-----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, JCYejfAArtMMubG14zhIDmrlJNz+qdmKpSXSlhkkoKYZ6NYF4AIDEaaeaTd5tnd4 49Zx0GvenofxOyR6M2xE3g== 0001047469-97-000748.txt : 19971015 0001047469-97-000748.hdr.sgml : 19971015 ACCESSION NUMBER: 0001047469-97-000748 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970730 ITEM INFORMATION: FILED AS OF DATE: 19971014 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VDI MEDIA CENTRAL INDEX KEY: 0001014733 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 954272619 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-21917 FILM NUMBER: 97695476 BUSINESS ADDRESS: STREET 1: 6920 SUNSET BOULEVARD CITY: HOLLYWOOD STATE: CA ZIP: 90028 BUSINESS PHONE: 2139575500 MAIL ADDRESS: STREET 1: 6920 SUNSET BLVD CITY: HOLLYWOOD STATE: CA ZIP: 90028 8-K/A 1 8-K/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) July 30, 1997 VDI MEDIA (Exact Name of Registrant as Specified in its Charter) California 0-21917 95-4272619 (State or Other Jurisdiction (Commission (I.R.S. Identification) of Incorporation) File Number) 6200 Sunset Boulevard Hollywood, California 90028 (Address of Principal Executive Offices) (Zip Code) (213) 957-5500 Registrant's telephone number, including area code - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The undersigned registrant (the "Registrant") hereby amends the following items of its Current Report on Form 8-K dated July 30, 1997 (the "Report") as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS The Registrant amends the information set forth in Items 7(a) and 7(b) of the Report and restates such items in their entirety as set forth below. (a) Financial Statements of Business Acquired 2 REPORT OF INDEPENDENT ACCOUNTANTS September 17, 1997 To the Board of Directors and Shareholder of Multi-Media Services, Inc. In our opinion the accompanying balance sheet and the related statements of operations and retained earnings and of cash flows present fairly, in all material respects, the financial position of Multi-Media Services, Inc. at April 30, 1997 and 1996, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Costa Mesa, California MULTI-MEDIA SERVICES, INC. BALANCE SHEET APRIL 30, 1997 AND 1996 - -------------------------------------------------------------------------------- 1997 1996 ASSETS Current assets: Cash $ 50,000 $ 155,000 Accounts receivable, net of allowance of $23,000 in 1997 1,783,000 1,645,000 Income tax receivable 40,000 Inventory 146,000 108,000 Prepaid expenses and other assets 19,000 30,000 Deferred income taxes 49,000 33,000 ---------- ---------- Total current assets 2,087,000 1,971,000 Property and equipment, net (Note 3) 2,210,000 1,666,000 Deposits 34,000 13,000 ---------- ---------- $4,331,000 $3,650,000 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Accounts payable $ 685,000 $ 540,000 Accrued expenses 174,000 145,000 Sales tax payable 23,000 24,000 Income taxes payable 9,000 Notes payable, current 735,000 185,000 Note payable to shareholder 1,509,000 1,462,000 ---------- ---------- Total current liabilities 3,126,000 2,365,000 Notes payable, net of current portion 629,000 583,000 Deferred income taxes 60,000 62,000 ---------- ---------- 3,815,000 3,010,000 ---------- ---------- Commitments (Note 6) Shareholder's equity: Common stock, $1 par value, 75,000 shares authorized; 47,000 shares issued and outstanding 47,000 47,000 Retained earnings 469,000 593,000 ---------- ---------- Total shareholder's equity 516,000 640,000 ---------- ---------- $4,331,000 $3,650,000 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these financial statements. MULTI-MEDIA SERVICES, INC. STATEMENT OF OPERATIONS AND RETAINED EARNINGS FOR THE YEARS ENDED APRIL 30, 1997 AND 1996 - -------------------------------------------------------------------------------- 1997 1996 Sales $6,995,000 $5,941,000 Cost of sales 5,292,000 4,339,000 ---------- ---------- Gross profit 1,703,000 1,602,000 Selling, general and administrative expense 1,701,000 1,333,000 ---------- ---------- Operating income 2,000 269,000 ---------- ---------- Interest expense 193,000 194,000 Interest income 2,000 1,000 ---------- ---------- (Loss) income before income taxes (189,000) 76,000 ---------- ---------- (Benefit) provision for income taxes (65,000) 43,000 ---------- ---------- Net (loss) income (124,000) 33,000 Retained earnings, beginning of year 593,000 560,000 ---------- ---------- Retained earnings, end of year $ 469,000 $ 593,000 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of these financial statements. MULTI-MEDIA SERVICES, INC. STATEMENT OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 1997 AND 1996 - -------------------------------------------------------------------------------- 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $(124,000) $ 33,000 Adjustments to reconcile net (loss) income to net cash provided by operations: Depreciation 630,000 557,000 Provision for bad debts 50,000 Deferred income taxes (18,000) 7,000 Changes in assets and liabilities: Accounts receivable (188,000) 104,000 Inventory (38,000) (29,000) Prepaid expenses and other assets 11,000 1,000 Deposits (21,000) Accounts payable 145,000 22,000 Accrued expenses 29,000 (296,000) Sales tax payable (1,000) 2,000 Income taxes payable (49,000) 9,000 --------- ---------- Net cash provided by operating activities 426,000 410,000 --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (665,000) (386,000) CASH FLOWS FROM FINANCING ACTIVITIES: New borrowings 400,000 832,000 Loan repayments (313,000) (1,002,000) Net increase in note payable to shareholder 47,000 212,000 --------- ---------- Net cash provided by financing activities 134,000 42,000 --------- ---------- Net (decrease) increase in cash (105,000) 66,000 Cash, beginning of year 155,000 89,000 --------- ---------- Cash, end of year $ 50,000 $ 155,000 --------- ---------- --------- ---------- SUPPLEMENTAL INFORMATION: Cash payments for: Interest $ 190,000 $ 192,000 Income taxes $ 4,000 $ 29,000 NON-CASH INVESTING AND FINANCING ACTIVITIES: During the year ended April 30, 1997, long-term debt of $509,000 was incurred to purchase equipment and a vehicle. The accompanying notes are an integral part of these financial statements. MULTI-MEDIA SERVICES, INC. NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997 AND 1996 PAGE 1 - -------------------------------------------------------------------------------- 1. THE COMPANY Multi-Media Services, Inc. (the Company) provides broadcast duplication, distribution and computerized storage services primarily to advertising agencies throughout the United States. The Company's principal administrative facility is located in Hollywood, California. Additional duplication and distribution facilities are located in Chicago, New York City and San Francisco. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUES AND RECEIVABLES. The Company records revenues and receivables at the time products are delivered to customers. Although sales and receivables are concentrated in the advertising industry, management believes credit risk is limited due to the financial stability of the customer base. CASH AND CASH EQUIVALENTS. The Company considers cash equivalents to be all highly liquid investments with an original maturity of three months or less. INVENTORIES. Inventories comprise raw materials, principally tape stock, and are stated at the lower of cost or market. Cost is determined using the average cost method. PROPERTY AND EQUIPMENT. Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Maintenance, repairs and minor improvements are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally five years. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the estimated useful lives of the improvements or the remaining lease term. INCOME TAXES. Income taxes are provided for using the liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable expected tax rates. A valuation allowance is provided when it is more likely than not that some portion or all the deferred tax assets will not be realized. 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. MULTI-MEDIA SERVICES, INC. NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997 AND 1996 PAGE 2 - -------------------------------------------------------------------------------- 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following: 1997 1996 Automobiles $ 103,000 $ 88,000 Furniture and fixtures 403,000 366,000 Leasehold improvements 665,000 554,000 Dub center equipment 4,859,000 3,960,000 Computer network system 185,000 188,000 ----------- ----------- 6,215,000 5,156,000 Less accumulated depreciation (4,005,000) (3,490,000) ----------- ----------- $ 2,210,000 $ 1,666,000 ----------- ----------- ----------- ----------- Depreciation expense was $630,000 and $557,000 for the years ended April 30, 1997 and 1996, respectively. 4. BANK LINE OF CREDIT The Company has a $400,000 revolving credit agreement with a bank. Amounts available pursuant to this agreement are secured by substantially all of the Company's assets. In addition, repayment of amounts borrowed is guaranteed by the Company's shareholder. Interest accrues at a rate of 9.25%. 5. LONG-TERM DEBT AND NOTES PAYABLE NOTE PAYABLE TO RELATED PARTY The Company is obligated on a note payable to a shareholder, as described in Note 8. EQUIPMENT FINANCING The Company has financed the purchase of equipment through the issuance of notes payable to banks. These notes bear interest at rates ranging from 6.95% to 9.25% and are payable in monthly installments through April 2001. MULTI-MEDIA SERVICES, INC. NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997 AND 1996 PAGE 3 - -------------------------------------------------------------------------------- Annual maturities of long-term debt are as follows: YEAR ENDED APRIL 30, AMOUNT 1998 $2,244,000 1999 315,000 2999 261,000 2001 53,000 ---------- $2,873,000 ---------- ---------- 6. COMMITMENTS The Company leases office and production facilities in California, New York and Illinois with various lease expiration dates through 2005. Total rental expense was approximately $620,000 and $541,000 for the years ended April 30, 1997 and 1996, respectively. Approximate minimum annual rentals under these noncancellable operating leases are as follows: YEAR ENDED APRIL 30, AMOUNT 1998 $ 567,000 1999 453,000 2000 423,000 2001 430,000 2002 436,000 Thereafter 769,000 ---------- $3,078,000 ---------- ---------- MULTI-MEDIA SERVICES, INC. NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997 AND 1996 PAGE 4 - -------------------------------------------------------------------------------- 7. INCOME TAXES The provision for income taxes is summarized as follows: YEAR ENDED APRIL 30, 1997 1996 Current tax (benefit) expense Federal $ (47,000) $ 31,000 State 5,000 ---------- ---------- Total current (47,000) 36,000 ---------- ---------- ---------- ---------- Deferred tax (benefit) expense Federal $ (4,000) $ 6,000 State (14,000) 1,000 ---------- ---------- Total deferred (18,000) 7,000 ---------- ---------- $ (65,000) $ 43,000 ---------- ---------- ---------- ---------- A reconciliation of income tax expense computed at the federal statutory rates to the Company's effective income tax expense is as follows: YEAR ENDED APRIL 30, 1997 1996 Tax expense at statutory rate $ (64,000) $ 26,000 State franchise tax, net of federal benefit (11,000) 5,000 Meals and entertainment 11,000 10,000 Officer life insurance 2,000 2,000 Other (3,000) ---------- ---------- $ (65,000) $ 43,000 ---------- ---------- ---------- ---------- MULTI-MEDIA SERVICES, INC. NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997 AND 1996 PAGE 5 - -------------------------------------------------------------------------------- The tax effect of net operating loss (NOL) and tax credit carryforwards and significant temporary differences between reported and taxable earnings that give rise to net deferred tax liabilities were as follows: APRIL 30, 1997 1996 DEFERRED TAX ASSETS: Benefit from net operating loss carryforward $ 14,000 Tax credits 82,000 $ 69,000 Allowance for doubtful accounts 9,000 Accrued vacation 40,000 33,000 ---------- ---------- Gross deferred tax assets 145,000 102,000 Valuation allowance (54,000) (46,000) ---------- ---------- DEFERRED TAX LIABILITIES: Accumulated deprecation 102,000 85,000 ---------- ---------- Gross deferred tax liabilities 102,000 85,000 ---------- ---------- Net deferred tax liabilities $ (11,000) $ (29,000) ---------- ---------- ---------- ---------- The remaining unutilized federal NOL carryforward was approximately $15,000 at April 30, 1997. Federal NOL carryforwards that have not been utilized expire in 2012. Tax credits of approximately 82,000 expire in varying amounts from 2008 through 2012. A valuation allowance is provided since it is more likely than not that the tax benefits of net operating loss carryforwards and certain tax credits will not be realized. 8. RELATED PARTY TRANSACTIONS The Company leases its principal business facility in California from a shareholder of the Company. This lease provides for monthly payments of $19,000 through April 14, 2005. Rent expense on this lease, for the years ended April 30, 1997 and 1996, was $229,000. The Company is also obligated on a note payable to a shareholder. Interest is accrued and paid monthly at 8 percent. Principal and any unpaid interest are due on April 30, 1998. Interest expense on this note was $117,000 and $95,000 for the years ended April 30, 1997 and 1996, respectively. MULTI-MEDIA SERVICES, INC. NOTES TO FINANCIAL STATEMENTS APRIL 30, 1997 AND 1996 PAGE 6 - -------------------------------------------------------------------------------- 9. DEFINED CONTRIBUTION RETIREMENT PLANS The Company sponsors a profit sharing plan that covers substantially all eligible employees. Contributions to the plan are discretionary and are limited to 15% of aggregate annual compensation of the participating employees. There were no contributions for the years ended April 30, 1997 and 1996. During 1996 the Company established a 401(k) profit sharing plan. Company contributions are also discretionary and are limited to 4% of eligible wages. Company contributions for the year ended April 30, 1997 totaled $11,000. 10. SALES TO MAJOR CUSTOMERS Sales to a single customer amounted to $1,129,000 and $1,284,000 for the years ended April 30, 1997 and 1996, respectively, which represented 16% and 22%, respectively, of total sales for the years then ended. Sales to another customer amounted to $700,000 for the year ended April 30, 1996, which represented 12% of total sales. 11. SUBSEQUENT EVENT In July 1997, the Company's shareholder agreed to sell all outstanding shares of the Company's common stock, effective July 31, 1997, to VDI Media. As part of this transaction, VDI Media paid the outstanding principle and interest on the note payable to shareholder. During July 1997 the credit line available under the revolving credit agreement with the bank as described in Note 4 was increased to $600,000. Item 7 (a) (2) Interim Period Financial Statements Multi-Media Services, Inc. Balance Sheet ------------- JUNE 30, 1997 ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 129,000 Accounts receivable, net 1,782,000 Inventories 146,000 Deferred income taxes 49,000 Prepaid expenses 53,000 ----------- Total current assets 2,159,000 Property and equipment, net 2,194,000 Intangible and other assets 41,000 ----------- Total assets 4,394,000 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 638,000 Other accrued liabilities 176,000 Current portion of notes payable 896,000 Note payable to shareholder 1,539,000 ----------- Total current liabilities 3,249,000 ----------- Deferred income taxes 60,000 Long-term portion of notes payable 596,000 Shareholders' equity: Common stock 47,000 Retained earnings 442,000 ----------- Total shareholders' equity 489,000 ----------- Total liabilities and shareholder's equity $ 4,394,000 ----------- ----------- Statement of Operations For the Two Month Period Ending June 30, 1997 and 1996 1997 1996 ----------- ---------- (UNAUDITED) Sales $ 1,065,000 $ 961,000 Cost of Sales 822,000 683,000 ----------- ---------- Gross Profit 243,000 278,000 Marketing, general and administrative expenses 236,000 141,000 ----------- ---------- Income from operations 7,000 137,000 Interest expense 35,000 32,000 Other income 1,000 ----------- ---------- (Loss) income before income taxes (27,000) 105,000 Provision for income taxes 36,000 ----------- ---------- Net (loss) income $ (27,000) $ 69,000 ----------- ---------- ----------- ---------- Multi-Media Services, Inc. Statement of Cash Flows For the Two Month Period Ending June 30, 1997 and 1996 1997 1996 ----------- ---------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income (27,000) 69,000 Adjustments to reconcile net (loss) income to net cash provided by operations: Depreciation 101,000 92,000 Deferred income taxes 23,000 Changes in assets and liabilities: Accounts receivable 1,000 10,000 Inventory 14,000 Prepaid expenses and other assets 6,000 10,000 Deposits (7,000) (8,000) Accounts payable (47,000) (80,000) Accrued expenses (21,000) (27,000) ----------- ---------- Net cash provided by operating activities 6,000 103,000 ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (85,000) (36,000) CASH FLOWS FROM FINANCING ACTIVITIES: New borrowings 164,000 Loan repayments (36,000) (28,000) Net increase in note payable to shareholer 30,000 (1,000) ----------- ---------- Net cash provided by (used for) financing activities 158,000 (29,000) ----------- ---------- Net increase in cash 79,000 38,000 Cash, beginning of period 50,000 155,000 ----------- ---------- Cash, end of period 129,000 193,000 ----------- ---------- ----------- ---------- Multi-Media Services, Inc. Notes to Interim Financial Statements 1. The financial statements included herein are based in part on estimates and include such adjustments (consisting solely of normal, recurring adjustments) which management believes are necessary for fair presentation of the financial position of Multi-Media Services Inc. (Multi-Media) at June 30, 1997 and the results of its operations and its cash flows for the two month periods ended June 30, 1997 and 1996. The financial statements and related notes have been prepared in accordance with generally accepted accounting principles applicable to interim periods. Consequently, they do not include all generally accepted accounting disclosures required for complete annual financial statements. These financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended April 30, 1997 contained in this current report on Form 8-K. The results of operations for the periods presented are not necessarily indicative of results to be expected for any subsequent fiscal year or interim period thereof. 2. On July 30, 1997, VDI Media acquired all of the outstanding shares of Multi-Media for a purchase price of $7.0 million less $1.7 million (the amount by which Multi-Media's management represented its liabilities, including long-term liabilities, exceeded its current assets as of June 30, 1997), plus a post-closing adjustment based upon Multi-Media's closing financial statements. In addition, VDI Media may be required to pay, as an earn-out, up to $100,000, with respect to each quarter in the period commencing January 1, 1998 to December 31, 2004 in which Multi-Media achieves certain financial goals. Total earn-out payments can not exceed $2 million. (b) Pro Forma Financial Information The following unaudited pro forma financial statements give effect to the acquisition of Multi-Media. The unaudited pro forma combined balance sheet presents the combined financial position of the Company and Multi-Media at June 30, 1997 as if the Company had acquired Multi-Media on that date. Such pro forma information is based upon the unaudited historical balance sheet data of the Company and Multi-Media on June 30, 1997. The unaudited pro forma combined statements of operations for the six months ended June 30, 1997 and the most recently completed fiscal year ended December 31, 1996, reflect adjustments as if the transaction had occurred on January 1, 1996. The acquisition is being accounted for as a purchase. The historical results of operations of Multi-Media for the three months ended March 31, 1997 have been included in both the pro forma statement of operations for the six months ended June 30, 1997 and for the year ended December 31, 1996. In management's opinion, the inclusion of this three month period in both pro forma presentations does not materially impact the pro forma results. For the three month period ended March 31, 1997, Multi-Media had revenues of $1,962,000 and a net loss of $153,000. The unaudited pro forma combined financial statements reflect the Company's allocation of the purchase price of approximately $5.3 million to the assets and liabilities of Multi-Media based upon the Company's current estimates of the relative values of the assets acquired and liabilities assumed. The final allocation of the purchase price may vary as additional information is obtained, and differ from that used in the unaudited pro forma combined financial statements. The unaudited pro forma combined financial statements should be read in conjunction with the separate historical financial information and related notes of Multi-Media, appearing in Item 7 (a) of this current report on Form 8-K and the historical financial statements, related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company for the year ended December 31, 1996, and the six months ended June 30, 1997, previously filed with the Securities and Exchange Commission. The pro forma information is not necessarily indicative of the results that would have been reported had the acquisition actually occurred on the dates specified, nor is it necessarily indicative of the future results of the combined companies. PRO FORMA COMBINED BALANCE SHEET The following unaudited pro forma combined balance sheet presents the combined financial position of the Company and Multi-Media as of June 30, 1997. Such unaudited pro forma information is based on the combined historical balance sheets of the Company and Multi-Media as of June 30, 1997, giving effect to the pro forma adjustments described in the accompanying Notes to Pro Forma Combined Financial Statements.
JUNE 30, 1997 (UNAUDITED) ------------------------------------------------------------- PRO FORMA ----------------------------- MULTI-MEDIA VDI MEDIA SERVICES ADJUSTMENTS COMBINED ------------- ----------- ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 10,747,000 $ 129,000 $(6,860,000) (A),(B) $4,016,000 Accounts receivable, net 5,999,000 1,782,000 7,781,000 Other receivables 5,000 5,000 Inventories 155,000 146,000 301,000 Deferred income taxes 49,000 49,000 Prepaid expenses 662,000 53,000 715,000 ------------- ---------- ------------- ------------ Total current assets 17,568,000 2,159,000 (6,860,000) 12,867,000 Property and equipment, net 5,448,000 2,194,000 - 7,642,000 Intangible and other assets 2,338,000 41,000 4,832,000 (A) 7,211,000 ------------- ---------- ------------- ------------ Total assets 25,354,000 4,394,000 (2,028,000) 27,720,000 ------------- ---------- ------------- ------------ ------------- ---------- ------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,276,000 $ 638,000 $ 2,914,000 Other accrued liabilities 1,794,000 176,000 1,970,000 Current portion of notes payable 14,000 896,000 910,000 Note payable to shareholder 1,539,000 (1,539,000) (B) - Current portion of capitalized lease obligations 814,000 814,000 Deferred income taxes 185,000 - 185,000 ------------- ---------- ------------- ------------ Total current liabilities 5,083,000 3,249,000 (1,539,000) 6,793,000 ------------- ---------- ------------- ------------ Deferred income taxes 60,000 60,000 Capitalized lease obligations, less current portion 855,000 855,000 Long-term portion of notes payable 596,000 596,000 Shareholders' equity: Common stock 19,056,000 47,000 (47,000) (A) 19,056,000 Retained earnings 360,000 442,000 (442,000) (A) 360,000 ------------- ---------- ------------- ------------ Total shareholders' equity 19,416,000 489,000 (489,000) 19,416,000 ------------- ---------- ------------- ------------ Total liabilities and shareholders' equity $ 25,354,000 $4,394,000 $ (2,028,000) $ 27,720,000 ------------- ---------- ------------- ------------ ------------- ---------- ------------- ------------
PRO FORMA COMBINED STATEMENT OF OPERATIONS The following unaudited pro forma combined statement of operations presents the combined results of operations of the Company and Multi-Media for the year ended December 31, 1996 by combining the historical statement of operations of the Company for the year ended December 31, 1996 with the historical statement of operations of Multi-Media for the twelve months ended March 31, 1997, giving effect to the pro forma adjustments described in the accompanying Notes to Pro Forma Combined Financial Statements.
YEAR ENDED TWELVE MONTHS 12/31/96 ENDED 3/31/97 PRO FORMA ---------- ------------- ------------------------- MULTI-MEDIA (UNAUDITED) VDI MEDIA SERVICES ADJUSTMENT COMBINED ------------ ------------- ---------- ------------ Sales $ 24,780,000 $ 6,974,000 $ - $ 31,754,000 Cost of Sales 14,933,000 5,083,000 (339,000) (C) 19,677,000 ------------ ------------- ---------- ------------ Gross Profit 9,847,000 1,891,000 339,000 12,077,000 Marketing, general and administrative expenses 5,720,000 1,716,000 242,000 (D) 7,678,000 ------------ ------------- ---------- ------------ Income from operations 4,127,000 175,000 97,000 4,399,000 Interest expense 291,000 188,000 479,000 Other income 68,000 2,000 70,000 ------------ ------------- ---------- ------------ Income (loss) before income taxes 3,904,000 (11,000) 97,000 3,990,000 Provision (benefit) for income taxes 68,000 (5,000) 136,000 (E) 199,000 ------------ ------------- ---------- ------------ Net income (loss) $ 3,836,000 $ (6,000) $ (39,000) $ 3,791,000 ------------ ------------- ---------- ------------ ------------ ------------- ---------- ------------ Earnings per share $ 0.57 $ 0.57 ------------ ------------ ------------ ------------ Weighted average number of shares 6,694,503 6,694,503 ------------ ------------ ------------ ------------
See accompanying Notes to Pro Forma Combined Financial Statements. PRO FORMA COMBINED STATEMENT OF OPERATIONS The following unaudited pro forma combined statement of operations presents the combined results of operations of the Company and Multi-Media for the six months ended June 30, 1997 by combining the historical statements of operations of the Company and Multi-Media for the period, giving effect to the pro forma adjustments described in the accompanying Notes to Pro Forma Combined Financial Statements.
SIX MONTHS ENDED JUNE 30, 1997 PRO FORMA --------------------------- ------------------------- MULTI-MEDIA VDI MEDIA SERVICES ADJUSTMENT COMBINED ------------ ----------- ----------- ----------- Sales $ 17,298,000 $ 3,643,000 $ - $20,941,000 Cost of Sales 10,417,000 2,841,000 (181,000) (C) 13,077,000 ------------ ----------- ----------- ----------- Gross Profit 6,881,000 802,000 181,000 7,864,000 Marketing, general and administrative expenses 4,236,000 1,100,000 121,000 (D) 5,457,000 ------------ ----------- ----------- ----------- Income (loss) from operations 2,645,000 (298,000) 60,000 2,407,000 Interest expense 165,000 110,000 275,000 Other income 151,000 2,000 153,000 ------------ ----------- ----------- ----------- Income (loss) before income taxes 2,631,000 (406,000) 60,000 2,285,000 Provision (benefit) for income taxes 942,000 (130,000) 72,000 (E) 884,000 ------------ ----------- ----------- ----------- Net income (loss) $ 1,689,000 $ (276,000) $ (12,000) $ 1,401,000 ------------ ----------- ----------- ----------- ------------ ----------- ----------- ----------- Earnings per share $ 0.20 $ 0.16 ------------ ----------- ------------ ----------- Weighted average number of shares 8,551,333 8,551,333 ------------ ----------- ------------ -----------
See accompanying Notes to Pro Forma Combined Financial Statements. NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS The historical results of operations of Multi-Media for the three months ended March 31, 1997 have been included in both the pro forma statement of operations for the six months ended June 30, 1997 and for the year ended December 31, 1996. In management's opinion, the inclusion of this three month period in both pro forma presentations does not materially impact the pro forma results. For the three month period ended March 31, 1997, Multi-Media had revenues of $1,962,000 and a net loss of $153,000. The following significant adjustments were made to the historical balance sheets of the Company and Multi-Media at June 30, 1997 or historical statements of operations of the Company and Multi-Media, as applicable, to arrive at the pro forma combined balance sheet and pro forma combined statements of operations: (A) Pro forma adjustments have been made to (i) record estimated goodwill of $4.8 million equal to the excess of the initial consideration over the fair market value assigned to specific assets less liabilities assumed, (ii) eliminate the equity of Multi-Media and (iii) reflect the use of available cash to purchase Multi-Media. (B) Pro forma adjustments have been made to cash and current portion of notes payable to reflect the repayment of the note payable to the former shareholder of Multi-Media made at the closing of the acquisition in accordance with the purchase agreement. (C) A pro forma adjustment has been made to cost of sales to reflect a reduction for salaries of employees terminated in connection with the acquisition of Multi-Media which were effected immediately thereafter. The related severance costs were not significant. (D) A pro forma adjustment has been made to marketing, general and administrative expenses to reflect the amortization over 20 years of the goodwill related to the acquisition of Multi-Media. (E) A pro forma adjustment has been made to reflect the income tax effects of the pro forma adjustments described above. 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, the undersigned, thereunto duly authorized, in Los Angeles, California on October 13, 1997. Date: October 13, 1997 VDI Media By: /s/ Donald Stine ------------------------------- Name: Donald Stine Title: Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----