Florida | 1-04334 | 59-0780772 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
(a) | Financial Statements of Business Acquired. | |
The financial statements of Middleton are attached as Exhibit A to this Current Report on Form 8-K/A. | ||
(b) | Pro Forma Financial Information. | |
The pro forma financial information relating to the Middleton acquisition are attached as Exhibit B to this Current Report on Form 8-K/A. |
2
SUNAIR ELECTRONICS, INC. |
||||
Date: August 19, 2005 | By: | /s/ SYNNOTT B. DURHAM | ||
Synnott B. Durham | ||||
Chief Financial Officer | ||||
3
UNAUDITED FINANCIAL STATEMENTS |
||||
Comparative
Balance Sheet
|
1 | |||
Comparative
Statements of Income and Retained Earnings
|
2 | |||
Comparative
Statements of Cash Flows
|
3 | |||
AUDITED FINANCIAL STATEMENTS |
||||
Independent Auditors Report
|
4 | |||
Comparative Balance Sheet
|
5-6 | |||
Comparative Statement of Income
|
7 | |||
Comparative Statement of Shareholders Equity
|
8 | |||
Comparative Statement of Cash Flows
|
9 | |||
Notes to Financial Statements
|
10 |
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash |
$ | 1,769,171 | $ | 1,245,777 | ||||
Accounts receivable |
1,522,971 | 1,333,943 | ||||||
Inventory |
467,235 | 492,706 | ||||||
Prepaid
expenses and other current assets |
626,211 | 389,104 | ||||||
Total current assets |
4,385,588 | 3,461,530 | ||||||
Property and equipment (net of accumulated |
||||||||
depreciation of $3,680,435) |
1,573,705 | 1,545,621 | ||||||
Other Assets |
63,582 | 59,096 | ||||||
Total Assets |
$ | 6,022,875 | $ | 5,066,247 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current Liabilities |
||||||||
Accounts payable |
$ | 839,942 | $ | 412,064 | ||||
Accrued expenses and other
current liabilities |
807,848 | 694,601 | ||||||
Deferred revenues |
| |||||||
Customer deposits |
1,481,435 | 1,338,229 | ||||||
Current portion of long-term debt |
99,232 | 109,251 | ||||||
Total current liabilities |
3,228,457 | 2,554,145 | ||||||
Long-Term Debt |
||||||||
Notes payable |
380,132 | 396,110 | ||||||
Total Liabilities |
3,608,589 | 2,950,255 | ||||||
Stockholders Equity: |
||||||||
Common stock Class A (par value $1.00 per share, 500 shares |
||||||||
authorized, issued and outstanding) |
500 | 500 | ||||||
Additional paid-in capital |
23,227 | 23,227 | ||||||
Retained earnings |
2,390,559 | 2,092,265 | ||||||
Total stockholders equity |
2,414,286 | 2,115,992 | ||||||
Total Liabilities and Stockholders Equity |
$ | 6,022,875 | $ | 5,066,247 | ||||
-1-
2005 | 2004 | |||||||
Revenues |
$ | 7,950,369 | $ | 7,001,890 | ||||
Cost of revenues |
5,454,091 | 4,458,420 | ||||||
Gross profit |
2,496,278 | 2,543,470 | ||||||
Selling, general and |
||||||||
administrative expenses |
1,954,016 | 1,983,518 | ||||||
Income from operations |
542,262 | 559,952 | ||||||
Other income (expenses): |
||||||||
Gain on disposal of equipment |
| 1,500 | ||||||
Interest income |
1,773 | 773 | ||||||
Interest expense |
(6,939 | ) | (2,372 | ) | ||||
Total other expense |
(5,166 | ) | (99 | ) | ||||
NET INCOME |
537,096 | 559,853 | ||||||
Retained earnings, January 1 |
2,092,265 | 2,468,423 | ||||||
Shareholder distributions |
(238,802 | ) | (622,095 | ) | ||||
Retained earnings, March 31 |
$ | 2,390,559 | $ | 2,406,181 | ||||
-2-
2005 | 2004 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 537,096 | $ | 559,853 | ||||
Adjustments to reconcile net income to |
||||||||
net cash provided by operating activities |
||||||||
Depreciation |
126,010 | 107,614 | ||||||
(Increase) decrease in: |
||||||||
Accounts receivable |
(189,028 | ) | (83,714 | ) | ||||
Inventory |
25,471 | (33,516 | ) | |||||
Prepaid expenses and other current assets |
(237,107 | ) | (189,065 | ) | ||||
Other assets |
(4,486 | ) | 11,626 | |||||
Increase (decrease) in: |
||||||||
Accounts payable |
427,878 | 440,911 | ||||||
Accrued expenses and other current liabilities |
113,247 | 111,883 | ||||||
Deferred revenues |
| (39,574 | ) | |||||
Customer deposits |
143,206 | 270,383 | ||||||
Net cash provided by operating activities |
942,287 | 1,156,401 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Purchase of property and equipment |
(154,094 | ) | (73,222 | ) | ||||
Net cash used in investing activities |
(154,094 | ) | (73,222 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Principle payments of notes payable |
(25,997 | ) | (21,203 | ) | ||||
Distributions to shareholders |
(238,802 | ) | (622,095 | ) | ||||
Net cash used in financing activities |
(264,799 | ) | (643,298 | ) | ||||
NET INCREASE IN CASH |
523,394 | 439,881 | ||||||
Cash, January 1 |
1,245,777 | 1,807,370 | ||||||
Cash, March 31 |
$ | 1,769,171 | $ | 2,247,251 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
Cash paid during the period for interest |
$ | 6,939 | $ | 2,372 | ||||
Cash paid during the year for income taxes |
$ | | $ | | ||||
-3-
/s/ Linder & Thornley | ||||
Linder & Thornley | ||||
Certified Public Accountant |
-4-
December 31, | ||||||||
2004 | 2003 | |||||||
ASSETS |
||||||||
CURRENT ASSETS |
||||||||
Cash |
$ | 1,245,777 | $ | 1,807,370 | ||||
Accounts receivable |
1,333,943 | 1,090,203 | ||||||
Inventories |
492,706 | 434,842 | ||||||
Employee advances |
11,406 | 10,924 | ||||||
Prepaid expenses |
377,698 | 258,113 | ||||||
Total Current Assets |
3,461,530 | 3,601,452 | ||||||
PROPERTY AND EQUIPMENT |
||||||||
Leasehold and building improvements |
540,122 | 558,536 | ||||||
Equipment |
364,976 | 277,921 | ||||||
Vehicles |
2,332,604 | 2,371,298 | ||||||
Computer equipment |
695,102 | 629,341 | ||||||
Office furniture and equipment |
517,543 | 468,136 | ||||||
In progress fixed assets |
649,699 | 17,034 | ||||||
5,100,046 | 4,322,266 | |||||||
Less allowance for depreciation |
(3,554,425 | ) | (3,220,871 | ) | ||||
Net Property and Equipment |
1,545,621 | 1,101,395 | ||||||
OTHER ASSETS |
||||||||
Deposits and other assets |
59,096 | 64,086 | ||||||
Total Other Assets |
59,096 | 64,086 | ||||||
Total Assets |
$ | 5,066,247 | $ | 4,766,933 | ||||
-5-
December 31, | ||||||||
2004 | 2003 | |||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES |
||||||||
Accounts payable |
$ | 412,064 | $ | 246,930 | ||||
Accrued expenses |
694,601 | 601,475 | ||||||
Deferred revenue Note C |
51,364 | 250,397 | ||||||
Customer deposits |
1,286,865 | 1,044,046 | ||||||
Current portion of long-term debt Note B |
109,251 | 80,901 | ||||||
Total Current Liabilities |
2,554,145 | 2,223,749 | ||||||
LONG-TERM DEBT |
||||||||
Less: current portion Note B |
396,110 | 51,034 | ||||||
Total Liabilities |
2,950,255 | 2,274,783 | ||||||
LEASES NOTE B |
||||||||
SHAREHOLDERS EQUITY |
||||||||
Common stock Class A, par value $1.00 per share- |
||||||||
500 shares authorized, issued and outstanding |
||||||||
Non-voting common stock-Class B, 5,000 shares |
||||||||
authorized, 4,500 issued and outstanding |
500 | 500 | ||||||
Paid-in capital |
23,227 | 23,227 | ||||||
Retained earnings |
2,092,265 | 2,468,423 | ||||||
Total Shareholders Equity |
2,115,992 | 2,492,150 | ||||||
Total Liabilities and Shareholders Equity |
$ | 5,066,247 | $ | 4,766,933 | ||||
-6-
Years Ended December 31, | ||||||||
2004 | 2003 | |||||||
Net sales |
$ | 30,164,101 | $ | 25,102,352 | ||||
Cost of sales |
16,892,863 | 13,862,088 | ||||||
Gross profit |
13,271,238 | 11,240,264 | ||||||
General and administrative expenses |
11,219,470 | 9,752,629 | ||||||
Income from operations |
2,051,768 | 1,487,635 | ||||||
Other income (expense) |
||||||||
Gain on sale of assets |
6,000 | 15,301 | ||||||
Interest income |
4,124 | 2,701 | ||||||
Interest expense |
(12,621 | ) | (12,668 | ) | ||||
Total other income (expense) |
(2,497 | ) | 5,334 | |||||
Net income |
$ | 2,049,271 | $ | 1,492,969 | ||||
-7-
Common | Paid-in | Retained | ||||||||||
Stock | Capital | Earnings | ||||||||||
Balance at December 31, 2002 |
$ | 500 | $ | 23,227 | $ | 1,255,490 | ||||||
Net Income |
1,492,969 | |||||||||||
Distributions |
(280,036 | ) | ||||||||||
Balance at December 31, 2003 |
500 | 23,227 | 2,468,423 | |||||||||
Net Income |
2,049,271 | |||||||||||
Distributions |
(2,425,429 | ) | ||||||||||
Balance at December 31, 2004 |
$ | 500 | $ | 23,227 | $ | 2,092,265 | ||||||
-8-
Years Ended December 31, | ||||||||||||
2004 | 2003 | |||||||||||
OPERATING ACTIVITIES |
||||||||||||
Net income |
$ | 2,049,271 | $ | 1,492,969 | ||||||||
Adjustments to reconcile net income to net
cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
469,341 | 644,022 | ||||||||||
Gain on sale of assets |
(6,000 | ) | (15,301 | ) | ||||||||
Changes in operating assets and liabilities: |
||||||||||||
(Increase) in accounts receivable |
(243,740 | ) | (207,626 | ) | ||||||||
(Increase) in inventories |
(57,864 | ) | (97,498 | ) | ||||||||
(Decrease) Increase in prepaid expenses
and advances |
(120,067 | ) | 36,479 | |||||||||
Increase in customer deposits |
242,819 | 63,430 | ||||||||||
Increase in accounts payable and
accrued expenses |
258,262 | 227,539 | ||||||||||
Decrease (Increase) in deposits and other assets |
4,988 | (9,899 | ) | |||||||||
(Decrease) in deferred revenue |
(199,033 | ) | (262,612 | ) | ||||||||
Net Cash Provided by Operating Activities |
2,397,977 | 1,871,503 | ||||||||||
INVESTING ACTIVITIES |
||||||||||||
Purchases of vehicles and equipment |
(267,664 | ) | (281,870 | ) | ||||||||
Building improvements |
(13,828 | ) | (20,529 | ) | ||||||||
Purchase of in progress assets |
(632,075 | ) | 0 | |||||||||
Proceeds from sale of vehicles and equipment |
6,000 | 24,205 | ||||||||||
Net Cash Used in Investing Activities |
(907,567 | ) | (278,194 | ) | ||||||||
FINANCING ACTIVITIES |
||||||||||||
Shareholder distributions |
(2,425,429 | ) | (280,036 | ) | ||||||||
Borrowings |
450,000 | 0 | ||||||||||
Payments on short and long-term borrowings |
(76,574 | ) | (93,782 | ) | ||||||||
Net Cash Used in Financing Activities |
(2,052,003 | ) | (373,818 | ) | ||||||||
(Decrease) Increase in Cash and Cash Equivalents |
(561,593 | ) | 1,219,491 | |||||||||
Cash at Beginning of Year |
1,807,370 | 587,879 | ||||||||||
Cash at End of Year |
$ | 1,245,777 | $ | 1,807,370 | ||||||||
Interest
paid see Note B |
-9-
Vehicles |
3 - 5 years | |||
Equipment |
5 years | |||
Furniture & Fixtures |
5 - 7 years |
-10-
2004 | 2003 | |||||||
Notes payable to First National Bank of Central
Florida. Borrowings are repaid over a 3 to 5 year
term. Interest is due at rates ranging from
6.75% to 8.0%. Notes are secured by vehicles. |
$ | 31,032 | $ | 66,760 | ||||
Note payable to Bank of America payable in
50 monthly installments of $2,522.32 including
principal and interest at 6.8%. Note is secured
by equipment. |
38,491 | 65,175 | ||||||
Note payable to Bank of America in monthly
installments of $5,793.64 including interest at
5.25%. Note is secured by computer equipment
and matures 9/29/08. |
235,838 | 0 | ||||||
Note payable to Bank of America in interest only
installments of 5.6% Note is secured by office
build out and matures 3/29/11. |
200,000 | 0 | ||||||
Less current portion: |
(109,251 | ) | (80,901 | ) | ||||
$ | 396,110 | $ | 51,034 | |||||
2005 |
$ | 109,251 | ||
2006 |
70,969 | |||
2007 |
60,219 | |||
2008 |
64,922 | |||
2009 |
0 | |||
Thereafter |
200,000 | |||
$ | 505,361 | |||
-11-
Property Leases | Vehicle Leases | Total | ||||||||||||||
2005 | $ | 798,881 | 1,135,027 | 1,933,908 | ||||||||||||
2006 | 653,764 | 878,608 | 1,532,372 | |||||||||||||
2007 | 591,084 | 521,453 | 1,112,537 | |||||||||||||
2008 | 561,449 | 226,275 | 787,724 | |||||||||||||
2009 | 445,595 | 114,555 | 560,150 | |||||||||||||
Thereafter | 763,976 | 72,818 | 836,794 | |||||||||||||
$ | 3,814,749 | 2,948,736 | 6,763,485 | |||||||||||||
-12-
Page | ||||
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION
|
1 | |||
CONSOLIDATING BALANCE SHEET AS OF MARCH 31, 2005
|
2 | |||
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2005
|
3 | |||
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2004
|
4 | |||
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
|
5 |
1
Sunair and | See Note 3 | ||||||||||||||||||||||||||
Subsidiaries | Middleton | Combined | Pro-forma | Pro-forma | Pro-forma | ||||||||||||||||||||||
Historical | Historical | Total | Adjustments | Adjustments | Combined | ||||||||||||||||||||||
ASSETS |
|||||||||||||||||||||||||||
Cash |
$ | 1,894,814 | $ | 1,769,171 | $ | 3,663,985 | $ | 10,904,000 | 1 | ||||||||||||||||||
(9,149,762 | ) | 2 | $ | 5,418,223 | |||||||||||||||||||||||
Accounts receivable, net |
3,375,073 | 1,522,971 | 4,898,044 | 4,898,044 | |||||||||||||||||||||||
Interest receivable |
10,875 | 10,875 | 10,875 | ||||||||||||||||||||||||
Inventory |
7,106,299 | 467,235 | 7,573,534 | 7,573,534 | |||||||||||||||||||||||
Prepaid and other current assets |
809,022 | 626,211 | 1,435,233 | 1,435,233 | |||||||||||||||||||||||
Deferred tax asset |
969,000 | 969,000 | 969,000 | ||||||||||||||||||||||||
Investments |
25,850,238 | 25,850,238 | (25,850,238 | ) | 2 | | |||||||||||||||||||||
Property and equipment, net |
660,205 | 1,573,704 | 2,233,909 | 2,233,909 | |||||||||||||||||||||||
Software costs, net |
4,037,384 | 4,037,384 | 4,037,384 | ||||||||||||||||||||||||
Customer list |
10,500,000 | 3 | 10,500,000 | ||||||||||||||||||||||||
Notes receivable |
70,604 | 70,604 | 70,604 | ||||||||||||||||||||||||
Investment in subsidiary |
| | 53,100,000 | 2 | |||||||||||||||||||||||
(53,100,000 | ) | 3 | | ||||||||||||||||||||||||
Other assets |
(35,183 | ) | 63,582 | 28,399 | 96,000 | 1 | 124,399 | ||||||||||||||||||||
Goodwill |
852,683 | | 852,683 | 40,185,714 | 3 | 41,038,397 | |||||||||||||||||||||
Total Assets |
$ | 45,601,014 | $ | 6,022,874 | $ | 51,623,888 | $ | 26,685,714 | $ | 78,309,602 | |||||||||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|||||||||||||||||||||||||||
Accounts payable |
$ | 1,131,976 | $ | 839,942 | $ | 1,971,918 | $ | 3,100,000 | 1 | $ | 5,071,918 | ||||||||||||||||
Accrued expenses and other liabilities |
845,189 | 807,848 | 1,653,037 | | 1,653,037 | ||||||||||||||||||||||
Income tax payable |
186,950 | 186,950 | 261,400 | 4 | 448,350 | ||||||||||||||||||||||
Deferred tax liability |
1,368,282 | 1,368,282 | 1,368,282 | ||||||||||||||||||||||||
Unearned revenues |
100,689 | 100,689 | | 100,689 | |||||||||||||||||||||||
Customer deposits |
| 1,481,435 | 1,481,435 | 1,481,435 | |||||||||||||||||||||||
Bank line of credit |
47,000 | 47,000 | 47,000 | ||||||||||||||||||||||||
Due to shareholder |
22,800 | 22,800 | 22,800 | ||||||||||||||||||||||||
Loan from parent |
| | | ||||||||||||||||||||||||
Notes payable and capital leases |
23,028 | 479,363 | 502,391 | 11,000,000 | 1 | 11,502,391 | |||||||||||||||||||||
5,000,000 | 2 | 5,000,000 | |||||||||||||||||||||||||
Total Liabilities |
3,725,914 | 3,608,588 | 7,334,502 | 19,361,400 | 26,695,902 | ||||||||||||||||||||||
Common stock |
901,487 | 500 | 901,987 | 102,881 | 2 | ||||||||||||||||||||||
(500 | ) | 3 | 1,004,368 | ||||||||||||||||||||||||
Additional paid-in capital |
27,612,264 | 23,227 | 27,635,491 | 9,897,119 | 2 | ||||||||||||||||||||||
(23,227 | ) | 3 | 37,509,383 | ||||||||||||||||||||||||
Retained earnings (deficit) |
13,320,818 | 2,390,559 | 15,711,377 | (2,390,559 | ) | 3 | |||||||||||||||||||||
(261,400 | ) | 4 | 13,059,418 | ||||||||||||||||||||||||
Translation adjustment |
40,531 | | 40,531 | | 40,531 | ||||||||||||||||||||||
Total Stockholders Equity |
41,875,100 | 2,414,286 | 44,289,386 | 7,324,314 | 51,613,700 | ||||||||||||||||||||||
Total Liabilities and Stockholders Equity |
$ | 45,601,014 | $ | 6,022,874 | $ | 51,623,888 | $ | 26,685,714 | $ | 78,309,602 | |||||||||||||||||
2
Sunair | See Note 3 | ||||||||||||||||||||
Electronics, Inc. | Middleton | Pro-forma | Pro-forma | Pro-forma | |||||||||||||||||
Historical | Historical | Adjustments | Adjustments | Combined | |||||||||||||||||
Revenues |
$ | 9,940,320 | $ | 15,669,377 | $ | | $ | 25,609,697 | |||||||||||||
Cost of revenues |
5,537,526 | 10,764,908 | | 16,302,434 | |||||||||||||||||
Gross profit |
4,402,794 | 4,904,469 | | 9,307,263 | |||||||||||||||||
Selling, general and administrative
expenses |
3,419,467 | 4,262,344 | | 7,681,811 | |||||||||||||||||
Income from operations |
983,327 | 642,125 | | 1,625,452 | |||||||||||||||||
Other income: |
99,980 | 28,089 | | 128,069 | |||||||||||||||||
Income before provision for
income taxes |
1,083,307 | 670,214 | | 1,753,521 | |||||||||||||||||
Provision for income taxes |
(347,800 | ) | | (261,400 | ) | 4 | (609,200 | ) | |||||||||||||
NET INCOME |
$ | 735,507 | $ | 670,214 | $ | | $ | 1,144,321 | |||||||||||||
Pro-forma net income per common share |
|||||||||||||||||||||
Basic |
$ | 0.14 | $ | 0.18 | |||||||||||||||||
Diluted |
$ | 0.11 | $ | 0.15 | |||||||||||||||||
Weighted average of pro-forma shares outstanding: |
|||||||||||||||||||||
Basic |
5,412,524 | 6,441,331 | |||||||||||||||||||
Diluted |
6,667,402 | 7,696,209 | |||||||||||||||||||
3
Sunair | See Note 3 | ||||||||||||||||||||
Electronics, Inc. | Middleton | Pro-forma | Pro-forma | Pro-forma | |||||||||||||||||
Historical | Historical | Adjustments | Adjustments | Combined | |||||||||||||||||
Revenues |
$ | 9,885,375 | $ | 28,948,849 | $ | | $ | 38,834,224 | |||||||||||||
Cost of revenues |
5,685,222 | 18,874,447 | | 24,559,669 | |||||||||||||||||
Gross profit |
4,200,153 | 10,074,402 | | 14,274,555 | |||||||||||||||||
Selling, general and administrative expenses |
2,747,579 | 7,755,583 | | 10,503,162 | |||||||||||||||||
Income from operations |
1,452,574 | 2,318,819 | | 3,771,393 | |||||||||||||||||
Other income: |
178,001 | 1,768 | | 179,769 | |||||||||||||||||
Income before provision for
income taxes |
1,630,575 | 2,320,587 | | 3,951,162 | |||||||||||||||||
Provision for income taxes |
(500,855 | ) | | (905,000 | ) | 4 | (1,405,855 | ) | |||||||||||||
NET INCOME |
$ | 1,129,720 | $ | 2,320,587 | $ | | $ | 2,545,307 | |||||||||||||
Pro-forma net income per common share
Basic |
$ | 0.30 | $ | 0.52 | |||||||||||||||||
Diluted |
$ | 0.29 | $ | 0.51 | |||||||||||||||||
Weighted average of pro-forma shares outstanding: |
|||||||||||||||||||||
Basic |
3,830,487 | 4,859,293 | |||||||||||||||||||
Diluted |
3,919,127 | 4,947,933 | |||||||||||||||||||
4
Cash |
$ | 1,769,171 | ||
A/R |
1,522,971 | |||
Inventory |
467,235 | |||
Prepaid assests |
626,211 | |||
Fixed assets |
1,573,704 | |||
Other assets |
63,582 | |||
Customer list |
10,500,000 | |||
Goodwill |
40,185,714 | |||
Accounts payable |
(839,942 | ) | ||
Accrued liabilities |
(807,848 | ) | ||
Customer deposits |
(1,481,435 | ) | ||
Notes payable vehicles |
(26,337 | ) | ||
Notes payable |
(453,026 | ) | ||
Total |
$ | 53,100,000 | ||
1. | To reflect a Bank Line of Credit acquired by Sunair of $11,000,000 less $96,000 in closing costs to complete the acquisition of Middleton. | ||
2. | Reflects common stock of Sunair issued at $.10 par value and additional paid-in capital as a result of the issuance, the promissory note given and the cash disbursed in connection with the acquisition of Middleton. Also included in the investment and recorded to accounts payable are acquisition costs of $1,700,000 and the estimated tax effect of built-in capital gains of 1,400,000 as a result of Middleton relinquishing its status as an S-Corporation. |
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3. | To reflect consolidation of the common stock, additional paid-in capital and retained earnings of Middleton and to reflect adjustment from book value to market value. The excess of purchase price over the book value was allocated first to customer lists at the appraised value on the date of purchase. The remainder was allocated to goodwill. | ||
4. | Middleton Pest Control, Inc. had elected in 1998 to be taxed as a Small Business Corporation under Subchapter S of the Internal Revenue Code. All taxable income was apportioned to the shareholders for inclusion in their individual income tax returns. The Company is reflecting the effect of Federal and State income taxes at a blended rate of 39%, as if Middleton was combined with Sunair as a C corporation. |
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