<PAGE> 1
EXHIBIT 99.3
DENSE-PAC MICROSYSTEMS, INC. AND
PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
Effective October 26, 2000, the Company purchased all outstanding common stock
of Productivity Enhancement Products, Inc. and subsidiaries (PEP), in exchange
for 884,167 shares of Dense-Pac Microsystems, Inc. (Dense-Pac) common stock
valued at $3,719,019, and the assumption of net liabilities estimated to be
$1,068,304 at July 2, 2000. Transaction costs are estimated at $250,000.
The following table sets out certain consolidated financial information for
Dense-Pac and PEP, as well as certain pro forma combined consolidated financial
information for Dense-Pac after giving effect to the acquisition. The unaudited
pro forma adjustments are based upon currently available information and upon
certain assumptions that management of Dense-Pac believes are reasonable under
the circumstances.
The following unaudited pro forma combined consolidated balance sheet as of
August 31, 2000 includes the unaudited consolidated balance sheet of Dense-Pac
as of August 31, 2000 and the unaudited consolidated balance sheet of PEP as of
July 2, 2000 and assumes that the acquisition had occurred on August 31, 2000.
The unaudited pro forma combined consolidated statement of operations for the
six months ended August 31, 2000 includes the unaudited consolidated statement
of operations of Dense-Pac for the six months ended August 31, 2000 and the
unaudited consolidated statement of operations of PEP for the six months ended
July 2, 2000. The unaudited pro forma combined consolidated statement of
operations for the year ended February 29, 2000 includes the consolidated
statement of operations of Dense-Pac for the fiscal year ended February 29, 2000
and the consolidated statement of operations of PEP for the year ended January
2, 2000. The unaudited pro forma combined consolidated statements of operations
assume that the acquisition occurred on March 1, 1999.
The pro forma financial information is intended for information purposes only
and is not necessarily indicative of the future financial position or future
results of operations of the Company after the acquisition, or of the financial
position or results of operations of the Company that would have actually
occurred had the acquisition been effected for the periods presented.
Furthermore, the pro forma financial information excludes discontinued
operations and other comprehensive income of PEP as the related financial
information does not relate to assets or operations of PEP purchased by
Dense-Pac.
The acquisition will be accounted for using the purchase method of accounting.
Accordingly, the cost to acquire PEP will be allocated to the assets acquired
and liabilities assumed according to their estimated fair values as of the date
of acquisition after giving effect to the purchase price adjustments required by
the acquisition. The allocation presented herein is based on unaudited financial
statements of PEP. Accordingly, the purchase allocation adjustments made in
connection with the preparation of the unaudited pro forma consolidated
financial information are preliminary, and have been made solely for the purpose
of preparing such unaudited pro forma consolidated financial information.
28
<PAGE> 2
DENSE-PAC MICROSYSTEMS, INC. AND
PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 29, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
DENSE-PAC PEP PRO FORMA
FEBRUARY 29, JANUARY 2, PRO FORMA FEBRUARY 29,
2000 2000 ADJUSTMENTS 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 27,459,614 $ 5,946,793 $ -- $ 33,406,407
Cost of sales 18,181,463 3,048,450 21,229,913
------------ ------------ ------------ ------------
Gross profit 9,278,151 2,898,343 12,176,494
Costs and expenses:
Research and development 1,277,701 1,277,701
Selling, general, and administrative 5,263,039 2,311,513 724,475(2) 8,299,027
Write-off of note receivable 366,519 366,519
------------ ------------ ------------ ------------
Total costs and expenses 6,540,740 2,678,032 724,475 9,943,247
------------ ------------ ------------ ------------
Income from operations 2,737,411 220,311 (724,475) 2,233,247
Other expense, net 150,038 7,109 157,147
------------ ------------ ------------ ------------
Income before income tax provision 2,587,373 213,202 (724,475) 2,076,100
Income tax provision (benefit) 22,800 72,239 (70,360)(5) 24,679
------------ ------------ ------------ ------------
Net income from continuing
operations $ 2,564,573 $ 140,963 $ (654,115) $ 2,051,421
============ ============ ============ ============
Earnings per share:
Basic $ 0.14 $ 0.10
Diluted $ 0.13 $ 0.10
Weighted-average shares:
Basic 18,773,138 884,167(3) 19,657,305
Diluted 19,974,857 884,167(3) 20,859,024
</TABLE>
See notes to unaudited pro forma financial information
29
<PAGE> 3
DENSE-PAC MICROSYSTEMS, INC. AND
PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
DENSE-PAC PEP TOTAL PRO FORMA
AUGUST 31, JULY 2, AUGUST 31, PRO FORMA AUGUST 31,
2000 2000 2000 ADJUSTMENTS 2000
------------ ------------ ------------ ------------ ------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents $ 4,959,746 $ 283,333 $ 5,243,079 $ -- $ 5,243,079
Investments 11,198,240 11,198,240 (11,198,240)(4)
Accounts receivable,
net 2,760,945 1,025,271 3,786,216 3,786,216
Inventories, net 2,128,578 697,691 2,826,269 2,826,269
Prepaid expenses and
other current assets 234,655 153,807 388,462 388,462
------------ ------------ ------------ ------------ ------------
Total current assets 10,083,924 13,358,342 23,442,266 (11,198,240) 12,244,026
Property, net 5,446,139 213,073 5,659,212 5,659,212
Goodwill, net 5,068,323(1) 5,068,323
Other assets 29,171 94,872 124,043 124,043
------------ ------------ ------------ ------------ ------------
$ 15,559,234 $ 13,666,287 $ 29,225,521 $ (6,129,917) $ 23,095,604
============ ============ ============ ============ ============
</TABLE>
See notes to unaudited pro forma financial information
30
<PAGE> 4
DENSE-PAC MICROSYSTEMS, INC. AND
PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 2000 (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
DENSE-PAC TOTAL PRO-FORMA
AUGUST 31, JULY 2, AUGUST 31, PRO FORMA AUGUST 31,
2000 2000 2000 ADJUSTMENTS 2000
------------ ------------ ------------ ------------ ------------
LIABILITIES AND
STOCKHOLDERS'
EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 1,258,876 $ 678,434 $ 1,937,310 $ -- $ 1,937,310
Accrued
compensation 443,773 116,318 560,091 560,091
Other accrued
expenses 91,333 241,524 332,857 250,000(1) 582,857
Deferred income taxes 1,435,055 1,435,055 1,435,055
Current portion of
long-term debt 560,586 773,888 1,334,474 1,334,474
Deferred revenue 300,000 297,432 597,432 597,432
------------ ------------ ------------ ------------ ------------
Total current
liabilities 2,654,568 3,542,651 6,197,219 250,000 6,447,219
Long-term debt, less
current portion 1,009,153 24,700 1,033,853 1,033,853
Stockholders' equity:
Common stock 20,766,929 46,000 20,812,929 3,673,019(1) 24,485,948
(Accumulated deficit)
retained earnings (8,833,755) 3,377,001 (5,456,754) (3,377,001)(1) (8,833,755)
Accumulated other
comprehensive
income 6,706,935 6,706,935 (6,706,935)(4)
Notes receivable from
sale of common stock (31,000) (31,000) 31,000(1)
Unearned
compensation (37,661) (37,661) (37,661)
------------ ------------ ------------ ------------ ------------
Total stockholders'
equity 11,895,513 10,098,936 21,994,449 (6,379,917) 15,614,532
------------ ------------ ------------ ------------ ------------
$ 15,559,234 $ 13,666,287 $ 29,225,521 $ (6,129,917) $ 23,095,604
============ ============ ============ ============ ============
</TABLE>
See notes to unaudited pro forma financial information
31
<PAGE> 5
DENSE-PAC MICROSYSTEMS, INC. AND
PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED
DENSE-PAC TOTAL PRO FORMA
AUGUST 31, PEP AUGUST 31, PRO FORMA AUGUST 31,
2000 JULY 2, 2000 2000 ADJUSTMENTS 2000
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 18,185,152 $ 3,454,052 $ 21,639,204 $ -- $ 21,639,204
Cost of sales 12,697,849 2,250,087 14,947,936 14,947,936
------------ ------------ ------------ ------------ ------------
Gross profit 5,487,303 1,203,965 6,691,268 6,691,268
Costs and expenses:
Research and development 858,944 858,944 858,944
Selling, general, and administrative 2,975,212 1,590,026 4,565,238 362,237(2) 4,927,475
------------ ------------ ------------ ------------ ------------
Total costs and expenses 3,834,156 1,590,026 5,424,182 362,237 5,786,419
Income (loss) from operations 1,653,147 (386,061) 1,267,086 (362,237) 904,849
Other income, net 38,542 16,570 55,112 55,112
------------ ------------ ------------ ------------ ------------
Income (loss) before income tax provision 1,691,689 (369,491) 1,322,198 (362,237) 959,961
Income tax provision (benefit) 53,000 349,858 402,858 (361,434)(5) 41,424
------------ ------------ ------------ ------------ ------------
Net income (loss) from continuing operations $ 1,638,689 $ (719,349) $ 919,340 $ (803) $ 918,537
============ ============ ============ ============ ============
Earnings per share:
Basic $ 0.08 $ 0.03
Diluted $ 0.08 $ 0.02
Weighted-average shares:
Basic 19,612,042 884,167(3) 20,496,209
Diluted 20,633,423 884,167(3) 21,517,590
</TABLE>
See notes to unaudited pro forma financial information
32
<PAGE> 6
DENSE-PAC MICROSYSTEMS, INC. AND
PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION FOR THE
YEAR ENDED FEBRUARY 29, 2000 AND AS OF AND FOR THE SIX MONTHS ENDED AUGUST 31,
2000
--------------------------------------------------------------------------------
1. To reflect the elimination of PEP's equity accounts and the allocation
of the purchase price of $5,068,323 to goodwill. The purchase price
consists of the common stock issued by Dense-Pac ($3,719,019), estimated
transaction costs ($250,000), and assumed net liabilities of PEP as
follows:
<TABLE>
<S> <C>
Net assets of PEP as of July 2, 2000 $ 10,098,936
Less available-for-sale investments (Note 4) (11,198,240)
Note receivable from sale of common stock 31,000
------------
Net liabilities of PEP being assumed by Dense-Pac $ (1,068,304)
============
</TABLE>
The allocation may change once the audit of PEP's closing balance sheet
is completed and other valuation information is received.
2. To reflect the amortization of goodwill over seven years on a
straight-line basis.
3. To adjust for the 884,167 shares of Dense-Pac common stock issued in the
acquisition in the basic and diluted net income per share calculation.
4. To eliminate available-for-sale investments and related accumulated
other comprehensive income associated with PEP's discontinued line of
business. The securities are not being purchased by Dense-Pac.
5. To adjust the income tax provision to reflect estimated income tax
expense on a combined basis.
33
