-----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, UXXnL06S5AR63W5WqFV9LkmOrkdlmgOBuRUKjUkJMdFZEESIdIU/NrxAlxbriSvF FBKMOqwQjPxZx+x1YQUoGQ== 0000950123-96-005134.txt : 19960924 0000950123-96-005134.hdr.sgml : 19960924 ACCESSION NUMBER: 0000950123-96-005134 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960521 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960923 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S ALCOHOL TESTING OF AMERICA INC CENTRAL INDEX KEY: 0000853017 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 222806310 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-10964 FILM NUMBER: 96633082 BUSINESS ADDRESS: STREET 1: 10410 TRADEMARK ST CITY: RANCHO CUCAMONGA STATE: CA ZIP: 91730 BUSINESS PHONE: 9094668378 MAIL ADDRESS: STREET 1: 10410 TRADEMARK ST CITY: RANCHO CUCAMONGA STATE: CA ZIP: 91730 8-K/A 1 AMENDMENT TO FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ---------------------------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) May 21, 1996 ------------------------------- U.S. ALCOHOL TESTING OF AMERICA, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 33-90034 22-2806310 - ------------------------------------ -------------------------------------- (Commission File Number) (I.R.S. Employee Identification No.) 10410 Trademark Street, Rancho Cucamonga, California 91730 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (909) 466-8378 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) 2 INFORMATION TO BE INCLUDED IN REPORT Item 7. Financial Statements and Exhibits. (a) Financial statements of businesses acquired: (i) The following audited financial statements of RSA are annexed hereto: Page 1. Report of Independent Auditors...................... F-1 2. Balance Sheets as of December 31, 1995 and 1994..... F-2 3. Statements of Operations for the years ended December 31, 1995, 1994 and 1993.............. F-3 4. Statements of Shareholders' Equity for the years ended December 31, 1995, 1994 and 1993.............. F-4 5. Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993.................... F-5 6. Notes to Financial Statements....................... F-6 (b) Proforma financial information: The following proforma financial statements are annexed hereto: 1. Proforma Balance Sheet as of March 31, 1996......... F-10 2. Proforma Statement of Operations for the fiscal year ended March 31, 1996................................ F-12 2 3 (c) Exhibits Number Exhibit - ------ ------- A Copy of Stock Purchase Agreement dated as of May 21, 1996 by and among U.S. Alcohol Testing of America, Inc. ("USAT"), Robert Stutman, Brian Stutman, Sondra DeBow, Michael Rochelle and Kimberly Rochelle.(1) B Form of Secured Promissory Note dated May 21, 1996 is Exhibit A to Exhibit A hereto. C Form of Security Agreement dated May 21, 1996 by and among USAT, Robert Stutman and Brian Stutman is Exhibit C to Exhibit A hereto. D Form of USAT Warrant expiring May 20, 1999 is Exhibit B to Exhibit A hereto. E Form of Registration Rights Agreement dated as of May 21, 1996 by and between USAT, Robert Stutman, Brian Stutman, Michael Rochelle, Kimberly Rochelle and Sondra DeBow is Exhibit D to Exhibit A hereto. F Copy of Consulting Agreement dated as of December 14, 1996 by and between USAT, ProActive, RSA and Robert Stutman.(2) G Copy of Severance Agreement dated May 21, 1996 by and between USAT and Robert Stutman.(1) H Copy of Severance Agreement dated May 21, 1996 by and between USAT and Brian Stutman.(1) - --------------- (1) Filed as an Exhibit to USAT's Current Report on Form S-K filed on June 5, 1996 and incorporated herein by this reference. (2) Filed as an Exhibit to USAT's Registration Statement on Form S-8 filed on March 11, 1996 and incorporated herein by this reference. 3 4 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. U.S. Alcohol Testing of America, Inc. ------------------------------------- (Registrant) Date: September 19, 1996 By: /s/ Linda H. Masterson --------------------------------- Linda H. Masterson, President 4 5 [ERNST & YOUNG LLP LETTERHEAD] Report of Independent Auditors The Board of Directors U.S. Alcohol Testing, Inc. We have audited the accompanying balance sheets of Robert Stutman & Associates, Inc. as of Decenber 31, 1995 and 1994, and the related statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion of the 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 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 statemant 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 Robert Stutman & Associates, Inc. at December 31, 1995 and 1994 and the result of its operations and its cash flow for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts July 23, 1996 F-1 6 ROBERT STUTMAN & ASSOCIATES, INC. BALANCE SHEETS
DECEMBER 31, -------------------------- 1994 1995 --------- --------- A S S E T S Current Assets: Cash and Cash Equivalents $ 94,100 $ 4,836 Accounts Receivable 9,900 3,761 Receivable from Shareholder -- 200 Prepaid Expenses 2,750 2,888 --------- --------- Total Current Assets 106,750 11,685 Property and Equipment, net 3,929 6,027 --------- --------- Total Assets $ 110,679 $ 17,712 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY) Current Liabilities: Accrued Expenses $ 15,877 $ 39,326 Unearned Revenue 224,909 285,416 Due to Shareholder 15,000 5,250 --------- --------- Total Current Liabilities 255,786 329,992 Commitments and Contingencies Shareholders' Equity (Capital Deficiency): Common Stock, $50 par value Authorized - 80 shares Issued and outstanding-77 shares on December 31, 1993 and 80 shares on December 31, 1994 and 1995 4,000 4,000 Accumulated Deficit (149,107) (316,280) --------- --------- Total Shareholders' Equity (Capital Deficiency) (145,107) (312,280) --------- --------- Total Liabilities and Shareholders' Equity (Capital Deficiency) $ 110,679 $ 17,712 ========= =========
The accompanying notes are an integral part of the financial statements. F-2 7 ROBERT STUTMAN & ASSOCIATES, INC. STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ------------------------------------------ 1993 1994 1995 ----------- ----------- ----------- Revenues $ 536,292 $ 646,428 $ 1,101,599 Cost of Revenues 458,874 467,822 845,663 ----------- ----------- ----------- Gross Margin 77,418 178,606 255,936 Operating Expenses 175,866 161,912 275,485 ----------- ----------- ----------- Net Income (Loss) $ (98,448) $ 16,694 $ (19,549) =========== =========== =========== Pro forma data (unaudited) Historical income (loss) before income taxes $ (98,448) $ 16,694 $ (19,549) Pro forma income taxes (39,379) 6,680 (7,820) ----------- ----------- ----------- Pro forma net income (loss) $ (59,069) $ 10,014 $ (11,729) =========== =========== ===========
The accompanying notes are an integral part of the financial statements. F-3 8 ROBERT STUTMAN & ASSOCIATES, INC. STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON TREASURY ACCUMULATED STOCK STOCK DEFICIT TOTAL ------- ------- ----------- --------- Balance - January 1, 1993 $ 3,400 $ (41,978) $ (38,578) Issued 9 shares, net 450 450 Net Income (Loss) -- (98,448) (98,448) ------- ----------- --------- Balance - December 31, 1993 3,850 (140,426) (136,576) Repurchase of 17 shares $ (850) (850) Issued 20 shares, net 150 850 1,000 Net Income (Loss) 16,694 16,694 Distributions to Shareholders (25,375) (25,375) ------- ------- ----------- --------- Balance - December 31, 1994 4,000 (149,107) (145,107) Net Income (Loss) (19,549) (19,549) Distributions to Shareholders (147,624) (147,624) ------- ------- ----------- --------- Balance - December 31, 1995 $ 4,000 $ -- $ (316,280) $(312,280) ======= ======= =========== =========
The accompanying notes are an integral part of the financial statements. F-4 9 ROBERT STUTMAN & ASSOCIATES, INC. STATEMENTS OF CASH FLOWS
DECEMBER 31, ------------------------------------- 1993 1994 1995 --------- --------- --------- Cash Flow From Operating Activities: Net Income (Loss) $ (98,448) $ 16,694 $ (19,549) Adjustments to Reconcile Net Loss To Net Cash Used By Operating Activities: Depreciation 5,782 7,030 3,938 Changes in Operating Assets and Liabilities: (Increase) Decrease in Accounts Receivable (30,400) 20,500 6,139 (Increase) Decrease in Due from Shareholder (450) 450 (200) (Increase) Decrease in Prepaid Expenses (331) (1,592) (138) Increase (Decrease) in Accrued Expenses 9,184 (14,151) 23,449 Increase (Decrease) in Unearned Income 117,125 84,660 60,507 (Decrease) in Due to Shareholder -- -- (9,750) (Decrease) in Profit Sharing Accrual (24,000) -- -- --------- --------- --------- Net Cash Provided (Used) By Operating Activities (21,538) 113,591 64,396 Cash Flow From Investing Activities: Purchase of Property and Equipment (7,415) (4,564) (6,036) --------- --------- --------- Net Cash Flow (Used) by Investing Activities (7,415) (4,564) (6,036) Cash Flow From Financing Activities: Distributions to Shareholders -- (25,375) (147,624) Issuance of Stock 450 150 -- --------- --------- --------- Net Cash Provided (Used) by Financing Activities 450 (25,225) (147,624) Increase (Decrease) in Cash and Cash Equivalents (28,503) 83,802 (89,264) Cash and Cash Equivalents - Beginning 38,801 10,298 94,100 --------- --------- --------- Cash and Cash Equivalents - Ending $ 10,298 $ 94,100 $ 4,836 ========= ========= =========
The accompanying notes are an integral part of the financial statements. F-5 10 ROBERT STUTMAN & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1--THE COMPANY Robert Stutman & Associates, Inc. ( "RSA" or "the Company") was incorporated in Massachusetts in June 1990. The Company, which operates in a single industry segment, provides consulting, education, and drug-testing services to organizations planning to implement drug- and alcohol-free workplace programs. NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Concentration of Credit Risk The Company sells its services to a diverse group of customers in several industries. No single customer accounted for more than 10% of 1995 sales. In 1994, one customer accounted for 11% of sales. The financial strength of customers are routinely reviewed and evaluated. The Company typically obtains a contract with a significant down payment and firm payment schedule before beginning work on contracts. The Company has experienced no bad debt losses since incorporation. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash equivalents and trade receivables. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid cash investments with a maturity of three months or less when purchased to be cash equivalents. Property and Equipment Property and equipment is stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally five years. Expenditures for maintenance and repairs are charged to expense as incurred whereas major betterments and renewals are capitalized. Revenue Recognition Revenues are recorded as earned. Contracts for the development of custom alcohol and drug testing programs typically extend over several months with revenue recognized on a percentage of completion basis as determined by major contract milestones. Revenue for standard alcohol and drug testing policies, programs, employee assistance program fees and supervisor "hot line" fees is recognized over the life of the contract. Buying group set up fees are recognized when the programs are set up. Losses on contracts are recorded in full as they are identified. F-6 11 ROBERT STUTMAN & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE--2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes The Company has elected to be taxed as a Subchapter S corporation. Accordingly, the Company's stockholders, rather than the Company, are required to pay federal and certain state income taxes on the Company's earnings, whether or not the earnings are distributed to the stockholders. An estimated tax provision using the statutory tax rates has been provided as proforma disclosure. The Company accounts for income taxes under Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. No material differences between tax and book income exist in the periods presented. Earnings per Common Share Earnings per common share is based upon the weighted average number of common shares outstanding during the periods reported. There are no common stock equivalents. NOTE 3--CASH AND CASH EQUIVALENTS Cash and cash equivalents are summarized as follows:
DECEMBER 31, -------------------------- 1994 1995 ------- ------- Cash in Banks $91,270 $ 1,933 Money Market Funds 2,830 2,903 ------- ------- $94,100 $ 4,836 ======= =======
NOTE 4--PROPERTY AND EQUIPMENT Property and equipment consisted of:
DECEMBER 31 ------------------------- 1994 1995 -------- -------- Computers $ 16,483 $ 19,481 Furniture and Fixtures 17,645 20,683 -------- -------- Property and Equipment, at cost 34,128 40,164 Less: Accumulated depreciation (30,199) (34,137) -------- -------- Property and Equipment, net $ 3,929 $ 6,027 ======== ========
Depreciation expense amounted to $5,782, $7,030 and $3,938 in the years ended December 31, 1993, 1994 and 1995, respectively. F-7 12 ROBERT STUTMAN & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5--LINE OF CREDIT The Company had a line of credit with a bank allowing for borrowings up to $50,000 at the bank's prime rate plus 2%. Robert Stutman and Brian Stutman, both of whom are officers and shareholders of the Company, are guarantors of the loan. Collateral for the loan consisted of a first security interest in all business assets. The line of credit was canceled by the Company on May 14, 1996. There were no balances outstanding at December 31, 1994 or 1995. NOTE 6--PRO FORMA INFORMATION Pro Forma Statement of Operations The Company has been taxed as a Subchapter S corporation until its stock was acquired on May 21, 1996 by U.S. Alcohol Testing of America, Inc. As of that date the Subchapter S status terminated and the Company became subject to federal and state corporate income taxes. Accordingly, for informational purposes, the accompanying statements of income for the years ended December 31, 1993, 1994 and 1995 include an unaudited pro forma adjustment for income taxes, based on the tax laws in effect at the time, which would have been recorded if the Company had not been an S corporation. NOTE 7--LEASE COMMITMENTS The Company leases its office facilities and certain equipment under lease arrangements expiring between 1998 and 1999. Total rent expense for all operating leases amounted to approximately $11,700, $14,700 and $35,000 for the years ended December 31, 1993. 1994 and 1995, respectively. In addition to rent, the facility lease provides for payment of real estate taxes and other occupancy costs. Future minimum payments under operating leases are summarized as follows:
Years Ending December 31 - ------------------------ 1996 $ 39,288 1997 39,288 1998 35,925 1999 25,534 -------- Total $140,035 ========
NOTE 8 - PENSION PLAN During the years ended December 31, 1993 and 1994, the Company maintained a defined contribution pension benefit plan. The annual contribution to the plan was determined at the discretion of the Board of Directors. This plan was discontinued in January 1995. Pension expense was $35,183 in 1993. No pension expense was incurred in 1994 or 1995. NOTE 9 - CONTINGENCY A former client has made a claim against the Company in the amount of approximately $109,000 for alleged deficiencies in the work performed by the Company. The Company has rejected this claim as management believes it is without merit. Accordingly, no provision for possible loss has been provided. F-8 13 ROBERT STUTMAN & ASSOCIATES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 10 SUBSEQUENT EVENTS On May 21, 1996, the Company's common stock was acquired by U. S. Alcohol Testing of America, Inc. ("USAT"). Robert Stutman, the largest holder of the Company's common stock, was elected to the board of directors of USAT, elected Chairman of the Board and designated Chief Executive Officer of USAT on April 18, 1996. The Company expects to move its principal offices to Florida in August 1996. In connection with this move, the Company negotiated an early termination of its office lease at no cost to the Company. Proforma Combined Financial Data The proforma condensed consolidated balance sheet of the Company as of March 31, 19996 and the proforma condensed consolidated statement of operations for the fiscal year ended march 31, 1996 give effect to the following: 1. The sale of assets of USSR on April 30, 1996; 2. The segregation on the consolidated balance sheet of the assets held for sale or liquidation and the related liabilities of Good Ideas and the effect of the proposed merger; 3. The effect of the proposed U.S. Drug Merger; 4. The acquisition of RSA using audited financial statements for the year ended December 31, 1995 and the related Common Stock purchase warrant exercise between March 31, 1996 and the acquisition date of May 21, 1996 only to the extent necessary to generate the $2,100,000 of cash used in the acquisition transaction. These proforma statements may not be indicative of the results that actually would have occurred if the transactions would have been in effect on the date indicated or to project the results of operations for any future date or period. F-9 14 U.S. ALCOHOL TESTING OF AMERICA, INC. PROFORMA BALANCE SHEET
MERGER & PROPOSED MERGER WITH SALE OR ACQUISITION OPERATIONS SALE OF LIQUIDATION OF CORP. OF RSA HISTORICAL USRR GOOD IDEAS USD YE 12/31/95 PROFORMA ASSETS 3/31/96 DR(CR) DR(CR) DR(CR) DR(CR) 3/31/96 Current Assets: ----------- -------- -------------- ----------- ---------- ----------- Cash and Cash Equivalents 1,286,520 150,000 (1) 4,836(7) 1,441,356 Accounts Receivable (net of Allowance for Bad Debts of $187,703 and $112,490) 488,776 (141,038)(2) (61,612)(3) 3,761(7) 289,887 Other Receivables 1,850 200(7) 2,050 Inventories 1,041,261 (174,981)(2) (196,209)(3) 670,071 Prepaid Expenses 265,660 (3,721)(2) (7,358)(3) 2,888(7) 257,469 ----------- -------- --------- ---------- ---------- ----------- Total Current Assets 3,084,067 (169,740) (265,179) 11,685 2,660,833 ----------- -------- --------- ---------- ---------- ----------- Property and Equipment (Net of Accumulated Depreciation of $2,060,568 and $1,890,439) 2,997,066 (281,120)(2) (15,801)(3) 6,027(7) 2,706,172 Other Assets: 871,151 (6,000)(2) (6,808)(3) 858,343 Excess of Cost over Fair Value on Net Assets Acquired 4,143,804(8) 4,143,804 Estimated Net Realizable Value of Assets Held for Sale 39,580 (4) 39,580 Notes Receivable - Non Current 300,000 (1) 300,000 ----------- -------- --------- ---------- ---------- ----------- 6,952,284 (156,860) (248,208) 4,161,516 10,708,732 =========== ======== ========= ========== ========== =========== Current Liabilities: CR(DR) CR(DR) CR(DR) CR(DR) Accounts Payable 649,835 (78,613)(2) (86,831)(3) 484,391 Accrued Liabilities 708,620 (65,215) (138,858) 104,326(7) 608,873 Unearned Revenue 285,416(7) 285,416 Current Portion Long Term Debt 32,827 (3,431)(2) (8,337)(3) 21,059 Due to Shareholder 5,250(7) 5,250 Pref. Stock Dividend Payable 7,202 7,202 ----------- -------- --------- ---------- ---------- ----------- Total Current Liabilities 1,398,484 (147,259) (234,026) 394,992 1,412,191 ----------- -------- --------- ---------- ---------- ----------- Long Term Debt - Net of Current Portion 42,962 (9,601) (14,182)(3) 400,000 419,179 Minority Interest 1,478,508 (911,039)(5) (567,469)(6) Stockholders' Equity Preferred Stock Class "A" 412 412 Common Stock $.01 324,800 6,883 (5) 40,178 (6) 14,459(3) 386,320 Additional Paid In Capital 45,176,619 1,541,797 (5) 8,999,797 (6) 3,648,041(3) 59,366,254 Accumulated Deficit (41,469,501) (637,641)(12) (8,472,506)(11) 295,985(8) (50,579,648) ------------ -------- --------- ---------- ---------- ----------- Total Stockholders' Equity 4,032,330 911,039 567,469 3,366,515 8,877,353 ----------- -------- --------- ---------- ---------- ----------- TOTAL LIABILITIES AND EQUITY 6,952,284 (156,860) (248,208) 4,161,507 10,708,732 =========== ======== ========== ========== ========== ===========
F-10 15 Notes to Proforma Balance Sheet (1) Proceeds of sale of USRR (2) Assets of USRR sold and liabilities assumed by purchaser (3) Assets of Good Ideas to be sold or liquidated and liabilities assumed or settled, excluding cash and receivable from parent (4) Estimated value of assets to be sold or liquidated less liabilities (5) Purchase of minority interest in Good Ideas (6) Purchase of minority interest in U.S. Drug (7) Assets Acquired and Liabilities Assumed in Purchase of Robert Stutman & Associates, Inc. (RSA) (8) RSA-Excess of Cost over Fair Value of Assets Acquired Consideration Paid: Cash $2,100,000 Note Payable 400,000 Stock 500,000 shares of Common @ 3.125 1,562,500 Estimated Expenses 65,000 ---------- Total Price Paid 4,127,500 Accumulated Deficit 316,280 Common Stock (4,000) ---------- Purchase Price in excess of net asset value $4,439,780 ==========
RSA assets, both tangible and intangible, were reviewed for the possibility of allocating excess cost. No significant other intangible assets were identified. Management believes the excess cost over fair value of assets acquired will be realizable based on its projections of the RSA business and the contribution the RSA acquisition will make to the growth of the ProActive Synergies business. Amortization of purchase price in excess of net asset value is based on a 15 year life and amounts to $295,985 per year. (9) The cash portion of the Robert Stutman acquisition was provided by the exercise of 945,946 Common Stock Purchase Warrants at an average excise price of $2.22 subsequent to March 31, 1996 (10) Operations of RSA for the year ended December 31, 1996 Calculation of number of shares assumed in Merger Transactions with USD and Good Ideas
USD GI --------- --------- Agreed price per share of aqcquired entity 5.25 1.00 Estimated Average USAT price 2.25 2.25 Agreed Price/Est. Ave. USAT price 2.33 0.44 OS USD Minority Shares 1,721,900 1,548,680 --------- --------- Estimated Number of USAT Shares to be issued 4,017,767 688,302 ========= =========
(11) If the U.S. Drug merger is successful, USAT will record a non-recurring charge to income of approximately $8,500,000 as Incomplete Research and Development Cost, representing the excess of the market value of the USAT Common Stock issued in the U.S. Drug merger over the book value of the acquired minority investment in U.S. Drug. (12) If the Good Ieas merger is successful, USAT will record a charge to loss on Disposal of Discontinued Operations of approximately $635,000, representing the excess of the market value of the USAT Common Stock issued in the merger over the book value of the acquired minority interest in Good Ideas. (13) Elimination of minority interest. F-11 16 U.S. Alcohol Testing of America, Inc. Proforma Statement of Operations For the Fiscal Year ended 3/31/96
MERGER AND PROPOSED SALE OR MERGER WITH SALE LIQUIDATION ACQUISITION ACQUISITION OF OF CORP. OF RSA HISTORICAL USRR GOOD IDEAS USD 12/31/95 PROFORMA ---------- ---- ---------- --- -------- ------------ Continuing Operations: Net Sales $ 1,165,661 1,101,599(10) 2,267,260 Costs and Expenses Cost of Sales (Exclusive of Depreciation Shown Below) 1,208,726 845,663(10) 2,054,389 Selling, General and Administrative Expenses (Exclusive of Depreciation Shown Below) 5,720,592 275,485(10) 5,996,077 Research and Development 1,005,832 1,005,832 Incomplete Research and Development 8,472,506(11) 8,472,506 Interest 81,450 81,450 Depreciation and Amortization 1,017,534 295,985 1,313,519 Loss on Settlement of Litigation 1,137,914 1,137,914 ------------ -------- ----------- ---------- ---------- ------------ Total Costs and Expenses 10,172,048 8,472,506 1,417,133 20,061,687 ------------ -------- ----------- ----------- ---------- ------------ Loss From Operations (9,006,387) (8,472,506) (315,534) (17,794,427) ------------ -------- ----------- ----------- ---------- ------------ Other Income (Expense) Interest Income 116,075 116,075 Loss on Sale of Marketable Securities (1,889,216) (1,889,216) Unrealized Gain on Marketable Securities 2,190,721 2,190,721 Other Losses (8,704) (8,704) ------------ -------- ----------- ----------- ---------- ------------ Total Other Income (Expense) 408,876 408,876 ------------ -------- ----------- ----------- ---------- ------------ Loss Before Minority Interest in Net Loss of Subsidiaries (8,597,511) (8,472,506) (315,534) (17,385,551) Minority Interest in Net Loss of Subsidiaries 541,466 (541,466) ------------ -------- ----------- ----------- ---------- ------------ Loss from Continuing Operations (8,056,045) (9,013,972) (315,534) (17,385,551) Discontinued Operations: Loss from Operations before Minority Interest (1,545,457) (1,545,457) Minority Interest in Net Loss 467,183 (467,183) Loss on Disposal, Net of Minority Interest $143,671 (1,326,267) (781,312) (2,107,579) ------------ -------- ----------- ----------- ---------- ------------ Loss from Discontinued Operations (2,404,541) (1,248,495) (3,653,036) ------------ -------- ----------- ----------- ---------- ------------ Net Loss $(10,460,586) $ $ 2,035,973 $(9,013,972) $ (315,534) (21,038,587) ============ ======== =========== =========== ========== ============ Weighted Average Common Shares Outstanding 29,834,502 688,302 4,017,767 1,445,946 35,986,517 ============ ======== =========== =========== ========== ============ Loss Applicable to Common Stock: Net Loss (10,460,586) $(1,248,495) $(9,013,972) (315,534) (21,038,587) Preferred Stock Dividend - Class "A" (28,810) (28,810) ------------ -------- ----------- ----------- ---------- ------------ Loss Applicable to Common Stock $(10,489,396) $ $(1,248,495) $(9,013,972) $ (315,534) $(21,067,397) ============ ======== =========== =========== ========== ============ Loss Per Common Share: Loss from Continuing Operations $ (0.27) $ (0.48) Loss from Discontinued Operations $ (0.08) $ (0.10) ------------ ------------ Net Loss $ (0.35) $ (0.58) ============ ============
F-12 17 Notes to Proforma Balance Sheet 1) Proceeds of Sale of USRR 2) Assets of USRR sold and liabilities assumed by purchaser 3) Assets of Good Ideas to be sold or liquidated and liabilities assumed or settled, excluding cash and receivable from parent 4) Estimated value of assets to be sold or liquidated less liabilities 5) Purchase of Minority interest in Good Ideas 6) Purchase of Minority interest in U.S. Drug 7) Assets Acquired and Liabilities Assumed in Purchase of Robert Stutman & Associates, Inc. (RSA) 8) RSA-Excess of Cost over Fair Value of Assets Acquired Consideration Paid - Cash $2,100,000 Note Payable 400,000 Stock 500,000 shares of Common @3.125 1,562,500 Estimated Expenses 65,000 --------- Total Price Paid 4,127,500 Accumulated Deficit 316,280 Common Stock (4,000) ---------- Purchase price in excess of net asset value $4,439,780 =========
RSA assets, both tangible and intangible, were reviewed for the possible allocation of excess cost. No significant intangible assets were identified. Management believes the excess cost over fair value of the assets acquired will be realizable based on its projections for the RSA business and on the contribution the RSA acquisition is expected to make to the growth of ProActive Synergies, Inc. Amortization of purchase price in excess of net assets acquired is based on a 15 year life and amounts to $295,985 per year. 9) The cash portion of the Robert Stutman acquisition was provided by the exercise of Common Stock Purchase Warrants to purchase 945,946 shares at an average exercise price of $2.22 subsequent to March 31, 1996. 10) Operations of RSA for the year ended December 31, 1995. Calculation of Number of shares assumed in Merger Transactions with USD and Good Ideas
USD GI --- -- Agreed price per share of Acquired Entity 5.25 1.00 Estimated Average USAT price 2.25 2.25 Agreed Price/Est. Ave. USAT price 2.33 0.44 Outstanding USD and GI Minority Shares 1,721,900 1,548,680 --------- --------- Estimated Number of USAT Shares to be issued 4,017,767 688,302 ========= =========
11) If the U.S. Drug merger is successful, USAT will record a non-recurring charge to income of approximately $8,500,000 as Incomplete Research and Development Cost, representing the excess of the market value of the USAT Common Stock issued in the U.S. Drug merger over the book value of the acquired minority investment in U.S. Drug. 12) If the Good Ideas merger is successful, USAT will record a charge to Loss on Disposal of Discontinued Operations of approximately $635,000, representing the excess of the market value of the USAT Common Stock issued in the Good Ideas merger over the book value of the acquired minority investment interest in Good Ideas. 13) Elimination of Minority Interest. -----END PRIVACY-ENHANCED MESSAGE-----