-----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, NveC5ayOlsrilpxuC6LKJxgPPxmuIk4Fq4kWtIfGJK4Dgiot/zKXyX7tK7gN79rL nEF2XZth06zomCgb4dt8GQ== 0000912057-01-511337.txt : 20010501 0000912057-01-511337.hdr.sgml : 20010501 ACCESSION NUMBER: 0000912057-01-511337 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20010212 ITEM INFORMATION: FILED AS OF DATE: 20010430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIQUITEK ENTERPRISES INC CENTRAL INDEX KEY: 0000773603 STANDARD INDUSTRIAL CLASSIFICATION: COATING, ENGRAVING & ALLIED SERVICES [3470] IRS NUMBER: 911499978 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-31571 FILM NUMBER: 1615778 BUSINESS ADDRESS: STREET 1: 1350 DRAPER PARKWAY CITY: DRAPER STATE: UT ZIP: 84020 BUSINESS PHONE: 8015538785 MAIL ADDRESS: STREET 1: 1350 DRAPER PARKWAY CITY: DRAPER STATE: UT ZIP: 84020 FORMER COMPANY: FORMER CONFORMED NAME: VITROSEAL INC DATE OF NAME CHANGE: 19990121 8-K/A 1 a2047042z8-ka.txt 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20509 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act February 12, 2001 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) LIQUITEK ENTERPRISES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Nevada 2-99110-NY 91-1499978 (State or other juris- (Commission File No.) (IRS Employer ID No.) diction of incorporation) 1350 Draper Parkway Draper, Utah 84020 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (801) 553-8753 (REGISTRANT'S TELEPHONE NUMBER) Liquitek Enterprises, Inc. 12226 South 1000 East Draper, Utah 84020 (FORMER NAME OR FORMER ADDRESS) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. There have been the following changes to this Item that was contained in the 8-K Current Report of the Company dated February 12, 2001: (a) Financial Statements of Business Acquired. Audited Consolidated Financial Statements for Distech Limited and Subsidiary for the years ended March 31, 2000, and March 31, 1999. (See Exhibits.) Unaudited Consolidated Financial Statements for Distech Limited and Subsidiary for the nine-month periods ended December 31, 2000, and December 31, 1999. (See Exhibits.) (b) Pro Forma Financial Information. Unaudited Pro Forma Combined Financial Statements of Liquitek Enterprises, Inc. and Subsidiaries as of and for the year ended December 31, 2000. (See Exhibits.) (c) Exhibits. (1) Audited Consolidated Financial Statements for Distech Limited and Subsidiary for the years ended March 31, 2000, and March 31, 1999: - Independent Auditors' Report - Consolidated Balance Sheets - Consolidated Statements of Operations and Comprehensive Loss - Consolidated Statements of Stockholders' Deficit - Consolidated Statements of Cash Flows - Notes to Consolidated Financial Statements (2) Unaudited Condensed Consolidated Financial Statements for Distech Limited and Subsidiary as of and for the nine-month periods ended December 31, 2000, and December 31, 1999: - Consolidated Balance Sheets - Consolidated Statements of Operations and Comprehensive Loss - Consolidated Statements of Cash Flows - Notes to Unaudited Consolidated Financial Statements (3) Unaudited Pro Forma Combined Financial Statements of Liquitek Enterprises, Inc. and Subsidiaries, as of and for the year ended December 31, 2000. - Unaudited Pro Forma Combined Balance Sheet as of December 31, 2000. - Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 2000 - Notes to Unaudited Pro Forma Combined Financial Statements All other portions of the previously filed 8-K remain unchanged. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. LIQUITEK ENTERPRISES, INC. Date: April 27, 2001 By: /s/ Culley W. Davis ---------------------------- Culley W. Davis, Chairman of the Board of Directors EX-1 2 a2047042zex-1.txt EXHIBIT 1 EXHIBIT 1 DISTECH LIMITED AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report................................................ 1 Consolidated Balance Sheets................................................. 2 Consolidated Statements of Operations and Comprehensive Loss................ 3 Consolidated Statements of Stockholders' Deficit ........................... 4 Consolidated Statements of Cash Flows....................................... 5 Notes to Consolidated Financial Statements.................................. 7
INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Distech Limited and Subsidiary We have audited the accompanying consolidated balance sheets of Distech Limited and subsidiary (the "Group") as of March 31, 2000 and 1999, and the related statements of operations and comprehensive loss, stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 financial statements referred to above present fairly, in all material respects, the financial position of Distech Limited and subsidiary as of March 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. As described in Note 13, the Group was acquired on November 30, 2000 by Liquitek Enterprises, a publicly traded company in the United States, in a business combination accounted for as a purchase. BDO INTERNATIONAL April 26, 2001 Auckland, New Zealand
- ----------------------------------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS AT MARCH 31, 2000 AND 1999 - ----------------------------------------------------------------------------------------------------------- NOTES 2000 1999 -------------------- ------------------- ASSETS CURRENT ASSETS Cash $ 37,591 $ 10,892 Accounts receivable 8,196 135 Inventories 3 200,382 234,379 Related party advances 4 - 53,650 Other current assets 50,481 14,532 -------------------- ------------------- 296,650 313,588 PLANT AND EQUIPMENT, NET 5 81,123 93,685 INTANGIBLE ASSETS, NET 6 252,653 270,591 -------------------- ------------------- $ 630,426 $ 677,864 ==================== =================== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable and accrued expenses $ 1,057,240 $ 861,137 Capital lease obligations, current portion 7 17,708 6,058 Due to stockholders 9 860,154 850,655 Other loans 10 79,278 106,720 -------------------- ------------------- 2,014,380 1,824,570 CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 7 12,463 7,204 COMMITMENTS AND CONTINGENCIES 12 STOCKHOLDERS' DEFICIT Common stock, no par value; 3,536,851 and 3,221,900 shares issued and outstanding at March 31, 2000 and 1999, respectively 3,421,877 2,632,642 Accumulated deficit (4,942,242) (3,798,818) Accumulated other comprehensive income 123,948 12,266 -------------------- ------------------- (1,396,417) (1,153,910) -------------------- ------------------- $ 630,426 $ 677,864 ==================== =================== - ----------------------------------------------------------------------------------------------------------- PAGE 2 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
- ----------------------------------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - ----------------------------------------------------------------------------------------------------------- 2000 1999 -------------------- ------------------- NET SALES $ 21,368 $ 155,057 COST OF SALES 151,616 314,753 -------------------- ------------------- GROSS MARGIN (130,248) (159,696) OPERATING EXPENSES 815,908 1,272,273 -------------------- ------------------- LOSS FROM OPERATIONS (946,156) (1,431,969) OTHER INCOME (EXPENSE) Interest income 991 5,442 Interest expense (146,262) (147,103) Forgiveness of advance (52,292) (91,339) Other 295 4,687 -------------------- ------------------- (197,268) (228,313) -------------------- ------------------- NET LOSS $ (1,143,424) $ (1,660,282) OTHER COMPREHENSIVE INCOME Foreign currency translation 111,682 (15,151) -------------------- ------------------- COMPREHENSIVE LOSS $ (1,031,742) $ (1,675,433) ==================== =================== Basic and diluted loss per common share $ (0.34) $ (0.54) ==================== =================== Basic and diluted comprehensive loss per common share $ (0.31) $ (0.54) ==================== =================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING THE YEAR 3,379,375 3,098,450 ==================== =================== - ----------------------------------------------------------------------------------------------------------- PAGE 3 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------------------------------------------------------- Common Stock Accumulated Other ---------------------------------- Accumulated Comprehensive Shares Amount Deficit Income Total ------------- ------------------- ------------------- -------------------- -------------------- BALANCE - MARCH 31, 1998 2,975,000 $ 1,973,913 $ (2,138,536) $ 27,417 $ (137,206) Issuance of common stock 246,900 658,729 - - 658,729 Net loss - - (1,660,282) - (1,660,282) Other comprehensive loss - - - (15,151) (15,151) ------------- ------------------- ------------------- -------------------- -------------------- BALANCE - MARCH 31, 1999 3,221,900 2,632,642 (3,798,818) 12,266 (1,153,910) Issuance of common stock 314,951 789,235 - - 789,235 Net loss - - (1,143,424) - (1,143,424) Other comprehensive income - - - 111,682 111,682 ------------- ------------------- ------------------- -------------------- -------------------- BALANCE - MARCH 31, 2000 3,536,851 $ 3,421,877 $ (4,942,242) $ 123,948 $ (1,396,417) ============= =================== =================== ==================== ==================== - -------------------------------------------------------------------------------------------------------------------------------- PAGE 4 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
- ----------------------------------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - ----------------------------------------------------------------------------------------------------------- 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ 1,143,424 $ 1,660,282 Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 39,416 40,234 Loss on disposal of asset 2,699 452 Write-off of related party advance 52,292 0 Interest credited to shareholders advances 61,521 96,069 Services credited to shareholders advances 0 50,981 Stock issued for services 195,502 3,691 Stock issued for interest 12,220 0 Services capitalized to share application account 876,008 0 Changes in operating assets and liabilities Accounts receivable (8,373) 1,048 Inventories 20,501 35,548 Other assets (31,522) 11,244 Accounts payable and accrued expenses (562,270) 499,169 ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (485,431) (921,846) CASH FLOWS FROM INVESTING ACTIVITIES Advances 0 (105) Expenditure relating to patents (17,828) (16,564) Proceeds from disposal of equipment 650 0 Acquisitions of property, plant and equipment (2,078) (33,692) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (19,256) (50,361) CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on loans (104,018) (421,808) Advances from stockholders 86,849 540,278 Repayment of stockholder advances (58,250) 0 Principal payments on capital lease obligation (2,794) (1,307) Net proceeds from issuance of common stock 611,293 649,115 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 533,080 766,278 ----------- ----------- NET INCREASE (DECREASE) IN CASH 28,393 (205,929) Foreign Currency Translation Adjustments (1,694) (10,449) ----------- ----------- CASH - beginning of year 10,892 227,270 ----------- ----------- CASH - end of year $ 37,591 $ 10,892 =========== =========== (continued) - ----------------------------------------------------------------------------------------------------------- PAGE 5 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. - ----------------------------------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - ----------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 72,522 $ 51,034 =================== =================== - ----------------------------------------------------------------------------------------------------------- PAGE 6 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Distech Limited (the "Company") was incorporated in New Zealand on August 25, 1995 under the New Zealand Companies Act of 1993. The Company is engaged, primarily in New Zealand, in the commercialization of low temperature vacuum mechanical vapour recompression evaporation technology capable of removing organic and inorganic contaminants from liquids. The Company has patents registered worldwide on this technology. FOREIGN CURRENCY TRANSLATION The Company's position and results of operations are measured using the Company's local currency, the New Zealand dollar, as the functional currency. Revenues and expenses have been translated into U.S. dollars at average exchange rates prevailing during the periods. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders' deficit. Foreign currency translation adjustments resulted in gains (losses) of $111,682 and $(15,151) in fiscal 2000 and 1999, respectively. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the holding company (Distech Limited) and its fully owned subsidiary (Distech USA, Inc) accounted for using the purchase method as prescribed by accounting principles generally accepted in the United States ("GAAP"). All significant intercompany transactions have been eliminated in consolidation. USE OF ESTIMATES Management uses estimates and assumptions in preparing financial statements in accordance with GAAP. Such estimates and assumptions affect the reported amounts of certain assets and liabilities, disclosures relating to any contingent assets and liabilities, and the reported amounts of certain expenses. Actual results could vary from the estimates used to prepare the accompanying financial statements. CONCENTRATIONS OF CREDIT RISK The Company extends credit to its customers based upon its evaluation of each customer's financial condition and credit history. The Company generally does not require collateral from its customers. Should a customer be unable to meet its obligation to the Company, the accounting loss would equal the recorded accounts receivable. - -------------------------------------------------------------------------------- PAGE 7 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) CONCENTRATIONS OF CREDIT RISK (continued) For the years ended March 31, 2000 and 1999 the Company had three major customers who accounted for significantly all sales. FAIR VALUE OF FINANCIAL INSTRUMENTS Management believes that the carrying amounts of the Company's financial instruments approximate their fair value at March 31, 2000 and 1999. INVENTORIES Inventories are valued at the lower of cost (using the first-in, first-out method) or estimated market. PLANT AND EQUIPMENT Plant and equipment are stated at cost. Major renewals and improvements are capitalized, while replacements, maintenance and repairs that do not significantly improve or extend the useful life of the asset are expensed when incurred. All plant and equipment is being depreciated using accelerated methods. Machinery capitalized for research and development projects with alternative future uses (see RESEARCH AND DEVELOPMENT below) are depreciated using the straight-line method over the shorter of 10 years or the estimated life of the project. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the remaining lease term. INTANGIBLE ASSETS Intangible assets consist primarily of goodwill and patent costs. Goodwill and patents are amortized using the straight-line method over estimated lives of 20 years and 12 years, respectively. IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews the carrying values of its long-lived and identifiable intangible assets for possible impairment whenever events or changes in circumstance indicate that the carrying amount of the assets may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset (excluding interest), an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. Any long-lived assets held for disposal are reported at the lower of their carrying amounts or fair values less costs to sell. During the years ended March 31, 2000 and 1999, no valuation adjustments were required. As such, the Company's long-lived assets are stated at cost less accumulated depreciation and amortization. - -------------------------------------------------------------------------------- PAGE 8 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) REVENUE RECOGNITION Revenue is recognized when products are shipped to customers. RESEARCH AND DEVELOPMENT All research and development costs are expensed when incurred except for the costs of materials and equipment or facilities that are acquired or constructed for research and development activities that have future alternative uses (in research and development projects or otherwise). Such costs are capitalized as tangible assets and depreciated over the shorter of the estimated life of the project or 10 years. INCOME TAXES The company is taxed under the provisions of the New Zealand income taxation laws. Taxation is payable at 33% on taxable profits. Due to losses incurred to date, no taxation is currently payable. Using the liability method required by Statement of Financial Accounting Standards No. 109, "ACCOUNTING FOR INCOME TAXES" ("SFAS 109"), the estimated tax effects of temporary differences between financial and income tax reporting are recorded in the period in which the events occur. Such differences between the financial and tax bases of assets and liabilities result in future tax deductions or taxable income (Note 10). COMPREHENSIVE INCOME The Company discloses comprehensive income as required by Statement of Financial Accounting Standards No. 130, "REPORTING COMPREHENSIVE INCOME". Other comprehensive income, as defined, includes unrealized gains or losses on foreign currency translations, net of deferred taxes, as recorded by the Company in accordance with Statement of Financial Accounting Standards No. 52, "FOREIGN CURRENCY TRANSLATION". LOSS PER COMMON SHARE In accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share," basic loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. For the years ended March 31, 2000 and 1999, the Company had not issued any securities that could potentially dilute loss per common share. The weighted average number of common shares outstanding for the years ended March 31, 2000 and 1999 are 3,379,375 and 3,098,450, respectively. - -------------------------------------------------------------------------------- PAGE 9 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) COMMON STOCK ISSUED FOR SERVICES The Company accounts for common stock issued for non-employee services using Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation". 2. GOING CONCERN Since incorporation, the Company has experienced significant operating losses. The accompanying consolidated financial statements have been prepared on a going concern basis based on forecasted future results and a letter of support from the parent company (see Note 13) Liquitek Enterprises Inc, stating it will not withdraw its support within the foreseeable future. Should the Company be unable to continue operations, the going concern basis may be invalid and provision would have to be made for any possible loss on realization of the Company's assets and for any other liabilities which may arise should the Company cease operations. 3. INVENTORIES Inventory consists of the following at December 31:
2000 1999 ------------------ ------------------ Raw materials $ 48,525 $ 76,966 Work-in-process 11,527 8,005 Finished goods 140,330 149,408 ------------------ ------------------ $ 200,382 $ 234,379 ================== ==================
4. RELATED PARTY ADVANCES Funds were advanced during the 1999 fiscal year to Global Distillation Services Inc ("GDS"), a company incorporated in the United States. The advances were forgiven in fiscal 1999, and, accordingly, a loss in the amount of $91,339 is included in the accompanying March 31, 1999 consolidated statement of operations and comprehensive loss. - -------------------------------------------------------------------------------- PAGE 10 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 4. RELATED PARTY ADVANCES (continued) In an agreement dated 25th August 1995, Distech accepted assignment from D E J Ward of a debt owed to him by Milcon Developments (NZ) Limited (the "Ward Advance"). Mr. Dudley Ward is a Director of the Company and is a 25% shareholder, including ownership through various entities of which Mr. Dudley Ward has voting and/or dispositive power. The debt is repayable to the Company on demand and bears interest at 1% over the BNZ Mortgage One interest rate or equivalent (9% at March 31, 2000 and 1999). The debt is unsecured. During fiscal 2000, the Directors of the Company waived repayment of the Ward Advance under a deed of forgiveness of debt. The loss of $52,292 is included in the accompanying March 31, 2000 consolidated statement of operations and comprehensive loss. 5. PLANT AND EQUIPMENT Plant and equipment consist of the following as of March 31:
2000 1999 ------------------- ----------------- Motor vehicles $ 14,705 $ 15,656 Plant & Equipment 65,995 69,197 Furniture, fixtures and equipment 77,041 60,764 Leasehold improvements 3,739 - ------------------- ----------------- 161,480 145,617 Accumulated depreciation and amortization (80,357) (51,932) ------------------- ----------------- $ 81,123 $ 93,685 =================== =================
Depreciation expense for the years ended March 31, 2000 and 1999 totaled $21,074 and $22,076, respectively. Included in plant and equipment at March 31, 2000 are costs totaling $50,118 for research and development equipment with alternative future uses that were capitalized in fiscal 1998. 6. INTANGIBLE ASSETS
2000 1999 ------------------- ----------------- Goodwill acquired through purchase of business in 1995 $ 250,590 $ 266,800 Accumulated amortization (57,427) (47,801) ------------------- ----------------- 193,163 218,999 (continued) - -------------------------------------------------------------------------------- PAGE 11 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 6. INTANGIBLE ASSETS (continued) Patent costs 73,771 60,251 Accumulated amortization (14,281) (8,659) ------------------- ----------------- 59,490 51,592 ------------------- ----------------- Total $ 252,653 $ 270,591 =================== =================
Amortization expense for the years ended March 31, 2000 and 1999 totaled $19,382 and $18,157 respectively. 7. CAPITAL LEASE OBLIGATIONS The Company leases equipment under several capital lease obligations. At March 31, 2000 and 1999, these assets are included in plant and equipment in the accompanying consolidated balance sheets at $27,754 and $15,130, respectively, less accumulated amortization in the amount of $4,071 and $1,086, respectively. Future minimum lease payments required under capital lease obligations are as follows for the years ending March 31: 2001 $ 19,537 2002 10,263 2003 4,028 ------------------- 33,828 Less amount representing interest 3,657 ------------------- Capital lease obligation (including current portion of $17,708) $ 30,171 ===================
8. DUE TO STOCKHOLDERS Certain stockholders have periodically advanced funds to and received repayments from the Company and its subsidiary. Advances from stockholders generally accrue interest at a rate of 12% per annum, are due upon demand and are to be repaid as cash becomes available or through the issue of stock (see Note 13). - -------------------------------------------------------------------------------- PAGE 12 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 9. OTHER LOANS The Company received $1 million from a third party on February 13, 1998. The loan was personally guaranteed by the directors of the Company, repayable on demand. The loan bears interest at 20% per annum, with interest payable monthly. The loan has been progressively repaid. 10. INCOME TAXES The Company has a tax net operating loss carryforward, for New Zealand tax purposes, of approximately $2,900,000 at March 31, 2000, which was eliminated by operation of tax law as a result of the Company's acquisition by Liquitek Enterprises, Inc. (see Note 13). The Company's deferred tax asset approximated $960,000 and $670,000 at March 31, 2000 and 1999, respectively. Because there is no reasonable assurance that such asset will be realized in future years, the Company has recorded a 100% valuation allowance against this deferred tax asset. A summary of the activity in the deferred tax benefit and related 100% valuation allowance for the years ended March 31, 2000 and 1999 follows: Balance - March 31, 1998 $ 350,000 Deferred benefit for 1999 320,000 ----------------- Balance - March 31, 1999 670,000 Deferred benefit for 2000 290,000 ----------------- Balance - March 31, 2000 $ 960,000 =================
The deferred tax asset at March 31, 2000 and 1999 consisted primarily of tax net operating loss carryforwards. 11. COMMITMENTS AND CONTINGENCIES LEASE COMMITMENTS The Company leases certain factory and office space under a noncancelable operating lease that expires January 16, 2003. Rent is subject to a review every two and a half years. - -------------------------------------------------------------------------------- PAGE 13 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 11. COMMITMENTS AND CONTINGENCIES (continued) LEASE COMMITMENTS (continued) Future minimum payments under this noncancelable operating lease are as follows for the years ending March 31: 2001 $ 29,692 2002 29,692 2003 24,743 ------------------- $ 84,127 ===================
Rent expense for the years ended March 31, 2000 and 1999 approximated $31,000 each year. OTHER CONTINGENCIES The Company's commitments and contingencies also include the usual obligations incurred in the ordinary course of business. In the opinion of management, these matters will not have a material adverse effect on the Company's financial position or results of operations. 12. RELATED PARTY TRANSACTIONS Included in due to stockholders (Note 8) are balances relating to companies owned by various directors of the company. These balances represent loans, directors' fees and management consulting fees charged to the Company. These liabilities bear interest at 12 percent per annum and, except as discussed in the PAYMENT OF LIABILITIES WITH COMMON STOCK section of Note 13, are repayable on demand. Other related party transactions are discussed elsewhere in these notes to the financial statements. 13. SUBSEQUENT EVENTS (UNAUDITED) ACQUISITION On February 12, 2001, 100% percent of the Company was acquired by Liquitek Enterprises, Inc. ("Liquitek"), a company publicly traded in the United States. In the first phase of this transaction, which was effective November 30, 2000, Liquitek acquired approximately 71% of the Company's equity securities in exchange for a total of approximately 11,400,000 shares and warrants of Liquitek at a 3:1 exchange ratio. In accordance with New Zealand law, Liquitek subsequently made a successful - -------------------------------------------------------------------------------- PAGE 14 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 13. SUBSEQUENT EVENTS (UNAUDITED) (continued) ACQUISITION (continued) tender offer at the same exchange ratio for the remaining approximately 1.6 million Company equity securities in exchange for a total of approximately 4.8 million Liquitek shares, options and warrants. Subsequent to March 31, 2000 and prior to December 31, 2000, Liquitek advanced to the Company $620,000. Unless Liquitek raises $5 million of fresh equity capital by September 30, 2001, the former Company stockholders have the right to rescind the transaction described in the preceding paragraph. The terms of the Liquitek options and warrants issued to the former Company stockholders are summarized as follows: options to acquire 69,000 shares of Liquitek common stock for NZ$1.67 per share, expiring on December 31, 2005; and warrants to acquire approximately 791,000 shares of Liquitek common stock for NZ$1.67 per share, expiring on May 1, 2001. OTHER MATTERS In October 2000, the Company issued 1,576,517 shares, 263,632 warrants and 23,000 options. PAYMENT OF LIABILITIES WITH COMMON STOCK The Company has received services and loans from certain parties, which are included in accounts payable and accrued expenses, due to stockholders and other loans in the accompanying consolidated balance sheet at March 31, 2000. Following the approach from Liquitek these parties have agreed to accept the issue of the Company's common stock to settle such outstanding liabilities. On October 31, 2000 the Company issued common stock and warrants in repayment of the following liabilities of the Company at March 31, 2000. The issue price of the shares was approximately $0.50 per share in respect to liabilities arising prior to April 30, 1998 and approximately $2.51 per share for liabilities arising after such date:
$0.50 SHARES $2.51 SHARES NO. OF SHARES NO. OF SHARES VALUE ------------------ ------------------ ------------------ Directors' loans 281,203 159,073 $ 539,554 Directors' fees 308,767 55,207 293,091 Creditors and loans - 54,014 135,354 Staff and contractors - 76,178 190,895 Equus management fees 151,986 72,135 256,935 ------------------ ------------------ ------------------ 741,956 416,607 $ 1,415,829 ================== ================== ==================
- -------------------------------------------------------------------------------- PAGE 15 EX-2 3 a2047042zex-2.txt EXHIBIT 2 EXHIBIT 2 DISTECH LIMITED AND SUBSIDIARY UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999
- ----------------------------------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) DECEMBER 31, 2000 AND 1999 - ----------------------------------------------------------------------------------------------------------- 2000 1999 -------------------- ------------------ ASSETS CURRENT ASSETS Cash $ 87,533 $ 18,125 Accounts receivable 73,652 8,808 Inventories 322,711 229,283 Related party advances 133,841 52,380 Other current assets 65,702 11,443 -------------------- ------------------ 683,439 320,039 PLANT AND EQUIPMENT, NET 61,296 90,333 INVESTMENT IN UNCONSOLIDATED CLOSELY HELD COMPANY 14,829 - INTANGIBLE ASSETS, NET 224,988 265,822 -------------------- ------------------ $ 984,552 $ 676,194 ==================== ================== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable and accrued expenses $ 164,095 $ 863,959 Capital lease obligation, current portion 6,758 13,177 Due to related party 620,000 - Due to stockholders 177,612 1,095,161 Deposits - 397,917 Other loans - 104,400 -------------------- ------------------ 968,465 2,474,614 CAPITAL LEASE OBLIGATION, NET OF CURRENT PORTION 5,318 20,548 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT) Common stock, no par value; 5,105,292 and 3,221,900 shares issued and outstanding at December 31, 2000 and 1999, respectively 5,587,857 2,632,642 Accumulated deficit (5,855,266) (4,495,492) Accumulated other comprehensive income 278,178 43,882 -------------------- ------------------ 10,769 (1,818,968) -------------------- ------------------ $ 984,552 $ 676,194 ==================== ================== - ----------------------------------------------------------------------------------------------------------- PAGE 2 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- ----------------------------------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999 - ----------------------------------------------------------------------------------------------------------- 2000 1999 -------------------- ------------------- NET SALES $ 126,144 $ 20,661 COST OF SALES 169,622 151,388 -------------------- ------------------- GROSS MARGIN (43,478) (130,727) OPERATING EXPENSES 802,519 510,468 -------------------- ------------------- LOSS FROM OPERATIONS (845,997) (641,195) OTHER INCOME (EXPENSE) Interest income 25,145 946 Interest expense (30,093) (56,443) Loss from investment impairment (78,816) -- Other 16,737 18 -------------------- ------------------- (67,027) (55,479) -------------------- ------------------- NET LOSS (913,024) (696,674) OTHER COMPREHENSIVE INCOME Foreign currency translation 154,231 31,616 -------------------- ------------------- COMPREHENSIVE LOSS $ (758,793) $ (665,058) ==================== =================== BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.21) $ (0.22) ==================== =================== BASIC AND DILUTED COMPREHENSIVE LOSS PER COMMON SHARE $ (0.18) $ (0.21) ==================== =================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING THE YEAR 4,321,072 3,221,900 ==================== =================== - ----------------------------------------------------------------------------------------------------------- PAGE 3 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- ----------------------------------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999 - ----------------------------------------------------------------------------------------------------------- 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (913,024) $ (696,674) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 27,903 31,002 Loss on disposal of asset -- 1,249 Write-down of investment 78,817 -- Interest credited to shareholder advances 52,563 -- Stock issued for services 167,035 -- Stock issued for interest 10,440 -- Services capitalized to share application account 744,121 -- Changes in operating assets and liabilities Accounts receivable (66,445) (8,758) Inventories (145,308) -- Other assets (146,619) 2,799 Accounts payable and accrued expenses (773,150) 26,193 ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (963,667) (644,189) CASH FLOWS FROM INVESTING ACTIVITIES Investment in closely held company (93,658) 105 Advances (8,329) -- Expenditures relating to patents (14,690) (15,853) Acquisitions of plant and equipment (3,793) -- ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (120,470) (15,748) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from loans 546,137 -- Advances from stockholders -- 667,170 Repayment of stockholder advances (584,881) -- Principal payments on capital lease obligation (14,665) -- Net proceeds from issuance of common stock 1,187,488 -- ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,134,079 667,170 ----------- ----------- NET INCREASE IN CASH 49,942 7,233 CASH - beginning of period 37,591 10,892 ----------- ----------- CASH - end of period $ 87,533 $ 18,125 =========== =========== - ----------------------------------------------------------------------------------------------------------- PAGE 4 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION Distech Limited and Subsidiary (the "Company") has prepared its condensed consolidated financial statements for the nine months ended December 31, 2000 and 1999 without audit by the Company's independent auditors. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company as of December 31, 2000 and for the nine months ended December 31, 2000 and 1999 have been made. Such adjustments consist only of normal recurring adjustments. Certain note disclosures normally included in the Company's annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These condensed consolidated financial statements and notes should be read in conjunction with the accompanying March 31, 2000 and 1999 audited financial statements within this Form 8-K filed with the Securities and Exchange Commission. The Company's financial position and results of operations are measured using the Company's local currency, the New Zealand dollar, as the functional currency. Revenues and expenses have been translated into U.S. dollars at average exchange rates prevailing during the periods. Assets and liabilities have been translated at the rates of exchange on the balance sheet dates. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders' equity (deficit). The results of operations for the nine months ended December 31, 2000 and 1999 are not necessarily indicative of the results to be expected for the full year. 2. DUE TO RELATED PARTY In connection with the acquisition of the Company, as described in Note 3 below, Liquitek Enterprises, Inc. ("Liquitek") made certain advances to the Company. Advances totaling $620,000 at December 31, 2000 are due on demand and are non-interest bearing. 3. ACQUISITION On November 30, 2000, Liquitek acquired approximately 71% of the Company's equity securities in exchange for a total of approximately 11,400,000 shares and warrants of Liquitek, as further discussed in Note 13 to the accompanying March 31, 2000 and 1999 audited financial statements contained herein in Form 8-K. In accordance with New Zealand law, Liquitek subsequently made a successful tender offer for the remaining 1.6 million Company equity securities in exchange for a total of approximately 4.8 million Liquitek shares, options and warrants. - -------------------------------------------------------------------------------- PAGE 5 - -------------------------------------------------------------------------------- DISTECH LIMITED AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 - -------------------------------------------------------------------------------- 3. ACQUISITION (continued) All tax net operating loss carryforwards were eliminated by operation of tax law as a result of the Company's acquisition by Liquitek. 4. ISSUANCE OF COMMON STOCK, WARRANTS, AND OPTIONS As further discussed in Note 13 to the accompanying March 31, 2000 and 1999 audited financial statements contained herein in Form 8-K, the Company issued options and warrants to certain stockholders during October 2000. 5. LOSS PER SHARE In accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share," basic loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the amount that would have resulted if certain dilutive potential common stock had been issued. Because the Company has experienced losses from inception, certain issuances of options and warrants are antidilutive. - -------------------------------------------------------------------------------- PAGE 6 EX-3 4 a2047042zex-3.txt EXHIBIT 3 Exhibit 3 LIQUITEK ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2000 LIQUITEK ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS DECEMBER 31, 2000 INTRODUCTION On February 12, 2001, Liquitek Enterprises, Inc. (the "Company") completed acquiring all of the outstanding voting stock of Distech Limited ("Distech") in a purchase business combination by issuing 15,340,104 shares of its restricted common stock, warrants for 790,896 shares of its restricted common stock, and options for 69,000 shares of its restricted common stock. Distech has a March 31 year-end. The following unaudited pro forma combined financial statements (hereinafter collectively referred to as "the pro forma financial statements") are presented for illustrative purposes only, and are not necessarily indicative of the combined financial position at an earlier date, the results of operations for future periods, or the results that would have been realized had the Company and Distech been a combined entity during the specified period. The pro forma financial statements (including the notes thereto) are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements of the Company and Distech (including the notes thereto) incorporated herein by reference or included elsewhere herein. The Company's historical financial statements incorporated herein by reference are the audited December 31, 2000 consolidated financial statements included in the related Form 10-KSB. The financial statements referred to in the preceding sentence have been filed with the Securities and Exchange Commission. The following pro forma financial statements give effect to the purchase of 100% of the equity interest in Distech by the Company using the purchase method of accounting. The pro forma financial statements are based on the respective historical financial statements and the notes thereto of the Company and Distech. The December 31, 2000 pro forma combined balance sheet, which assumes that the purchase took place on December 31, 2000, combines the audited balance sheet of the Company and the unaudited balance sheet of Distech as of such date. The pro forma combined statement of operations, which assumes that the purchase took place on January 1, 2000, combines the audited statement of operations of the Company for the year ended December 31, 2000, and the unaudited statements of operations of Distech for the three months ended March 31, 2000 and the nine months ended December 31, 2000. Of the 15,340,104 shares of the Company's restricted common stock cited above as issued in the purchase transaction, approximately 1,640,000 shares are being held in escrow as collateral for an indemnity agreement regarding any losses or claims relating to Distech's intellectual property. The indemnity agreement, which expires November 30, 2002, was provided to the Company by a former Distech stockholder/officer. To the extent that such escrowed shares are not sold to third parties to finance any expenses related to the claims described above, they will be released to the buyer in December 2001 and December 2002. The recognition of the aforementioned 1,640,000 shares in the Company's historical financial statements will be delayed until the dates noted in the preceding sentence. 1 Under Regulation S-X Rule 11-02(b)(8), a second set of pro forma financial statements based on an assumption of forfeiture of these collateral shares could be deemed appropriate. While the escrowed shares amount to approximately 10% of the total shares exchanged in the transaction, they represent only approximately 2.5% of the pro forma common shares outstanding at December 31, 2000 and only approximately 3.4% of the pro forma weighted average common shares outstanding during the year then ended. Accordingly, management has judged the differences to be immaterial and has not included a second set of pro forma financial statements. The pro forma adjustments described in the accompanying notes are preliminary, and are based on management's estimates and a preliminary third-party valuation of the estimated fair value of the net assets acquired. Such adjustments are also based on a third-party valuation of the estimated fair values of the Company's restricted common stock, warrants and options issued to the former stockholders of Distech; such values have been estimated at approximately $0.99 per share, $0.48 per warrant and $0.88 per option. Factors considered in estimating the fair value of the Company's equity securities issued in the purchase include those discussed below. Except as described in the following paragraph, the owners of the aforementioned stock (and the options and warrants described in Note D) have the right to participate in a registration statement to be filed by the Company under the Securities Act of 1933, as amended (the "Act"). Owners who exercise this right become subject to an agreement whereby they will be allowed to sell a maximum of 25% of their shares in each of three successive six-month periods, after which such restrictions are lifted. The first six-month period commences with the earlier of (a) the declaration of effectiveness of the registration statement by the Securities and Exchange Commission or (b) the date three months after completion of the audit of Distech's financial statements included herein. The date described as "b" in the preceding sentence is presently estimated to be approximately July 31, 2001. The second six-month period commences immediately after the conclusion of the first six-month period, and the third commences immediately after the second. The stock owned by shareholders who do not exercise this right will remain restricted under Rule 144 of the Act. Based on the factors described above, the matter discussed in the following paragraph, the substantial number of shares issued in the purchase (as compared to the average daily trading volume of the Company's common stock), and a third-party valuation, management has applied a discount of 40% to the average market price of the Company's common stock during the week ended November 30, 2000 to estimate its fair value. Such date is based on the Company's conclusion as of that date of the first phase of the Distech acquisition, whereby approximately 71% of the equity interests in Distech were acquired from six shareholders before tendering an offer (based on the same 3:1 exchange ratio) to the remaining shareholders for the remaining equity interests under New Zealand securities laws. As to the 1,640,000 shares of contingently issuable restricted common stock of the Company discussed above, the owner thereof is prohibited by the aforementioned indemnity agreement from selling or otherwise transferring any such shares prior to December 1, 2001. From that date until November 30, 2002, such owner may not sell or otherwise transfer 2 more than 50% of such shares. As of December 1, 2002, all transfer restrictions imposed by the indemnity agreement will be lifted. Management is in the process of assessing and formulating its integration plans; although restructuring costs (if any) are not yet known, management does not believe that they will be material. In the opinion of management, all known presently quantifiable adjustments have been made that are necessary to present fairly the accompanying pro forma financial statements. 3
LIQUITEK ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET DECEMBER 31, 2000 (in thousands) Historical Pro Forma Adjustments -------------------- --------------------- Pro Forma Liquitek Distech References Amount Combined -------- ------- ---------- ------ -------- ASSETS CURRENT ASSETS Cash $ 24 $ 87 $ - $ 111 Accounts Receivable, net 201 74 275 Advances to related party 620 134 A (620) 134 Inventory 67 323 390 Prepaid expenses 47 47 Other current assets - 66 66 -------- ------- -------- 959 684 1,023 PROPERTY, PLANT AND EQUIPMENT, NET 3,153 61 3,214 INVESTMENT IN CLOSELY HELD COMPANIES 15 15 NON-CURRENT ASSETS Deposits and other assets 297 297 Prepaid royalties to related party 150 150 Patents, net 173 173 Goodwill, net 10,023 C,J 7,947 17,970 Acquired completed technology, net 10,557 C 14,010 24,567 Other intangible assets, net 675 225 C 260 1,160 Deferred tax asset, net of valuation allowance - - - - -------- ------- ------ -------- 21,875 225 44,317 -------- ------- -------- TOTAL ASSETS $ 25,987 $ 985 $21,597 $ 48,569 ======== ======= ====== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 588 $ 176 $ - $ 764 DUE TO RELATED PARTIES 967 798 A (620) 1,145 DEFERRED INCOME TAXES 3,827 J 4,850 8,677 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock at par value 38 38 Additional paid-in capital 30,205 5,588 C,E 11,271 47,064 Stock options, warrants and deferred compensation 1,356 C 519 1,875 Accumulated deficit (10,994) (5,855) E 5,855 (10,994) Accumulated other comprehensive income - 278 E (278) - -------- ------- ------ -------- 20,605 11 37,983 -------- ------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,987 $ 985 $21,597 $ 48,569 ======== ======= ====== ======== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
LIQUITEK ENTERPRISES, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (in thousands, except for per share amounts) HISTORICAL PRO FORMA ADJUSTMENTS -------------------------------------------- --------------------- DISTECH DISTECH (FOR (FOR THE NINE LIQUITEK (FOR THE THREE MONTHS THE YEAR ENDED MONTHS ENDED ENDED DECEMBER 31, MARCH 31, DECEMBER PRO FORMA 2000) 2000) 31, 2000) REFERENCE AMOUNT COMBINED -------------- ------------ ------------- --------- ------ --------- REVENUES Sales $ 989 $ - $ 126 $ - $ 1,115 Less discounts and allowances (10) - - (10) -------------- ------------ ------------- --------- Net Sales 979 - 126 1,105 COST OF SALES 686 - 170 856 -------------- ------------ ------------- --------- GROSS PROFIT 293 - (44) 249 OPERATING EXPENSES 4,910 305 802 F 1,798 7,815 -------------- ------------ ------------- --------- LOSS BEFORE OTHER INCOME (EXPENSE) (4,617) (305) (846) (7,566) OTHER INCOME (EXPENSE) Interest income (expense), net 95 (89) (5) 1 Loss from investment impairment - - (79) (79) Forgiveness of advance - (52) - (52) Write-off of acquired in-process research and development costs (970) - - (20) (990) Loss on disposal of equipment (10) - - (10) Other - - 17 17 -------------- ------------ ------------- --------- Total Other Income (Expense) (885) (141) (67) (1,113) -------------- ------------ ------------- --------- NET LOSS $ (5,502) $ (446) $ (913) $(1,818) $ (8,679) ============== ============ ============= ======= ========= BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.17) $ (0.18) ============== ========= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING THE YEAR $ 31,834 15,340 47,174 ============== ======= ========= THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5 LIQUITEK ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS December 31, 2000 Note (A) Basis of Presentation The pro forma combined balance sheet assumes that the purchase took place on December 31, 2000 and that 100% of the equity interest in Distech was acquired by the Company on that date. Such financial statement combines the historical balance sheets of the Company and Distech at that date. The pro forma combined statement of operations assumes that the purchase took place on January 1, 2000, and combines the historical statement of operations of the Company for calendar 2000 and the historical financial statements of Distech for the quarter ended March 31, 2000 and for the nine months ended December 31, 2000. The aforementioned historical financial statements have been adjusted as discussed in the notes below. Other than $620,000 of advances by the Company to Distech in anticipation of the purchase, there were no other significant transactions on a combined basis between the acquired entity and the Company during the period presented. Note (B) Introduction to the Unaudited Preliminary Pro Forma Adjustments The accompanying pro forma information, including the allocation of the purchase price, is based on management's preliminary estimates and a third-party valuation of (1) the net assets acquired and (2) the fair value of the equity securities issued by the Company to consummate the purchase. Based on the timing of closing the second phase of the acquisition, the finalization of the valuation, and other factors, the final purchase price adjustments may differ materially from those presented in the accompanying pro forma combined financial statements. A change in the value assigned to long-term assets and liabilities could result in a reallocation of the purchase price and a revision of certain pro forma adjustments. The impact of any such changes on the pro forma financial statements will depend on the nature and amount of the assets and/or liabilities adjusted. Management is in the process of assessing and formulating its integration plans. Though management has not yet determined the actual amount of any restructuring costs associated with the integration plans, it is not expected that such costs will be material; no amounts pertaining thereto are included in the accompanying pro forma financial statements. In addition, the pro forma financial statements have not been adjusted to reflect any cost savings or operating synergies that may result from the purchase. Note (C) To reflect the excess of the total acquisition cost over the estimated fair value of the tangible and identifiable intangible assets acquired [goodwill; see Note (J)]. The purchase price, purchase price allocation and financing of the transaction are summarized as follows: 6 Purchase price paid as: Common stock issued $ 16,854,479 Stock warrants issued 450,967 Stock options issued 67,776 ------------ Total purchase consideration 17,373,222 ------------ Allocated to: Historical book value of Distech's assets and liabilities (13,305) * Adjustments to reflect assets and lia- bilities at estimated fair value: Completed technology 14,010,000 In-process research and development written off 20,000 Assembled workforce 260,000 Deferred income taxes (4,850,000) ------------ Total allocation 9,426,695 ------------ Excess of purchase price over allocation to identifiable assets and liabilities (goodwill) $ 7,946,527 ============
* The purchase agreement included a right of rescission for the former shareholders of Distich pending securing $5 million of equity investment in the Company by September 30, 2001. The recording of the acquisition for financial statement purposes has been deferred until this contingency is satisfied. The acquisition is expected to be reported for financial statement purposes in the quarter ending June 30, 2001, except for the delayed accounting recognition related to the 1,640,000 shares of common stock described in the "Introduction" section hereof. 7 Note (D) As of February 12, 2001, the Company had issued warrants to acquire 790,896 shares of its restricted common stock to former Distech shareholders who owned warrants to purchase Distech common stock. Such warrants, which expire on May 1, 2001, and vested on their issuance dates allow the holders to acquire such Company stock at a price of NZ$1.67 per share (or approximately US$0.68 per share as of April 24, 2001). The fair value of the above warrants, which was estimated using the Black-Scholes stock option-pricing model, has been included in the purchase price. The use of such model was based on the 40% valuation discount discussed in the "Introduction" section hereof and the following assumptions: Risk-free interest rate 6.0% Expected life 5 months Estimated annualized volatility 126% Expected dividend yield Zero The Company also issued options to acquire 69,000 shares of its restricted common stock to former Distech shareholders who owned options to purchase Distech common stock. Such options, which expire on December 31, 2005, allow the holders to acquire such stock at a price of NZ$1.67 per share. The impact of assuming that the above exercise prices were translated into U.S. dollars at the exchange rates in effect on January 1, 2000 and December 31, 2000 is not material to the accompanying pro forma financial statements. The fair value of the above options, which was estimated using the Black-Scholes stock option-pricing model, has been included in the purchase price. The use of such model was based on the 40% valuation discount discussed in the "Introduction" and the following assumptions: Risk-free interest rate 5.3% Expected life 5 years Estimated annualized volatility 126% Expected dividend yield Zero The Company warrants and options described above are restricted securities under the Act. Note (E) To reflect (1) the elimination of the stockholders' equity accounts of Distech, and (2) the issuance of common stock, warrants and options by the Company as consideration for the purchase (see Notes C and D). 8 Note (F) To reflect the increase in amortization expense due to (i) the amortization of goodwill and completed technology over 10 years and (ii) the amortization of assembled workforce over 3 years. Note (G) Since the unaudited pro forma combined statement of operations reports a loss, there is no income tax effect of the above pro forma adjustments. Note (H) Basic and diluted pro forma loss per common share is calculated based on the issuance (assumed to have been on January 1, 2000) of 15,340,104 shares of the Company's restricted common stock in the purchase. Warrants and stock options, including those assumed to be outstanding as of January 1, 2000, were not considered in the computation of diluted pro forma loss per common share because their inclusion would have been antidilutive. Note (I) As of February 12 2001, the Company had advanced to Distech a total of $770,000 pursuant to the terms of the purchase agreement. Note (J) Since the purchase is intended to qualify as a non-taxable transaction, the predecessor tax bases of Distech's assets and liabilities are carried forward for U.S. income tax purposes. Therefore, the amortization of the purchase consideration allocated to certain assets acquired (see Note C) is not deductible by the Company in its future income tax returns. To account for such temporary differences, the accompanying pro forma combined balance sheet reflects a deferred tax liability (representing additional goodwill) of approximately $4,850,000 as required by accounting principles generally accepted in the United States. Note (K) The unaudited historical balance sheet and statements of operations of Distech used to develop the accompanying pro forma financial statements have been translated from New Zealand dollars into U.S. dollars based on exchange rates in effect on December 31, 2000 and the weighted average exchange rate for the year then ended, respectively. Accounting principles generally accepted in the United States require that foreign currency translation gains (approximately $234,000 for the year ended December 31, 2000, which is less than $0.01 per common share on a pro forma basis) be reported outside the statement of operations as an element of other comprehensive income. 9 -----END PRIVACY-ENHANCED MESSAGE-----