| Tekgraf, Inc. | |||
| Proposed Ticker: | TKGFA | 2979 Pacific Drive, Suite B | |
| Exchange: | NASDAQ-National Market | Norcross, GA 30071 | |
| Industry: | Wholesale (SIC Code 5045) | (770) 441-1107 | |
| # of Employees: | 97 | ||
| Type of Shares: | Class A Common Shares | Filing Date: | 8/12/97 | |
| U.S. Shares Filed: | 2,500,000 | Filing Price: | $5.00 | |
| Non-U.S. Shares Filed: | 0 | Offering Amount: | $12,500,000 | |
| Primary Shares: | 2,500,000 | Expenses: | - | |
| Secondary Shares: | 0 | Shares Out After: | 6,500,000 |
| Manager | Tier | Phone |
| D.H. Blair & Co Inc. | Lead Manager | (212) 495-4306 |
| Issuer's Law Firm: | Bachner, Tally, Polevoy & Misher |
| Bank's Law Firm: | Paul, Hastings, Janofsky & Walker |
| Auditor: | Coopers & Lybrand |
| Registrar/Transfer Agent: | American Stock Transfer & Trust Co |
Dollar amounts in U.S. millions except for per share data | |||||
| 3 Month Ending Financials | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/31/96 | 3/31/97 | 3/31/97 | |||
| Revenue: | $68.90 | $17.60 | Assets: | $22.92 | |
| Net Income: | $1.78 | $0.48 | Curr Assets: | ||
| EPS: | $0.47 | $0.13 | Liabilities: | $15.48 | |
| Prior EPS: | Curr Liabilities: | ||||
| Cash Flow/Oper: | Equity: | $7.44 | |||
| Cash Flow/Fin: | Cash: | ||||
| Cash Flow/Inv: | Working Cap: | $3.57 | |||
| Business Description |
| The company is engaged in the manufacture, configuration, distribution and servicing of computers and computer peripherals, hardware and software. The company operations of the company are conducted through its Graphics and its Technology Division. The Graphics Division currently consists of five regional distributors which specialize in marketing, sales, support and wholesale distribution of high-end computer graphics technologies (i.e. peripherals, software, subsystems and consumable products) to value-added resellers ("VARs"), dealers and systems integrators in the digital prepress, presentation graphics, professional color desktop publishing, large format display graphics, digital imaging, electronic drawing management ("EDMS"), computer-aided design ("CAD") and other emerging computer graphics technologies markets. Among the products the Graphics Division distributes and sells are color scanners, color digital film recorders, digital cameras, color laser printers, color-calibrated monitors, audio-visual presentation systems, raster image processors ("RIPs"), ink jet printers, plotters, pre-press software, image setters, color proofers and mass storage devices.The activities of the Technology Division consist primarily of the configuration, design and assembly of custom designed network and internet servers and workstations in the form of personal computers ("PCs") under the Crescent Computer brand and the resale of Digital Equipment Corporation ("DEC") equipment to the nationwide DEC-installed customer base. |
| Competition |
| The business of manufacturing and selling computers and computer peripheral equipment is intensely competitive and rapidly changing. The Company believes that the principal competitive factors in this industry include relative price and performance, product availability, technical expertise, financial stability, service, support and reputation. The Company's Graphics Division competes primarily with computer equipment manufacturers that either utilize an in-house sales force to market their products to resellers and end-users or utilize the services of large, national fulfillment distributors. The Company believes that its primary competition will come from the latter category whose specialty is order fulfillment. The Company believes that the key factors differentiating it from such competitors lies in its ability to provide technical sales training, product demonstrations, product training, pre- and post-sale technical support and evaluation units. The Company's Crescent Computers are constructed with standardized parts which are available to others in the market. The Company's competitors include established computer product manufacturers, some of which supply products to the Company, computer resellers, distributors and service providers. Some of the Company's current and potential competitors have substantially greater financial, sales, marketing, technical and other competitive resources than those of the Company. As a result, the Company's competitors may be able to devote greater resources than the Company to the sales and service of their computer products. As the computer market in which the Company competes has matured, product price competition has intensified and is likely to continue to intensify, which may make it too costly for the Company to continue its "made to order" method of doing business. One of the results of this competition may be to lower sales prices and decrease profit margins. Technological competition from other and longer established computer hardware manufacturers and software developers is significant and expected to increase. The Company expects that hardware manufacturers and software developers will continue to enter the market to provide and package integrated information distribution solutions to the same customer base served by the Company's Technology Division. All such market participants will compete intensely to maintain or improve their market shares and revenues. Most of the companies with which the Company's Technology Division competes have substantially greater capitalresources, research and development staffs, marketing and distribution programs and facilities, and many of them have substantially greater experience in the production and marketing of products. In the development market for network servers and workstations, the Company experiences competition from hundreds of small companies and a number of significant competitors, including such major industry participants as IBM, Microsoft Corporation, Novell, Inc. and Compaq Computers, Inc. Accordingly, there is no assurance that the Crescent Computer will continue to achieve sufficient market acceptance to assure the Company's future success and long range profitability in the face of competition with such significantly larger and better capitalized companies. With respect to the Technology Division's DEC reseller activities, the Company faces competition from several national and regional companies, many of which are substantially larger and more established than the Company and have national sales forces. |
| Business Plan |
| The company's overall business strategy is to become a nationally-recognized, vertically-oriented provider of computer products and services. The company intends to accomplish this goal through internal growth of its operating divisions, acquisitions of complementary businesses and expansion into selected international markets. The key elements of the company's strategy are: (I) Internal Growth, (ii) Acquisitions and (iii) International Expansion. |
| Use of Proceeds |
| The proceeds from the proposed offering will be used for debt retirement; future acquisitions; consolidation expenses; sales and marketing; and for working capital. |
| Name of Shareholder | % Owned Before | % Owned After |
| Phillip C. Aginsky | 17.46% | 10.74% |
| Anita, Ltd. | 17.46% | 10.74% |
| J. Thomas Woolsey | 15.86% | 9.76% |
| Thomas A. Gust | 12.78% | 7.86% |
| William M. Rychel | 12.27% | 7.55% |
| Martyn Cooper | 8.34% | 5.13% |
| Peter Goletz | 7.71% | 4.74% |
| Dan I. Bailey | 7.10% | 4.74% |
| Beverly Nerenberg | 6.40% | 3.94% |
| Officer Name | Title | Age |
| Phillip C. Aginsky | Chairman of the Board of Directors | 44 |
| William M. Rychell | Co-President-Graphics Division | 46 |
| Dan I. Bailey | Co-President-Technology Division | 42 |
| Additional Underwriter Compensation |
| Warrant to purchase 250,000 shares/units at a nominal price. |
| # of Units: | 2,500,000 | |||
| Unit Ticker: | TKGFU | Unit Price: | $5.00 | |
| Warrant Ticker: | TKGFW | Warrant Price: | ||
| Warrant Exercise Date: | Warrant Exercise Price: | $7.00 | ||
| Warrant Expiration Date: | ||||
| Warrant Detachable: | Yes | Warrant Detach Date: | ||
| Warrant Callable: | Yes | Warrant Call Date: |
| Unit Composition: 1 Class A Common Share + 1 Warrant |
| Warrant Entitlement: 1 Class A Common Share |
| Warrants are callable at $0.05 if the common stock trades at $9.80 for 30 of 30 consecutive trading days. |
| 5.00% of the proceeds from the exercise of warrants goes to the underwriter. |