<PAGE> 1
UNITED STATES
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): October 2, 2000
MOBILITY ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-30907 86-0843914
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization File Number) Identification No.)
7955 EAST REDFIELD ROAD, SCOTTSDALE, ARIZONA 85260
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (480) 596-0061
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Mobility Electronics, Inc. (the "Registrant") entered into an
Agreement and Plan of Merger (the "Agreement") dated October 2, 2000 by and
among the Registrant, Magma, Inc., a Delaware corporation and wholly owned
subsidiary of the Registrant, (the "Merger Sub"), Mesa Ridge Technologies, Inc.
doing business as MAGMA, a California corporation ("MAGMA") and all of the
shareholders of MAGMA. Pursuant to the Agreement, MAGMA merged with and into
Merger Sub. The Registrant acquired all of the outstanding voting stock of MAGMA
from Nancy Rubenstein, Ed Romascan, Paul Smith, John Dickerson and Bruce
Schoenleber (the "MAGMA Stock"). The Agreement and Plan of Merger was previously
filed as an exhibit to Form 8-K dated October 17, 2000.
MAGMA designs and manufactures PCI expansion products and
solutions.
The Registrant acquired all of the public and private rights,
privileges, powers, assets and liabilities and obligations of MAGMA.
The purchase price was determined through arms-length negotiations
by the parties. The consideration paid for the MAGMA Stock was $2 million in
cash and 562,098 shares of Registrant's Common Stock valued at approximately
$4.6 million. In addition, contingent earn out payments are to be made depending
on MAGMA's performance over the next two years. The source of the funds for the
consideration paid came from proceeds of the Registrant's initial public
offering on June 30, 2000.
The merger was treated as a purchase for financial accounting
purposes. Prior to the execution of the Agreement and Plan of Merger, there was
no material relationship between the Registrant, or its affiliates, and Mesa
Ridge Technologies, Inc. and MAGMA, or between any officers or directors of the
Registrant, or its affiliates, and the officers and directors of Mesa Ridge
Technologies, Inc. and MAGMA, or its affiliates.
ITEM 7. FINANCIAL STATEMENTS, UNAUDITED PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of MAGMA.
Independent Auditors' Report
Balance Sheets as of June 30, 2000 and 1999
Statements of Earnings for the Years Ended June 30, 2000 and
1999
Statements of Stockholders' Equity for the Years Ended
June 30, 2000 and 1999
Statements of Cash Flows for the Years Ended June 30, 2000 and
1999
Notes to the Financial Statements
(b) Unaudited Pro forma Condensed Combined Financial Information
Unaudited Pro Forma Condensed Combined Balance Sheet as of
June 30, 2000
Unaudited Pro Forma Condensed Combined Statements of
Operations for the Year Ended December 31, 1999
Unaudited Pro Forma Condensed Combined Statements of
Operations for the Six Months Ended June 30, 2000
Notes to the Unaudited Pro Forma Condensed Combined Financial
Information
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated October 2,
2000, by and among Mobility Electronics, Inc.,
Mesa Ridge Technologies, Inc. doing business as
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA and all
of the shareholders of Mesa Ridge Technologies,
Inc. (1)
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
</TABLE>
(1) Previously filed as an exhibit to Form 8-K dated October 17,
2000.
2
<PAGE> 3
MOBILITY ELECTRONICS, INC.
SIGNATURE
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.
MOBILITY ELECTRONICS, INC.
Dated: December 15, 2000 By: /s/ RICHARD W. WINTERICH
------------------------
Richard W. Winterich
Vice President and Chief Financial Officer
and Authorized Officer of Registrant
(Principal Financial and Accounting Officer)
3
<PAGE> 4
ITEM 7 (a). FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Mesa Ridge Technologies, Inc. d.b.a. MAGMA:
We have audited the accompanying balance sheets of Mesa Ridge Technologies, Inc.
d.b.a. MAGMA (the Company) as of June 30, 2000 and 1999, and the related
statements of earnings, stockholders' equity, and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 audits provide 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 Mesa Ridge Technologies, Inc.
d.b.a. MAGMA as of June 30, 2000 and 1999, and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
Phoenix, Arizona
December 14, 2000
4
<PAGE> 5
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
BALANCE SHEETS
June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 149,655 $ 167,330
Accounts receivable 461,853 429,031
Inventories 1,157,276 588,591
Receivable from stockholders 6,400 --
Prepaid expenses and other current assets 13,764 --
Deferred income tax asset 39,550 36,618
---------- ----------
Total current assets 1,828,498 1,221,570
---------- ----------
Equipment, net 26,493 5,098
Other assets 12,959 540
---------- ----------
Total assets $1,867,950 $1,227,208
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 837,525 $ 461,731
Accrued liabilities 155,734 368,857
Payable to stockholders 166,668 110,716
Current portion of long-term debt 1,367 1,156
---------- ----------
Total current liabilities 1,161,294 942,460
---------- ----------
Long-term debt, less current portion 1,765 3,132
---------- ----------
Total liabilities 1,163,059 945,592
---------- ----------
Commitments, contingencies and subsequent event (notes 4, 6, 7, 8 and 10)
Stockholders' equity:
Common stock, no par value; 1,000,000 shares authorized;
20,417 shares issued and outstanding 28,412 28,412
Retained earnings 676,479 253,204
---------- ----------
Total stockholders' equity 704,891 281,616
---------- ----------
Total liabilities and stockholders' equity $1,867,950 $1,227,208
========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
STATEMENTS OF EARNINGS
Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 7,896,494 $ 5,100,583
Cost of goods sold 4,791,657 2,937,168
------------ ------------
Gross profit 3,104,837 2,163,415
Selling, general and administrative 2,330,270 1,466,714
------------ ------------
Income from operations 774,567 696,701
Other income (expense):
Interest income 8,057 6,273
Interest expense (77,492) (64,857)
------------ ------------
Earnings before provision for income taxes 705,132 638,117
Provision for income taxes (281,857) (255,201)
------------ ------------
Net earnings $ 423,275 $ 382,916
============ ============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
(Accumulated
Common stock deficit)/ Total
--------------------- Retained stockholders'
Shares Amount earnings equity
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, June 30, 1998 20,212 $ 20,212 $ (129,712) $ (109,500)
Shares issued to employees 205 8,200 -- 8,200
Net earnings -- -- 382,916 382,916
--------- --------- ------------ -------------
Balance, June 30, 1999 20,417 28,412 253,204 281,616
Net earnings -- -- 423,275 423,275
--------- --------- ------------ -------------
Balance, June 30, 2000 20,417 $ 28,412 $ 676,479 $ 704,891
========= ========= ============ =============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
STATEMENTS OF CASH FLOWS
Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 423,275 $ 382,916
Adjustments to reconcile net earnings to net cash (used
in) provided by operating activities:
Depreciation and amortization 21,914 13,596
Common stock issued to employees -- 8,200
Increase (decrease) in cash resulting from changes in:
Accounts receivable (32,822) (402,910)
Inventories (568,685) (283,679)
Prepaid expenses and other current assets (13,764) --
Deferred income tax assets (2,932) (19,354)
Other assets (12,419) 706
Accounts payable and accrued liabilities 162,671 644,304
--------- ---------
Net cash (used in) provided by operating activities (22,762) 343,779
--------- ---------
Cash flows from investing activities:
Purchase of equipment (43,309) (6,703)
--------- ---------
Net cash (used in) investing activities (43,309) (6,703)
--------- ---------
Cash flows from financing activities:
Advances to stockholders under stockholder receivable (18,000) --
Proceeds received from stockholders under stockholder receivable 11,600 --
Net proceeds (payments) on notes payable to stockholders 55,952 (202,100)
Principal payments on long-term debt (1,156) (902)
--------- ---------
Net cash provided by (used in) financing activities 48,396 (203,002)
--------- ---------
Net increase (decrease) in cash and cash equivalents (17,675) 134,074
Cash and cash equivalents, beginning of year 167,330 33,256
--------- ---------
Cash and cash equivalents, end of year $ 149,655 $ 167,330
========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 64,857 $ 77,492
========= =========
Cash paid for taxes $ 511,308 $ 61,800
========= =========
Supplemental disclosures of non-cash financing and investing activity:
Property and equipment acquired through debt financing $ -- $ 5,190
========= =========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(1) Description of Business
Mesa Ridge Technologies, Inc. d.b.a. MAGMA founded in 1987, provides the
music, video and satellite communications industries with connectivity
products. The Company manufactures products of two types, serial products
and PCI slot expansion systems. Serial products allow a user to attach
additional peripheral devices on one main computer. PCI slot expansion
systems enable technologies to run multiple monitors using only one
computer, record and edit digital audio video using one location, and run
multiple file, fax modems and/or network servers on a single computer.
(2) Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America 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
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
(b) Cash Equivalents
Cash equivalents consist of short-term money market funds and are
stated at cost, which approximates fair market value. The Company
considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(c) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the average cost method (which approximates cost
under the first-in first-out method) for all inventories.
Provisions are made currently for obsolete and slow moving
inventory.
(d) Equipment
Equipment, which consists of computers and office furniture and
equipment, are stated at cost. Depreciation on equipment is
calculated on an accelerated method over the estimated useful
lives of the assets ranging from three to five years.
(e) Impairment of Long-Lived Assets
The Company accounts for long-lived assets under the provisions of
SFAS No. 121, Accounting for Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of. This statement requires
that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
(f) Revenue Recognition
Revenue is recognized upon shipment of product and transfer of
ownership from the Company to the customer. Provision for returns
and credits are provided for in the same period the related sales
are recorded.
9
<PAGE> 10
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(g) Warranty Reserve
The Company provides limited warranties on certain of its products
for periods generally ranging from one to three years. The Company
accrues warranty costs for potential product liability and
warranty claims based on the Company's claim experience. The
Company's warranty accrual was $67,000 and $45,000 as of June 30,
2000 and 1999, respectively.
(h) Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Valuation allowances are provided against assets which are not
likely to be realized. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
(i) Segment Reporting
The Company has one operating business because it is not organized
by multiple segments for purposes of making operating decisions or
assessing performance. The chief operating decision maker
evaluates performance, makes operating decisions, and allocates
resources based on financial data consistent with the presentation
in the accompanying financial statements.
(j) Fair Value of Financial Instruments
The fair value of accounts receivable, accounts payable and
accrued liabilities approximates the carrying value due to the
short-term nature of these instruments. Management has estimated
that the fair values of the long-term debt approximate the current
balances outstanding, based on currently available rates for debt
with similar terms.
(3) Equipment
Equipment consists of the following:
<TABLE>
<CAPTION>
2000 1999
--------- ----------
<S> <C> <C>
Computers $ 115,881 $ 74,133
Furniture and equipment 43,463 41,902
--------- ----------
Total cost 159,344 116,035
Less accumulated depreciation (132,851) (110,937)
--------- ----------
Equipment, net $ 26,493 $ 5,098
========= ==========
</TABLE>
10
<PAGE> 11
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(4) Leases
The Company is committed under long-term real and personal property
noncancelable operating leases with initial terms of more than one year.
Future minimum rental payments are summarized as follows:
<TABLE>
<CAPTION>
Years ending June 30:
<S> <C>
2001 $ 158,164
2002 164,687
2003 171,209
2004 177,731
2005 and thereafter 90,496
---------
$ 949,707
=========
</TABLE>
Total rent expense of $138,844 and $103,963 was recognized for the
years ended June 30, 2000 and 1999, respectively.
(5) Income Taxes
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
Current Deferred Total
--------- --------- ---------
<S> <C> <C> <C>
Year ended June 30, 2000:
U.S. Federal $ 221,589 $ (2,281) $ 219,308
State and local 63,200 (651) 62,549
--------- --------- ---------
$ 284,789 $ (2,932) $ 281,857
========= ========= =========
Year ended June 30, 1999:
U.S. Federal $ 213,566 $ (14,999) $ 198,567
State and local 60,989 (4,355) 56,634
--------- --------- ---------
$ 274,555 $ (19,354) $ 255,201
========= ========= =========
</TABLE>
Income tax expense differed from the amounts computed by applying the
U.S. federal income tax rate of 34% to pretax income as a result of the
following:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Computed "expected" tax expense $ 239,745 $ 216,960
Increase in income taxes resulting from:
State and local income taxes, net of federal income tax benefit 41,282 37,378
Other, net 830 863
---------- ----------
$ 281,857 $ 255,201
========== ==========
</TABLE>
11
<PAGE> 12
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June
30, 2000 and 1999 are presented below.
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Deferred tax assets:
Accrued warranty costs $ 26,689 $ 17,926
Accrued vacation 9,993 18,692
Sales returns allowance 2,868 --
---------- ----------
Net deferred tax assets $ 39,550 $ 36,618
========== ==========
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies
in making this assessment. Based upon the level of historical taxable
income and projections for future taxable income over the periods which
the deferred tax assets are deductible, management believes it is more
likely than not the Company will realize the benefits of these deductible
differences. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced.
(6) Concentration of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and trade
accounts receivable. The Company places its cash with high credit quality
financial institutions and generally limits the amount of credit exposure
to the amount of FDIC coverage. However, periodically during the year,
the Company maintains cash in financial institutions in excess of the
FDIC insurance coverage limit of $100,000. The Company performs ongoing
credit evaluations of its customers' financial condition but does not
typically require collateral to support customer receivables.
Two customers accounted for 36% and 10% of net sales for the year ended
June 30, 2000. One customer accounted for 36% of net sales for the year
ended June 30, 1999. As of June 30, 2000, two customers accounted for
approximately 44% and 11% of accounts receivable. As of June 30, 1999,
two customers accounted for approximately 46% and 16% of accounts
receivable.
(7) Related Party Transactions
The Company has utilized the credit cards of stockholders of the Company
for working capital purposes. These payables to stockholders were
$129,558 and $110,716 at June 30, 2000 and 1999, respectively.
In May 2000, the Company signed a promissory note to borrow $41,751 from
its five stockholders to finance the purchase of equipment. The note
bears interest at 6% per annum and is due in eighteen monthly principal
and interest installments of $2,431. The balance outstanding under this
note of $37,110 is reflected in payable to stockholders at June 30, 2000.
In October 2000, the Company repaid the note.
During fiscal 2000, the Company issued loans of $18,000 to five officers
of the Company, of which a balance of $6,400 remains as of June 30, 2000.
The loans are payable on demand.
12
<PAGE> 13
MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
(8) Commitments and Contingencies
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, based on
consultation with legal counsel, the ultimate disposition of these
matters will not have a material adverse effect on the Company.
In August 1998, the Company entered into a loan agreement with a
financing company to purchase certain fixed assets for $5,190. This loan
bears interest at a rate of 16.9% per annum and is payable in 48 monthly
principal and interest payments of $150. As of June 30, 2000, $3,132 is
outstanding under this note, of which, $1,367 is due over the next twelve
months.
(9) Common Stock
During 1999, the Company issued 205 shares of common stock to employees
valued at $8,200 which was charged to 1999 operations.
(10) Subsequent Event
On October 2, 2000, the Company's stockholders entered into an agreement
to sell their ownership interest in the Company to Mobility Electronics,
Inc. ("Mobility") in exchange for $2.0 million in cash and 562,098 shares
of Mobility's common stock valued at approximately $4.6 million. In
addition, contingent earn out payments are to be made depending on the
Company's performance over the next two years.
13
<PAGE> 14
ITEM 7(b). UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information gives effect to the merger using the purchase method of accounting,
after giving effect to the pro forma adjustments described in the accompanying
notes. The unaudited pro forma condensed combined financial information should
be read in conjunction with the audited historical consolidated financial
statements and related notes thereto reported by the Company in its registration
statement on Form S-1 dated June 30, 2000 and its quarterly report on Form 10-Q
for the quarter ended June 30, 2000 and the audited historical financial
statements of MAGMA as of and for the years ended June 30, 2000 and 1999 (which
are contained elsewhere herein).
The unaudited pro forma condensed balance sheet gives effect to the
merger as if it had occurred on the balance sheet date. The unaudited pro forma
condensed combined balance sheet combines Mobility's June 30, 2000 unaudited
consolidated balance sheet with MAGMA's June 30, 2000 audited balance sheet. The
unaudited pro forma condensed combined statements of operations give effect to
the merger as if it had occurred at the beginning of the periods presented. The
unaudited pro forma condensed combined statements of operations combine
Mobility's historical operating results for the six months ended June 30, 2000
and for the fiscal year ended December 31, 1999 with the corresponding MAGMA
historical operating results for the six months ended June 30, 2000 and for the
year ended December 31, 1999, respectively. The historical operating results of
MAGMA for the six months ended June 30, 2000 were derived by removing the six
months ended December 31, 1999 from the year ended June 30, 2000. The historical
operating results of MAGMA for the year ended December 31, 1999 were derived by
removing the six months ended December 31, 1998 from the year ended June 30,
1999 and adding the six months ended December 31, 1999.
For purpose of the preparation of the unaudited pro forma condensed
combined balance sheet, merger-related expenses (which the companies anticipate
will be approximately $198,000 on a pre-tax basis) were included. The estimate
of merger-related expenses is preliminary and subject to change.
Certain financial statement balances of MAGMA have been
reclassified to conform with Mobility's financial statement presentation.
The unaudited pro forma condensed combined financial information is
presented for illustrative purposes only and does not purport to be indicative
of the operating results of financial position that would have actually occurred
if the merger had been in effect on the dates indicated , nor is it necessarily
indicative of future operating results or financial position of the merged
companies. The pro forma adjustments are based on the information and
assumptions available as of the date of this Form 8-K/A. The unaudited pro forma
combined financial statements do not give effect to any cost savings or
synergies that may result from the integration of Mobility's and MAGMA's
operations.
14
<PAGE> 15
MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2000
(In thousands)
<TABLE>
<CAPTION>
Historical
---------------------- Pro Forma Pro Forma
Mobility MAGMA Adjustments Combined
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,702 $ 150 $ 42,442 (A),(D) $ 44,294
Accounts receivable, net 6,917 462 7,379
IPO proceeds 44,640 -- (44,640)(D) --
Inventories, net 2,121 1,157 3,278
Prepaid expenses and other current assets 827 60 887
--------- --------- ----------- ---------
Total current assets 56,207 1,829 (2,198) 55,838
--------- --------- ----------- ---------
Property and equipment, net 1,907 26 1,933
Goodwill -- -- 6,111 (A) 6,111
Other assets, net 2,438 13 2 (A),(B) 2,453
--------- --------- ----------- ---------
Total assets $ 60,552 $ 1,868 $ 3,915 $ 66,335
========= ========= =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit $ 2,794 $ -- $ 2,794
Accounts payable 3,238 838 4,076
Accrued expenses and other current liabilities 2,593 156 2,749
Payable to stockholders -- 167 167
Notes payable 2,685 -- 2,685
Current installments of long-term debt 72 1 73
Current installments of capital lease obligations 58 -- 58
--------- --------- ----------- ---------
Total current liabilities 11,440 1,162 -- 12,602
--------- --------- ----------- ---------
Long-term debt, less current installments 3,401 2 3,403
Capital lease obligations, less current installments 14 -- 14
--------- --------- ----------- ---------
Total liabilities 14,855 1,164 -- 16,019
--------- --------- ----------- ---------
Stockholders' equity:
Convertible preferred stock - Series C 24 -- 24
Common stock 114 28 (22)(A),(B) 120
Additional paid-in capital 101,759 -- 4,613 (A) 106,372
Retained earnings (accumulated deficit) (52,724) 676 (676)(B) (52,724)
Stock subscription and deferred compensation (3,476) -- (3,476)
--------- --------- ----------- ---------
Total stockholders' equity 45,697 704 3,915 50,316
--------- --------- ----------- ---------
Total liabilities and stockholders' equity $ 60,552 $ 1,868 $ 3,915 $ 66,335
========= ========= =========== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial information.
15
<PAGE> 16
MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
Year Ended December 31, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
---------------------------- Pro Forma Pro Forma
Mobility MAGMA Adjustments Combined
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net product sales $ 13,952 $ 6,562 $ 20,514
Cost of product sales 11,751 3,788 15,539
------------- ------------- ------------- -------------
Gross profit 2,201 2,774 -- 4,975
------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing 5,208 89 5,297
Research and development 3,377 -- 3,377
General and administrative 3,010 1,771 611 (C) 5,392
Non-cash compensation 641 -- 641
------------- ------------- ------------- -------------
Total operating expenses 12,236 1,860 611 14,707
------------- ------------- ------------- -------------
Income (loss) from operations (10,035) 914 (611) (9,732)
Other income (expense):
Interest expense (1,556) (60) (1,616)
Interest income 100 10 110
Non-cash deferred loan costs (4,840) -- (4,840)
Other, net (126) -- (126)
------------- ------------- ------------- -------------
Income (loss) before provision for income taxes (16,457) 864 (611) (16,204)
Provision for income taxes -- 346 -- 346
------------- ------------- ------------- -------------
Net earnings (loss) (16,457) 518 (611) (16,550)
Beneficial conversion costs of preferred stock (1,450) -- -- (1,450)
------------- ------------- ------------- -------------
Net earnings (loss) attributable to common stockholders $ (17,907) $ 518 $ (611) $ (18,000)
============= ============= ============= =============
Net loss per share:
Basic and diluted $ (3.59) $ (3.24)
============= =============
Weighted average common shares outstanding:
Basic and diluted 4,994 5,556
============= =============
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial information.
16
<PAGE> 17
MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2000
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical
---------------------------- Pro Forma Pro Forma
Mobility MAGMA Adjustments Combined
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net product sales $ 11,291 $ 4,166 $ $ 15,457
Cost of product sales 8,429 2,651 11,080
------------- ------------- ------------- -------------
Gross profit 2,862 1,515 -- 4,377
------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing 2,983 74 3,057
Research and development 1,878 -- 1,878
General and administrative 1,875 1,450 306 (C) 3,631
Non-cash compensation 659 -- 659
------------- ------------- ------------- -------------
Total operating expenses 7,395 1,524 306 9.225
------------- ------------- ------------- -------------
Income (loss) from operations (4,533) (9) (306) (4,848)
Other income (expense):
Interest expense (756) (46) (802)
Interest income 138 4 142
Non-cash deferred loan costs (916) -- (916)
Other, net 2 -- 2
------------- ------------- ------------- -------------
Loss before provision for income taxes (6,065) (51) (306) (6,422)
Provision for income taxes -- -- -- --
------------- ------------- ------------- -------------
Net loss (6,065) (51) (306) (6,422)
Beneficial conversion costs of preferred stock (48) -- -- (48)
------------- ------------- ------------- -------------
Net loss attributable to common stockholders $ (6,113) $ (51) $ (306) $ (6,470)
============= ============= ============= =============
Net loss per share:
Basic and diluted $ (0.93) $ (0.90)
============= =============
Weighted average common shares outstanding:
Basic and diluted 6,597 7,159
============= =============
</TABLE>
See accompanying notes to unaudited condensed combined pro
forma financial information.
17
<PAGE> 18
MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
June 30, 2000
Note 1. General Information
The Unaudited Pro Forma Condensed Combined Financial Statements
reflect the payment of (i) $2,000,000 in cash, and (ii) issuance of 562,098
shares of Mobility's common stock valued at $4,619,000 (net of $100,000 cost to
register the shares). The acquisition has been recorded as a purchase
transaction in accordance with generally accepted accounting principles and
accordingly MAGMA's assets and liabilities are recorded at their estimated fair
values at the date of the merger.
The purchase price has been allocate to the assets acquired and
liabilities assumed as follows (in thousands):
<TABLE>
<S> <C>
Purchase price:
Cash consideration $ 2,000
Common stock 6
Additional paid-in capital 4,613
Direct acquisition costs 198
17 -----------
Total $ 6,817
===========
Assets acquired and liabilities assumed:
Current assets $ 2,216
Fixed assets 26
Other assets 13
Goodwill 6,111
Liabilities assumed (1,549)
-----------
Total $ 6,817
===========
</TABLE>
Note 2. Pro Forma Adjustments
The unaudited pro forma condensed combined financial information
reflects the merger, and gives effect to the following:
(A) To record purchase of MAGMA by issuance of $2.0 million in cash and
562,098 shares of Mobility's common stock valued at $4,619,000 (net of
$100,000 estimated cost to register these shares) and record resultant
goodwill of $6,111,000 as well as record payment of direct acquisition
costs of $198,000.
(B) Eliminate equity in MAGMA at June 30, 2000 consisting of approximately
$28,000 of common stock and $676,000 of retained earnings.
(C) To record amortization expense of approximately $611,000 and $306,000
for the year ended December 31, 1999 and the six months ended June 30,
2000, respectively, based upon goodwill of $6.1 million and
amortization period of 10 years.
(D) To record receipt of IPO proceeds receivable received in July, 2000.
18
<PAGE> 19
MOBILITY ELECTRONICS, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated October 2, 2000, by and among
Mobility Electronics, Inc., Mesa Ridge Technologies, Inc. doing
business as MESA RIDGE TECHNOLOGIES, INC. D.B.A. MAGMA and all of
the shareholders of Mesa Ridge Technologies, Inc. (1)
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
</TABLE>
(1) Previously filed as an exhibit to Form 8-K dated October 17, 2000.
19
