SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(a) of
the Securities Exchange Act of 1934
Date of Report
September 5, 1995
CORCAP, INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
1-09964 06-1237135
(Commission File Number) (IRS Employer Identification No.)
90 State House Square
Hartford, Connecticut 06103-3720
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(203) 247-7611
This Amendment No. 1 to the Registrant's Current Report on Form 8-K, dated
September 5, 1995, is made in order to file, as required in Items 7(a) and
7(b), respectively, of Form 8-K, the audited financial statements of
MicroAssembly Systems, Inc. ("MicroAssembly") and pro-forma financial
information in connection with the acquisition by CompuDyne Corporation
("CompuDyne") of all of MicroAssembly's common stock.
As of August 21, 1995, the date of the acquisition of MicroAssembly by
CompuDyne, and as of September 5, 1995, CompuDyne was a subsidiary of the
Registrant. As a result, CompuDyne's financial results previously were
consolidated with the Registrant's in its financial statements. On September
15, 1995, the Registrant disposed of 224,000 shares of CompuDyne Common Stock
by contributing those shares to the Corcap, Inc. Pooled Pension Investment Trust
in order to satisfy the Registrant's minimum funding obligations for the 1992,
1993 and 1994 Plan Years of two of its employee pension plans. After giving
effect to that disposition, the Registrant now has beneficial ownership of
only approximately 25.5% of CompuDyne's issued and outstanding stock, or
approximately 12.6% on a fully diluted basis. Based upon that reduced level
of ownership of CompuDyne's common stock, it is no longer appropriate to
consolidate CompuDyne's financial results with those of the Registrant. The
Registrant is filing this Amendment No. 1 with respect to the acquisition of
MicroAssembly by CompuDyne solely to comply with the requirement in effect and
applicable to the Registrant on September 5, 1995, that it file audited and
pro-forma financial statements with respect to MicroAssembly in the
Registrant's Current Report on Form 8-K at that time, or, if not then
available, within 60 days thereafter.
Items 7(a) and 7(b) of the Registrant's Current Report on Form 8-K, dated
September 5, 1995 are amended to read as follows:
Item 7. Financial Statements and Exhibits
(a) Balance sheets of MicroAssembly as of December 31, 1993 and 1994, the
related statements of income (loss) and accumulated deficit and cash flows for
the years then ended, and the statements of loss and accumulated deficit and
cash flow of MicroAssembly for the year ended December 31, 1992, together with
the report thereon by Harper & Whitfield, P.C., independent accountants, are
set forth, together with an unaudited balance sheet of MicroAssembly as of
August 21, 1995, the date of its acquisition by the Registrant, and the
related statements of income and accumulated deficit and cash flow for the
period from January 1, 1995 through August 21, 1995, are as follows:
Independent Auditor's Report
The Board of Directors
MicroAssembly Systems, Inc.
We have audited the accompanying balance sheets of MicroAssembly Systems,
Inc. (an S corporation) as of December 31, 1994 and 1993 and the related
statements of income (loss) and accumulated deficit and cash flows for the
years ended December 31, 1994, 1993 and 1992. 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 audits.
Except as discussed in the following paragraph, we conducted our audits
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 audits provide a reasonable
basis for our opinion.
We did not observe the taking of the physical inventories at December 31,
1994, 1993 and 1992 (stated at $297,466, $182,443 and $256,588,
respectively), since those dates were prior to the time we were initially
engaged as auditors for the Company. We were unable to satisfy ourselves
about inventory quantities by means of other auditing procedures.
In our opinion, except for the effects of such adjustments, if any, as
might have been determined to be necessary had we been able to observe the
physical inventories taken as of December 31, 1994, 1993 and 1992, the
financial statements referred to in the first paragraph present fairly, in
all material respects, the financial position of MicroAssembly Systems, Inc.
as of December 31, 1994, 1993 and the results of its operations and its cash
flows for the years ended December 31, 1994, 1993 and 1992 in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary data included in
Schedules 1 and 2 for the years ended 1994, 1993 and 1992 are presented for
purposes of additional analysis and are not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in
our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
The accompanying balance sheet of MicroAssembly Systems, Inc. as of
August 21, 1995 and the related statements of income and accumulated deficit,
and cash flows for the period from January 1, 1995 to August 21, 1995 were
not audited by us, and accordingly, we do not express an opinion on them.
Harper & Whitfield
Farmington, Connecticut
September 25, 1995
<TABLE>
MICROASSEMBLY SYSTEMS, INC.
Balance Sheets
August 21, 1995 (Unaudited) and December 31, 1994 and 1993 (Audited)
Assets
______
<S> <C> <C> <C>
1995 1994 1993
(Unaudited) (Audited) (Audited)
___________ _________ _________
Current assets:
Cash $ 117,703 57,142 5,374
Accounts receivable, less
allowance for doubtful
accounts of $7,500 in 1995
and no allowance for 1994 and 1993 260,558 251,962 157,274
Income tax refund receivable - 524 186
Inventory:
Finished goods 75,484 39,682 24,421
Work in process 163,312 134,060 62,597
Raw materials 137,970 123,724 95,425
------- ------- ------
Total inventories 376,766 297,466 182,443
Prepaid expenses 25,414 9,193 6,027
Deferred income taxes (note 5) 13,113 17,741 5,025
------- ------- -------
Total current assets 793,554 634,028 356,329
------- ------- -------
Property, plant and equipment
at cost, net of accumulated
depreciation (note 2) 273,495 258,635 214,654
Other assets:
Intangible assets, net of
accumulated amortization (note 3) 5,767 11,027 27,999
Deposits 5,000 2,500 2,500
Deferred income taxes (note 5) 11,641 49,542 64,968
------ ------ ------
Total other assets 22,408 63,069 95,467
------ ------ ------
$1,089,457 955,732 666,450
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current installments of long-
term debt (note 4) - - 15,836
Subordinated debt - stockholder
(note 4) 15,000 - -
Accounts payable 223,917 186,687 52,781
Other payables 501 504 -
State income tax payable 194 - -
Accrued payroll 3,000 13,632 4,633
Accrued vacation 886 - -
Accrued interest 5,883 3,897 3,926
Other accrued expenses 3,899 3,541 2,024
------ ------ ------
Total current liabilities 253,280 208,261 79,200
------- ------- ------
Long-term liabilities:
Long-term debt - stockholder
(note 4) - - 60,000
Subordinated long-term debt -
stockholder (note 4) 84,600 150,000 150,000
------- ------- -------
Total long-term liabilities 84,600 150,000 210,000
------- ------- -------
Stockholders' equity:
Common stock - authorized
20,000 shares, par value
$.10. 1,664, 1,520 and 1,360
shares issued and outstanding
at August 21, 1995 and December
31, 1994 and 1993, respectively 166 152 136
Additional paid-in capital 1,401,434 1,199,848 999,864
Accumulated deficit (650,023) (602,529) (622,750)
--------- --------- -------
Total stockholders' equity 751,577 597,471 377,250
--------- --------- -------
Commitments (note 9)
$1,089,457 955,732 666,450
See accompanying notes to financial statements.
</TABLE>
<TABLE>
MICROASSEMBLY SYSTEMS, INC.
Statements of Income (Loss) and Accumulated Deficit
For the Period from January 1, 1995 to August 21, 1995 (Unaudited) and
Years ended December 31, 1994, 1993 and 1992 (Audited)
<CAPTION>
<S> <C> <C> <C> <C>
1995 1994 1993 1992
(Unaudited) (Audited) (Audited) (Audited)
----------- --------- --------- ---------
Net sales $ 1,027,338 1,405,277 881,787 861,011
Cost of sales 715,719 908,406 723,725 676,105
---------- --------- ------- -------
Gross profit 311,619 496,871 158,062 184,906
Selling, general and
administrative expenses 303,281 459,396 403,088 460,543
------- ------- ------- -------
Operating income (loss) 8,338 37,475 (245,026) (275,637)
Other income (expense):
Interest income 783 549 321 273
Interest expense (9,524) (15,958) (14,933) (16,601)
Loss on disposal of fixed assets (5,669) - (2,576) -
Other income 1,945 1,787 8,657 5,383
------ ------ ------ ------
Total other income (expense) (12,465) (13,622) (8,531) (10,945)
------ ------ ----- ------
Income (loss) before income
taxes and cumulative effect
adjustment (4,127) 23,853 (253,557) (286,582)
----- ------ ------- -------
Income tax expense (note 5):
Current 838 922 714 876
Deferred, net of tax benefit
of operating loss carryforward
of $26,378 in 1993 42,529 2,710 (25,641) -
------ ----- ------ -----
Total income tax expense 43,367 3,632 (24,927) 876
------ ----- ------ -----
Income (loss) before effect of
a change in accounting
principle (47,494) 20,221 (228,630) (287,458)
Cumulative effect on prior
years of an accounting
change (note 5) - - 44,352 -
------ ------ ------- -------
Net income (loss) (47,494) 20,221 (184,278) (287,458)
Accumulated deficit at
beginning of period (602,529) (622,750) (438,472) (151,014)
------- ------- ------- -------
Accumulated deficit at end
of period $(650,023) (602,529) (622,750) (438,472)
======== ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
<TABLE>
MICROASSEMBLY SYSTEMS, INC.
Statements of Cash Flows
For the Period from January 1, 1995 to August 21, 1995 (Unaudited) and
Years ended December 31, 1994, 1993 and 1992 (Audited)
<CAPTION>
<S> <C> <C> <C> <C>
1995 1994 1993 1992
(Unaudited) (Audited) (Audited) (Audited)
----------- --------- --------- ---------
Cash flows from operating
activities
- -------------------------
Net income (loss) $ (47,494) 20,221 (184,278) (287,458)
Adjustments needed to
reconcile to net cash flows:
Noncash long-term items
included in income:
Depreciation 16,578 24,579 23,917 20,432
Amortization 6,394 16,972 43,222 43,221
Deferred taxes 42,529 2,710 (69,993) -
------ ------ ------ ------
65,501 44,261 (2,854) 63,653
Nonoperational items included
in income:
Loss on disposal of
fixed assets 5,669 - 2,576 -
Changes in current items:
Increase in accounts
receivable (8,596) (94,688) (27,957) (6,398)
Decrease (increase) in income
tax refund receivable 524 (338) (186) -
Decrease (increase) in
inventory (79,300) (115,023) 74,145 (36,277)
Decrease (increase) in
prepaid expenses (16,221) (3,166) (1,226) 683
Increase in deposits (2,500) - - -
Increase (decrease) in
accounts payable 37,230 133,906 (23,904) 11,707
Increase (decrease) in
other payables (3) 504 - 16
Increase (decrease) in state
income tax payable 194 - (876) 180
Increase (decrease) in
accrued payroll - other (10,632) 8,999 1,829 (2,490)
Increase (decrease) in
accrued payroll - officer - - (1,346) 808
Increase (decrease) in
accrued vacation 886 - (1,825) (2,085)
Increase (decrease) in
accrued interest 1,986 (29) (854) (1,914)
Increase (decrease) in
other accrued expenses 358 1,517 851 (1,174)
----- ----- ----- -----
(76,074) (68,318) 18,651 (36,960)
Net cash flows from
operating activities (52,398) (3,836) (165,905) (260,765)
------ ------ ------- -------
Cash flows from investing
activities
- -------------------------
Purchases of property and
equipment (38,241) (68,560) (12,085) (46,935)
Purchases of intangible assets - - - (400)
------ ------ ------ ------
Net cash flows from
investing activities (38,241) (68,560) (12,085) (47,335)
------ ------ ------ ------
Cash flows from financing
activities
- -------------------------
Proceeds from long-term debt 25,000 122,500 85,000 135,000
Repayments of long-term debt - (23,336) (31,673) (31,672)
Proceeds from issuance of stock 14 16 16 20
Proceeds from additional
stockholder contributions 126,186 24,984 114,984 199,980
------- ------ ------- -------
Net cash flows from
financing activities 151,200 124,164 168,327 303,328
------- ------- ------- -------
Net increase (decrease)
in cash 60,561 51,768 (9,663) (4,772)
Cash at beginning of period 57,142 5,374 15,037 19,809
------ ------ ------ ------
Cash at end of period $ 117,703 57,142 5,374 15,037
======== ====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<TABLE>
MICROASSEMBLY SYSTEMS, INC.
Statements of Cash Flows
Supplemental Disclosures
For the Period from January 1, 1995 to August 21, 1995 (Unaudited) and
Years ended December 31, 1994, 1993 and 1992 (Audited)
Supplemental disclosures of cash flow information:
<CAPTION>
<S> <C> <C> <C> <C>
1995 1994 1993 1992
(Unaudited) (Audited) (Audited) (Audited)
----------- --------- --------- ---------
Cash paid during the
period for:
Interest $ 7,538 15,987 15,787 18,515
Income taxes - 1,260 1,776 696
Supplemental disclosure of noncash investing and financing activities:
During 1995, the stockholders converted $75,400 of their notes payable
to capital.
During 1994, the stockholders converted $175,000 of their notes payable
to capital.
During 1993, the stockholders converted $85,000 of their notes payable
to capital.
See accompanying notes to financial statements.
</TABLE>
MICROASSEMBLY SYSTEMS, INC.
Notes to Financial Statements
For the Period from January 1, 1995 to August 21, 1995 (Unaudited) and
Years ended December 31, 1994 and 1993 (Audited)
(1) Summary of Significant Accounting Policies
(a) Organization
MicroAssembly Systems, Inc. is a Connecticut corporation formed
March 12, 1991. The Company is engaged in the manufacturing,
sale and distribution of stick-screws and the related proprietary
assembly tool employed by manufacturers who use small-sized
screws in their assembly operations. As of August 21, 1995, the
Company became a wholly owned subsidiary of CompuDyne Corporation
as a result of the acquisition of 100% of the Company's stock by
CompuDyne Corporation. See note 8.
(b) Basis of Presentation
The financial statements of the Company have been prepared on
the accrual basis.
(c) Inventories
Raw material and finished goods inventories are stated at the
lower of cost (first-in, first-out) or market. Work in process
inventory consists of accumulated material, labor and overhead
costs on incomplete jobs. It is stated at the lower of cost or
market.
(d) Depreciation
For financial statement purposes the Company provides for
depreciation using the straight-line method over the estimated
useful lives of the related assets. The Modified Accelerated
Cost Recovery System (MACRS) is being used in computing
depreciation for income tax purposes.
The estimated useful lives are as follows:
Machinery and equipment 7 years
Office furniture and equipment 5-7 years
Building and building improvements 7-39 years
Cost and accumulated depreciation of assets retired or disposed
of are eliminated from asset and related reserve accounts.
Gains or losses on disposal of assets are credited or charged to
earnings. Expenditures for maintenance and repairs are charged
directly to earnings.
(e) Income Taxes
The Company maintains its books for tax purposes on the accrual
basis of accounting. Income taxes are provided for the tax
effects of transactions reported in the financial statements
and consist of taxes currently due plus deferred taxes related
primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax
return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are
recovered or settled. Deferred taxes also are recognized for
state operating losses that are available to offset future
taxable income.
MICROASSEMBLY SYSTEMS, INC.
Notes to Financial Statements
(f) Concentration of Credit Risk
The Company grants credit to its customers which are located
throughout the United States. Consequently, the Company's
ability to collect the amounts due from customers is affected by
economic fluctuations in the business industry and the overall
economy.
(g) Advertising Costs
Advertising costs are expensed as incurred.
(2) Property, Plant and Equipment
A summary of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
(Unaudited) (Audited) (Audited)
----------- --------- ---------
<S> <C> <C> <C>
Land $ 19,994 19,994 19,994
Building and building
improvements 131,728 128,371 117,762
Machinery and equipment 181,573 159,612 102,693
Office furniture and equipment 31,113 28,543 27,511
-------- ------- -------
364,408 336,520 267,960
Less accumulated depreciation 90,913 77,885 53,306
------- ------- -------
$ 273,495 258,635 214,654
======== ======= =======
</TABLE>
Included in machinery and equipment is $66,006 related to the purchase
of a furnace. There is an additional amount of $39,904 due to
complete this furnace. The liability and the additional asset cost
are not included on the financial statements since the amount due was
not due and payable as of the balance sheet date, as certain
conditions of its installation were not yet complete.
(3) Intangible Assets
Intangible assets consist of the following at August 21, 1995 and
December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
(Unaudited) (Audited) (Audited)
----------- --------- ---------
<S> <C> <C> <C>
Covenant not to compete $ 105,000 105,000 105,000
Organization costs 41,109 41,109 41,109
Trademark 750 750 750
-------- ------- -------
146,859 146,859 146,859
Less accumulated amortization 141,092 135,832 118,860
------- ------- -------
$ 5,767 11,027 27,999
======== ======= =======
</TABLE>
The covenant not to compete and organization costs are being amortized
on a straight-line basis over thirty-six and sixty months,
respectively.
MICROASSEMBLY SYSTEMS, INC.
Notes to Financial Statements
(4) Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
(Unaudited) (Audited) (Audited)
----------- --------- ---------
<S> <C> <C> <C>
Subordinated note payable to
stockholder at prime plus 1% $ 99,600 150,000 150,000
Note payable to stockholder at
prime plus 1% - - 60,000
Subordinated note payable to
Ripley Company, Inc. at 10% - - 15,836
------- -------- ------
99,600 150,000 225,836
Less current installments
of long-term debt 15,000 - 15,836
------ -------- -------
Long-term debt, excluding current
installments $ 84,600 150,000 210,000
======= ======= =======
</TABLE>
The subordinated note payable to stockholder consists of drawdowns
totaling $99,600, $150,000, and $175,000 on August 21, 1995 and
December 31, 1994 and 1993, respectively, on a $200,000 unsecured
line of credit due March 26, 1995, with interest on the unpaid balance
payable quarterly from the dates of drawdowns at prime plus 1%. This
debt is subordinated to all other debt of the Company. In 1994,
an amendment to this note extended the maturity date from March 26,
1995 to March 26, 1996. In 1995, this stockholder contributed $50,400
of the above note to capital. In 1994, the same stockholder loaned the
Company $25,000 and subsequently contributed the entire amount to
capital. Also in 1994, the stockholder contributed an additional
$25,000 directly to capital. In 1993, this same stockholder
loaned the Company an additional $25,000 and contributed $50,000 of
this note to capital. In the event of default, the stockholder has an
option to purchase 500 shares of the Company's common stock at
$400 per share.
During 1995, the above loan was converted to a term loan, payable
quarterly in the amount of $5,000 plus interest at a rate of prime
plus 1% beginning December, 1995.
Expected maturities are as follows:
1996 $ 15,000
1997 20,000
1998 20,000
1999 20,000
2000 20,000
2001 4,600
MICROASSEMBLY SYSTEMS, INC.
Notes to Financial Statements
During 1995, the Company's majority stockholder loaned the Company
$25,000 and subsequently converted the $25,000 to capital. The
stockholder also loaned the Company $97,500 during 1994, was
repaid $7,500 and converted the remaining $90,000 to capital. The note
payable to stockholder of $60,000 at December 31, 1993 consists of two
notes which were payable on demand with interest on the unpaid balance
payable quarterly at prime plus 1%.
The 10% subordinated note payable to Ripley Company, Inc. is payable
in four equal semi-annual installments of principal in the amount of
$15,836, plus interest due, beginning March 31, 1992. This note is
subordinate to the lenders' liens, rights, title priority and security
interest of any senior debt of the Company incurred for the purposes of
financing its business.
(5) Income Taxes
The Company had elected to be treated as an S corporation for federal
income tax purposes, in accordance with Section 1361 of the Internal
Revenue Code. The Company was not subject to federal income tax, but
the taxable income flows through to the individual stockholders'
federal income tax returns. The State of Connecticut does not
recognize S corporation status and, therefore, taxes the Company as if
it were a C corporation. As of August 21, 1995, the S corporation
election terminated as a result of the acquisition of 100% of the
Company by CompuDyne Corporation. As a result, the Company is now
subject to federal income taxes and, accordingly, the Company recorded
$14,611 of federal deferred income taxes as of August 21, 1995. Income
tax expense (benefit) amounted to $43,367 for 1995, $3,632 for 1994,
($24,927) for 1993 and $876 for 1992.
Components of income tax expense (benefit) at August 21, 1995 and
December 31, 1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
Federal State Total
------- ----- -----
<S> <C> <C> <C>
1995 (Unaudited):
Current $ - 838 838
Deferred, net of $1,477
benefit from enacted
rate reduction 14,611 27,918 42,529
------ ------ ------
$ 14,611 28,756 43,367
======= ====== ======
1994 (Audited):
Current - 922 922
Deferred - 2,710 2,710
------- ------ ------
$ - 3,632 3,632
======= ====== ======
1993 (Audited):
Current - 714 714
Deferred - (25,641) (25,641)
------- ------- --------
$ - (24,927) (24,927)
======= ====== ======
1992 (Audited):
Current - 876 876
Deferred - - -
------ ------ -------
$ - 876 876
======== ======= =======
</TABLE>
MICROASSEMBLY SYSTEMS, INC.
Notes to Financial Statements
State tax laws were enacted on June 1, 1995 to reduce the business tax
rates. The deferred tax liability has been reduced to reflect the newly
enacted rates.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The cumulative
effect of the change in accounting principle is included in determining
net income for 1993. Financial statements for prior years have not been
restated.
The net deferred income taxes in the accompanying balance sheets include
the following components:
<TABLE>
<CAPTION>
1995 1994 1993
(Unaudited) (Audited) (Audited)
----------- --------- ---------
<S> <C> <C> <C>
Current:
Federal deferred income tax asset $ 3,346 - -
Federal deferred income tax
liability (3,256) - -
State deferred income tax asset 14,890 18,661 5,750
State deferred income tax asset
valuation allowance (1,867) (920) (725)
----- ----- ------
Net deferred income tax asset $ 13,113 17,741 5,025
======= ====== ======
Non-current:
Federal deferred income tax asset 656 - -
Federal deferred income tax
liability (15,357) - -
State deferred income tax liability (2,394) (2,196) (2,117)
State deferred income tax asset 53,430 54,498 69,985
State deferred income tax asset
valuation allowance (24,694) (2,760) (2,900)
------ ------ ------
Net deferred income tax asset $ 11,641 49,542 64,968
======= ====== ======
</TABLE>
Included in the current state deferred income tax asset is $13,451 for
1995, $16,875 for 1994 and $5,750 for 1993 resulting from state net
operating loss carryforwards of $124,900 for 1995, $150,000 for 1994 and
$50,000 for 1993. The noncurrent state deferred income tax asset is
comprised of $53,430 for 1995, $54,498 for 1994 and $69,985 for
1993 resulting from state net operating loss carryforwards of $533,414,
$517,812, and $653,936 for 1995, 1994 and 1993, respectively. The
valuation allowances were applied against these assets. The net change in
the valuation allowance amounted to $22,881 for 1995, and $55 for 1994.
The tax provision differs from the expense that would result from applying
state statutory rates to income because of permanent differences such as
meals and entertainment, separately stated items that flow through to the
shareholders and timing differences between book and tax depreciation, bad
debt reserves, accrued bonuses, accrued interest to stockholders and other
miscellaneous accruals. It also differs because a valuation allowance has
been provided to reduce the deferred tax assets to the amount that is more
likely than not to be realized, and to reflect the benefit of enacted rate
reductions.
At August 21, 1995, the Company had the following carryovers for state
income tax purposes:
Year State
Expiration Operating Loss
(December 31) Carryover
------------- --------------
1996 $ 101,966
1997 298,546
1998 257,802
MICROASSEMBLY SYSTEMS, INC.
Notes to Financial Statements
(6) Major Customers
Sales were made to one major customer in 1995 and 1994 exceeding 10% of
revenues. Sales to the customer amounted to $144,800 and $315,654 in
1995 and 1994, respectively.
(7) Related Party Transactions
During 1995, the Company borrowed $25,000 from its stockholders.
Interest on the loans amounted to $9,177 during 1995. During 1994,
the Company borrowed $122,500 from its stockholders. Interest on
the loans amounted to $15,562 during 1994. During 1993, the Company
borrowed $85,000 from its stockholders. Interest on the loans amounts
to $11,725 during 1993. See note 4.
(8) Change in Ownership
On August 21, 1995, the Company was acquired by CompuDyne Corporation in
a stock for stock exchange. As a result, the Company is now a wholly
owned subsidiary of CompuDyne Corporation, and the Company has now
lost its S corporation status and will be treated as a C corporation
for tax purposes. See note 5.
(9) Commitments
The Company has an available line of credit up to $100,000, with a
bank. As of August 21, 1995, the Company has not borrowed against the
line of credit.
The Company also has placed a $2,500 deposit on a building adjacent to
the current facilities. The building will be purchased in October,
1995 for $30,000, assuming the current owner performs certain
maintenance obligations which are conditions of the purchase.
Schedule 1
<TABLE>
MICROASSEMBLY SYSTEMS, INC.
Cost of Sales
For the Period from January 1, 1995 to August 21, 1995 (Unaudited) and
Years ended December 31, 1994, 1993 and 1992 (Audited)
<CAPTION>
1995 1994 1993 1992
(Unaudited) (Audited) (Audited) (Audited)
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Material purchases $ 295,642 365,046 169,653 188,210
Direct and indirect labor 260,577 351,943 256,514 259,604
Manufacturing supplies 92,946 132,146 92,487 87,519
Insurance 64,181 73,833 62,282 58,312
Payroll taxes 37,843 41,120 22,931 23,532
Depreciation 13,777 18,998 18,482 16,048
Utilities 11,765 16,951 13,590 14,353
Repairs and maintenance 9,558 12,829 4,069 14,299
Miscellaneous shop expense 6,014 6,775 6,552 6,039
Property taxes 1,225 2,064 1,885 2,757
Uniforms 1,491 1,724 1,135 1,037
Engineering - - - 40,672
------ ------- ------ -------
795,019 1,023,429 649,580 712,382
------- --------- ------- -------
Adjustment for inventory
change:
Inventory at beginning of
period 297,466 182,443 256,588 220,311
Inventory at end of period 376,766 297,466 182,443 256,588
------- ------- ------- -------
Increase (decrease) in cost
of sales (79,300) (115,023) 74,145 (36,277)
------ ------- ------ ------
Total cost of sales $ 715,719 908,406 723,725 676,105
======== ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
Schedule 2
<TABLE>
MICROASSEMBLY SYSTEMS, INC.
Selling, General and Administrative Expenses
For the Period from January 1, 1995 to August 21, 1995 (Unaudited) and
Years ended December 31, 1994, 1993 and 1992 (Audited)
<CAPTION>
1995 1994 1993 1992
(Unaudited) (Audited) (Audited) (Audited)
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Salaries $ 113,227 170,681 151,416 122,479
Commissions 64,357 115,253 52,286 56,118
Travel 21,058 23,874 23,455 3,792
Professional fees 18,570 9,937 6,685 12,514
Consulting fees 18,157 27,904 16,250 28,620
Payroll taxes 12,097 15,088 12,201 19,230
Advertising and promotion 10,181 19,533 27,674 30,893
Depreciation and amortization 9,195 22,553 48,657 47,605
Telephone 8,963 14,398 13,680 11,267
Bad debt 7,500 7,408 - -
Office supplies 6,295 7,146 10,370 13,983
Insurance 6,159 7,742 9,302 19,032
Shipping (net of reimbursements
of $21,506, $32,606, $21,237
and $17,060 in 1995, 1994,
1993 and 1992, respectively) 3,310 6,161 5,907 1,078
Other expenses 1,839 1,284 1,705 1,323
Postage 1,564 3,413 2,919 3,200
Utilities 675 892 715 755
Property taxes 134 199 239 288
Samples - 5,930 18,956 13,450
Officers' salaries - - - 72,966
Maintenance - - 671 1,950
------ ------- ------ ------
Total selling, general and
administrative expenses $ 303,281 459,396 403,088 460,543
======== ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
(b) Pro-forma financial statements of CompuDyne Corporation to
reflect the acquisition of MicroAssembly and the disposition of
Suntec Service Corporation, including (i) a consolidated balance
sheet as at June 30, 1995; (ii) a consolidated statement of
operations for the six months ended June 30, 1995; and (iii) a
consolidated statement of operations for the year ended December
31, 1994 are as follows:
<TABLE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
ACQUISITION OF MICROASSEMBLY AND DISPOSITION
OF SUNTEC ASSETS AND LIABILITIES
(In Thousands)
(UNAUDITED)
<CAPTION>
Actual Pro
Balance Suntec MicroAssembly forma
June 30, 1995 Adjustments Adjustments Results
____________________________________________________
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash 503 503
Accounts
receivable, net 2,244 (165) 268 2,347
Inventories:
Finished Goods 138 138
Work in process 377 (25) 162 514
Raw Materials and
supplies 270 (18) 170 422
____________________________________________________
Total Inventories 647 (43) 470 1,074
Prepaid expenses and
other current assets 96 (18) 33 111
____________________________________________________
Total Current Assets 2,987 (226) 1,274 4,035
Non-current
receivables, related
parties 13 13
Property, plant and
equipment, at cost 706 (32) 493 1,167
Less: accumulated
depreciation and
amortization (677) 14 (663)
____________________________________________________
Net property, plant
and equipment 29 (18) 493 504
Other assets, net 10 1,088 1,098
Promissory notes
receivables 129 60 189
____________________________________________________
Total Assets 3,039 (115) 2,915 5,839
====================================================
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Accounts payable 1,831 (92) 186 1,925
Bank line payable 48 50 98
Customer deposits 21 (21) 0
Accrued pension costs 25 25
Accrued expenses 801 (52) 28 777
Current portion of
deferred compensation 96 96
____________________________________________________
Total Current
Liabilities 2,822 (115) 214 2,921
Notes Payable 500 500
Long term pension
liability 298 298
Deferred income taxes 251 251
Deferred compensation,
net of current portion 61 61
____________________________________________________
Total Liabilities 3,181 (115) 965 4,031
SHAREHOLDERS' (DEFICIT) EQUITY:
Common Stock, par value
$.75 per share
10,000,000 1,202 112 1,314
authorized; 1,603,372
shares issued as of
6/30/95
Preferred Stock, Series
D, Convertible share for
share 1,890 1,890
Other Capital 7,988 (52) 7,936
Receivable from
management (92) 24 (68)
Treasury stock at cost (24) (24)
(9,240) (9,240)
____________________________________________________
Total Shareholders'
Equity (Deficit) (142) 0 1,950 1,808
____________________________________________________
Total Liabilities and
Shareholders' Equity
(Deficit) 3,039 (115) 2,915 5,839
====================================================
</TABLE>
NOTES:
1. The purpose of this proforma statement is to report the effect of the
Acquisition of Microassembly Systems, Inc. Common Stock; and the
Disposition of the Assets and Liabilities of the Suntec Division as filed
on Form 8-K dated September 5, 1995.
2. All Suntec adjustments other than Cash and Promissory Notes Receivable
reflect June 30, 1995 book value of the Suntec assets and liabilities that
were disposed of.
3. $50,000 was loaned to Norman Silberdick in exchange for a Promissory
Note. The Bank Line Payable is increased to reflect the source of the
money.
4. The other $79,000 included in the Suntec Promissory Notes Receivable
represents the consideration received from Norman Silberdick for the
purchase of Suntec assets and liabilities. Subsequent to the closing,
the closing date net book value of the Suntec assets and liabilities was
adjusted to reflect additional losses at Suntec during July and August
1995 in an amount that reduced the purchase price and promissory note
receivable from Mr. Silberdick to zero.
5. Mr. Silberdick, as part of the consideration for the purchase of Suntec
assets and liabilities, has turned in to the Company 60,000 shares of the
Company's common stock issued pursuant to a Stock Purchase Agreement,
dated August 1, 1993. This is reflected in $24,000 adjustments between
Treasury stock and Receivable from management.
6. The Convertible Preference Stock, Series D issued in exchange for all of
MicroAssembly's capital stock is valued at $1.50 a share based on the
redemption value of the preference stock and the fair market price of the
common stock.
7. Other assets, net in the MicroAssembly Adjustments column include $38,000
in Engineering Design and drawings; $150,000 in 'STICKSCREW' trademark;
$280,000 in Customer List; $50,000 in miscellaneous other assets; and
$570,000 in Goodwill.
8. The exercise by Corcap, Inc. Of a warrant to acquire 150,000 shares of
CompuDyne common stock is included in the MicroAssembly adjustment column
with an increase of $60,000 to promissory notes receivables, an increase
of $112,000 to common stock and a decrease of $52,000 to other capital.
<TABLE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
ACQUISITION OF MICROASSEMBLY AND DISPOSITION
OF SUNTEC ASSETS AND LIABILITIES
(In Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Six Months Pro
Ended Suntec MicroAssembly forma
June 30, 1995 Adjustments Adjustments Results
____________________________________________________
<S> <C> <C> <C> <C>
Net sales 5,223 (608) 826 5,441
Cost of sales 4,330 (337) 556 4,549
____________________________________________________
Gross margin 893 (271) 270 892
Selling, general and
administrative
expenses 974 (517) 230 687
Research and
development 39 0 0 39
____________________________________________________
Operating income
(loss) (120) 246 40 166
____________________________________________________
Other (income) expense
Interest (income)
expense 10 8 18
Other (income) expense 12 (1) 11
____________________________________________________
Total other (income)
expense, net 22 0 7 29
____________________________________________________
Income (loss) from
Continuing operations (142) 246 33 137
before income tax
provision
Income tax provision
(benefit) 1 1
____________________________________________________
Net income (loss) (142) 246 32 136
====================================================
Weighted average common
shares:
Primary 1,603 2,954
_____ _____
Fully diluted 1,603 3,220
_____ _____
Net income (loss) per
share:
Net income (loss) (0.089) 0.046
_____ _____
Net income (loss) per
share - full dilution:
Net income (loss) (0.089) 0.042
_____ _____
</TABLE>
NOTES:
1. The purpose of this proforma statement is to report the effect of the
Acquisition of Microassembly Systems, Inc. Common Stock; and the
Disposition of the Assets and Liabilities of the Suntec Division as filed
on Form 8-K dated September 5, 1995.
2. The pro forma adjustments were calculated assuming the acquisition and
disposition transactions were consummated at the beginning of fiscal
year 1994.
3. Suntec division was operated in a separate building with personnel
separate from other operations. Therefore the adjustments for the
disposition involve mainly the revenue and cost incurred directly
related to the Suntec Division. Other effects of the disposition were
immaterial and not considered in this report.
4. No Income Tax Provision is shown against the resulting net income; there
are sufficient credits from loss-carry-forwards to offset any required
tax provision.
<TABLE>
COMPUDYNE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
ACQUISITION OF MICROASSEMBLY AND DISPOSITION
OF SUNTEC ASSETS AND LIABILITIES
(In Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Fiscal Year Pro
Ended Dec- Suntec MicroAssembly forma
ember 31, 1994 Adjustments Adjustments Results
____________________________________________________
<S> <C> <C> <C> <C>
Net sales 12,287 (2,588) 1,405 11,104
Cost of sales 9,683 (1,570) 908 9,021
____________________________________________________
Gross margin 2,604 (1,018) 497 2,083
____________________________________________________
Selling, general and
administrative
expenses 2,973 (1,878) 459 1,554
Research and development 66 0 0 66
____________________________________________________
Operating income (loss) (435) 860 38 463
____________________________________________________
Other (income) expense
Interest (income)
expense (7) 15 8
Other (income) (1) (1,663)
expense (1,662) (34) (1,696)
____________________________________________________
Total other
(income) expense,
net (1,669) 0 (14) (1,655)
____________________________________________________
Income (loss) from
Continuing operations 1,234 860 24 2,118
before income tax
provision
Income tax provision
(benefit) 29 4 33
____________________________________________________
Income (loss) before
extraordinary items 1,205 860 20 2,085
Extraordinary items,
debt forgiveness 523 523
____________________________________________________
Net income (loss) 1,728 860 20 2,608
====================================================
Weighted average
common shares:
Primary 1,748 2,954
_____ _____
Fully diluted 1,748 3,220
_____ _____
Net income (loss)
per share:
Continuing operations
before extraordinary
Items 0.69 0.71
_____ _____
Extraordinary items 0.30 0.18
_____ _____
Net income (loss) 0.99 0.88
_____ _____
Net income (loss) per
share - fully diluted
Continuing operations
before extraordinary
Items 0.69 0.65
_____ _____
Extraordinary items 0.30 0.16
_____ _____
Net income (loss) 0.99 0.81
_____ _____
</TABLE>
NOTES:
1. The purpose of this proforma statement is to report the effect of the
Acquisition of Microassembly Systems, Inc. Common Stock and the
Disposition of the Assets and Liabilities of the Suntec Division as
filed on Form 8-K dated September 5, 1995.
2. The pro forma adjustments were calculated assuming the acquisition and
disposition transactions were consummated at the beginning of fiscal
year 1994.
3. Suntec division was operated in a separate building with personnel
separate from other operations. Therefore the adjustments for the
disposition involve mainly the revenue and cost incurred directly
related to the Suntec Division. Other effects of the disposition were
immaterial and not considered in this report.
4. No additional Income Tax Provision is shown against the resulting net
income; there are sufficient credits from loss-carry-forwards to
offset any required tax provision.
Item 7(c) of the Registrant's Current Report on Form 8-K is amended by
adding to the list of exhibits set forth therein a new Exhibit 23 as
follows:
Exhibit (23) Consent of Harper & Whitfield, P.C., dated November 2, 1995,
to the use in this Report on Form 8-K of its Report, dated
September 28, 1995, on the financial statements of MicroAssembly Systems,
Inc.
------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned
hereto duly authorized.
CORCAP, INC.
Dated: November 3, 1995 By /s/ Diane Burns
Diane Burns, President
INDEX TO EXHIBITS
Exhibit (23) Consent of Harper & Whitfield, P.C., dated November 2, 1995,
to the use in this Report on Form 8-K of its Report, dated
September 28, 1995, on the financial statements of MicroAssembly Systems,
Inc.
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the use of our report, dated September 28, 1995, on
the balance sheets of MicroAssembly Systems, Inc. for the years ended December
31, 1993 and 1994, the related statements of income (loss) and accumulated
deficit and cash flows for the years then ended, and the statements of loss and
accumulated deficit and cash flows for the year ended December 31, 1992 in
Amendment No. 1 to each of the Current Reports on Form 8-K of CompuDyne
Corporation and Corcap, Inc., respectively, each of which Current Reports was
originally dated September 5, 1995.
We also hereby consent to the incorporation by reference in the
Registration Statement of CompuDyne Corporation on Form S-8 with respect to the
CompuDyne Corporation 1986 Stock Incentive Compensation Plan Benefit Plan of our
report as it appears in the above-mentioned Amendment No. 1 to the Current
Report on Form 8-K of CompuDyne Corporation.
Harper & Whitfield, P.C.
Farmington, Connecticut
November 2, 1995
