May 13, 1996
Securities and Exchange Commission
Judiciary Plaza
450 5th Street NW
Washington, DC 20549
RE: ARC Capital
Enclosed in accordance with Rule 13a-11 of the Securities Exchange Act of
1934 is ARC Capital's report on Form 8-K-A dated May 13, 1996.
Very truly yours,
Alan R. Steel
Vice President, Finance & CFO
ARS/smk
<PAGE>
FORM 8-K-A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 1, 1996
ARC CAPITAL
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of incorporation)
0-20097 33-0256103
(Commission File Number) (I.R.S. Employer Identification No.)
2067 Commerce Drive
Medford, Oregon 97504
(Address of principal executive offices) (Zip Code)
541-776-7700
(Registrant's telephone number, including area code)
N.A.
(Former name or former address, if changed since last report)
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K, filed
March 6, 1996, as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Operations for the Fiscal Years Ended
December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 31, 1995 and 1994
Notes to Consolidated Financial Statements as of December 31,
1995 and 1994
Auditors' Report
(b) Unaudited pro forma financial information.
Balance Sheet at December 31, 1995 (unaudited)
Statement of Operations for the Year Ended December 31, 1995 (unaudited)
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.
ARC Capital
Date: May 13, 1996 By: /s/ Alan R. Steel
Vice President of Finance and
Chief Financial Officer
<TABLE>
Pulsarr Holding B.V.
Consolidated Balance Sheets
ASSETS
<CAPTION>
December 31, December 31,
1995 1994
<S> <C> <C>
Current assets:
Cash $ 461,214 $ 634,283
Accounts receivable, net of allowance of $149,766
and $100,835 at December 31, 1995 and
1994, respectively (Note 1) 1,320,590 1,335,122
Inventories (Notes 1 and 2) 3,528,604 3,477,550
Prepaid expenses and other assets 164,375 295,730
________ ________
Total current assets 5,474,783 5,742,685
Property, plant and equipment, net (Notes 1 and 3) 808,300 167,656
Long-term deposits (Note 5) 468,019 0
_________ _________
$ 6,751,102 $ 5,910,341
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,564,742 $ 970,581
Customer deposits (Note 1) 1,388,001 3,066,759
Short-term borrowings (Note 5) 215,010 0
Accrued liabilities (Note 4) 196,306 388,853
Provision for warranty and
repurchase liabilities 78,003 103,716
Current portion of long-term
liabilities (Note 5) 55,975 0
Payable to parent (Note 9) 282,427 155,171
_________ _________
Total current liabilities 3,780,464 4,685,080
_________ ________
Long-term liabilities, less current
portion (Note 5) 1,690,326 447,143
__________ ________
Commitments and contingencies (Note 7) -- --
Shareholders' equity (Notes 5 and 10):
Capital stock - $624 par value, one vote per
share: 40 shares authorized, issued and
outstanding at December 31, 1995 24,961 219,185
Additional paid in capital 753,157 0
Retained earnings 436,552 493,759
Accumulated translation adjustment 65,642 65,174
_________ _________
Total shareholders' equity 1,280,312 778,118
_________ _________
$ 6,751,102 $ 5,910,341
<F1>
See Accompanying Notes to Audited Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Pulsarr Holding B.V.
Consolidated Statements of Operations
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
<S> <C> <C>
Net sales (Notes 1 and 8) $ 11,442,907 $ 6,754,811
Cost of sales 6,472,025 3,283,198
___________ __________
Gross profit 4,970,882 3,471,613
___________ __________
Operating expenses:
Selling and marketing 873,586 523,687
Research and development (Note 1) 1,625,599 1,293,995
General and administrative (Note 9) 1,777,653 1,243,766
___________ __________
4,276,838 3,061,448
___________ __________
Income from operations 694,044 410,165
Interest income 16,291 16,117
Interest expense (38,716) (3,827)
___________ __________
Income before income taxes 671,619 422,455
Income tax expense (Note 6) 235,067 147,756
___________ __________
Net income $ 436,552 $ 274,699
<F2>
See Accompanying Notes to Audited Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Pulsarr Holding B.V.
Consolidated Statements of Shareholders' Equity
<CAPTION>
Accumulated
Capital Stock Additional Retained Translation
Shares Amount Paid-In Capital Earnings Adjustment
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 425 $ 219,185 $ 0 $ 219,060 $ 0
Net income 0 0 0 274,699 0
Translation adjustment 0 0 0 0 65,174
_____ ________ ________ _________ ________
Balance, December 31, 1994 425 219,185 0 493,759 65,174
Formation of Pulsarr Holding B.V.,
contribution of Pulsarr Industrial
Research B.V. and Pulsarr USA Inc.
to Pulsarr Holding B.V. and
recapitalization of number of
shares outstanding (see Note 1) (385) (194,224) 753,157 (493,759) (65,174)
Net income 0 0 0 436,552 0
Translation adjustment 0 0 0 0 65,642
_____ ________ ________ _________ ________
Balance, December 31, 1995 40 $ 24,961 $ 753,157 $ 436,552 $ 65,642
</TABLE>
<PAGE>
<TABLE>
Pulsarr Holding B.V.
Consolidated Statements of Cash Flows
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
<S> <C> <C>
Cash flows from operating activities:
Net income $ 436,552 $ 274,699
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 89,051 69,461
Changes in assets and liabilities:
Accounts receivable 14,532 (417,293)
Inventories (51,054) (2,084,324)
Prepaid expenses and
other assets 131,355 (255,698)
Long-term deposits (468,019) 0
Current liabilities (904,616) 3,000,361
_________ __________
Net cash (used in)
provided by operating
activities (752,199) 587,206
_________ __________
Cash (used in) investing activities:
Purchases of property, plant and equipment (729,695) (94,558)
_________ __________
Net cash (used in)
investing activities (729,695) (94,558)
_________ __________
Cash provided by financing activities:
Proceeds from long-term liabilities 1,243,183 61,107
_________ __________
Net cash provided
by financing activities 1,243,183 61,107
_________ __________
Effect of exchange rate changes on cash 65,642 65,174
_________ __________
Net (decrease) increase in cash (173,069) 618,929
Cash - beginning of the period 634,283 15,354
_________ __________
Cash - end of the period $ 461,214 $ 634,283
Supplemental cash flow information:
Cash paid for:
Interest $ 39,338 $ (1,800)
Income taxes $ 147,756 $ 75,092
</TABLE>
<PAGE>
PULSARR HOLDING B.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include
the accounts of Pulsarr Holding B.V. ("Pulsarr" or the "Company")
and its three wholly owned subsidiaries, Pulsarr Industrial Research
B.V., Pulsarr Vastgoed B.V. and Pulsarr USA Inc. Intercompany
transactions have been eliminated in consolidation.
On November 10, 1995, Meyn formed Pulsarr Holding B.V. by contributing,
as a non-cash transaction, all of the issued and outstanding capital
stock of Pulsarr Industrial Research B.V. and Pulsarr USA Inc. to Pulsarr
Holding B.V. Pulsarr Vastgoed B.V. was also formed on November 10, 1995
as a direct subsidiary of Pulsarr Holding B.V. Due to the fact that Pulsarr
Holding B.V. itself was established in 1995, and that the operational
activities have not changed compared to last year, the comparative figures
are of Pulsarr Industrial Research B.V. Pulsarr was wholly owned by Meyn
Beheer B.V. ("Meyn"), through February 1, 1996.
On February 1, 1996, the Managing Director of Pulsarr exercised an option
to purchase 20% of Pulsarr from Meyn. On March 1, 1996, ARC Capital will
purchase all of the outstanding capital stock of Pulsarr from Meyn and the
Managing Director of Pulsarr (see note 10).
Description of Operations: Pulsarr designs, manufactures and markets
computer-aided vision sorting and defect removal equipment for use in
primarily the food processing industry. Pulsarr's systems combine optical
and mechanical systems technologies to perform diverse scanning, analytical
sensing, measuring and sorting applications on a variety of food products.
Pulsarr is located in Eindhoven, the Netherlands, and sells its equipment
throughout the world (see Note 8). These financial statements have been
prepared in accordance with generally accepted accounting principles in
the United States.
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 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.
Concentrations of Credit Risk: Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally
of money market instruments and trade receivables. The Company invests
its excess cash in money market instruments and certificates of deposit
with high credit quality financial institutions, and by policy, limits
the amount of credit exposure to any one issuer. Concentrations of credit
risk with respect to trade receivables exist because the Company
relies heavily on a relatively small number of customers. The Company
performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for potential
credit losses and such losses, to date, have been within management's
expectations.
Inventories: Manufacturing inventories are stated at the lower of cost
or net realizable value, with cost determined principally by use of the
first-in, first-out method.
Property, Plant, and Equipment: Property, plant and equipment is stated
at cost. Depreciation and amortization are computed by the straight-line
method over the estimated useful lives of the assets, which range from
3 to 36 years. When assets are retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts and
any resulting gain or loss is recognized in income for the period. The cost
of maintenance and repairs is charged to expense as incurred; significant
renewals and betterments are capitalized.
Long-Lived Assets: In March 1995, the Financial Accounting Standards
Board issued the Statement of Financial Accounting Standards No. 121
(FAS 121), "Accounting for the Impairment of Long-Lived Assets and For
Long-Lived Assets to Be Disposed Of." FAS 121 requires that long-
lived assets and certain identifiable intangibles to be held and used by
a company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company will adopt the statement in fiscal 1996; however
the adoption is not expected to have a significant impact on the Company's
financial statements.
Revenue Recognition: The Company recognizes revenue upon the shipment of
products or upon the customer's acceptance of the product, as contractually
agreed. Customer deposits represent monies received in advance of shipment
of products.
Research and Development Costs: Research and development costs are
expensed as incurred. A substantial portion of the research and development
expenses is related to developing new products and to improving existing
products or processes.
Income Taxes: Taxable income of the Company is included as part of
the fiscal unit with Meyn (i.e. included in the consolidated tax returns
filed by Meyn). Pulsarr's tax sharing agreement with Meyn requires Pulsarr
to compute income taxes on a separate company basis. Any income taxes due
are paid to Meyn. Accordingly, for purposes of these financial statements
income taxes have been computed on a separate company basis.
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109 (FAS 109), Accounting for Income
Taxes. FAS 109 requires the recognition of deferred tax assets and
liabilities for the expected tax effects from differences between the
financial reporting and tax basis of assets and liabilities. In estimating
future tax effects, FAS 109 generally considers all expected future events
other than enactments of changes in tax law or statutorily imposed rates.
Foreign Currency Translation: The functional currency of the Company is the
Dutch guilder. These financial statements have been translated into United
States dollars. The resulting translation adjustments are included as a
separate component of shareholder's equity and not included in net income.
Foreign currency transaction gains and losses resulting from the process of
remeasuring receivables, payables and liabilities denominated in currencies
other than the functional currency into Dutch guilders are included in
net income.
Fair Value of Financial Assets and Liabilities: Statement of Financial
Accounting Standards No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of the fair value of certain financial
assets and liabilities. The Company estimates the fair value of its
monetary assets and liabilities based upon the existing interest rates
related to such assets and liabilities compared to current market rates
of interest for similar nature and degree of risk. The Company estimates
that the carrying value of all of its monetary assets and liabilities
approximate fair value as of December 31, 1995.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Raw materials $ 849,221 $ 550,695
Work-in-process 1,207,096 1,718,558
Finished goods 1,472,287 1,208,297
________ ________
$ 3,528,604 $ 3,477,550
</TABLE>
All of the inventories have been pledged as collateral against the
Company's operating line of credit (see Note 5).
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Land $ 502,384 $ 0
Buildings 47,836 44,170
Machinery and equipment 427,222 303,443
Construction in Progress 124,805 0
Other 59,666 17,949
__________ ___________
1,161,913 365,562
Less accumulated depreciation (353,613) (197,906)
__________ ___________
$ 808,300 $ 167,656
</TABLE>
Substantially all of the property, plant and equipment is secured by a
mortgage note payable (see Note 5). Depreciation expense aggregated
$89,051 and $69,461 for the years ended December 31, 1995 and 1994,
respectively.
NOTE 4 - ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Subsidies received not yet earned $ 151,095 $ 248,078
Other accrued liabilities 45,211 140,775
__________ _________
$ 196,306 $ 388,853
</TABLE>
NOTE 5 - FINANCING ARRANGEMENTS
The Company has an operational line of credit with a bank for $620,000.
As of December 31, 1995, the Company had borrowings under this line of
credit totaling $215,010. Interest is based on the Amsterdam Inter
Bank Offering Rate ("AIBOR"), and was 5.625% as of December 31, 1995.
The line of credit is secured by receivables and inventories
of the Company.
The Company has a line of credit for value added tax purposes for
$374,000. As of December 31, 1995, no borrowings were made under the
line of credit for value added tax purposes and the Company was
contingently liable for letter of credit guarantees of $201,503.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Mortgage note payable $ 700,803 $ 0
Technical development loan 729,300 155,708
Subordinated loan to Meyn 312,012 288,101
Other 4,186 3,334
__________ _________
1,746,301 447,143
Less: current maturities (55,975) 0
__________ _________
$1,690,326 $ 447,143
The mortgage note relates to a building under construction and the underlying
land. The total of the mortgage note is $2,184,087, which represents the
total estimated cost of the building and land upon completion of construction
(anticipated to be on or around July 1, 1996). The mortgage consists of two
parts:
*A long-term loan for $1,560,062 which is payable in equal installments
over 26 years beginning on or around July 1, 1996. The interest
rate is based on long-term rates and is fixed for the first five
years at 7.85%.
*A long-term loan for $624,025 which is payable in equal installments over
13 years beginning on or around July 1, 1996. The interest rate is based
on AIBOR, changes monthly, and was 4.75% as of December 31, 1995.
The mortgage note is secured by the land and the building as well as a cash
deposit of $468,019. The cash deposit bears interest at a variable rate
and will be reduced as the Company makes principal payments when due.
The Company has a conditional obligation to repay a technical development
loan received from the government of the Netherlands should the development
of certain technologies prove to be commercially successful. If the
technologies are commercially successful, the technical development loan
must be repaid at a rate of 11% of net sales of the products including such
technologies, and bears interest at a rate of 8% per annum from the date
the technologies become commercially successful. If the technologies are not
commercially successful, there is no obligation to repay the loan. The
Company is currently developing these technologies and expects that such
technologies will be commercially successful. If the Company should
discontinue development of these technologies, the Company will recognize
a gain on the forgiveness of this liability.
The subordinated loan due to Meyn does not bear interest and has no fixed
repayment terms. This loan will be purchased by ARC Capital from Meyn
as part of ARC Capital's purchase of all of the outstanding stock of
Pulsarr subsequent to December 31, 1995 (see Note 10).
As of December 31, 1995, the aggregate amounts of minimum maturities of
long-term debt for the indicated fiscal year are as follows:
</TABLE>
<TABLE>
<S> <C>
1996 $ 55,975
1997 116,136
1998 111,950
1999 111,950
2000 111,950
Thereafter 1,238,340
_________
$ 1,746,301
</TABLE>
NOTE 6 - INCOME TAXES
The provision for income taxes was composed of current income tax expense of
$235,067 and $147,756 for the years ended December 31, 1995 and 1994,
respectively. The income tax expense primarily relates to the taxing
jurisdiction of the Netherlands.
There are no material differences between the income tax and the financial
reporting basis of the Company's assets and liabilities and therefore no
deferred taxes are provided.
There are no significant differences between the effective income tax rate and
the statutory income tax rate of the Netherlands of 35%.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
As of December 31, 1995 the Company had capital commitments for buildings
aggregating $1,450,895. These commitments will be entirely financed by a
mortgage note (see Note 5).
The Company was contingently liable pursuant to letter of credit guarantees of
$201,503 as of December 31, 1995.
As of December 31, 1995 Pulsarr and the Dutch companies of the Meyn Group
are severally liable to the bank, which provides Pulsarr with its operational
line of credit, for the debts of these companies.
Pulsarr will be contingently liable for rental payments of $67,395 per year,
through July 2001, on property it intends to sublease around July 1996.
The Company is a party to several law suits in the ordinary course of
business. The Company believes that the outcome of all such proceedings,
even if determined adversely to Pulsarr, would not have a material effect on
its business.
NOTE 8 - GEOGRAPHIC INFORMATION
Sales to geographic areas are as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
<S> <C> <C>
Europe $ 8,805,718 $ 6,754,811
United States 2,010,825 0
Other 626,364 0
___________ ___________
$ 11,442,907 $ 6,754,811
</TABLE>
NOTE 9 - RELATED PARTY TRANSACTIONS
During the years ended December 31, 1995 and 1994, Meyn charged Pulsarr
$187,192 and $109,376, respectively, for management services and expenses
incurred by Meyn on behalf of Pulsarr. These charges are included in
general and administrative expense in the accompanying consolidated
statement of operations.
As of December 31, 1995 and 1994, Pulsarr owed Meyn $282,427 and $155,171,
respectively for income taxes and management fees.
NOTE 10 - SUBSEQUENT EVENTS
On February 1, 1996, the Managing Director of Pulsarr exercised an option to
purchase 20% of Pulsarr from Meyn.
On March 1, 1996, ARC Capital will purchase all of the capital stock of
Pulsarr from Meyn and the Managing Director of Pulsarr.
NOTE 11 - REPORT OF INDEPENDENT ACCOUNTANTS
The Report of Independent Accountants is set out on page 11.
<PAGE>
To the Board of Directors and Shareholders
of Pulsarr Holding B.V., Eindhoven
Report of Independent Accountants
We have audited the accompanying balance sheets of Pulsarr Holding B.V.,
Eindhoven as of December 31, 1995 and 1994 and the related statement of
operations, shareholders' equity and cash flows for the years then ended, all
expressed in United States Dollars.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements
based onour audit.
We conducted our audit in accordance with the auditing standards generally
accepted in the United States. 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 the company
as of December 31, 1995 and 1994 and the results of its operations and
its cash flows for the years then ended, in conformity with generally
accepted accounting principles in the United States.
Amsterdam, February 27, 1996
Coopers & Lybrand
ARC Capital
<PAGE>
INTRODUCTORY INFORMATION
On March 1, 1996, ARC Capital acquired all of the outstanding capital stock of
Pulsarr Holding B.V. ("Pulsarr") for approximately $7.8 million in cash and
notes payable. The acquisition is accounted for under the purchase method of
accounting. Pulsarr designs, manufactures and markets computer-aided vision
sorting and defect removal equipment primarily for use in the food processing
industry.
The $7.8 million purchase price was allocated based on the fair values of the
identifiable assets of Pulsarr as follows: $1.3 million represents the net
assets of Pulsarr, $6.1 million represents a chargefor in-process research
and development technologies to be recorded in operations in the quarter
ending March 31, 1996, and the remainder of $0.4 million represents goodwill
to be amortized over 15 years. The $6.1 million charge for in-process
research and development technologies is excluded from the accompanying
pro forma statements of operations.
The unaudited pro forma statements of operations for the twelve months ended
December 31, 1995, were prepared as if the acquisition had taken place on
January 1, 1995. The unaudited pro forma balance sheet as of December 31, 1995,
was prepared as if the acquisition had taken place on December 31, 1995.
The unaudited pro forma financial information is intended to provide
information about the continuing impact of the acquisition by showing how
it might have affected historical financial statements if it had been
consummated at an earlier date. This information is not necessarily
indicative of future operations or the actual results that would have
occurred had the acquisition been consummated at the beginning of the
earliest period presented. This information should be read in conjunction with
the accompanying notes to the unaudited pro forma financial information.
<PAGE>
<TABLE>
ARC Capital
Unaudited Pro Forma Balance Sheet
December 31, 1995
(In thousands)
<CAPTION>
Historical Pro Forma
____________________ _______________________
ARC Pulsarr Adjustments Results
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,171 $ 461 $ 5,000 (A) $ 3,172
(6,460)(B)
Accounts receivable 1,904 1,321 0 3,225
Inventories 3,810 3,529 0 7,339
Prepaid expenses and other
assets 506 164 70 (A) 838
98 (B)
_______ _______ _________ _______
Total current assets 10,391 5,475 (1,292) 14,574
Property plant and equipment, net 4,693 808 0 5,501
Goodwill and other assets, net 2,544 0 406 (B) 2,950
Long-term deposits 0 468 0 468
_______ _______ _________ ______
$ 17,628 $ 6,751 $ (886) $ 23,493
</TABLE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable $ 769 $ 1,565 $ 0 $ 2,334
Accrued liabilities 845 196 418 (B) 1,459
Customer deposits 1,083 1,388 0 2,471
Short-term borrowings 0 215 0 215
Accrued payroll 374 0 0 374
Warranty reserve 408 78 0 486
Current portion of long-term
liabilities 22 56 0 78
Payable to former parent 0 282 0 282
_______ _______ ________ _______
Total current liabilities 3,501 3,780 418 7,699
_______ _______ ________ _______
Long-term liabilities, less
current portion 4,875 1,690 3,400 (A) 10,960
995 (B)
_______ _______ _________ ______
Shareholders' equity:
Common stock 23,750 25 1,600 (A) 25,350
(25) (C)
Common stock warrants 3,112 0 70 (A) 3,182
Additional paid in capital 1,500 753 (753) (C) 1,500
(Accumulated deficit) retained
earnings (19,110) 437 (6,088) (B) (25,198)
(437) (C)
Accumulated translation
adjustment 0 66 (66) (C) 0
_______ _______ _________ _______
Total shareholders'
equity 9,252 1,281 (5,699) 4,834
_______ _______ _________ _______
$ 17,628 $ 6,751 $ (886) $ 23,493
<F3>
See accompanying notes to Unaudited Pro Forma Financial Information.
</TABLE>
<PAGE>
<TABLE>
ARC Capital
Unaudited Pro Forma Statement of Operations
For the Year Ended December 31, 1995
(In thousands, except per share amounts)
<CAPTION>
Historical Pro Forma
______________________ _______________________
ARC Pulsarr Adjustments Results
<S> <C> <C> <C> <C>
Net sales $ 19,394 $ 11,443 $ 0 $ 30,837
Cost of sales 11,194 6,605 0 17,799
_______ _______ ________ ________
Gross margin 8,200 4,838 0 13,038
Operating expenses:
Selling and marketing 3,255 656 0 3,911
Research & development 1,987 2,134 0 4,121
General and administrative 1,933 1,354 0 3,287
Goodwill amortization 371 0 27 (D) 398
_______ _______ ________ ________
7,546 4,144 27 11,717
_______ _______ ________ ________
Income from continuing
operations before other
income and expense 654 694 (27) 1,321
Other income and expense:
Gain on recission of stock
compensation, net 732 0 0 732
Investment & other income 212 16 0 228
Interest expense (483) (38) (316) (E) (940)
(103) (F)
_______ _______ ________ ________
Income (loss) from
continuing operations
before income taxes 1,115 672 (446) 1,341
Provision for income taxes 0 (235) 147 (G) (88)
_______ _______ ________ ________
Income from continuing
operations 1,115 437 (299) 1,253
Loss from discontinued
operations (173) 0 0 (173)
_______ _______ ________ ________
Net income $ 942 $ 437 $ (299) $ 1,080
Net income per share:
Continuing operations $ 0.12 $ 0.12
Discontinued operations (0.02) (0.02)
_______ ______
$ 0.10 $ 0.10
Weighted average shares
outstanding 9,451 1,400 (H) 10,851
<F5>
See accompanying notes to Unaudited Pro Forma Financial Information.
</TABLE>
<PAGE>
ARC CAPITAL
Notes to Unaudited Pro Forma Financial Information
(A) The pro forma balance sheet adjustments represent the sale of
1,400,000 shares of ARC Capital Class A Common Stock for $2,000,000 of net
proceeds and issuance of a$3,400,000 convertible secured note (net proceeds
of $3,000,000). The net proceeds from these financings, along with existing
cash balances and a note payable, were used to finance the purchase of Pulsarr.
(B) The pro forma balance sheet adjustments represent the consideration paid
and the preliminary allocation of the purchase price based on the fair values
of the identifiable assets of Pulsarr as of December 31, 1995, and the
acquired in-process research and development technologies (which was charged
to "Accumulated Deficit") with the remainder allocated to goodwill. The
charge for acquired in-process research and development technologies is
not tax deductible.
(C) The pro forma balance sheet adjustments represent the elimination of
common stock, additional paid in capital, retained earnings and accumulated
translation adjustment of Pulsarr.
(D) The pro forma adjustment to "Goodwill amortization" represents the
amortization over 15 years of $406,000 of goodwill resulting from the
preliminary allocation of the purchase price of Pulsarr. This goodwill
amortization is not tax deductible.
(E) The pro forma adjustment to "Interest Expense" represents the
interest expense associated with the convertible secured note issued in
connection with the acquisition of Pulsarr. See (A) above.
(F) The pro forma adjustment to "Interest Expense" represents the
interest expense associated with the financing of the acquisition with
the former owners of Pulsarr.
(G) The pro forma adjustment to "Provisions for income taxes" represents
the tax benefits associated with (E) and (F) above.
(H) The pro forma adjustment to "Weighted average shares outstanding"
represents the sale of 1,400,000 shares of ARC Capital Class A Common
Stock, the proceeds from which were used to partially finance the
acquisition of Pulsarr.
