1
SECURITIES AND 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 6, 1997
Bristol Retail Solutions, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-21633 58-2235556
(State or other juridiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
5000 Birch Street, Suite 205, Newport Beach, California 92660
(Address of prinicipal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 475-0800
Bristol Technology Systems, Inc.
18201 Von Karman Avenue, Suite 305, Irvine, California 92612
(Former name or former address, if changed since last report)
2
The undersigned Registrant hereby amends the following item of its Current
Report on Form 8-K, filed on June 20, 1997. The Registrant is amending Item 7 to
include certain required financial statements and pro forma financial
information.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Page
Audited financial statements of the business acquired (Electronic Business 4
Machines, Inc.) as of May 31, 1997 and December 31, 1996 and for the five
months ended May 31, 1997 and the years ended December 31, 1996 and
1995, together with the independent auditors' report thereon.
Unaudited financial statements of Electronic Business Machines, Inc. as of 14
March 31, 1997 and for the three months ended March 31, 1997 and 1996.
(b) PRO FORMA CONDENSED COMBINED FINANCIAL INORMATION (UNAUDITED)
Unaudited pro forma condensed combined financial information of
Bristol Retail Solutions, Inc. and Electronic Business Machines, Inc.:
Introduction to pro forma condensed combined financial 18
information
Pro forma condensed combined balance sheet as of 19
March 31, 1997
Pro forma condensed combined statement of operations for the 20
period from inception (April 3, 1996) to December 31, 1996
Pro forma condensed combined statement of operations for the 21
three months ended March 31, 1997
Notes to pro forma condensed combined financial information 22
2
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SIGNATURE
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 thereunto duly authorized.
BRISTOL RETAIL SOLUTIONS, INC.
(Registrant)
Date: August 11, 1997 By: /s/ ROGER MONACO
-----------------------------------
Roger Monaco, Senior Vice President
and Chief Financial Officer
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Report of Independent Auditors
The Board of Directors and Stockholder of Electronic Business Machines, Inc.
We have audited the accompanying balance sheets of Electronic Business Machines,
Inc. (the Company) as of December 31, 1996 and May 31, 1997, and the related
statements of operations, stockholders' equity, and cash flows for the two years
ended December 31, 1996 and the five-month period ended May 31, 1997. 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 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 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 the Company at December 31,
1996 and May 31, 1997, and the results of its operations and its cash flows for
each of the two years ended December 31, 1996 and the five-month period ended
May 31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
July 15, 1997
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Electronic Business Machines, Inc.
Balance Sheets
DECEMBER 31, MAY 31,
1996 1997
------------ ----------
ASSETS
Current assets:
Cash $ 39,151 $ 22,490
Accounts receivable, less allowance of
$45,962 in 1996 and $55,962 in 1997 404,300 457,101
Inventories 236,482 245,987
Prepaid expenses and other 12,643 6,210
Note receivable-stockholder, current portion 7,834 13,807
---------- ----------
Total current assets 700,410 745,595
Property and equipment, net 343,912 322,405
Note receivable-stockholder, less current portion 86,588 80,615
Other assets 4,421 4,081
---------- ----------
91,009 84,696
---------- ----------
Total assets $1,135,331 $1,152,696
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 219,048 $ 315,293
Accrued wages and expenses 70,316 99,751
Deferred revenue 226,418 205,561
Customer advances 13,500 10,000
Current portion of long-term debt 63,507 65,879
---------- ----------
Total current liabilities 592,789 696,484
Long-term debt, less current portion 356,846 332,190
Stockholder's equity
Common stock, 1,000 shares authorized,
200 issued and outstanding 1,000 1,000
Retained earnings 184,696 123,022
---------- ----------
Total stockholder's equity 185,696 124,022
========== ==========
Total liabilities and stockholder's equity $1,135,331 $1,152,696
========== ==========
See accompanying notes.
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Electronic Business Machines, Inc.
Statements of Operations
YEAR ENDED FIVE MONTHS
DECEMBER 31, ENDED MAY 31,
1995 1996 1997
---------- ---------- -------------
Revenue:
System sales and installation $1,166,566 $1,422,813 $ 642,251
Service and supplies sales 947,029 1,097,515 475,405
---------- ---------- -----------
Net revenue 2,113,595 2,520,328 1,117,656
Costs and expenses:
Cost of system sales and installation 807,659 852,806 505,605
Cost of service and supplies sales 640,463 624,058 344,316
Selling, general and administrative 603,659 701,947 294,331
---------- ---------- -----------
Total costs and expenses 2,051,781 2,178,811 1,144,252
---------- ---------- -----------
Operating income (loss) 61,814 341,517 (26,596)
Interest expense 59,015 51,206 23,457
---------- ---------- -----------
Net income (loss) $ 2,799 $ 290,311 $ (50,053)
========== ========== ===========
See accompanying notes.
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Electronic Business Machines, Inc.
Statements of Stockholder's Equity
Common Stock Retained
------------------- earnings
Shares Amounts (deficit) Total
------ ------- --------- ---------
Balance at December 31, 1994 200 $1,000 $ (75,121) $ (74,121)
Distribution to stockholder -- -- (13,073) (13,073)
Net income -- -- 2,799 2,799
--- ------ --------- ---------
Balance at December 31, 1995 200 1,000 (85,395) (84,395)
Distribution to stockholder -- -- (20,220) (20,220)
Net income -- -- 290,311 290,311
--- ------ --------- ---------
Balance at December 31, 1996 200 1,000 184,696 185,696
Distribution to stockholder -- -- (11,621) (11,621)
Net loss -- -- (50,053) (50,053)
=== ====== ========= =========
Balance at May 31, 1997 200 $1,000 $ 123,022 $ 124,022
=== ====== ========= =========
See accompanying notes.
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Electronic Business Machines, Inc.
Statements of Cash Flows
YEAR ENDED FIVE MONTHS
DECEMBER 31, ENDED MAY 31,
1995 1996 1997
--------- --------- -------------
OPERATING ACTIVITIES
Net income (loss) $ 2,799 $ 290,311 $(50,053)
Adjustments to reconcile net income (loss) to
net cash provided by operations:
Depreciation and amortization 34,363 36,806 28,307
Changes in operating assets and liabilities:
Accounts receivable (185,197) (69,804) (52,801)
Inventories (16,358) (43,292) (9,505)
Prepaid expenses and other (5,825) (6,454) 6,433
Accounts payable 120,056 14,649 96,246
Accrued wages and expenses 5,506 15,577 29,435
Deferred revenue 23,116 (46,048) (20,857)
Customer advances 112,800 (99,300) (3,500)
--------- --------- --------
Net cash provided by operations 91,260 92,445 23,705
INVESTING ACTIVITIES
Payments for property and equipment (36,439) (23,365) (6,461)
FINANCING ACTIVITIES
Debt repayments (45,950) (59,637) (22,284)
Borrowings 8,800 15,650 --
Distribution to stockholder (13,073) (20,220) (11,621)
--------- --------- --------
Net cash used for investing activities (50,223) (64,207) (33,905)
--------- --------- --------
Net increase (decrease) in cash 4,598 4,873 (16,661)
Cash at beginning of year 29,680 34,278 39,151
--------- --------- --------
Cash at end of year $ 34,278 $ 39,151 $ 22,490
========= ========= ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest $ 59,015 $ 51,206 $ 15,151
========= ========= ========
See accompanying notes.
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Electronic Business Machines, Inc.
Notes to Financial Statements
May 31, 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Electronic Business Machines (the Company or EBM) is an Indiana corporation. On
June 6, 1997, all of the outstanding stock of the Company was acquired by Cash
Registers, Incorporated (CRI), a wholly-owned subsidiary of Bristol Technology
Systems, Inc. (subsequently renamed Bristol Retail Solutions, Inc.), effective
as of May 31, 1997. The accompanying financial statements present the historical
accounts of EBM immediately prior to the CRI acquisition.
NATURE OF BUSINESS
The Company sells, installs, and services cash registers, point-of-sale (POS)
systems, computers and related hardware primarily in the Midwestern United
States. The Company sells its cash registers primarily to restaurants while
computers and related products are sold to a wide range of customers. Credit is
extended based on an evaluation of the customer's financial condition.
Collateral is generally not required.
REVENUE RECOGNITION
The Company recognizes revenue for system sales upon delivery to the customer
and completed installation of the system. The Company sells product service
contracts for hardware and peripheral support which generally cover a period of
twelve months. Revenues from such service contracts are deferred and amortized
on a straight-line basis over the life of the contracts. Deferred revenue
represents the unrealized portion of deferred maintenance contract revenue.
CUSTOMER ADVANCES
Customer advances represent deposits made in advance of equipment installation
and are applied against invoices when revenue is recorded.
INVENTORIES
Inventories are stated at the lower of cost or market using the specific
identification method for inventories with identifying serial numbers and the
average cost method for all other inventories.
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Electronic Business Machines, Inc.
Notes to Financial Statements (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed principally
by accelerated methods for income tax and financial reporting purposes over the
estimated useful lives of the assets which range from three to thirty-one and a
half years.
INCOME TAXES
The Company has elected to be taxed as a Subchapter S corporation as defined in
the Internal Revenue Code for federal and state income tax purposes, whereby the
income of the Company is normally taxed to the stockholder. Accordingly, these
financial statements include only a provision for income taxes payable to local
governments which do not recognize Subchapter S corporation elections.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's cash, accounts receivable and accounts payable
approximated their carrying amounts due to the relatively short maturity of
these items. The fair value of debt approximated its carrying amount at May 31,
1997 based on rates currently available to the Company for debt with similar
terms and remaining maturities.
USE OF ESTIMATES
The preparation of the 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.
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Electronic Business Machines, Inc.
Notes to Financial Statements (continued)
2. CONCENTRATION OF CREDIT RISK
For the years ended December 31, 1995 and 1996 and the five months ended May 31,
1997, the Company had 3%, 11% and 10%, respectively, of revenues attributed to
one food franchiser and its franchisees. At December 31, 1996 and May 31, 1997,
accounts receivable due from these customers totaled $120,000 and
$85,000, respectively.
3. INVENTORIES
Inventories consist primarily of POS terminals, computers, peripherals, paper
and other supplies for resale to customers, as well as items to support
maintenance contracts. Inventories held by revenue type were as follows:
DECEMBER 31, 1996 MAY 31, 1997
------------------ ------------
Systems and installation inventories $108,146 $102,065
Service and supplies inventories 128,336 143,922
======== ========
$236,482 $245,987
======== ========
Included in inventories at May 31, 1997 is approximately $91,000 of refurbished
parts and components which the Company has on hand to fulfill maintenance
contract requirements. Due to the nature of the systems installed and the
longevity of the systems in general, service may be provided for up to 12 years
after sale, causing much of the refurbished inventory on hand to be of older
items.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
DECEMBER 31, 1996 MAY 31, 1997
----------------- ------------
Land $ 16,700 $ 16,700
Buildings and improvements 366,517 366,517
Capital lease equipment 3,845 3,845
Other equipment 92,531 96,448
Automobiles 105,045 91,102
--------- ---------
584,638 574,612
Less accumulated depreciation (240,726) (252,207)
========= =========
Property, plant and equipment, net $ 343,912 $ 322,405
========= =========
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Electronic Business Machines, Inc.
Notes to Financial Statements (continued)
4. PROPERTY AND EQUIPMENT (CONTINUED)
As part of CRI's purchase of the Company, on the day immediately following the
effective closing date of May 31, 1997, the Company transferred all real
property and related obligations (consisting of SBA loans) to the former owner
of the Company. In conjunction with this transfer, the Company entered into a
lease agreement whereby the Company has agreed to lease the Louisville, Kentucky
and Greenwood, Indiana, facilities from the former owner for three years at an
aggregate monthly rental of $ 7,125. No rent escalation clauses or renewal
options are included in the leases.
5. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31, 1996 MAY 31, 1997
----------------- ------------
SBA loan from bank, due 1992-2002, variable
interest, 11.25% at May 31, 1997 $343,742 $330,264
SBA loan from bank, due 1989-2004, variable
interest, 10.5% at May 31, 1997 53,167 50,722
Automobile loans, due through 1999, various
interest rates 21,474 15,627
Other 1,970 1,456
-------- --------
420,353 398,069
Less current portion 63,507 65,879
-------- --------
$356,846 $332,190
======== ========
The two SBA loans are collateralized by the buildings and improvements purchased
using the proceeds. The automobile loans are collateralized by the automobiles
purchased with those funds. The net book value of property held as collateral at
December 31, 1996 and May 31, 1997 was $254,505 and $242,950, respectively.
As part of the purchase agreement, effective June 1, 1997, the real property and
related SBA loans were transferred to the former owner.
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Electronic Business Machines, Inc.
Notes to Financial Statements (continued)
6. COMMITMENTS AND CONTINGENCIES
Future minimum lease payments for noncancellable operating leases at May 31,
1997 were (through December 31, for 1997):
1997 $ 49,875
1998 85,500
1999 78,375
--------
$213,750
========
LITIGATION
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. Management believes the resolution of such
matters will not have a material effect on the Company's financial position or
future results of operations.
7. EMPLOYEE BENEFIT PLAN
The Company sponsors a Section 401(K) employee savings plan, covering
substantially all full-time employees who have worked for the Company for more
than one year. The Company has not made any discretionary contributions. The
Company recorded expenses related to the Plan of $879, $742, and $0 for the two
years ended December 31, 1995 and 1996 and the five-month period ended May 31,
1997, respectively.
8. NOTE RECEIVABLE - STOCKHOLDER
The note receivable-stockholder is a six-year obligation of the former owner of
the Company which commences on June 1, 1997 and replaces a note receivable due
the Company for the same amount. This note is a non-interest bearing note with a
face value of $120,000 which is carried in the balance sheet at $94,400, the
present value of the note discounted at 9.4%. The Company has the right, if
needed, to offset payments made to the former owner for consulting services
against payments due from the former owner.
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ELECTRONIC BUSINESS MACHINES, INC.
BALANCE SHEET
MARCH 31, 1997
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,466
Accounts receivable - net of allowance for doubtful
accounts of $52,982 441,917
Inventories 241,693
Prepaid expenses and other current assets 6,845
Note receivable-stockholder, current portion 7,834
----------
TOTAL CURRENT ASSETS 709,755
Property and equipment, net 324,741
Note receivable-stockholder, less current portion 86,588
Other assets 4,217
----------
TOTAL ASSETS $1,125,301
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 273,038
Deferred revenue 222,292
Other accrued expenses 61,350
Current portion of notes payable 59,762
----------
TOTAL CURRENT LIABILITIES 616,442
NOTES PAYABLE LESS CURRENT PORTION 343,913
STOCKHOLDERS' EQUITY:
Common stock, 1,000 shares authorized,
200 shares issued 1,000
Retained earnings 163,946
----------
TOTAL STOCKHOLDERS' EQUITY 164,946
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,125,301
==========
See notes to financial statements.
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ELECTRONIC BUSINESS MACHINES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarter Ended Quarter Ended
March 31,1997 March 31, 1996
------------- --------------
REVENUE:
System sales and installation $ 466,869 $ 323,457
Service and supplies sales 212,804 229,283
--------- ---------
Net revenue 679,673 552,740
Costs and expenses:
Cost of system sales and installation 366,528 267,920
Cost of service and supplies sales 151,342 151,785
Selling, general and administrative 168,479 153,222
--------- ---------
Total costs and expenses 686,349 572,927
--------- ---------
Operating loss (6,676) (20,187)
Interest expense 14,074 12,802
--------- ---------
Net loss $ (20,750) $ (32,989)
========= =========
See notes to financial statements.
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ELECTRONIC BUSINESS MACHINES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Quarter Ended Quarter Ended
March 31, 1997 March 31, 1996
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(20,750) $(32,989)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 22,430 21,480
Provision for doubtful accounts 7,020 0
Changes in operating assets and liabilities:
Accounts receivable (44,637) 49,566
Inventories (5,211) 3,872
Prepaid expenses and other assets 5,402 (6,231)
Accounts payable 53,990 (43,625)
Deferred revenue (4,126) (5,756)
Other current liabilities (22,466) 9,262
-------- --------
Net cash used in operating activities (8,348) (4,421)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (2,659) (5,791)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt repayments (16,678) (10,274)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (27,685) (20,486)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 39,151 34,278
-------- --------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 11,466 $ 13,792
======== ========
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ELECTRONIC BUSINESS MACHINES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED MARCH 31, 1997 AND 1996
1. BASIS OF PRESENTATION
The accompanying interim financial statements of Electronic Business
Machines, Inc. (the "Company") have been prepared without audit. In the
opinion of Company management, the financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary
to present fairly the financial position as of March 31,1997 and the
results of operations and cash flows for the quarters ended March 31,
1997 and 1996.
Results of operations for the quarter ended March 31, 1997 are not
necessarily indicative of the results to be expected for the fiscal
year.
The Company has elected to be taxed as a Subchapter S corporation as
defined in the Internal Revenue Code for federal and state income tax
purposes, whereby the income of the Company is normally taxed to the
stockholder. Accordingly, these financial statements include only a
provision for income taxes payable to local governments which do not
recognize Subchapter S corporation elections.
2. SUBSEQUENT EVENTS
Subsequent to March 31, 1997, the Company and Bristol Technology
Systems, Inc. (subsequently renamed Bristol Retail Solutions, Inc.)
("Bristol") entered into an agreement to merge the Company with and
into Cash Registers, Incorporated, a wholly-owned subsidiary of
Bristol. In connection with the transaction, which closed on June 6,
1997, the stockholder of the Company received a combination of cash and
common stock of Bristol.
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BRISTOL RETAIL SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information gives effect to the combination of Bristol Retail Solutions, Inc.
(the Company, formerly Bristol Technology Systems, Inc.) with (i) Cash
Registers, Incorporated (CRI), which was acquired by the Company effective June
28, 1996 for cash consideration of $955,000, including acquisition costs of
$72,000; (ii) Automated Register Systems, Inc. (ARS), which was acquired by the
Company effective December 31, 1996 for consideration of $1,103,000 in cash,
including acquisition costs of $78,000, and 58,154 shares of non-registered,
restricted common stock of the Company which were valued at $683,000 at the
acquisition date; and (iii) Electronic Business Machines, Inc. (EBM), which was
acquired by the Company effective June 6, 1997 for the following consideration:
$452,000 in cash, including $52,000 of acquisition costs; a note payable of
$21,000 to be paid in cash seventy-five days after the acquisition date; 139,682
shares of non-registered, restricted common stock of the Company which were
valued at $550,000 at the acquisition date; and a note payable of $29,000 to be
paid by 7,351 shares of non-registered, restricted common stock of the Company
seventy-five days after the acquisition date. The unaudited pro forma condensed
combined financial information is based on the historical financial statements
of the Company, CRI, ARS and EBM and certain assumptions set forth below and in
the notes to the unaudited pro forma condensed combined financial information.
The Company changed its name to Bristol Retail Solutions, Inc. in July 1997. The
Company's former name was Bristol Technology Systems, Inc.
The unaudited pro forma condensed combined balance sheet gives effect
to the combination of the Company with EBM as if such merger had occurred on the
Company's latest balance sheet date, March 31, 1997. The carrying values of the
acquired tangible assets and assumed liabilities of EBM have been adjusted to
approximate fair value. The allocation of the purchase price is subject to final
determination based on the valuation of the assets acquired. Any additional
purchase price adjustments are not expected to be material to the pro forma
financial information taken as a whole. The balance sheets of CRI and ARS are
included in the Company's historical consolidated balance sheet at March 31,
1997.
The unaudited pro forma condensed combined statement of operations for
the period from inception (April 3, 1996) to December 31, 1996 gives effect to
the acquisitions of CRI, ARS and EBM as if all of such acquisitions had been
made on April 3, 1996. The unaudited pro forma condensed combined statement of
operations for the period from inception (April 3, 1996) to December 31, 1996
includes the audited historical financial information of the Company for the
period from inception (April 3, 1996) to December 31, 1996; the financial
information of CRI for the period from April 3, 1996 to June 30, 1996; and the
financial information of ARS and EBM for the period from April 3, 1996 to
December 31, 1996.
The unaudited pro forma condensed combined statement of operations for
the three months ended March 31, 1997 includes the unaudited interim financial
information of the Company and EBM for the three months ended March 31, 1997.
The financial information of CRI and ARS is included in the Company's historical
consolidated statement of operations for the three months ended March 31, 1997.
Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate. The
unaudited pro forma condensed combined financial information presented herein is
not necessarily indicative of the results the Company would have obtained had
such events occurred at the beginning of the period, as assumed, or the future
results of the Company. The unaudited pro forma condensed combined financial
statements should be read in conjunction with the Company's audited historical
financial statements and related notes thereto in its Annual Report on Form
10-KSB for the period from inception (April 3, 1996) to December 31, 1996 and
the Company's unaudited historical financial statements and related notes
thereto in its Quarterly Report on Form 10-QSB for the quarterly period ended
March 31, 1997, both previously filed, and the audited historical financial
statements and related notes thereto of Electronic Business Machines, Inc. as of
May 31, 1997 and December 31, 1996 and for the five months ended May 31, 1997
and for the years ended December 31, 1996 and 1995 and the unaudited historical
financial statements and related notes thereto of Electronic Business Machines,
Inc. as of March 31, 1997 and for the three months ended March 31, 1997 and
1996, both included herein.
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BRISTOL RETAIL SOLUTIONS, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 1997
Historical EBM Pro Forma Pro Forma
Company Acquisition Adjustments Combined
------------ ----------- ----------- ------------
Current assets:
Cash and cash equivalents $ 4,519,770 $ 11,466 $(452,313)(a) $ 4,078,923
Accounts receivable 1,257,386 441,917 -- 1,699,303
Inventories 2,204,577 241,693 -- 2,446,270
Prepaid expenses and other current assets 59,238 6,845 -- 66,083
Amounts due from related parties 75,114 7,834 -- 82,948
------------ ---------- --------- ------------
Total current assets 8,116,085 709,755 (452,313) 8,373,527
Property and equipment, net 264,688 324,741 99,622 (a) 689,051
Intangible assets, net 1,664,878 -- 787,745 (a) 2,452,623
Other assets 190,978 4,217 -- 195,195
Note receivable from related party -- 86,588 -- 86,588
============ ========== ========= ============
Total assets $ 10,236,629 $1,125,301 $ 435,054 $ 11,796,984
============ ========== ========= ============
Current liabilities:
Line-of-credit $ 50,000 $ -- $ -- $ 50,000
Accounts payable 840,281 273,038 -- 1,113,319
Accrued expenses 566,055 60,350 -- 626,405
Deferred revenue 491,203 222,292 -- 713,495
Customer advances 412,635 1,000 -- 413,635
Note payable to related party 40,000 -- 50,000 (a) 90,000
Current portion of long-term debt -- 59,762 -- 59,762
Current portion of capital lease obligation 19,193 -- -- 19,193
------------ ---------- --------- ------------
Total current liabilities 2,419,367 616,442 50,000 3,085,809
Long-term debt -- 343,913 -- 343,913
Capital lease obligation - non-current portion 32,485 -- -- 32,485
Other long-term liabilities 36,749 -- -- 36,749
------------ ---------- --------- ------------
Total liabilities 2,488,601 960,355 50,000 3,498,956
Stockholders' equity:
Common stock 4,746 -- 140 (a) 4,886
Additional paid-in capital 8,284,893 -- 549,860 (a) 8,834,753
Accumulated deficit (541,611) -- -- (541,611)
Equity of purchased company -- 164,946 (164,946)(a) --
------------ ---------- --------- ------------
Total stockholders' equity 7,748,028 164,946 385,054 8,298,028
------------ ---------- --------- ------------
Total liabilities and stockholders' equity $ 10,236,629 $1,125,301 $ 435,054 $ 11,796,984
============ ========== ========= ============
See accompanying notes.
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BRISTOL RETAIL SOLUTIONS, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Period from Inception (April 3, 1996) to December 31, 1996
Historical CRI ARS EBM Pro Forma Pro Forma
Company Acquisition Acquisition Acquisition Adjustments Combined
----------- ----------- ----------- ----------- ----------- ------------
Revenue:
System sales and installation $ 3,120,350 $ 1,722,402 $2,500,571 $1,099,356 $ -- $ 8,442,679
Service and supplies sales 1,075,880 529,294 1,137,339 868,232 -- 3,610,745
----------- ----------- ---------- ---------- --------- ------------
Net revenue 4,196,230 2,251,696 3,637,910 1,967,588 -- 12,053,424
Costs and expenses:
Cost of system sales and installation 2,161,340 1,196,549 1,650,470 584,886 -- 5,593,245
Cost of service and supplies sales 684,655 316,059 769,223 472,273 -- 2,242,210
Selling, general and administrative
expenses 1,452,215 720,737 817,792 548,725 81,403 (b) 3,674,439
53,567 (c)
----------- ----------- ---------- ---------- --------- ------------
Total costs and expenses 4,298,210 2,233,345 3,237,485 1,605,884 134,970 11,509,894
----------- ----------- ---------- ---------- --------- ------------
Operating income (loss) (101,980) 18,351 400,425 361,704 (134,970) 543,530
Other (income) expense:
Investment income (43,280) (2,036) -- -- -- (45,316)
Interest expense 46,125 5,174 22,090 38,404 20,438 (d) 132,231
----------- ----------- ---------- ---------- --------- ------------
Total other expense 2,845 3,138 22,090 38,404 20,438 86,915
----------- ----------- ---------- ---------- --------- ------------
Income (loss) before income taxes (104,825) 15,213 378,335 323,300 (155,408) 456,615
Income tax provision (benefit) 1,800 5,335 144,252 -- (27,591)(e) 123,796
----------- ----------- ---------- ---------- --------- ------------
Net income (loss) $ (106,625) $ 9,878 $ 234,083 $ 323,300 $(127,817) $ 332,819
=========== =========== ========== ========== ========= ============
Net income (loss) per common share: $ (0.03) $ 0.07
=========== ============
Common shares used in computing per share
amounts: 3,483,012 4,890,667 (g)
=========== ============
See accompanying notes.
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BRISTOL RETAIL SOLUTIONS, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 1997
Historical EBM Pro Forma Pro Forma
Company Acquisition Adjustments Combined
----------- ----------- ----------- -----------
Revenue:
System sales and installation $ 1,748,821 $ 466,869 $ -- $ 2,215,690
Service and supplies sales 911,477 212,804 -- 1,124,281
----------- --------- ------- -----------
Net revenue 2,660,298 679,673 -- 3,339,971
Costs and expenses:
Cost of system sales and installation 1,171,596 366,528 -- 1,538,124
Cost of service and supplies sales 689,335 151,342 -- 840,677
Selling, general and administrative expenses 1,284,821 168,479 4,923 (f) 1,458,223
----------- --------- ------- -----------
Total costs and expenses 3,145,752 686,349 4,923 3,837,024
----------- --------- ------- -----------
Operating loss (485,454) (6,676) (4,923) (497,053)
Other (income) expense:
Interest income (64,252) -- -- (64,252)
Interest expense 12,734 14,074 -- 26,808
----------- --------- ------- -----------
Total other (income) expense (51,518) 14,074 -- (37,444)
----------- --------- ------- -----------
Loss before income taxes (433,936) (20,750) (4,923) (459,609)
Income tax provision 1,050 -- -- 1,050
=========== ========= ======= ===========
Net loss $ (434,986) $ (20,750) $(4,923) $ (460,659)
=========== ========= ======= ===========
Net loss per common share $ (0.09) $ (0.09)
=========== ===========
Common shares used in computing per share amounts 4,745,654 4,886,561 (h)
=========== ===========
See accompanying notes.
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BRISTOL RETAIL SOLUTIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET ADJUSTMENTS
(a) Adjustment to reflect the acquisition of EBM for the following
consideration: $452,000 in cash, including $52,000 of acquisition costs; a note
payable of $21,000 to be paid in cash seventy-five days after the acquisition
date; 139,682 shares of non-registered, restricted common stock of the Company
which were valued at approximately $550,000; and a note payable of $29,000 to be
paid by 7,351 shares of non-registered, restricted common stock of the Company
seventy-five days after the acquisition date. Acquired land and buildings were
written up to their fair market value as part of the preliminary purchase price
allocation. The preliminary purchase price allocation includes amounts assigned
to goodwill of $788,000 which represents the excess of the cost over the fair
value of the net assets acquired and is being amortized over a period of 40
years. The final purchase price allocation may involve the assignment of amounts
to different intangible assets which may be amortized over different periods.
2. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
ADJUSTMENTS
(b) Adjustment to reflect the increase in amortization expense relating to
the goodwill recorded in purchase accounting related to the CRI, ARS and EBM
acquisitions and the amortization of such goodwill over its estimated useful
life. An aggregate of $1,712,000 of goodwill was recorded in connection with the
CRI and ARS acquisitions and is being amortized over an estimated useful life of
15 years and $788,000 of goodwill was preliminarily recorded in connection with
the acquisition of EBM and is being amortized over an estimated useful life of
40 years. The final allocation of the EBM purchase price may involve the
assignment of amounts to different intangible assets which may be amortized over
different periods.
(c) Adjustment to reflect an increase in rent expense at ARS. As part of
the acquisition of ARS by the Company, ARS's office facility lease was
renegotiated and the monthly rental rate was increased.
(d) Adjustment to reflect an increase in interest expense as if the
Company's $817,500 subordinated notes payable had been issued on April 3, 1996.
The subordinated notes payable were issued in June 1996 and bore interest at 10%
per annum. The proceeds from the subordinated notes payable were used by the
Company to acquire CRI on June 28, 1996. The subordinated notes payable were
retired on November 22, 1996.
(e) Adjustment to calculate the impact on income taxes of the pro forma
adjustments at the effective income tax rate for the respective entities in the
respective periods to which the adjustments relate.
(f) Adjustment to reflect the increase in amortization expense relating to
the goodwill of $788,000 preliminarily recorded in purchase accounting related
to the EBM acquisition and the amortization of such goodwill over an estimated
useful life of 40 years.
(g) The weighted average shares outstanding used to calculate pro forma
earnings per share for the period from inception (April 3, 1996) to December 31,
1996 is based on the assumptions that (i) the Company's actual common shares
outstanding at December 31, 1996 of 4,745,654, including 2,648,745 shares issued
at the inception of the Company, 577,417 shares issued in a private placement in
June 1996, 1,437,500 shares issued in the Company's initial public offering in
November 1996, 58,154 shares issued to the stockholders of ARS on December 31,
1996 and 23,838 shares issued to directors of the Company, and (ii) the 139,682
shares of common stock issued to the shareholder of EBM at the acquisition date
had all been issued at the beginning of the period and that the additional 7,351
shares of common stock had been issued to the shareholder of EBM seventy-five
days after the beginning of the period. A portion of the proceeds from the
private placement and the initial public offering were used by the Company to
acquire CRI, ARS and EBM.
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BRISTOL RETAIL SOLUTIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
2. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
ADJUSTMENTS (CONTINUED)
(h) The weighted average shares outstanding used to calculate pro forma
earnings per share for the three months ended March 31, 1997 is based on the
actual weighted average shares outstanding of 4,745,654 for the quarter as
adjusted to reflect (i) the issuance of 139,682 shares of common stock to the
shareholder of EBM at the beginning of the quarter and (ii) the issuance of
7,351 shares of common stock to the shareholder of EBM seventy-five days after
the beginning of the quarter.
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