U. S. 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) September 24, 2000
INVESTAMERICA, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 0-28303 87-0400797
- ------------------------------- -------------- ----------------
(STATE OR OTHER JURISDICTION OF (COMMISSION (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) FILE NUMBER) IDENTIFICATION NO.)
1776 Park Avenue, #4, Park City, Utah 84060
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 435-615-8801
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Not Applicable
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(Former name or former address, if changed since last report.)
1
ITEM 2. ACQUISTION OR DISPOSITON OF ASSETS.
On July 7, 2000, the Company consummated the acquisition of Zed Data
Systems Corp. ("Zed") pursuant to the terms of (i) a Share Exchange Agreement
(the "Exchange Agreement") among the Company, Zed and one shareholder of Zed
and (ii) a Share Purchase Agreement (the "Purchase Agreement") among the
Company, Zed and the remaining shareholders of Zed. All of the issued and
outstanding shares of Zed were owned directly or indirectly by Douglas Smith,
President and a director of the Company. Mr. Smith is also the President and
a founder of Zed.
Under the terms of the Exchange Agreement, Smith Shelf Company Limited,
a corporation solely owned by Mr. Smith, the holder of approximately 23% of
the issued and outstanding shares of Zed Common Stock, exchanged its Zed
shares for 50,000 Preferred Shares of Zed. The Zed Preferred Shares are
exchangeable for an aggregate of 50,000 shares of Series B Preferred Stock
of the Company ("Series B Preferred Stock"). Each share of Series B
Preferred Stock, upon issuance, will be convertible into 300 shares of Common
Stock of the Company. Therefore, an aggregate of 15,000,000 shares of Common
Stock will be issuable upon the conversion of all of the Series B Preferred
Stock. In addition, each share of Series B Preferred Stock will have 300
votes (an aggregate of 15,000,000 votes for all of the outstanding Series B
Preferred Stock), voting together with the holders of Common Stock and Series
A Preferred Stock of the Company as a single class. Based upon the
31,168,857 shares of Common Stock currently issued and outstanding, and
giving effect to the conversion of all of the Company's outstanding Series A
Preferred Stock into 83,250,000 shares of Common Stock, the holders of Series
B Preferred Stock would own approximately 11.6% of the Company's outstanding
Common Stock upon conversion of the Series B Preferred Stock (without giving
effect to any currently outstanding options and warrants of the Company).
Under the terms of the Purchase Agreement, the Company acquired all of
the remaining issued and outstanding shares of Zed in consideration for a
$5,000,000 promissory note of the Company. The note bears interest at the
rate of 12% per annum and is payable in 6 equal monthly installments of
$715,000 commencing July 31, 2000 followed by one final installment of
$710,000 on January 31, 2001. The note is secured by a pledge of the shares
of Zed Common Stock acquired by the Company and a security interest in all of
the assets of the Company.
The Company intends to use proceeds from a private offering of equity or
debt to pay the note.
The Company currently has 50,000,000 shares of Common Stock authorized
for issuance of which 31,168,857 shares are issued and outstanding. Based on
the number of shares of Common Stock that are issuable upon conversion of the
Series A Preferred Stock and Series B Preferred Stock, the Company does not
have a sufficient number of authorized common shares available. The Board of
Directors of the Company has approved an amendment to the Company's Articles of
Incorporation to increase the number of authorized common shares from
50,000,000 to 200,000,000. Such amendment is subject to approval by the
shareholders of the Company. Therefore, the Company intends to call a Special
Meeting of Shareholders to consider and vote upon the amendment.
ITEM 7. FINANCIAL STATEMENTS, PRO-FORMS FINANCIAL INFORMATION AND EXHIBITS.
Financial statements are filed herewith.
EXHIBITS
1.1* Share Exchange Agreement, among the Company, Zed and Smith Shelf Company
Limited.
1.2* Share Purchase Agreement, among the Company, Zed and the shareholders of
Zed named therein.
1.3* Form of Promissory Note of the Company.
1.4* Certificate of Designation of Series B Preferred Stock of the Company.
1.5** Zed Data Systems Corp. audited consolidated balance sheets,
consolidated statements of operations, shareholders' equity and cash
flows
1.6** InvestAmerica, Inc. and Zed Data Systems Corp. unaudited ProForma
combined Financial Statements.
______
*filed by Form 8-K on July 24, 2000
**filed herewith
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 thereunto duly authorized.
INVESTAMERICA, INC.
By: /s/ Douglas Smith
-------------------------
Douglas Smith, President
Dated: September 26, 2000
By: /s/ Brian Kitts
--------------------------
Brian Kitts, Secretary
Date: September 26, 2000
Exhibit 1.5
AUDITORS' REPORT
To the Shareholders of
Zed Data Systems Corp.
We have audited the consolidated balance sheets of Zed Data Systems Corp. as
at June 30, 2000 and August 31, 1999 and the consolidated statements of
operations, shareholders' equity and cash flows for the ten month period ended
June 30, 2000 and the year ended August 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Zed Data Systems Corp. as at June
30, 2000 and August 31, 1999 and the results of its operations and its cash
flows for the ten month period ended June 30, 2000 and the year ended August
31, 1999 in accordance with Canadian generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Vancouver, Canada
August 17, 2000
- 1 -
ZED DATA SYSTEMS CORP
CONSOLIDATED BALANCE SHEETS
(Expressed in Canadian dollars)
ASSETS
June 30, August 31,
2000 1999
----------- -----------
Current assets:
Cash $ 60,750 $ 94,680
Accounts receivable (Note 2) 1,087,806 405,663
Short-term investments - 280,000
Inventories 1,044,982 4,792,056
----------- -----------
Total current assets 2,193,538 5,572,399
Property and equipment, net (Note 3) 184,931 202,015
----------- -----------
Total assets $ 2,378,469 $ 5,774,414
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities (Note 4) $ 2,134,452 $ 5,364,700
Notes payable (Note 5) 65,000 346,897
----------- -----------
Total current liabilities 2,199,452 5,711,597
----------- -----------
Commitments (Note 6)
Shareholders' equity
Common shares (Note 7) 3,395 3,395
Retained earnings 175,622 59,422
----------- -----------
Total shareholders' equity 179,017 62,817
----------- -----------
Total liabilities and shareholders' equity $ 2,378,469 $ 5,774,414
=========== ===========
See Accompanying Notes to these Financial Statements
- 2 -
ZED DATA SYSTEMS CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF OPERATIONS
Ten months Year ended
ended June 30, August 31,
2000 1999
------------- -------------
Revenues $ 8,867,723 $ 2,846,279
Cost of goods sold 7,771,967 2,106,000
------------- --------------
Gross profit 1,095,756 740,279
Operating expenses:
General and administrative 1,009,105 1,143,882
------------- --------------
Total operating expenses 1,009,105 1,143,882
------------- --------------
Earnings (loss) from operations 86,651 (403,603)
Interest and other income 29,549 76,332
------------- --------------
Earnings (loss) before income taxes 116,200 (327,271)
Income taxes (Note 8) - -
------------- --------------
Net earnings (loss) for the period $ 116,200 $ (327,271)
============= ==============
See Accompanying Notes to these Financial Statements
- 3 -
ZED DATA SYSTEMS CORP
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Shares Preferred Shares Total
------------- ---------------- Retained Shareholders'
Shares Amount Shares Amount Earnings Equity
------ ------ ------ ------ -------- ------------
Balance,
August 31, 1998 672 $ 3,395 - $ - $ 496,361 $ 499,756
Issued - - 7,215 721,500 - 721,500
Redeemed - - (7,215) (721,500) - (721,500)
Dividend - - - - (109,668) (109,668)
Net Loss - - - - (327,271) (327,271)
---- ------- ------ --------- ---------- -----------
Balance,
August 31, 1999 672 3,395 - - 59,422 62,817
Net Income - - - - 116,200 116,200
---- ------- ------ --------- ---------- -----------
Balance,
June 30, 2000 672 $ 3,395 - - $ 175,622 $ 179,017
==== ======= ====== ========= ========== ===========
See Accompanying Notes to these Financial Statements
- 4 -
ZED DATA SYSTEMS CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Ten months
ended June 30, August 31,
2000 1999
-------------- --------------
Cash flows from operating activities:
Net Income (loss) for the period $ 116,200 $ (327,271)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 50,116 66,046
Write down of investments - 600
Change in operating assets and liabilities:
Accounts receivable (682,143) 244,172
Inventories 3,747,075 (4,407,199)
Accounts payable (3,230,250) 4,607,376
------------ ------------
Net cash provided by operating activities 998 183,724
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (56,939) (51,416)
Proceeds from sale of property and equipment 23,908 43,027
Sale (purchase) of short term investments 280,000 (280,000)
Proceeds from sale of long term investment - 60,000
------------ ------------
Net cash provided by (used in)
investing activities 246,969 (228,389)
------------ ------------
Cash flows from financing activities
(Repayment of) proceeds from issuance of
notes payable (281,897) 127,298
Payment of dividend - (109,668)
------------ ------------
Net cash (used in) provided by
financing activities (281,897) 17,630
------------ ------------
Net decrease in cash (33,930) (27,035)
Cash, beginning of period 94,680 121,715
------------ ------------
Cash, end of period $ 60,750 $ 94,680
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income tax installments paid $ 22,500 $ 27,000
============ ============
Interest paid $ 36,348 $ 264,223
============ ============
See Accompanying Notes to these Financial Statements
- 5 -
Zed DATA SYSTEMS CORP.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The financial statements of Zed Data Systems Corp. ("Zed Data") have been
prepared in accordance with Canadian generally accepted accounting principles.
There are no material differences between Canadian and United States generally
accepted accounting principles ("GAAP") in these consolidated financial
statements, except for the information disclosed in Note 11.
Zed Data is a privately owned Vancouver based company specializing in the
resale of equipment for Local Area Networks, Wide Area Networks, Fiber Optic
Networking and Network Security. Zed Data provides data communications
solutions for businesses and organizations across North America. A full
spectrum of businesses in the private sector including school districts,
universities and stock exchanges, have used the products and services offered
by Zed Data.
Principles of Consolidation
These consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All inter-company accounts and transactions
have been eliminated.
Use of Estimates
The preparation of consolidated 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
consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Estimates are used for, but not limited
to, the accounting for doubtful accounts, depreciation and amortization, taxes
and contingencies. Actual results may differ from those estimates.
Revenue Recognition
Revenues are recognized upon acceptance of the related product by the
customer, when all significant contractual obligations have been satisfied
and collection is reasonably assured.
- 6 -
Zed DATA SYSTEMS CORP.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Short-term Investments
Cash consists of balances with major Canadian Chartered Banks. As at August
31, 1999, the Company's short-term investments consisted solely of held-to-
maturity investments and their carrying value was substantially the same as
their market value.
Fair Value of Financial Instruments
At June 30, 2000 and August 31, 1999, the Company has the following financial
instruments: cash and cash equivalents, short-term investments, accounts
receivable, accounts payable and accrued liabilities and notes payable. The
carrying value of cash and cash equivalents, short-term investments, accounts
receivable, accounts payable and accrued liabilities and notes payable
approximates their fair value based on their liquidity and/or short-term
nature.
Inventories
Inventories are valued at the lower of cost or net realizable value and are
accounted for using the specific cost method. Management performs periodic
assessments to determine the existence of obsolete, slow moving and non-
salable inventories, and records necessary provisions to reduce such
inventories to net realizable value.
Zed Data reserves a portion of its inventory book value to account for
anticipated inability to sell some products at a net realizable value
greater than their recorded cost. Products in Zed Data's inventory that
are no longer being sold are fully reserved. All inventory reserves are
recognized as a component of cost of goods sold.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation.
The carrying value of property and equipment is reviewed periodically for
any impairment in value. Depreciation of property and equipment is provided
using the following rates and methods:
Computer and test equipment 30% declining balance
Computer software 2 years straight line
Office furniture and equipment 20% declining balance
Leasehold improvements are amortized over the shorter of the lease term or
estimated useful life.
- 7 -
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration
of credit risk consist principally of cash, short-term investments and
accounts receivable. Cash is custodied with high-quality financial
institutions and short term investments are made in investment grade
securities to mitigate exposure to credit risk. The Company had revenues
from two customers during the 10 months ended June 30, 2000 that accounted for
77% of equipment sales and services. No one customer accounted for more
than 10% of revenues during the year ended August 31, 1999. One customer
accounted for 54% of trade accounts receivable as at June 30, 2000 (Nil% as
of August 31, 1999).
Foreign Currency Translation
The functional currency of the Company and its subsidiaries is the Canadian
dollar. Assets and liabilities denominated in other than the Canadian dollars
are translated using the exchange rates prevailing at the balance sheet date.
Revenues and expenses are translated using average exchange rates prevailing
during the period. Gains and losses on foreign currency transactions and
translation are recorded in the statements of operations.
Advertising
The Company expenses advertising costs as they are incurred. Advertising
expense is included in general and administrative operating expenses and
amounts to $5,539 and $8,003 in 2000 and 1999, respectively.
Income Taxes
The Company accounts for income taxes using a liability approach under which
deferred income taxes are provided based on enacted tax laws and rates.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amounts expected to be realized.
Segmented Information
The Company is principally engaged in providing data communications solutions
within North America. Accordingly, the Company considers itself to be in a
single industry and geographic segment.
- 8 -
Zed DATA SYSTEMS CORP.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
2. ACCOUNTS RECEIVABLE
June 30, August 31,
2000 1999
-------- ----------
Trade accounts receivable $ 944,064 $ 226,940
Sales taxes receivable 82,422 77,257
Note receivable 14,654 16,571
Income taxes receivable 49,500 54,000
Other accounts receivable 7,765 37,664
Allowance for doubtful accounts (10,599) (6,769)
------------ -----------
Accounts receivable $ 1,087,806 $ 405,663
=========== ===========
3. PROPERTY AND EQUIPMENT
June 30, August 31,
2000 1999
-------- ----------
Cost:
Computer and test equipment $ 489,288 $ 513,204
Computer software 34,916 19,215
Office furniture and equipment 125,322 154,098
Leasehold improvements 36,476 36,476
---------- ----------
686,002 722,993
Less accumulated depreciation:
Computer and test equipment 350,351 355,091
Computer software 23,514 18,061
Office furniture and equipment 90,861 111,666
Leasehold Improvements 36,345 36,160
---------- ----------
501,071 520,978
---------- ----------
$ 184,931 $ 202,015
- 9 -
Zed DATA SYSTEMS CORP.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities were as follows:
June 30, August 31,
2000 1999
-------- ----------
Trade accounts payable $ 1,940,687 $ 4,974,936
Sales taxes 8,196 9,077
Accrued compensation 127,440 29,193
Other accounts payable - 163,291
Dividends payable - 109,668
Accrued interest 58,129 78,535
----------- -----------
Accounts payable and
accrued liabilities $ 2,134,452 $ 5,364,700
5. NOTES PAYABLE
June 30, August 31,
2000 1999
-------- ----------
Global Futures Corporation $ 65,000 $ 65,000
Ewing Consulting Corp - 167,298
Plum Equity (VCC) Corp - 100,000
Due to shareholder - 14,599
---------- ----------
Notes payable $ 65,000 $ 346,897
The note payable to Global Futures Corporation bears interest at 10% per
annum, has no fixed repayment terms, is unsecured and is due on demand.
The note payable to Ewing Consulting Corp. ("Ewing"), a related party with a
shareholder in common, accrues interest at 12% per annum, is due on demand
without fixed repayment terms and is unsecured. The note was fully repaid by
Zed Data during 2000.
The note payable to Plum Equity (VCC) Corp. ("Plum"), a related party with a
shareholder in common, bears interest at 12% per annum, is due on demand, has
no fixed repayment terms and is secured by agreement pursuant to the Personal
Property Security Act (B.C.). Zed Data fully repaid the note in October 1999.
The amount due to shareholder is due on demand and does not bear interest.
The amount was repaid by Zed Data in 1999.
- 10 -
Zed DATA SYSTEMS CORP.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
6. COMMITMENTS
Operating Leases
The Company leases office facilities and certain equipment under operating
leases. Future minimum operating lease payments for the years ending August
31 pursuant to leases outstanding as at June 30, 2000 are due as follows:
2001 $ 97,202
2002 97,202
2003 97,202
2004 97,202
2005 97,202
----------
$ 486,010
Rent expense totaled approximately $73,777 for the 10 months ended June 30,
2000, and $91,356 for the year ended August 31, 1999.
7. SHAREHOLDERS' EQUITY
June 30, August 31,
2000 1999
-------- ----------
Authorized
1,000 Class " A " redeemable, retractable,
non-voting preferred shares with a par
value of $l,OOO each, cumulative at
12% per annum
1,000 Class "B" redeemable, retractable,
non-voting preferred shares with a par
value of$1.00 each, cumulative at
12% per annum
20,000 Class "C" redeemable, retractable,
non-voting preferred shares with a par
value of $0.10 each, cumulative at
5% per annum
8,000 Common shares without par value
Issued and outstanding
672 Common shares $ 3,395 $ 3,395
======== ========
During the year ended August 31, 1999 the Company issued and subsequently
redeemed 7,215 Class "C" preferred shares as described in Note 10.
- 11 -
8. INCOME TAXES
Deferred income taxes result principally from temporary differences in the
recognition of certain revenue and expense items for financial and income
tax reporting purposes. Significant components of the Company's deferred
tax assets and liabilities as of June 30, 2000 and August 31, 1999 are as
follows:
June 30, August 31,
2000 1999
-------- ----------
Deferred income tax assets
Net operating tax loss
carry-forwards $ 31,514 $ 54,705
Book and tax base differences
on assets 10,600 12,114
---------- ----------
Total deferred income tax assets 42,114 66,819
Valuation allowance for deferred
income tax assets (42,114) (66,819)
--------- ----------
Net deferred income tax assets $ - $ -
========= ==========
Due to the uncertainty surrounding the realization of the deferred income
tax assets in future income tax returns, the Company has a recognized 100%
valuation allowance against its deferred income tax assets.
As of June 30, 2000, the Company has Canadian tax loss carry-forwards of
approximately $177,245 available to reduce future years' income for tax
purposes. These carry-forward losses expire in 2006.
9. RELATED PARTY TRANSACTIONS
Year ended June 30, 2000:
The Company loaned $44,065 to Optica Communications Inc. ("Optica"), a
related party with a shareholder in common. Of this amount, Optica repaid
$37,903, including accrued interest. At year end, $6,309 remained
outstanding in other accounts receivable.
The Company loaned $165,000 to Plum. During the year, Plum repaid this
amount plus $745 of interest. The Company also borrowed and repaid $175,000
from Plum during the period and made total interest payments of $16,427.
At year end, no amounts remain outstanding between the parties.
The Company made interest payments to Ewing of $13,856 and principal
repayments in respect of notes payable to Ewing of $405,973. At year end,
no amounts remain owing to Ewing. Zed Data paid $205,193 in management
fees to Ewing during the period.
- 12 -
Zed DATA SYSTEMS CORP.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
9. RELATED PARTY TRANSACTIONS (Continued)
Year ended August 31, 1999:
The Company loaned $531,727 to Ewing. Ewing repaid this amount plus
$17,475 of interest during the year. The Company also borrowed $1,021,301
from Ewing and made total interest payments of $224,972 and principal
repayments of $854,003. At year end $167,298 of principal and $5,618 of
accrued interest remained outstanding in notes payable. Zed Data also
sold Ewing 42,857 of Plum for $60,000, their cost amount. Zed Data paid
$14,360 in management fees to Ewing.
During the year, Zed Data entered into a transaction with Ewing to
purchase 406,443 shares of Accel Financial Group ("AFG") shares at their
fair value of $963,301. In consideration for the shares, Ewing received
a promissory note in the amount of $241,801 and 7,215 Class "C" preferred
shares of Zed Data with a redemption value of $100 each. The preferred
shares were redeemed by Ewing in exchange for a promissory note for $721,500.
Both promissory notes were subsequently repaid by the Company after disposal
of the AFG shares for total proceeds of $1,216,108.
10. THE EFFECT OF APPLYING UNITED STATES GAAP
The Company's accounting policies are consistent in all material respects
with United States GAAP.
Comprehensive income
Under Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"), the Company is required to report total
comprehensive income. Comprehensive income is defined as changes in
stockholders' equity exclusive of transactions with owners such as
capital contributions and dividends. The Company has no comprehensive
income items, other than the net income or loss in any of the periods
presented.
Impairment of long-lived assets
The Company makes reviews for the impairment of long-lived assets including
goodwill and other intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Under Statement of Financial Accounting Standard ("SFAS") No. 121, an
impairment loss would be recognized when estimates of undiscounted
future cash flows expected to result from the use of an asset and its
eventual disposition are less than its carrying amount. No such impairment
losses have been identified by the Company for the 10 months ended June 30,
2000 and the year ended August 31, 1999.
- 13 -
Zed DATA SYSTEMS CORP.
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in Canadian dollars)
10. THE EFFECT OF APPLYING UNITED STATES GAAP (Continued)
Recent Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities",
which establishes accounting and reporting standards for derivative
instruments and hedging activities. The Statement will require the
recognition of all derivatives on the Company's consolidated balance
sheet at fair value. The FASB has subsequently delayed implementation of
the standard to the financial years beginning after June 15, 2000. The
Company expects to adopt the new Statement effective January 1, 2001.
The impact on the Company's financial statements is not expected to be
material.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
(SAB No. 101). SAB No. 101, which is effective in the fourth quarter of
2000, provides guidance on the recognition, presentation, and disclosure
of revenue in financial statements of all public companies. Management
does not expect that the adoption of SAB 101 will have a significant
effect on the Company's results of operations or financial position.
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"),
"Accounting for Certain Transactions Involving Stock Compensation."
The Company will be required to adopt FIN 44 effective July 1, 2000
with respect to certain provisions applicable to new awards, exchanges
of awards in a business combination, modifications to outstanding awards,
and changes in grantee status that occur on or after that date. FIN 44
addresses practice issues related to the application of Accounting
Practice Bulletin Opinion No. 25, "Accounting for Stock issued to
Employees." The Company does not expect the application of FIN 44 to
have a material impact on its financial position or results of operations.
11. SUBSEQUENT EVENTS
On July 7, 2000 Zed Data was acquired by InvestAmerica, Inc.
("InvestAmerica") pursuant to a Share Exchange Agreement and a Share
Purchase Agreement. As part of the transaction, Zed Data was reorganized
by the creation and issuance to a shareholder of 50,000 Preferred Shares,
which are exchangeable for an aggregate of 50,000 shares of Series B
Preferred Stock of InvestAmerica. Each share of Series B Preferred
Stock, upon issuance, will have 300 votes and will be convertible into
300 common shares of InvestAmerica. Under terms of the Purchase Agreement,
InvestAmerica acquired all the remaining and issued outstanding shares of
Zed Data in consideration for a $5,000,000 promissory note of InvestAmerica
payable in installments prior to January 31, 2001.
- 14 -
Exhibit 1.6
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements are
presented assuming the merger will be accounted for as a pooling of interests.
Under this method of accounting, the companies are treated as if they had
always been combined for accounting and financial reporting purposes. These
unaudited pro forma financial statements and accompanying notes of
InvestAmerica, Inc. and Zed Data Systems Corp. have been incorporated by
reference into this document.
The unaudited pro forma combined financial information is presented for
illustration purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the merger had been
completed at the dates indicated. The information does not necessarily
indicate the future operating results or financial position of the combined
company.
The unaudited pro forma financial data was prepared by adding or combining
the historical amounts of each company and adjusting the combined amounts for
significant differences in accounting methods used by each company. These
adjustments are described in the accompanying notes to the financial
statements. The unaudited pro forma combined balance sheet was prepared by
combining the balance sheets of InvestAmerica, Inc. and Zed Data Systems at
June 30, 2000, giving effect to the merger as if it had occurred as of June 30,
2000. The unaudited pro forma combined statements of income give effect to the
merger as if it had occurred at the beginning of the earliest period presented,
combining the results of InvestAmerica, Inc. for the year ended September 30,
1999, with that of Zed Data Systems for the year ended August 31, 1999 and
results of InvestAmerica, Inc. for the nine months ended June 30, 2000, with
that of Zed Data Systems for the nine months ended May 31, 2000. The terms of
the merger specify all of the outstanding shares of Zed Data Systems will be
exchanged for 50,000 shares of InvestAmerica, Inc. preferred stock. These
shares have a conversion right into 15,000,000 shares of InvestAmerica, Inc.
common stock. This exchange ratio (15,000,000 shares of common stock) was used
in computing certain of the pro forma adjustments and in computing share and
per share amounts in the accompanying unaudited pro forma financial
information.
The pro forma adjustments do not reflect any operating efficiencies and
cost savings that may be achievable with respect to the combined companies.
The pro forma adjustments do not include any adjustments to historical sales
for any future price changes nor any adjustments to selling or marketing
expenses for any future operating changes.
The pro forma amounts pertaining to the Zed Data Systems entity in the
unaudited pro forma combined financial statements are expressed in U.S. dollars
and translated at the noon buying rate on June 30, 2000 which was $1.00 US to
$1.4806 Canadian for the June 30, 2000 balance sheet and a mix of average
historical rates for the statements of income for the respective periods.
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INVESTAMERICA, INC. and ZED DATA SYSTEMS CORP.
Pro Forma Combined Balance Sheet
Historical
As at
June 30, 2000
---------------------------- Pro Forma
Zed Data Adjustment Pro Forma
InvestAmerica Systems Note 3(a) Combined
ASSETS
Current Cash
Cash $ 318,121 $ 41,031 $ $ 359,152
Accounts
Receivable - Net - 734,706 734,706
Inventory - 705,783 705,783
Inventory
Stock Subscription
Receivable 600,000 - 600,000
------------- ----------- -----------
Total Current Assets 918,121 1,481,520 2,399,641
Property and
Equipment - Net 36,421 124,902 161,323
Investment in
Unconsolidated
Business 4,000,000 - 4,000,000
------------- ----------- -----------
Total Assets $ 4,954,542 $ 1,606,422 $ 6,560,964
============= =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Debt Maturing Within
One Year $ 21,020 $ 43,901 5,000,000 $ 5,064,921
Account Payable
and Accrued
Expenses 27,874 1,441,612 1,469,486
------------ ----------- -----------
Total Current
Liabilities 48,894 1,485,513 6,534,407
------------ ----------- ----------
Long-term Debt 1,981,621 - 1,981,621
------------ ----------- ----------
Shareholders' Equity
Preferred Shares 450 - 50 500
Common Shares 31,118 2,883 2,883 31,118
Additional Paid-In
Capital 14,503,905 - 4,997,167 9,506,738
Retained Earnings
(Accumulated Deficit) (11,611,446) 118,026 (11,493,420)
------------- ----------- ------------
Total shareholders'
Equity 2,924,207 120,909 - (1,955,064)
Total Liabilities and
Shareholders' Equity $ 4,954,542 $ 1,606,422 $ 6,560,964
============ =========== ============
The accompanying notes are an integral part of the unaudited pro forma
combined financial statements
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INVESTAMERICA, INC. and ZED DATA SYSTEMS CORP.
Pro Forma Combined Statement of Income
Historical for the
Nine Months Ended
----------------------------
June 30, 2000 May 31, 2000
------------- ------------ Pro Forma
Zed Data Adjustment Pro Forma
InvestAmerica Systems Note 3(b) Combined
Operating Revenues $ - $ 5,846,243 $ $ 5,846,243
Operating Expenses 2,239,091 5,778,217 8,017,308
------------ ------------ ------------
Operating Income
(Loss) (2,239,091) 68,026 (2,171,065)
Other Income
(Expense) - Net 810,206 30,039 840,245
------------ ------------ ------------
Net Income (Loss) $ (1,428,885) $ 98,065 $ - $ (1,330,820)
============= ============ =============
Basic Earning Per
Common Shares
Net Income (Loss)
Per Share $ (0.07) $ $ (0.01)
============= =============
Weighted Average
Shares Outstanding 20,469,073 20,469,073 20,469,073
============= ============ =============
Diluted Earning Per
Common Share
Net Income (Loss)
Per Share $ (0.01) $ - $ (0.01)
============ =============
Weighted Average
Shares Outstanding 103,719,073 103,719,073 15,000,000 118,719,073
The accompanying notes are an integral part of the unaudited pro forma
combined financial statements
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INVESTAMERICA, INC. and ZED DATA SYSTEMS CORP.
Pro Forma Combined Statement of Income
Historical for the
Twelve Months Ended
----------------------------
Sept 30, 1999 Aug 31, 1999
------------- ------------ Pro Forma
Zed Data Adjustment Pro Forma
InvestAmerica Systems Note 3(b) Combined
Operating Revenues $ - $ 1,888,956 $ $ 1,888,956
Operating Expenses 256,865 2,156,810 2,413,675
------------ ------------ ------------
Operating Income
(Loss) (256,865) (267,854) (524,719)
Other Income
(Expense) - Net (6,991,348) 50,658 (6,940,690)
------------- ------------ ------------
Net (Loss) $ (7,248,213) $ (217,196) $ - $ (7,465,409)
============= ============= =============
Basic Earning Per
Common Shares
Net Income (Loss)
Per Share $ (0.74) $ (0.02) $ (0.76)
============= ============= =============
Weighted Average
Shares Outstanding 9,790,443 9,790,443 9,790,443
============= ============= =============
Diluted Earning Per
Common Share
Net Income (Loss)
Per Share $ (0.74) $ (0.02) $ (0.30)
============ ============== =============
Weighted Average
Shares Outstanding 9,790,443 9,790,443 15,000,000 24,790,443
The accompanying notes are an integral part of the unaudited pro forma
combined financial statements
- 4 -
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENT
Note 1 - Reclassifications
Reclassifications have been made to the historical financial statements
to conform to the presentation expected to be used by the combined company.
Note 2 - Exchange Ratio
The terms of the merger agreement specify all of the outstanding shares
of Zed Data Systems Corp. will be converted into 50,000 preferred shares of
combined company stock. These preferred shares are convertible into
15,000,000 common shares of the combined company's common stock. This
exchange ratio was used in computing share and per share amounts in the
accompanying pro forma financial information.
Note 3 - Pro Forma Adjustments
(a) A pro forma adjustment had been made to reflect the issuance of 50,000
shares of combined company preferred stock in exchange for all of the shares
of Zed Data Systems as per the exchange ratio in Note 2 above. The
adjustment also reflects the issuance of a $5,000,000, 12% annual interest
promissory note payable in six monthly installments of $715,000 commencing
July 31, 2000 plus a final installment of $715,000 on January 31, 2001.
Interest to be paid separately.
(b) Pro forma adjustments have been made in all periods presented to the
number of weighted average shares outstanding used in the calculation of
basic and diluted earnings per share. The number of weighted average
shares outstanding reflects the conversion of shares and share equivalents
of Zed Data Systems common into combined company common stock after giving
effect to conversion from preferred stock to common stock in accordance
with the merger agreement.
(c) There are no significant inter-company transactions between
InvestAmerica, Inc. and Zed Data Systems.
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