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Clearlogic Inc – ‘8-K’ for 11/13/99

On:  Monday, 11/29/99   ·   For:  11/13/99   ·   Accession #:  1002334-99-238   ·   File #:  0-24376

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/29/99  Clearlogic Inc                    8-K:1,2    11/13/99    3:54K                                    Hand Jehu/FA

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Acquisition of Clearlogic                             17     55K 
 2: EX-2        Agreement and Plan of Reorganization                  10     47K 
 3: EX-3.(I)    Certificate of Amendment                               2     10K 


8-K   —   Acquisition of Clearlogic
Document Table of Contents

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11st Page   -   Filing Submission
3Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 13, 1999 CLEARLOGIC, INC. (Exact name of registrant as specified in its charter) ST. JAMES GROUP, INC. (Former Name) Delaware (State or other jurisdiction of incorporation) 0-24376 33-0612125 (Commission File Number) (IRS Employer Identification No.) 41 South Haddon Avenue, Haddonfield, New Jersey 08033 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (856) 547-7844
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Item 1. Change in Control of Registrant. Item 2. Acquisition or Disposition of Assets. Pursuant to an Agreement and Plan of Reorganization dated November 13, 1999 (the "Agreement") a wholly owned subsidiary of the Registrant, ClearLogic, Inc. merged into ClearLogic, Inc., a New Jersey Corporation ("Clearlogic") effective November 23, 1999 and the Company issued 11,114,458 shares to acquire all of the outstanding shares of Clearlogic. Clearlogic employee stock options to purchase 905,000 shares were converted in the Merger to options to purchase 1,635,542 Shares of the Registrant at a price of $.027666 per share. The Registrant changed its name to Clear- logic, Inc. and Clearlogic became a wholly owned subsidiary of the Registrant. Officers and directors of Clearlogic, Inc. were elected as the new directors and officers of the Registrant. Prior to the Closing the Registrant had no affiliation with Clearlogic. The Registrant issued 137,900 shares on conversion of a promissory note and then effected a four-for-one forward stock split immediately prior to the Closing, resulting in 2,250,000 shares outstanding and 15,000,000 total shares outstanding after giving effect to the issuance of shares to ClearLogic shareholders and the potential exercise of all 1,635,542 option. The names of the current directors and executive officers of the Registrant and holders of more than 5% of the outstanding shares of common stock and the number of shares held and the percentage of the total issued and outstanding Common Stock (the only voting security) of the Registrant owned by each of them are as follows. The table includes only those options which are exerciseable within 60 days. [Download Table] Number Percentage of Shares of Shares Name Office Owned Owned Sina Khelil, CEO and Director(1) 7,969,880 53.1% Philip Burnham, COO and Director 361,446 2.4% Najat Khelil(1) 1,084,337 7.2% Ronaldo Nascimento, Senior Vice President R&D and Director 361,446 2.4% Doug Schwarzwaelder, Director 1,626,506 10.8% Jason Costomiris, CTO 361,446 2.4% All officers and directors as a group (4 persons)10,680,724 71.2% (1) Najat Khelil is the mother of Sina Khelil. Each disclaims beneficial ownership of the shares held by the other. 2
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a)(b) The required financial statements and pro forma financial information are filed herewith. (c) Exhibits 2. Plan of acquisition, reorganization, arrange- ment, liquidation or succession. 2.1. Agreement and Plan of Reorganization, dated November 13, 1999, between the Registrant, Clearlogic and Clearlogic Acquisition Corp. 3. Certificate of Incorporation and Bylaws 3.3 Amendment to Certificate of Incorporation changing name to Clearlogic, Inc. 3
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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. Dated: November 23, 1999 CLEARLOGIC, INC. By: /s/ Philip Burnham Philip Burnham COO 4
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Board of Directors and Stockholders ClearLogic, Inc.: We have audited the accompanying balance sheet of ClearLogic, Inc. as of December 31, 1998 and June 30, 1999, and the related statements of income, retained earnings, and cash flows (6/30/99 only) for the year and partial year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit 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. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ClearLogic, Inc. as of December 31, 1998 and June 30, 1999, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. August 31, 1999 5
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ClearLogic, Inc. Balance Sheets June 30, 1999 and December 31, 1998 [Enlarge/Download Table] 6/30/99 12/31/98 Assets Current Assets Cash $ 124,892 $ (2,732) Accounts Receivable 63,886 12,693 Prepaid Expenses 20,554 6,343 209,332 16,304 Property, Plant and Equipment, net 182,672 118,900 Total Assets 392,004 135,204 Liabilities and Stockholder's Equity Current Liabilities Accounts Payable 51,800 48,023 Line of Credit 30,000 30,000 Current Portion of Long Term Debt 9,630 9,630 Accrued Expenses 5,561 Current Portion of Capital 61,587 9,388 Lease Obligations Total Current Liabilities 158,578 97,041 Shareholders' Loans 305,699 152,413 Notes Payable 190,000 Long Term Debt 39,293 44,108 Long Term Portion of Capital Lease 19,450 13,661 Obligations Total Liabilities 713,020 307,223 Stockholders' Equity: Common Stock, no par value, 20,000,000 shares authorized, 6,055,000 issued and outstanding** Capital Stock 106,500 106,000 Retained Earnings (427,516) (278,019) Total Stockholders' Equity (321,016) (172,019) Total Liabilities & Stockholders' Equity 392,004 135,204 **Company also has 5,000,000 shares of preferred stock authorized. See accompanying notes to financial statements and accountants' audit report 6
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ClearLogic, Inc. Statement of Operations and Retained Earnings Partial Year Ended June 30, 1999 and Year Ended December 31, 1998 [Download Table] 1/1/99-6/30/99 1998 Sales $ 206,894 $ 250,179 (net of allowance 6/30/99 of $3,000) Cost of Services 148,064 198,079 Gross Profit 58,830 52,100 General & Administrative Expenses 194,793 265,392 Operating Profit (Loss) (135,963) (213,292) Other Income (Expense) Interest Expense (13,534) (25,012) Other Income 6,000 (13,534) (19,012) Income (loss) before income taxes $ (149,497) $ (232,304) Retained Earnings: Balance at beginning of year (278,019) (45,715) Balance at 6/30/99 $ (427,516) $ (278,019) See accompanying notes to financial statements and accountants' audit report 7
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ClearLogic, Inc. Statements of Cash Flows Partial Year Ended 6/30/99 Cash flows from operating activities: [Download Table] 6/30/99 Net Income $ (149,497) Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation 18,370 (Increase) decrease in assets: Accounts receivable (51,193) Prepaid expenses (14,211) Increase (decrease) in liabilities: Accounts payable 3,777 Accrued expenses 5,561 Deferred income taxes Total adjustments (37,696) Net cash provided by (used in) operating activities $ (187,192) Cash flows used in investing activities: Capital expenditures (72,601) Net cash used in investing activities (72,601) Cash flows from financing activities: Net proceeds (payments) from borrowings 406,019 Payments on capital lease obligations (18,602) Net cash provided by (used in) financing activities 387,417 Net increase in cash $ 127,624 Cash: Beginning of year (2,732) End of year $ 124,892 See accompanying notes to financial statements and accountants' audit report 8
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ClearLogic, Inc. Notes to Financial Statements June 30, 1999 and December 31, 1998 (1) Summary of Significant Accounting Policies Description of Business ClearLogic, Inc. is an enterprise solutions developer. They have introduced to the marketplace an Internet based electronic proofing system. Their initial focus for this product are the print and advertising industries, while additionally targeting any enterprise that engages in proofing/review of materials on a consistent basis. In addition, ClearLogic, Inc. provides security, network administration and new media. The new media department has full range of services that include video/multimedia production and cutting edge web development. Revenue and Cost Recognition Software, security, network administration and new media revenues are recognized on the accrual method for financial reporting purposes. Direct costs associated with software, security, network administration and new media revenues include all subcontractor, labor costs and product costs and those indirect costs related to product or service performance, such as travel expenses. General and administrative costs are charged to expense as incurred. Provision for estimated losses on uncompleted services are made in the period in which such losses are determined. Allowance for Doubtful Accounts The Company provides an allowance for doubtful accounts equal to the estimated losses that may be incurred in the collection of receivables. The estimated losses are based on a review of the current status of the existing receivables. Property and Equipment Major additions and improvements of assets are capitalized at cost. Maintenance, repairs, and minor improvements are expensed when incurred. The cost and accumulated depreciation of items sold or otherwise disposed of are removed from the related property, plant and equipment and accumulated depreciation accounts, and the resulting gain or loss is recorded. Depreciation is provided on the declining balance method at rates based on estimated service lives. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures in the financial statements. Accordingly, actual results could differ from those estimates. 9
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ClearLogic, Inc. Notes to Financial Statements (1) Summary of Significant Accounting Policies, continued Income Taxes For the period ending December 31, 1998, the Company has elected S corporation tax status whereby federal and state taxable income is taxed directly to the shareholder. Accordingly, no provision for income taxes was made in the financial statements for December 31, 1998. Income taxes for subsequent periods are accounted for using the asset and liability method, as required by Statement of Financial Accounting Standards No. 109. Under this method, deferred income taxes are recognized for the estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred tax liabilities and assets is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. (2) Property, Plant and Equipment Property, Plant and Equipment at June 30, 1999 and December 31, 1998 consisted of the following: [Download Table] 6/30/99 12/31/98 Furniture and Fixtures $ 10,612 $ 5,354 Leasehold Improvements 4,000 Computer and Office Equipment 118,974 85,712 Software 31,334 30,044 Video Equipment 69,596 31,263 Less accumulated depreciation 51,844 33,473 $ 182,672 $ 118,900 Depreciation expense for the partial year ended June 30, 1999 and year ended December 31, 1998 amounted to $18,370 and $22,870, respectively. (3) Long-Term Debt Long-term debt at June 30, 1999 and December 31, 1998 consisted of the following: [Enlarge/Download Table] 6/30/99 12/31/98 Note Payable, Columbia Savings Bank, secured by accounts receivable and property, plant and equipment. Payable in monthly principal and interest payments of $1,221.72 to April 1, 2004, with interest, current interest rate at 10.25% $ 48,923 $ 53,738 $ 48,923 $ 53,738 Less current maturates 9,630 9,630 $ 39,293 $ 44,108 10
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ClearLogic, Inc. Notes to Financial Statements (3) Long-Term Debt, continued Maturates of long-term debt as of June 30, 1999 are as follows: [Download Table] 1999 (balance) 4,815 2000 9,630 2001 9,630 2002 9,630 2003 9,630 2004 5,589 48,923 In addition, the Company has available a $30,000 line of credit; interest payable at a rate which varies depending on the lender's prime rate; secured by accounts receivable and property, plant, and equipment. The line of credit is a demand obligation and has outstanding advances of $30,000 and $30,000 at June 30, 1999 and December 31, 1998. (4) Leases The Company leases office space and equipment under long-term lease agreements. The leases of computer equipment are classified as capital leases. The leases for the office space are classified as operating leases. The following is a schedule of future minimum lease payments for capital leases and operating leases as of 6/30/99: Year ending December 31: [Download Table] Capital Operating Leases Leases 1999 $ 42,963 $ 49,000 2000 54,179 65,250 2001 5,491 74,250 2002 32,500 $ 102,632 $ 221,000 Less interest amount 17,457 Present value of minimum lease payments $ 85,175 Rent expense under the operating lease totaled $20,500 and $29,000 for the partial year June 30, 1999 and full year December 31, 1998, respectively. The Company relocated its offices on May 1, 1999 to Haddonfield, NJ. (5) Major Customers Four of the Company's customers accounted for approximately 59% of revenue as of 6/30/99. For 1998, two customers accounted for approximately 47% of revenue. 11
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ClearLogic, Inc. Notes to Financial Statements (6) Concentration of Credit Risk As of June 30, 1999, the two largest client receivable balances represented approximately 77% of the total accounts receivable. As of December 31, 1998, the two largest client receivable balances represent approximately 80% of the total accounts receivable. (7) Supplemental Cash Flow Information Cash paid during the partial year ended 6/30/99 and yea ended December 31, 1998 for interest follows: [Download Table] 6/30/99 12/31/98 Interest $ 7,242 $14,894 (8) Commitments and Contingencies The Company is subject to lawsuits and claims arising out of its normal course of business. The Company has referred all such suits or claims to legal counsel, and if appropriate, its insurance carriers. In the opinion of legal counsel and management, there are no lawsuits or claims that will have a material adverse effect upon the business or financial position of the Company. The Company is in the process of raising funds to fund their planned extensive marketing efforts and to meet their working capital needs. The notes that are being issued for the funds have a conversion option. The payee has the right to, prior to the notes maturity, convert the note to capital stock. The total raised as of the 6/30/99 financial statements was $447,200. The notes issued in 1998 totaled $116,200. All notes issued in 1998 have a 36 month maturity date, with 8% interest. The notes issued in 1999, as of 6/30/99, totaled $331,000. Of that $331,000, $141,000 have an 18 month maturity date and $190,000 have a 24 month maturity date, all with 8% interest. 12
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The accompanying pro forma financial statements give effect to the merger (the "Merger") of ClearLogic Acquisition Corp., a wholly-owned subsidiary of the Company into ClearLogic, Inc. a New Jersey corporation ("ClearLogic") for 12,750,000 shares of Company Common Stock, or 85% of the outstanding shares of Company Common Stock. As a result, ClearLogic is described for financial reporting purposes to have acquired the Company by the issuance of 2,250,000 shares for its net assets valued at $0. The proforma balance sheets as of December 31, 1999 and June 30, 1999 assume the Merger was effected at the end of the periods presented. The proforma income statements for the year ended December 31, 1998 and the six months ended June 30, 1999 assume the Merger was effected as of the end of the periods presented. Pro Forma Balance Sheet December 31, 1998 ASSETS [Enlarge/Download Table] ClearLogic, Inc. St. James Pro Forma Historical Historical Pro Forma Balance Dec. 31, 1998 Dec. 31, 1998 Adjustments Sheets Current Assets Cash $ (2,732) $ $ $ (2,732) Prepaid Expenses 6,343 6,343 Accounts Receivables 12,693 12,693 Total Current Assets $ 16,304 $ $ $ 16,304 Property, Plant and Equipment, Net $ 118,900 $ $ $ 118,900 Total Assets $ 135,204 $ $ $ 135,204 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable $ 48,023 $ 1,941 $ (1,941)(A) $ 48,023 Line of Credit 30,000 30,000 Current Portion of Long Term Debt 9,630 9,630 Current Portion of Capital Lease Obligations 9,388 9,388 Total Current Liabilities $ 97,041 $ 1,941 $ (1,941)(A) $ 97,041 Shareholders' Loans $ 152,413 $ $ $ 152,413 Notes Payable -- -- Long Term Debt 44,108 44,108 Long Term Potion of Capital Lease Obligations 13,661 13,661 Total Liabilities $ 307,223 $ $ $ 307,223 Stockholders' Equity Common Stock $ 106,000 $ 425 $ (93,089)(B) $ 13,336 Paid-in Capital 0 821 91,843(B) 92,664 Accumulated Deficit (278,019) (3,187) 3,187(B) (278,019) Total Stockholders' Equity $ (172,019) $ (1,941) $ 1,941(B) $ (172,019) Total Liabilities and Stockholders' Equity $ 135,204 $ $ $ 135,204 13
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Pro Forma Income Statement Year Ended December 31, 1998 [Enlarge/Download Table] Pro Forma Pro Forma Balance ClearLogic St. James Adjustments Sheets Sales $ 250,179 $ -- $ -- $ 250,179 Cost of Services (198,079) (198,079) Gross Profit 52,100 52,100 Expenses General and Administrative 265,392 110 (110)(C) 265,392 Total Expenses $ 265,392 $ 110 $ (110) $ 265,392 Net Operating Income $ (213,292) $ (110) $ 110(C) $ (213,292) Other Income Interest Expense (25,012) (25,012) Other Income 6,000 6,000 Forgiveness of Debt Total Other Income (19,012) (19,017) Net Income (Loss) $ (232,304) $ $ $ (232,304) 14
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Pro Forma Balance Sheet June 30, 1999 ASSETS [Enlarge/Download Table] ClearLogic, Inc. St. James Pro Forma Historical Historical Pro Forma Balance June 30, 1999 June 30, 1999 Adjustments Sheets Current Assets Cash $ 124,892 $ $ $ 124,892 Prepaid Expenses 20,554 20,554 Accounts Receivables 63,886 63,886 Total Current Assets $ 209,332 $ $ $ 209,332 Property, Plant and Equipment, Net $ 182,672 $ $ $ 182,672 Total Assets $ 392,004 $ $ $ 392,004 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable $ 51,800 $ 2,021 $ (2,021)(A) $ 51,800 Line of Credit 30,000 30,000 Current Portion of Long Term Debt 9,630 9,630 Accrued Expenses 5,561 5,561 Current Portion of Capital Lease Obligations 61,587 61,587 Total Current Liabilities $ 158,578 $ 2,021 $ (2,021)(A) $ 158,578 Shareholders' Loans $ 305,699 $ $ $ 305,699 Notes Payable 190,000 190,000 Long Term Debt 39,293 39,293 Long Term Portion of Capital Lease Obligations 19,450 19,450 Total Liabilities $ 713,020 $ $ $ 713,020 Stockholders' Equity Common Stock $ 106,500 $ 425 $ (93,089)(B) $ 13,336 Paid-in Capital 0 821 91,843(B) 92,664 Accumulated Deficit (427,516) (3,267) 3,267(B) (427,516) Total Stockholders' Equity $ (321,016) $ (2,021) $ 2,021(B) $ (321,016) Total Liabilities and Stockholders' Equity $ 392,004 $ $ $ 392,004 15
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Pro Forma Income Statement Six Months Ended June 30, 1999 [Enlarge/Download Table] Pro Forma Pro Forma Balance ClearLogic St. James Adjustments Sheets Sales $ 206,894 $ -- $ -- $ 206,894 Cost of Services (148,064) (148,064) Gross Profit 58,830 58,830 Expenses General and Administrative 194,793 110 (110) 194,793 Total Expenses $ 194,793 $ 110 $ (110) $ 194,793 Net Operating Income $ (135,963) $ (110) $ 110(C) $ (135,963) Other Income Interest Expense (13,534) (13,534) Total Other Income (13,534) (13,534) Net Income (Loss) $ (149,497) $ $ $ (149,497) 16
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Notes to Proforma Statements (A) Represents $1,941 in accounts payable to a former officer ($2,021 as of June 30, 1999), of which $1,379 was converted to 551,600 shares of Common Stock pursuant to the terms of a convertible promissory note and $562 was forgiven ($642 as of June 30, 1999). All share numbers give effect to a four-for-one stock split effected immediately before closing of the Merger. (B) Stockholders' equity is calculated as follows: [Enlarge/Download Table] Paid In Accumulated Shares Amount Capital Deficit Totals St. James historical 12/31/98 424,600 425 821 (3,187) (1,941) Issuance of Shares for debt of $1,379 137,900 138 1,241 1,379 Balance 562,500 563 2,062 (3,187) (562) Forgiveness of debt by principal shareholder by contribution to capital 562 562 562,500 563 2,624 (3,187) Forward stock split 1,687,500 1,687 (1,687) Balance 2,250,000 2,250 937 (3,187) ClearLogic Amounts 7,055,000 106,000 -- (278,019) (172,019) Net issuance of shares in acquisition (12,750,000 - 7,055,000) 5,695,000 5,695 (5,695) Elimination of St. James Deficit (3,187) 3,187 Transfer of excess capital to paid-in-capital (99,970) 99,970 Balance 15,000,000 13,336 92,664 (278,017) (172,019)

Dates Referenced Herein   and   Documents Incorporated by Reference

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4/1/0410
12/31/991310KSB,  NTN 10K
11/30/998-K
Filed on:11/29/99
11/23/9924
For Period End:11/13/99138-K
8/31/995
6/30/9951710QSB
5/1/9911
12/31/9851410QSB
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