Exhibit 1.6
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements are
presented assuming the acquisition will be accounted for under the purchase
method of accounting.
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 acquisition
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 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
Pro Forma Combined Balance Sheet
Historical
As at
June 30, 2000
----------------------------
Zed Data Pro Forma Pro Forma
InvestAmerica Systems Adjustments Combined
------------- -------- ----------- ---------
ASSETS
Current Assets
Cash and Cash Equivalents $ 96,217 $ 41,031 $ - $ 137,248
Accounts
Receivable - Net - 734,706 - 734,706
Inventory - 705,783 - 705,783
---------- --------- -------- ------------
Total Current Assets 96,217 1,481,520 - 1,577,737
Long-Term Investment 4,000,000 - - 4,000,000
Property and
Equipment - Net 11,907 124,902 - 136,809
Goodwill - Net - - 27,097,841(3a) 17,613,597
(9,484,244)(3d)
--------- --------- -------- ------------
Total Assets $ 4,108,124 $1,606,422 $17,613,597 $ 23,328,143
=========== ========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Due to related party $ 1,456,691 $ - $ - $ 1,456,691
Notes Payable - 43,901 - 43,901
Notes Payable - Related
Party 2,000,000 - 5,000,000(3b) 7,000,000
Accounts Payable
and Accrued
Liabilities 107,873 1,441,612 1,050,000(3e) 2,599,485
---------- --------- -------- ------------
Total Current
Liabilities 3,564,564 1,485,513 6,050,000 11,100,077
---------- --------- -------- -------------
Stockholders' Equity
Preferred Stock 450 - - 450
Equity Conversion Right - - 22,218,750(3b) 22,218,750
Common Stock 31,018 2,883 (2,883)(3c) 31,018
Additional Paid-In
Capital 2,317,877 - - 2,317,877
Retained Earnings
(Accumulated Deficit) (1,805,785) 118,026 (118,026)(3c) (11,290,029)
(9,484,244)(3d)
(1,050,000)(3e)
---------- --------- ------------- -----------
Total stockholders'
Equity 543,560 120,909 11,563,597 12,228,066
Total Liabilities and
Stockholders' Equity $ 4,108,124 $ 1,606,422 $ 17,613,597 $ 23,328,143
============ =========== ============ ============
The accompanying notes are an integral part of the unaudited pro forma
combined financial statements.
F-2
INVESTAMERICA, INC. and ZED DATA SYSTEMS CORP.
Pro Forma Combined Statement of Income
Pro Forma Combined Statement of Income
Historical for the
Nine Months Ended
----------------------------
June 30, 2000 May 31, 2000
------------- ------------
Zed Data Pro Forma Pro Forma
InvestAmerica Systems Adjustments Combined
------------- -------- ----------- ---------
Operating Revenues $ - $ 5,846,243 $ - $ 5,846,243
Operating Expenses 1,801,226 5,778,217 $ 4,064,676(3d) 11,644,119
------------ ----------- ----------- -----------
Operating Income
(Loss) (1,801,226) 68,026 (4,064,676) (5,797,876)
Other Income
(Expense) - Net - 30,039 (450,000)(3e) (419,961)
------------ ----------- -------------- -----------
Net Income (Loss) $ (1,801,226) $ 98,065 $(4,510,676) $(6,217,837)
============= ========== ============ ============
Basic Earnings Per
Common Share $ (0.02) $ (0.06)
============= ===========
Weighted Average
Shares Outstanding 95,382,808 110,382,808
============ ===========
The accompanying notes are an integral part of the unaudited pro forma
combined financial statements.
F-3
INVESTAMERICA, INC. and ZED DATA SYSTEMS CORP.
Pro Forma Combined Statement of Income
Pro Forma Combined Statement of Income
Historical for the
Twelve Months Ended
----------------------------
Sept 30, 1999 Aug 31, 1999
------------- ------------
Zed Data Pro Forma Pro Forma
InvestAmerica Systems Adjustments Combined
------------ --------- ----------- ---------
Operating Revenues $ - $ 1,888,956 $ - $ 1,888,956
Operating Expenses 4,559 2,156,810 5,419,568(3b) 7,580,937
----------- ------------ ------------- ---------
Operating Income
(Loss) (4,559) (267,854) (5,419,568) (5,691,981)
Other Income
(Expense) - Net - 50,658 (600,000)(3e) (549,342)
----------- ----------- ------------- ----------
Net (Loss) $ (4,559) $ (217,196) $(6,019,568) $(6,241 323)
============ ============ ========== ===========
Basic Earnings Per
Common Share $ (0.00) $ (0.06)
============ ============
Weighted Average
Shares Outstanding 83,250,000 98,250,000
============ ============
The accompanying notes are an integral part of the unaudited pro forma
combined financial statements.
F-4
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
On July 7, 2000, InvestAmerica consummated the acquisition of Zed.
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 and
appropriate pro forma adjustments. 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 and Zed at June 30, 2000, giving effect to the acquisition
of Zed as if it had occurred as of June 30, 2000. The unaudited pro
forma combined statements of income give effect to the acquisition of Zed
as if it had occurred at the beginning of the earliest period presented,
combining the results of InvestAmerica for the year ended September 30,
1999, with that of Zed for the year ended August 31, 1999 and results of
InvestAmerica for the nine months ended June 30, 2000, with that of Zed
for the nine months ended May 31, 2000, with pro forma adjustments. The
terms of the acquisition specify all of the outstanding shares of Zed will
be exchanged for 50,000 shares of InvestAmerica Series B preferred stock
and a $5,000,000 promissory note of the Company. These shares have a
conversion right into 15,000,000 shares of InvestAmerica common stock.
This conversion right has been valued at $22,218,750 and the purchase
price has been valued at $27,218,750. 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 unaudited pro forma combined balance sheet reflects the
appropriate pro forma adjustments to record the acquisition of Zed using
the purchase method of accounting. Total consideration has been allocated,
based on estimated fair values on the acquisition date, as follows:
Current assets $ 1,481,520
Other assets 124,902
------------
1,606,422
Less: Current liabilities (1,485,513)
------------
Net identifiable assets acquired 120,909
Goodwill 27,097,841
------------
Purchase price $ 27,218,750
============
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The unaudited pro forma combined statements of income reflect
additional amortization expense resulting from the increase in goodwill
due to this acquisition.
The unallocated excess of total consideration over net identifiable
assets acquired has been allocated to goodwill, which will be amortized
over five years.
Note 2 - Exchange Ratio
The terms of the purchase agreement specify all of the outstanding
shares of Zed 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 has been made to record goodwill.
(b) A pro forma adjustment had been made to record the acquisition of Zed
by the issuance of 50,000 shares of combined company preferred stock in
exchange for all of the shares of Zed as per the exchange ratio in Note 2
above, and also reflects the issuance of a $5,000,000, 12% annual interest
promissory note. Under revised terms of repayment with the noteholder,
$100,000 of the promissory note is now due and payable with the remainder
payable in six monthly installments of $715,000 commencing July 31, 2001
plus a final installment of $610,000 on January 31, 2002. Interest to be
paid separately. The conversion right has been valued at $22,218,750.
(c) A pro forma adjustment has been made to eliminate the share capital and
retained earnings of Zed.
(d) A pro forma adjustment has been made to record amortization of goodwill
over the useful life of five years.
(e) A pro forma adjustment has been made to record the interest payable on
the promissory note associated with the Zed acquisition.
(f) 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 common into combined company common stock after
giving effect to conversion from preferred stock to common stock in
accordance with the acquisition agreement.
(g) There are no significant inter-company transactions between InvestAmerica
and Zed.
Note 4 - Reclassifications
Reclassifications have been made to the historical financial statements
to conform to the presentation expected to be used by the Company in the
future.
F-6