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 Act of 1934
June 29, 1998 (April 15, 1998)
Date of Report (Date of earliest event reported)
Commission File #0-10964
MAXWELL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2390133
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
9275 Sky Park Court
San Diego, California 92123
(Address of principal executive offices)
Registrant's telephone number, including area code: (619) 279-5100
<PAGE>
Maxwell Technologies, Inc.
Form 8-K Index
ITEM 2. ACQUISITION OF ASSETS
(a) On April 15, 1998, Maxwell Technologies, Inc. (the "Company"
or "Maxwell"), through its Maxwell Technologies Systems Division, Inc.
subsidiary, completed the acquisition of certain assets and assumed certain
liabilities of the ElectroMagnetic Systems Group of Primex Physics
International Company (the "EMS Group" or "Physics International") (a
wholly-owned subsidiary of Primex Technologies, Inc.), for a cash purchase
price of approximately $10.0 million, substantially all of which was paid at
closing. The purchase price was paid out of cash on hand. The acquired assets
consist primarily of existing customer contracts and related accounts
receivable, property and equipment, inventories, and intellectual property.
The Company also assumed substantially all of the current liabilities of
Physics International.
(b) Physics International specializes in high-energy pulsed power
technology. In 1997, Physics International had sales of approximately $17.0
million, with the U.S. Department of Defense as its single largest customer.
The Company intends to continue such use of the acquired assets.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF OPERATION ACQUIRED.
In accordance with Rule 3-05 of Regulation S-X, audited financial statements
for the acquired operation are filed with this report. With the concurrence of
the Securities and Exchange Commission, pursuant to Rule 3-13 of Regulation
S-X, the audited financial statements of the acquired operation consist of an
Audited Statement of Assets Acquired and Liabilities Assumed as of March 29,
1998, Audited Statement of Revenues and Direct Operating Expenses for the
Twelve Months Ended March 29, 1998, accompanying explanation and notes, and
Report of Ernst & Young LLP, Independent Auditors.
(b) PRO FORMA FINANCIAL INFORMATION.
In accordance with Article 11 of Regulation S-X, pro forma financial
information is filed with this Report. With the concurrence of the Securities
and Exchange Commission, pursuant to Rule 3-13 of Regulation S-X, the pro forma
financial information consists of an unaudited pro forma condensed consolidated
balance sheet as of April 30, 1998, an unaudited pro forma condensed
consolidated statement of operations for the twelve months ended July 31, 1997,
an unaudited pro forma condensed consolidated statement of operations for the
nine months ended April 30, 1998, and accompanying explanation and notes.
<PAGE>
Report of Independent Auditors
The Board of Directors
Primex Technologies, Inc.
We have audited the accompanying statement of assets acquired and liabilities
assumed of the ElectroMagnetic Systems Group (the "EMS Group") of Primex
Physics International Company (a wholly owned subsidiary of Primex
Technologies, Inc.) at March 29, 1998 and the related statement of revenues
and direct operating expenses for the twelve month period ended March 29, 1998.
These statements are the responsibility of the management of Primex
Technologies, Inc. Our responsibility is to express an opinion on these
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 statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements. An audit also
includes assessing the accounting principles used and significant estimates
made by the management, as well as evaluating the overall statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
As described in Note 1, the accompanying statement of revenues and direct
operating expenses were prepared solely to present the revenues and direct
operating expenses of the EMS group and are not intended to be a complete
presentation of the results of the operations of the EMS Group.
In our opinion, the statements referred to above present fairly, in all
material respects, the assets acquired and the liabilities assumed of the EMS
Group at March 29, 1998, and the related revenues and direct operating expenses
for the twelve month period ended March 29, 1998, in conformity with generally
accepted accounting principles.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
June 18, 1998
San Diego, California
<PAGE>
<TABLE>
The ElectroMagnetic Systems Group
of Primex Physics International Company
(a wholly-owned subsidiary of Primex Technologies, Inc.)
Statement of Assets Acquired and Liabilities Assumed
<CAPTION>
March 29, 1998
(in thousands)
<S> <C> <C>
Assets
- - ------
Current assets:
Cash $ 2
Accounts receivable --net of
allowance for doubtful
accounts of $198 3,584
Inventories 213
Other current assets 52
----------
Total current assets 3,851
----------
Property and equipment--net 2,456
----------
Total assets acquired $ 6,307
==========
Liabilities
- - -----------
Accounts payable $ 318
Accrued employee compensation 508
Accrued rent payable 1,171
Accrued warranty 340
Other current liabilities 112
----------
Total liabilities acquired 2,449
----------
Assets acquired net of
liabilities assumed $ 3,858
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
The ElectroMagnetic Systems Group
of Primex Physics International Company
(a wholly-owned subsidiary of Primex Technologies, Inc.)
Statement of Revenues and Direct Operating Expenses
For the twelve months ended March 29, 1998
(in thousands)
<CAPTION>
<S> <C> <C>
Revenues:
Contract revenue $ 15,482
Other revenue 1,352
---------
16,834
Direct operating expenses:
Cost of sales 13,597
Selling, general and
administrative expenses 4,278
---------
17,875
---------
Revenues less direct
operating expenses $ (1,041)
=========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
The ElectroMagnetic Systems Group
of Primex Physics International Company
(a wholly-owned subsidiary of Primex Technologies, Inc.)
Notes to Financial Statements
March 29, 1998
1. BASIS OF PRESENTATION
The ElectroMagnetic Systems Group of Primex Physics International Company (the
"EMS Group" or "Physics International"), (a wholly-owned subsidiary of Primex
Technologies, Inc.) has operated as a business group of Primex Physics
International Company. On April 15, 1998, Maxwell Technologies, Inc. ("Maxwell"
or "the Company") through its Maxwell Systems Division, Inc. subsidiary,
acquired certain assets and assumed certain liabilities of Physics
International. The acquisition was made pursuant to an Asset Purchase Agreement
("the Agreement") dated April 15, 1998. The assets acquired consisted primarily
of customer contracts and related accounts receivable, inventories, and
property and equipment. Liabilities assumed included accounts payable,
accrued salaries and wages, accrued vacation and holiday and certain other
current liabilities. The Company did not assume certain liabilities (e.g.,
retirement and benefit plans, environmental claims, income taxes and certain
other accrued employee compensation), and any liability associated with such
claims arising from the operations of Physics International prior to March 29,
1998 (the effective date of the acquisition) is excluded from these statements.
Physics International specializes in high-energy pulsed power technology.
Historically, it has had no separate legal status as it operated as a group
within Primex Physics International Company (Primex Physics International
Company is an immaterial wholly-owned subsidiary of Primex Technologies, Inc.)
As a result, separate financial statements have not been maintained for Physics
International.
The accompanying statements have been prepared from the historical accounting
records of Primex Physics International Company and present the assets acquired
and the liabilities assumed as of March 29, 1998, and the revenues and direct
operating expenses of Physics International for the twelve months ended March
29, 1998, including allocations of certain common expenses based upon selected
criteria, as defined (Note 2). Since only certain assets of Physics
International have been acquired and only certain liabilities assumed,
statements of financial position and cash flows are not applicable. In
addition, the statement of revenues and direct operating expenses does not
include income tax expense, as this expense was determined at the consolidated
level of Primex Technologies, Inc. The accompanying statement of revenues and
direct operating expenses was prepared to present the net revenues and direct
operating costs of Physics International.
As a result, the accompanying financial statements are not intended to be a
complete presentation of Physics International's results of operations and they
do not purport to reflect the revenues and direct operating expenses that would
have resulted if Physics International had operated as an unaffiliated
independent entity.
The preparation of these statements requires the use of management estimates,
which may vary from actual results.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
ALLOCATION OF EXPENSES
Various administrative services were provided to all business groups of Primex
Physics International Company on a combined basis, including data processing,
finance and accounting, facilities, personnel and other services. In addition,
certain other costs were allocated to Physics International from the parent
company, Primex Technologies, Inc. For purposes of the accompanying Statement
of Revenues and Direct Operating Expenses, such expenses were charged on the
basis of direct usage when identifiable, with the remainder allocated among
the Primex Physics International Company's businesses on the basis of their
respective revenues, headcount, or level of effort. An occupancy charge
(consisting of depreciation, rent, property taxes and the like) for shared
facilities occupied by Physics International was allocated based on square
footage used. In the opinion of management of Primex Physics International
Company, these methods of allocation are reasonable.
ACCOUNTS RECEIVABLE
As of March 29, 1998, accounts receivable consisted of the following (in
thousands):
Billed $ 1,095
Unbilled 2,687
--------
3,782
Less: allowance for
doubtful accounts (198)
--------
$ 3,584
========
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated using the straight-
line method over the estimated useful life of the assets. Leasehold
improvements are amortized over the estimated useful life of the improvement,
or the term of the lease, whichever is shorter.
The cost and accumulated depreciation and amortization of property and
equipment acquired are summarized as follows as of March 29, 1998 (in
thousands):
Leasehold improvements $ 2,968
Machinery and equipment 3,482
Office furniture and equipment 3,620
--------
10,070
Less: Accumulated depreciation
and amortization (7,703)
--------
2,367
Construction in progress 89
--------
$ 2,456
========
<PAGE>
INVENTORIES
Inventories (stated at the lower of average costs or market) acquired consisted
of the following as of March 29, 1998 (in thousands):
Raw materials and purchased
parts $ 192
Work in progress 21
--------
Total $ 213
========
REVENUE RECOGNITION
The majority of the revenues of Physics International result from contracts
with agencies of the U. S. Government (principally, the Department of Defense).
Physics International recognizes substantially all revenues from short-term
fixed priced contracts upon shipment of products or completion of services.
Revenues, including estimated profits, on long-term fixed price contracts are
recognized as costs are incurred under the percentage-of-completion method.
Revenues, including fees earned, on cost plus contracts are also recognized as
costs are incurred. Contract revenue is reflected in sales and includes
amounts received from the U. S. Government and commercial customers from the
funded research and development efforts of Physics International. Provisions
are made on a current basis to fully recognize any anticipated losses on
contracts. Revenues are based on the current direct operating expenses and
this may have resulted in increased revenues (based on increased costs) had
Physics International operated as a stand-alone entity.
DIRECT OPERATING EXPENSES
Direct operating expenses include the direct costs of contracts and costs
related to product shipments included in revenues of Physics International,
including direct labor, direct materials and allocated overhead costs. Total
direct operating expenses are not necessarily indicative of the costs that
would have been incurred had Physics International operated as a stand-alone
operation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the dates of the financial statements
and the reported amounts of revenues and expenses during the reporting periods.
As a result, estimates are required to provide for percentage of completion,
warranty costs, inventory obsolescence as well as other matters. Historically,
actual amounts have not varied from estimated amounts.
3. LOSS ON LONG-TERM FIXED CONTRACT
During the twelve months ended March 29, 1998, Physics International recorded
charges of approximately $1.3 million to provide for losses and estimated
warranty costs on an overseas contract for customized testing equipment,
which was substantially complete as of March 29, 1998.
<PAGE>
4. LEASES
Physics International's sole operating facility, which also served as its
headquarters, is a leased facility in San Leandro, California. The term of
this operating lease ends in 2006. Rental expense associated with this lease
for the year ended March 29, 1998 was approximately $1,536,000.
Future minimum rental commitments on its facilities lease are as follows in
periods ending March 29 (in thousands): (Certain of these costs will be
offset by existing subleases).
1999 $ 1,639
2000 1,643
2001 1,640
2002 1,641
2003 1,638
Thereafter 6,515
--------
$ 14,716
========
5. YEAR 2000 (Unaudited)
The Physics International currently has software and hardware which is not year
2000 compliant. Physics International, in coordination with Maxwell
Technologies, Inc., has implemented plans to ensure its year 2000 compliance.
These plans include the conversion to software and hardware programs that are
year 2000 compliant. In addition, Physics International is working with its
vendors and customers to ensure year 2000 compliance. Any changes would be
done in the normal course of business during 1998 and 1999 at minimal increment
costs. As a result, Physics International does not expect the year 2000 issue
to have a significant impact on its operations.
<PAGE>
<TABLE>
Maxwell Technologies, Inc.
Pro Forma Condensed Consolidated Balance Sheet -- unaudited
(in thousands)
<CAPTION>
Maxwell Physics
Technologies International Pro Forma(1) Pro Forma(2) Total
April 30, 1998 March 29, 1998 Adjustments Adjustments Pro Forma
-------------- -------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
- - ------
Current assets:
Cash and cash equivalents $ 29,645 $ 2 $ 10,173 $ (10,175) (F) $ 29,645
Accounts receivable --net 34,232 3,584 (3,497) (275) (A) 34,044
Inventories 13,948 213 (212) -- 13,949
Prepaid expenses and other 2,200 52 (111) -- 2,141
Deferred income taxes 161 -- -- -- 161
--------------- -------------- ----------- ------------ ----------
Total current assets 80,186 3,851 6,353 (10,450) 79,940
--------------- -------------- ----------- ------------ ----------
Property and equipment--net 22,332 2,456 (2,338) (118) (C) 22,332
Goodwill and other intangibles,
and other assets 5,688 -- (3,530) 3,586 (B) 5,744
--------------- -------------- ----------- ------------ ----------
$ 108,206 $ 6,307 $ 485 $ (6,982) $ 108,016
=============== ============== =========== ============ ==========
Liabilities and Stockholders' Equity
- - ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable and other $ 23,420 $ 1,941 $ (1,401) $ (824) (D) $ 23,136
Accrued employee
compensation 6,621 508 (564) 150 (E) 6,715
Current portion of long-
term debt 81 -- -- -- 81
--------------- -------------- ----------- ------------ ----------
Total current liabilities 30,122 2,449 (1,965) (674) 29,932
--------------- -------------- ----------- ------------ ----------
Long-term debt 447 -- -- -- 447
Minority interest 1,605 -- -- -- 1,605
Stockholders' equity:
Common stock 843 -- -- -- 843
Additional paid-in capital 73,662 -- -- -- 73,662
Deferred compensation (466) -- -- -- (466)
Retained earnings 1,993 -- 2,450 (2,450) (B) 1,993
--------------- -------------- ----------- ------------ -----------
76,032 -- 2,450 (2,450) 76,032
--------------- -------------- ----------- ------------ -----------
$ 108,206 $ 2,449 $ 485 $ (3,124) $ 108,016
=============== ============== =========== ============ ===========
See accompanying notes to pro forma financial statements.
</TABLE>
<PAGE>
<TABLE>
Maxwell Technologies, Inc.
Pro Forma Condensed Consolidated Statement of Operations -- unaudited
(in thousands, except per share data)
<CAPTION>
Maxwell Physics
Technologies International
-------------- --------------
Nine Months Ended Pro Forma Total
------------------------------
April 30, 1998 March 29, 1998 Adjustments Pro Forma
-------------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 89,589 $ 12,675 $ -- $ 102,264
Cost of sales 59,543 10,294 -- 69,837
-------------- -------------- ----------- ----------
Gross profit 30,046 2,381 -- 32,427
-------------- -------------- ----------- ----------
Operating expenses:
Selling, general
and administrative 19,342 2,463 329 (A) 22,134
Acquired in-process
technology and
other restructure
related charges 8,942 -- -- 8,942
Research and
development
expenses 5,885 521 -- 6,406
-------------- -------------- ----------- ----------
Total operating
expenses 34,169 2,984 329 37,482
-------------- -------------- ----------- ----------
Operating income (loss) (4,123) (603) (329) (5,055)
Interest expense 160 -- -- 160
Other -- net (1,070) -- 375 (B) (695)
-------------- -------------- ----------- ----------
Income (loss) before
income taxes and
minority interest (3,213) (603) (704) (4,520)
Income tax provision 74 -- -- 74
Minority interest in
income (loss) of
subsidiary (24) -- -- (24)
-------------- -------------- ------------ ---------
Net income (loss) $ (3,263) $ (603) $ (704) $ (4,570)
============== ============== ============ =========
Earnings (loss) per
share: Basic $ (0.44) $ (0.62)
============== =========
Earnings (loss) per
share: Diluted $ (0.44) $ (0.62)
============== =========
Weighted average
shares used to
calculate:
Basic earnings
(loss) per share 7,421 7,421
============== =========
Diluted earnings
(loss) per share 7,421 7,421
============== =========
See accompanying notes to pro forma financial statements.
</TABLE>
<PAGE>
<TABLE>
Maxwell Technologies, Inc.
Pro Forma Condensed Consolidated Statement of Operations -- unaudited
(in thousands, except per share data)
Maxwell Physics
Technologies International
-------------- -------------
Twelve Months Ended Pro Forma Total
-----------------------------
July 31, 1997 June 30, 1997 Adjustments Pro Forma
-------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 101,411 $ 16,383 $ -- $ 117,794
Cost of sales 70,107 12,835 -- 82,942
------------- -------------- ------------ ----------
Gross profit 31,304 3,548 -- 34,852
------------- -------------- ------------ ----------
Operating expenses:
Selling, general
and administrative 21,900 2,818 389 (A) 25,107
Research and
development
expenses 5,303 1,415 -- 6,718
-------------- ------------- ------------ ----------
Total operating
expenses 27,203 4,233 389 31,825
-------------- ------------- ------------ ----------
Operating income (loss) 4,101 (685) (389) 3,027
Interest expense 173 -- -- 173
Other -- net (150) -- 500 (B) 350
-------------- ------------- ------------ ----------
Income (loss) before
minority interest 4,078 (685) (889) 2,504
Minority interest in
net income (loss) of
subsidiary 54 -- -- 54
-------------- ------------- ------------ ----------
Net income (loss) $ 4,024 $ (685) $ (889) $ 2,450
============== ============= ============ ==========
Earnings (loss) per
share: Basic $ 0.68 $ 0.41
============== ==========
Earnings (loss) per
share: Diluted $ 0.60 $ 0.37
============== ==========
Weighted average
shares used to
calculate:
Basic earnings
(loss) per share 5,949 5,949
============== ==========
Diluted earnings
(loss) per share 6,644 6,644
============== ==========
See accompanying notes to pro forma financial statements.
</TABLE>
<PAGE>
MAXWELL TECHNOLOGIES, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
DESCRIPTION
The ElectroMagnetic Systems Group of Primex Physics International Company (the
"EMS Group" or "Physics International"), (a wholly-owned subsidiary of Primex
Technologies, Inc.) has operated as a business group of Primex Physics
International Company. On April 15, 1998, Maxwell Technologies, Inc. ("Maxwell"
or "the Company") through its Maxwell Systems Division, Inc. subsidiary,
acquired certain assets and assumed certain liabilities of Physics
International. The acquisition was made pursuant to an Asset Purchase Agreement
("the Agreement") dated April 15, 1998. The assets acquired consisted primarily
of customer contracts and related accounts receivable, inventories, and
property and equipment. Liabilities assumed included accounts payable,
accrued salaries and wages, accrued vacation and holiday and certain other
current liabilities. The Company did not assume certain liabilities (e.g.,
retirement and benefit plans, environmental claims, income taxes and certain
other accrued employee compensation), and any liability associated with such
claims arising from the operations of Physics International prior to March 29,
1998 (the effective date of the acquisition) is excluded from these statements.
The acquisition is being accounted for as a purchase and the allocation of the
purchase price and related acquisition costs is subject to adjustment based
upon refinements in the application of purchase method accounting and the
final determination of the purchase price.
The pro forma financial statements have been prepared by the Company's
management based upon the financial statements of Physics International
included in this Form 8-K/A. These pro forma financial statements may not be
indicative of the results that actually would have occurred if the combination
had been in effect on the dates indicated or which may be obtained in the
future. The pro forma adjustments are based upon preliminary estimates,
available information and certain assumptions that management deemed
appropriate. Final purchase accounting adjustments will be made on the basis
of appraisals and more complete evaluations and, therefore, may differ from
the pro forma adjustments presented herein. The pro forma condensed
consolidated financial statements should be read in conjunction with the
Company's consolidated historical financial statements and notes thereto,
contained in the Company's Annual Report on Form 10-K for the year ended July
31, 1997 and the Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1998, and the Physics International audited Statement of Assets
Acquired and Liabilities Assumed as of March 29, 1998 and Statement of Revenues
and Direct Operating Expenses for the twelve months ended March 29, 1998 and
related footnotes contained in this Form 8-K/A. The Company's future
historical consolidated financial statements will reflect the acquisition of
Physics International as of March 29, 1998.
The unaudited pro forma consolidated balance sheet has been prepared as if the
transaction occurred as of the Company's latest interim balance sheet, April
30, 1998.
<PAGE>
The unaudited pro forma consolidated statement of operations for the year ended
July 31, 1997, includes the results of operations of Physics International for
the twelve months ended June 30, 1997. The unaudited pro forma consolidated
statement of operations for the nine months ended April 30, 1998, includes
the results of operations of Physics International for the nine months ended
March 29, 1998. These statements were prepared by taking into consideration
only those transactions known to be occurring, and having continuing impact to
operations as a result of the acquisition.
Notes to Pro Forma Consolidated Condensed Balance Sheet:
- - --------------------------------------------------------
(1) Represents the adjustment to remove the opening balances, which had
already been included in the Company's April 30, 1998 consolidated
condensed balance sheet.
(2) Other Pro Forma Adjustments:
(A) Pro Forma adjustment to reflect the estimated unrecoverable and
uncollectible receivables primarily resulting from unbilled revenues
related to unfavorable indirect rate variances on U. S. Government
contracts. It was the policy of Physics International to record
revenues based on actual rates, and adjustments would subsequently
be made if the U. S. Government did not later approve such rates.
Maxwell, on the other hand, generally records costs, and therefore,
revenues based on the lower of approved provisional indirect rates
or actual rates incurred. Revenue adjustments reflecting actual
rates in excess of provisional rates are not recorded until the U. S.
Government approves such rates. Therefore the pro forma adjustments
are necessary to conform to the Company's accounting policies.
(B) This adjustment reflects the goodwill recognized upon the
acquisition of certain assets and the assumption of certain
liabilities of Physics International ($6.1 million), less amounts
charged to expense by Maxwell during the quarter ended April 30,
1998, which reflects the estimated value of acquired in-process
technology ($2.45 million). This adjustment represents the estimated
decrease in net book value for fixed assets based upon a physical
inventory and preliminary analysis of fair market value. Final
analysis is not yet completed, and final adjustment may differ from
this pro forma adjustment.
(C) This adjustment reflects the decrease in accrued rent payable and
other accruals to conform straight-line lease payments to generally
accepted accounting principles after acquisition and assumption of
the facility lease.
(D) This adjustment reflects Maxwell's portion of an employment bonus
to be paid to certain employees of Physics International in
accordance with the Asset Purchase Agreement.
(E) This adjustment reflects the consideration paid for the net assets
of Physics International, which consisted of $10 million cash from
cash on hand, and acquisition costs of approximately $175,000.
<PAGE>
Notes to Pro Forma Consolidated Condensed Statement of Operations:
- - ------------------------------------------------------------------
(A) This adjustment represents the pro forma goodwill amortization assuming
the acquisition occurred as of the beginning of the periods reflected in
the statement of operations (based on a goodwill balance of $3,586,
amortized over a period of 15 years.) In addition, also an adjustment to
reflect Maxwell's portion of the employment bonus to be paid to certain
employees of Physics International in accordance with the Asset Purchase
Agreement. (See note (D) to Consolidated Condensed Pro Forma Balance
Sheet).
(B) This adjustment reflects the reduction in interest income at average
rates the Company would have foregone, assuming the acquisition occurred
as of the beginning of the period covered in the financial statements.
