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Previous: PINNACLE SERIES ACCOUNT OF GREAT WEST LIFE & ANN INS CO, N-30D, 1996-08-29 |
Next: CAPITAL BUILDERS DEVELOPMENT PROPERTIES /CA/, 10-Q, 1996-08-29 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
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) June 19, 1996
POLLUTION RESEARCH AND CONTROL CORP.
(Exact Name of Registrant as Specified in Its Charter)
CALIFORNIA
(State or Other Jurisdiction of Incorporation)
0-14266 95-2746949
(Commission File Number) (I.R.S. Employer Identification No.)
506 Paula Avenue, Glendale, California 91201
(Address of Principal Executive Offices) (Zip Code)
818-247-7601
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
POLLUTION RESEARCH AND CONTROL CORP.
AMENDMENT NO. 1 TO FORM 8-K
June 19, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 2. Acquisition or Disposition of Assets. 3
Item 7. Financial Statements and Exhibits. 4
</TABLE>
2
<PAGE> 3
Item 2. Acquisition or Disposition of Assets.
On July 3, 1996, the Company filed a Current Report on Form 8-K
describing its acquisition of Nutek, Inc. effective June 19, 1996. This
Amendment No. 1 to that Form 8-K is filed for the purpose of furnishing the
financial information required by Rule 310(c) and (d) of Regulation S-B.
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired:
The financial statements of Nutek, Inc. and Notes to Financial Statements,
together with the Independent Auditor's report of Patton Thornton & Co.
required by this Item 7(a) are attached on pages F-1 through F-15 hereof and
are incorporated herein by this reference. The Pro-forma financial information
required by this Item 7(a) is attached on pages F-16 through F-18 hereof and is
incorporated herein by this reference.
The financial statements and information filed as part of this current report
on Form 8-K are listed in the index to financial statements below:
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1) Independent Auditor's report F-1
2) Balance Sheets of Nutek, Inc. as of September 29, 1995 and
September 30, 1994 F-2
3) Statements of Income of Nutek, Inc. for the Years Ended
September 29, 1995 and September 30, 1994 F-4
4) Statements of Changes in Stockholders' Equity of Nutek, Inc.
for the Years Ended September 29, 1995 and September 30, 1994 F-5
5) Statements of Cash Flows of Nutek, Inc. for the Years Ended
September 29, 1995 and September 30, 1994 F-6
6) Notes to Financial Statements of Nutek, Inc. F-7
7) Unaudited Balance Sheet of Nutek, Inc. as of May 31, 1996 F-12
8) Unaudited Statements of Income of Nutek Inc. for the Eight
Months Ended May 31, 1996 and 1995 F-14
9) Unaudited Statements of Cash Flows of Nutek Inc. for the
Eight Months Ended May 31, 1996 and 1995 F-15
(b) Pro-forma financial information::
1) Pro-forma Condensed Consolidated Statement of Operations
of Pollution Research and Control Corp. and Subsidiaries for
the Year Ended December 31, 1995 F-16
2) Pro-forma Condensed Consolidated Statement of Operations
of Pollution Research and Control Corp. and Subsidiaries
for the Five Months Ended May 31, 1996 F-17
3) Notes to Pro-Forma Condensed Consolidated Statements
of Operations F-18
</TABLE>
4
<PAGE> 5
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 hereunto duly authorized.
Pollution Research and Control Corp.
------------------------------------
(Registrant)
Date: August 29, 1996 By: /s/ Albert E. Gosselin, Jr .
------------------ -----------------------------------
Albert E. Gosselin, Jr., President
5
<PAGE> 6
Patton Thornton & Co.
Certified Public Accountants
2nd Floor Harbourview Bldg.
25 West Cedar Street
Pensacola, FL 32573
Tel: (904) 434-3146
Fax: (904) 438-2160
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Nutek, Inc. as of
September 29, 1995 and September 30, 1994, and the related statements of
income, changes in 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 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 Nutek, Inc., as of
September 29, 1995 and September 30, 1994, and the results of its operations,
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles
/S/ Patton, Thornton & Co..
December 4, 1995
F-1
<PAGE> 7
BALANCE SHEET
NUTEK, INC. - PENSACOLA, FLORIDA
SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS: 1995 1994
---------- ----------
<S> <C> <C>
Cash $ 498 $ -0-
Contracts receivable (note B) 277,928 680,655
Costs and estimated earnings in
excess of billings (notes A1 & C) 276,834 459,399
Inventory (notes A2 & L) 402,969 648,179
Income taxes receivable 9,920 -0-
Other receivables 45,853 36,759
Employee advances 3,424 514
Prepaid expenses 11,097 5,890
Deferred tax asset (note E) 17,000 15,000
---------- ----------
$1,045,523 $1,846,396
PROPERTY & EQUIPMENT:
Office furniture and equipment $ 52,141 $ 58,905
Buildings & Leasehold improvements 289,544 285,032
Transportation equipment 88,529 83,569
Machinery and equipment 609,587 673,542
Computer and software 154,845 93,558
Equipment under capital leases 108,608 173,119
---------- ----------
$1,303,254 $1,367,725
Less accumulated depreciation
(note A3) 997,094 1,061,664
---------- ----------
$ 306,160 $ 306,061
OTHER ASSETS:
Patents, less accumulated amortization
of $49,746 in 1994 (note F) $ -0- $ 39,315
Deposits 424 424
---------- ----------
$ 424 $ 39,739
---------- ----------
$1,352,107 $2,192,196
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE> 8
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES: 1995 1994
---------- ----------
<S> <C> <C>
Accounts payable $ 162,410 $ 498,301
Accrued and other payables 21,358 35,623
Income taxes payable 2,212
Accrued salaries and bonuses 10,263 24,261
Billings in excess of costs and
estimated earnings (notes A1 & C) 17,086 16,850
Current portion of long-term
debt (note M) 179,627 517,666
---------- ----------
$ 390,744 $1,094,913
LONG-TERM DEBT:
Notes payable (note M) $ 254,099 $ 555,558
Note payable to stockholder (note G) 466,862 548,308
Obligations under capital leases
(note H) 16,209
---------- ----------
$ 720,961 $1,120,075
Less amounts due within one year
(note M) (179,627) (517,666)
---------- ----------
$ 541,334 $ 602,409
COMMITMENTS AND CONTINGENCIES
(note H) - -
DEFERRED INCOME TAXES - LONG TERM
(note E) $ 27,000 $ 33,000
STOCKHOLDERS' EQUITY:
Common stock: $1 par value; 20,000
shares authorized, 2,548.19 shares
issued and 1,800 outstanding
in 1994 and 1995 $ 1,913 $ 1,913
Additional paid-in capital 81,361 81,361
Retained earnings 369,231 438,076
Treasury stock (Common stock 748.19
shares in 1994 and 1995) at cost. (59,476) (59,476)
---------- ----------
$ 393,029 $ 461,874
---------- ----------
$1,352,107 $2,192,196
========== ==========
</TABLE>
F-3
<PAGE> 9
STATEMENTS OF INCOME
NUTEK, INC. - PENSACOLA, FLORIDA
YEARS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
1995 1994
----- ----
% of % of
Amount Revenues Amount Revenues
----------- -------- ---------- --------
<S> <C> <C> <C> <C>
Contract revenues earned $2,480,299 100.0% $3,743,467 100.0%
Cost of revenues earned 2,073,692 83.6 2,967,104 79.3
---------- ----- ---------- ------
Gross profit $ 406,607 16.4 $ 776,363 20.7
Discounts earned and
miscellaneous income 4,651 .2 5,747 .2
---------- ----- ---------- ------
$ 411,258 16.6 $ 782,110 20.9
General and administrative
expenses 692,612 27.9 644,567 17.2
---------- ----- ---------- ------
Income (loss) from
operations $ (281,354) (11.3) $ 137,543 3.7
Other income (expenses):
Sale of assets $ 7,596 .3 $ 5,500 .1
Sale of scrap 5,027 .2 4,525 .1
Interest income 2,415 .1 6 -
Interest expense (108,169) (4.4) (99,340) (2.6)
Gain on FirePower Sale 287,291 11.6 -0- -
---------- ----- ---------- ------
$ 194,160 7.8 $ (89,309) (2.4)
---------- ----- ---------- ------
Net income (loss) before
taxes $ (87,194) (3.5) $ 48,234 1.3
Provision (benefit) for income
taxes (note D) (18,349) (.7) 11,000 .3
----------- ----- ---------- ------
Net income (loss) $ (68,845) (2.8)% $ 37,234 1.0%
========== ===== ========== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 10
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NUTEK, INC. - PENSACOLA, FLORIDA
YEARS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
Additional
Capital Paid-In Treasury Retained
Stock Capital Stock Earnings Total
----- ------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
Balances at
October 1, 1993 $1,913 $ 81,361 $(27,524) $400,842 $456,592
Net income 37,234 37,234
Treasury stock reacquired
from ESOP (31,952) (31,952)
------ -------- -------- -------- --------
Balances at September 30,
1994 $1,913 $ 81,361 $(59,476) $438,076 $461,874
Net (loss) (68,845) (68,845)
------ -------- -------- -------- --------
Balance at September 29,
1995 $1,913 $ 81,361 $(59,476) $369,231 $393,029
====== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 11
STATEMENTS OF CASH FLOWS
NUTEK, INC. - PENSACOLA, FLORIDA
YEARS ENDED SEPTEMBER 29, 1995 AND SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994
---------- ----------
<S> <C> <C>
Net income (loss) $ (68,845) $ 37,234
Adjustments to reconcile net income to net cash:
(Gain) Loss on disposal of asset (294,887) (5,500)
Depreciation and amortization 72,253 63,967
Provision for deferred taxes (8,000) 11,000
(Increase) decrease in current assets:
Contracts receivable 402,727 (244,260)
Costs and estimated earnings in excess of billings 182,565 (35,909)
Inventory 245,210 49,521
Income taxes receivable (9,920) -0-
Employee advances (2,910) (371)
Prepaid expenses (5,207) 1,000
Other receivables (9,094) (1,639)
Refundable income taxes -0- -0-
Other assets -0- 21,569
Increase (decrease) in current liabilities:
Accounts payable (335,890) 131,941
Accrued and other payables (14,265) 23,167
Income taxes payable (2,212) (8,892)
Accrued salaries and bonuses (13,996) 15,587
Billings in excess of costs and
estimated earnings 236 12,412
--------- ---------
$ 137,765 $ 70,827
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment $ (88,731) $ (78,490)
Proceeds from disposal of property and
equipment and patents 350,580 5,500
--------- ---------
$ 261,849 $ (72,990)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt $ 75,567 $ 75,811
Borrowings from stockholders 46,669 59,687
Repayments to stockholders (128,115) (80,728)
Repayments of long-term debt (393,237) (28,506)
Stock reacquired from ESOP plan and trust -0- (31,952)
--------- --------
$(399,116) $ (5,688)
--------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 498 $ (7,851)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR -0- 7,851
--------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 498 $ -0-
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
NUTEK, INC. - PENSACOLA, FLORIDA
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. The Company uses the accrual method of accounting in maintaining its
books and preparing its financial statements.
Profits on long-term contracts are recorded on the basis of the
Company's estimates of the percentage of completion of individual
contracts, commencing when progress reaches a point where experience
is sufficient to estimate final results with reasonable accuracy.
That portion of the contract price is accrued which is allocable, on
the basis of the estimates of percentage of completion, to contract
expenditures incurred and work performed.
At the time a loss on a contract becomes known, the entire amount of
the estimated ultimate loss is accrued.
General and administrative expenses are charged as incurred to
periodic income and are not allocated to contract costs.
Costs and earnings in excess of amounts billed are classified as
current assets under "costs and estimated earnings in excess of
billings on uncompleted contracts." Billings in excess of costs are
classified under "current liabilities as billings in excess of costs
and estimated earnings on uncompleted contracts."
2. Inventory is stated at the lower of cost or market, with cost being
determined by the first-in, first-out method of inventory valuation.
3. Depreciation is provided by using accelerated and straight-line
methods over the estimated useful lives of the related assets.
4. Investment and other business tax credits are recognized as reductions
of income tax expense in the period in which the credits may be
utilized.
5. In 1987, the Company changed from a fiscal year ending on September
30th to one ending on the Friday closest to September 30th. The last
days of fiscal 1995 and 1994 were September 29th and September 30th,
respectively.
6. For the purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments with an original maturity when
purchased of three months or less to be cash equivalents.
7. The Company's sole manufacturing facility is located in Pensacola,
Florida. The Company's primary activities include: production of
control panels, PC boards, and electronic ignition systems. Although
the Company only has one manufacturing facility, it sells and ships
its products nationwide.
F-7
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NUTEK, INC. - PENSACOLA, FLORIDA
NOTE B - CONTRACTS RECEIVABLE
Contracts receivable as of September 29, 1995 and September 30, 1994,
were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Contracts receivable $292,928 $ 690,655
Allowance for doubtful accounts (15,000) (10,000)
-------- ---------
$277,928 $ 680,655
======== =========
</TABLE>
NOTE C - CONTRACTS IN PROGRESS
Information with respect to contracts in progress at September 29,
1995 and September 30, 1994, was as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Cost incurred on uncompleted contracts $428,534 $819,164
Estimated earnings 96,749 166,609
-------- --------
$525,283 $985,773
Less: Billings to date 265,535 543,224
-------- --------
$259,748 $442,549
======== ========
</TABLE>
These amounts are included in the accompanying balance sheet under the
following captions:
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Costs and estimated earnings in excess
of billings on uncompleted contracts $276,834 $ 459,399
Billings in excess of costs and
estimated earnings on uncompleted
contracts (17,086) (16,850)
-------- ---------
$259,748 $ 442,549
======== =========
</TABLE>
NOTE D - INCOME TAXES
The Company has approximately $41,000 of job credits and research
credits expiring in the years 1998 through 2001. The major differences between
the current year statutory tax rates and the actual income tax provision in
these financial statements are the use of general business tax credits to
reduce taxes.
F-8
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NUTEK, INC. - PENSACOLA, FLORIDA
NOTE E - DEFERRED INCOME TAXES
The deferred tax asset results primarily from book and tax differences
in inventory due to Internal Revenue Code Section 263A (uniform capitalization)
and allowance for doubtful accounts. The deferred tax liability results from
differences in accumulated depreciation for book and tax purposes.
NOTE F - PATENTS
Patents are stated at cost less accumulated amortization.
Amortization is provided by using the straight-line method over the estimated
useful life of 17 years.
NOTE G - NOTE PAYABLE TO STOCKHOLDER
The note from the stockholder is a demand note with interest accruing
monthly at 10.0% per annum. The note is due on October 1, 1997. This note is
subordinated to the other liabilities of Nutek, Inc. Total interest expense
paid to the shareholder in fiscal year 1995 was $56,186 and $53,346,
respectively.
NOTE H - COMMITMENTS AND CONTINGENCIES
The Company leases various equipment and office space under operating
leases expiring at various dates through July 1998. As of September 29, 1995,
future minimum lease payments under the non-cancelable leases were:
<TABLE>
<S> <C>
1996 $13,680
1997 13,680
1998 11,400
-------
Total $38,760
=======
</TABLE>
NOTE I - RELATED PARTY TRANSACTIONS
Rental expense for all operating leases for the years ending September
29, 1995 and September 30, 1994, was $30,180 and $32,240, respectively. These
amounts include leases from stockholders for several assets. The total lease
payments to stockholders for the years ending September 29, 1995 and September
30, 1994, were approximately $30,180 and $29,040, respectively.
F-9
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NUTEK, INC. - PENSACOLA, FLORIDA
NOTE J - EMPLOYEE STOCK OWNERSHIP PLAN
During fiscal year 1994, the Company terminated its employee stock
ownership plan, and reacquired all of the outstanding stock under that plan.
NOTE K - NON-CASH INVESTING AND OTHER CASH FLOW INFORMATION
Cash was paid during the year for interest and income taxes as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Interest $105,664 $ 90,173
Income taxes (see note D) $ -0- 9,920
NOTE L - INVENTORIES
1995 1994
---- ----
Raw materials $388,554 $461,542
Manufactured parts 16,725 139,750
Shop supplies 72,690 80,268
Finished goods -0- 21,447
Inventory out for testing -0- 25,172
Less: Reserve for inventory loss (75,000) (80,000
-------- --------
$402,969 $648,179
======== ========
</TABLE>
NOTE M - NOTES PAYABLE
<TABLE>
<CAPTION>
Payee Security Rate Terms Current Long-Term Total
- ----- -------- ---- ----- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Barnett Bank Inventory and
accounts
receivable Prime +.75 Variable $149,500 $ -0- $149,500
Barnett Bank Computer Prime +.75 Variable 11,124 39,808 50,932
Barnett Bank Computer 8.75% $490./mo 1,423 -0- 1,423
Barnett Bank Iron Worker 7.50% $372./mo 4,161 1,514 5,675
Barnett Bank Auto 6.50% $502./mo 5,250 9,014 14,264
Barnett Bank Truck 8.05% $815./mo 7,561 23,365 30,926
Xerox Corp. Fax Machine 15.50% $ 65./mo 608 771 1,379
------- ------- --------
$179,627 $74,472 $254,099
======== ======= ========
</TABLE>
F-10
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NUTEK, INC. - PENSACOLA, FLORIDA
NOTE M - NOTES PAYABLE (continued)
Maturities in each of the next five years are as follows:
<TABLE>
<CAPTION>
September 30, Amount
------------- ------
<S> <C>
1996 $179,627
1997 27,206
1998 23,414
1999 17,416
2000 6,436
--------
$254,099
========
</TABLE>
NOTE N
During fiscal year 1995, the Company sold its Firepower Product line.
As a result, Nutek realized $287,291 in gain on the sale of related patents,
fixed assets, inventory, and work-in-process.
F-11
<PAGE> 17
BALANCE SHEET
NUTEK, INC. - PENSACOLA, FLORIDA
MAY 31, 1996
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
1996
----
<S> <C>
CURRENT ASSETS:
Cash $ 300
Accounts receivable 508,608
Inventory 1,025,062
Other receivables 9,787
Prepaid expenses 11,098
Deferred tax asset 17,000
----------
$1,571,855
PROPERTY AND EQUIPMENT:
Office furniture and equipment $ 53,827
Buildings & leasehold improvements 296,594
Transportation equipment 88,529
Machinery and equipment 611,413
Computer and software 161,781
Equipment under capital leases 107,708
----------
$1,319,852
Less accumulated depreciation (1,034,194)
----------
$ 285,658
OTHER ASSETS:
Patents $ -0-
Deposits $ 424
----------
$ 424
----------
$1,857,937
==========
</TABLE>
F-12
<PAGE> 18
BALANCE SHEET
NUTEK, INC. - PENSACOLA, FLORIDA
MAY 31, 1996
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 626,627
Accrued and other payables 14,999
Income taxes payable -0-
Accrued salaries and bonuses 10,260
Deferred tax liability 22,000
Current portion of long-term debt 196,749
----------
$ 870,635
LONG-TERM DEBT:
Notes payable $ 333,518
Note payable to stockholder 498,956
----------
$ 832,474
Less amounts due within one year (196,749)
----------
$ 635,725
COMMITMENTS AND CONTINGENCIES -
DEFERRED INCOME TAX - LONG-TERM $ 5,000
STOCKHOLDERS' EQUITY:
Common stock; $1 par value; 20,000
shares authorized, 2,548 shares
issued and 1,800 outstanding
in 1996 $ 1,913
Additional paid-in capital 81,361
Retained earnings 322,779
Treasury stock (Common stock
748.19 shares in 1996) at cost (59,476)
----------
$ 346,577
----------
$1,857,937
==========
</TABLE>
F-13
<PAGE> 19
STATEMENTS OF INCOME
NUTEK, INC. - PENSACOLA, FLORIDA
FOR THE EIGHT MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Sales $ 1,875,907 $ 1,887,633
Cost of Sales 1,529,934 1,563,111
----------- -----------
Gross profit $ 345,973 $ 324,522
Discounts earned and
miscellaneous income 127 860
----------- -----------
$ 346,100 $ 325,382
General and administrative
expenses 346,267 490,473
----------- ------------
Income/loss from operations $ (167) $ (165,091)
Other income (expenses):
Sale of scrap $ 2,598 $ 3,143
Interest income 6,571 2,216
Interest expense (55,454) (70,548)
----------- -----------
$ (46,285) $ (65,189)
----------- -----------
Net income (loss) $ (46,452) $ (230,280)
Retained earnings, beginning of
period $ 369,231 $ 438,076
----------- -----------
Retained earnings, end of period $ 322,779 $ 207,796
=========== ===========
</TABLE>
F-14
<PAGE> 20
STATEMENTS OF CASH FLOWS
NUTEK, INC. - PENSACOLA, FLORIDA
FOR THE EIGHT MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (46,452) $(230,280)
Adjustments to reconcile net
income to net cash:
Depreciation and amortization 37,100 40,200
Provision for deferred taxes - 15,000
(Increase) decrease in current assets:
Contracts receivable (230,680) 429,404
Costs and estimated earnings in
excess of billings 276,834 459,399
Inventory (622,094) (303,880)
Income taxes receivable 9,920
Employee advances 3,424 514
Prepaid expenses -0- (2)
Other receivables 36,067 (19,341)
Other assets -0- (723)
Increase (decrease) in current
liabilities:
Accounts payable 463,617 (267,125)
Accrued and other payables (6,359) (23,949)
Income taxes payable -0- (1,783)
Accrued salaries and bonuses (3) (14,127)
Billings in excess of costs and
estimated earnings (17,086) (16,850)
-------- ---------
$(95,712) $ 66,457
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and
equipment $(16,598) $ (67,636)
Obligations under capital lease -0- (16,209)
-------- ---------
$(16,598) $ (83,845)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt $100,500 $ 55,567
Borrowings from stockholders 50,000 -0-
Repayments to stockholders (17,907) (30,000)
Repayments of long-term debt (21,081) (7,879)
-------- ---------
$111,512 $ 17,688
-------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (798) $ 300
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,098 -0-
-------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 300 $ 300
======== =========
</TABLE>
F-15
<PAGE> 21
Pollution Research and Control Corp. and Subsidiaries
Pro-Forma Condensed Consolidated
Statement of Operations
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
PRCC &
Subsidiaries Nutek, Inc.
Year Ended Year Ended Pro-forma Pro-forma
12-31-95 9-29-95 Adjustments (Unaudited)
---------- --------- ------------ ---------
<S> <C> <C> <C> <C>
Net Revenues $5,515,505 $2,484,950 $(187,189)(1) $7,813,266
Cost of Goods Sold 3,664,504 2,073,692 (113,026)(2) 5,625,170
---------- ---------- ----------
Gross Profit 1,851,001 411,258 2,188,096
Operating Expenses 2,446,691 692,612 109,167(3) 3,248,470
---------- ---------- ----------
Loss From Operations (595,690) (281,354) (1,060,374)
Interest & Other Income 3,961 302,329 306,290
Interest Expense (5,589) (108,169) (70,000)(4) (183,758)
---------- ---------- ----------
Loss Before Income Taxes (597,318) (87,194) (937,842)
Provision (Benefit) for
Income Taxes - (18,349) (49,651)(5) (68,000)
---------- ---------- ---------
Net Loss $(597,318) $ (68,845) $(869,842)
========= ========== =========
Loss Per Share:
Net Loss $ (.09) $ (.13)
========= =========
Weighted average common
and common equivalent
shares outstanding 6,932,662 6,932,662
========= =========
</TABLE>
See accompanying notes.
F-16
<PAGE> 22
Pollution Research and Control Corp. and Subsidiaries
Pro-Forma Condensed Consolidated
Statement of Operations
For the Five Months Ended May 31, 1996
<TABLE>
<CAPTION>
PRCC &
Subdidiaries Nutek, Inc. Pro-forma Pro-forma
(Unaudited) (Unaudited) Adjustments (Unaudited)
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Revenues $2,331,275 $1,335,013 $( 83,051)(1) $3,583,237
Cost of Goods Sold 1,398,690 1,055,872 47,000 (2) 2,501,562
---------- ---------- ----------
Gross Profit 932,585 279,141 1,081,675
Operating Expenses 746,992 174,879 45,069(3) 966,940
---------- ---------- ----------
Income From Operations 185,593 104,262 114,735
Interest & Other Income 5,035 4,264 9,299
Interest Expense (7,091) (34,666) (36,000)(4) (77,757)
---------- ---------- ----------
Income Before Income Taxes 183,537 73,860 46,277
Provision (Benefit) for - - (24,000)(5) (24,000)
---------- ---------- ----------
Income Taxes
Net Income $ 183,537 $ 73,860 $ 70,277
========== ========== ==========
Earnings Per Share:
Net Income $ .03 $ .01
========== ==========
Weighted average common
and common equivalent
shares outstanding 7,045,041 7,045,041
========= =========
</TABLE>
See accompanying notes.
F-17
<PAGE> 23
Pollution Research and Control Corp. and Subsidiaries
Notes to Pro-Forma Condensed Consolidated Statements of Operations
1. Introduction
Effective June 19, 1996 the Company acquired 100% of the outstanding
stock of Nutek, Inc., a Florida company primarily engaged in the manufacture of
electrical control panels for process control applications in the utility, pulp
and paper, and other industries. The Company paid $315,184 inclusive of
acquisition costs, and financed the balance of the total purchase price of
$1,929,669 (including the incurrence and assumption of debt) with $1,285,069 in
asset-based loans based on Nutek's assets, $150,000 in seller financing, with
miscellaneous debt accounting for the remainder.
The transaction was accounted for as a purchase. Current assets and
liabilities were recorded at their fair values, with the remainder of
$1,496,308 assigned to property and equipment. The details of the assignment
of the purchase price are presented in the summary balance sheet of Nutek as
of the acquisition date given below:
<TABLE>
<S> <C>
Certificate of deposit $ 21,750
Accounts receivable 525,811
Inventories 1,105,918
Deferred tax asset - current 38,000
Other current assets 21,470
Property and equipment 1,496,308
Loan costs 90,500
Deferred tax asset - long term 67,000
Other assets 424
Accounts payable (656,864)
Other current liabilities (328,648)
Deferred tax liability (452,000)
Asset-based loans (1,285,069)
Seller financing (150,000)
Other debt (179,416)
-----------
Cash paid (Stockholder's equity) $ 315,184
===========
</TABLE>
Reference is made to the Company's Form 10-Q for the period ended June
30, 1996, particularly the Consolidated Balance Sheet as of June 30, 1996
(which reflects the acquisition) and the notes to the Consolidated Financial
Statements contained therein for additional information.
F-18
<PAGE> 24
Pro-forma statements of operations are presented for the year ended
December 31, 1995 (using Nutek's annual results from its fiscal year ended
September 29, 1995), and for the five months ended May 31, 1996.
Pro-forma financial information is intended to provide investors with
information about the continuing impact of a particular transaction by showing
how it might have affected historical financial statements if the transaction
had been consummated at an earlier time. Such statements can possibly assist
investors in analyzing future prospects of the Company because they illustrate
the possible scope of the change in the Company's historical financial position
and results of operations caused by the transaction, but are not necessarily
indicative of future results.
2. Pro-forma adjustments:
The pro-forma adjustments listed below were made assuming the
transaction had been consummated at the beginning of the fiscal year and the
interim period, respectively, and consist of those adjustments management
believes were necessary to give effect to events that were directly
attributable to the transaction, expected to have a continuing impact, and are
factually supportable. The parenthetical item numbers cross-reference to
those shown on the face of the respective pro-forma statement of operations.
<TABLE>
<CAPTION>
Year Five Months
Ended Ended
12/31/95 5/31/96
--------- --------
<S> <C> <C>
(1) Revenue
To convert Nutek's revenues from percentage
of completion method to recognize revenue when the
goods are shipped, to be consistent with the Company's
accounting method $(187,189) $(83,051)
========= ========
(2) Cost of Goods Sold
To convert Nutek's cost of goods sold from
percentage-of-completion method to recognize
costs when the goods are shipped, to be consistent
with the Company's accounting method $(225,026) $ -
To reflect additional depreciation on the
amount of the purchase price assigned to fixed assets
in excess of previous book value 112,000 47,000
--------- --------
$(113,026) $ 47,000
========= ========
(3) Selling, General and Administrative
To reflect additional depreciation on the amount
of the purchase price assigned to fixed assets in
excess of previous book value $ 61,000 $ 25,000
To reflect amortization of loan costs 30,167 12,569
To reflect miscellaneous fees relating to
asset based financing 18,000 7,500
--------- --------
$ 109,167 $ 45,069
========= ========
</TABLE>
F-19
<PAGE> 25
<TABLE>
<CAPTION>
Year Ended Five Months
Ended Ended
12/31/95 5/31/96
--------- -------
<S> <C> <C>
(4) Interest Expense
To reflect additional interest expense
on the increase in debt $(70,000) $(36,000)
======== ========
(5) Income taxes
To eliminate the current income tax benefit
of Nutek which would not have existed $ 10,349 $ -
To reflect the reduction of the deferred tax
liability relating to the additional excess of book
over tax depreciation (60,000) (24,000)
-------- --------
$(49,651) $(24,000)
======== ========
</TABLE>
F-20
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