt. 111 St. Petersburg, FL 33716 Jimmy Dowda 1982 Shannon Lane 50,000 Apopka, FL 32703 William H. Egge, IV 11555 Tradewinds Boulevard 398,080 Largo, FL 33773 Roger W. Finefrock 1146 17th Avenue North 143,000 St. Petersburg, FL 33704 Richard W. Groner 2033 Main Street 500,000 Suite 403 Sarasota, FL 34237 Stephen Guarino 3 Downe Circle 500,000 Medford, NJ 08055 Bob Havemeister 700 Lake Avenue 30,000 Maitland, FL 32751 David Hollis 10353 Abbotsford Drive 199,040 Tampa, FL 33626 Brian Keith Jones 10460 Roosevelt Boulevard 25,000 Apt. 111 St. Petersburg, FL 33716 Deidre R. Jones 5026 Dickens Avenue 10,000 Tampa, FL 33629 Harold and Wanda Faye Jones Rt #1, Box 496 174,230 JTWROS Gray, KY 40734 Robert Stacey Jones 3106 Treetrail Parkway 10,000 Norcross, GA 30093
16
NAME ADDRESS NUMBER OF SHARES - ---- ------- ---------------- William Tal Jones P.O. Box 219 10,000 Barbourville, KY 40906 Steven H. Kerr 917 Stillwell Lane 10,000 Lake Mary, FL 32746 Richard M. Konsens, MD 1696 Bridgewater Drive 10,000 Heathrow, FL 32746 Mark Lauter 4870 Bay Heron Place 5,000 Apt. 321 Tampa, FL 33616 Frederick A. Lenz 113 Hattaway Drive 10,000 Altamonte Springs, FL 32701 Lighthouse Holdings, Inc. P.O. Box 97 150,000 Clayton Been, Director Caribbean Place Leeward Highway Providenciales, Turks & Caicos Islands Darin McManaway 11601 4th Street North 25,000 Apt. 4413 St. Petersburg, FL James Neader 396 Coffee Pot Riviera N.E. 25,000 St. Petersburg, FL 33704 James Neader Profit 396 Coffee Pot Riviera N.E. 15,000 Sharing Plan & Trust St. Petersburg, FL 33704 Chong Park 311 N. Knowles Avenue 10,000 Winter Park, FL 32789 James L. Rhodes C/F 18914 Rogers Road 10,000 Gwyndolyn Heather Rhodes, Odessa, FL 33556 UGMA/FL David and Doris Rothschild 8027 Palomino Avenue 477,680 JTWROS Naples, FL 34113 Frank P. Rothschild, Inc. P.O. Box 17325 100,000 Clearwater, FL 33762
17
NAME ADDRESS NUMBER OF SHARES - ---- ------- ---------------- Geneva-Roth Investment P.O. Box 17325 377,680 Trust Clearwater, FL 33762 Frank P. Rothschild, Trustee Sherry L. Shaw 540 Carillon Parkway 199,040 Unit 204 St. Petersburg, FL 33716 Roger Tichenor 1749 Bridgewater Drive 645,530 Heathrow, FL 32746 Peter VanSon 4661 Laurel Oak Lane N.E. 318,460 St. Petersburg, FL 33703 Ronnie L. Williams, Sr. 1826 South Ridge Avenue 10,000 Edgewater, FL 32141 TOTAL 10,000,000
18 EXHIBIT "B" OPTIONS TO ACQUIRE CLASS A VOTING COMMON STOCK OF EMAGISOFT CORPORATION
CURRENT PERFORMANCE LONGEVITY HOLDER OWNERSHIP(1) OPTIONS(2) OPTIONS(3) - ------ ------------ ----------- ---------- Kyle Jones 100,000 1,000,000 100,000 Peter VanSon 50,000 500,000 50,000 Frank Rothschild 50,000 500,000 50,000 William Egge, IV 50,000 500,000 50,000 Roger Tichenor 50,000 500,000 50,000 David Hollis -0- 500,000 50,000 ------- --------- ------- TOTAL 300,000 3,500,000 350,000
- ---------- 1 Represents the number of options granted at the time of execution of employment agreement. The options are exercisable at a price of $1.50 per share. 2 Represents the maximum number of options that can be granted during employment in the event Emagisoft attains certain specified annualized gross revenues. The options are exercisable at a price of $1.75 per share. 3 Represents the number of options to be granted per each year of employment. The options are exercisable at a price of $2.00 per share. 19 EXHIBIT "C" INVESTMENT LETTER TO THE BOARD OF DIRECTORS OF MANATEE-AMERICAN FINANCIAL CORP. The undersigned hereby represents to Manatee-American Financial Corp. (the "Corporation") that (1) the shares of the Corporation's commons stock (the "Securities") which are being acquired by the undersigned are being acquired for his own account and for investment and not with a view to the public resale or distribution thereof; (2) the undersigned will not sell, transfer or otherwise dispose of the securities except in compliance with the Securities Act of 1933, as amended (the "Act"); and (3) the undersigned is aware that the Securities are "restricted securities" as that term is defined in Rule 144 or the General Rules and Regulations under the Act. The undersigned hereby agrees and acknowledges that he will not sell the Securities outside of the United States in any manner which will allow the Securities to become nonrestricted except upon registration in the United States. The undersigned further acknowledges that he or she has had an opportunity to ask questions of and receive answers from duly designated representatives of the Corporation concerning the terms and conditions pursuant to which the Securities are being acquired. The undersigned acknowledges that he has been afforded an opportunity to examine such documents and other information which he or she has requested for the purpose of verifying the information set forth in said documents. The undersigned acknowledges and understands that the Securities are unregistered and must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The undersigned further acknowledges that he is fully aware of the applicable limitations on the resale of the Securities. These restrictions for the most part are set forth in Rule 144. The Rule permits sales of "restricted securities" upon compliance with the requirements of such Rule. If the Rule is available to the undersigned, the undersigned may make only routine sales of securities, in limited amounts, in accordance with the terms and conditions of that Rule. Any and all certificates representing the Securities, and any and all Securities issued in replacement thereof or in exchange therefore, shall bear the following legend, which the undersigned has read and understands: The Securities represented by this Certificate have not been registered under the Securities Act of 1933 (the "Act") and are "restricted securities" as that term is defined in Rule 144 under the Act. The Securities may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Act or pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of the Corporation. 20 The undersigned further agrees that the Corporation shall have the right to issue stop-transfer instructions to its transfer agent and acknowledges that the Corporation has informed the undersigned of its intention to issue such instructions. Very truly yours, ____________________________ Date: ________________, 1999 EX-3.1 3 ARTICLES OF AMENDMENT 1 Exhibit 3.1 ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF MANATEE-AMERICAN FINANCIAL CORP. Pursuant to the provisions of Section 607.1006 of the Florida Business Corporation Act, the Articles of Incorporation of MANATEE-AMERICAN FINANCIAL CORP. (the "Corporation") shall be amended as follows: ARTICLE I. NAME of the Articles of Incorporation of the Corporation shall be amended in its entirety to read as follows: ARTICLE I. NAME The name of the Corporation shall be EMAGISOFT TECHNOLOGIES, INC. The address of the principal office of the Corporation shall be 405 Central Avenue, Second Floor, St. Petersburg, Florida 33701, and the mailing address of the Corporation shall be the same. ARTICLE II. CAPITAL STOCK of the Articles of Incorporation of the Corporation shall be amended in its entirety to read as follows: ARTICLE III. CAPITAL STOCK The maximum number of shares of stock that the Corporation shall be authorized to issue and have outstanding at any one time shall be 55,000,000 shares, which are to be divided into two classes as follows: 50,000,000 shares of common stock, par value $.0001 per share, and 5,000,000 shares of preferred stock, par value $.0001 per share. The preferred stock may be created and issued, from time to time, in one or more series and with such designations, rights, preferences, conversion rights, privileges and restrictions as shall be stated and expressed in the resolution or resolutions providing for the creation and issuance of such preferred stock as may be adopted from time to time in the sole discretion of the Board of Directors pursuant to the authority given in this paragraph. The foregoing amendments to the Articles of Incorporation of the Corporation were approved and adopted by the sole director of the Corporation and by the shareholders of the -1- 2 Corporation entitled to vote on the amendments on the 20th day of October, 1999. The number of votes cast for the amendments was sufficient for approval. IN WITNESS WHEREOF, the undersigned President of the Corporation has executed these Articles of Amendment to the Articles of Incorporation of the Corporation this 20th day of October, 1999. MANATEE-AMERICAN FINANCIAL CORP. By: /s/ Marc B. Tescher -------------------------------- Marc B. Tescher, President STATE OF FLORIDA COUNTY OF BROWARD The foregoing instrument was acknowledged before me this 20th day of October, 1999, by Marc B. Tescher, as President of Manatee-American Financial Corp. /s/ Carol W. Heckler ------------------------------- NOTARY PUBLIC My Commission Expires: April 24, 2002 Personally known [X] ---- or Produced Identification ------------------------------- Type of Identification Produced: ------------------------------- -2- EX-16.1 4 LETTER OF RACHLIN COHEN & HOLTZ 1 Exhibit 16.1 November 15, 1999 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 RE: EMAGISOFT TECHNOLOGIES, INC. Gentlemen: We were previously accountants for Manatee-American Financial Corp. and on August 16, 1999, we reported on the consolidated financial statements of Manatee-American Financial Corp. as of December 31, 1998 and for each of the two years in the period ended December 31, 1998 and for the period from inception to December 31, 1998 (which report contained an explanatory paragraph referring to an uncertainty as to the ability of the company to continue as a going concern). On November 10, 1999, we were dismissed as principal accountants of Manatee-American Financial Corp. We have read the statements included under Item 4 of Form 8-K of Emagisoft Technologies, Inc. (the new name of the company) for November 15, 1999, and we agree with such statements. Very truly yours, Rachlin Cohen & Holtz LLP EX-23.1 5 CONSENT OF RACHLIN COHEN & HOLTZ 1 Exhibit 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the use in the Form 8-K of Emagisoft Technologies, Inc. of our report dated August 16, 1999 (which report contains an explanatory paragraph that describes a condition that raises substantial doubt as to the ability of the Company to continue as a going concern) relating to the financial statements of Manatee-American Financial Corp. appearing in such Form 8-K. RACHLIN COHEN & HOLTZ LLP Miami, Florida November 15, 1999 EX-99.1 6 REPORT OF INDEPENDENT ACCOUNTANTS 1 Exhibit 99.1 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) FINANCIAL STATEMENTS DECEMBER 31, 1998 2 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) TABLE OF CONTENTS
PAGE ---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1 FINANCIAL STATEMENTS: Balance Sheet 2 Statements of Operations 3 Statements of Stockholders' Deficiency 4 Statements of Cash Flows 5 Notes to Financial Statements 6-10
3 (Rachlin Cohen & Holtz LLP Letterhead) REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Manatee-American Financial Corp. (A Development Stage Enterprise) North Miami Beach, Florida We have audited the accompanying balance sheet of Manatee-American Financial Corp. (A Development Stage Enterprise) as of December 31, 1998, and the related statements of operations, stockholders' deficiency and cash flows for each of the two years in the period ended December 31, 1998 and from inception (February 24, 1993) to December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Manatee-American Financial Corp. (A Development Stage Enterprise) as of December 31, 1998, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1998 and from inception (February 24, 1993) to December 31, 1998, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2 to the financial statements, the Company is in the development stage and has incurred net losses and reflects a deficit accumulated during the development stage and stockholders' deficiency as of and for the periods ended December 31, 1998. This condition raises substantial doubt as to the ability of the Company to continue as a going concern. Management's plans with regard to this matter are also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ RACHLIN COHEN & HOLTZ LLP ----------------------------- Miami, Florida August 16, 1999 -1- 4 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEET DECEMBER 31, 1998
ASSETS Current Assets: Cash $ 1,968 -------- Total current assets 1,968 -------- $ 1,968 ======== LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current Liabilities: Accrued liabilities, primarily professional fees $ 42,992 -------- Total current liabilities 42,992 -------- Commitments and Other Matters -- Stockholders' Deficiency: Preferred stock, $.0001 par value; authorized 5,000,000 shares; none issued -- Common stock, $.0001 par value; authorized 20,000,000 shares; issued and outstanding 2,250,000 shares 225 Capital in excess of par 1,535 Deficit accumulated during the development stage (42,784) -------- (41,024) -------- $ 1,968 ========
See notes to financial statements. -2- 5 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF OPERATIONS
Inception Year Ended (February 24, December 31, 1993) to -------------------------- December 31, 1998 1997 1998 -------- -------- ------------ Revenues: Operating revenue $ -- $ -- $ -- Other income 12,500 -- 12,500 -------- -------- -------- 12,500 -- 12,500 -------- -------- -------- Costs and Expenses: General and administrative 2,557 13,796 33,654 Offering costs in excess of proceeds from initial public offering -- -- 21,630 -------- -------- -------- 2,557 13,796 55,284 -------- -------- -------- Income (Loss) before Income Taxes 9,943 (13,796) (42,784) Income Taxes -- -- -- -------- -------- -------- Net Income (Loss) $ 9,943 $(13,796) $(42,784) ======== ======== ======== Net Income (Loss) per Common Share $ -- $ -- ======== ========
See notes to financial statements. -3- 6 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF STOCKHOLDERS' DEFICIENCY
Deficit Capital Accumulated Common Stock in During the ------------------------- Excess Development Shares Amount of Par Stage Total ---------- ---------- ---------- ----------- ---------- From Inception (February 24, 1993) to December 31, 1993: Issuance of common stock ($.002 per share) 2,250,000 $ 225 $ 4,775 $ -- $ 5,000 Net loss -- -- -- (1,717) (1,717) ---------- ---------- ---------- ---------- ---------- Balance, December 31, 1993 2,250,000 225 4,775 (1,717) 3,283 Year Ended December 31, 1994: Sales of common stock in public offering ($.08 per share), net of allocated offering costs 45,000 5 (5) -- -- Net loss -- -- -- (21,939) (21,939) ---------- ---------- ---------- ---------- ---------- Balance, December 31, 1994 2,295,000 230 4,770 (23,656) (18,656) Year Ended December 31, 1995: Net loss -- -- -- (5,466) (5,466) ---------- ---------- ---------- ---------- ---------- Balance, December 31, 1995 2,295,000 230 4,770 (29,122) (24,122) Year Ended December 31, 1996: Refund of net proceeds of public offering and retirement of common stock (45,000) (5) (3,235) -- (3,240) Net loss -- -- -- (9,809) (9,809) ---------- ---------- ---------- ---------- ---------- Balance, December 31, 1996 2,250,000 225 1,535 (38,931) (37,171) Year Ended December 31, 1997: Net loss -- -- -- (13,796) (13,796) ---------- ---------- ---------- ---------- ---------- Balance, December 31, 1997 2,250,000 225 1,535 (52,727) (50,967) Year Ended December 31, 1998: Net income -- -- -- 9,943 9,943 ---------- ---------- ---------- ---------- ---------- Balance, December 31, 1998 2,250,000 $ 225 $ 1,535 $ (42,784) $ (41,024) ========== ========== ========== ========== ==========
See notes to financial statements. -4- 7 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF CASH FLOWS
Inception Year Ended (February 24, December 31, 1993) to ------------------------ December 31, 1998 1997 1998 -------- -------- ------------- Cash Flows from Operating Activities: Net income (loss) $ 9,943 $(13,796) $(42,784) Adjustments to reconcile net income (loss) to net cash required: Increase in accrued liabilities 1,010 11,662 22,879 Offering costs in excess of proceeds from initial public offering -- -- 21,630 -------- -------- -------- Net cash provided by (used in) operating activities 10,953 (2,134) 1,725 -------- -------- -------- Cash Flows from Financing Activities: Proceeds from issuance of common stock -- -- 8,600 Deferred offering costs, net of accrued liabilities -- -- (5,117) Loans from stockholders -- 1,975 9,450 Refund of net proceeds of public offering -- -- (3,240) Repayment of stockholder loans (9,450) -- (9,450) -------- -------- -------- Net cash provided by (used in) financing activities (9,450) 1,975 243 -------- -------- -------- Net Increase (Decrease) in Cash 1,503 (159) 1,968 Cash, Beginning 465 624 -- -------- -------- -------- Cash, Ending $ 1,968 $ 465 $ 1,968 ======== ======== ========
See notes to financial statements. -5- 8 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND CAPITALIZATION Manatee-American Financial Corp. (the "Company") was incorporated under the laws of the State of Florida on February 24, 1993. The Company's articles of incorporation, as amended in 1997 (see below), provide for the issuance of 20,000,000 shares of common stock, with a par value of $.0001 per share, and 5,000,000 shares of preferred stock, with a par value of $.0001 per share. Series of the preferred stock may be created and issued from time to time, with such designations, preferences, conversion rights and other rights, including voting rights, as adopted by the Board of Directors. STOCK SPLIT On February 11, 1997, the sole director and all of the stockholders authorized a 75 for 1 forward stock split, thereby increasing the corporation's authorized capital stock to 25,000,000 shares to be divided into two classes, 20,000,000 shares of common stock, par value $.0001 per share, and 5,000,000 shares of preferred stock, par value $.0001 per share. All references in the accompanying financial statements to the number of shares of common and preferred stock and per share amounts for all periods have been retroactively restated to reflect the stock split. BUSINESS The Company's business is to seek one or more potential business combinations that may, in the opinion of management, merit the Company's involvement. In seeking to attain its business objectives, the Company will not restrict its search to any particular industry. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. DEVELOPMENT STAGE ENTERPRISE As noted above, the Company was incorporated on February 24, 1993. To date, the Company has been principally engaged in organizational activities and raising capital. Accordingly, the Company is considered to be in the development stage, and the accompanying financial statements represent those of a development stage enterprise. -6- 9 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) OFFERING COSTS Costs incurred in connection with the Company's initial public offering, consisting of professional fees directly associated with the offering amounted to $25,230 (see Note 3). Of this total, an amount equal to the net proceeds realized ($3,600) has been charged against stockholders' equity; the balance ($21,630) has been charged to operations in 1994 as offering costs in excess of proceeds from initial public offering. NET INCOME (LOSS) PER COMMON SHARE Net loss per common share has been computed based upon the weighted average number of shares of common stock outstanding during the periods. The number of shares used in the computation was 2,250,000 shares for 1998 and 1997. Retroactive effect has been given to the number of outstanding shares for the stock split effected on February 11, 1997. NOTE 2. BASIS OF PRESENTATION As disclosed above, the Company was incorporated on February 24, 1993, and is in the development stage and has no meaningful operating history. Accordingly, the Company is considered to be in the development stage, and the accompanying financial statements represent those of a development stage enterprise. The accompanying financial statements have been presented in accordance with generally accepted accounting principles, which assume the continuity of the Company as a going concern. However, as discussed above, the Company is in the development stage and, therefore has generated no operating revenue to date. As reflected in the accompanying financial statements, the Company reflects a deficit accumulated during the development stage and a stockholders' deficiency as of December 31, 1998. This condition raises substantial doubt as to the ability of the Company to continue as a going concern. Management's plans with regard to this matter encompass the successful completion of the Company's business plan and the attainment of profitable operations, which is dependent upon future events, including obtaining adequate financing to fulfill its business plan and identifying one or more potential businesses that may merit the Company's involvement. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. -7- 10 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 3. PUBLIC OFFERING The Company raised additional equity through a Blank Check Offering of its securities. The offering, which was declared effective on September 21, 1994, contemplated the sale of 750,000 shares of common stock at a price of $.08 per share, for gross proceeds of $60,000, before offering costs. The public offering expired on February 17, 1995. Through December 31, 1994, the Company received subscriptions for the sale of 45,000 shares of common stock for proceeds of $3,600. Payment for these subscriptions was received in February 1995. Of these proceeds, the Company retained 10%, or $360, for working capital purposes and deposited the balance ($3,240) into an escrow account pending the consummation of future business combinations. During 1996, the Company determined that it had not made the acquisition of any business enterprise in the time frame prescribed by the rules and regulations of the Securities and Exchange Commission applicable to Blank Check Companies. Accordingly, the Company refunded all funds received from the sale of common stock received in 1994 from the Company's initial public offering, less the 10% allowed to be used for administrative purposes, together with accrued interest, and retired the shares of common stock issued in connection with the initial public offering. The amount refunded ($3,240) has been charged to additional paid-in capital during 1996, and the refund of the accrued interest has been charged to expense during 1996. NOTE 4. RELATED PARTY TRANSACTIONS LOANS PAYABLE, STOCKHOLDERS AND OTHER RELATED PARTIES The Company's stockholders and other related parties have, from time to time, loaned the Company funds to meet its obligations. All loans were repaid during 1998. PROFESSIONAL FEES The Company has incurred legal fees in connection with the initial public offering and continuing legal services with a law firm whose principals were stockholders of the Company, and presently certain stockholders to the Company are related to certain principals of the law firm. Such professional fees amounted to $910 and $8,098 for the years ended December 31, 1998 and 1997, respectively. As of December 31, 1998, unpaid fees to the law firm amounted to approximately $38,000 and are included in accrued liabilities in the accompanying financial statements. ADMINISTRATIVE FACILITIES The Company presently leases office space on a month-to-month basis from a relative of the Company's president, its major stockholder, at no cost. -8- 11 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 4. RELATED PARTY TRANSACTIONS (Continued) ADMINISTRATIVE FACILITIES (Continued) It is anticipated that the Company will maintain its administrative facilities in leased premises owned by a relative of one of the major stockholders of the Company. Such costs, if any, that may be charged for the use of these facilities, as well as any administrative services that may be provided, will be charged to operations at the time of such determination. NOTE 5. INCOME TAXES The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS No. 109 is an asset and liability approach for computing deferred income taxes. The provision for income taxes for the year ended December 31, 1998 was comprised of the following:
Currently payable income taxes $ 2,000 Less benefit of operating loss carryforwards 2,000 --------- Net income tax expense $ -- =========
As of December 31, 1998, the Company had a net operating loss carryforward for Federal and state income tax reporting purposes amounting to approximately $42,000, which expires in varying amounts and years through 2013. The Company presently has no significant temporary differences between financial reporting and income tax reporting. The components of the deferred tax asset as of December 31, 1998 were as follows:
Benefit of net operating loss carryforwards $ 6,300 Less valuation allowance 6,300 -------- Net deferred tax asset $ -- ========
As at December 31, 1998, sufficient uncertainty exists regarding the realizability of these operating loss carryforwards and, accordingly, a valuation allowance of $6,300, which related to the net operating losses, has been established. In accordance with certain provisions of the Tax Reform Act of 1986, a change in ownership of greater than 50% of a corporation within a three year period will place an annual limitation on the Company's ability to utilize its existing tax benefit carryforwards. The Company's utilization of its tax benefit carryforwards may be further restricted in the event of subsequent changes in the ownership of the Company. -9- 12 MANATEE-AMERICAN FINANCIAL CORP. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6. PROPOSED ACQUISITION On July 28, 1998, the Company entered into a letter of intent, which was subsequently extended through January 15, 1999, with an unaffiliated entity to effect a business combination, subject to mutually satisfactory due diligence on the part of both parties and other contingencies. In connection therewith, such entity paid the Company a non-refundable deposit of $12,500 which funds were utilized primarily to repay shareholder loans to the Company and for professional fees. On February 9, 1999, the Company and such entity determined not to proceed further with any business combination. The Company has recorded the receipt of these non-refundable funds as other income during the year ended December 31, 1998. -10- -----END PRIVACY-ENHANCED MESSAGE-----