SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------- FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) June 8, 1998 (March 24, 1998) Unidigital Inc. (Exact Name of Registrant as Specified in Charter) Delaware 0-27664 13-3856672 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 545 West 45th Street, New York, New York 10036 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (zip code) (212) 397-0800 ---------------------------------------------- (Registrant's telephone number, including area code) ------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. ------------------------------------------------------------------ As reported in the Current Report on Form 8-K dated April 8, 1998 filed by Unidigital Inc. (the "Company"), on March 25, 1998, the Company, through a wholly-owned subsidiary, Unison (NY), Inc., consummated the acquisition of substantially all of the assets of Kwik International Color, Ltd. (the "Seller"), located in New York City. The Company hereby files this Amendment No. 1 on Form 8-K/A to file the financial statements and related pro forma financial statements required pursuant to Item 7 of Form 8-K with respect to such transaction. (a) Financial Information of Business Acquired. KWIK INTERNATIONAL COLOR, LTD. COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 TOGETHER WITH REPORT OF INDEPENDENT ACCOUNTANT KWIK INTERNATIONAL COLOR, LTD. ------------------------------ REPORT ON AUDITS OF FINANCIAL STATEMENTS ---------------------------------------- YEARS ENDED DECEMBER 31, 1997 AND 1996 -------------------------------------- CONTENTS -------- Page ---- FINANCIAL STATEMENTS: Independent auditors' report 1 Balance sheets 2 Statements of earnings 3 Statement of stockholders' equity 4 Statements of cash flows 5 Notes to financial statements 6 - 12 FINANCIAL STATEMENTS -------------------- RUSSELL A. GLICK, CPA --------------------- To the Officers and Stockholders of Kwik International Color, Ltd. I have audited the accompanying balance sheets of Kwik International Color, Ltd. as of December 31, 1997 and 1996, and the related statements of earnings, stockholders' equity and cash flows for each of the years in the three year period ended December 31, 1997. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based upon my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audits 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. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kwik International Color, Ltd. as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 1997 in conformity with generally accepted accounting principles. /s/ Russell A. Glick, CPA --------------------------- Certified Public Accountant New York, New York February 26, 1998 515 Madison Avenue, Suite 725 9 Park Place New York, New York 10022 Great Neck, New York 11021 (212) 755-7340 (516) 466-2624 FAX (212) 759-9521 FAX (516) 466-0223 - 2 - KWIK INTERNATIONAL COLOR, LTD. ------------------------------ BALANCE SHEETS -------------- December 31, ------------------------------- 1997 1996 ----------- ----------- ASSETS (Note 6) CURRENT ASSETS: Cash and cash equivalents $ 516,386 $ 247,452 Marketable securities 44,508 32,948 Accounts receivable 3,180,296 2,670,837 Inventories 324,793 180,259 Prepaid expenses (Note 11) 371,416 339,579 ----------- ----------- Total current assets 4,437,399 3,471,075 INVESTMENT (Note 3) 312,185 250,729 PROPERTY AND EQUIPMENT, net (Note 4) 1,721,108 1,982,197 INTANGIBLE ASSET, net (Note 5) 28,125 60,625 OTHER ASSETS (Note 10) 1,227,664 1,453,347 ----------- ----------- $ 7,726,481 $ 7,217,973 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Loans payable, bank (Note 6) $ 1,995,000 $ 1,450,000 Accounts payable 533,498 646,694 Accrued expenses (Note 8) 721,026 762,796 Income taxes payable -- 97,280 Current portion of long-term debt (Note 7) 196,991 268,480 ----------- ----------- Total current liabilities 3,446,515 3,225,250 LONG-TERM DEBT (Note 7) 550,966 536,989 ----------- ----------- Total liabilities 3,997,481 3,762,239 ----------- ----------- COMMITMENTS (Notes 9 and 11) STOCKHOLDERS' EQUITY: Common stock, no par value, 200 shares authorized; 10 shares issued and outstanding 5,000 5,000 Retained earnings 3,823,078 3,561,372 Unrealized loss on available-for sale securities - net (99,078) (110,638) ----------- ----------- Total stockholders' equity 3,729,000 3,455,734 ----------- ----------- $ 7,726,481 $ 7,217,973 =========== =========== See notes to financial statements - 3 - KWIK INTERNATIONAL COLOR, LTD. ------------------------------ STATEMENTS OF EARNINGS ---------------------- Years Ended December 31, ------------------------------------------ 1997 1996 1995 ------------ ------------ ------------ NET SALES $ 14,324,884 $ 13,573,941 $ 13,412,163 COST OF GOODS SOLD (Notes 4, 9 and 11) 8,590,790 7,843,438 8,173,437 ----------- ----------- ----------- GROSS PROFIT 5,734,094 5,730,503 5,238,726 ----------- ----------- ----------- OPERATING EXPENSES: (Notes 4, 5, 9 and 11) Selling 1,655,370 1,410,432 1,736,948 General and administrative 3,138,439 2,926,819 2,742,353 Interest 221,624 182,788 234,324 ----------- ----------- ----------- 5,015,433 4,520,039 4,713,625 ----------- ----------- ----------- OPERATING INCOME 718,661 1,210,464 525,101 ----------- ----------- ----------- OTHER INCOME (EXPENSE): Income (loss) from investment - equity method 61,456 (2,789) 15,695 Interest and dividend income 41,272 45,932 22,985 Other income -- 105,375 -- Loss on disposal of fixed assets (11,085) -- -- ----------- ----------- ----------- 91,643 148,518 38,680 ----------- ----------- ----------- NET INCOME BEFORE INCOME TAXES 810,304 1,358,982 563,781 INCOME TAXES 100,598 156,409 55,914 ----------- ----------- ----------- NET EARNINGS $ 709,706 $ 1,202,573 $ 507,867 =========== =========== =========== See notes to financial statements - 4 - KWIK INTERNATIONAL COLOR, LTD. ------------------------------ STATEMENT OF STOCKHOLDERS' EQUITY --------------------------------- Unrealized Loss on Available- for-Sale Common Retained Securities - Stock Earnings Net Total ----------- ----------- ----------- ----------- Balance, January 1, 1995 $ 5,000 $ 1,950,932 $ (102,064) $ 1,853,868 Net earnings -- 507,867 -- 507,867 Distributions -- (100,000) -- (100,000) Unrealized net gain on available- for-sale securities -- -- (9,630) (9,630) ----------- ----------- ----------- ----------- Balance, December 31, 1995 5,000 2,358,799 (111,694) 2,252,105 Net earnings -- 1,202,573 -- 1,202,573 Unrealized net gain on available- for-sale securities -- -- 1,056 1,056 ----------- ----------- ----------- ----------- Balance, December 31, 1996 5,000 3,561,372 (110,638) 3,455,734 Net earnings -- 709,706 -- 709,706 Distributions -- (448,000) -- (448,000) Unrealized net gain on available- for-sale securities -- -- 11,560 11,560 ----------- ----------- ----------- ----------- Balance, December 31, 1997 $ 5,000 $ 3,823,078 $ (99,078) $ 3,729,000 =========== =========== =========== =========== See notes to financial statements - 5 - KWIK INTERNATIONAL COLOR, LTD. ------------------------------ STATEMENTS OF CASH FLOWS ------------------------ Years Ended December 31, ---------------------------------------- 1997 1996 1995 ---------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 709,706 $ 1,202,573 $ 507,867 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 575,344 419,777 269,365 (Income) loss from investment - equity method (61,456) 2,789 (15,695) Loss disposal of fixed assets 11,085 -- -- (Increase) decrease in operating assets: Accounts receivable (509,459) (953,339) (211,051) Inventory (144,534) 25,848 22,008 Prepaid expenses (31,837) (253,000) (53,892) Other assets (7,614) (105,433) (169,173) Increase (decrease) in operating liabilities: Accounts payable (113,197) (81,766) (250) Accrued expenses (41,770) (267,539) 315,852 Corporation taxes payable (97,280) 81,576 9,798 ----------- ----------- ----------- Total adjustments (420,718) (1,131,087) 166,962 ----------- ----------- ----------- Net cash provided by operating activities 288,988 71,486 674,829 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of fixed assets 22,500 -- -- Purchase of intangible assets -- (100,000) -- Proceeds from (advances to) affiliates, officers and employees 86,221 137,200 (41,423) Purchases of equipment and improvements (120,746) (989,331) (181,661) Decrease in cash surrender value - officers' life insurance 8,109 -- -- ----------- ----------- ----------- Net cash used for investing activities (3,916) (952,131) (223,084) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds of loans from bank 545,000 355,000 (50,000) Proceeds of long-term debt -- 660,179 -- Proceeds from loans against cash surrender value of officers' life insurance 144,324 -- -- Repayments of long-term debt (257,462) (210,853) (210,605) S Corporation distributions (448,000) -- (100,000) ----------- ----------- ----------- Net cash (used in) provided by financing activities (16,138) 804,326 (360,605) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 268,934 (76,319) 91,140 CASH AND CASH EQUIVALENTS, beginning of year 247,452 323,771 232,631 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, end of year $ 516,386 $ 247,452 $ 323,771 =========== =========== =========== See notes to financial statements - 6 - KWIK INTERNATIONAL COLOR, LTD. ------------------------------ NOTES TO FINANCIAL STATEMENTS ----------------------------- YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -------------------------------------------- 1. Summary of Significant Accounting Policies: ------------------------------------------ a. Nature of business ------------------ The Company is in the printing industry primarily performing color separation services for various clients throughout the United States. b. Equity method ------------- Investments in companies in which the Company has a 20% to 50% interest are carried at cost, adjusted for the Company's proportionate share of their undistributed earnings or losses (see Note 3). c. 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. d. Statement of cash flows ----------------------- For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. e. Marketable securities --------------------- Marketable securities are valued at quoted market prices as of the balance sheet date. The cost of the securities is $143,586. The marketable securities have been categorized as available-for-sale equity securities. f. Inventories ----------- Inventories, primarily consisting of work-in progress, are valued at the lower of cost (first-in, first-out) or market. g. Property and equipment ---------------------- Property and equipment are valued at cost less accumulated depreciation. Expenditures for additions, renewals and betterments are capitalized; expenditures for maintenance and repairs are charged to expenses as incurred. Upon retirement or disposal of assets, the cost and accumulated depreciation are eliminated from the accounts and the resulting gain or loss is included in determining the results of operations. Depreciation is computed either on a straight-line, double-declining or accelerated cost recovery method over the estimated useful lives of the related assets. - 7 - 1. Summary of Significant Accounting Policies: (Cont'd) ------------------------------------------- h. Intangible assets ----------------- The cost of intangible assets are amortized on a straight-line basis over their respective useful lives. i. Income taxes ------------ The Company elected to have the corporation treated as a "Small Business Corporation", pursuant to the Internal Revenue Code and related New York State statute. As a result of this election, the income or loss and credits of the Company will pass through directly to the individual stockholders. Accordingly, no provision for federal income taxes is included in the financial statements. New York State imposes a tax on "Small Business Corporations" which approximates the incremental difference between corporate and individual tax rates. Local taxes are provided for at the prevailing annual rates. j. Reclassifications ----------------- Certain reclassifications have been made to the 1996 and 1995 financial statements to conform to the 1997 presentation. 2. Concentration of Credit Risk: ---------------------------- The Company's financial instruments that are exposed to concentration of credit risk consist primarily of its cash equivalents, marketable securities and trade receivables. The Company invests its temporary cash investments and marketable securities with high quality institutions. This policy limits the Company's exposure to concentration of credit risk. Concentrations of credit risk with respect to trade receivables are limited due to the large number of accounts comprising the Company's customer base as well as their dispersion across different industries and geographic areas. The Company routinely assesses the financial strength of its customers. Only one individual customer accounted for more than 10% of the net sales for the years ended December 31, 1997 and 1995. For the years ended December 31, 1997 and 1995, the Company's five largest individual customers, including the one largest customer, accounted for 40% and 39% of net sales. 3. Investment: ---------- Investment carried at equity consists of the following: December 31, ----------------------------- 1997 1996 ------- ------- HMK Graphics Inc. and Subsidiaries Equity owned 33-1/3% 33-1/3% The following is a summary of financial position and results of operations of the above companies as of: April 30, ------------------------------------ 1997 1996 -------------- -------------- Current assets $ 992,627 $ 962,687 Property and equipment, net 4,493,278 4,621,763 Other assets 4,932,910 5,160,135 -------------- -------------- $ 10,418,815 $ 10,744,585 ============== ============== - 8 - 3. Investment: (Cont'd) ---------- April 30, ----------------------------------- 1997 1996 -------------- ------------- Current liabilities $ 1,084,230 $ 1,470,631 Long-term debt 6,594,918 6,601,728 Other long-term liabilities 1,828,111 1,945,038 -------------- ------------- 9,507,259 10,017,397 Stockholders' equity 911,556 727,188 -------------- ------------- $ 10,418,815 $ 10,744,585 ============== ============= Sales and rental income $ 2,274,104 $ 1,818,372 ============== ============= Net income (loss) $ 184,368 $ (8,367) ============== ============= 4. Property and Equipment: Property and equipment consists of the following: December 31, ------------------------------------ 1997 1996 -------------- -------------- Equipment $ 4,832,263 $ 5,480,588 Leasehold improvements 703,459 690,987 ------------- ------------- 5,535,722 6,171,575 Less accumulated depreciation 3,814,614 4,189,378 ------------- ------------- $ 1,721,108 $ 1,982,197 ============= ============= Depreciation expense for the years ended December 31, 1997, 1996 and 1995 approximated $542,800, $380,400 and $269,400, respectively. 5. Intangible Asset: ---------------- Intangible asset consists of the following: December 31, -------------------------------- 1997 1996 ---------- ----------- Covenants not to compete $ 100,000 $ 100,000 Less accumulated amortization 71,875 39,375 ---------- ----------- $ 28,125 $ 60,625 ========== =========== Amortization expense for the years ended December 31, 1997, 1996 and 1995 approximated $32,500, $39,400 and $0, respectively. 6. Loans Payable - Bank: -------------------- At December 31, 1997, the Company has outstanding $1,995,000 against its approved line of credit for $2,500,000 with an interest rate of .25% above the bank's prime rate (8.50% at December 31, 1997). The loan is secured by all assets of the Company and guaranteed by the shareholders. Advances under the line are limited to 75% of eligible accounts receivable. - 9 - 7. Long-Term Debt: -------------- Long-term debt consists of the following: December 31, -------------------------------- 1997 1996 ---------- ----------- U.S. Concord Inc. $ - $ 52,593 Heller Financial, Inc. (a) 76,552 153,976 JLJ Capital (b) 671,405 598,900 ---------- ----------- 747,957 805,469 Less current maturities 196,991 268,480 ---------- ----------- $ 550,966 $ 536,989 ========== =========== The obligations consist of the following transactions: (a) The obligation is payable in 48 monthly installments of $7,940 each. Payments are scheduled to end in October, 1998. Each payment includes interest at 8.038%. A Scitex Work Station was pledged as collateral for this note. (b) During the year 1997, the Company entered into a new loan agreement with JLJ Capital which encompassed the purchase of new machinery and equipment for $199,950 and the refinance of certain existing debt totaling $500,050 leaving a new loan of $700,000. The note is payable in 60 monthly installments of $14,275 each. Payments are scheduled to end in September 2002. Each payment includes interest at 8.243% per annum. Certain equipment is pledged as collateral for this note. Scheduled payments to reduce debt are as follows: Year Ending December 31, ------------ 1998 $ 196,991 1999 130,752 2000 141,945 2001 154,098 2002 124,171 ---------- $ 747,957 ========== 8. Accrued Expenses: ---------------- Accrued expenses consist of the following: December 31, -------------------------------- 1997 1996 ---------- ----------- Payroll and payroll taxes $ 113,922 $ 97,936 Pension plan 429,584 333,020 Other 177,520 331,840 ---------- ----------- $ 721,026 $ 762,796 ========== =========== - 10 - 9. Commitments: ----------- The Company is obligated to make minimum annual rental payments as follows: 1998 $ 524,400 1999 524,400 2000 557,175 2001 557,175 2002 557,175 Thereafter 1,114,350 ------------- $ 3,834,675 ============= The Company rents its New York City business premises from an affiliated company (see Note 10). The leases are due to expire on December 31, 2004. Total rent expense for operating leases for years ended December 31, 1997, 1996 and 1995 was approximately $551,000, $592,000 and $640,000, respectively. 10. Related Party Transactions: -------------------------- The Company made various loans to its officers. Such loans are payable on demand with interest charged at 6% per annum The total officers loans, including accrued interest, approximated $61,700 and $-0- at December 31, 1997 and 1996, respectively. In addition, the Company conducts business with various affiliated companies. At December 31, 1997 and 1996, the amounts due to the Company from its affiliates approximated $930,300 and $1,086,000, respectively. Rent expense paid to an affiliated company for the years ended December 31, 1997, 1996 and 1995 approximated $524,400, respectively. 11. Retirement Plans: ---------------- (a) The Company has a defined benefit pension plan for its non-union employees. The Company's funding policy is to contribute annually the maximum amount that can be deducted for Federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. Pension expense includes the following components: Years Ended December 31, --------------------------------------- 1997 1996 1995 --------- --------- --------- Service cost of the current period $ 157,468 $ 68,768 $ 69,027 Interest cost on the projected benefit obligation 104,445 84,791 117,584 Actual return on plan assets (149,123) (126,004) (191,670) Net amortization of transition asset, net asset gain and other components 43,110 2,849 62,811 --------- --------- --------- Pension expense $ 155,900 $ 30,404 $ 57,752 ========= ========= ========= - 11 - 11. Retirement Plans: ---------------- The following sets forth the funded status of the plan and the amounts shown in the accompanying balance sheets: December 31, -------------------------- 1997 1996 ----------- ----------- Actuarial present value of accumulated obligations: Vested benefits $ 1,481,135 $ 1,270,570 Non-vested benefits 20,011 24,198 ----------- ----------- Accumulated benefit obligation 1,501,146 1,294,768 Effect of anticipated future compensation levels and other events 251,555 136,586 ----------- ----------- Projected benefit obligation 1,752,701 1,431,354 Fair value of assets held in the plan, primarily corporate securities 1,781,495 1,394,175 ----------- ----------- Plan assets in excess of projected benefit obligations $ 28,794 $ (37,179) =========== =========== The unfunded excess consists of the following: December 31, -------------------------- 1997 1996 ----------- ----------- Unamortized asset at transition $ 14,110 $ 11,995 Net unrecognized actuarial loss (225,055) (305,303) Prepaid pension cost, net of accrued liability 239,739 256,129 ----------- ----------- $ 28,794 $ (37,179) =========== =========== The weighted average discount rate used in determining the actuarial present value of the projected benefit obligation was 7%. The expected long-term rate of return of assets was 7%. The rate of increase in salary level was 5%. (b) The Company is a party to a multiemployer health, welfare and defined benefit pension plan covering certain union employees. Costs for the years ended December 31, 1997, 1996 and 1995 approximated $656,000, $636,000 and $658,000, respectively. (c) The Company maintains a nonqualified profit sharing plan for one key employee where contributions are calculated at a rate of 5% of after-tax profit. Expense for the years ended December 31, 1997, 1996 and 1995 approximated $28,000, $63,000 and $0, respectively. 12. Supplementary Information - Statement of Cash Flows: --------------------------------------------------- Cash paid for interest approximated $224,000, $180,600 and $206,500 during the years ended December 31, 1997, 1996 and 1995, respectively. Cash paid for taxes approximated $248,800, $75,000 and $40,500 during the years ended December 31, 1997, 1996 and 1995, respectively. During 1997, the Company entered into a long-term financing agreement for the purchase of equipment in the amount of $199,950. In addition, the Company refinanced certain long-term obligations in the amount of $500,050. - 12 - 13. Subsequent Event: On January 15, 1998, the Company purchased all of the issued and outstanding shares of common stock of the Company owned by a retiring officer (50% of the outstanding capital stock of the Company) at a purchase price of $3,760,000. As part of the redemption agreement, the Company paid $376,000 and executed a promissory note for $3,384,000, with interest at 8%. (b) Pro Forma Financial Information (unaudited). PRO FORMA FINANCIAL INFORMATION The following Pro Forma Financial Statements are based on the historical financial statements of the Company, adjusted to give effect to the acquisition of substantially all of the assets of the Seller by the Company (the "Kwik Acquisition"). The Pro Forma Balance Sheet assumes the Kwik Acquisition occurred as of the most recent balance sheet date prior to the acquisition date of March 25, 1998. The Pro Forma Income Statements for the six months ended February 28, 1998 and the twelve months ended August 31, 1997 assume that the Kwik Acquisition occurred as of the first day of the applicable period. In addition, the Pro Forma Income Statement for the twelve months ended August 31, 1997 is adjusted to give effect to the Company's acquisition of all of the capital stock of Libra City Corporate Printing Limited on May 22, 1997 (the "Libra Acquisition") and its acquisition of substantially all of the assets of Boris Image Group, Inc. on April 4, 1997 (the "Boris Acquisition") and assumes that such acquisitions occurred as of September 1, 1996. The Pro Forma Financial Statements should be read in conjunction with the audited consolidated financial statements of the Company and the related notes thereto which are included in the Company's Annual Report on Form 10-KSB for the year ended August 31, 1997, the Company's Quarterly Report on Form 10-QSB for the quarter ended February 28, 1998, the Company's Current Report on Form 8-K dated April 8, 1998, the Company's Current Report on Form 8-K dated June 6, 1997, the Company's Current Report on Form 8-K/A dated August 5, 1997 (each as filed with the Securities and Exchange Commission) and the audited financial statements of the Seller that are filed herewith. The pro forma financial information does not purport to present what the Company's results of operations would actually have been if the Kwik Acquisition, the Libra Acquisition and the Boris Acquisition had occurred on the assumed dates, as specified above, or to project the Company's financial condition or results of operations for any future period. Pro Forma Condensed Balance Sheet (Unaudited) --------------------------------------------- February 28, 1998 ----------------- ASSETS Current assets: Unidigital Kwik Adjustments Pro Forma ---------- ---- ----------- --------- Cash and cash equivalents ........................... $ 1,945,436 $ 114,012 $ $ 2,059,448 Accounts receivable (less allowance for doubtful accounts for Unidigital of $264,337) .............. 11,092,840 2,885,670 13,978,510 Deferred financing costs, net ....................... 287,793 -- 287,793 Prepaid expenses .................................... 2,729,212 458,267 3,187,479 Other current assets ................................ 1,805,843 -- 1,805,843 ------------ ------------ ------------ Total current assets ............................ 17,861,124 3,457,949 21,319,073 Property and equipment, net ............................ 11,463,726 1,667,868 13,131,594 Intangible assets, net ................................. 5,307,950 -- 22,053,951 27,361,901 Other assets ........................................... 214,249 234,025 885,000 1,333,274 ------------ ------------ ------------ ------------ Total assets .................................... $ 34,847,049 $ 5,359,842 $ 22,938,951 $ 63,145,842 ============ ============ ============ ============ LIABILITIES Current liabilities: Accounts payable and accrued expenses ............... $ 5,437,277 $ 1,295,134 $ (509,949) $ 6,222,462 Current portion of capital lease obligations......... 2,042,579 183,746 2,226,325 Current portion of long-term debt ................... 11,264,459 -- (8,750,500) 2,513,959 Income taxes payable ................................ 900,836 -- 900,836 Loans and notes payable to stockholders ............. 164,364 -- 750,000 914,364 ------------ ------------ ------------ ------------ Total current liabilities ....................... 19,809,515 1,478,880 (8,510,449) 12,777,946 Capital lease obligations, net of current portion....... 2,338,283 529,913 2,868,196 Long-term debt, net of current portion ................. 2,044,202 -- 31,390,798 33,435,000 Deferred income taxes .................................. 399,036 -- 399,036 Loans and notes payable to stockholders, net of current portion................................ 207,496 -- 207,496 ------------ ------------ ------------ ------------ Total liabilities ............................... 24,798,532 2,008,793 22,880,349 49,687,674 ------------ ------------ ------------ ------------ STOCKHOLDERS' EQUITY Preferred stock -- authorized 5,000,000 shares for Unidigital, $.01 par value each; none issued or outstanding ......................................... -- -- -- Common stock -- authorized 10,000,000 shares for Unidigital, $.01 par value each; 3,249,461 shares issued and outstanding at February 28, 1998; authorized 200 shares for Kwik, without par value; 10 shares issued and outstanding at February 28, 1998 32,495 5,000 1,498 38,993 Additional paid-in capital ............................. 6,392,427 -- 3,403,153 9,795,580 Retained earnings ...................................... 3,936,409 3,445,127 (3,445,127) 3,936,409 Cumulative foreign translation adjustment .............. (312,814) (99,078) 99,078 (312,814) ------------ ------------ ------------ ------------ Total stockholders' equity ...................... 10,048,517 3,351,049 58,602 13,458,168 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity....... $ 34,847,049 $ 5,359,842 $ 22,938,951 $ 63,145,842 ============ ============ ============ ============ Pro Forma Condensed Statement of Operations (Unaudited) ------------------------------------------------------- Six Months Ended February 28, 1998 ---------------------------------- Unidigital Kwik Adjustments Pro Forma ---------- ---- ----------- --------- Revenues - -------- Net sales.................................. $19,255,448 $ 7,225,280 $ $26,480,728 ----------- ----------- ----------- ----------- Expenses - -------- Cost of sales.............................. 10,300,273 4,918,976 15,219,249 Selling, general & administrative expenses................................. 6,746,376 2,774,901 (a) (865,424) 8,655,853 ----------- ----------- ----------- ----------- Total operating expenses................... 17,046,649 7,693,877 (865,424) 23,875,102 Income from operations..................... 2,208,799 (468,597) 865,424 2,605,626 Interest expense ........................... 748,607 118,199 (b) 1,043,801 1,910,607 Interest expense-deferred financing costs... 276,138 -- 276,138 Interest and other expenses (income) ....... 86,071 (70,278) 15,793 ----------- ----------- ----------- ----------- Income before income taxes ................. 1,097,983 (516,518) (178,377) 403,088 Provision for income taxes ................. 399,558 78,770 (c) (328,932) 149,396 ----------- ----------- ----------- ----------- Net income ................................... $ 698,425 $ (595,288) $ 150,555 $ 253,692 =========== ============ =========== =========== Net income per share available to common stockholders: Basic ..................................... $ 0.22 $ 0.07 =========== =========== Diluted ................................... $ 0.20 $ 0.06 =========== =========== Shares used to compute net income per share: Basic ..................................... 3,244,797 649,841 3,894,638 =========== =========== =========== Diluted ................................... 3,436,008 649,841 4,105,377 =========== =========== =========== Pro Forma Condensed Statement of Operations (Unaudited) ------------------------------------------------------- Year Ended August 31, 1997 -------------------------- Unidigital Libra Boris Kwik Adjustments Pro Forma ---------- ----- ----- ---- ----------- --------- Revenues - -------- Net sales.......................... $ 27,261,856 $ 4,202,018 $ 3,276,883 $ 14,096,098 $ $ 48,836,855 ------------ ----------- ------------ ------------ ----------- ------------ Expenses - -------- Cost of sales...................... 14,449,663 3,053,209 1,733,080 8,435,133 27,671,085 Selling, general & administrative expenses........... 9,673,071 1,270,444 1,615,998 4,965,031 (d) (625,319) 16,899,225 ------------ ----------- ------------ ------------ ----------- ------------ Total operating expenses........... 24,122,734 4,323,653 3,349,078 13,400,164 (625,319) 44,570,310 Income (loss) from operations...... 3,139,122 (121,635) (72,195) 695,934 625,319 4,266,545 Interest expense................... 1,094,628 37,282 92,972 212,520 (e) 2,552,480 3,989,882 Interest expense-deferred financing costs............................. 138,069 -- -- -- 138,069 Interest and other (income) expenses.......................... (27,587) (21,584) -- 124,299 75,128 ------------ ----------- ------------ ------------ ----------- ------------ Income (loss) before income taxes.. 1,934,012 (137,333) (165,167) 359,115 (1,927,161) 63,466 Provision for income taxes......... 593,280 (26,493) 3 178,237 (f) (643,066) 101,961 ------------ ----------- ------------ ------------ ----------- ------------ Net income (loss).................... $ 1,340,732 $ (110,840) $ (165,170) $ 180,878 $(1,284,095) $ (38,495) ============ =========== ============ ============ =========== ============ Net income per share available to common stockholders: Basic ............................ $ 0.41 $ (0.01) ============ ============ Diluted........................... $ 0.40 $ (0.01) ============ ============ Shares used to compute net income per share: Basic ............................ 3,239,040 649,841 3,888,881 ============ =========== ============ Diluted .......................... 3,378,775 649,841 4,028,616 ============ =========== ============ Notes to Pro Forma Condensed Consolidated ----------------------------------------- Financial Statements (Unaudited) -------------------------------- For purposes of determining the pro forma effect of the Kwik Acquisition on the Company's balance sheet as of February 28, 1998 and the Company's income statement for the six months ended February 28, 1998, the following pro forma adjustments have been made: February 28, 1998 Cash received from borrowings $ 33,435,000 Cash consideration for Kwik Acquisition (21,245,349) Debt repayment - other (12,189,651) ------------ -- ============ Consideration for Kwik Acquisition ---------------------------------- Cash 20,590,349 Issuance of 649,841 common shares at $5.2469 per share 3,409,651 Note payable 750,000 Expenses of acquisition 655,000 ------------ Total Consideration $ 25,405,000 ============ Total value of net assets acquired 3,351,049 ------------ Goodwill $ 22,053,951 ============ (a) Amortization of goodwill over 25 years $ 441,079 Excess owners' compensation (1,306,503) ------------- $ (865,424) ============= (b) Additional interest expense $ (1,043,801) ============= (c) Pro forma tax adjustment $ (328,932) ============= Notes to Pro Forma Condensed Consolidated ----------------------------------------- Financial Statements (Unaudited) -------------------------------- For purposes of determining the pro forma effect of the Kwik Acquisition, the Libra Acquisition and the Boris Acquisition on the Company's income statement for the twelve months ended August 31, 1997, the following pro forma adjustments have been made: Kwik Libra Boris Total ---- ----- ----- ----- (d) Amortization of goodwill $ 882,158 $ 128,962 $ 66,614 $ 1,077,734 Excess owners' compensation (1,703,053) (1,703,053) ------------ ----------- ----------- ----------- $ (820,895) $ 128,962 $ 66,614 $ (625,319) ============ =========== =========== =========== (e) Additional financing costs $ (2,111,480) $ (441,000) $ -- $(2,552,480) ============ =========== =========== =========== (f) Pro forma tax adjustment $ (457,678) $ (185,388) $ -- $ (643,066) ============ =========== =========== =========== (c) Exhibits. Exhibit No. Description of Exhibit ----------- ---------------------- 4.1 Stockholders' Agreement dated March 25, 1998 by and among Unidigital Inc., William E. Dye and Richard J. Sirota (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.1 Asset Purchase Agreement dated as of March 25, 1998 by and among Unidigital Inc., Unison (NY), Inc., Kwik International Color, Ltd. and Richard J. Sirota (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.2 Subordinated Promissory Note dated March 25, 1998 of Unidigital Inc. payable to Kwik International Color, Ltd. in the principal amount of $750,000 (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.3 Employment Agreement dated as of March 25, 1998 by and between Unidigital Inc. and Richard J. Sirota (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.4 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik International Color, Ltd. for the property located at 229 W. 28th Street, New York, New York, on the fourth floor, known as Room 401-405 (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.5 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik International Color, Ltd. for the property located at 229 W. 28th Street, New York, New York, on the seventh floor, known as Room 706-714 and 707-713 (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.6 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik International Color, Ltd. for the property located at 229 W. 28th Street, New York, New York, on the eighth floor (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.7 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik International Color, Ltd. for the property located at 229 W. 28th Street, New York, New York, on the ninth floor (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.8 Credit Agreement dated as of March 24, 1998 by and among Unidigital Inc., the lenders from time to time parties thereto and Canadian Imperial Bank of Commerce (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.9 Term Note dated March 24, 1998 of Unidigital Inc. payable to Canadian Imperial Bank of Commerce in the principal amount of $25,000,000 (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.10 Acquisition Note dated March 24, 1998 of Unidigital Inc. payable to Canadian Imperial Bank of Commerce in the principal amount of $5,000,000 (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.11 Revolving Credit Note dated March 24, 1998 of Unidigital Inc. payable to Canadian Imperial Bank of Commerce in the principal amount of $10,000,000 (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.12 Stock Pledge Agreement (U.S.) dated as of March 24, 1998 made by Unidigital Inc. in favor of Canadian Imperial Bank of Commerce (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.13 Mortgage dated as of March 24, 1998 made by Unidigital Inc. in favor of Canadian Imperial Bank of Commerce (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.14 Security Agreement dated as of March 24, 1998 made by Unidigital Inc. in favor of Canadian Imperial Bank of Commerce (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.15 Subsidiaries Guarantee dated as of March 24, 1998 made by each of Unidigital Elements (NY), Inc., Unidigital Elements (SF), Inc., Unison (NY), Inc. and Unison (MA), Inc., in favor of Canadian Imperial Bank of Commerce (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.16 Intercreditor and Subordination Agreement dated as of March 25, 1998 by and among Kwik International Color, Ltd., Unidigital Inc. and Canadian Imperial Bank of Commerce (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 10.17 Mortgage, Assignment of Leases and Rents and Security Agreement dated as of March 24, 1998 between Unidigital Inc. and Canadian Imperial Bank of Commerce (included as an exhibit to the Current Report on Form 8-K of the Company dated April 8, 1998 and incorporated by reference herein). 23.1 Consent of Russell A. Glick, CPA. 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. Unidigital Inc. By: /s/ William E. Dye --------------------------------- William E. Dye, Chief Executive Officer (Principal Executive, Financial and Accounting Officer) Date: June 8, 1998