UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 1998
STRATFORD ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-26112 41-1759882
(State of Jurisdiction) (Commission (IRS Employer
File Number) Identification No.)
67 Wall Street, New York, New York 10005
(Address of Principal Executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-825-9292
Item 1. Changes in Control of Registrant. None.
Item 2. Acquisition or Disposition of Assets. On September 16, 1998, the
registrant's wholly-owned subsidiary, Novacrete Technology (Canada) Inc.,
located at 2525 Tedlo Street, Mississauga, Ontario L5A 4A8, purchased all the
issued and outstanding common stock of ARM PRO, Inc., located at P.O. Box 11,
Teeswater, Ontario N0G 2S0. The purchase price was $891,000 (CDN).
Since 1986, ARM PRO has manufactured and marketed the trademarked FIBERFORCE
line of polypropylene fibres. Polypropylene fibres are blended into cementitious
products to provide secondary reinforcement and reduce plastic cracking. The
Registrant will be conducting a full audit of ARM PRO's financial statements
which will be filed with the Commission by November 30, 1998.
The funds used to purchase ARM PRO Inc. were derived from the Registrant's sale
of a 9% $800,000 (USD) debenture that matures on September 4, 2000, and which
included a warrant to purchase 1,500,000 shares of the Registrant's common stock
at the exercise price of $.45 per share for a period commencing on the issuance
thereof and terminating on September 4, 2000.
Item 3. Bankruptcy or Receivership. None.
Item 4. Changes in Registrant's Certifying Accountant. None.
Item 5. Other Events. None.
Item 6. Resignation of Registrant's Directors. None.
Item 7. Financial Statements and Exhibits. In conjunction with the Registrant's
filing obligations, the financial statements of ARM PRO, Inc. (See Item 2 above)
for the fiscal periods ending May 31, 1998 and May 31, 1997 have been audited
and are annexed hereto as Exhibit A. In addition unaudited financial statements
for the period commencing on the first day of ARM PRO Inc.'s fiscal year being
June 1, 1998 and ending on the closing date of the aforementioned transaction,
September 16, 1998, are also annexed hereto as part of Exhibit A.
Item 8. Change in Fiscal Year. None.
Item 9. Sales of Equity Securities Pursuant to Regulation S. None.
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.
STRATFORD ACQUISITION CORPORATION
(Registrant)
Dated: November 30, 1998 /s/ Daniel W. Dowe
---------------------------------
Daniel W. Dowe, President
67 Wall Street, Suite 2411
New York, New York 10005
(212) 825-9292
ARMPRO INCORPORATED
FINANCIAL STATEMENTS
YEARS ENDED
MAY 31, 1998 and 1997
ARMPRO INCORPORATED
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants 2
Financial Statements
Balance Sheets
as of May 31, 1998 and 1997 and September 16, 1998 (unaudited) 3
Statements of Operations
Years ended May 31, 1998 and 1997 and period from June 1, 1998 to 4
September 16, 1998 (Unaudited)
Statements of Cash Flows
Years ended May 31, 1998 and 1997 and period from June 1, 1998 to 5
September 16, 1998 (Unaudited)
Notes to Financial Statements 6-8
1
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
Armpro, Inc.
Teeswater, Ontario
We have audited the accompanying balance sheets of Armpro Incorporated as of May
31, 1998 and 1997 and the related statements of operations and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Armpro Incorporated as of May
31, 1998 and 1997 and the results of its operations, and cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Feldman Sherb Ehrlich & Co., P.C.
FELDMAN SHERB EHRLICH & CO., P.C.
Certified Public Accountants
New York, New York
November 20, 1998
2
ARMPRO INCORPORATED
BALANCE SHEET
ASSETS
September 16, May 31, May 31,
1998 1998 1997
------------- -------- --------
(Unaudited)
CURRENT ASSETS:
Cash $158,275 $175,559 $ 13,935
Accounts receivable 90,131 69,250 67,180
Inventory 65,458 104,655 161,454
Due from Teeswater Concrete 0 0 82,356
-------- -------- --------
Total Current Assets 313,864 349,464 324,925
PROPERTY, PLANT, AND EQUIPMENT, net of
accumulated depreciation and amortization 3,636 17,095 18,870
OTHER ASSETS 550 571 595
-------- -------- --------
$318,050 $367,130 $344,390
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 62,592 $ 20,909 $113,108
-------- -------- --------
Total Current Liabilities 62,592 20,909 113,108
DUE TO OFFICERS 0 83,234 51,610
SHAREHOLDERS' EQUITY:
Common stock - par value
1,000 shares authorized 665 690 720
Translation adjustment (3,883) 8,626 6,854
Retained Earnings 258,676 253,671 172,098
-------- -------- --------
Total Stockholders' Equity 255,458 262,987 179,672
-------- -------- --------
$318,050 $367,130 $344,390
======== ======== ========
SEE NOTES TO FINANCIAL STATEMENTS
3
ARMPRO INCORPORATED
STATEMENT OF OPERATIONS
September 16, May 31, May 31,
1998 1998 1997
------------- -------- --------
(Unaudited)
SALES $ 99,994 $318,481 $373,712
COST OF SALES 98,754 133,988 174,364
-------- -------- --------
GROSS PROFIT 1,240 184,493 199,348
SELLING AND ADMINISTRATIVE EXPENSES 9,068 153,592 257,476
-------- -------- --------
Income (loss) from operations (7,828) 30,901 (58,128)
-------- -------- --------
Gain on foreign currency exchange 16,727 62,825 103,328
Interest Expense (111) (438) (1,568)
-------- -------- --------
16,616 62,387 101,760
-------- -------- --------
INCOME BEFORE TAXES 8,788 93,288 43,632
PROVISION FOR TAXES 3,783 11,715 16,029
-------- -------- --------
NET INCOME 5,005 81,573 27,603
RETAINED EARNINGS - Beginning of period 253,671 172,098 144,495
-------- -------- --------
RETAINED EARNINGS - End of period $258,676 $253,671 $172,098
======== ======== ========
SEE NOTES TO FINANCIAL STATEMENTS
4
ARMPRO INCORPORATED
STATEMENT OF CASH FLOWS
September 16, May 31, May 31,
1998 1998 1997
------------- --------- ---------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,005 $ 81,573 $ 27,603
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 241 1,800 3,839
Translation adjustment (13,902) 1,772 6,854
Changes in assets and liabilities:
(Increase) decrease in trade receivables (17,840) (2,070) 163,940
(Increase) decrease in inventory 39,196 56,799 (70,126)
(Increase) decrease in due from Teesewater Concrete (2,378) 82,356 (87,107)
(Increase) decrease in other assets 25 24 75,901
Increase (decrease) in accounts payable and accrued expenses 41,224 (92,229) (16,244)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 51,571 130,025 104,660
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (Purchase) of property and equipment 13,214 (25) (4,466)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES 13,214 (25) (4,466)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in due from shareholders (83,234) 31,624 (86,259)
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES (83,234) 31,624 (86,259)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (18,449) 161,624 13,935
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 175,559 13,935 --
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 157,110 $ 175,559 $ 13,935
========= ========= =========
SEE NOTES TO FINANCIAL STATEMENTS.
5
ARMPRO, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED MAY 31, 1998 AND 1997
AND PERIOD FROM JUNE 1, 1998 TO SEPTEMBER 16, 1998 (UNAUDITED)
The financial statements for the period June 1, 1998 through September 16,
1998 are unaudited, but reflect all adjustments which, in the opinion of
management, are necessary for a fair presentation of financial position and the
results of operations for the interim period presented. All such adjustments are
of a normal and recurring nature. The results of operations for any interim
period are not necessarily indicative of the results attainable for a full
fiscal year.
1. ORGANIZATION AND BUSINESS DESCRIPTION
The Company is located in Ontario, Canada and is in the business of
manufacturing a fiber reinforcement material used in the manufacturing of
cement products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Cash Equivalents - The Company considers all highly liquid temporary
cash investments, with an original maturity of three months or less
when purchased, to be cash equivalents.
b. Accounts Receivable - Accounts receivable are presented net of
allowance for doubtful accounts. The allowance was approximately $800
at May 31, 1998 and 1997.
c. Inventories - Inventories consisting of raw materials and finished
goods are stated at the lower of cost or market using average costing.
d. Property and Equipment - Property and equipment are stated at cost.
Depreciation is calculated on straight-line method over the estimated
useful lives of the assets, which range from 3 to 40 years.
e. Income Taxes - The Company accounts for income taxes under Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). Pursuant to SFAS 109, the Company accounts for
income taxes under the liability method. Under the liability method, a
deferred tax asset or liability is determined based upon the tax
effect of the differences between the financial statement and tax
basis of assets and liabilities as measured by the enacted rates
6
which will be in effect when these differences reverse.
f. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principals requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
g. Fair Value of Financial Instruments - The carrying amounts reported in
the balance sheet for cash, trade receivables, accounts payable and
accrued expenses approximate fair value based on the short-term
maturity of these instruments.
h. Foreign Currency - The accompanying financial statements are
translated from Canadian dollars into US dollars assuming the
functional currency is the Canadian dollar, accordingly, a translation
adjustment is recorded as an item of stockholders' equity. Foreign
currency transaction gains and losses are recorded on the income
statement.
3. PROPERTY AND EQUIPMENT
May 31, May 31,
Life 1998 1997
----------- -------- --------
Land, building and improvements 10 - 40 yrs $ 26,596 $ 26,596
Machinery and equipment 3 - 10 yrs 130,413 130,404
-------- --------
157,009 157,000
Less accumulated depreciation 139,914 138,130
-------- --------
$ 17,095 $ 18,870
======== ========
4. INCOME TAXES
The provision for income taxes consists of current Canadian Federal and
Provincial taxes payable. There were no material temporary differences at
May 31, 1998 and 1997.
7
5. RELATED PARTY TRANSACTIONS
The Company occupies facilities owned by Teesewater Concrete, a Company
related through common ownership. Teesewater Concrete does not charge the
Company any rent for the facilities.
6. MAJOR CUSTOMERS AND FOREIGN SALES
During the fiscal year ended May 31, 1998 two customers accounted for
approximately 20% and 10% of sales. During the fiscal year ended May 31,
1997 two customers accounted for approximately 22% and 13% of sales.
The Company sells a large portion of its sales to the United States. Such
sales were approximately 56% for fiscal year ended May 31, 1998 and 71% for
fiscal year ended May 31, 1997.
7. INVENTORY
Inventory consisted of the following:
May 31, May 31,
1998 1997
-------- --------
Raw materials $ 67,851 $132,731
Finished goods 36,804 28,723
-------- --------
$104,655 $161,454
======== ========
8. SUBSEQUENT EVENT
On September 16, 1998, the Company was acquired in a purchase business
acquisition. The purchase price was approximately $592,000.
8
STRATFORD ACQUISITION CORP. AND SUBSIDIARY/ARMPRO, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed financial statements have
been prepared to show the effects of the September 16, 1998 acquisition of
Armpro, Inc. ("Armpro") by Stratford Acquisition Corp. for $592,000. The
acquisition is accounted for as a purchase business combination.
The following unaudited pro forma consolidated balance sheet presents the
pro forma financial position of the Company at August 31, 1998 as if the
acquisition of Armpro had occurred on such date. Included are adjustments to
record the purchase consideration paid and the resulting goodwill.
The unaudited pro forma consolidated statements of operations for the year
ended May 31, 1998 and the three month period ended August 31, 1998 reflect the
combined results of the Company and Armpro, Inc. as if the acquisition had
occurred on June 1, 1997.
The unaudited pro forma consolidated statements of operations do not
necessarily represent actual results that would have been achieved had the
companies been together as of June 1, 1997, nor may they be indicative of future
operations. These unaudited pro forma consolidated financial statements should
be read in conjunction with the Company's historical financial statements and
notes thereto.
9
STRATFORD ACQUISITION CORP. AND SUBSIDIARY/ARMPRO, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
Stratford
Acquisition
Corp. and
Subsidiaries Armpro, Inc. Pro Forma
August 31, September 16, Adjustments
----------- ------------- -----------
1998 1998 DR (CR) Total
----------- ------------- ----------- -----------
CURRENT ASSETS:
Cash $ -- $ 158,275 (1),(2) $ 196,962 $ 355,237
Accounts receivable, net 10,027 87,735 97,762
Other receivable 4,877 2,396 7,273
Inventory 144,776 65,458 210,234
Prepaid expenses and other current assets 18,050 -- 18,050
----------- ----------- -----------
TOTAL CURRENT ASSETS 177,730 313,864 688,556
PROPERTY AND EQUIPMENT 96,019 3,636 99,655
GOODWILL -- -- (1) 347,580 347,580
DEPOSITS AND OTHER ASSETS 12,808 550 13,358
----------- ----------- ----------- -----------
$ 286,557 $ 318,050 $ 544,542 $ 1,149,149
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash deficit $ 9,555 $ -- $ $ 9,555
Accounts payable and accrued expenses 237,028 62,592 299,620
Notes payable 632,111 -- (2) 800,000 1,432,111
Current portion of long-term debt, net of discount -- -- --
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 878,694 62,592 1,741,286
STOCKHOLDERS' EQUITY:
Common stock, $ .0001 par value, 50,000,000 shares
authorized, 12,243,145 shares issued and outstanding --
(actual) and (pro forma) 12,243 665 (1) (665) 12,243
Additional paid-in capital 3,654,296 3,654,296
Translation adjustment -- (3,883)(1) 3,883 --
Retained earnings (deficit) (4,258,676) 258,676 (1) (258,676) (4,258,676)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY (592,137) 255,458 (592,137)
----------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 286,557 $ 318,050 $ 544,542 $ 1,149,149
=========== =========== =========== ===========
See notes to pro forma financial statements.
10
STRATFORD ACQUISITION CORP. AND SUBSIDIARY/ARMPRO INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Stratford Acquisition
Corp. and Subsidiaries Armpro, Inc.
Three months ended Period June 1, 1998 Pro Forma
August 31, to September 16, 1998 Adjustments
------------ ------------ ------------
1997 1997 DR (CR) Total
------------ ------------ ------------ ------------
REVENUES $ 9,677 $ 99,994 $ $ 109,671
COST OF GOODS SOLD 4,155 98,754 102,909
------------ ------------ ------------
GROSS PROFIT 5,522 1,240 6,762
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 258,744 9,068(2) 4,800 272,612
AMORTIZATION OF GOODWILL --(1) 6,000 6,000
NON-CASH IMPUTED STOCK COMPENSATION 18,750 -- 18,750
------------ ------------ ------------
OPERATING LOSS (271,972) (7,828) (284,600)
INTEREST INCOME (EXPENSE) (15,264) (111)(3) (20,000) (35,375)
AMORTIZATION OF DEBT DISCOUNT (26,074) (26,074)
FOREIGN CURRENCY GAIN (LOSS) (12,682) 16,727
PROVISION FOR TAXES -- (3,783) (3,783)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (325,992) $ 5,005 $ (349,832)
============ ============ ============
NET INCOME (LOSS) PER SHARE $ (0.03) $ (0.03)
============ ============
WEIGHTED AVERAGE SHARES 12,150,849 12,150,849
============ ============
See notes to pro forma financial statements.
11
STRATFORD ACQUISITION CORP./ARMPRO INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Stratford Acquisition
Corp. and Subsidiaries Armpro, Inc.
Year ended Year ended Pro Forma
May 31, May 31, Adjustments
----------- ----------- -----------
1998 1998 DR (CR) Total
----------- ----------- ----------- -----------
REVENUES $ 9,073 $ 318,481 $ $ 327,554
COST OF GOODS SOLD -- 133,988 133,988
----------- ----------- -----------
GROSS PROFIT 9,073 184,493 193,566
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 824,321 153,592 (2) 19,200 997,113
AMORTIZATION OF GOODWILL -- (1) 24,000 24,000
NON-CASH IMPUTED STOCK COMPENSATION 180,405 -- 180,405
----------- ----------- -----------
OPERATING LOSS (995,653) 30,901 (983,952)
INTEREST INCOME (EXPENSE) (17,139) (438)(3) (80,000) (97,577)
AMORTIZATION OF DEBT DISCOUNT (84,535) (84,535)
FOREIGN CURRENCY GAIN (LOSS) 62,825
PROVISION FOR TAXES (15,267) (11,715) (26,982)
----------- ----------- ----------- ----------
NET LOSS $(1,112,594) $ 81,573 $(1,193,046)
=========== =========== ===========
NET LOSS PER SHARE - BASIC $ (0.10) $ (0.10)
=========== ===========
WEIGHTED AVERAGE SHARES 11,472,508 11,472,508
=========== ===========
See notes to pro forma financial statements.
12
STRATFORD ACQUISITION CORP. AND SUBSIDIARY/ARMPRO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
A. The following unaudited pro-forma adjustments are included in the
accompanying unaudited pro forma consolidated balance sheet at August 31,
1998:
(1) To record the acquisition of all of the issued stock of Armpro for
$592,400 shares, with the acquisition accounted for as a purchase business
combination. The net fair value of assets acquired, consisting of cash,
accounts receivable, inventory and fixed assets, as reduced by accounts
payable, was $255,941.
(2) To record $800,000 in debt borrowed to finance the acquisition.
B. The following pro-forma adjustments are included in the accompanying
unaudited pro forma consolidated statements of operations for the year
ended May 31, 1998 and the period ended August 31, 1998:
(1) To record the amortization of goodwill.
(2) To record a fair market cost for rent expense for $1,600 per month.
(3) To record interest expense on financing debt at 10%.
13