-----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, LykTITJY/vrB1Oye0z5P47nxdT8HHS1DSsfIgLZhu9Yk/tD3OKlJ67gA0r6H5yzd 3HcdYsdQa4VdepU2DdeLZQ== 0000889812-95-000734.txt : 19951211 0000889812-95-000734.hdr.sgml : 19951211 ACCESSION NUMBER: 0000889812-95-000734 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950927 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951208 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLD SECURITIES CORP CENTRAL INDEX KEY: 0000773487 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 911224178 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08958 FILM NUMBER: 95600342 BUSINESS ADDRESS: STREET 1: ONE KALISA WAY STE 108 CITY: PARAMUS STATE: NJ ZIP: 07652 BUSINESS PHONE: 2012615234 MAIL ADDRESS: STREET 1: C/O EVOLUTIONS INC STREET 2: 65 RAILROAD AVENUE CITY: RIDGEFIELD STATE: NJ ZIP: 07657 8-K/A 1 AMENDED CURRENT REPORT 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 earliest event reported): September 27, 1995 GOLD SECURITIES CORPORATION (Exact name of registrant as specified in its charter) IDAHO (State or other Jurisdiction of Incorporation) 1-8958 91-1224178 (Commission File No.) (I.R.S. Employer Identification No.) 65 Railroad Avenue, Ridgefield, New Jersey 07657 (Address of principal executive offices) (zip code) Registrant's telephone number including area code (201) 941-6550 Item 7. Financial Statements and Exhibits. (a) Financial Statements Complete audited financial statements for DCI's Zoo Borns Division for its fiscal year ended April 30, 1995 are filed herewith (b) Pro Forma Financial Information Pro forma financial information is filed herewith. DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY ZOO BORNS DIVISION FINANCIAL STATEMENTS APRIL 30, 1995 DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY ZOO BORNS DIVISION APRIL 30, 1995 CONTENTS Page ---- Independent Auditors' Report 1 Balance Sheets 2 Statements of Operations and Accumulated Deficit 3 Statements of Cash Flows 4 Notes to Financial Statements 5 - 7 [Letterhead of Bederson & Company LLP] INDEPENDENT AUDITORS' REPORT To the Board of Directors Direct Connect International Inc. and Subsidiary Midland Park, New Jersey We have audited the accompanying balance sheet of the Zoo Borns Division (as defined in Note 1) of Direct Connect International Inc. and Subsidiary as of April 30, 1995 and the related statements of operations and accumulated deficit, and cash flows for the year then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Zoo Borns Division of Direct Connect International Inc. and Subsidiary as of April 30, 1995, and the results of its operations and its cash flows for the year ended April 30, 1995 in conformity with generally accepted accounting principles. BEDERSON & COMPANY LLP /s/ Bederson & Company LLP West Orange, New Jersey November 22, 1995 (1) DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY ZOO BORNS DIVISION BALANCE SHEETS ASSETS September 26, April 30, 1995 1995 ------------- --------- (Unaudited) CURRENT ASSETS: Inventories $ - $ 40,367 Prepaid royalties 10,000 10,000 ------------ ----------- TOTAL CURRENT ASSETS 10,000 50,367 MOLDS, MACHINERY AND EQUIPMENT, at cost, less accumulated depreciation of $7,151 and $3,151 84,228 32,446 ------------ ----------- TOTAL ASSETS $ 94,228 $ 82,813 ============ =========== LIABILITIES AND ACCUMULATED DEFICIT CURRENT LIABILITIES: Accounts payable and accrued expenses $ 160,434 $ 185,846 Due to owner 1,062,013 1,139,636 ------------ ----------- TOTAL LIABILITIES 1,222,447 1,325,482 ACCUMULATED DEFICIT (1,128,219) (1,242,669) ------------ ----------- TOTAL LIABILITIES AND ACCUMULATED DEFICIT $ 94,228 $ 82,813 ============ =========== The accompanying notes are an integral part of these financial statements. (2) DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY ZOO BORNS DIVISION STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT May 1, 1995 Through September 26, Year Ended 1995 April 30, 1995 ------------- -------------- (Unaudited) SALES $ 1,071,922 $ 1,389,923 ----------- ----------- COSTS AND EXPENSES: Cost of goods sold 543,724 662,599 Royalties/licensing fees 84,817 110,898 Advertising and promotion 65,881 758,142 Depreciation 4,000 3,151 General and administrative expenses 259,050 552,600 Product development costs - 545,202 ----------- ----------- TOTAL COSTS AND EXPENSES 957,472 2,632,592 ----------- ----------- NET INCOME (LOSS) 114,450 (1,242,669) ACCUMULATED DEFICIT - beginning (1,242,669) - ----------- ----------- ACCUMULATED DEFICIT - ending $(1,128,219) $(1,242,669) =========== =========== The accompanying notes are an integral part of these financial statements. (3) DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY ZOO BORNS DIVISION STATEMENTS OF CASH FLOWS May 1, 1995 Through September 26, Year Ended 1995 April 30, 1995 ------------- -------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 114,450 $(1,242,669) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation 4,000 3,151 (Increase) decrease in assets: Inventories 40,367 (40,367) Prepaid royalties - (10,000) Increase (decrease) in liabilities: Accounts payable and accrued expenses (25,412) 185,846 Due to owner (77,623) 1,139,636 ---------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 55,782 35,597 ---------- ----------- CASH FLOWS USED IN INVESTING ACTIVITIES: Acquisition of molds, machinery and equipment (55,782) (35,597) ---------- ----------- NET INCREASE IN CASH - - CASH - beginning - - ---------- ----------- CASH - ending $ - $ - ========== =========== The accompanying notes are an integral part of these financial statements. (4) DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY ZOO BORNS DIVISION NOTES TO FINANCIAL STATEMENTS THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED) AND THE YEAR ENDED APRIL 30, 1995 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization, Business and Basis of Presentation The accompanying financial statements present the financial position, results of operations and changes in accumulated deficit and cash flows of the rights and interest to the Zoo Borns product line, Tea Bunnies product line and Kidsview name (collectively the Zoo Borns Division ) of Direct Connect International Inc. and Subsidiary (the Company). The financial statements are prepared for Evolutions, Inc., in connection with its acquisition of the Zoo Borns Division (Note 5). Certain amounts in the accompanying financial statements have been allocated in a reasonable and consistent manner in order to depict the financial position, results of operations and cash flows of the Zoo Borns Division on a stand-alone basis. The Zoo Borns Division, which commenced operations during the year ended April 30, 1995, is engaged in the business of designing, developing, marketing, and distributing a variety of infant, preschool and general soft toy products. Substantially, all of the Company s purchases are from suppliers in the Far East. The accompanying balance sheet reflects a working capital deficiency of $1,212,447 at September 26, 1995 (unaudited) and $1,275,115 at April 30, 1995 and the statement of operations for the year ended April 30, 1995 reflects a net loss of $1,242,669. The management of the Company believes the subsequent events described in Note 5, will provide sufficient funds to meet the Zoo Borns Division s operating needs during the next twelve (12) months, assuming no material change in the level of its business operations. Inventories Inventories are valued at the lower of cost (first-in, first-out method) or market and consist principally of finished goods held for resale. Prepaid Royalties The Company has entered into license agreements and royalty arrangements for the use of certain characters for its toys and is obligated to pay nonrefundable advances over the terms of these agreements, which are recoupable by the Company to the extent of the royalties earned on products sold. In order to match revenues with expenses, these minimum guarantees are treated as prepaid expenses and are charged against income as the products are sold. Any minimum guaranty paid in excess of earned royalties is charged against income at such point that it is known that earned royalties will not cover minimum royalties. Molds, Machinery and Equipment Molds, Machinery and equipment, stated at cost less accumulated depreciation, is depreciated using the straight-line method over a five year period. (5) DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY ZOO BORNS DIVISION NOTES TO FINANCIAL STATEMENTS THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED) AND THE YEAR ENDED APRIL 30, 1995 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes Certain income and expense items are accounted for in different periods for income tax purposes than for financial reporting purposes. Provisions for deferred income taxes are made in recognition of these temporary differences. Deferred income tax assets as of April 30, 1995 have been reduced to zero by a valuation allowance of approximately $500,000 due to uncertainties concerning their realization. Interim Financial Statements The unaudited financial statements reflects all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the results for the period. The results of operations are not necessarily indicative of the results expected for the fiscal year. NOTE 2 - RELATED PARTY TRANSACTIONS During the period May 1, 1995 through September 26, 1995 (unaudited) and year ended April 30, 1995, the Zoo Borns Division purchased products totaling approximately $-0- and $266,986, respectively, from a corporation which is owned and operated by a principal stockholder and executive vice president of the Company. During the year ended April 30, 1995, Zoo Borns Division incurred product development expenses of $49,000 payable to this corporation. NOTE 3 - LICENSE AGREEMENTS The Company has the right to use product names and designs under license agreements with designers. These agreements require the Company to pay royalties ranging from five percent to ten percent of sales. The Company is obligated to make minimum annual cash royalty payments aggregating $15,000 for the fiscal year ending April 30, 1996, with respect to the Tea Bunnies product line. NOTE 4 - MAJOR CUSTOMERS The Zoo Borns Division had ninety six percent of its sales to two customers during the period May 1, 1995 through September 26, 1995 (unaudited) and seventy-eight percent of its sales to two customers during the year ended April 30, 1995. (6) DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY ZOO BORNS DIVISION NOTES TO FINANCIAL STATEMENTS THE PERIOD MAY 1, 1995 THROUGH SEPTEMBER 26, 1995 (UNAUDITED) AND THE YEAR ENDED APRIL 30, 1995 NOTE 5 - SUBSEQUENT EVENTS (Unaudited) On September 27, 1995, the Company entered into an agreement with Evolutions, Inc. ( Evo ), an unaffiliated public company, whereby the Company transferred all rights and interests to its Zoo Borns product line, Tea Bunnies product line and Kidsview name to Evo for $750,000 and shares of common stock of Evo equivalent to approximately seven percent of Evo s then outstanding common stock. The Company also has the right to receive additional shares of Evo s common stock, equivalent to approximately fifteen percent of the then outstanding common stock based on certain performance levels of the Zoo Borns Division over the next three years. As part of the agreement, the Company will manage these product lines for Evo, and will receive an amount equal to its monthly operating costs, up to $100,000, for such period of time as the Company is managing such product lines. The Company will provide the services of Peter Schneider, president of the Company, for such management, and he has so agreed. This management arrangement may terminate after one year, but could be extended for up to two additional years depending on certain performance levels of such product lines. As an inducement for Evo to enter into this agreement, the Company issued to Evo warrants to purchase 300,000 shares of common stock of the Company at exercise prices of $.10 per share with respect to 100,000 shares and $.20 per share with respect to 200,000 shares. In anticipation of consummating the agreement, Evo and the Company entered into a lending arrangement under which the Company signed a promissory note in March 1995 for $750,000 with interest at the annual rate of twelve percent. Such note was secured by 133,973 shares of common stock of Glasgal Communications, Inc. held by the Company and by an interest in certain amounts receivable and is due on September 1, 1996. Subsequently, the Company also signed promissory notes totalling $350,000 with interest at the annual rate of twelve percent. Such notes were due on October 31, 1995. Upon consummation of the agreement, all notes were cancelled with $1,100,000 applied to the purchase price and management fees. Under certain circumstances and at the Company s option on or before December 31, 1995, the Company can reacquire the product lines but will be obligated to pay to Evo $1,100,000 and deliver to Evo the shares of Evo common stock previously issued to the Company. The Company recognized a gain of approximately $1,000,000 as a result of the sale of the Zoo Borns Division. (7) GOLD SECURITIES CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED STATEMENTS (UNAUDITED) SEPTEMBER 30, 1995 On July 24, 1995, Gold Securities Corporation ("Gold") acquired Evolutions, Inc. ("EVI") by merging a wholly-owned subsidiary, GSC Acquisition Corporation, into EVI. The holders of EVI stock received an aggregate of 10,000,000 shares of Gold common stock and the right to receive an additional 88,851,174 shares upon shareholder approval to increase Gold's authorized number of shares. Although in the form of a merger, the transaction is, in substance, an acquisition of Gold by EVI as the control of Gold will transfer from the management of Gold to the management of EVI. For purposes of the pro forma financial statements, the value of the record assets and liabilities of EVI, as being the most indicative measurement. Such value aggregated $2,495,316 at June 30, 1995. On September 27, 1995, Kidsview, Inc., a wholly owned subsidiary of EVI ("Kidsview"), purchased certain assets of Direct Connect International, Inc. ("DCI"), consisting primarily of a line of toy animals marketed under the tradenames Zoo Borns and Tea Bunnies. In consideration for the purchase, EVI, among other things, conditionally released DCI of $750,000 in indebtedness to EVI. In addition, the Company agreed to issue to DCI 1,500,000 shares of Gold common stock, which issuance is contingent upon shareholder approval to increase Gold's authorized number of shares. Up to an additional 4,000,000 shares of Gold common stock ("Contingent Shares") will be issued to DCI if over a period of three years certain net sales and earnings tests are met in connection with the business acquired from DCI. DCI was also indebted to EVI under a $350,000 note payable. Under the terms of the agreement between EVI and DCI, Kidsview and DCI entered into a management agreement pursuant to which DCI will continue to manage the business relating to the toy animals for a monthly fee of up to $100,000. The first $150,000 of management fees incurred will be offset against this note. DCI was conditionally released from the balance of the note, which has been attributed to additional consideration for the acquired assets. GOLD SECURITIES CORPORATION AND SUBSIDIARIES NOTES TO PRO FORMA COMBINED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1994 AND NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) The pro forma combined statements of operations for the year ended December 31, 1994 includes the statement of operations of EVI for the period from inception (January 21, 1994) to December 31, 1994, the statement of operations of Gold for the year ended December 31, 1994, and the statement of operations of the acquired product line of DCI for the twelve months January 31, 1995. The statement of operations of the acquired product line of DCI for the twelve month period ended January 31, 1995 was derived by deducting the statement of operations data for the three months ended April 30, 1995 from the statement of operations data for the year ended April 30, 1995 and adding the statement of operations data for the three months ended April 30, 1994. The pro forma combined statements of operations for the nine months ended September 30, 1995 includes the statement of operations of EVI for the nine months ended September 30, 1995, the statement of operations of Gold from January 1, 1995 through July 24, 1995 (date of merger) and the statement of operations of the acquired product line DCI for the nine months ended September 30, 1995. The statement of operations of the acquired product line of DCI from the nine months ended September 30, 1995 was derived by adding the statement of operations for the eight months ended September 30, 1995 with the statement of operations for the one month ended January 31, 1995. The pro forma combined statements of operations have been prepared as if the merger and acquisition transactions had been consummated as of January 21, 1994 and January 1, 1995, respectively. The pro forma results of operations do not purport to be indicative of the results of operations that actually would have resulted had such transactions been consummated on such dates. Combination of Gold and EVI (1) To record additional amortization of goodwill arising from the acquisition, assuming an amortization period of 10 years. (2) To record write down of assets to fair value based upon purchase accounting. Acquisition of DCI Product Line (3) To record amortization of intangible assets arising from the acquisition, assuming an amortization period of 7 years. (4) To record monthly management fee due to DCI under the Management Agreement dated September 27, 1995. The Agreement provides for a monthly fee equal to the lesser of $100,000 or DCI's documented operating costs in performing its services. The pro forma statements of operations assume a monthly fee of $100,000. (5) To deduct selling, general, and administrative costs of DCI, as such costs will be covered by the monthly management fee described in Note 4. GOLD SECURITIES CORPORATION PRO FORMA STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1994
Gold Evolutions Securities Pro forma Direct Pro forma Inc. Corporation Adjustments Subtotal Connect Adjustments Total ---------- ----------- ----------- -------- ------- ----------- ----- NET REVENUES $ 124,281 $ 924 $ - $ 125,205 $1,331,853 $ - $ 1,457,058 --------- --------- --------- --------- ---------- ---------- ----------- COSTS AND EXPENSES: Cost of goods sold 216,389 - - 216,389 635,329 - 851,718 Selling, general and administrative 227,245 30,830 (1) 27,000 285,075 701,036 (5) (701,036) 431,475 (3) 146,400 Management fee - - - - - (4) 1,200,000 1,200,000 --------- --------- --------- --------- ---------- ---------- ----------- 443,634 30,830 27,000 501,464 1,336,365 645,364 2,483,193 --------- --------- --------- --------- ---------- ---------- ----------- OPERATING LOSS (319,353) (29,906) (27,000) (376,259) (4,512) (645,364) (1,026,135) --------- --------- --------- --------- ---------- ---------- ----------- OTHER: Loss on sale of securities 60,874 - - 60,874 - - 60,874 Abandoned mining claims - 226,325 (2) (226,325) - - - - Interest expense 3,573 - - 3,573 - - 3,573 Interest income (42,262) - - (42,262) - - (42,262) --------- --------- --------- --------- ---------- ---------- ----------- 22,185 226,325 (226,325) 22,185 - - 22,185 --------- --------- --------- --------- ---------- ---------- ----------- NET (LOSS) INCOME $(341,538) $(256,231) $ 199,325 $(398,444) $ (4,512) $ (645,364) $(1,048,320) ========= ========= ========= ========= ========== ========== =========== LOSS PER SHARE $(0.00) $(0.01) ====== ====== WEIGHTED AVERAGE NUMBER OF SHARES 107,457,363 108,957,363 =========== ===========
See notes to pro forma combined statements of operations GOLD SECURITIES CORPORATION PRO FORMA STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1995
Gold Evolutions Securities Pro forma Direct Pro forma Inc. Corporation Adjustments Subtotal Connect Adjustments Total ---------- ----------- ----------- -------- ------- ----------- ----- NET REVENUES $ 309,910 $ - $ - $ 309,910 $1,904,696 $ - $2,214,606 --------- --------- --------- --------- ---------- ---------- ---------- COSTS AND EXPENSES: Cost of goods sold 229,822 - - 229,822 947,579 - 1,177,401 Selling, general and administrative 188,301 - (1) 18,700 207,001 1,275,062(5) (1,275,062) 317,001 (3) 110,000 Management fee - - - - - (4) 900,000 900,000 --------- --------- --------- --------- ---------- ---------- ---------- 418,123 - 18,700 436,823 2,222,641 (265,062) 2,394,402 --------- --------- --------- --------- ---------- ---------- ---------- OPERATING (LOSS) INCOME (108,213) - (18,700) (126,913) (317,945) 265,062 (179,796) --------- --------- --------- --------- ---------- ---------- ---------- OTHER: Loss on sale of securities 49,697 - - 49,697 - - 49,697 Interest expense 37,794 - - 37,794 - - 37,794 Interest income (26,917) - - (26,917) - - (26,917) --------- --------- --------- --------- ---------- ---------- ---------- 60,574 - - 60,574 - - 60,574 --------- --------- --------- --------- ---------- ---------- ---------- NET (LOSS) INCOME $(168,787) $ - $(18,700) $(187,487) $ (317,945) $ 265,062 $ (240,370) ========= ========= ======== ========= ========== ========== ========== LOSS PER SHARE $(0.00) $(0.00) ====== ====== WEIGHTED AVERAGE NUMBER OF SHARES 107,457,363 108,957,363 =========== ===========
See notes to pro forma combined statements of operations 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 thereunto duly authorized. GOLD SECURITIES CORPORATION By /s/ Michael Nafash --------------------------- Michael Nafash, President Date: December 7, 1995 -----END PRIVACY-ENHANCED MESSAGE-----