-----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, AAyR+VpQZoYFkaCaDN1qVvMquoncmM5JJoJeMC39tPFPIgbxOzBEDHXa//SX6Tk5 yoSMiL78VL9nUiTJ2mcN4w== 0000923604-96-000017.txt : 19960820 0000923604-96-000017.hdr.sgml : 19960820 ACCESSION NUMBER: 0000923604-96-000017 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 ITEM INFORMATION: Changes in control of registrant FILED AS OF DATE: 19960819 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AQUAGENIX INC/DE CENTRAL INDEX KEY: 0000923604 STANDARD INDUSTRIAL CLASSIFICATION: SANITARY SERVICES [4950] IRS NUMBER: 650419263 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12061 FILM NUMBER: 96617576 BUSINESS ADDRESS: STREET 1: 6500 NW 15TH AVE CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 BUSINESS PHONE: 9549757771 MAIL ADDRESS: STREET 1: 6500 NORTHWEST 15 AVE CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 FORMER COMPANY: FORMER CONFORMED NAME: AQUATERRA INC DATE OF NAME CHANGE: 19940523 8-K/A 1 U.S. SECURITIES & EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) June 7, 1996 AQUAGENIX, INC. (Exact name of registrant as specified in its charter) Delaware 0-24490 65-0419263 (State or other jurisdiction of (Commission File Number) (I.R.S.Employer incorporation) Identification No.) 6500 Northwest 15th Avenue, Fort Lauderdale, Florida 33309 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (954) 975-7771 Not Applicable (Former name or former address, if changed since last report) Page 1 ITEM 7. Financial Statements and Pro Forma Financial Statements and Exhibits The following financial statements and pro forma financial information are incorporated herein as part of this report. Page (a) Financial Statements of Business Acquired Audited financial statements of Aquatic and Right of Way Control, Inc. as of December 31, 1995 and for the year ended December 31, 1995, together with the auditors' report thereon. 5-11 Unaudited interim financial statements of Aquatic and Right of Way Control, Inc. as of March 31, 1995 and 1996 and for the three months ended March 31, 1995 and 1996. 12-17 (b) Pro Forma Consolidated Financial Information (Unaudited) Unaudited pro forma condensed consolidated financial statements of Aquagenix, Inc. and Aquatic and Right of Way Control, Inc. : Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996 18 Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1995 19 Pro Forma Condensed Consolidated Statement of Operations for the three months ended March 31, 1996 20 Notes to Pro Forma Condensed Consolidated Financial Statements 21-23 The pro forma consolidated financial information have been prepared giving effect to the acquisition of Aquatic and Right of Way Control, Inc. as if the transaction had taken place at March 31, 1996 for the pro forma balance sheet and January 1, 1995 for the pro forma statements of operations for the years ended December 31, 1995 and the three months ended March 31, 1996. The pro forma information has been based on historical financial statements of Aquagenix, Inc. and Aquatic and Right of Way Control, Inc. (as provided by the accountants of Aquatic and Right of Way Control, Inc.) after giving effect to the acquisition using the purchase method of accounting and the adjusments as described in the accompanying notes to the pro forma financial statements. The carrying values of the acquired assets and liabilities have been estimated to approximate fair market values. The allocation of the purchase price is subject to final determination based on the valuations of the assets acquired. Any purchase price adjustments will be made within one year from the acquisition date and are not expected to be material to the pro forma financial information taken as a whole. Page 2 The pro forma financial information is not necessarily indicative of the results of operations or the financial position which would have been attained had the acquisition been consummated on the dates indicated or which may be achieved in the future. The pro forma financial statements should be read in conjunction with the historical financial statements of both Aquagenix, Inc. and Aquatic and Right of Way Control, Inc. (c) Exhibit 10.81 Stock Exchange Agreement, dated as of June 7, 1996, by and among Aquagenix, Inc., Aquatic and Right of Way Control, Inc. and Ray Spirnock and Shirley Spirnock. (incorporated by reference to Exhibit 10.81 to the Company's Current Report on Form 8-K, filed with the Commission on June 20, 1996). Page 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. AQUAGENIX, INC. Date: August 15, 1996 By: /s/ Helen Chia Helen Chia, Chief Financial Officer Page 4 AQUATIC & RIGHT OF WAY CONTROL, INC. FINANCIAL STATEMENTS AND AUDITORS' REPORT DECEMBER 31, 1995 Page 5 INDEPENDENT AUDITORS' REPORT February 21, 1996 Board of Directors Aquatic & Right of Way Control, Inc. Plant City, Florida We have audited the accompanying balance sheet of Aquatic & Right of Way Control, Inc., as of December 31, 1995, and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aquatic & Right of Way Control, Inc., as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Respectfully submitted, Harman & Peaslee, P.A. /s/ Harman & Peaslee Certified Public Accountants Page 6 AQUATIC & RIGHT OF WAY CONTROL, INC. BALANCE SHEET DECEMBER 31, 1995 ASSETS CURRENT ASSETS: Cash $ 110,706 Accounts Receivable 20,792 Employee Advance 165 Total Current Assets 131,663 EQUIPMENT Small Equipment and Tools 44,752 Trucks 128,964 Furniture and Fixtures 11,911 Total Equipment 185,627 Less, Accumulated Depreciation (127,645) Equipment - Net 57,982 OTHER ASSETS: Deposits 557 TOTAL ASSETS $ 190,202 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current Portion of Long-Term Debt $ 7,352 Accounts Payable 10,144 Payroll and Payroll Taxes Payable 20,771 Total Current Liabilities 38,267 STOCKHOLDER EQUITY: Common Stock - 1,000 Shares Authorized, $1.00 Par Value - 600 Shares Issued and Outstanding 600 Retained Earnings 151,335 Total Stockholders' Equity 151,935 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 190,202 The Accompanying Notes are an Integral Part of These Financial Statements Page 7 AQUATIC & RIGHT OF WAY CONTROL, INC. STATEMENT OF EARNINGS AND RETAINED EARNINGS FOR THE YEAR ENDED DECEMBER 31, 1995 SALES AND COMMISSIONS $ 1,106,121 COST OF SALES: Chemicals 436,530 Subcontracting 91,841 Supplies 20,865 Fuel 21,539 Depreciation 26,893 Equipment Repairs 46,858 Travel and Lodging 24,180 Salaries and Wages 64,191 Payroll Taxes 7,242 Total Cost of Sales 740,139 GROSS PROFIT 365,982 GENERAL AND ADMINISTRATIVE EXPENSES: Advertising 3,982 Officer Salaries 74,098 Payroll Taxes 5,668 Entertainment 25,608 Insurance 54,767 Interest 4,700 Professional Fees 7,675 Taxes and Licenses 7,535 Telephone and Utilities 25,085 Other General & Administrative 20,418 Total General and Administrative Expense 229,536 INCOME FROM OPERATIONS 136,446 OTHER INCOME (EXPENSE): Interest Income 2,159 Loss on Sale of Equipment (4,374) Total Other Income (Expense) (2,215) NET INCOME 134,231 RETAINED EARNINGS, JANUARY 1 92,717 Less, Dividends Paid (75,613) RETAINED EARNINGS, DECEMBER 31 $ 151,335 The Accompanying Notes are an Integral Part of These Financial Statements Page 8 AQUATIC & RIGHT OF WAY CONTROL, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995 CASH ACTIVITIES FROM OPERATING ACTIVITIES: Collection from Customers $ 1,128,300 Payment for Goods and Services (998,428) Repayment of Line of Credit (20,000) Interest Paid (4,700) Cash Provided by Operating Activities 105,172 CASH FLOWS (USED BY) INVESTING ACTIVITIES: Purchase of Equipment (3,000) CASH FLOWS FROM (USED BY) FINANCING ACTIVITIES: Repayment of Long-Term Debt (7,869) Dividends Paid (75,613) Cash Used by Financing Activities (83,482) INCREASE IN CASH 18,690 CASH, JANUARY 1 92,016 CASH, DECEMBER 31 $ 110,706 RECONCILIATION OF NET INCOME TO NET CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 134,231 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 26,893 Loss on Sale of Equipment 4,374 (Increase) Decrease in: Accounts Receivable 20,020 Employee Advances (165) Increase (Decrease) in: Accounts Payable (92,352) Payroll and Payroll Taxes Payable 12,171 $ 105,172 The Accompanying Notes are an Integral Part of These Financial Statements Page 9 AQUATIC & RIGHT OF WAY CONTROL, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1995 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS The company is a service provider to various utility and other companies in control vegetation on their utility, road and waterway right of ways. These services are basically performed for companies in the State of Florida. ACCOUNTS RECEIVABLE Accounts receivable are considered to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become uncollectible, they will be charged to operations when that determination is made. DEPRECIATION The company records all equipment at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, ranging generally from three to seven years. SIGNIFICANT CONCENTRATION OF CREDIT RISK The company has concentrated its credit risk for cash by maintaining all of its accounts with the Southtrust Bank. The maximum loss that would have resulted from the risk totaled $10,706 as of December 31, 1995, for the excess of the deposit liabilities reported by the bank over the amount that would have been covered by federal insurance. INCOME TAXES The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under these provisions, the Company does not pay federal corporate income taxes on its taxable income. Instead, the stockholders are liable for individual income taxes on their respective share of income. RELATED PARTY TRANSACTIONS The Company's does not pay any rent for its office space, which is located in the stockholder's home. Page 10 AQUATIC & RIGHT OF WAY CONTROL, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1995 NOTE 4: LONG-TERM DEBT Long-term debt consist of two notes payable to local banks. Payment amounts total $959 per month and include interest at the rate of 8%, and are secured by vehicles. These notes will be fully amortized during the year ended December 31, 1996. Page 11 AQUATIC & RIGHT OF WAY CONTROL, INC. BALANCE SHEET MARCH 31, 1995 UNAUDITED ASSETS CURRENT ASSETS Cash $ 20,983.90 Accounts Receivable 40,049.97 Employee Advances 0.00 Total Current Assets $ 61,033.87 PROPERTY AND EQUIPMENT Tools & Small Equipment 41,751.67 Autos and Trucks 162,793.52 Furniture & Fixtures 4,083.00 Buildings 7,827.00 Accumulated Depreciation (127,579.41) Total Property and Equipment Net 88,875.78 OTHER ASSETS Deposits 557.00 TOTAL ASSETS $ 150,466.65 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 51,637.28 Line of Credit 20,000.00 Payroll Taxes Payable 1,619.92 Total Current Liabilities 73,257.20 LONG-TERM DEBT Note Payable - Ford Motor 10,685.65 Note Payable - First Fede 8,019.62 Total long-term Debt 18,705.27 TOTAL LIABILITIES 91,962.47 STOCKHOLDERS' EQUITY Common Stock 600.00 Retained Earnings 92,717.00 Dividends Paid (1,560.48) Net Income Current Year (33,252.34) Total Stockholders' Equity 58,504.18 TOTAL LIABILITIES AND STOCKHOLDERS' EQU $ 150,466.65 Page 12 AQUATIC & RIGHT OF WAY CONTROL, INC. STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1995 (UNAUDITED) INCOME Sales and Commissions $ 134,850.74 Interest Income 365.27 Total Income $ 135,216.01 EXPENSES Chemicals 67,549.30 Subcontractors 8,725.00 Advertising 201.00 Auto and Truck Expense 337.75 Fuel 3,941.98 Damages 750.00 Travel & Lodging 5,863.05 Meals 1,218.95 Bunnell Hunt Lease 23.00 Entertainment 1,046.00 Bids 25.00 Bank Charges 0.00 Repairs & Maintenance 17,667.04 Outside Services 450.00 Depreciation Expense 9,667.50 Dues & Subscriptions 292.18 Insurance 10,617.98 Interest 604.12 Legal & Accounting 1,500.00 Taxes & Licenses 2,045.70 Office Expense 3,023.85 Postage & Shipping 352.19 Payroll Taxes 1,697.24 Supplies 3,435.98 Telephone Expense 3,754.36 Utility Expense 1,518.18 Wages & Salaries 22,161.00 Total Expenses 168,468.35 OTHER INCOME Sale of Assets 0.00 NET INCOME (LOSS) $ (33,252.34) Page 13 AQUATIC & RIGHT OF WAY CONTROL, INC. STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 1995 Cash flows from operating activities: Net loss $ (33,252) Adjustments to reconcile net income to net cash used in operating activities: Depreciation 9,668 Net change in operating assets and (11,049) Net cash used in operating acti (34,633) Cash flows from investing activities: Purchase of property and equipment (6,617) Cash flows from financing activities: Repayment of long-term debt (28,222) Payment of dividends (1,560) Net cash used in financing acti (29,782) Cash and cash equivalents: Decrease (71,032) Beginning balance 92,016 Ending balance $ 20,984 Page 14 AQUATIC & RIGHT OF WAY CONTROL, INC. BALANCE SHEET MARCH 31, 1996 UNAUDITED ASSETS CURRENT ASSETS Cash $ 11,117.10 Accounts Receivable 83,709.54 Employee Advances 215.00 Total Current Assets $ 95,041.64 PROPERTY AND EQUIPMENT Tools & Small Equipment 44,751.67 Autos and Trucks 128,964.19 Furniture & Fixtures 11,910.80 Accumulated Depreciation (133,644.91) Total Property and Equipment Net 51,981.75 OTHER ASSETS Deposits 557.00 TOTAL ASSETS $ 147,580.39 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 14,144.00 Line of Credit 0.00 Payroll Taxes Payable 2,308.32 Total Current Liabilities 16,452.32 LONG-TERM DEBT Note Payable 5,432.89 Total long-term Debt 5,432.89 TOTAL LIABILITIES 21,885.21 STOCKHOLDERS' EQUITY Common Stock 600.00 Retained Earnings 151,334.78 Dividends Paid (16,923.00) Net Income Current Year (9,316.60) Total Stockholders' Equity 125,695.18 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 147,580.39 Page 15 AQUATIC & RIGHT OF WAY CONTROL, INC. STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) INCOME Sales and Commissions $ 149,290.04 Interest Income 331.96 Total Income $ 149,622.00 EXPENSES Chemicals 51,219.60 Subcontractors 22,350.00 Advertising 196.36 Auto and Truck Expense 0.00 Fuel 4,229.85 Damages 77.00 Travel & Lodging 3,877.97 Meals 299.89 Bunnell Hunt Lease 3,544.71 Entertainment 540.79 Bids 0.00 Bank Charges 3.53 Repairs & Maintenance 6,720.04 Outside Services 1,510.00 Depreciation Expense 6,000.00 Dues & Subscriptions 93.00 Insurance 10,021.83 Interest 172.00 Legal & Accounting 2,287.75 Taxes & Licenses 306.75 Office Expense 780.25 Miscellaneous 3,500.77 Postage & Shipping 220.00 Payroll Taxes 2,664.41 Supplies 4,677.93 Telephone Expense 3,398.68 Utility Expense 1,826.99 Wages & Salaries 28,418.50 Total Expenses 158,938.60 OTHER INCOME Sale of Assets 0.00 NET INCOME (LOSS) $ (9,316.60) Page 16 AQUATIC & RIGHT OF WAY CONTROL, INC. STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 1996 Cash flows from operating activities: Net loss $ (9,317) Adjustments to reconcile net income to net cash used in operating activities: Depreciation 6,000 Net change in operating assets and liabilities (77,430) Net cash used in operating activit (80,747) Cash flows from financing activities: Repayment of long-term debt (1,919) Payment of dividends (16,923) Net cash used in financing activit (18,842) Cash and cash equivalents: Decrease (99,589) Beginning balance 110,706 Ending balance $ 11,117 Page 17 AQUAGENIX, INC. & SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996 (UNAUDITED)
AQUAGENIX AQUATIC PRO FORMA CONSOLIDATED Assets HISTORICAL RIGHT OF WAY ADJUSTMENTS PRO FORMA Current assets: Cash and cash equivalents $ 810,280 $ 11,117 $ (150,000)(a)$ 671,397 Accounts receivable, net 761,703 83,709 845,412 Income tax receivable 486,239 0 486,239 Inventories 333,386 0 333,386 Net assets of discontinued operations 1,192,720 0 1,192,720 Prepaid expenses and other 180,054 215 180,269 Total current assets 3,764,382 95,041 (150,000) 3,709,423 Property and equipment, net 1,844,814 51,982 1,896,796 Intangible assets, net 3,177,583 0 1,374,305 (a) 4,927,888 376,000 (h) Deferred financing costs, net 188,460 0 188,460 Other assets 73,439 557 73,996 Total assets $ 9,048,678 $ 147,580 $ 1,600,305 $ 10,796,563 Liabilities and Stockholders' Equity Current liabilities: Current maturities of long-term debt $ 575,077 $ 0 $ $ 575,077 Borrowings under credit agreements 404,415 0 404,415 Accounts payable 473,491 14,144 487,635 Other current liabilities 251,220 2,308 253,528 Total current liabilities 1,704,203 16,452 0 1,720,655 Long-term debt, net of current maturities 5,023,898 5,433 5,029,331 Deferred income tax 0 0 376,000 (h) 376,000 Total liabilities 6,728,101 21,885 376,000 7,125,986 Stockholders' equity: Common stock 32,153 600 2,100 (a) 34,853 Additional paid-in capital 8,451,615 0 1,347,300 (a) 9,798,915 Retained earnings (deficit) (6,163,191) 125,095 (125,095)(a) (6,163,191) Total stockholders' equity 2,320,577 125,695 1,224,305 3,670,577 Total liabilities and stockholders'$ 9,048,678 $ 147,580 $ 1,600,305 $ 10,796,563 equity
Page 18 AQUAGENIX, INC. & SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
AQUAGENIX (Note A) AQUATIC & PRO FORMA AQUAGENIX HISTORICAL AMERAQUATIC RIGHT OF WAY ADJUSTMENTS PRO FORMA Revenues $ 6,208,905 $ 3,137,549 $ 1,106,121 $ 0 $ 10,452,575 Costs and expenses: Costs of services 3,344,314 1,509,793 713,246 (334,889)(b) 5,232,464 Selling, general and administrati 3,723,724 1,450,800 229,210 (833,778)(b) 4,569,956 Depreciation and amortization 253,190 129,319 26,893 280,750 (c) 708,374 18,222 (d) Total costs and expenses 7,321,228 3,089,912 969,349 (869,695) 10,510,794 Operating (loss) income (1,112,323) 47,637 136,772 869,695 (58,219) Interest income 217,364 0 2,159 0 219,523 Interest expenses (161,385) (25,068) (4,700) (520,833)(e) (711,986) (Loss) income from continuing operatio (1,056,344) 22,569 134,231 348,862 (550,682) before income taxes Income tax (benefit) provision (374,350) 0 0 58,957 (f) (169,187) 146,206 (g) (Loss) income from continuing operati$ (681,994) $ 22,569 $ 134,231 $ 143,699 $ (381,495) Loss per common share $ (0.22) $ (0.11) Weighted average common shares outstanding 3,166,768 270,000 (a) 3,436,768
Note A - Acquisition of AmerAquatic, Inc. ("AmerAquatic") was completed on October 31, 1995 (as previously reported on Form 8K/A dated October 31, 1995). Operating results are included from January 1, 1995 to October 31, 1995 which is the date of acquisition. Page 19 AQUAGENIX, INC. & SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AQUAGENIX AQUATIC & PRO FORMA AQUAGENIX HISTORICAL RIGHT OF WAY ADJUSTMENTS PRO FORMA Revenues $ 2,252,634 $ 149,290 $ 0 $ 2,401,924 Costs and expenses: Costs of services 1,094,942 124,159 (21,500)(b) 1,197,601 Selling, general and administrative 650,634 28,608 (17,919)(b) 661,323 Depreciation and amortization 137,089 6,000 28,743 (c) 171,832 Total costs and expenses 1,882,665 158,767 (10,676) 2,030,756 Operating income (loss) 369,969 (9,477) 10,676 371,168 Interest income 41,311 332 0 41,643 Interest expenses (160,790) (172) 0 (160,962) Income (loss) from continuing operations 250,490 (9,317) 10,676 251,849 before income taxes Income tax provision 0 0 0 (f) 0 Income (loss) from continuing operation$ 250,490 $ (9,317) $ 10,676 $ 251,849 Earnings per common and common equivalent shares $ 0.08 $ 0.07 Weighted average common and common equivalent shares outstanding 3,354,026 270,000 (a) 3,624,026
Page 20 AQUAGENIX, INC. & SUBSIDIARIES NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Explanation of pro forma adjustments (a) On June 7, 1996, Aquagenix, Inc. (the "Company") acquired 100% of the voting common stock of Aquatic and Right of Way Control, Inc. ("ARC"). The aggregate purchase price was $1,500,000, of which $1,350,000 was paid by the issuance of 270,000 shares of the Company's common stock and $150,000 was paid in cash which was funded out of cash flows from operations. The net tangible assets acquired from ARC consist primarily of accounts receivable and equipment . The acquisition of ARC is estimated to create approximately $1,400,000 of intangible assets calculated as follows: Stock purchase price $ 1,350,000 Cash purchase price 150,000 Total purchase price 1,500,000 Less: Net tangible assets acquired (125,695) Intangible assets $ 1,374,305 Comprising: Intangible contract relationships to be amortized over 10 years 1,000,000 Goodwill to be amortized over 25 years 374,305 Total intangible assets $ 1,374,305 (b) Reflects the elimination of certain expenses which would be realized by the Company after the acquisition. These cost savings reflect certain expenses, primarily consisting of materials, insurance, payroll and equipment rentals, which would not be duplicated in the combined operations of the Company. Year Ended Three Months December 31, Ended 1995 March 31,1996 Cost of Services ARC $ 86,000 $ 21,500 AmerAquatic 248,889 0 $ 334,889 $ 21,500 Selling, General and Administrative Expenses ARC $ 79,000 $ 17,919 AmerAquatic 754,778 0 $ 833,778 $ 17,919 Page 21 (c) Reflects the amortization of intangible contract relationships and goodwill,based on the allocation of the purchase price paid for ARC, which is being amortized on a straight-line basis over 10 and 25 years, respectively. Also reflects amortization of a non-compete agreement of $100,000, goodwill of $2,646,026, and finance costs of $452,000 based on the allocation of the purchase price paid for AmerAquatic on straight-line basis over 10, 20 and 8 years, respectively. Year Ended Three Months December 31, Ended March 31, 1995 1996 ARC (see note (a)): Intangible contract relationships $ 100,000 $ 25,000 Goodwill 14,972 3,743 AmerAquatic (as previously reported in Form 8-K/A dated October 31, 1995) 165,778 0 $ 280,750 $ 28,743 (d) Reflects the adjustment of depreciation for equipment acquired at fair value on a straight-line basis over 5 to 7 years as follows: AmerAquatic (as previously reported in Form 8-K/A dated October 31, 1995) $ 18,222 $ 0 (e) Reflects interest expense at 12.5% on $5,000,000 note issued for the acquisition of AmerAquatic as follows: AmerAquatic (as previously reported in Form 8-K/A dated October 31, 1995) $ 520,833 $ 0 (f) Reflects incremental income taxes since the acquired companies were Subchapter S corporations prior to their respective dates of acquisition, assuming a combined federal and state income tax rate of 37.6% as follows: ARC $ 50,471 $ 0 AmerAquatic 8,486 $ 58,957 $ 0 Page 22 No income taxes have been provided for the quarter ended March 31, 1996 since the Company has a net operating loss carryforward which is available to offset taxable income. (g) Reflects the establishment of a deferred tax liability, at an assumed federal and state income tax rate of 37.6% for intangible contract relationships purchased in connection with the ARC acquisition. Page 23 -----END PRIVACY-ENHANCED MESSAGE-----