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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) August 11, 1998 (May 29, 1998)
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FLORAFAX INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-5531 41-0719035
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(State or other jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
8075 20TH STREET, VERO BEACH, FLORIDA 32966
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 561/563-0263
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
The Current Report on Form 8-K, dated June 8, 1998, (the "Original Current
Report") of Florafax International, Inc., a Delaware corporation (the "Company")
is hereby amended to report the information required by Item 7 that was not
available for the filing of the Original Current Report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
(1) Marketing Projects, Inc. (MPI) balance sheet as of December 31, 1997,
and income statement and statement of cash flows and changes in
stockholders' equity for the year ended December 31, 1997 and
Independent Auditors Report.
(2) MPI balance sheet as of March 31, 1998, and income statement and cash
flows statement and changes in stockholders equity for the three month
periods ended March 31, 1998 and 1997 (unaudited)
(b) Unaudited Pro Forma Financial Information
(1) Florafax International, Inc. (Florafax) Pro Forma combined statement of
operations for the year ended August 31, 1997.
(2) Florafax International, Inc. combined statement of operations for the
nine months ended May 31, 1998.
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.
FLORAFAX INTERNATIONAL, INC.
(Registrant)
Date August 11, 1998 /s/ James H. West
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James H. West
Chief Financial Officer
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Marketing Projects, Inc.
Financial Statements
Year ended December 31, 1997
CONTENTS
Report of Independent Certified Public Accountants......................................... 1
Audited Financial Statements
Balance Sheets............................................................................. 2
Statements of Operations................................................................... 3
Statements of Changes in Stockholders' Equity ............................................. 4
Statements of Cash Flows................................................................... 5
Notes to Financial Statements.............................................................. 6
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Report of Independent Certified Public Accountants
Stockholder and Board of Directors
Marketing Projects, Inc.
We have audited the accompanying balance sheet of Marketing Projects, Inc. as of
December 31, 1997 and the related statements of operations, stockholder's
equity, 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 Marketing Projects, Inc. at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Tampa, Florida
June 26, 1998
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Marketing Projects, Inc.
Balance Sheets
DECEMBER 31 MARCH 31
1997 1998
--------- ---------
(UNAUDITED)
ASSETS
Current assets:
Cash $ 203,057 $ 25,215
Accounts receivable 1,859 3,532
Prepaid expenses and other current assets -- 130,430
--------- ---------
Total current assets 204,916 159,177
Property and equipment, at cost
Fixtures and equipment 8,107 8,107
Computer equipment 15,701 15,701
Vehicle 35,596 35,596
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59,404 59,404
Accumulated depreciation (27,124) (28,156)
--------- ---------
32,280 31,248
Other assets 933 758
--------- ---------
Total assets $ 238,129 $ 191,183
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities $ 6,440 $ 6,733
Stockholder's equity:
Common stock, $1 par value -- authorized 100,000 2,500 2,500
shares; issued and outstanding 2,500 shares
Retained earnings 229,189 181,950
--------- ---------
Total stockholder's equity 231,689 184,450
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Total liabilities and stockholder's equity $ 238,129 $ 191,183
========= =========
SEE ACCOMPANYING NOTES.
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Marketing Projects, Inc.
Statements of Operations
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31 MARCH 31
1997 1997 1998
---------- ---------- ----------
(UNAUDITED)
Commission revenues $1,501,412 $ 341,049 $ 336,664
Expenses:
General and administrative 109,435 29,600 37,581
Selling, advertising and promotion 1,113,779 227,430 345,223
Depreciation and amortization 15,461 3,141 1,207
---------- ---------- ----------
Operating income (loss) 262,737 80,878 (47,347)
Gains on sale of marketable securities and other
income 125,280 -- 108
---------- ---------- ----------
Income (loss) before provision for income taxes 388,017 80,878 (47,239)
Provision for income taxes 5,640 1,370 --
---------- ---------- ----------
Net income (loss) $ 382,377 $ 79,508 $ (47,239)
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SEE ACCOMPANYING NOTES.
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Marketing Projects, Inc.
Statement of Changes in Stockholder's Equity
COMMON STOCK
NUMBER OF PAR RETAINED
SHARES ISSUED VALUE EARNINGS TOTAL
------------- --------- --------- ---------
Balance at January 1, 1997 2,500 $ 2,500 $ 214,812 $ 217,312
Net income -- -- 382,377 382,377
Distributions -- -- (368,000) (368,000)
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Balance at December 31, 1997 2,500 $ 2,500 $ 229,189 $ 231,689
Net loss for three-months ended
March 31, 1998 (unaudited) -- -- (47,239) (47,239)
----- --------- --------- ---------
Balance at March 31, 1998 (unaudited) 2,500 $ 2,500 $ 181,950 $ 184,450
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SEE ACCOMPANYING NOTES.
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Marketing Projects, Inc.
Statement of Cash Flows
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31 MARCH 31
1997 1997 1998
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(UNAUDITED)
OPERATING ACTIVITIES
Net income (loss) $ 382,377 $ 79,468 $ (47,239)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 15,461 3,141 1,207
Gain on sale of marketable securities (124,995) -- --
Changes in operating assets and liabilities:
Accounts receivable 18,053 13,077 (1,673)
Prepaid expenses and other current assets -- -- (130,430)
Accounts payable and other accrued liabilities (8,899) (5,272) 293
--------- --------- ---------
Net cash provided by (used in) operating activities 281,997 97,249 (177,842)
INVESTING ACTIVITIES
Capital expenditures (17,388) (1,256) --
Proceeds from sale of marketable securities 247,495 -- --
--------- --------- ---------
Net cash provided by (used in) investing activities 230,107 (1,256) --
FINANCING ACTIVITIES
Distributions (368,000) (75,000) --
--------- --------- ---------
Net increase (decrease) in cash 144,104 20,993 (177,842)
Cash at beginning of the period 58,953 58,953 203,057
--------- --------- ---------
Cash at end of the period $ 203,057 $ 79,946 $ 25,215
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for income taxes $ 3,800 $ 950 $ 5,640
========= ========= =========
SEE ACCOMPANYING NOTES.
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Marketing Projects, Inc.
Notes to Financial Statements
December 31, 1997
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Marketing Projects, Inc. (the Company), a California Corporation, is engaged in
the business of marketing, through large United States corporations, floral
arrangements and floral related gift products to principally individual
consumers throughout the United States. Such floral arrangements and gift
products are provided directly to consumers by Florafax International Inc.
(Florafax) pursuant to a servicing agreement that provides for a commission to
the Company.
The Company's business is highly cyclical, with large portions of commission
revenue realized near major United States holidays.
The Company maintains their underlying books and records on the federal income
tax basis. These financial statements include adjustments necessary for a
presentation in accordance with generally accepted accounting principles.
INTERIM FINANCIAL INFORMATION
The accompanying unaudited financial information as of March 31, 1998 and for
the three months ended March 31, 1998 and 1997 have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the applicable sections of Regulation S-B. Accordingly, all information
and footnotes that are otherwise required under generally accepted accounting
principles and Regulation S-B are not required as it relates to the interim
financial information. However, in the opinion of management of the Company, all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the unaudited interim financial information have been included. Results
for the three months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the full fiscal year.
REVENUE RECOGNITION
Commission revenues relate principally to commissions under the servicing
agreement with Florafax. Commission revenue is recognized as a percentage of the
sales revenue to the benefit of Florafax, for its sale of floral arrangements
and related gift products, at the time of delivery of the product to the
consumer.
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Marketing Projects, Inc.
Notes to Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives are three years for fixtures and equipment, computers and the
vehicle.
INCOME TAXES
The Company has elected to be treated as an S corporation under the Internal
Revenue Code. In lieu of corporate income taxes, the stockholders of an S
Corporation are taxed on their proportionate share of the taxable income of the
Company. The Company is still liable for income taxes in the state of
California. However, for the three-month period ended March 31, 1998, this
liability is deemed immaterial. Therefore, no provision or liability for federal
or state income taxes has been included in these financial statements for the
three-month period ended March 31, 1998.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense amounted to
$23,230 in 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
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Marketing Projects, Inc.
Notes to Financial Statements (continued)
2. LEASES
Non-cancelable obligations under an operating lease for office space are as
follows for each year ending December 31:
MINIMUM
LEASE
PAYMENTS
--------
1998 $ 23,137
1999 23,137
2000 3,856
Thereafter --
--------
Total $ 50,130
========
Total rent expense under the operating lease for 1997 amounted to $19,211.
3. RETIREMENT PLAN
The Company sponsors a profit sharing plan covering all employees. Contributions
under the plan are discretionary and, accordingly, the Company may contribute up
to 13% of the employees annual salary. During 1997, the Company contributed and
expensed $100,627 under the plan. All costs have been expensed as incurred by
the Company.
4. YEAR 2000 ISSUE (UNAUDITED)
The Company modified its information technology to be ready for the year 2000
and converted critical data processing systems. The Company completed the
project in 1997 and has only incurred the costs to upgrade and replace systems
in the normal course of business. All costs have been expensed as incurred by
the Company.
5. SUBSEQUENT EVENT
On May 29, 1998, Florafax acquired substantially all the assets and assumed
substantially all of the liabilities of the Company, pursuant to an Asset
Purchase and Sale Agreement, dated May 29, 1998, by and between the Company and
Florafax. The sale consideration exceeded the net book values of the Company's
assets and liabilities on the date of the sale.
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Florafax International, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
Summary
The accompanying unaudited pro forma consolidated statements of operations of
Florafax International, Inc. (Florafax) for the fiscal year ended August 31,
1997 and the nine-months ended May 31, 1998 includes the historical and pro
forma effects of the acquisition of Marketing Projects, Inc. (MPI), which was
consummated on May 29, 1998, effective on May 1, 1998. In connection with the
acquisition, the Company incurred $2.5 million in bank debt. The accompanying
unaudited pro forma consolidated statements of operations includes the effects
on such financials statements of that debt.
The pro forma effects are based on the historical statement of operations of the
acquired business giving effect to the transaction under the purchase method of
accounting. As such, the total cost of the acquisition has or will be allocated
to the net tangible and intangible assets acquired and liabilities assumed based
upon their respective fair values at the effective date of the acquisition.
Accordingly, the allocations reflected in the pro forma statement of operations
are preliminary and subject to revision.
The unaudited pro forma consolidated statement of operations are not intended to
purport to be indicative of the actual results of operations that would have
been achieved had the acquisition in fact been consummated at the beginning of
the periods presented. Such pro forma financial information should be read in
conjunction with the Consolidated Financial Statements and Notes of Florafax.
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Florafax International, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
Fiscal year ended August 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(b) (c)
FLORAFAX MPI
YEAR ENDED YEAR ENDED PRO FORMA PRO FORMA
AUGUST 31, 1997 DECEMBER 31, 1997 ADJUSTMENTS TOTALS
--------------- ----------------- ------------ ---------
Net Revenues: $11,609 $ 1,501 $(1,501) (d) $11,609
Expenses:
General and administrative 5,668 109 -- 5,777
Selling and advertising 3,379 1,114 (1,501) (d) 2,992
Depreciation and amortization 261 15 90 (e) 416
50 (f)
Directory publishing 383 -- -- 383
------- ------- ------- -------
Operating income 1,918 263 (140) 2,041
Other income 996 125 (133) (g) 988
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Income before provision for
income taxes 2,914 388 (273) 3,029
Benefit (provision) for income taxes 519 (6) (37)(h) 476
------- ------- ------- -------
Net income $ 3,433 $ 382 $ (310) $ 3,505
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Net income per share:
Primary $ 0.40 $ 0.41
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Fully diluted $ 0.39 $ 0.40
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SEE ACCOMPANYING NOTES.
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Florafax International, Inc.
Notes to Unauditied Pro Forma Consolidated Statement of Operations
Year ended August 31, 1997
a) The unaudited proforma consolidated statement of operations for the fiscal
year ended August 31, 1997 does not give effect to any potential cost
savings and synergies that could result from the MPI acquisition.
b) This column represents the historical consolidated statement of operations
of Florafax for the fiscal year ended August 31, 1997.
c) This column represents the historical statement of operations of MPI for
the year ended December 31, 1997.
d) This adjustment represents the elimination of commission revenue
paid/accrued to MPI, by Florafax.
e) This adjustment represents the amortization expense on the goodwill that
would have been recorded in connection with the MPI acquisition. For
purposes of the pro forma presentation, it is assumed that the excess of
the purchase price over the net tangible assets acquired will be allocated
to goodwill and amortized over 40 years.
f) This adjustment represents the amortization expense of the non-compete
agreement related to the purchase of MPI. The non-compete agreement is to
be amortized over its term of two years.
g) This adjustment represents management's best estimate of the effect on
interest expense of the incurred debt and the reduction of interest income
associated with the cash used to fund the purchase of MPI.
h) This adjustment represents the additional income tax expense the Company
would have provided if MPI was acquired at the beginning of the fiscal
year.
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FloraFax International, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
Nine-months ended May 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(b) (c)
FLORAFAX MPI
NINE-MONTHS ENDED EIGHT-MONTHS ENDED PRO FORMA PRO FORMA
MAY 31, 1998 APRIL 30, 1998 ADJUSTMENTS TOTALS
----------------- ------------------ ----------- ------------
Net Revenues: $ 10,712 $ 993 $ (993) $ 10,712
Expenses:
General and administrative 5,064 99 -- 5,163
Selling and advertising 3,297 908 (993)(d) 3,212
Depreciation and amortization 247 10 60 (e) 350
33 (f)
Directory publishing 301 -- -- 301
-------- -------- -------- --------
Operating income (loss) 1,803 (24) (93) 1,686
Other income 136 125 (122)(g) 139
-------- -------- -------- --------
Income before provision for
income taxes 1,939 101 (215) 1,825
Provision for income taxes (721) (2) 45 (h) (678)
-------- -------- -------- --------
Net income $ 1,218 $ 99 $ (170) $ 1,147
======== ======== ======== ========
Net income per share:
Primary $ 0.14 $ 0.13
======== ========
Fully diluted $ 0.14 $ 0.13
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SEE ACCOMPANYING NOTES.
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Florafax International, Inc.
Notes to Unaudited Pro Forma Consolidated Statement of Operations
Nine-months ended May 31, 1998
a) The unaudited proforma consolidated statement of operations for the
nine-months ended May 31, 1998 does not give effect to any potential cost
savings and synergies that could result from the MPI acquisition.
b) This column represents the historical consolidated statement of operations
of Florafax for the nine-months ended May 31, 1998.
c) This column represents the historical statement of operations of MPI for
the eight-months ended April 30, 1998.
d) This adjustment represents the elimination of commission revenue
paid/accrued to MPI, by Florafax.
e) This adjustment represents the amortization expense on the goodwill that
would have been recorded in connection with the MPI acquisition. For
purposes of the pro forma presentation, it is assumed that the excess of
the purchase price over the net tangible assets acquired will be allocated
to goodwill and amortized over 40 years.
f) This adjustment represents the amortization expense of the non-compete
agreement related to the purchase of MPI. The non-compete agreement is to
be amortized over its term of two years.
g) This adjustment represents management's best estimate of the effect on
interest expense of the incurred debt and the reduction of interest income
associated with the cash used to fund the purchase of MPI.
h) This adjustment represents the reduction in the income tax expense the
Company would have provided if MPI was acquired at the beginning of the
fiscal period.