-----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, Nx4upfEqbEgs0F0wEAfoXTVJwy1FqemDwXqArMZLKheTRAIpuwBq+8231g8yKY8C x2XOIJnLdo1t5Inrkjd07g== 0000950134-03-005246.txt : 20030402 0000950134-03-005246.hdr.sgml : 20030402 20030402123501 ACCESSION NUMBER: 0000950134-03-005246 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020319 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMPRESO INC CENTRAL INDEX KEY: 0001108345 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 752849585 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-29883 FILM NUMBER: 03635985 BUSINESS ADDRESS: STREET 1: 652 SOUTHWESTERN BLVD CITY: COPPELL STATE: TX ZIP: 75019 BUSINESS PHONE: 9724620100 MAIL ADDRESS: STREET 1: 652 SOUTHWESTERN BLVD CITY: COPPELL STATE: TX ZIP: 75019 FORMER COMPANY: FORMER CONFORMED NAME: IMPRESO COM INC DATE OF NAME CHANGE: 20000302 8-K/A 1 d04578a2e8vkza.txt AMENDMENT NO. 2 TO FORM 8-K - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 2 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 MARCH 19, 2002 (Date of earliest event reported) IMPRESO, INC. (Exact name of registrant as specified in its charter) DELAWARE 000-29883 75-2849585 (State or other jurisdiction (Commission File Number) (I.R.S. employer of incorporation) Identification Number) 652 SOUTHWESTERN BOULEVARD, COPPELL, TX 75019 (Address of principal executive offices) (972) 462-0100 (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- Impreso, Inc. hereby files Amendment No. 2 to its Form 8-K (date of report: March 19, 2002) filed with the Securities and Exchange Commission on April 3, 2002. This current report amends Item 7. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED The following audited financial statements, which are filed as Exhibit 99.2(a) and (b) to this report and are incorporated herein by reference thereto, were prepared to present the net assets and the revenues and expenses of United Computer Supplies, Inc. and its subsidiaries ("United") for the years ended December 31, 2001, and 2000. The December 31, 2001 financial statements also include unaudited information for the six-month period ended February 28, 2002. 99.2(a) 1. Report of Independent Auditor 2. Combined Balance Sheets 3. Combined Statements of Loss and Accumulated Deficit 4. Combined Statements of Cash Flows 5. Notes to Combined Financial Statements 99.2(b) 1. Report of Independent Auditor 2. Combined Balance Sheets 3. Combined Statements of Income and Retained Earnings 4. Combined Statements of Cash Flows 5. Notes to Combined Financial Statements 6. Independent Auditor's Report on Additional Information 7. Combined Schedules of Costs and Expenses (b) PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information, which is filed as Exhibit 99.3 to this report and is incorporated herein by reference thereto, relates to the March 19, 2002 acquisition of United. The transaction will be accounted for as a purchase business combination. The pro forma amounts have been prepared based on certain purchase accounting and other pro forma adjustments (as described in the accompanying notes) to the historical financial statements of Impreso, Inc. The unaudited pro forma consolidated balance sheet at February 28, 2002, reflects our historical financial position at February 28, 2002, combined with the allocated purchase price of United as of December 31, 2001, with pro forma adjustments as if the acquisition had occurred on February 28, 2001. The unaudited pro forma consolidated statement of income for the six-month period ended February 28, 2002, reflects the historical results of operations of both companies with pro forma acquisition adjustments as if the acquisition had occurred on September 1, 2001. The unaudited Pro Forma consolidated statement of income for the year ended August 31, 2001, reflects the historical results of operations of both companies with pro forma acquisition 2 adjustments as if the acquisition had occurred on September 1, 2000. The pro forma adjustments are described in the accompanying notes and give effect to events that are (a) directly attributable to the acquisition, (b) factually supportable, and (c) in the case of certain statement of income adjustments, expected to have a continuing impact. The unaudited pro forma condensed financial statements should be read in connection with our historical financial statements and related footnotes. The unaudited pro forma financial information presented is for information purposes only and does not purport to represent what our and United's financial position or results of operations as of the dates presented would have been had the acquisition in fact occurred on such date or at the beginning of the period indicated or to project our and United's financial position or results of operations for any future date or period. 1. Unaudited Pro Forma Consolidated Balance Sheet 2. Unaudited Pro Forma Consolidated Statement of Income 3. Notes to Unaudited Pro Forma Consolidated Financial Statements (c) EXHIBITS: 2.1 Asset Purchase Agreement by and between TST/Impreso, Inc. and Bank of America, N.A., and consented to by United Computer Supplies, Inc., United Computer Supplies-East, Inc. and John R. Zimmerman dated as of March 19, 2002* 99.1 Impreso, Inc. Press Release issued March 20, 2002 announcing the closing of the purchase* 99.2(a) Audited Combined Financial Statements of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. for the Year Ended December 31, 2001 and the Six Months ended February 28, 2002 (unaudited) listed in Item 7 (a) of this report (filed herewith) 99.2(b) Audited Combined Financial Statements of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. for the Years Ended December 31, 2000 and 1999 listed in Item 7 (a) of this report (filed herewith) 99.3 Unaudited Pro Forma Financial Statements of Impreso, Inc. and Subsidiaries listed on Item 7 (b) of this report* *Previously filed 3 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. IMPRESO, INC. (registrant) Dated: April 2, 2003 /s/ Marshall Sorokwasz ----------------------------------- Marshall Sorokwasz, Chairman of the Board, Chief Executive Officer, President, and Director /s/ Susan Atkins ----------------------------------- Susan Atkins, Chief Financial Officer and and Vice President 4 EXHIBIT INDEX
Exhibit Number Description - ------- ----------- 2.1 Asset Purchase Agreement by and between TST/Impreso, Inc. and Bank of America, N.A., and consented to by United Computer Supplies, Inc., United Computer Supplies-East, Inc. and John R. Zimmerman dated as of March 19, 2002* 99.1 Impreso, Inc. Press Release issued March 20, 2002 announcing the closing of the purchase* 99.2(a) Audited Combined Financial Statements of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. for the Year Ended December 31, 2001 and the Six Months ended February 28, 2002 (unaudited) listed in Item 7 (a) of this report (filed herewith) 99.2(b) Audited Combined Financial Statements of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. for the Years Ended December 31, 2000 and 1999 listed in Item 7 (a) of this report (filed herewith) 99.3 Unaudited Pro Forma Financial Statements of Impreso, Inc. and Subsidiaries listed on Item 7 (b) of this report*
* Previously filed EX-99.2(A) 3 d04578a2exv99w2xay.txt AUDITED COMBINED FINANCIAL STATEMENTS EXHIBIT 99.2(a) United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Year Ended December 31, 2001 and the Six Months Ended February 28, 2002 (Unaudited) ================================================================================ Contents
Page ---- Independent Auditor's Report 1 Combined Balance Sheets 2 Combined Statements of Income and Accumulated Deficit 3 Combined Statements of Cash Flows 4 Notes to Combined Financial Statements 5-9
Independent Auditor's Report Board of Directors United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Itasca, Illinois We have audited the accompanying combined balance sheet of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. as of December 31, 2001 and the related combined statements of income and accumulated deficit and cash flows for the year then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 2001 combined financial statements referred to above present fairly, in all material respects, the combined financial position of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. as of December 31, 2001 and the combined results of its operations and its combined cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the company will continue as a going concern. As discussed in Note 9, the Companies have experienced significant net losses over the past two years, resulting in a material deterioration in the Companies working capital position. In addition, the Companies are not in compliance with certain covenants of their loan agreements, causing them to be in technical default of these agreements. The above-described conditions raise substantial doubt about the Companies' ability to continue as a going concern. The financial statements do not include any adjustments that might arise from the outcome of this uncertainty. Blackman Kallick Bartelstein, LLP Chicago, Illinois May 6, 2002 United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Combined Balance Sheets December 31, 2001 and February 28, 2002 (Unaudited) ================================================================================ Assets
(Unaudited) December 31, February 28, 2001 2002 ------------ ------------ CURRENT ASSETS Cash $ 361,193 $ 359,965 Customer receivables 2,914,505 3,257,053 Inventories 3,936,485 3,234,371 Prepaid expenses and deposits 200,074 468,365 ------------ ------------ Total Current Assets 7,412,257 7,319,754 Property and Equipment (Net of accumulated depreciation and amortization) 6,209,627 6,108,830 ------------ ------------ $ 13,621,884 $ 13,428,584 ============ ============ Liabilities and Stockholders' Deficit Current Liabilities Short-term borrowings $ 3,470,541 $ 2,880,909 Accounts payable - Trade 4,726,403 5,192,280 Long-term debt due within one year 4,861,766 4,713,664 Note payable -Stockholder 340,000 340,000 Accrued expenses Salaries, wages and other compensation 90,003 90,003 Vacation 176,345 171,518 Other accrued liabilities 156,154 177,754 ------------ ------------ Total Current Liabilities 13,821,212 13,566,128 ------------ ------------ Stockholders' Deficit Common stock United Computer Supplies, Inc.; authorized 5,000 shares; issued and outstanding 844.44 shares 141,000 141,000 United Computer Supplies-East, Inc. 1,055.55 shares issued and outstanding 111,000 111,000 Accumulated deficit (Exhibit B) (451,328) (389,544) ------------ ------------ Total Stockholders' Deficit (199,328) (137,544) ------------ ------------ $ 13,621,884 $ 13,428,584 ============ ============
The accompanying notes are an integral part of the combined financial statements. -2- United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Combined Statements of Loss and Accumulated Deficit Year Ended December 31, 2001 and the Six Months Ended February 28, 2002 (Unaudited) ================================================================================
(Unaudited) Year Ended Six Months Ended December 31, February 28, 2001 2002 ------------ ---------------- Net Sales $ 33,620,759 $ 18,085,752 Cost of Goods Sold 31,086,567 16,146,538 ------------ ------------ Gross Profit 2,534,192 1,939,214 ------------ ------------ Operating Expenses Selling expenses 2,645,486 1,316,499 General and administrative expenses 1,858,455 1,255,448 ------------ ------------ Total Operating Expenses 4,503,941 2,571,947 ------------ ------------ Net Operating Loss (1,969,749) (632,733) ------------ ------------ Other Expense (Income) Interest expense 1,200,840 759,744 (Gain) loss on sale of property, plant and equipment (3,603) 4,906 Rental income (286,228) (138,728) ------------ ------------ Total Other Expense 911,009 625,922 ------------ ------------ Net Loss (2,880,758) (1,258,655) Retained Earnings, Beginning of Period 2,429,430 869,111 ------------ ------------ Accumulated Deficit, End of Period (Exhibit A) $ (451,328) $ (389,544) ============ ============
The accompanying notes are an integral part of the combined financial statements. -3- United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Combined Statements of Cash Flows Year Ended December 31, 2001 and the Six Months Ended February 28, 2002 (Unaudited) ================================================================================
(Unaudited) Year Ended Six Months Ended December 31, February 28, 2001 2002 ------------ ---------------- Cash Flows from Operating Activities Net loss $(2,880,758) $(1,258,655) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 597,293 315,050 Provision for losses on receivables 488,364 488,364 (Gain) loss on sale of assets (3,603) 4,906 (Increase) decrease in Receivables 132,284 (282,258) Inventories 1,065,036 1,142,898 Prepaid expenses and deposits 105,662 (63,849) Increase (decrease) in Accounts payable 1,287,257 368,888 Accrued expenses (82,677) 21,989 ----------- ----------- Total Adjustments 3,589,616 1,995,988 ----------- ----------- Net Cash Provided by Operating Activities 708,858 737,333 ----------- ----------- Cash Flows from Investing Activities Proceeds from sale of fixed assets 10,410 10,410 Capital expenditures (81,107) (96,744) ----------- ----------- Net Cash Used in Investing Activities (70,697) (86,334) ----------- ----------- Cash Flows from Financing Activities Net repayments under line of credit (208,874) (407,156) Principal payments on long-term debt (326,990) (263,608) ----------- ----------- Net Cash Used in Financing Activities (535,864) (670,764) ----------- ----------- Net Increase (Decrease) in Cash 102,297 (19,765) Cash, Beginning of Period 258,896 379,730 ----------- ----------- Cash, End of Period $ 361,193 $ 359,965 =========== ===========
The accompanying notes are an integral part of the combined financial statements. -4- United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Notes to Combined Financial Statements Year Ended December 31, 2001 and the Six Months Ended February 28, 2002 (Unaudited) ================================================================================ Note 1 - Nature of Operations The Companies manufacture and distribute paper products and business forms to be used with computers or computer-related applications. The Companies also manufacture and distribute paper rolls and related products to be used in retail applications, such as cash registers and gas station pumps. Products are sold primarily to distributors located throughout the midwest and eastern sections of the United States. Note 2 - Summary of Significant Accounting Policies Combined Financial Statements The combined financial statements include the accounts of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. (collectively known as UCS or the Company), which are both commonly controlled and managed. All intercompany transactions and intercompany account balances have been eliminated in preparation of the combined financial statements. Inventories Inventories are valued at the lower of cost or market using the last-in, first-out method. Depreciation and Amortization The Company's policy is to depreciate or amortize the cost of property and equipment over the estimated useful lives of the assets as indicated in the following tabulation by use of the straight-line method. The cost of leasehold improvements is amortized over their useful lives, or the applicable lease term, if shorter.
Years ----- Building and improvements 40 Leasehold improvements 10 Production equipment 5-10 Office equipment 5-10 Automobiles 5
Income Taxes The Companies have elected to be taxed as S corporations under provisions of the Internal Revenue Code. Therefore, the financial statements do not include a provision for corporate income taxes. -5- United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Notes to Combined Financial Statements Year Ended December 31, 2001 and the Six Months Ended February 28, 2002 (Unaudited) ================================================================================ Note 2 - Summary of Significant Accounting Policies (Continued) Management 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 3 - Inventories
(Unaudited) 2001 2002 ----------- ----------- Raw materials $ 1,888,249 $ 1,308,658 Work in process 110,669 129,630 Finished goods 2,080,467 1,938,983 LIFO reserve (142,900) (142,900) ----------- ----------- $ 3,936,485 $ 3,234,371 =========== ===========
If the first-in, first-out (FIFO) method of inventory accounting had been used by UCS, inventories would have been $142,900 and $166,801 higher than reported as of December 31, 2001 and February 28, 2002, respectively. Note 4 - Property and Equipment
(Unaudited) 2001 2002 ------------ ------------ Building and improvements $ 3,446,601 $ 3,446,601 Leasehold improvements 102,959 102,959 Production equipment 8,184,964 8,188,827 Office equipment 354,810 349,614 ------------ ------------ 12,089,334 12,088,001 Accumulated depreciation and amortization (5,879,707) (5,979,171) ------------ ------------ $ 6,209,627 $ 6,108,830 ============ ============
-6- United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Notes to Combined Financial Statements Year Ended December 31, 2001 and the Six Months Ended February 28, 2002 (Unaudited) ================================================================================ Note 5 - Short-Term Borrowings As of December 31, 2001, UCS was obligated under a line of credit agreement with a bank for $3,470,541. Borrowings under this line of credit bear interest as stated in the credit agreement (9.5% as of December 31, 2001) and are secured by substantially all of the company's assets. As of December 31, 2001, there were no additional available borrowings on this line of credit and UCS was in default of loan and security agreement (Note 6). Note 6 - Long-Term Debt
(Unaudited) 2001 2002 ----------- ----------- Mortgage loan payable, bank, principal and interest paid monthly at 9.5% and expires in July 2001.* $ 3,065,998 $ 3,055,972 Note payable, bank, principal and interest paid monthly at 9%, final balloon payment due June 2005.* 887,941 787,805 Note payable, bank, principal and interest paid monthly at 8.25%, final balloon payment due November 2004.* 907,827 869,887 Note payable, stockholder, with interest payments at 10% due in monthly installments. No payback schedule established on principal 340,000 340,000 ----------- ----------- Long-term debt, net 5,201,766 5,053,664 Less current maturities (5,201,766) (5,053,664) ----------- ----------- $ -- $ -- =========== ===========
* The notes payable and line of credit (Note 5) contain certain covenants relating to the indebtedness. In addition, the agreement requires UCS to maintain compliance with a minimum tangible net worth target and other financial ratios. UCS is not in compliance with these covenants as of December 31, 2001, and therefore is in default on the loan and security agreement. Because of this default, the long-term portion of the obligations covered by this agreement has been reclassified as a current liability on the balance sheet. Interest expense on the stockholder note payable was $34,000 for the year ended December 31, 2001. -7- United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Notes to Combined Financial Statements Year Ended December 31, 2001 and the Six Months Ended February 28, 2002 (Unaudited) ================================================================================ Note 7 - Operating Leases UCS occupies three buildings under separate operating leases. The leases provide for minimum monthly lease payments ranging from $12,500 to $31,000 throughout the lease terms and expire between August 2004 and May 2006. In addition, the Company has agreed to pay for certain maintenance and taxes as defined in the lease agreements. The leases contain renewal options, which are not assured of being exercised and therefore are not included in the schedule below. Total rental expenses for these leases amounted to $725,835 for the year ended December 31, 2001. The following is a schedule by year of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year, as of December 31, 2001: Fiscal Year Ending December 31: 2002 $ 736,067 2003 743,047 2004 572,777 2005 227,101 2006 95,518 ----------- Total Minimum Payments Required $ 2,374,510 ===========
Note 8 - Major Customer For the year ended December 31, 2001, sales to a major customer amounted to more than 10% of total sales. The amount of revenue from such customer amounted to approximately $4,700,000. The receivable balance for this customer was $566,003 as of December 31, 2001. -8- United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Notes to Combined Financial Statements Year Ended December 31, 2001 and the Six Months Ended February 28, 2002 (Unaudited) ================================================================================ Note 9 - Going Concern and Subsequent Sale of Assets UCS has experienced significant net losses for the past two years, resulting in a material deterioration in the Company's working capital position. In addition, as described in Note 6, the Company is not in compliance with certain covenants of their loan agreements, causing them to be in technical default of these agreements. The combination of the events described above raises substantial doubt about the Company's ability to continue as a going concern. On March 19, 2002, the company sold inventory and substantially all of its machinery and office equipment to an unrelated party for $2,907,346. Note 10 - Other Cash Flow Information Cash payments for interest amounted to $1,200,541 for the year ended December 31, 2001. -9- EX-99.2(B) 4 d04578a2exv99w2xby.txt AUDITED COMBINED FINANCIAL STATEMENTS EXHIBIT 99.2(b) United Computer Supplies, Inc. and United Computer Supplies-East, Inc. Years Ended December 31, 2000 and 1999 Contents
Page ----- Independent Auditor's Report 1 Combined Balance Sheets 2 Combined Statements of Income and Retained Earnings 3 Combined Statements of Cash Flows 4 Notes to Combined Financial Statements 5-8 Independent Auditor's Report on Additional Information 9 Combined Schedules of Costs and Expenses 10-11
INDEPENDENT AUDITOR'S REPORT We have audited the accompanying combined balance sheet of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. (both S corporations) as of December 31, 2000 and 1999 and the related combined statements of income, retained earnings and cash flows for the 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 generally accepted auditing standards. Those standards require that we plan and perform the audits 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 combined financial statements referred to above present fairly, in all material respects, the combined financial position of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. WILLIAM J. BARNES & CO., LTD. March 12, 2001 Arlington Heights, Illinois UNITED COMPUTER SUPPLIES INC.. UNITED COMPUTER SUPPLIES-EAST, INC. Combined Balance Sheets December 31, 2000 and 1999
2000 1999 ----------- ----------- ASSETS Current Assets Cash $ 258,896 $ 214,224 Accounts receivable 3,535,154 2,385,021 Inventory 5,001,521 4,118,707 Prepaid expenses and deposits 305,736 42,673 ----------- ----------- Total current assets 9,101,307 6,760,625 ----------- ----------- Building and Equipment Building 3,446,601 -- Production equipment 8,229,251 6,560,998 Office equipment 332,377 231,796 Automobiles 85,880 85,880 Deposits on equipment -- 710,471 ----------- ----------- Total 12,094,109 7,589,145 Less accumulated depreciation 5,361,489 4,915,683 ----------- ----------- Building and equipment - net 6,732,620 2,673,462 ----------- ----------- Total Assets $15,833,927 $ 9,434,087 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 3,439,146 $ 978,856 Note payable - bank line of credit 3,679,415 2,175,000 Current portion of long-term debt 308,696 132,352 Accrued salaries 96,284 89,331 Accrued vacation pay 161,918 153,188 Other accrued liabilities 246,977 107,628 ----------- ----------- Total current liabilities 7,932,436 3,636,355 ----------- ----------- Other Liabilities Note payable - shareholder 340,000 -- Note payable - bank term loan 4,880,060 1,056,973 ----------- ----------- Total other liabilities 5,220,060 1,056,973 ----------- ----------- Shareholders' Equity Common stock: United Computer Supplies, Inc. 5,000 shares authorized, 844.44 issued and outstanding 141,000 141,000 United Computer Supplies-East, Inc. 1,055.55 shares issued and outstanding 111,000 111,000 Retained earnings 2,429,431 4,488,759 ----------- ----------- Total shareholders' equity 2,681,431 4,740,759 ----------- ----------- Total Liabilities and Shareholders' Equity $15,833.927 $ 9,434,087 =========== ===========
The accompanying notes and report on additional information are an integral part of and should be read in conjunction with the financial statements. -2- UNITED COMPUTER SUPPLIES, INC. UNITED COMPUTER SUPPLIES-EAST, INC. Combined Statements of Income and Retained Earnings For the Years Ended December 31,2000 and 1999
2000 1999 ------------ ------------ Sales $ 33,786,138 $ 33,130,128 ------------ ------------ Cost of Goods Sold Material 24,902,264 24,023,002 Direct labor 1,373,372 1,325,404 Manufacturing overhead 4,302,488 4,148,240 LIFO reserve adjustment 80,000 167,000 ------------ ------------ Total cost of goods sold 30,658,124 29,663,646 ------------ ------------ Gross Profit on Sales 3,128,014 3,466,482 ------------ ------------ Shipping, Sales and Administrative Expenses Shipping expense 437,941 438,474 Sales expenses 2,229,127 1,888,953 Administrative expense 1,295,243 1,169,631 ------------ ------------ Total shipping, sales and Administrative expenses 3,962,311 3,497,058 ------------ ------------ Net Operating Income (Loss) (834,297) (30,576) ------------ ------------ Other Income (Expense) Interest expense (572,120) (235,544) Interest income 260 -- Discounts allowed (573,975) (513,655) Purchase discounts 39,137 133,813 Moving expense (191,131) -- Sundry 72,798 29,458 ------------ ------------ Total other income (expense) (1,225,031) (585,928) ------------ ------------ Net Income (Loss) (2,059,328) (616,504) Retained Earnings - Beginning of Year 4,488,759 5,601,364 Distributions to Shareholders (See Note F) -- (496,101) ------------ ------------ Retained Earnings - End of Year $ 2,429,431 $ 4,488,759 ============ ============
The accompanying notes and report on additional information are an integral part of and should be read in conjunction with the financial statements. -3- UNITED COMPUTER SUPPLIES, INC. UNITED COMPUTER SUPPLIES-EAST, INC. Combined Statements of Cash Flows For the Years Ended December 31, 2000 and 1999 Cash Flows from Operating Activities - Net Income (loss) $(2,059,328) $ (616,503) Reconciling adjustments: Depreciation 493,870 374,165 LIFO reserve adjustment 80,000 167,000 Loss on disposal of assets 19,878 -- (Increase) decrease in assets - Accounts receivable (1,929,023) (624,921) Inventory (962,814) (579,982) Prepaid expenses and deposits (263,063) 2,170 Increase (decrease) in liabilities Accounts payable 3,239,180 798,747 Accrued liabilities 155,032 30,629 ----------- ----------- Net cash provided (used) by operating activities (1,226,268) (448,695) ----------- ----------- Cash Flows from Investing Activities - Purchase of building and equipment (4,572,906) (410,389) ----------- ----------- Net cash (used) by investing activities (4,572,906) (410,389) ----------- ----------- Cash Flows from Financing Activities - Distributions to shareholders (See note F) -- (496,101) Notes payable-line of credit - Increase (decrease) 5,503,846 2,589,325 Increase (decrease) shareholder loan 340,000 (1,250,000) ----------- ----------- Net cash provided (used) by financing activities 5,843,846 843,224 ----------- ----------- Net Increase (Decrease) in Cash 44,672 (15,860) Cash at Beginning of Year 214,224 230,084 ----------- ----------- Cash at End of Year $ 258,896 $ 214,224 =========== =========== * * * * * * * * * * * Supplemental Disclosure - Interest paid $ 572,120 $ 235,544
The accompanying notes and report on additional information are an integral part of and should be read in conjunction with the financial statements. -4- UNITED COMPUTER SUPPLIES, INC. UNITED COMPUTER SUPPLIES-EAST, INC. Notes to Combined Financial Statements December 31, 2000 Note A - Accounting Policies 1. Operations The Companies are in the paper conversion business. The products consist of standard computer paper and of paper rolls for recording retail transactions. The products are sold to distributors through the Midwest and eastern sections of the United States. 2. Combined Financial Statements The financial statements of the two companies are prepared on a combined basis because the Companies have common ownership and management. All intercompany transactions and intercompany account balances have been eliminated in preparation of the combined financial statements. 3. Accounts Receivable - Trade The Companies do not make a provision for uncollectible accounts. The direct charge-off method is used when an account is determined to be uncollectible. The management is of the opinion that the Accounts Receivable - Trade are substantially all collectible. 4. Inventories Inventories are stated at the lower of cost or market using the last in, first out method. Additional information concerning inventories is presented in Note B. 5. Building and Equipment Building and equipment purchases are recorded at cost at the time of acquisition. For financial reporting, depreciation is computed over the useful service lives of the assets, using the straight-line method. Depreciation is based on an estimated useful life of five to ten years for equipment and forty years for the building. 6. Income Taxes In 1987, the Companies made an election to be treated as S Corporations for income tax purposes. As such, the Corporations are not subject to Federal income taxes, the income is taxable to the shareholder. -5- Note B - Inventories Inventories are summarized as follows:
December 31 2000 1999 ----------- ----------- Raw materials $ 2,117,838 $ 1,946,570 Work-in-process 192,268 147,447 Finished goods 2,796,215 2,049,490 LIFO reserve (104,800) (24,800) ----------- ----------- Total $ 5,001,521 $ 4,118,707 =========== ===========
As indicated in Note A, the inventories are stated on the last-in, first-out method. Had the first-in, first-out method been used, inventories would have been $5,106,321 and $4,143,507 at December 31, 2000 and 1999, respectively, and net income (loss) would have been $(1,979,328) and $(449,504) respectively. Note C - Loans Payable Note Payable - bank line of credit: Interest is payable monthly at 9.5% and expires July 2001 $3,679,415 Note Payable - mortgage loan: Principal and interest paid monthly at 9% rate with balloon payment due July 2005 3,127,104 Note payable - equipment loan: Principal and interest paid monthly at 9% with balloon payment due July 2005 1,004,658 Note payable - equipment loan: Principal and interest paid monthly at 8.25% with balloon payment due November 2004 1,056,994 Shareholder loan: Interest paid monthly at 10%. No payback Schedule established on principal 340,000 ---------- $9,208,171 ==========
-6- Note C - Loans Payable (continued) The Company has pledged real estate, equipment, accounts receivable and inventory as collateral on loans payable. The Company has an interest rate "swap" agreement on the 9% term loans. Early payoff of these loans would result in a $280,305 penalty at December 31, 2000. The bank loans have various covenants which include maintaining net worth dollar amounts and various financial ratios. The Company is not in compliance with these covenants at December 31, 2000. Failure to maintain covenants can allow the bank to call the loans at a date earlier than stated above. Maturities of loans are as follows: 2001 $ 3,988,111 2002 336,434 2003 366,659 2004 800,257 2005 3,716,710 ------------- $ 9,208,171 =============
Note D - Lease Commitments The Companies occupy three buildings under separate operating leases. The leases provide for minimum monthly lease payments as scheduled throughout the lease term. In addition, the Companies have agreed to pay certain maintenance and tax costs as set forth in the leases. The following is a schedule of future minimum lease payments required under the leases: 2001 $ 725,835 2002 $ 487,100 2003 $ 479,362 2004 $ 221,960 2005 $ 227,101 2006 $ 95,518
The leases contain renewal options which are not assured of being exercised and are therefore not included in the above schedule. Rental payments for the year 2000 amounted to $720,515. During July 2000, the Company purchased a building and moved a significant part of its operation to the new facility. The leased space that the Company moved from has been subleased to another tenant. -7- Note E - Related Party Transactions The Companies made payments of interest to the major shareholder in the amount of $24,408 in 2000 and $114,385 in 1999. Note F - Distributions to Shareholders The Companies made distributions to the shareholders of nothing in 2000 and $496,101 in 1999. As indicated in Note A-6 Companies are S Corporations and as such are not subject to Federal income taxes, the income being taxable to the shareholders. The Companies have adopted a policy throughout the years of making distributions only to meet the shareholders' needs in funding these tax payments. -8- INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION Our report on our audits of the basis combined financial statements of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. for 2000 and 1999 appears on the first page. The audits were conducted for the purpose of forming an opinion on the financial statements taken as a whole. The schedules of costs and expenses for 2000 and 1999 are presented for purposes of analysis and are not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the basis combined financial statements taken as a whole. WILLIAM J. BARNES & CO., LTD March 12, 2001 Arlington Heights, Illinois -9- UNITED COMPUTER SUPPLIES, INC. UNITED COMPUTER SUPPLIES-EAST, INC. Combined Schedules of Costs and Expenses For the Years Ended December 31, 2000 and 1999
2000 1999 ---------- ---------- Manufacturing Overhead Supervision and administrative salaries $ 309,252 $ 358,727 Indirect labor 954,058 933,056 Maintenance wages 107,190 103,632 Vacation and holiday pay 157,574 155,997 Overtime premium 215,912 167,809 Ink and tape 52,342 63,841 Plates 16,694 15,238 Other operating supplies and expense 269,563 265,075 Depreciation 428,407 327,790 Equipment repairs and maintenance 322,969 337,794 Building rent 561,556 635,167 Building maintenance 54,665 26,026 Utilities 302,723 254,585 Taxes 233,384 225,096 Insurance 229,189 210,563 Auto and travel 33,826 36,443 Other 53,184 31,401 ---------- ---------- Total $4,302,488 $4,148,240 ========== ========== Shipping Expense Wages $ 313,772 $ 310,067 Supplies 13,374 13,983 Depreciation 6,848 7,341 Building rent and utilities 34,268 38,836 Taxes 23,417 29,389 Insurance 31,701 26,291 Sundry 14,561 12,567 ---------- ---------- Total $ 437,941 $ 438.474 ========== ==========
The accompanying notes and report on additional information are an integral part of and should be read in conjunction with the financial statements. -10- UNITED COMPUTER SUPPLIES, INC. UNITED COMPUTER SUPPLIES-EAST, INC. Combined Schedules of Costs and Expenses For the Years Ended December 31, 2000 and 1999
2000 1999 ---------- ---------- Sales Expense Salaries $ 564,631 $ 512,590 Commissions 61,953 63,752 Marketing supplies 35,049 21,457 Auto expense 49,838 51,524 Travel and entertainment 91,115 74,122 Conventions 21,742 7,860 Depreciation 18,438 16,228 Building rent and utilities 30,050 42,117 Telephone 51,188 71,544 Taxes 36,796 34,696 Insurance 26,447 19,349 Freight 1,088,694 885,586 Postage 22,539 22,632 Interest expenses 50,271 11,128 Dues and subscriptions 3,248 4,365 Sundry 77,128 50,003 ---------- ---------- Total $2,229,127 $1,888,953 ========== ========== Administrative Expenses Administrative salaries $ 225,000 $ 259,466 Office salaries 466,426 429,655 Outside services 28,690 20,727 Taxes 49,652 52,006 Insurance 42,927 48,731 Office supplies 19,188 19,912 Maintenance 16,106 13,657 Telephone 19,496 29,002 Building rent and utilities 53,755 63,244 Professional fees 85,695 38,330 Computer expense 34,822 91,717 Depreciation 33,861 22,806 Equipment expense 21,095 18,602 Dues and subscriptions 4,797 3,623 Sundry 49,611 56,880 Bad debt expense 144,121 1,273 ---------- ---------- Total $1,295,243 $1,169,631 ========== ==========
The accompanying notes and report on additional information are an integral part of and should be read in conjunction with the financial statements. -11- -----END PRIVACY-ENHANCED MESSAGE-----