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): January 4, 2001
EBIZ ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-27721 84-1075269
(State or other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
15695 North 83rd Way
Scottsdale, Arizona 85260
(Address of Registrant's Principal Executive Offices) (Zip Code)
(480) 778-1000
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective January 4, 2001 (the "Effective Time"), JBSI Acquisition, Inc.
("Merger Sub"), a newly formed Texas corporation and wholly-owned subsidiary of
EBIZ Enterprises, Inc., a Nevada corporation (the "Company"), merged (the
"Merger") with and into Jones Business Systems, Inc., a Texas Corporation
("JBSI") pursuant to an Agreement and Plan of Merger dated November 17, 2000
(the "Merger Agreement"). The description contained in this Item 2 of the
transactions consummated pursuant to the terms and conditions of the Merger
Agreement is qualified in its entirety by reference to the full text of the
Merger Agreement, and the amendments thereto, which are incorporated herein by
reference and are filed as Exhibits 2.1 through 2.6 to the Report on Form 8-K
filed by the Company on January 19, 2001 ("Form 8-K").
At the Effective Time, each outstanding share of the common stock, $0.01
par value per share, of JBSI ("JBSI Common Stock") was converted into the right
to receive and be exchangeable for 1.549 shares of common stock of the Company,
par value $.001 per share ("EBIZ Common Stock"), and each outstanding share of
the Series A Convertible Preferred Stock, $0.01 par value per share, of JBSI
("JBSI Preferred Stock") was converted into the right to receive 13.019 shares
of EBIZ Common Stock. In addition, each unexpired outstanding option to purchase
JBSI Common Stock was converted into an exercisable option to purchase a number
of shares of EBIZ Common Stock equal to the number of shares of JBSI Common
Stock that could have been purchased under such option multiplied by 1.78, at a
price per share of EBIZ Common Stock equal to the per share exercise price of
such option divided by 1.78.
On a pro rata basis, five percent of the shares of EBIZ Common Stock issued
to the holders of JBSI Common Stock and JBSI Preferred Stock will be held in
escrow pending the resolution of any indemnification claims. Indemnification
claims must be made within nine months following the effective date of the
Merger. The maximum indemnity liability of the JBSI shareholders is $1,000,000
and no indemnification claims will be paid if the net indemnification amount is
less than $250,000.
The Merger was intended to qualify as a tax deferred reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended, and to be
accounted for on a purchase basis. Neither the Company nor any of its
affiliates, directors, or officers or any affiliate of any of the Company's
directors or officers had any material relationship with the holders of
securities of JBSI at or before the Effective Time with the exception of Alok
Mohan who served as a director of both companies. JBSI assembles markets and
sells customized computer servers.
2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
INDEX TO JONES BUSINESS SYSTEMS, INC. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1998 and 1999...... 6
Consolidated Statements of Operations for the Years Ended
December 31, 1998 and 1999....................................... 7
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998 and 1999........................... 8
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998 and 1999....................................... 9
Notes to Consolidated Financial Statements........................ 11
(b) Pro Forma Financial Information
INDEX TO EBIZ ENTERPRISES, INC. PRO FORMA FINANCIAL INFORMATION
Pro Forma Financial Statements (unaudited)........................ 25
Pro Forma Condensed Combined Balance Sheets (unaudited)........... 26
Pro Forma Condensed Combined Statements of
Operations (unaudited)........................................... 27
Pro Forma Condensed Combined Statements of
Operations (unaudited)........................................... 28
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements............................................. 29
3
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Merger, dated November 17, 2000, by
and among Ebiz Enterprises, Inc., a Nevada corporation,
Jones Business Systems, Inc., a Texas corporation, and JBSI
Acquisition, Inc., a Texas corporation. (Incorporated by
reference to Exhibit 2.1 to the Form 8-K filed by the
Company on January 19, 2001.)
2.2 First Amendment to Agreement and Plan of Merger, dated
December 22, 2000. (Incorporated by reference to Exhibit 2.2
to the Form 8-K filed by the Company on January 19, 2001.)
2.3 Second Amendment to Agreement and Plan of Merger, dated
January 3, 2001. (Incorporated by reference to Exhibit
2.3 to the Form 8-K filed by the Company on January 19,
2001.)
2.4 Registration Rights Agreement, by and among Ebiz
Enterprises, Inc., a Nevada corporation, and Shareholders of
Jones Business Systems, Inc., dated as of January 4, 2001.
(Incorporated by reference to Exhibit 2.5 to Form 8-K filed
by the Company on January 19, 2001.)
2.5 Lock-Up Letter Agreement, by and among Ebiz Enterprises,
Inc., a Nevada corporation, and Shareholders of Jones
Business Systems, Inc., dated as of November 30, 2000.
(Incorporated by reference to Exhibit 2.6 to Form 8-K filed
by the Company on January 19, 2001.)
2.6 Shareholder Voting Agreement and Proxy, by and among Ebiz
Enterprises, Inc., a Nevada corporation, and certain
shareholders of Jones Business Systems, Inc., dated December
28, 2000. (Incorporated by reference to Exhibit 2.4 to Form
8-K filed by the Company on January 19, 2001.)
4
INDEPENDENT AUDITOR'S REPORT
The following consolidated financial statements of Jones Business Systems,
Inc. for the years ended December 31, 1998 and 1999 are presented as unaudited
because PriceWaterhouseCoopers, the independent auditor that prepared those
statements, has refused to authorize publication of its opinion regarding those
statements and has refused to provide its report regarding those statements.
Therefore the statements presented for the years ended December 31, 1998 and
1999 are not in compliance with the requirements of the regulations for this
Form 8-K/A. In addition, an audit is currently underway for the fiscal year
ended December 31, 2000 for Jones Business Systems, Inc. by Semple & Cooper, LLP
and PriceWaterhouseCoopers has refused to provide any review of interim
financial statements of Jones Business Systems, Inc. pending completion of the
audit. Therefore, no interim financial statements for Jones Business Systems,
Inc. are presented in this Form 8-K/A and the requirements of the regulations
for this Form 8-K/A have not been met. We anticipate that upon completion of the
audit in the near future, the appropriate reviews, reports and opinions will be
provided as required by the regulations of Form 8-K and that a second amended
Form 8-K will be filed. We have been advised by the SEC that until an amended
Form 8-K is filed with financial information containing the required reviews,
reports and opinions of independent auditors, that the SEC does not consider us
to have current public information available for purposes of Rule 144(c).
Accordingly, Rule 144, other than Rule 144(k), may not be relied upon for sales
of our common stock by persons holding any such shares considered to be
"Restricted Shares" under Rule 144.
5
Jones Business Systems, Inc.
Consolidated Balance Sheets
As of December 31, 1998 and 1999
- --------------------------------------------------------------------------------
(In Thousands, Except Shares and Par Value) 1999 1998
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 1 $ 1,306
Accounts receivable, net of an allowance for doubtful
accounts of $227 and $213, respectively 6,984 8,740
Unbilled revenue 168
Notes receivable 340 601
Other receivables 513 1,581
Related party receivables 95 66
Inventory 3,218 6,644
Other current assets 291 411
-------- --------
Total current assets 11,442 19,517
Property and equipment, net 1,713 1,822
Notes receivable 320
Related party receivables 289 134
Other assets, net 3,640 4,862
-------- --------
$ 17,084 $ 26,655
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of indebtedness $ 612 $ 2,285
Accounts payable 8,010 9,485
Related party payable 317
Other liabilities and accrued expenses 654 1,054
-------- --------
Total current liabilities 9,593 12,824
Noncurrent portion of indebtedness 5,797 9,688
Subordinated convertible debentures 185 1,685
Deferred taxes 24
-------- --------
Total liabilities 15,575 24,221
-------- --------
Commitments and contingencies (Note 11)
Mandatorily redeemable preferred stock:
Series A noncumulative, convertible, 6% redeemable preferred
stock, 1,000,000 shares authorized; 194,738 shares issued
and outstanding, stated at redemption value (Note 7) 2,363
-------- --------
Stockholders' equity (deficit):
Common stock, $1 par value - 20,000,000 shares authorized; 821,795
and 828,368 shares issued and outstanding, respectively 822 828
Additional paid-in capital 1,620 1,658
Notes receivable for common stock (593) (713)
(Accumulated deficit) retained earnings (2,703) 661
-------- --------
Total stockholders' equity (deficit) (854) 2,434
-------- --------
$ 17,084 $ 26,655
======== ========
The accompanying notes form an integral part of these financial statements.
6
Jones Business Systems, Inc.
Consolidated Statements of Operations
Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
(In Thousands) 1999 1998
-------- --------
Sales $ 49,289 $ 58,360
Cost of goods sold 41,879 50,530
-------- --------
Gross profit 7,410 7,830
Selling, general and administrative expenses 6,508 5,520
Depreciation and amortization 571 369
-------- --------
Operating income from continuing operations 331 1,941
Other expense:
Interest, net (849) (744)
-------- --------
(Loss) income from continuing operations before income taxes (518) 1,197
Benefit (provision) for income taxes 143 (465)
-------- --------
(Loss) income from continuing operations (375) 732
Discontinued operations:
Loss from operations of Clark Technologies, net of income tax
benefit of $1,001 and $566, respectively (1,991) (890)
Loss on disposal of Clark Technologies, net of applicable
income tax benefit of $110 (998)
-------- --------
Net loss $ (3,364) $ (158)
======== ========
The accompanying notes form an integral part of these financial statements.
7
Jones Business Systems, Inc.
Consolidated Statement of Stockholders' Equity
- --------------------------------------------------------------------------------
(In Thousands Except Shares) Notes (Accumulated
Common Stock Additional Receivable Deficit)/
-------------------- Paid-in for Common Retained
Shares Amount Capital Stock Earnings Total
-------- -------- -------- -------- -------- --------
Balance at December 31, 1997 587,311 $ 587 $ 776 $ (265) $ 819 $ 1,917
Stock issued for acquisitions (Note 2) 122,500 122 613 (397) 338
Stock forfeiture (1,223) (1) (24) (25)
Collection of note receivable for common stock 16 16
Stock issued to employee 5,000 5 35 (40)
Conversion of subordinated notes payable 60,924 61 91 152
Exercise of employee stock options 28,856 29 130 (27) 132
Exercise of warrant 25,000 25 37 62
Net loss (158) (158)
-------- -------- -------- -------- -------- --------
Balance at December 31, 1998 828,368 828 1,658 (713) 661 2,434
Stock forfeiture (1,223) (1) (24) (25)
Employee stock bonus 13,000 13 65 78
Collection of notes receivable for common stock 23 23
Stock redemptions in lieu of collection on
related party notes receivable (18,350) (18) (79) 97
Net loss (3,364) (3,364)
-------- -------- -------- -------- -------- --------
Balance at December 31, 1999 821,795 $ 822 $ 1,620 $ (593) $ (2,703) $ (854)
======== ======== ======== ======== ======== ========
The accompanying notes form an integral part of these financial statements.
8
Jones Business Systems, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
(In Thousands) 1999 1998
------- -------
Operating activities:-
Net loss $(3,364) $ (158)
Adjustments to reconcile net loss to net cash
provided by continuing operations:
Loss on disposal of discontinued operation 998
Accretion of interest on mandatorily redeemable preferred stock 113
Depreciation and amortization 571 591
Deferred income taxes (1,219) (191)
Employee stock bonus 78
Discount on sale of note receivable 11
Changes in operating assets and liabilities, net of
effect of acquisitions:
Accounts receivable, net 1,756 351
Unbilled revenue 168 (168)
Other receivables 1,068 (1,119)
Inventory 3,426 1,182
Other current assets 164 (24)
Accounts payable (1,475) (1,076)
Other liabilities and accrued expenses (324) (597)
------- -------
Net cash provided by operating activities 1,971 (1,209)
------- -------
Investing activities:
Purchases of property and equipment (364) (734)
Payments for acquisitions, net of cash acquired (650)
Cash proceeds from sale of Clark Technologies 1,000
Collections on note receivable 412 535
Increase in other assets (6)
------- -------
Net cash provided by investing activities 1,042 (849)
------- -------
Financing activities:
Payments under revolving line of credit, net (4,111) (678)
Repayments on term note (345) (279)
(Repayment) borrowings on term notes (300) 2,187
Payments on subordinated convertible debentures (249) (51)
Payments on capital lease obligations (187) (95)
Debt issue costs (21)
Sale of note receivable with recourse to affiliate 485
Repayments on sale of note receivable with recourse to affiliate (168)
Advances to stockholders and affiliates (17) (518)
Collection of notes receivable for common stock 23 16
Proceeds from exercise of stock options and warrants 194
Proceeds from sale-leaseback of equipment 551
------- -------
Net cash (used by) provided by financing activities (4,318) 755
------- -------
Net decrease in cash (1,305) (1,303)
Cash at beginning of period 1,306 2,609
------- -------
Cash at end of period $ 1 $ 1,306
======= =======
The accompanying notes form an integral part of these financial statements.
9
Jones Business Systems, Inc.
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
(In Thousands) 1999 1998
------- -------
Supplemental disclosure of cash flow information:
Interest paid $ 1,093 $ 1,162
Income taxes paid 1 45
Noncash investing and financing activities:
Conversion of debentures into mandatorily redeemable preferred stock 2,250
Note receivable resulting from sale of Clark Technologies 207
Preferred stock received from sale of Clark Technologies 1,000
Stock forfeiture 25 25
Stock redemptions in lieu of collection on related party notes receivable 97
Property acquired through capital lease obligations 153
Conversion of subordinated notes payable held by
stockholders into common stock 152
Issuance of common stock for notes receivable 67
Issuance of common stock for acquisitions 735
The accompanying notes form an integral part of these financial statements.
10
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Jones Business Systems, Inc. (the Company) manufactures and sells its
Terian general purpose application computer servers as a packaged computing
solution with software applications provided by its independent software
vendor partners and vertical channel partners. The Company also distributes
and serves as a value-added reseller of computer equipment and software.
The Company is based in Houston, Texas and has sales offices in six states.
The Company's significant accounting policies are as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Jones
Business Systems, Inc. and its subsidiary. All intercompany accounts and
transactions have been eliminated in the consolidated financial statements.
REVENUE RECOGNITION
Distribution revenues are recognized upon shipment of product under
confirmed customer purchase orders. A provision is made for estimated
returns.
The Company has authorized distributorship agreements with various
manufacturers. Products sold under the most significant of these individual
agreements comprised 20%, 19% and 11% of the Company's revenues during 1999
and 17%, 14%, 12% and 10% of the Company's revenues during 1998. These
agreements also provide for periodic reimbursement of a portion of the
Company's advertising expenses and credit toward purchases based on the
Company's transaction volume. During 1999 and 1998, the Company recorded
reductions of $1,233 and $2,467, respectively, in selling, general and
administrative expenses related to these reimbursements and credits, $510
and $1,202 of which are included in other receivables at December 31, 1999
and 1998, respectively.
ADVERTISING AND PROMOTION
All costs associated with advertising and promoting products are expensed
in the year incurred.
STOCK BASED COMPENSATION
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standard (SFAS) No. 123, "Accounting for Stock-Based
Compensation Issued to Employees." SFAS No. 123 prescribes using the fair
value method of accounting for stock-based compensation issued to
employees; however, the Company has elected, as permitted by SFAS No. 123,
to continue to use the intrinsic value method in its primary financial
statements. The intrinsic value method records compensation expense for
stock based upon the difference between the exercise price and the fair
market value of the Company's stock at the date of grant, recognized over
the vesting period of the options.
11
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns. In estimating future tax
consequences, all expected future events are considered other than
enactments of changes in the tax law or rates.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments with an original maturity
of three months or less from the date of purchase to be classified as cash
and cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of cash equivalents and accounts receivable. The
Company maintains a majority of its cash equivalent balance in overnight
sweep investments. Management believes that concentrations of credit risk
with respect to accounts receivable are limited because the Company's
customer base is large and dispersed across many different industries and
geographic regions. The Company performs ongoing credit evaluations of its
customers to minimize risks.
INVENTORY
Inventory consists of microcomputers and related peripheral products and
software and is valued at the lower of cost (first-in, first-out) or
market. The inventory balance at December 31, 1999 and 1998 is shown net of
an allowance for obsolescence of $205 and $222, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. The cost of additions and
improvements is capitalized, while maintenance and repairs are charged to
operations when incurred. Depreciation is recorded using the straight-line
method over the estimated useful life of the asset.
LONG-LIVED ASSETS
The Company reviews for the impairment of long-lived assets and certain
identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
carrying amount of a long-lived asset is considered impaired when
anticipated undiscounted cash flows, expected to result from the use of the
asset and its eventual disposition, is less than its carrying amount. The
Company believes that no material impairment exists at December 31, 1999.
MANDATORILY REDEEMABLE PREFERRED STOCK
The carrying value of mandatorily redeemable preferred stock is increased
by periodic accretions so that the carrying amount will equal the
redemption amount at the redemption election date. These increases are
recorded as interest expense in the period incurred.
12
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company enters into various types of financial instruments in the
normal course of business and in connection with acquisitions and
divestitures. The Company does not hold or issue financial instruments for
trading purposes nor does it hold interest rate, leveraged or other types
of derivative financial instruments. The carrying values of cash and cash
equivalents, accounts receivables, notes receivable, related party
receivables, accounts payable and indebtedness reflected in the December
31, 1999 and 1998 consolidated balance sheets approximate their fair value
at that date.
TRANSFER OF FINANCIAL ASSETS
In 1999, the Company adopted Statement of Financial Accounting Standards
No. 125 (SFAS 125), "Accounting for Transfer and Servicing of Financial
Assets and Extinguishment of Liabilities." During 1999, the Company sold a
note receivable to a related party for $485 (Note 9). In accordance with
SFAS 125, the balance of the note receivable at December 31, 1999 of $317
is reflected as a note receivable and a corresponding related party payable
as there is full recourse to the Company in the event the note receivable
is not collected.
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 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. Management believes these estimates are reasonable.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. ACQUISITIONS
On May 12, 1998, the Company acquired all of the assets and liabilities of
Clark Data Systems, Inc. (Clark), a computer services and integration
business and all of the outstanding stock of Cadsys Texas, Inc. (Cadsys), a
computer software reseller business and affiliate of Clark. Both were
headquartered in Houston, Texas. The Company paid consideration of 122,500
shares of the Company's common stock, valued at $6 per share, and assumed
$6,283 of Clark liabilities. The acquisition was recorded using the
purchase method of accounting, and accordingly, the acquired combined
operations of Clark and Cadsys have been included in the results of
operations since the date of acquisition. The allocation of the purchase
price included $3,615 of goodwill.
On May 31, 1998, the Company acquired certain assets of Computer Support of
Sioux City, Ltd. (CSSC), a computer manufacturing business headquartered in
Sioux City, Iowa. The consideration for the purchase was $589 in cash, a
$100 subordinated debenture with detachable stock warrants and the
assumption of $150 of CSSC liabilities. The debenture has a stated rate of
interest of 6%, provides for quarterly interest payments with all principal
being paid on maturity on October 18, 2002. The detachable stock warrants
give CSSC the right to buy up to 5,000
13
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
shares of the Company's common stock at $20 per share at any time prior to
maturity. The acquisition was recorded using the purchase method of
accounting, and accordingly, the acquired operations of CSSC have been
included in the results of operations since the date of acquisition. The
allocation of purchase price included $713 of goodwill.
3. DISCONTINUED OPERATION
During 1998, the Company combined the acquired business of Clark with its
service division and created Clark Technologies, Inc. (Clark Technologies),
a computer services and integration business focused on integrating
computer solutions for small to mid-sized businesses. The Company operated
Clark Technologies until December 1999. Accordingly, the consolidated
statement of operations has been reclassified for all periods presented to
report separately the results of the discontinued operation.
On December 7, 1999, the Company completed the sale of Clark Technologies
to VeriCenter, Inc. (VeriCenter) (Note 9), for cash of $1,000, one million
shares of VeriCenter preferred stock valued at $1.00 per share, and a note
receivable of $207. The note receivable bears interest at 7% and is due in
quarterly instalments of $19 beginning March 7, 2000 with final maturity at
December 7, 2002. Several of the VeriCenter stockholders own, in the
aggregate, a significant amount of the outstanding shares of the Company.
VeriCenter had no operations prior to this transaction.
The results of the discontinued Clark Technologies operations through
December 7, 1999 are as follows:
1999 1998
------- -------
Sales $ 7,376 $ 8,715
Cost of sales 6,200 6,766
------- -------
Gross margin 1,176 1,949
Selling, general and administrative expenses 3,613 2,855
Depreciation and amortization 268 222
------- -------
Operating loss from discontinued operations (2,705) (1,128)
Interest expense, net 287 328
------- -------
Loss from discounted operations before taxes (2,992) (1,456)
Income tax benefit 1,001 566
------- -------
Net loss from discontinued operations $(1,991) $ (890)
======= =======
14
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
The net loss on the disposal of Clark Technologies at December 7, 1999 is
as follows:
Proceeds from disposal of discontinued operations $ 2,207
Net book value of assets sold (3,315)
-------
Loss on disposal of discontinued operations (1,108)
Income tax benefit 110
-------
Net loss on disposal of discontinued operations $ (998)
=======
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
Estimated
useful life 1999 1998
----------- ---- ----
Computer equipment 3 to 5 years $ 1,893 $ 1,680
Furniture and fixtures 7 years 98 292
Automobiles 5 years 19 19
Property under capital lease 5 years 641 225
Leasehold improvements 5 years 332 368
------- -------
2,983 2,584
Accumulated depreciation (1,270) (762)
------- -------
$ 1,713 $ 1,822
======= =======
In March 1999, the Company entered into a sale-and-leaseback transaction
related to certain of its property and equipment with proceeds of
approximately $551. No gain or loss was recognized on this transaction. The
leases are classified as capital leases in accordance with SFAS No. 13
"Accounting for Leases".
15
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
5. OTHER ASSETS
Other assets consist of the following at December 31:
1999 1998
------ ------
Goodwill, net of accumulated amortization
of $209 and $268 $1,318 $4,845
Investment in VeriCenter preferred stock (Note 3) 1,000
Deferred tax asset (Note 8) 1,299
Other assets 23 17
------ ------
$3,640 $4,862
====== ======
Goodwill is being amortized on a straight-line method over a 15-year
period.
In December 1999, the Company disposed of certain assets related to Clark
Technologies (Note 3) including related goodwill, with a net book value of
$3,429. The Company received one million shares of VeriCenter preferred
stock with an estimated fair value of $1,000 on December 7, 1999. On
February 25, 2000, the Company sold 400,000 shares of VeriCenter preferred
stock for $1,600.
16
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
6. INDEBTEDNESS
The components of indebtedness at December 31 are summarized as follows:
1999 1998
--------- --------
Financial institution borrowings:
Line of credit, as amended in 1998 - $20,000, interest at prime,
minus 1.5% to plus 2% (10% at December 31, 1999), matures July 2001 $ 2,816 $ 6,927
Term note, as amended in 1998 - $3,000, due in monthly instalments of
$40, which escalates to $55 in 2001 (depending on amounts outstanding)
with the balance due July 2001, interest at prime, plus 2.0% to 3.5%
(11% at December 31, 1999) 2,480 2,825
Other borrowings:
Subordinated convertible debentures, converted into preferred stock
during 1999 2,250
Subordinated convertible debentures resulting from acquisitions (Note 2) 185 435
Note payable resulting from acquisition (Note 2), interest at 10.5%
payable in equal quarterly instalments beginning February 12, 1999 with
principal due May 12, 2001 450 750
Note payable resulting from acquisition (Note 2), interest at 6%, payable
quarterly with all principal due October 18, 2002 100 100
Capital leases, with aggregate monthly payments approximating $12 and bearing
interest at rates between 9% and 11% 559 195
Other 4 176
--------- --------
6,594 13,658
Less - current maturities (612) (2,285)
--------- --------
$ 5,982 $ 11,373
========= ========
Borrowings under the line of credit are limited to 85% of eligible accounts
receivable and 50% of eligible inventory. The line of credit is secured by
all accounts receivable, inventory and property and equipment of the
Company. The term note is secured by property and equipment. These
borrowings contain various covenants which require, among other things, the
maintenance of certain working capital and financial ratios and limitations
on the declaration of dividends. The Company was not in compliance with
certain covenants of the line of credit and the term note with regard to
minimum tangible capital funds, debt to tangible capital funds,
17
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
senior debt service coverage ratio and total debt coverage ratio as of
December 31, 1999. However, the lender has waived these violations
pertaining to these covenants through March 31, 2000. In March 2000, the
lender modified the covenants related to these borrowings and suspended all
principal payments on the term note until April 1, 2001. Accordingly, the
note balance is classified as noncurrent indebtedness at December 31, 1999.
The Company is in violation of certain financial covenants under a $450
note payable resulting from an acquisition and has included the balance as
a current maturity in the accompanying consolidated balance sheet.
Effective February 28, 1999, a vendor converted a $2,000 subordinated
debenture into redeemable preferred stock (Note 7). Three other
subordinated debentures totaling $250 were converted into redeemable
preferred stock on the same terms, on the same date.
The aggregate maturities of indebtedness described above are as follows:
$612 in 2000; $5,410 in 2001, $413 in 2002, $125 in 2003 and $34 in 2004.
7. REDEEMABLE PREFERRED STOCK
On February 28, 1999, a total of $2,250 in subordinated convertible
debentures were converted into 194,738 shares of preferred stock having a
par value of $0.01 per share. These shares, designated as Series A
Convertible Redeemable Non-Cumulative Preferred Stock (Series A Preferred
Stock), are entitled to one vote per share on all matters upon which common
stockholders are entitled to vote and have a redemption value equal to the
original issue price plus an amount equal to 6% of the original issue price
per annum from the date of issuance. Redemption of the Series A Preferred
Stock may be requested at the option of the holders for any or all the
outstanding shares provided that the Company does not consummate an
underwritten public offering or other defined liquidity event by February
28, 2001. The redemption would be made in six equal quarterly installments
of principal plus interest, at an interest rate equal to the price rate
adjusted quarterly, at the redemption election date. Under certain
circumstances within the Company's control, the holders may redeem the
Series A Preferred Stock at a redemption value equal to the original issue
price plus an amount equal to 12% of the original issue price, adjusted
annually, from the date of issuance. The total redemption value of the
shares outstanding at December 31, 1999, in an amount of $2,363, is
classified on the Company's balance sheet as mandatorily redeemable
preferred stock.
The Series A Preferred Stock may be converted into a number of shares of
the Company's common stock, determined by dividing the original issue price
of the Series A Preferred Stock by the conversion price applicable to such
share (the initial conversion price equals the original issue price of the
Series A Preferred Stock, resulting in a one-to-one conversion rate). In
the event of any liquidation, dissolution or winding up of the affairs of
the Company, holders of the Series A Preferred Stock shall be paid the
greater of (1) the original issuance price plus any accrued or
18
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
unpaid dividends to the date of liquidation, dissolution or winding up of
affairs or (2) the amount per share such holder would receive if the
Company's assets were ratably distributed among the holders of common stock
and Series A Preferred Stock (determined on an as-converted basis with
respect to outstanding shares of Series A Preferred Stock).
8. INCOME TAXES
The provision for income taxes (from both continuing operations and
discontinued operations) for the years ended December 31, 1999 and 1998
consists of the following:
1999 1998
------- -------
Current tax expense (benefit) $ 75 $ (33)
Deferred tax (benefit) (1,329) (68)
------- -------
(Benefit) for income taxes $(1,254) $ (101)
======= =======
The Company's provision for income taxes exceeds the federal statutory rate
primarily due to state income taxes.
Deferred income tax assets (liabilities) at December 31, 1999 and 1998
consist of the following:
1999 1998
------- -------
Accounts receivable allowance $ 77 $ 79
Inventory 86 122
Gain on instalment sale - current (44)
------- -------
Net deferred tax asset - included in
other current assets $ 163 $ 157
------- -------
Gain on instalment sale $ (24)
Operating loss carryforward 1,190
Capital loss carryforward 110
Miscellaneous other (1)
------- -------
Net noncurrent deferred tax asset (liability) $ 1,299 $ (24)
======= =======
The Company's net operating loss carryforward totaled approximately $3,488
at December 31, 1999, of which $256 expires in 2018, with the remainder
expiring in 2019. The Company's capital loss carryforward totaled
approximately $336 at December 31, 1999 and expires in 2004.
19
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
9. RELATED PARTY TRANSACTIONS
In August 1999 the Company sold a note receivable to the Chairman of the
Company's Board of Directors for $485. The note receivable was sold at a
discount of $11 from its carrying value at the time of the sale. The
balance of the note receivable at December 31, 1999 of $317 is reflected as
a note receivable and a corresponding related party payable to the
Chairman, because the Chairman has recourse to the Company in the event the
note receivable is not collected.
In December 1999 the Company completed the sale of Clark Technologies to
VeriCenter a company created by a stockholder and former president of the
Company (Note 3). In connection with the transaction, the Company agreed to
provide a turn-key office environment, including offices and administrative
services, to VeriCenter for a minimum monthly fee of $29 for a two-year
period ending December 7, 2001. Fees received for these services during
1999 were approximately $31. Either party has the ability to terminate the
arrangement prior to expiration by paying a termination fee of $115.
The Company also entered into an agreement to obtain its technology
solution services from VeriCenter. These services will be rendered at a
rate of 1.5 times the base payroll rate of the VeriCenter consultant
performing the services. Fees for these services during 1999 were
approximately $33.
20
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
Related party receivables at December 31 include the following:
1999 1998
---- ----
Note from VeriCenter; interest at 7% annually, due in
quarterly instalments of $19, beginning March 7, 2000
with final maturity at December 7, 2002 $207
Note from affiliated printing company in original amount of
$122; interest at 12% annually, eight quarterly instalments
of interest only; monthly instalments of $4, beginning
November 8, 2000; final maturity, September 8, 2003 122 122
Notes from three officers of the Company; interest at
8% annually, monthly instalments of interest only through
September 2000; total monthly instalments of $1 beginning
October 5, 2000 with final maturity at February 5, 2004 39 46
Other 16 32
---- ----
384 200
Less - current portion 95 66
---- ----
Noncurrent portion $289 $134
==== ====
The Company holds various notes receivable for common stock from officers
and stockholders of the Company. The loans are collateralized by 94,100
shares of the Company's common stock at December 31, 1999. The notes
receivable are shown on the balance sheet as a reduction in stockholders'
equity.
The Company has contracted for printing services from a company which is
majority owned by the Company's stockholders for a monthly rate of $17.
The Chairman of the Company's Board of Directors provides legal services to
the Company. Fees paid for these services during 1999 and 1998 were
approximately $67 and $52, respectively.
21
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
The stockholders of the Company participate in a Buy-Sell Agreement that
provides them with the right of first refusal to purchase the shares of a
stockholder wishing to sell stock under a bona fide offer. The Agreement
also provides for the possible sale of stock to the Company in the event of
a stockholder's death or disability.
10. EMPLOYEE COMPENSATION
401K PLAN
The Company sponsors a defined contribution 401(k) Savings Plan for its
employees. Company contributions to the plan are discretionary and totaled
$72 and $22 for the years ended December 31, 1999 and 1998, respectively.
STOCK OPTION PLAN
The Company has granted stock options to certain stockholders and
employees. Options granted vest ratably on an annual basis over a period of
five years or immediately upon the sale of the Company. Information with
respect to stock options is as follows:
1999 1998
-------- --------
Options outstanding at beginning of year 297,315 135,698
Granted 452,000 214,500
Exercised (28,856)
Canceled (120,000) (24,027)
-------- --------
Options outstanding at end of year 629,315 297,315
Options exercisable at end of year 367,152 31,395
1999 1998
-------- --------
Weighted-average exercise price:
Granted $ 4.18 $ 6.00
Exercised 5.50
Canceled 6.00 15.68
Outstanding at end of year 4.66 5.94
Exercisable at end of year 3.10 5.67
22
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
Information with respect to stock options outstanding and stock options
exercisable at December 31, 1999 is as follows:
Options Outstanding Options Exercisable
--------------------------------------- --------------------------
Weighted-
Number Average Weighted- Number Weighted-
Outstanding At Remaining Average Exercisable At Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Prices 1999 Life Price 1999 Price
--------------- ---- ---- ----- ---- -----
$2.50 300,000 2.80 $ 2.50 300,000 $ 2.50
$5.50 - $6.00 177,315 12.10 $ 5.90 67,152 $ 5.79
$7.50 152,000 9.60 $ 7.50
-------- --------
629,315 367,152
======== ========
During 1999, the Company granted 300,000 options that were exercisable upon
issuance, with an exercise price of $2.50 per share to certain employees
and directors. No compensation expense has been recognized as the exercise
price of the options at the date of grant did not exceed the fair value of
the stock.
During 1998, the Company exchanged 117,500 options with an exercise price
of $12.50 per share and 10,000 options with an exercise price of $20.83 per
share for 127,500 options with an exercise price of $6.00 per share. No
compensation expense has been recognized as the exercise price of the
options at the date of grant did not exceed the fair value of the stock.
Pro forma stock-based compensation costs if calculated using the fair value
method prescribed by SFAS No. 123, would have increased pretax loss by $9
in 1999 and by $19 in 1998. In calculating the fair value of the options,
the Company used a Black-Scholes model and the minimum value method with
the following assumptions: 5.5% risk-free interest rate, an expected life
of five years, volatility of 0% and no dividend yield.
23
Jones Business Systems, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
(in thousands except share and per share amounts)
- --------------------------------------------------------------------------------
11. COMMITMENTS AND CONTINGENCIES
Aggregate rental expense under noncancelable operating leases for the
period ended December 31, 1999 and 1998 was approximately $272 and $260,
respectively. The aggregate future rental payments under noncancelable
operating leases are as follows:
YEAR ENDING
DECEMBER 31:
------------
2000 $ 228
2001 210
2002 223
2003 206
-----
$ 867
=====
12. SUBSEQUENT EVENTS
On January 25, 2000, the Company granted options to purchase an aggregate
of 337,500 shares of VeriCenter preferred stock (currently owned by the
Company) to the holders of its mandatorily redeemable preferred stock. The
options grant the holders the right to purchase the shares at a price of
$3.00 per share or 80% of the share price of any private financing in
excess of $2,000 undertaken by VeriCenter. In connection with the options
grant, the Company committed to using the proceeds received from the
exercise of the options to redeem, at face value plus accrued interest, the
Company's mandatorily redeemable preferred stock, subject to the approval
of the Company's lender, and subject to the action being in the best
interest of the Company.
The Company authorized the redemption of a portion of its mandatorily
redeemable preferred stock on January 25, 2000 for approximately $169.
Effective January 25, 2000, the Company transferred 200,000 shares of its
VeriCenter preferred stock to various stockholders who are personal
guarantors of the Company's term note. In addition, the Company issued, to
the same individuals, 200,000 warrants that enable the holders to purchase
an aggregate of 200,000 shares of the Company's common stock at a price of
$7.50 per share. The warrants expire on January 25, 2005 and are redeemable
by the Company for $5.00 each if the personal guarantee requirements are
removed from the term note prior to September 30, 2000.
On February 25, 2000, the Company sold 400,000 shares of its VeriCenter
Preferred stock for $1,600.
24
EBIZ ENTERPRISES, INC.
PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
On January 4, 2001, Ebiz Enterprises, Inc. ("EBIZ") completed the acquisition of
Jones Business Systems, Inc. ("JBSi") by merger of JBSi into a newly formed
wholly owned subsidiary of Ebiz. Under the terms of the final transaction, Ebiz
paid $8.7 million for the acquisition comprised of 8.2 million shares of Ebiz's
common stock valued at $6.0 million, options for 3.7 million shares of Ebiz's
common stock valued at $2.6 million and related transaction costs totaling $0.1
million. The fair value of all shares to be issued to acquire JBSi equals
approximately $6.0 million or $0.73 per share. In addition, Ebiz assumed $3.7
million in net liabilities for total consideration of $12.4 million. The
transaction will be accounted for under the purchase method of accounting in
accordance with APB 16. Ebiz is currently in the process of determining the
final purchase price allocation. The anticipated useful life of intangibles and
goodwill will be 2-5 years.
The liabilities assumed were comprised of notes payable, trade accounts payable
and accrued expenses. Effective October 5, 2000, Ebiz acquired all of the
outstanding capital stock of LinuxMall.com, Inc. ("LinuxMall"). Ebiz paid $14.2
million for the acquisition comprised of Ebiz common stock valued at $9.2
million, options for the purchase of 0.9 million shares of Ebiz common stock
valued at $0.8 million, warrants for the purchase of 4.6 million shares of Ebiz
common stock valued at $4.1 million and related transaction costs totaling $0.1
million. In addition, Ebiz assumed $6.1 million in net liabilities for the total
consideration of $20.3 million.
The following unaudited pro forma condensed combined balance sheet gives effect
to the acquisition of JBSI as if the transaction occurred on December 31, 2000.
The following unaudited pro forma condensed combined statements of operations
for the year ended June 30, 2000, combine the historical results of operations
of Ebiz, LinuxMall and JBSi and assume that the acquisitions had been effective
as of July 1, 1999. The following unaudited proforma condensed combined
statement of operations for the six month period ended December 31, 2000 combine
the historical results of operations of Ebiz (including LinuxMall from the date
of acquisition, October 5, 2000), LinuxMall (for the period July 1, 2000 through
October 5, 2000, the date of acquisition) and JBSI and assume the acquisitions
had been effective July 1, 2000. The acquisition, which was a stock purchase,
will be accounted for as a purchase. The pro forma adjustments are based upon
the estimated fair value of the assets and liabilities of JBSi as of December
31, 2000, and are based on the preliminary estimates, evaluations and other data
which are currently available and may change as a result of information gained
subsequent to December 31, 2000.
The pro forma statements of operations are not necessarily indicative of the
actual results which would have occurred had the acquisition been consummated at
the beginning of such period or of future consolidated operations of the Company
and, accordingly, do not reflect results that would occur from a change in
management and planned restructuring of the operations of JBSi. The pro forma
financial information has been prepared by the Company and all calculations have
been made by the Company based upon assumptions deemed appropriate by the
Company. Certain of these assumptions are set forth under the notes to the
unaudited pro forma condensed combined financial statements. These statements
should be read in conjunction with the historical consolidated financial
statements and notes thereto of the Company and JBSi.
25
Ebiz Enterprises, Inc.
Pro Forma Condensed Combined Balance Sheets (Unaudited)
December 31, 2000
- --------------------------------------------------------------------------------
Pro Forma
Company(f) JBSi Adjustments Pro Forma
------------ ------------ ------------ ------------
ASSETS:
Cash $ 287,059 $ 757 $ -- $ 287,816
Restricted cash 1,782,381 -- -- 1,782,381
Receivables, net 1,127,914 2,741,314 -- 3,869,228
Inventories 1,532,301 910,182 -- 2,442,483
Other 31,988 270,189 -- 302,177
------------ ------------ ------------ ------------
Total Current Assets 4,761,643 3,922,442 -- 8,684,085
Property and Equipment, net 1,661,531 1,309,346 -- 2,970,877
Goodwill and Other intangibles 22,847,864 1,217,526 11,687,883 (b) 35,753,273
Other Noncurrent Assets 91,761 1,131,104 -- 1,222,865
Restricted Cash 2,100,528 -- -- 2,100,528
------------ ------------ ------------ ------------
Total Assets $ 31,463,327 $ 7,580,418 $ 11,687,883 $ 50,731,628
============ ============ ============ ============
LIABILITIES:
Accounts Payable $ 4,390,238 $ 4,622,257 $ -- $ 9,012,495
Accrued Expenses 3,036,615 (51,444) -- 2,985,171
Related Party on Demand Note 230,000 -- -- 230,000
Current Portion of Note Payable 1,000,000 465,000 -- 1,465,000
Convertible Debentures 320,524 -- 320,524
------------ ------------ ------------ ------------
Total Current Liabilities 8,977,377 5,035,813 -- 14,013,190
Long-Term Debt -- 4,034,857 -- 4,034,857
Convertible Debentures 6,461,407 -- -- 6,461,407
Redeemable stock 1,200,000 -- -- 1,200,000
Manditorily Redeemable Preferred Stock -- 2,250,000 2,250,000
STOCKHOLDERS' EQUITY:
Preferred Stock 366,737 -- -- 366,737
Common Stock 22,424 815,572 (807,329) (a)(b) 30,667
Additional Paid In Capital 30,823,845 1,366,533 6,572,855 (a)(b) 38,763,233
Notes Receivable for Stock -- (611,157) 611,157 (a) --
Accumulated Deficit (16,388,463) (5,311,200) 5,311,200 (a) (16,388,463)
------------ ------------ ------------ ------------
Total Stockholders' Equity 14,824,543 (3,740,252) 11,687,883 22,772,174
------------ ------------ ------------ ------------
Total Liabilities and Stockholders' Equity $ 31,463,327 $ 7,580,418 $ 11,687,883 $ 50,731,628
============ ============ ============ ============
The accompanying notes to the unaudited proforma combined financial statements
are an intergral part of this unaudited combined balance sheet.
26
Ebiz Enterprises, Inc.
Pro Forma Condensed Combined Statements of Operations (Unaudited)
Six Months Ended December 31, 2000
- --------------------------------------------------------------------------------
Pro Forma
Company(g) Linuxmall(e) JBSi Adjustments Pro Forma
------------ ------------ ------------ ------------ ------------
Net Revenues $ 5,589,458 $ 480,065 $ 14,661,223 $ -- $ 20,730,746
Cost of Sales 4,583,544 1,204,335 12,778,430 -- 18,566,309
------------ ------------ ------------ ------------ ------------
Gross Profit 1,005,914 (724,270) 1,882,793 -- 2,164,437
Selling, General & Administrative expenses 5,400,439 2,304,229 3,006,030 4,045,614 (d) 14,756,312
------------ ------------ ------------ ------------ ------------
Loss From Operations (4,394,525) (3,028,499) (1,123,237) (4,045,614) (12,591,875)
Other Income (Expense), net (2,005,061) (116,713) (453,494) 76,027 (c) (2,499,241)
------------ ------------ ------------ ------------ ------------
Net Loss (6,399,586) (3,145,212) (1,576,731) (3,969,587) (15,091,116)
Dividends on Preferred Stock 37,950 -- -- -- 37,950
------------ ------------ ------------ ------------ ------------
Net Loss Attributable to Common Stockholders $ (6,437,536) $ (3,145,212) $ (1,576,731) $ (3,969,587) $(15,129,066)
============ ============ ============ ============ ============
Basic and diluted earnings per share $ (0.16) $ (0.64)
============ ============
Weighted average number of shares $ 15,368,505 23,611,232
============ ============
The accompanying notes to the unaudited proforma combined financial statements
are an integral part of this unaudited combined balance sheet.
27
Ebiz Enterprises, Inc.
Pro Forma Condensed Combined Statements of Operations (Unaudited)
Year Ended June 30, 2000
- --------------------------------------------------------------------------------
Pro Forma
Company(g) Linuxmall JBSi Adjustments Pro Forma
------------ ------------ ------------ ------------ ------------
Net Revenues 11,900,667 3,301,436 40,714,216 -- 55,916,319
Cost of Sales 11,087,068 2,492,640 34,594,451 -- 48,174,159
------------ ------------ ------------ ------------ ------------
Gross Profit 813,599 808,796 6,119,765 -- 7,742,160
Selling, General & Administrative expenses 7,877,833 3,606,510 6,575,462 8,091,229 (d) 26,151,034
------------ ------------ ------------ ------------ ------------
Loss From Operations (7,064,234) (2,797,714) (455,697) (8,091,229) (18,408,874)
Other Income (Expense), net (2,032,952) (179,732) 112,609 69,769 (c) (2,030,306)
------------ ------------ ------------ ------------ ------------
Net Loss (9,097,186) (2,977,446) (343,088) (8,021,459) (20,439,179)
Dividends on Preferred Stock 104,089 -- -- -- 104,089
------------ ------------ ------------ ------------ ------------
Net Loss Attributable to Common Stockholders $ (9,201,275) $ (2,977,446) $ (343,088) $ (8,021,459) $(20,543,268)
============ ============ ============ ============ ============
Basic and diluted earnings per share $ (1.20) $ (0.88)
============ ============
Weighted average number of shares $ 7,685,232 23,286,937
============ ============
The accompanying notes to the unaudited proforma combined financial statements
are an intergral part of this unaudited combined statement.
28
Notes to Pro Forma Condensed Combining Financial Statements for the
Year Ended June 30, 2000 and the Six Months Ended December 31, 2000
- --------------------------------------------------------------------------------
(a) Reflects the elimination of JBSis' stockholders deficit comprised of common
stock of $815,572, additional paid in capital of $1,366,533, Notes
Receivable for Stock of $611,157 and accumulated deficit of $5,311,200.
(b) Reflects the additional amount of net liabilities to the purchase price of
JBSi and other intangibles totaling $12,369,427 and transaction costs
related to the acquisition of JBSi by the company totalling $50,000.
(c) Reflects the decrease in interest expense related to convertible
debentures.
(d) Reflects pro forma amortization of the goodwill resulting from the
LinuxMall and JBSi acquistions and other purchased intangibles over the
estimated useful lives of 2-5 years.
(e) Represents the operations for LinuxMall for the period July 1, 2000 through
October 5, 2000, the date of acquisition.
(f) Includes the accounts of Ebiz and its wholly-owned subsidiary, LinuxMall.
(g) Includes the operations of LinuxMall for the period from the date of
acquisition, October 5, 2000 through December 31, 2000.
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EBIZ ENTERPRISES, INC.
By: /s/ Ray Goshorn
---------------------------
Ray Goshorn
Chief Financial Officer
30