-----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, HkC+LVAeUgn9v1ZjAfEIau+dMjIp/ik5QaxBhce+IMxBaT8SEbyhyNj5fDbz/Yr9 6hUF5Bg9VLUdpcheyz08aw== 0001144204-05-008210.txt : 20050321 0001144204-05-008210.hdr.sgml : 20050321 20050321143202 ACCESSION NUMBER: 0001144204-05-008210 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040727 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050321 DATE AS OF CHANGE: 20050321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYSTEMS EVOLUTION INC CENTRAL INDEX KEY: 0000104375 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 820291029 STATE OF INCORPORATION: ID FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-31090 FILM NUMBER: 05693898 BUSINESS ADDRESS: STREET 1: 10707 CORPORATE DRIVE, SUITE 156 CITY: STAFFORD STATE: TX ZIP: 77477 BUSINESS PHONE: (281) 265-7075 MAIL ADDRESS: STREET 1: 10707 CORPORATE DRIVE, SUITE 156 CITY: STAFFORD STATE: TX ZIP: 77477 FORMER COMPANY: FORMER CONFORMED NAME: WALLACE SILVER INC DATE OF NAME CHANGE: 20010118 8-K/A 1 v14694_8ka.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 8-K/A 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 27, 2004 Commission File Number 000-31090 SYSTEMS EVOLUTION INC. -------------------------- (Exact name of registrant) IDAHO 82-0291029 ------------------------ ------------------------------------ (State of incorporation) (I.R.S. Employer Identification No.) 10777 Westheimer Road, Suite 810, Houston, Texas 77477 ------------------------------------------------------ (Address of principal executive offices and zip code) (713) 979-1600 ------------------------------- (Registrant's telephone number) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): { } Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) { } Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12) { } Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b)) { } Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c)) [GRAPHIC OMITTED] Item 2. Acquisition or disposition of Assets Purchase of CMS Technology Services LP 1. The Transaction. Systems Evolution Inc. ("SEVI") entered into a definitive agreement to acquire CMS Technology Services LP and its general partner CMS Associates, LLC ("CMS"), a San Antonio based network integration firm, on June 10, 2004, and closed the acquisition on July 27, 2004. In connection with the acquisition of CMS from its two stockholders, we paid the two selling stockholders $10,000 in cash, issued them $40,000 aggregate principal amount of our non-interest bearing notes dependent upon the note holders being retained by SEVI, and directly issued the two shareholders 200,000 shares of our common stock. The shares were valued at $0.52 per share for a total share price of $104,000. 2. Description of Business of CMS Technology Services LP General. CMS's primary focus is Microsoft and Novell network integration. Item 9.01. Financial Statements or Exhibits a. Financial Statements. CMS TECHNOLOGY SERVICES LP FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT JUNE 30, 2004 CMS TECHNOLOGY SERVICES LP FINANCIAL STATEMENTS JUNE 30, 2004 CONTENTS Page ---- Independent Auditor's Report............................................. F1 Balance Sheet............................................................ F2 Statement of Operations.................................................. F3 Statement of Members' Deficit............................................ F4 Statement of Cash Flows.................................................. F5 Notes to Financial Statements............................................ F6-7 Item 9.01 Financial Statements and Exhibits (a) Financial statements of businesses acquired. INDEPENDENT AUDITOR'S REPORT Board of Directors and Stockholders CMS Technology Services, LP San Antonio, Texas We have audited the accompanying balance sheet of CMS Technology Services LP as of June 30, 2004, and the related statements of operations, members' deficit, and cash flows for each of the two years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 CMS Technology Services LP as of June 30, 2004, and the results of its operations and its cash flows for each of the two years then ended in conformity with accounting principles generally accepted in the United States of America. Lopez, Blevins, Bork & Associates, LLP Houston, Texas January 3, 2005 CMS TECHNOLOGY SERVICES, LP BALANCE SHEET JUNE 30, 2004 ASSETS CURRENT ASSETS: Cash $ 6,553 Accounts receivable, net of allowance of $0 32,415 --------- Total current assets 38,968 Deposits 1,643 Furniture and Equipment, net 18,358 --------- Total assets $ 58,969 ========= LIABILITIES AND PARTNERS' DEFICIT CURRENT LIABILITIES: Current maturities of note payable $ 13,800 Line of credit 39,000 Accounts payable 43,535 Sales taxes payable 3,037 --------- Total current liabilities 99,372 LONG-TERM LIABILITIES: Notes payable 56,649 Unearned revenue 57,549 --------- Total long-term liabilities 114,198 COMMITMENTS PARTNERS' DEFICIT: Partnership deficit (21,776) Accumulated deficit (132,825) --------- Total members' deficit (154,601) --------- Total liabilities and members' deficit $ 58,969 ========= See accompanying summary of accounting policies and notes to financial statements. CMS TECHNOLOGY SERVICES, LP STATEMENT OF OPERATIONS YEARS ENDED JUNE 30, 2004 AND 2003 2004 2003 --------- --------- REVENUES $ 676,944 $ 874,422 COST OF SALES 362,424 414,419 --------- --------- GROSS MARGIN 314,520 460,003 OPERATING EXPENSES: GENERAL AND ADMINISTRATIVE EXPENSES 418,376 417,263 DEPRECIATION 4,447 1,911 IMPAIRMENT 54,000 -- GAIN ON SALE OF ASSETS (29,478) -- --------- --------- 447,345 497,810 --------- --------- NET LOSS $(132,825) $ (37,807) ========= ========= See accompanying summary of accounting policies and notes to financial statements. CMS TECHNOLOGY SERVICES, LP STATEMENTS OF MEMBERS' DEFICIT PERIOD FROM JULY 1, 2002 THROUGH JUNE 30, 2004 Total --------- Balances, July 1, 2002 $ (28,041) Net loss (37,807) Partner contributions 41,151 --------- Balances, July 1, 2003 (24,697) Partner Contributions 43,906 Partner Distributions (40,985) Net loss (132,825) --------- Balances, June 30, 2004 $(154,601) ========= See accompanying summary of accounting policies and notes to financial statements. CMS TECHNOLOGY SERVICES, LP STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(132,825) (37,807) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 4,447 1,911 Impairment 54,000 -- Changes in assets and liabilities: Accounts receivable (6,941) 26,457 Inventory -- 7,804 Other Assets 79 2,436 Accounts payable 9,829 (19,219) Accrued expenses (3,587) (2,858) Unearned revenue 57,549 -- --------- --------- Net cash provided by (used in) operating activities (17,449) (21,276) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (18,696) (4,145) --------- --------- Net cash used in investing activities (18,696) (4,145) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of debit (1,314) (12,506) Proceeds from debt 5,268 21,879 Partner Distributions (40,985) -- Partner Contributions 43,906 41,151 --------- --------- Net provided by financing activities 6,875 50,524 --------- --------- NET CHANGE IN CASH (29,270) 25,103 CASH, beginning of year 35,823 10,720 --------- --------- CASH, end of year $ 6,553 $ 35,823 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 6,035 $ 5,793 ========= ========= Income taxes paid $ -- $ -- ========= =========
See accompanying summary of accounting policies and notes to financial statements. CMS TECHNOLOGY SERVICES, LP NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION CMS Technology Services LP (CMS) was formed in January 1, 2001. CMS is an IT support and systems integration company providing services primarily in San Antonio, Texas. The objective of CMS is to work with its customers to help improve efficiency, productivity and profitability of their operations. Cash and Cash Equivalents - CMS considers all highly liquid investments purchased with an original maturity of three months or less to be cash and cash equivalents. Furniture and Equipment - Property and equipment is stated at cost with depreciation calculated using the straight-line method over the estimated useful lives. When assets are retired or otherwise removed from the accounts, any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged to expense as incurred, and significant renewals and improvements are capitalized. Revenue Recognition - Revenues are recognized as services are provided, in accordance with customer consulting agreements. Allowance for Doubtful Accounts - Earnings are charged with a provision for doubtful accounts based on past experience, current factors, and management's judgment about collectiblility. Accounts deemed uncollectible are applied against the allowance for doubtful accounts. Income Taxes - The Company is a general partnership. Under this structure for income tax purposes the net income or loss of the general partnership is allocated directly to the respective partners and is included in their individual tax returns. Therefore, no provision for income tax has been included in the financial statements for these entities. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - IMPAIRMENT During the year ended June 30, 2004, the Company made a distribution to one of its partners in exchange for their interests in the Company and accordingly recorded an impairment charge related to the intangible assets acquired from the former partner's company. NOTE 3 - FURNITURE AND EQUIPMENT Furniture and equipment consisted of the following as of June 30, 2004: ESTIMATED USEFUL LIVES IN YEARS ---------------- Furniture and office equipment 5 - 7 $ 6,545 Computer equipment 3 - 5 18,418 ---------- 24,963 Less: accumulated depreciation (6,605) ---------- $ 18,358 NOTE 4 - LINE OF CREDIT CMS entered into a revolving line of credit with Bank of America which is unsecured. The annual interest rate on unpaid principal is the prime rate plus 2%. Principal and interest were due on October 4, 2004. NOTE 5 - NOTES PAYABLE CMS has a note payable to a bank that accrues interest at prime rate (4% at December 31, 2003) plus 1% and is due in monthly installments of $1,464 including interest with the remaining unpaid principal and interest due February 5, 2009. At June 30, 2004 $70,449 was outstanding on the note. The note is unsecured. Principal repayments are as follows: Amount ------------ 2005 $ 13,800 2006 14,500 2007 15,100 2008 15,800 2009 11,249 ------------ $ 70,449 ============ NOTE 6 - UNEARNED REVENUE CMS sells blocks of time to clients for future IT repair, service, and maintenance needs which have no expiration date. At June 30, 2004, CMS has $57,549 remaining in future service due to clients. NOTE 7 - MAJOR CUSTOMERS During the year ended June 30, 2004, 27% of the Company's billings were to three customers. NOTE 8 - COMMITMENTS CMS currently leases its offices and warehouses under non-cancelable agreements which expire October 31, 2007. The lease provides for monthly payments of base rent and an unallocated portion of building operating costs. Minimum future lease rentals are as follows: June 30, Amount 2005 $ 22,490 2006 26,268 2007 29,850 2008 10,348 ------------ Totals $ 88,956 ============ Rent expense was $17,921 and $17,896 for the years ending June 30, 2004 and 2003, respectively. NOTE 9 - SUBSEQUENT EVENT On July 24, 2004, Systems Evolution Inc. acquired 100% ownership of CMS for $40,000 in notes payable and 200,000 shares of restricted common stock of Systems Evolutions Inc. (b) Pro forma financial information. SYSTEMS EVOLUTION, INC. PRO FORMA FINANCIAL INFORMATION INTRODUCTION The audited pro forma consolidated balance sheet includes the historical accounts of the Company and CMS Technology Services, LP at May 31, 2004 and gives effect to the CMS Technology acquisition and related financings and the issuance of $104,000 of common stock to purchase CMS Technology. The audited pro forma consolidated statements of operations for the year ended May 31, 2004 includes the historical operations of the Company and gives effect to the acquisition and related financings as if they had occurred at June 1, 2003. The audited pro forma consolidated financial statements are based on available information and the assumptions and adjustments described in the accompanying notes. The audited pro forma consolidated statements of operations do not purport to represent what our results of operations actually would have been if the events described above had occurred as of the dates indicated or what such results will be for any future periods. The audited pro forma financial statements are based upon assumptions and adjustments that we believe are reasonable. The audited pro forma consolidated financial statements are qualified in their entirety and should be read in conjunction with the historical financial statements and accompanying notes of the Company included in the annual report on Form 10-K/A for the year ended May 31, 2004, the quarterly report on Form 10-Q for the six month period ended November 30, 2004 and the audited financial statements of CMS Technology Services, LP for the year ended June 30, 2004. The CMS Technology, LP acquisition has been accounted for using the purchase method of accounting and, accordingly, the assets acquired and liabilities assumed have been recorded at their estimated fair values based upon estimates as of June 30, 2004. Further adjustments to the acquired assets and assumed liabilities will be made following completion of a third-party appraisal of the intangible assets acquired and following more detailed reviews by management of tangible assets acquired and liabilities assumed. Changes in the estimated fair value of acquired assets and assumed liabilities will be reflected as a change in the allocated fair value of the identifiable tangible and intangible assets and liabilities and goodwill in the period in which this determination is made. The following audited pro forma consolidated balance sheet and statement of operations should be read in connection with the "Notes to Audited Pro Forma Consolidated Balance Sheet" and "Notes to Audited Pro Forma Consolidated Statements of Operations" presented below and the historical financial statements included elsewhere or incorporated by reference. SYSTEMS EVOLUTION, INC. PROFORMA CONDENSED CONSOLIDATED BALANCE SHEETS (Audited) MAY 31, 2004
CMS Systems Technology Pro Forma Evolution, Services, Adjustments Pro Forma Inc. Inc.(a) (b) Consolidated ----------- ----------- -------- ----------- ASSETS Cash $ 19,522 $ 6,553 $ 26,075 Accounts receivable, net of allowance of $15,000 and $0 107,369 32,415 139,784 ----------- ----------- -------- ----------- Total current assets 126,891 38,968 165,859 INTANGIBLES 143,150 0 298,601(c) 441,751 FURNITURE & EQUIPMENT, NET 55,883 18,358 74,241 OTHER 1,643 1,643 ----------- ----------- -------- ----------- Total assets $ 325,924 $ 58,969 $298,601 $ 683,494 =========== =========== ======== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 48,515 $ 43,535 $ 92,050 Accrued Expenses 192,369 3,037 195,406 Current portion, long-term debt 5,000 13,800 18,800 Notes payable 150,973 39,000 40,000(e) 229,973 ----------- ----------- -------- ----------- Total current liabilities 396,857 99,372 40,000 536,229 Long-term debt, net of current portion 11,137 56,649 67,786 Unearned revenue 57,549 57,549 ----------- ----------- -------- ----------- Total liabilities 407,994 213,570 40,000 661,564 Commitments STOCKHOLDERS' EQUITY Common stock, no par value 2,679,765 104,000(f) 2,783,765 Members' deficit (154,601) 154,601(g) 0 Accumulated deficit (2,761,835) (2,761,835) ----------- ----------- -------- ----------- Total stockholders' equity (82,070) (154,601) 21,930 ----------- ----------- -------- ----------- Total liabilities and stockholders' equity $ 325,924 $ 58,969 $298,601 $ 683,494 =========== =========== ======== ===========
SYSTEMS EVOLUTION, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Audited) YEAR ENDED MAY 31, 2004
Systems CMS Technology Pro Forma Pro Forma Evolution, Inc. Services, LP (a) Adjustments Consolidated -------------- --------------- ----------- ----------- Revenues ........................... $ 656,676 $ 314,520 $ 971,196 Operating Expenses ................. 0 Payroll and related costs ......... 876,293 299,219 20,000(b) 1,195,512 General, administrative and selling 2,514,070 148,126 78,137(c) 2,740,333 ----------- ----------- ----------- ----------- 3,390,363 447,345 98,137 3,935,845 ----------- ----------- ----------- ----------- Loss from operations ............... ($2,733,687) ($ 132,825) ($ 98,137) ($2,964,649) =========== =========== =========== =========== Earnings per Share ($0.07) =========== Weighted Average Number of Shares Outstanding 45,559,510 ===========
Notes to Condensed Consolidated Pro Forma Statement of Income (a) - Certain reclassifications have been made to conform CMS Technology Services, LP's financials to the Company's presentation. (b) - Represents the increase in salaries of senior management in connection with the acquisition. (c) - Represents the amortization of intangibles in connection with the acquisition. b. Exhibits. 99.1 Press Release by Systems Evolution, Inc. dated July 29, 2004, concerning the acquisition of CMS Technology Services by Systems Evolution Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned hereunto duly authorized. Date: March 21, 2005 Systems Evolution, Inc. /s/ Robert C. Rhodes --------------------------- Robert C. Rhodes Chief Executive Officer EX-99.1 2 v14694_ex99-1.txt Exhibit 99.1 Press Release SYSTEMS EVOLUTION ACQUIRES CMS TECHNOLOGY SERVICES REMOTE MANAGEMENT SERVICES ADDED TO SMB SOLUTIONS PRACTICE STAFFORD, Texas, July 29, 2004 (PRIMEZONE) -- Systems Evolution Inc., (OTC BB:SEVI), an information technology services company, today announced that it has acquired CMS Technology Services, a San Antonio based IT and network support services company. Mitch Sowards, Owner and General Manager of CMS, commented, "We are excited to become part of the Systems Evolution family. Joining SEVI brings access to greater resources, products, and services than we have been able to provide in the past. We look forward to serving more San Antonio customers as well as expanding the range of services we can offer to our existing customers. We think this is a unique opportunity to continue to build solid relationships and create mutual success between our customers and ourselves." According to Systems Evolution CEO, Robert C. Rhodes, "The CMS acquisition adds Remote Management Services to not only the SMB solutions portfolio but also provides an IT support offering that transcends boundaries between SMB and Enterprise IT departments. As companies continue to strive for optimal performance in their IT infrastructure, the ability to provide proactive on-site and remote support services gives Systems Evolution the advantage to offer businesses with the IT stability necessary to compete." Mr. Sowards will continue leading the San Antonio marketplace as Consulting Services Manager while expanding service delivery throughout the San Antonio-Austin corridor. ABOUT SYSTEMS EVOLUTION INC. Systems Evolution Inc., (OTC BB:SEVI), http://www.systemsevolution.com, founded in 1993, is an information technology services company focused on delivering outstanding value in the IT outsourcing and consultancy industry. The Company has been successful over the last decade adapting and implementing new technologies as they emerge, with a commitment to long-term customer and partner relationships. SEI focuses on providing value to its clients by helping them maintain, integrate, and extend their legacy systems, and plan for the future with strategic business technology, infrastructure, and application development. ABOUT CMS TECHNOLOGY SERVICES CMS, http://www.cmsts.com, has provided IT support services and technology products to small and medium-sized San Antonio businesses since 1983. CMS offers network infrastructure design, implementation, support, and management services for Microsoft and Novell business networks. CMS is a Certified Microsoft, Citrix, Symantec, and Novell Gold Partner. Safe Harbor Statement The statements in this release relating to future product availability and positive direction are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Some or all of the aspects anticipated by these forward-looking statements may not, in fact, occur. Factors that could cause or contribute to such differences include, but are not limited to, contractual difficulties, the future market price of SEVI common stock and the Company's ability to obtain necessary future financing. Source: Systems Evolution Inc. -----END PRIVACY-ENHANCED MESSAGE-----