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) March 12, 1996
WIZ TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
1-12726 33-0560855
(Commission File Number) (IRS Employer Identification No.)
32951 Calle Perfecto, San Juan Capistrano, California 92675
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 443-3000
Item 2. Acquisition or Disposition of Assets.
Item 7. Financial Statements, Pro Forma Financial Informa-
tion and Exhibits.
As previously reported in the Form 8-K dated March 12, 1996, on
March 12, 1996, Wiz Technology, Inc. (the "Company") acquired Q&A Sales
Marketing, Inc. ("Q&A") pursuant to an Agreement and Plan of Reorganization
dated February 14, 1996 (the "Agreement") between the Company, Q&A, and a wholly
owned subsidiary of the Company, Q&A Acquisition Company ("QAC"). The
acquisition has been accounted for as a purchase.
The required financial statements and pro forma financial
information are filed herewith.
(c) Exhibits
2. Plan of acquisition, reorganization, arrangement, liquida-
tion or succession.
2.1. Agreement and Plan of Reorganization, dated February
14, 1996, between the Company, Q&A Sales Marketing,
Inc. and Q&A Acquisition Company. Filed with origi-
nal Form 8-K.
2
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 thereunto duly authorized.
Dated: May 24, 1996 WIZ TECHNOLOGY, INC.
By:/s/ Mar-Jeanne Tendler
Mar-Jeanne Tendler
Chief Executive Officer
3
January 19, 1996
Independent Auditors' Report
To the Board of Directors of Q & A Sales and Marketing, Inc.
We have audited the accompanying balance sheet of Q & A Sales and
Marketing, Inc. as of December 31, 1995, and the related statements of
operations and accumulated deficit, 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 bases, 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 Q & A Sales and
Marketing, 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.
Lesley, Thomas, Schwartz & Postma, Inc.
A Professional Accountancy Corporation
Newport Beach, California
4
Q & A SALES AND MARKETING, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 1) 32,114
Accounts receivable, less allowance
for doubtful accounts of $486,500 (Notes 4 and 7) 993,432
Inventories (Notes 1 and 7) 495,527
Income tax receivable 37,144
Due from employees 3,951
Deferred tax asset, net of valuation allowance of
$175,715 (Note 5) 204,597
Prepaid expenses 8,443
---------
Total current assets 1,775,208
PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation
and amortization of $41,168 (Notes 1, 2 and 7) 148,814
---------
OTHER ASSETS
Deposits 12,656
Software development, less accumulated amortization
of $221,771 (Note 1) 202,585
Organization costs, less accumulated amortization
of $5,389 (Note 1) 1,082
Goodwill, less accumulated amortization of $3,062 (Note 1) 14,438
Covenant not to compete, less accumulated amortization
of $8,854 (Note 1) 76,146
Deferred tax asset (Note 5) 79,407
Cash surrender value of life insurance policy (Note 6) 129,126
----------
Total other assets 515,440
$2,439,462
5
Q & A SALES AND MARKETING, INC.
BALANCE SHEET
DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 961,480
Accrued expenses and other liabilities 55,783
Accrued royalties payable 37,916
Deferred compensation (Notes 3, 6 and 7) 260,000
Income taxes payable 1,600
Notes payable to majority stockholder (Note 7) 1,934,507
Current portion of capital lease obligations (Note 3) 39,977
-----------------
Total current liabilities 3,291,263
CAPITAL LEASE OBLIGATIONS, net of current portion (Note 3) 69,834
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' DEFICIT
Common stock, no par value;
100,000 shares authorized
10,000 shares issued and outstanding $ 50,000
Paid-in-capital 10,715
Accumulated deficit (982,350)
------------------
Total stockholders' deficit (921,635)
$ 2,439,462
6
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1995
NET SALES $ 3,893,213
COST OF GOODS SOLD 2,210,705
GROSS PROFIT 1,682,508
OPERATING EXPENSES
Selling expenses 1,183,934
General and administrative expense 1,298,447
Depreciation and amortization (Note 1) 458,087
--------------
Total operating expenses 2,940,468
OPERATING LOSS (1,257,960)
OTHER EXPENSE
Interest expense (Notes 1 and 7) 109,852
--------------
Total other expense 109,852
LOSS BEFORE INCOME TAX BENEFIT (1,367,812)
INCOME TAX BENEFIT (Note 5) 329,733
--------------
NET LOSS (1,038,079)
RETAINED EARNINGS, beginning of year 55,729
ACCUMULATED DEFICIT, end of year $ (982,350)
==============
7
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES $ (1,038,079)
Adjustment to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 458,087
Increase in net deferred income taxes (203,995)
Change in operating assets and liabilities
Increase in accounts receivable (239,408)
Increase in inventories (225,026)
Increase in income tax receivable (37,144)
Increase in deposits and other assets (442,538)
Decrease in prepaid royalties 7,664
Increase in deferred compensation 160,000
Increase in prepaid expenses (8,443)
Increase in accounts payable 641,581
Increase in accrued expenses and other liabilities 15,880
Decrease in income taxes payable (138,390)
Increase in accrued royalties payable 37,916
Total adjustments 26,184
Net cash used in operating activities (1,011,895)
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase of property and equipment (126,331)
Acquisition of investment (104,114)
Net cash used in investing activities (230,445)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on line of credit 862,434
Repayments received on advances to licensor and employees 58,610
Net increase in capital lease obligation 79,514
Net increase in borrowings and amount due
to majority stockholder 237,692
Net cash provided by financing activities 1,238,250
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,090)
CASH AND CASH EQUIVALENTS, December 31, 1994 36,204
CASH AND CASH EQUIVALENTS, December 31, 1995 $ 32,114
8
February 6, 1995
Independent Auditors' Report
To the Board of Directors of Q & A Sales Marketing, Inc.
We have audited the accompanying balance sheet of Q & A Sales
Marketing, Inc. as of December 31, 1994, and the related statements of income,
changes in stockholders' equity and cash flows for the period from March 30,
1994 (inception) through December 31, 1994. 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 Q & A Sales
Marketing, Inc. as of December 31, 1994, and the results of its operations and
its cash flows for the period from March 30, 1994 (inception) through December
31, 1994 in conformity with generally accepted accounting principles.
Lesley, Thomas, Schwartz & Postma, Inc.
A Professional Accountancy Corporation
Newport Beach, California
Q & A SALES MARKETING, INC.
BALANCE SHEET
DECEMBER 31, 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 36,204
Accounts receivable, net (Note 1) 754,024
Due from licensor (Note 7) 61,500
Due from employees 1,061
Inventories (Note 1) 270,502
Deferred tax asset (Note 5) 74,335
Prepaid royalties 7,664
Investment (Note 8) 25,012
Total current assets 1,230,302
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation of $14,632 (Notes 1 and 2) 49,019
OTHER ASSETS
Deposits 6,754
Software development, less accumulated amortization
of $129,478 (Note 1) 265,194
Organization costs (Note 1) 6,471
Goodwill (Note 1) 17,500
Deferred tax asset (Note 5) 5,674
301,593
$ 1,580,914
10
Q & A SALES MARKETING, INC.
BALANCE SHEET
DECEMBER 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 319,899
Accrued expenses and other liabilities (Note 7) 39,903
Deferred compensation (Notes 3 and 6) 100,000
Income taxes payable 139,990
Line of credit (Note 7) 166,500
Amount due to majority stockholder (Note 7) 667,881
Current portion of capital lease obligations (Note 3) 11,555
Total current liabilities 1,445,728
CAPITAL LEASE OBLIGATIONS, less current portion (Note 3) 18,742
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY
Common stock, no par value;
100,000 shares authorized
10,000 shares issued and outstanding $ 50,000
Paid-in capital 10,715
Retained earnings 55,729
Total stockholders' equity 116,444
$ 1,580,914
11
Q & A SALES MARKETING, INC.
STATEMENT OF INCOME
PERIOD FROM MARCH 30, 1994 (INCEPTION)
THROUGH DECEMBER 31, 1994
NET SALES $ 1,694,020
COST OF GOODS SOLD 594,689
GROSS PROFIT 1,099,331
OPERATING EXPENSES
Selling expenses 521,508
General and administrative expense 307,430
Depreciation and amortization (Note 1) 144,110
Total operating expenses 973,048
OPERATING INCOME 126,283
OTHER EXPENSE
Interest expense (Notes 1 and 7) 9,773
Total other expense 9,773
INCOME BEFORE PROVISION FOR INCOME TAXES 116,510
PROVISION FOR INCOME TAXES (Note 5) 60,781
NET INCOME $ 55,729
12
Q & A SALES MARKETING, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM MARCH 30, 1994 (INCEPTION)
THROUGH DECEMBER 31, 1994
Common Stock Total
Shares Paid-In Retained Stockholders'
Outstanding Amount Capital Earnings Equity
Balance, Mar 30, 1994 --- $ --- $ --- $ --- $ ---
Common Stock 10,000 50,000 10,715 --- 60,715
Net Income --- --- --- 55,729 55,729
Balance, Dec. 31, 1996 10,000 $ 50,000 $ 10,715 $ 55,729 $ 116,444
13
Q & A SALES MARKETING, INC.
STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 30, 1994 (INCEPTION)
THROUGH DECEMBER 31, 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 55,729
Adjustments to reconcile net income to net cash used by
operating activities:
Depreciation and amortization 144,110
Increase in net deferred income taxes (80,009)
Increase in deferred compensation 100,000
Change in assets and liabilities
Increase in accounts receivable (754,024)
Increase in inventories (270,502)
Increase in deposits and other assets (425,397)
Increase in prepaid royalties (7,664)
Increase in accounts payable 319,899
Increase in accrued expenses and other liabilities 39,903
Increase in income taxes payable 139,990
Total adjustments (793,694)
Net cash used in operating activities (737,965)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (63,651)
Acquisition of investment (25,012)
Net cash used in investing activities (88,663)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on line of credit 166,500
Advance to licensor and employees (62,561)
Increase in capital lease obligation 37,928
Principal payments made on capital lease obligations (7,631)
Proceeds from issuance of common stock 60,715
Amount due to majority stockholder 667,881
Net cash provided by financing activities 862,832
14
Q & A SALES MARKETING, INC.
STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 30, 1994 (INCEPTION)
THROUGH DECEMBER 31, 1994 (CONTINUED)
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 36,204
CASH AND CASH EQUIVALENTS, March 30, 1994 -0-
CASH AND CASH EQUIVALENTS, December 31, 1994 $ 36,204
15
Q & A SALES AND MARKETING, INC.
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLI-
CIES
Nature of Business - Q & A Sales and Marketing, Inc. (the "Company"),
formerly The Software Solutions Division of Digital Systems Research, Inc., was
incorporated on March 30, 1994. The Company is engaged in the development,
assembly and distribution of computer software. The principal markets for the
Company's products are retail sellers of computer equipment and software. The
Company's customers are located predominately across the United States with a
small customer base in foreign countries.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles 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.
Fair Value of Financial Instruments - For purposes of valuation
analysis, financial instruments consist of the following: cash and cash
equivalents, accounts receivable, income tax receivable, due from employees,
investment, deposits, accounts payable, accrued expenses and other liabilities,
accrued royalties payable, deferred compensation, income taxes payable, notes
payable and capital lease obligations. Management periodically reviews various
market factors effecting financial instruments including maturi- ties, cash
flows, interest rates and investment risks to determine fair value. Based on
management's valuation, they have estimated the carrying amounts of short-term
financial instruments approximate fair value because their maturity is generally
less than one year in duration and the carrying amounts of long-term financial
instruments approximate fair value because the maturities, interest rates, cash
flows, and investment risks are comparable to the current financial instruments
available to the Company.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation and amortization are provided using the straight-line method over
the estimated lives of the assets which is three to four years. Depreciation and
amortization charged to operations for the year ended December 30, 1994 was
$14,632 and for the year ending December 31, 1995 was $41,093.
Maintenance and repairs are charged to operations as incurred.
Expenditures which extend the useful life of property and equipment or increase
its productivity are capitalized. When assets are sold or otherwise disposed of,
the cost and related accumulated depreci-
16
ation and amortization are removed from the accounts and any
resulting gain or loss is recognized.
Software Development Costs - Software development costs are amortized
on the straight-line method over one year. Amortization expense charged to
operations for the year ended December 31, 1995 was $404,496. For fiscal 1994,
software development costs are amortized
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLI-
CIES (CONTINUED)
on the straight-line method over two years. Amortization expense charged to
operations for the period from March 30, 1994 (inception) through December 31,
1994 was $129,478.
Cash and Cash Equivalents - For purposes of the balance sheet and
statement of cash flows the Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash equivalents. The
Company had no cash equivalents as of December 31, 1995 or 1994.
Supplemental disclosures of cash flow information are as follows:
Cash paid during the year for:
1995 1994
---- ----
Interest $ 7,071 $ 6,074
Income taxes $ 50,596 $ 800
Accounts Receivable - The Company uses the "reserve" method of
accounting for doubtful accounts for financial reporting purposes. An allowance
for doubtful accounts has been provided for trade accounts receivable at
December 31, 1994 amounting to $158,776. The direct write-off method is used for
tax reporting purposes.
Inventories - Inventories are valued at the lower of cost or market
under the average cost method. The inventory is comprised completely of finished
goods and raw materials. The inventory is subject to rapidly changing market
conditions and demand. Management has developed a program to reduce inventory to
desired levels and has provided a valuation allowance amounting to approximately
$302,000 as of December 31, 1995 for possible inventory losses.
Organizational Costs - Organizational costs are amortized over a period
of five years. Amortization expense charged to operations for the year ended
December 31, 1995 was $5,389. No amortization was taken during the period March
30, 1994 (inception) through December 31, 1994.
Goodwill - Goodwill is amortized over a period of ten years.
Amortization expense charged to operations for the year ended December 31, 1995
was $3,062. No amortization was taken during the period March 30, 1994
(inception) through December 31, 1994.
17
Covenant Not to Compete - In October 1995, the Company purchased a
small competitor for $75,000 and an $85,000 covenant not to compete. The
covenant expires in two years and is being amortized over that period.
Amortization expense charged to operations for the year ended December 31, 1995
was $8,854.
18
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
1995 1994
Computer equipment $77,880 19,023
Furniture and fixtures 89,540 13,106
Office equipment 18,640 27,600
Software 3,922 3,922
Less: accumulated depreciation 189,982 63,651
and amortization (41,168) 14,632
$ 148,814 $49,019
NOTE 3 - COMMITMENTS AND CONTINGENCIES
1994 Lease Obligations - The Company leases its headquarters office in
California and various equipment used in its operations under capitalized and
operating leases. Rental expense under operating leases during the period
between March 30, 1994 (inception) through December 31, 1994 for the year ended
December 31, 1995 and 1994 were $72,133 and $24,540, respectively. In fiscal
1995, the Company also leased offices in California, Texas and Minnesota that
are no longer used for company operations. Two of these offices are subleased
for the remaining of the lease terms. Rental income received during 1995 was
$5,965. The total minimum rentals to be received in the future is $73,999.
Minimum future annual rental commitments for leases in excess of one
year are as follows:
Capital Operating
Year Ended December 31, 1994 Leases Leases
1995 $ 17,417 $ 49,080
1996 17,417 49,080
1997 4,359 25,540
Total minimum lease payments 39,193 $ 123,700
Less amount representing interest (8,896)
Present value of net minimum payments
under capitalized leases 30,297
Less current portion (11,555)
$ 18,742
Minimum future annual rental commitments for leases in excess of one
year are as follows:
19
Operating Net
Capital Lease Sublease Operating
Leases Commitments Rentals Leases
Year Ended December 31
1996 $ 52,573 $ 143,455 $ (57,286) $ 86,169
1997 52,573 105,478 (16,713) 88,765
1998 24,954 79,776 -- 79,776
Total minimum
lease payments $ 130,100 $ 328,709 $ 73,999 $ 254,710
Less amount representing
interest (20,289)
Present value of net minimum
payments under capitalized
leases 109,811
Less: current portion (39,977)
$ 69,834
Deferred Compensation Agreement - The Company has entered into an
annual, elective, non-qualified deferred compensation agreement with an officer
of the Company amounting to $260,000. As of December 31, 1995, $129,126 of that
amount had been funded into a split-dollar insurance program (see Note 6). In
fiscal 1994 the amount was $100,000. As of December 31, 1994, $25,012 of that
amount had been funded (See Note 8).
The payment of the deferred compensation is structured to occur upon
the officer's retirement, death, disability, financial hardship, or termination
of the officer's employment.
NOTE 4 - MAJOR CUSTOMERS
During the year ended December 31, 1995, the Company had sales of
approximately $2,556,909 or 66% of net sales to three major customers. At
December 31, 1995, amounts due from these major customers amounted to $827,868.
During the period from March 30, 1994 (inception) through December 31,
1994, the Company had sales of approximately $472,035, or 28% of net sales to
one customer. At December 31, 1994, amounts due from the major customer amounted
to $371,275.
NOTE 5 - INCOME TAXES
In February 1992, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 109
("SFAS 109"), "Accounting for Income Taxes" which
20
NOTE 5 - INCOME TAXES, CONTINUED
mandates the liability method of accounting for deferred income
taxes and permits the recognition of net deferred tax assets
subject to an ongoing assessment of realizability. The Company has
adopted the provision of SFAS 109.
Deferred income taxes are provided for timing differences in the
recognition of certain income and expense items for tax and financial statement
purposes. These differences result from the Company deducting state income taxes
subsequent to the year of accrual, the use of the "reserve" method of accounting
for doubtful accounts for financial reporting purposes as opposed to the direct
write-off method for tax purposes and the use of accelerated depreciation
methods for property and equipment for tax purposes as compared to the
straight-line method for financial statement purposes.
The provision for income taxes consists of the following:
1994 1995
Current $ 140,790 (800)
Deferred (80,009) 330,533
Total $ 60,781 $ 329,733
The tax effect of the temporary differences giving rise to the
Company's deferred tax assets and liabilities as of December 31, are shown as
follows:
Assets
(Liabilities)
1995 1994
Depreciation and amortization $(33,173) $(36,827)
Allowance for doubtful accounts 210,655 68,750
State tax liability (6,058) 4,786
NOL carryforward 175,715
Deferred officer compensation 112,580 43,300
Total net deferred income taxes 459,719 80,009
Less: valuation allowance 175,715
284,004 80,009
Less: long-term deferred income
tax asset $ (79,407) (5,674)
Current deferred income tax asset $ 204,597 $ 74,335
21
NOTE 5 - INCOME TAXES, CONTINUED
A valuation allowance of $175,715 has been provided as of December 31,
1995 against the NOL carryforwards.
The remaining deferred tax assets realization is dependent on
generating sufficient taxable income to utilize the benefit. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax asset will be realized. The amount of the deferred tax
asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income are reduced.
NOTE 6 - CASH SURRENDER VALUE OF LIFE INSURANCE POLICY
The investment represents the amount to which the deferred officer
compensation plan (a non-qualified plan) has been partially funded (See Note 3).
NOTE 7 - RELATED PARTY TRANSACTIONS
Digital Systems Research, Inc. ("DSR") owns 65% of the out-
standing common stock of the Company at December 31, 1995 and 1994.
The following obligations to DSR amounted to the following as of
December 31, 1995:
Advances on a $1,000,000 revolving note with an interest rate of prime plus .25%
per annum, due May 31, 1996, secured by all the
assets of the Company $ 1,028,934
$700,095 term note payable to DSR with an interest
rate of 10% 844,114
Note payable to majority stockholder with an interest rate
of 8% per annum 61,459
Accounts payable 56,487
$ 1,990,994
Total interest accrued to DSR during 1995 was $105,464. During the year, the
Company contracted with DSR for $60,375 in consulting services.
The obligations to DSR amounted to the following as of December 31, 1994:
Advances on a $400,000 unsecured line of credit with an interest
rate of 7.5% per annum 166,500
22
NOTE 7 - RELATED PARTY TRANSACTIONS, CONTINUED
Amount due to majority stockholder for the
transfer of assets 667,881
Accounts payable 14,898
$ 849,279
Total interest expense on the line of credit amounted to $2,013 which is
included in accrued expenses.
As of December 31, 1994, the Company is owed $61,500 from a party with which a
licensing agreement is in effect. The receivable will be repaid by 50% of the
fourth quarter 1994 royalties due to the licensor and ten equal monthly
installments beginning March 15, 1995. The advance accrues interest at 8% per
annum.
The Company has a deferred compensation agreement with an officer of
the Company (see Notes 3 and 6).
The Company has approved an incentive stock option plan for key
management personnel effective January 1, 1996.
NOTE 8 - INVESTMENT
The investment represents the amount to which the deferred officer
compensation plan (a non-qualified plan) has been funded (See Note 4).
NOTE 9 - OPERATING AND LIQUIDITY ISSUES
the Company has incurred a net loss of $1,038,079 for the year ended
December 31, 1995 and current liabilities exceeded current assets by $1,516,055.
These matters may require the Company to obtain additional financing and there
is uncertainty concerning the Company's ability to obtain sufficient
financing to meet its requirements.
The Company's 1995 net operating loss is due to a restructuring of the
Company's business operations. The restructuring commenced prior to the fourth
quarter with the objective to reposition the Company as a more efficient and
competitive company by the start of 1996. Step were implemented to divest Q & A
Sales and Marketing, Inc. from its sales representation business with full
recognition that collections of revenue commissions would suffer as the various
relationships were terminated. Additionally, the Company's inventory of single
product line was repackaged in order to create new value-priced software product
lines.
The discontinued sales representations and the repackaging of single
product lines has had a significant impact upon the Company-'s operations and
contributed to its net operating loss. However, management anticipates the
restructuring of the Company's business
23
operation has stabilized operations and will return Q & A Sales and
Marketing, Inc. to profitability in 1996.
The Company's majority stockholder has committed to financially support
the Company.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets that may result from the possible
inability of the Company to continue its operations.
24
WIZ TECHNOLOGY,INC & Q&A SALES AND MARKETING, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JANUARY 31, 1996
WIZ Q & A
TECHNOLOGY SALES &
INC. MARKETING, INC.
HISTORICAL HISTORICAL (A)
AS OF AS OF PRO FORMA
JAN. 31, 1996 DEC. 31, 1995 ADJUSTMENTS TOTAL
CURRENT ASSETS
Cash and Equivalents $ 1,985,515 $ 32,114 (32,114) $ 1,985,515
Accts. Rec., Net 1,545,249 993,432 (564,372) 1,974,309
Notes Rec. From Stockholders 103,731 0 103,731
Inventories 1,149,862 495,527 (201,067) 1,444,322
Income Tax Receivable 0 37,144 (282) 36,862
Deferred Tax Asset 0 204,597 (204,597) 0
Prepaid Exp & Other 126,369 8,443 (538) 134,274
Employee Advances 3,377 3,951 (3,951) 3,377
TOTAL CURRENT ASSETS $ 4,914,103 $ 1,775,208 $ 5,682,390
PROP & EQUIP, NET $ 667,055 $ 148,814 (34,910) $ 780,959
License Agreement - DSR (1) 3,500,000 3,500,000
Software Development
Costs, Net 903,249 202,585 (202,585) 903,249
Deposits/Certificate 100,000 12,656 (61) 112,595
Notes Rec. 13,129 0 13,129
Covenants Non Compete 145,108 76,146 443,854 665,108
Goodwill 0 15,520 (15,520) 0
Deferred Tax Asset 0 79,407 (79,407) 0
Cash Value Life Insurance 0 129,126 (129,126) 0
Other Assets 42,531 0 0 42,531
TOTAL OTHER $ 1,204,017 $ 515,440 3,517,155 $ 5,236,612
TOTAL ASSETS $ 6,785,175 $ 2,439,462 2,475,324 $ 11,699,961
25
WIZ TECHNOLOGY, INC. & Q &A SALES AND MARKETING, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF JANUARY 31, 1996
WIZ Q & A
TECHNOLOGY SALES &
INC. MARKETING, INC.
HISTORICAL HISTORICAL (A)
AS OF AS OF PRO FORMA
JAN. 31, 1996 JAN. 31, 1996 ADJUSTMENTS TOTAL
LIABILITIES & STOCKHOLDERS
EQUITY
CURRENT LIABILITIES
Accounts Payable $ 359,338 $ 961,480 74,886 $ 1,395,704
Accrued Expense/Royalties/
Salary 229,096 93,699 (1,992) 320,803
Debt to Related Parties 80,000 1,934,507 (1,934,507) 80,000
Deferred Compensation 0 260,000 (164,125) 95,875
Income Taxes Payable 0 1,600 (1,600) 0
Current Portion Long Term 561,837 39,977 (1,425,524)
TOTAL CURRENT LIABILITIES 1,230,271 3,291,263 (2,037,338) 2,494,196
LONG TERM LIABILITIES 80,595 69,834 (10,473) 139,956
TOTAL LIABILITIES 1,310,866 3,361,097 (2,037,811) 2,634,152
STOCKHOLDERS' EQUITY
COMMON STOCK
Common Stock 8,186 50,000 (49,700) 8,486
Preferred Stock 2 0 1,200 1,202
Services Rec. for Stock (78,500) 0 (78,500)
Notes Rec. from Stockhldr (157,500) 0 (157,500)
Total Paid in Capital -
Common 6,325,193 10,715 288,985 6,624,893
Paid in Capital -
Preferred 1,664,998 0 3,358,800 5,023,798
Retained Earning/Deficit (2,809,140) 55,729 (2,753,411)
Net Income 521,069 (1,038,079) 913,851 396,841
TOTAL EQUITY 5,474,308 (921,635)(B)(C) 4,513,136 9,065,809
TOTAL LIAB & EQUITY 6,785,174 2,439,462 2,475,325 11,699,961
26
WIZ TECHNOLOGY, INC. & Q&A SALES AND MARKETING, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME SIX MONTHS ENDING JANUARY 31, 1996
WIZ Q & A
TECHNOLOGY SALES &
INC. MARKETING, INC.
SIX MONTHS SIX MONTHS (B)(C)
ENDING ENDING PRO FORMA
JAN. 31, 1996 DEC. 31, 1995 ADJUSTMENTS TOTAL
Net Sales $ 3,634,881 $ 1,946,606 $ (37,466) $ 5,544,021
Cost of Revenues 1,783,412 1,105,352 (18,358) 2,870,406
GROSS PROFIT 1,851,469 841,254 (19,108) 2,673,615
Administrative Expenses 1,310,487 1,470,234 2,780,721
Operating Profit (Loss) 540,982 (628,980) (107,106)
Other Income (Expense)
Interest & Other Income 70,706 0 70,706
Interest Expense (69,816) (54,926) 52,732 (72,010)
Total Other Income (Exp) 890 (54,926) 52,732 (1,304)
NET INCOME (LOSS) PRE-TAX 541,872 (683,906) (108,410)
PROVISION FOR TAXES
(TAX BENEFIT) (20,803) 164,867 144,064
NET INCOME (LOSS) $ 521,069 $ (519,039) $ 33,624 $ 35,654
NET INCOME (LOSS) PER SHARE OF COMMON STOCK:
Primary $ .06 $ .01
Fully Diluted $ .06 $ .01
WEIGHTED AVERAGE NUMBER OF SHARES O/S:
Primary 8,608,766 8,920,514
Fully Diluted 8,865,504 10,034,016
27
WIZ TECHNOLOGY, INC. & Q&A SALES AND MARKETING, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME TWELVE MONTHS ENDING JULY 31, 1995
WIZ Q & A
TECHNOLOGY SALES &
INC. MARKETING, INC.
HISTORICAL HISTORICAL
YEAR TWELVE MONTHS
ENDED ENDED PRO FORMA
JULY 31, 1995 JUNE 30, 1995 ADJUSTMENTS TOTAL
Net Sales $ 3,680,634 $ 3,212,148 $ $ 6,892,782
Cost of Revenues 1,932,746 1,619,936 3,552,682
GROSS PROFIT 1,747,888 1,592,212 3,340,100
Administrative Exp. 2,416,778 2,255,830 4,672,608
Operating Profit (Loss) (668,890) (663,618) (1,332,508)
Other Income (Expense)
Interest & Other Income 148,139 0 148,139
Interest Expense (41,160) (69,507) 62,637 (48,030)
Total Other Income (Exp) 106,979 (69,507) 62,637 100,109
NET INCOME (LOSS) PRE-TAX (561,911) (733,125) (1,232,399)
PROVISION FOR TAXES
(TAX BENEFIT) (800) 158,567 157,767
NET INCOME (LOSS) $ (562,711) $ (574,558) $ 62,637 $(1,074,632)
NET INCOME (LOSS) PER SHARE OF COMMON STOCK:
Primary $ .07 $ (0.13)
Fully Diluted $ .07 $ (0.13)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Primary 7,944,034 8,244,034
Fully Diluted 7,944,034 8,244,034
(A) Adjustments made as a result of purchase price allocations
(B) Adjustments made to eliminate sales and profit on transactions between
WIZ Technology, Inc. and Q & A Sales Marketing, Inc.
(C) Adjustments made as a result of eliminating interest on debt forgiven
by Digital Systems Research, Inc., parent of Q & A Sales Marketing,
Inc., in connection with acquisition.
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