SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of event reported): June 29, 1998
HEADWAY CORPORATE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 0-23170
DELAWARE 75-2134871
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
850 Third Avenue, 11th Floor
New York, NY 10022
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number: (212) 5080-3560
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
On or about July 13, 1998, Headway Corporate Resources, Inc.
("Company"), filed a current report on Form 8-K reporting that
the Company acquired on June 29, 1998, substantially all the
assets of Phoenix Communication Group, Inc. of N.J. ("PCG"), a
New Jersey corporation engaged in the business of offering
information technology staffing services. This amendment to that
report is filed for the purpose of presenting the financial
statements required by Item 7(a) and the pro forma financial
information required by item 7(b).
(a) Financial Statements. Included with this amendment are the
historical financial statements of PCG for the year ended
December 31, 1997 (audited), and for the periods ended June
29, 1998, and June 30, 1997 (unaudited), consisting of the
following:
Report of Independent Auditors
Balance Sheets
Statements of Income and Retained Earnings
Statements of Cash Flows
Notes to Financial Statements
(b) Pro Forma Financial Information. Included with this
amendment beginning on page P-3 are the pro forma condensed
combined statements of operations of the Company for the year
ended December 31, 1997, and for the six months ended June
30, 1998, giving effect to the acquisition of PCG.
(c) Exhibit No. SEC Ref. No. Title of Document Page
1 (23) Consent of Frankel and Topche, P.C. E-1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.
HEADWAY CORPORATE RESOURCES, INC.
DATED: August 18, 1998 By: /s/Barry Roseman, President
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PHOENIX COMMUNICATION GROUP, INC. OF NEW JERSEY
YEAR ENDED DECEMBER 31, 1997 AND PERIODS ENDED
JUNE 29, 1998 AND JUNE 30, 1997
CONTENTS
Page
Independent auditors' report 1
Financial statements:
Balance sheets 2
Statements of income and retained earnings 3
Statements of cash flows 4
Notes to financial statements 5-8
To the Stockholders
Phoenix Communication Group, Inc. of New Jersey
Woodbridge, New Jersey
We have audited the accompanying balance sheet of Phoenix
Communication Group, Inc. of New Jersey as of December 31, 1997,
and the related statements of income and retained earnings 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 Phoenix Communication Group, Inc. of New Jersey as of 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.
The accompanying balance sheet of Phoenix Communication Group,
Inc. of New Jersey as of June 29, 1998 and the related statements
of income, retained earnings, and cash flows for the periods
ended June 29, 1998 and June 30, 1997 were not audited by us and,
accordingly, we do not express an opinion on them.
FRANKEL AND TOPCHE, P.C.
March 18, 1998
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PHOENIX COMMUNICATION GROUP, INC. OF NEW JERSEY
BALANCE SHEETS
ASSETS
December 31, June 29,
1997 1998
(Unaudited)
Current assets:
Cash $ 814,501 $ 282,969
Trading securities 183,910 284,849
Accounts receivable 2,970,851 2,841,873
Advances to stockholders 103,687 557,913
Other current assets 71,785 36,000
Total current assets 4,144,734 4,003,604
Property and equipment, net 51,870 69,388
Security deposit 200 200
$ 4,196,804 $4,073,192
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - bank $ 1,000,000 $
Margin debt 33,480
Accounts payable and accrued expenses 41,661 31,060
Accrued commissions 434,792 366,047
Deferred state income taxes 70,000 160,000
Total current liabilities 1,579,933 557,107
Stockholders' equity:
Common stock, $15 par value; 100
shares authorized; 20 shares
issued and outstanding 300 300
Retained earnings 2,616,571 3,515,785
Total stockholders' equity 2,616,871 3,516,085
$ 4,196,804 $4,073,192
See notes to financial statements.
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PHOENIX COMMUNICATION GROUP, INC. OF NEW JERSEY
STATEMENTS OF INCOME AND RETAINED EARNINGS
Year ended Period ended Six months
December 31, June 29, ended June
1997 1998 30, 1997
(Unaudited) (Unaudited)
Fee revenues $ 13,949,887 $ 6,590,086 $7,238,546
Cost of revenues:
Direct labor and outside services 8,225,799 3,825,483 4,047,695
Payroll taxes 455,743 233,003 255,229
8,681,542 4,058,486 4,302,924
Gross profit 5,268,345 2,531,600 2,935,622
Operating expenses:
Officers' salaries 2,629,528 172,170 1,314,764
Other 2,647,067 1,387,707 1,323,534
5,276,595 1,559,877 2,638,298
(Loss) income from operations (8,250) 971,723 297,324
Other income (expense):
Interest and dividend income 27,963 2,257
Realized gain on sale of
trading securities 11,023 52,641
Change in unrealized appreciation
of trading securities 12,972 (30,879)
Loss on transfer of securities from
the available for sale category to
the trading category (10,339)
Interest expense (18,752) (6,528) (765)
22,867 17,491 (765)
Income before provision for
state income taxes 14,617 989,214 296,559
Provision for state income taxes 90,000
Net income 14,617 899,214 296,559
Retained earnings - January 1, 1997
(as previously reported) 2,671,954 2,671,954
Prior period adjustment (70,000) (70,000)
Retained earnings - Beginning of
period (as restated) 2,601,954 2,616,571 2,601,954
Retained earnings - End of period$ 2,616,571 $ 3,515,785 $2,898,513
See notes to financial statements.
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PHOENIX COMMUNICATION GROUP, INC. OF NEW JERSEY
STATEMENTS OF CASH FLOWS
Year ended Period ended Six months
December 31, June 29, ended June
1997 1998 30, 1997
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income $ 14,617 $ 899,214 $ 296,559
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 18,940 10,000 9,000
Deferred income taxes 90,000
Loss on transfer of securities
from the available for sale
category to the trading
category 10,339
Trading securities (70,995) (100,939)
Accounts receivable (174,727) 128,978 (703,072)
Other current assets (10,558) 35,785 (1,118)
Security deposits 3,794
Accounts payable and
accrued expenses (46,920) (10,601) 1,486,791
Accrued commissions 343,186 (68,745)
Net cash provided by
operating activities 87,676 983,692 1,088,160
Cash flows from investing activities:
Acquisition of property and
equipment (39,143) (27,518)
Stockholder loans:
Advances (582,568) (454,226) (64,070)
Repayments 921,254
Net cash provided by (used
in) investing activities 299,543 (481,744) (64,070)
Cash flows from financing activities:
Net proceeds (repayments) from:
Note payable - bank, net 250,000 (1,000,000) (750,000)
Margin debt 33,480 (33,480)
Net cash provided by (used
in) financing activities 283,480 (1,033,480) (750,000)
Net increase (decrease) in cash 670,699 (531,532) 274,090
Cash - Beginning of period 143,802 814,501 143,802
Cash - End of period $ 814,501 $ 282,969 $ 417,892
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 20,178 $ 6,528 $ 765
See notes to financial statements.
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PHOENIX COMMUNICATION GROUP, INC. OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND
PERIOD ENDED JUNE 29, 1998
1. Significant Accounting Policies:
Nature of Business:
Phoenix Communication Group, Inc. of New Jersey (the
"Company") is engaged in the business of recruiting and
placement of temporary and permanent professionals in
various computer related industries including Lan/Wan
Integration, PC/Lan Technology, Data Communications and
Telecommunications for businesses located primarily in the
northeast.
Unaudited Information:
The unaudited financial statements at June 29, 1998
and the periods ended June 29, 1998 and June 30, 1997
reflect adjustments, all of which are of a normal
recurring nature, which are, in the opinion of management,
necessary to a fair presentation. The results for the
interim period presented is not necessarily indicative of
full year results.
Use of Estimates:
The presentation 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.
Reclassification:
Certain balances on the 1996 balance sheet have been
reclassified to conform with the 1997 presentation for
purposes of calculating the 1997 statement of cash flows.
Concentration of Credit Risk:
One customer accounted for approximately 14% of
accounts receivable at December 31, 1997. Two customers
accounted for approximately 19% and 13% of fee revenues
for the year ended December 31, 1997. The Company
performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral
from its customers.
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PHOENIX COMMUNICATION GROUP, INC. OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
1. Significant Accounting Policies (Continued):
Off-balance Sheet Risk:
From time to time, the Company has cash balances in
excess of the FDIC insured amount of $100,000.
Property and Equipment:
Property and equipment are recorded at cost and
depreciated over their estimated useful lives using
primarily accelerated depreciation methods.
Income Taxes:
The Company, with the consent of its stockholders,
has elected to be an "S" corporation under the Internal
Revenue Code and tax laws of New Jersey. Instead of
paying federal corporate income taxes, the stockholders of
an "S" corporation are taxed individually on their
proportionate share of the company's taxable income.
Therefore, no provision or liability for federal income
taxes has been included in these financial statements.
New Jersey "S" corporations pay corporate taxes at a
reduced rate.
Deferred income taxes reflect temporary differences
in reporting assets and liabilities for income tax and
financial accounting purposes. These temporary
differences arise primarily from the use of the cash basis
method of accounting for income tax purposes.
2. Prior Period Adjustments:
Retained earnings at the beginning of 1997 has been
adjusted to correct the omission of a deferred state income
tax liability at December 31, 1996 for $70,000 which was
not recorded in accordance with Statement of Financial
Accounting Standards No. 109. Had the error not been made,
net income for the year ended December 31, 1996 would have
decreased by $19,000.
3. Trading Securities:
The Company's investment in trading securities consists of
equity securities that are bought and held principally for
the purpose of selling them in the near term. Trading
securities are recorded at fair value at December 31, 1997.
The Company uses the average cost method to determine
realized gains or losses from the sale of trading
securities.
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PHOENIX COMMUNICATION GROUP, INC. OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
4. Advances to Stockholders:
Advances to stockholders at December 31, 1997 are non-
interest bearing and are due on or before December 31,
1998.
5. Property and Equipment:
Property and equipment consist of the following at
December 31, 1997:
Office equipment $ 100,485
Leasehold improvements 2,348
102,833
Accumulated depreciation 50,963
$ 51,870
6. Note Payable, Bank:
The Company has a demand note payable with a bank under a
line of credit with a maximum availability of $1,500,000.
The line of credit expires on June 30, 1998. Interest is
charged at 1% over the bank's prime rate. The line of
credit is collateralized by substantially all of the
Company's assets and guaranteed by its stockholders. The
agreement provides that the Company must comply with
certain financial covenants related to debt service
coverage and tangible net worth. The bank has waived
compliance on the covenant related to debt service
coverage.
7. Margin Debt:
The Company has margin debt outstanding with a broker who
holds the Company's trading securities. The debt bears
interest at the Broker Call Rate (7.25% as of December 31,
1997). The Company can borrow up to 50% of the market
value of the Company's trading securities.
8. Related Party Transactions:
Lease:
In September 1997, the Company relocated its office to a
facility which is owned by a commonly owned entity and
entered into a long-term lease which expires in April,
2004. Rent is charged based on a formula tied into the net
costs on the underlying property. In addition, the terms
of the lease require that the Company pay $60,000 towards
tenant improvements. No rent was charged for 1997 and the
amount paid for tenant improvements has been recorded as
prepaid rent.
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PHOENIX COMMUNICATION GROUP, INC. OF NEW JERSEY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
8. Related Party Transactions (Cont'd):
Estimated future minimum lease payments are as follows:
1998 $ 133,300
1999 $ 128,500
2000 $ 123,800
2001 $ 119,000
2002 $ 114,300
Thereafter $ 145,000
Letter of Credit:
The Company is contingently liable under a letter of
credit issued by the bank for $28,636. The letter of
credit was issued on behalf of the Company's landlord and
expires June 30, 1998.
9. Retirement Plan:
The Company has a profit sharing plan covering all
eligible employees, as defined. The profit sharing plan
provides for pre-tax employee contributions (401(k)).
Employer contributions to the plan are discretionary. No
employer contributions were made for the year ended
December 31, 1997.
10. Salary Continuation Plan:
The Company provides a salary continuation plan for two
key employees. Under the terms of the plan, the specified
employees or their beneficiaries are entitled to receive a
lump sum death benefit upon the employee's death prior to
age sixty or an annual benefit for a period of fifteen
years upon the employee's retirement at age sixty. The
death benefit is funded by the Company's ownership of key-
man life insurance policies on the lives of each
participating individual. No amounts have been charged to
operations for the year ended December 31, 1997.
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Headway Corporate Resources, Inc.
Pro Forma Unaudited Condensed Combined Financial information
In 1997 and 1998, Headway Corporate Resources, Inc. ("Headway" or
the "Company") completed the following acquisitions (collectively
referred to as "Other Acquisitions"):
In March of 1997, the Company acquired substantially all the
assets of Advanced Staffing Solutions, Inc. ("Advanced").
In July of 1997, the Company acquired substantially all the
assets of Administrative Sales Associates Temporaries, Inc.
and Administrative Sales Associates, Inc. (collectively
referred to as "ASA").
In September of 1997, the Company acquired (i) substantially
all the assets of Quality OutSourcing, Inc. ("QOS"), and
(ii) all of the outstanding stock of E.D.R. Associates, Inc.
and substantially all the assets of Electronic Data
Resources, L.L.C. (collectively referred to as "EDR").
In March of 1998, the Company acquired (i) substantially all
the assets of Cheney Associates and Cheney Consulting Group
(collectively referred to as "Cheney"), (ii) substantially
all the assets of the Southern Virginia offices of Select
Staffing Services, Inc. (collectively referred to as
"Select"), and (iii) all of the outstanding capital stock of
Shore Resources, Incorporated ("Shore").
In June of 1998, the Company acquired substantially all the
assets of Staffing Solution, Inc. and Intelligent Staffing,
Inc. (collectively referred to as "SSI").
In addition, in June of 1998, the Company acquired substantially
all the assets of Phoenix Communications Group, Inc. of N.J.
("PCG").
In March of 1998, the Company completed debt and equity financing
totaling $105,000,000. The financing includes a $75,000,000
syndicated senior credit facility, $10,000,000 of senior
subordinated notes, and $20,000,000 of Series F Convertible
Preferred Stock. This financing was used to repay amounts
outstanding under the Company's credit facility with ING (U.S.)
Capital Corporation, and to finance the 1998 acquisitions
described above.
The following pro forma condensed combined statements of
operations for the year ended December 31, 1997, and the six
months ended June 30, 1998, give effect to the above acquisitions
and financing.
The pro forma information is based on the historical financial
statements of the Company, PCG and the Other Acquisitions giving
effect to the transactions under the purchase method of
accounting and the assumptions and adjustments in the
accompanying notes to the pro forma financial statements.
The pro forma condensed combined statement of operations for the
year ended December 31, 1997 gives effect (i) to the acquisitions
of Advanced, ASA, QOS, EDR, Cheney, Select, Shore, SSI, and PCG,
and (ii) to the debt and equity financing as if they occurred on
January 1, 1997.
P-1
The pro forma condensed combined statement of operations for the
six months ended June 30, 1998, gives effect (i) to the
acquisitions of Cheney, Select, Shore, SSI, and PCG, and (ii) to
the debt and equity financing as if they occurred on January 1,
1998.
The pro forma condensed combined statements of operations have
been prepared by the Company's management based upon the
historical financial statements of the Company, Advanced, ASA,
QOS, EDR, Cheney, Select, Shore, SSI, and PCG. These pro forma
condensed combined statements of operations may not be indicative
of the results that actually would have occurred if the
acquisitions and related financing had been in effect on the
dates indicated. The pro forma condensed combined statements of
operations should be read in conjunction with (i) the Company's
historical financial statements and notes contained in the
Company's annual report on Form 10-KSB and the Company's
quarterly reports on Form 10-Q, and (ii) the historical financial
statements of PCG and the Other Acquisitions contained in the
Form 8-K's filed by the Company in connection with its various
acquisitions.
P-2
Headway Corporate Resources, Inc.
Pro Forma Condensed Combined Statement of Operations (Unaudited)
Six months ended June 30, 1998
(In Thousands of Dollars, except Share and Per Share Amounts)
Historical Pro Forma
Headway Other Adjustments Pro Forma
Consolidated Phoenix Acquisitions Phoenix Other Combined
Revenues $ 129,999 $ 6,590 $ 7,835 $ - $ - $ 144,424
Direct Expenses 98,257 4,058 5,609 - - 107,924
Gross Profit 31,742 2,532 2,226 - - 36,500
General and administrative
expenses 23,684 1,560 1,545 (72)(1) (68)(6) 26,720
Depreciation and
amortization 1,100 - 9 248(3) 118(8) 1,475
24,784 1,560 1,554 176 121 28,195
Operating income from
continuing operations 6,958 972 672 (176) (121) 8,305
Other (income) expenses:
Interest expense 1,851 7 41 592(2) 485(7) 2,231
(1,346)(12)
600(13)
Interest income (53) (2) - - - (55)
Gain on sale of
investment (901) (22) - - - (923)
Other expense, net - - (3) - - (3)
897 (17) 38 592 (260) 1,250
Income from continuing
operations before income
tax expense 6,061 989 634 (768) 139 7,055
Income tax expense 2,531 90 283 (1)(4) (251)(9) 2,936
284(14)
Income from continuing
operations 3,530 899 351 (767) 106 4,119
Preferred dividend requirements (315) - - - (238)(15) (553)
Income from continuing
operations available for
common stockholders $ 3,215 $ 899 $ 351 $ (767) $ (132) $ 3,566
Basic earnings per common
share from continuing
operations $ 0.34 $ 0.37
Diluted earnings per common
share from continuing
operations $ 0.27 $ 0.27
Average Shares
Outstanding:
Basic 9,465,435 83,230(5) 8,559(10) 9,557,277
Diluted 13,295,652 83,230(5) 1,800,673(16) 15,179,555
P-3
Headway Corporate Resources, Inc.
Pro Forma Condensed Combined Statement of Operations (Unaudited)
Year ended December 31, 1997
(In Thousands of Dollars, except Share and Per Share Amounts)
Historical
Headway Other Pro Forma Pro
Adjustments Forma
Consolid Phoenix Acquisit Phoenix Other Combin
ated ions ed
Revenues $ 142,842 $ 13,950 $ 53,000 $ - $ - $ 209,792
Direct Expenses 104,396 8,682 38,503 - - 151,581
Gross Profit 38,446 5,268 14,497 - - 58,211
General and administrative
expenses 29,588 5,257 9,408 (2,421)(1) (383)(6) 42,102
653(11)
Depreciation and
amortization 1,453 19 95 496(3) 840(8) 2,903
31,041 5,276 9,503 (1,925) 1,110 45,005
Operating income (loss) from
continuing operations 7,405 (8) 4,994 1,925 (1,110) 13,206
Other (income) expenses:
Interest expense 2,662 19 272 836(2) 1,646(7) 4,986
(1,649)(12)
1,200(13)
Interest income (104) (28) (21) - - (153)
Gain on sale of investment (4,272) - - - - (4,272)
Other expense, net (750) (14) (10) - - (774)
(2,464) (23) 241 836 1,197 (213)
Income from continuing
operations before income
tax expense 9,869 15 4,753 1,089 (2,307) 13,419
Income tax expense 4,064 - 173 442(4) 985(9) 5,578
(86)(14)
Income from continuing
operations 5,805 15 4,580 647 (3,206) 7,841
Preferred dividend (137) - - - (1,100)(15) (1,237)
Income from continuing
operations available for
common stockholders $ 5,668 $ 15 $ 4,580 $ 647 $ (4,306) $ 6,604
Basic earnings per common share
from continuing operations $ 0.79 $ 0.89
Diluted earnings per common
share from continuing
operations $ 0.58 $ 0.57
Average Shares Outstanding:
Basic 7,223,462 85,608(5) 79,792(10) 7,388,862
Diluted 10,102,198 85,608(5) 3,664,021(16) 13,851,827
P-4
Headway Corporate Resources, Inc.
Notes to Pro Forma Condensed Combined Statement of Operations
(Unaudited)
(In Thousands of Dollars)
PCG
1) To record the difference between the historical salaries paid
to officers and salaries payable under the terms of
employment contract entered into upon the closing of the
acquisition of PCG.
Six months Year ended
ended December 31,
June 30, 1998 1997
Historical salaries $ 172 $ 2,621
Salaries payable to officers
pursuant to new employment
contracts (100) (200)
$ 72 $ 2,421
2) To record interest expense on borrowings under the senior
credit facility used to finance the acquisition of PCG.
Six months Year ended
ended December 31,
June 30, 1998 1997
Cash paid for acquisition $ 16,322 $ 16,322
Financed by:
Senior credit facility 16,322 11,525
Subordinated debt and Series F
Preferred Stock (see items 13
and 15 below) -- 4,797
16,322 16,322
Interest on senior credit
facility at 7.25% $ 592 $ 836
3) To record amortization of intangibles of $14,893,000 over 30
years.
4) To record income tax expense for operations of PCG.
5) To record additional shares issued for the purchase of PCG
(weighted average).
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Other Acquisitions
6) To record the difference between the historical salaries paid
to officers and salaries payable under the terms of empoyment
contracts entered into upon closing for the EDR and Shore
acquisitions. (Such adjustments were not applicable or not
material for the other acquisitions.)
Six months Year ended
ended December 31,
June 30, 1998 1997
Historical salaries $ 143 $ 753
Salaries payable to officers
pursuant to new employment
contracts (75) (370)
$ 68 $ 383
7) To record interest expense on borrowings under the senior
credit facility used to finance the Other Acquisitions.
Six months Year ended
ended December 31,
June 30, 1998 1997
Cash paid for Other $ 13,418 $ 32,164
Acquisitions
Financed by:
Senior credit facility 13,418 22,711
Subordinated debt and Series F
Preferred Stock (see items 12
and 14 below) -- 9,453
13,418 32,164
Intererst on senior credit
facility at 7.25% $ 486 $ 1,646
8) To record amortization of intangibles resulting from Other
Acquisitions as follows:
Advanced, Cheney,
ASA, and QOS EDR Shore, and SSI Total
and QOS Select
Cash paid (including
transaction expenses) $ 11,628 $ 7,118 $ 12,196 $ 1,222 $ 32,164
Stock issued as
consideration 500 -- -- 100 600
Notes issued as
consideration 451 -- -- -- 451
Net assets acquired (100) (1,005) (636) -- (1,741)
Intangibles $ 12,479 $ 6,113 $ 11,560 $ 1,322 $ 31,474
Amortization period 20 yrs. 30 yrs. 30 yrs. 30 yrs.
Amortization:
Annual $ 624 $ 204 $ 385 $ 44 $ 1,257
Included in 1997
historical financial
financial statements 366 51 -- -- 417
Adjustment for the
year ended December
31, 1997 $ 258 $ 153 $ 385 $ 44 $ 840
Adjustment for six
months ended June
30, 1997 n/a n/a $ 96 $ 22 $ 118
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9) To record income tax expense for the operations of other
companies acquired.
10)To record additional shares issued for the purchase of ASA
and SSI (weighted average).
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General
11)To record additional incentive bonus payable to managers and
executives resulting from the results of operations of
acquired companies for the entire periods.
12)To reverse interest expense and amortization on loan
acquisition fees related to ING facility recorded in the
historical financial statement of Headway, and to record
interest resulting from use of senior credit facility to
finance loan acquisition fees for new credit facility and
working capital as follows:
Six months Year ended
ended December 31,
June 30, 1998 1997
Interest expense per historical
financial statements of $ (1,851) $ (2,662)
Headway
Amortization of loan 147 293
acquisition fees
Interest on working capital
borrowings (refinanced) 344 693
Interest on note issued in
connection with acquisition 14 27
$ (1,346) $ (1,649)
13)To record interest on senior subordinated debt of $10,000,000
at 12%.
14)To record the income tax effect of General pro forma
adjustments.
15)To record dividends on $20,000,000 of Preferred Series F
stock at an annual rate of 5.5%.
16)To record (i) additional shares issued for the purchase of
other companies, and (ii) the dilutive effect of Preferred
Series F stock.
P-8