UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest reported): March 24, 2003
ROSEDALE DECORATIVE PRODUCTS LTD.
(Exact name of registrant as specified in charter)
Ontario, Canada 001-14898 n/a
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
731 Millway Avenue, Concord, Ontario, Canada L4K 3S8
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (905) 669-8909
ITEM 2. Acquisition or Disposition of Assets
On May 14, 2002, Rosedale Decorative Products Ltd. (the "Company")
entered into a share purchase agreement with Alan Fine, the Company's then Chief
Executive Officer and Chairman of the Board (the "Share Purchase Agreement"),
pursuant to which the Company agreed to sell its wholly-owned subsidiary,
Rosedale Wallcoverings & Fabrics Inc. (the "Subsidiary") to Mr. Fine. The Share
Purchase Agreement was unanimously approved by all members of the Company's
Board of Directors (Ken Page, Greg Sichenzia and Norm Maxwell) except Mr. Fine
and Mr. Ackerman, each of whom having recused himself from consideration of the
matter. At the Company's annual shareholders' meeting held on March 14, 2003,
the Company's shareholders approved the sale of the Subsidiary to Mr. Fine. The
transaction was consummated on May 24, 2003.
Pursuant to the terms of the Share Purchase Agreement, the Company and
Mr. Fine jointly retained Klein Valuation Services Inc. ("Klein"), an
independent valuation firm, to determine the fair value of the Subsidiary. Klein
determined the fair value of the Subsidiary to be $1,224,000 Cdn ($768,458
U.S.). Upon the closing of the sale, Mr. Fine resigned as an officer and member
of the Board of Directors of the Company. In connection with the transaction,
the Subsidiary assumed an obligation of the Company for severance obligations to
Mr. Fine in the amount of $1,100,250 Cdn ($690,765 U.S.), thereby reducing the
cash purchase price to be paid to the Company to $123,750 Cdn ($77,693 U.S.). In
addition, the Company, the Subsidiary, Mr. Fine, Sidney Ackerman (the Company's
President), and various persons or entities affiliated with the foregoing
parties have agreed to enter into transactions to further separate the business
affairs of the Company and the Subsidiary. In particular, the parties have
agreed to, or have agreed to use their best efforts to, eliminate various
inter-company loans, guarantees and similar transactions. Of particular note:
o the pre-existing inter-company term loan due and owing by Subsidiary
to the Company in the principal amount of approximately $696,000 Cdn
($437,000 U.S.) were repaid by delivery of a lump-sum payment from
Subsidiary to the Company on the closing date in full settlement
thereof in the amount of $400,000 Cdn ($251,130 U.S.);
o the pre-existing loan due and owing by Subsidiary to Sidney
Ackerman in the face amount of approximately $486,000 Cdn
($305,000 U.S.) was repaid in full on the closing date; and
o the pre-existing loan due and owing by the Company's
wholly-owned subsidiary, Ontario Paint & Wallpaper Limited
("Ontario") to Mr. Fine in the face amount of
approximately $250,000 Cdn ($157,000 U.S.) was repaid by Ontario in
full on the closing date.
In connection with the foregoing transactions, Mr. Ackerman purchased
375,000 shares of the Company's common stock from Mr. Fine. As a result of such
purchase, Mr. Ackerman is now the beneficial owner of 923,781 shares of common
stock representing 33.5% of the total shares outstanding. In addition, Ken Page
resigned as member of the Board of Directors upon the closing of the sale due to
the change in the structure in the company.
Item 7. Financial Statements and Exhibits
(a) Proforma Financial Information
Proforma Consolidated Financial Statements for the year ended December
31, 2002 and as of such date.
(b) Exhibits.
1. Share Purchase Agreement between Rosedale Decorative Products
Ltd. and Alan Fine, dated as of March 14, 2002 (incorporated
by reference from the Company's Definitive Proxy Statement,
dated as of January 29, 2003).
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.
ROSEDALE DECORATIVE PRODUCTS LTD.
Date: June 5, 2003 /s/ SIDNEY ACKERMAN
---------------------------
Sidney Ackerman, President
ROSEDALE DECORATIVE PRODUCTS LTD.
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(Amounts Expressed in US Dollars)
(Unaudited)
ROSEDALE DECORATIVE PRODUCTS LTD.
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002
(Amounts Expressed in US Dollars)
(Unaudited)
TABLE OF CONTENTS
Pro-forma Consolidated Balance Sheets 1 - 2
Pro-forma Consolidated Statements of Operations 3
Notes to Pro-forma Consolidated Financial Statements 4 - 5
ROSEDALE DECORATIVE PRODUCTS LTD.
Pro-Forma Consolidated Balance Sheets
As of December 31, 2002 and December 31, 2002 Pro-forma
(Amounts Expressed in US Dollars)
(Unaudited)
2002 Pro-forma 2002
Audited (note 2) Adjustments Pro-forma
------------ ------------ ------------
$ $ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 1,186,436 a) (191,898) 1,168,131
c) 253,550
d) 78,442
e) (158,399)
Accounts receivable 3,973,605 a) (1,940,216) 2,053,310
b) 19,921
Inventory 5,886,464 a) (2,348,983) 3,553,392
b) 15,911
Prepaid expenses and
sundry assets 332,031 a) (251,496) 80,535
Due from Rosedale
Wallcoverings and
Fabrics Inc. - a) 441,445 -
c) (441,445)
Income taxes recoverable - a) 8,597 8,597
11,378,536 (4,514,571) 6,863,965
------------ ------------ ------------
INVESTMENT IN ROSEDALE
WALLCOVERINGS AND
FABRICS INC. - a) 1,037,640 -
b) (17,290)
d) (1,020,350)
LOAN RECEIVABLE FROM
AFFILIATED COMPANY 41,975 - 41,975
MORTGAGES RECEIVABLE 312,805 - 312,805
PROPERTY, PLANT AND
EQUIPMENT 4,279,689 a) (2,270,783) 2,008,906
------------ ------------ ------------
16,013,005 (6,785,354) 9,227,651
============ ============ ============
1
ROSEDALE DECORATIVE PRODUCTS LTD.
Pro-Forma Consolidated Balance Sheets
As of December 31, 2002 and December 31, 2002 Pro-forma
(Amounts Expressed in US Dollars)
(Unaudited)
2002 Pro-forma 2002
Audited (note 2) Adjustments Pro-forma
------------ ------------ ------------
$ $ $
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness 4,710,636 a) (2,281,947) 2,428,689
Accounts payable and
accrued expenses 4,575,714 a) (1,890,896) 2,704,739
b) 19,921 -
Income taxes payable 6,682 a) (6,682) -
Due to stockholders
and directors 919,427 a) (761,028) -
e) (158,399)
------------ ------------ ------------
10,212,459 (5,079,031) 5,133,428
DEFERRED INCOME TAXES 410,624 a) (408,849) 1,775
------------ ------------ ------------
10,623,083 (5,487,880) 5,135,203
------------ ------------ ------------
STOCKHOLDERS' EQUITY
COMMON STOCK 5,029,355 - 5,029,355
ADDITIONAL PAID-IN CAPITAL 142,314 - 142,314
ACCUMULATED OTHER
COMPREHENSIVE LOSSES (459,997) a) 772 (462,704)
b) 6
c) 873
d) (4,358)
RETAINED EARNINGS (DEFICIT) 678,250 a) (167,064) (616,517)
b) (1,385)
c) (188,768)
d) (937,550)
------------ ------------ ------------
5,389,922 (1,297,474) 4,092,448
------------ ------------ ------------
16,013,005 (6,785,354) 9,227,651
============ ============ ============
2
ROSEDALE DECORATIVE PRODUCTS LTD.
Pro-Forma Consolidated Statements of Operations
For the year ended December 31, 2002 and December 31, 2002 Pro-forma
(Amounts Expressed in US Dollars)
(Unaudited)
2002 Pro-forma 2002
Audited (note 2) Adjustments Pro-forma
------------ ------------ ------------
$ $ $
SALES 21,193,725 a) (10,045,364) 11,306,293
b) 157,932
COST OF SALES 12,696,305 a) (6,216,031) 6,639,591
------------ ------------ ------------
b) 159,317
GROSS PROFIT 8,497,420 (3,830,718) 4,666,702
------------ ------------ ------------
OPERATING EXPENSES
General and administrative 2,576,277 a) (985,805) 1,590,472
Selling 3,079,880 a) (1,279,297) 1,800,583
Design studio 770,657 a) (461,022) 309,635
Book development costs 191,046 - 191,046
Amortization 1,322,265 a) (800,812) 521,453
TOTAL OPERATING EXPENSES 7,940,125 (3,526,936) 4,413,189
------------ ------------ ------------
OPERATING INCOME 557,295 (303,782) 253,513
Interest expense 240,773 a) (134,277) 106,496
Exchange loss on foreign
exchange contracts 7,520 a) 18,049 25,569
------------ ------------ ------------
INCOME BEFORE INCOME TAXES 309,002 (187,554) 121,448
Income taxes 144,644 a) (19,105) 125,539
------------ ------------ ------------
NET INCOME (LOSS) 164,358 (168,449) (4,091)
============ ============ ============
Net earnings per common share,
basic and diluted (0.06) (0.00)
============ ============
Weighted average number
of common shares
outstanding 2,755,514 2,755,514
============ ============
3
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Pro-Forma Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Amounts Expressed in US Dollars)
1. BASIS OF PRESENTATION
The accompanying unaudited pro-forma financial statements have been
prepared by management in accordance with generally accepted
accounting principles in the United States of America. They have been
prepared from information derived from the audited consolidated
financial statements of Rosedale Decorative Products Ltd. ("the
Company") and Rosedale Wallcoverings and Fabrics Inc. ("Rosedale") as
at December 31, 2002, together with other information available to
the corporations. In the opinion of management, these unaudited
pro-forma consolidated financial statements includes all adjustments
necessary for fair presentation of the proposed adjustments described
below.
The unaudited pro-forma financial statements should be read in
conjunction with the audited consolidated financial statements of the
Company as at December 31, 2002.
2. PRO-FORMA ADJUSTMENTS
The unaudited pro-forma financial statements includes the following
pro-forma adjustments reflecting transactions as disclosed in the
proxy statement. The loss on sale of Rosedale of $1,126,318
(consisting of loss on settlement of loan of $188,768 and loss on
sale to Alan Fine of $937,550) has not been included in the pro-forma
consolidated statements of operations.
a) This adjustment removes all of the assets, liabilities, equity,
revenue and expenses relating to Rosedale from the consolidated
financial statements.
b) This adjustment removes all consolidation entries including
intercompany balances and inter-company sales.
c) This adjustment reflects the proposed settlement of the loan due
from Rosedale as follows:
Cash proceeds $ 253,550
Total loan (441,445)
Foreign exchange adjustment (873)
-----------------
Loss on settlement (188,768)
=================
4
ROSEDALE DECORATIVE PRODUCTS LTD.
Notes to Pro-Forma Consolidated Financial Statements
December 31, 2002
(Unaudited)
(Amounts Expressed in US Dollars)
2. PRO-FORMA ADJUSTMENTS (cont'd)
d) This adjustment reflects the sale of Rosedale to Alan Fine as
follows:
Selling price $ 775,862
Obligation assumed by Rosedale (697,420)
-----------------
Net cash proceeds 78,442
Cost of investment (1,020,350)
Foreign exchange adjustment 4,358
-----------------
Loss on sale $ (937,550)
=================
e) This adjustment reflects the repayment of Alan Fine's director
loan by Ontario Paint & Wallpaper Limited.
There are no additional adjustments required to eliminate the
allocation of common costs as Rosedale operated independently
from the Company and was therefore not allocated any additional
costs.
3. FOREIGN CURRENCY TRANSLATION
The company is a foreign private issuer and maintains its books and
records in Canadian dollars, its functional currency. The financial
statements are converted to US dollars as the company has elected to
report in US dollars consistent with regulation S-X, Rule 3-20. The
translation method used is the current rate method which is the
method mandated by SFAS 52 where the functional currency is the
foreign currency. Under the current method all assets and liabilities
are translated at the current rate, stockholders' equity accounts are
translated at historical rates and revenues and expenses are
translated at average rates for the year.
Due to the fact that items in the financial statements are being
translated at different rates according to their nature, a
translation adjustment is created. This translation adjustment has
been included in accumulated other comprehensive income.
5