<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FINANCIAL SUPPLEMENT TO
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
Date of Report: May 11, 1996
PRO-DEX, INC.
-------------
(Exact Name of Registrant as Specified in its Charter)
Commission File No. 0-14942
Colorado 84-1261240
- ------------------------------ -----------------------
State or Other Jurisdiction of I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
1401 Walnut Street, Suite 500, Boulder, CO 80302
--------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 443-8165
<PAGE>
ITEM 7. Financial Statements and Exhibits. This Amendment to the Pro-Dex, Inc.
---------------------------------
Form 8-K dated May 11, 1996 only amends the Form 8-K of such date to incorporate
therein the audited financial statements of Pnu-Light Tool Works, Inc., together
with the consolidated and consolidating financial statements of the Registrant,
taking account of the acquisition of assets of Pnu-Light Tool Works, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PRO-DEX, INC.
May 11, 1996 By: /s/
-----------------------------------
George J. Isaac, Vice President and
Chief Financial Officer
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following unaudited pro forma consolidated balance sheets as of June 30,
1995 and March 31, 1996 and the related unaudited pro forma consolidated
statements of operations for the year ended June 30, 1995 and nine months ended
March 31, 1996 give retroactive effect to the May 11, 1996 acquisition of Pnu-
Light Tool Works, Inc. by Pro-Dex, Inc. The pro forma information is based on
the historical financial statements of Pro-Dex, Inc. for the year ended June 30,
1995, and nine months ended March 31, 1996 the Pro forms financial statements of
Pro-Dex, Inc. prepared in connection with the filing of the Form 8-k of Pro-Dex,
Inc. reflecting the acquisition of Oregan Micro Systems, Inc. and merger of
Micro Motors, Inc. with and into the Company's wholly owned subsidiary on
July 26, 1995; and the historical financial statement of Pnu-Light Tool Works,
Inc. for the year ended December 31, 1995, and nine months ended March 31, 1996
giving effect to the purchase method of accounting and the assumptions and
adjustments described in the accompanying notes to the unaudited pro forma
financial statements. The pro forma statements are presented on a consolidated
basis as if the acquisitions took place on July 1, 1994.
The unaudited pro forma financial statements have been prepared based on the
financial statements of the two companies included elsewhere herein. These pro
forma statements may not be indicative of the results that actually would have
occurred if the acquisition had actually occurred on July 1, 1994. The unaudited
pro forma financial statements should be read in conjunction with the financial
statements and related notes of the Companies contained herein.
<PAGE>
PRO-DEX, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEETS
30-Jun-95
<TABLE>
<CAPTION>
Consolidated Pnu-Light Consolidated
Pro Forma Tool Works Pro Forma Pro Forma
Pro-Dex, Inc. Balance Sheet Inc. Adjustments Balance Sheet
(unaudited)(1) (unaudited)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents 384,968 242,746 5,723 248,469
Accounts receivable, net 2,608,701 5,200,172 27,550 5,227,722
Inventories 1,236,109 4,102,476 64,659 4,167,135
Prepaid expenses 549,698 269,028 1,454 270,482
Deferred income taxes 37,000 37,000
Total current assets 4,779,476 9,851,422 99,386 9,950,808
Property and equipment 2,477,060 7,003,607 128,774 7,132,381
Less accumulated depreciation 1,608,613 3,899,680 32,286 3,931,966
Net property and equipment 868,447 3,103,927 96,488 3,200,415
Other Assets
Intangible assets 68,791 11,562,181 32,249 3,117,751 (2) 14,712,181
Other 6,466 146,605 37,742 (37,742)(2) 146,605
Total other assets 75,257 11,708,786 69,991 14,858,786
5,723,180 24,664,135 265,865 28,010,009
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion long term debt 104,000 1,292,000 33,190 1,325,190
Notes payable 374,180 975,780 73,321 1,049,101
Accounts payable 505,586 1,240,697 35,452 1,276,149
Income taxes payable 10,064 10,064 10,064
Accrued expenses 184,745 1,296,787 1,296,787
Deferred revenue 155,074 155,074 155,074
Total current liabilities 1,333,649 4,970,402 141,963 5,112,365
Long Term Debt, net of current
portion 416,010 5,866,519 204,110 6,070,629
Deferred Gain 39,966 39,966 39,966
Shareholders' Equity
Series A preferred stock 282,990 282,990 282,990
Common stock 5,347,445 14,559,944 505,232 1,567,485 (2) 16,632,661
Additional paid-in capital 10,000 10,000 927,084 (2) 937,084
Retained earnings (deficit) (1,706,880) (1,034,686) (585,440) 585,440 (2) (1,034,686)
Receivable from ESOP (31,000) (31,000)
Net Shareholders' equity 3,933,555 13,787,248 (80,208) 16,787,049
5,723,180 24,664,135 265,865 28,010,009
</TABLE>
(1) Pro-forma Consolidated Balance Sheet reflects Pro-Dex, Inc.'s acquisition
of Oregon Micro Systems, Inc. and merger of Micro Motors, Inc. with and
into the Company's wholly owned subsidiary on July 26, 1995.
(2) To record purchase of substantially all of the assets and liabilities of
Pnu-Light Tool Works, Inc. in exchange for 368,482 shares of Pro-Dex, Inc.
stock.
<PAGE>
PRO-DEX, INC. AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEETS
31-Mar-96
<TABLE>
<CAPTION>
Pnu-Light Consolidated
Tool Works Pro-Forma Pro-Forma
Pro-Dex, Inc. Inc. Adjustments Balance Sheet
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents 653,250 1,000 654,250
Accounts receivable, net 5,115,971 45,510 5,161,481
Inventories 4,818,293 74,889 4,893,182
Prepaid expenses 364,570 1,454 366,024
Deferred income taxes
Total current assets 10,952,084 122,853 11,074,937
Property and equipment 7,203,651 135,925 7,339,576
Less accumulated depreciation 4,168,159 32,287 4,200,446
Net property and equipment 3,035,492 103,638 3,139,130
Other Assets
Note Receivable 350,000 350,000
Intangible assets 10,806,919 25,948 3,124,052 (1) 13,956,919
Other 120,910 56,163 (56,163)(1) 120,910
Total other assets 11,277,829 82,111 14,427,829
25,265,405 308,602 28,641,896
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion long term debt 907,389 33,190 940,579
Notes payable 1,979,669 88,849 2,068,518
Accounts payable 1,202,335
Income taxes payable 480,441
Accrued expenses 1,391,632
Deferred revenue 180,330
Total current liabilities 6,141,796 122,039 6,263,835
Long Term Debt, net of current
portion 4,962,946 190,186 5,153,132
Deferred Gain
Shareholders' Equity
Series A preferred stock 282,990 282,990
Common stock 14,624,944 613,987 1,458,730 (1) 16,697,661
Additional paid-in capital 10,000 991,549 (1) 1,001,549
Retained earnings (deficit) (757,271) (617,610) 617,610 (1) (757,271)
Receivable from ESOP
Net Shareholders' equity 14,160,663 (3,623) 17,224,929
25,265,405 308,602 28,641,896
</TABLE>
(1) To record purchase of substantially all of the assets and liabilities of
Pnu-Light Tool Works, Inc. in exchange for 368,482 shares of Pro-Dex, Inc.
stock.
<PAGE>
PRO-DEX, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30, 1995
<TABLE>
<CAPTION>
Consolidated Pnu-Light Consolidated
Pro Forma Tool Works Pro Forma Pro Forma
Pro-Dex, Inc. Statement of Inc. Adjustments Statement of
Operations Operations
(unaudited)(1) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues
Net Sales 6,402,619 17,495,754 3,315 17,499,069
Professional fees 2,634,850 2,634,850
Total revenue 9,037,469 20,130,604 3,315 20,133,919
Cost of Sales
Cost of goods sold 2,648,809 7,551,345 7,849 7,559,194
Direct expenses related to fee
revenue 2,347,907 2,347,907 2,347,907
Total cost of sales 4,996,716 9,899,252 7,849 9,907,101
Gross Profit 4,040,753 10,231,352 (4,534) 10,226,818
Operating Expenses
Selling 2,080,191 3,126,583 34,482 3,161,065
Engineering 576,331 102,630 678,961
Genral and administrative 1,669,659 4,821,571 4,821,571
Amortization expense 751,000 210,000 (2) 961,000
3,749,850 9,275,485 137,112 9,622,597
Operating income(loss) 290,903 955,867 (141,646) (210,000) 604,221
Nonoperating income (expense) 19,419 (485,350) (34,989) (520,339)
0
Income (loss) before taxes 310,322 470,517 (176,635) (210,000) 83,882
Income taxes 35,431 104,000 53,000 51,000
Net income (loss) 274,891 366,517 (123,635) (210,000) 32,882
Net income per share 0.04 0
Weighted average number of common
shares outstanding 8,628,633 8,997,001
</TABLE>
(1) Pro-Forma Statement of Operations reflects Pro-Dex, Inc.'s acquisition of
Oregon Micro Systems, Inc. and merger of Micro Motors, Inc. with and into the
company's wholly owned subsidiary on July 26, 1995.
(2) To record amortizaton of goodwill and patent costs over a 15 year life.
<PAGE>
PRO-DEX, INC. AND SUBSIDIARIES
PRO-FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For The Nine Months Ended March 31, 1996
<TABLE>
<CAPTION>
Consolidated
Pnu-Light Pro-Forma
Tool Works, Pro-Forma Statement of
Pro-Dex, Inc. Inc. Adjustments Operations
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues
Net Sales 15,220,185 52,144 15,272,329
Professional fees 1,763,554 1,763,554
Total revenue 16,983,739 52,144 17,035,883
Cost of Sales
Cost of goods sold 6,115,376 33,878 6,149,254
Direct expenses related to fee
revenue 1,471,163 1,471,163
Total cost of sales 7,586,539 33,878 7,620,417
Gross Profit 9,397,200 18,266 9,415,466
Operating Expenses
Selling 2,900,883 21,572 2,922,455
Engineering 397,976 98,659 496,635
Genral and administrative 3,599,159 3,599,159
Amortization expense 568,803 157,500 (1) 726,303
7,466,821 120,231 157,500 7,744,552
Operating income(loss) 1,930,379 (101,965) (157,500) 1,670,914
Nonoperating income (expense) (573,364) (20,695) (594,059)
Income (loss) before taxes 1,357,015 (122,660) (157,500) 1,076,855
Income taxes 407,104 (37,000) 370,104
Net income (loss) 949,911 (85,660) (157,500) 706,751
Net income per share 0.11 0.08
</TABLE>
(1) To record amortizaton of goodwill and patent costs over a 15 year life
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AND
INDEPENDENT ACCOUNTANT'S REPORT
FOR THE THREE MONTHS ENDED
MARCH 31, 1996
<PAGE>
CONTENTS
PAGE NO.
Independent Accountant's Report 1
Balance Sheet 2
Statement of Operations 3
<PAGE>
Decker & DeGood 3259A EAST SUNSHINE
SPRINGFIELD MISSOURI 65804
CERTIFIED PUBLIC ACCOUNTANTS 417 887-1888
FAX 417 887-0028
To the Board of Directors
Pnu-Light Tool Works, Inc.
Springfield, Missouri
We have compiled the accompanying balance sheet of Pnu-Light Tool Works, Inc. (a
development stage company), as of March 31, 1996, and the related statement of
operations for the three months then ended, in accordance with the Statement on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of the owner. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
The owners have elected to omit substantially all of the disclosures and the
statement of cash flows required by generally accepted accounting principles.
If the omitted disclosures and statement of cash flows were included it the
financial statements, they might influence the user's conclusions about the
Company's financial position, results of operations, and cash flows.
Accordingly, these financial statements are not designed for those who are not
informed about such matters.
/s/ Decker & DeGood
-------------------
Decker & DeGood
July 11, 1996
A PROFESSIONAL CORPORATION
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT ASSETS
Cash - Boatmen's $ 901.30
Cash - Wood & Houston Bank 100.00
Accounts Receivable - Trade 27,960.00
Inventory 74,889.06
-----------
TOTAL CURRENT ASSETS $103,850.36
-----------
PROPERTY, PLANT AND
EQUIPMENT - AT COST
Furniture & Equipment 78,574.95
Leasehold Improvements 11,350.41
Vehicles 46,000.00
Accumulated Depreciation (32,286.92)
-----------
NET PROPERTY & EQUIPMENT 103,638.44
-----------
OTHER ASSETS
Note Receivable - Stockholder 17,550.00
Subscriptions Receivable 47.94
Lease Deposits 1,000.00
Deposits 406.00
Patent Costs 25,919.01
Organization Costs 5,975.00
Loan Fees 5,072.00
Accum. Amortization (11,018.11)
Employee Advances 56,161.74
-----------
TOTAL OTHER ASSETS 101,113.58
-----------
TOTAL ASSETS $308,602.38
===========
</TABLE>
See Accountant's Compilation Report.
-2-
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 1996
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Current Portion LT Debt $ 33,189.96
-----------
TOTAL CURRENT LIABILITIES $ 33,189.96
-----------
LONG-TERM DEBT
Note Payable - Boatmen's 0001 140,239.40
Note Payable - Stockholder 15,905.97
Note Payable - Boatmen's 0101 83,137.27
Note Payable - Deloris Furgason 25,000.00
Note Payable - Young 30,000.00
Note Payable - Spfld Remanufacturing 17,942.84
Current Portion - LT Debt (33,189.96)
-----------
TOTAL LONG-TERM DEBT 279,035.52
-----------
STOCKHOLDERS EQUITY
Common Stock, No Par, 613,987.12
30,000 shares authorized,
9758.3992 shares issued
and outstanding
Accumulated Deficit Beginning (585,440.48)
Current Earnings (Loss) (32,169.74)
Accumulated Deficit Ending (617,610.22)
-----------
TOTAL STOCKHOLDERS EQUITY (3,623.10)
-----------
TOTAL LIABILITIES and
STOCKHOLDERS EQUITY $308,602.38
===========
See Accountant's Compilation Report.
-2-
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Year-To-Date
------------
<S> <C>
REVENUES
Sales $ 48,829.25
-----------
TOTAL SALES 48,829.25
-----------
COST OF SALES
Materials 26,029.20
-----------
TOTAL COST OF SALES 26,029.20
-----------
GROSS PROFIT (LOSS) 22,800.05
-----------
OPERATING EXPENSES
Advertising 2,960.92
Amortization 6,491.38
Freight out 718.75
General 134.46
Life insurance 296.92
Office supplies 210.08
Postage 364.08
Professional fees 926.10
Rent 9,030.00
Supplies 26,162.94
Small tools 373.37
Telephone 1,713.71
Travel & lodging 1,370.00
Utilities 922.05
-----------
TOTAL EXPENSES 51,674.76
-----------
OPERATING INCOME (LOSS) (28,874.71)
-----------
OTHER REVENUE & EXPENSE
Other Income 173.90
Interest Expense 3,468.93
-----------
INCOME BEFORE TAXES $(32,169.74)
-----------
NET INCOME (LOSS) $(32,169.74)
===========
</TABLE>
See Accountant's Compilation Report.
-3-
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
FOR THE YEAR ENDED
DECEMBER 31, 1995
<PAGE>
CONTENTS
PAGE.
------
Independent Auditor's Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders Equity
and Retained Deficit 4
Statement of Cash Flows 5
Notes to Financial Statements 6-10
<PAGE>
[LETTERHEAD OF DECKER & DEGOOD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Pnu-Light Tool Works, Inc.
We have audited the accompanying balance sheet of Pnu-Light Tool Works, Inc. (A
Development Stage Company) (a Missouri Corporation) as of December 31, 1995, and
the related statements of operations, stockholders equity and retained deficit,
and cash flows for the year 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
misstatements. 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 Pnu-Light Tool Works, Inc. (A
Development Stage Company) as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Decker & DeGood
July 10, 1996 Decker & DeGood
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash $ 5,723
Inventory 64,659
---------
Total Current Assets 70,382
---------
Fixed Assets:
Equipment 71,424
Vehicles 46,000
Leasehold improvements 11,350
---------
128,774
Accumulated depreciation (32,283)
---------
Net Fixed Assets 96,491
---------
Other Assets:
Note receivable - shareholder 27,550
Deposits 1,406
Patent costs, net 22,774
Other costs, net 9,475
Subscriptions receivable 54
Due from employees 37,742
---------
Total Other Assets 99,001
---------
TOTAL ASSETS $ 265,874
=========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Revolving credit lines $ 35,452
Notes payable 73,321
Current portion of long-term debt 33,190
---------
Total Current Liabilities 141,963
Long-Term Liabilities-
Notes payable, less current portion 204,110
---------
Total Liabilities 346,073
---------
Stockholders Equity:
Common stock, no par, 505,238
30,000 shares authorized,
8,410 shares issued and outstanding
Retained deficit (585,437)
Total Stockholders Equity (80,199)
---------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 265,874
=========
</TABLE>
See accompanying notes to the financial statements.
-2-
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
SALES $ 3,315
COST OF SALES 2,254
---------
GROSS PROFIT 1,061
---------
EXPENSES
Research and development 84,713
Marketing 26,448
Amortization 2,718
General and administrative 28,827
Interest 37,392
---------
TOTAL EXPENSES 180,098
---------
OPERATING LOSS (179,037)
OTHER INCOME
2,406
---------
NET LOSS $ (176,631)
==========
</TABLE>
See accompanying notes to the financial statements.
-3-
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS EQUITY AND RETAINED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock
----------------------------------------------
Issued Subscribed
----------------------- -------------------- Retained
Shares Amount Shares Amount Deficit
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
As of January 1, 1995 764.97 $125,937 973.60 $10 $408,806
Shares sold 2,303.64 379,247 - - -
Subscriptions sold - - 4,367.58 44 -
Net loss - - - - 176,631
-------- -------- -------- ---- -------
As of December 31, 1995 3,068.61 $505,184 5,341.18 $54 $585,437
======== ======== ======== === ========
</TABLE>
See accompanying notes to the financial statements.
-4-
<PAGE>
PNU-LIGHT TOOL WORKS,INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (176,631)
Adjustments to reconcile net loss to
net cash used for operating activities
Depreciation 22,710
Amortization 2,718
Changes in assets and liabilities
Increase in inventory (64,659)
--------
NET CASH USED FOR OPERATING ACTIVITIES (215,862)
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for purchase of equipment (5,422)
Payments for purchase of vehicle (31,000)
Payments for patent costs (9,646)
Loans to shareholder (39,750)
Advances to employees (37,742)
--------
NET CASH USED FOR INVESTING ACTIVITIES (123,560)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 379,247
Payments on long-term debt (67,963)
Proceeds from issuance of note payable 26,975
Net proceeds from revolving credit lines 5,765
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 344,024
--------
NET INCREASE IN CASH 4,602
CASH, BEGINNING 1,121
--------
CASH, ENDING $ 5,723
========
</TABLE>
See accompanying notes to the financial statements.
-5-
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE A - NATURE OF BUSINESS
Pnu-light Tool Works, Inc. (the Company) was formed in 1991 to design, develop,
produce and market a proprietary line of revolutionary new direct light products
which work together with pnuematic tools without using batteries or electricity.
The light generates its power completely from compressed air. The products are
designed for uses ranging from dental to automobile manufacturing and aircraft
maintenance. Since its inception, the Company has focused on acquiring its
patented design along with improving prototypes through significant research and
development activities. Accordingly, the Company is considered to be in its
development stages.
NOTE B - ACCOUNTING POLICIES
The financial statements and notes are representations of the Company's
management, who is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements. 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 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.
Inventories
- -----------
Inventories are stated at the lower of cost or market with cost being determined
on the first-in, first-out (FIFO) method. All inventory consisted of raw
materials and component parts at year end.
Depreciation
- ------------
The cost of equipment is depreciated over the estimated useful lives of the
related assets using the declining balance and straight-line methods.
Depreciation expense charged to operations was $22,710.
Intangibles and Other Costs
- ---------------------------
Patent and other costs are being amortized using the straight-line method over
their estimated remaining lives ranging from 5 to 20 years.
6
<PAGE>
PNU-LIGHT TOOL WORKS,INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE B - ACCOUNTING POLICIES (CONTINUED)
Research and Development
- ------------------------
Current operations are charged with all research, engineering and product
development expenses.
Income Taxes
- ------------
The Company accounts for income taxes in accordance with Financial Accounting
Standards Board Statement No. 109, "Accounting For Income Taxes." Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax basis of assets and
liabilities and are measured using enacted tax rates.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Due to the uncertainty regarding
the Company's realization of deferred tax assets generated from net operating
loss carryforwards, no deferred tax assets have been recognized by the Company.
NOTE C - RELATED PARTY TRANSACTIONS
A note receivable was received from the Company's majority stockholder bearing
interest at 7% with principal and interest due on demand. The note is
unsecured.
The Company has advanced funds to employees. The advances are non-interest
bearing and unsecured.
NOTE D - LINES OF CREDIT
Lines of credit consists of various short-term borrowings against financial
institutions. Total line available approximates $50,000. Interest ranges from
12% to 18% and is due monthly. The lines are unsecured.
NOTE E - NOTES PAYABLE
Short-term notes payable consists of the following:
Notes payable to individuals bearing interest of 7%
with interest and principal due on demand. Notes
are unsecured. $ 55,000
7
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE E - NOTES PAYABLE (CONTINUED)
Note payable to local corporate investor bearing
interest of 8% due quarterly with principal due
on demand. Note is unsecured. 18,321
------
Total Notes Payable $ 73,321
======
NOTE F - LONG-TERM DEBT
The following is a summary of long-term debt:
Note payable - bank, payable in monthly installments
of $3,118 including interest at prime plus 2%,
maturing January 2001, secured by security agreement
covering substantially all assets of the Company. $ 150,039
Note payable - bank, payable in monthly installments
of $1,640 including interest at prime plus 2%,
maturing February 2002, secured by security agreement
covering substantially all assets of the Company. 87,261
------
Total Long-Term Debt 237,300
Less Current Maturities of Long-Term Debt 33,190
-------
Net Long-Term Debt $ 204,110
=======
Maturities of long-term debt are as follows:
1996 33,190
1997 37,302
1998 40,659
1999 44,319
2000 48,308
Thereafter 33,522
NOTE G - COMMON STOCK
Persuant to an agreement among the Company's stockholders, Marty J. Anderson,
the Company's founder, majority stockholder, president and chairman of the
board, has the right of first refusal to purchase a stockholder's shares upon
the exit of a stockholder or the occurrence of certain stockholder events.
8
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE G - COMMON STOCK (CONTINUED)
Upon the approval of the Company's stockholders, Marty J. Anderson has the
preemptive right to acquire additional shares of no par stock at $.01 per share
to the extent necessary to maintain 51% ownership of the Company. This right was
assignable by him provided that the amount held and assigned did not exceed 51%.
This preemptive right will expire upon completion of the Company's research and
development tax credit program provided by the State of Missouri. Expiration of
this credit program occurred May 11, 1996.
Additionally, the Company's general counsel, Leland Gannaway, was provided with
the same preemptive right as Marty J. Anderson to maintain 5% ownership.
Further, based upon approval by the Company's board of directors, key employees
or others providing assistance to the Company could acquire shares at the $.01
price.
All other shares were acquired and offered at $165 per share. All other persons
subscribing to purchase shares at the $165 offering price were advised of the
above preemptive rights.
NOTE H - INCOME TAXES
The Company has a net operating loss carryforward of approximately $300,000
available to offset future federal and state taxable income through 2010.
NOTE I - GOING CONCERN
These statements are presented on the basis that the Company is a going concern.
Going concern contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business over a reasonable length of time.
The Company incurred a net operating loss of $179,037, current liabilities
exceeded current assets by $71,581, and stockholders deficit totaled $80,199.
Those factors, as well as uncertainties surrounding the Company's ability to
secure long-term financing and additional capital to fund continued research and
development, inventory, receivables and market entry, create an uncertainty
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Subsequent to year end (see NOTE J - SUBSEQUENT EVENT), the Company acquired an
interest in Prodex, Inc. in exchange for the Company's patent rights, inventory,
customer receivables, other costs, vendor payables, and outstanding debt along
with all future operating activities.
9
<PAGE>
PNU-LIGHT TOOL WORKS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE J - SUBSEQUENT EVENT
On May 11, 1996, the Company received 375,000 shares of stock in Prodex, Inc.
(NASDAQ: Prodex), valued at approximately $2,000,000 on May 11, 1996, as part of
an agreement to assume significantly all Company assets, liabilities, operations
and name. Over the next 3 years, based upon acceptable operations of Prodex's
"Pnu-Light" unit and stock price, the Company could receive additional Prodex
stock valued, with the above initial shares, at no less than $4,000,000.
However, if Prodex's "Pnu-Light" unit does not perform at expectation, at the
end of 3 years, Prodex can "unwind" the agreement and return the Company's
patent rights, any additional acquired or developed technology, contracted
marketing, sales or distribution rights and any other asset of value relating to
the Company's original technology in return for all shares issued to the
Company.
