<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934
JMAR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
May 23, 1996 as set forth in the pages attached hereto:
- Audited financial statements of California ASIC Technical
Services, Inc. as of December 31, 1995, 1994 and 1993 and for
the years then ended.
- JMAR Industries, Inc. and California ASIC Technical
Services, Inc. pro forma condensed combined financial
statements as of March 31, 1996, for the three months then
ended and for the year ended December 31, 1995.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
JMAR Industries, Inc.
---------------------------
(Registrant)
By: /s/ Dennis E. Valentine
-----------------------
Dennis E. Valentine
Chief Financial Officer
Date: August 2, 1996
<PAGE> 2
The following financial statements, proforma financial information and
exhibits are filed as a part of this report.
(a) Financial statements of the business acquired, prepared pursuant to
Rule 3-05 of Regulation S-X and provided to the Registrant by California ASIC
Technical Services, Inc.:
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
Audited financial statements of California ASIC Technical Services, Inc.:
Report of Arthur Andersen LLP, Independent Public Accountants for the Years
Ended December 31, 1995 and 1994........................................................................ 4
Balance Sheets as of December 31, 1995 and 1994........................................................... 5
Statements of Operations for the Years Ended December 31, 1995 and 1994................................... 7
Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 1995 and 1994............... 8
Statements of Cash Flows for the Years Ended December 31, 1995 and 1994................................... 9
Notes to Financial Statements............................................................................. 11
Report of Corbin & Wertz, Independent Public Accountants for the Year Ended
December 31, 1993....................................................................................... 15
Balance Sheet as of December 31, 1993..................................................................... 16
Statement of Operations for the Year Ended December 31, 1993.............................................. 17
Statement of Stockholders' Equity for the Year Ended December 31, 1993.................................... 18
Statement of Cash Flows for the Year Ended December 31, 1993.............................................. 19
Notes to Financial Statements............................................................................. 21
</TABLE>
(b) Proforma financial information required pursuant to Article 11 of
Regulation S-X:
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
JMAR Industries, Inc. and California ASIC Technical Services, Inc. Proforma
Condensed Combined Financial Statements:
Consolidated Balance Sheet as of March 31, 1996 (Unaudited)............................................... 28
Proforma Condensed Combined Statement of Operations for the Year
Ended December 31, 1995 (Unaudited).................................................................... 29
Proforma Condensed Combined Statement of Operations for the Three
Months Ended March 31, 1996 (Unaudited)................................................................ 30
</TABLE>
2
<PAGE> 3
The unaudited proforma condensed combined statements of operations for
the year ended December 31, 1995, and three months ended March 31, 1996, give
effect to the acquisition of California ASIC Technical Services, Inc. by JMAR
Industries, Inc. as if the acquisition, accounted for as a purchase, had
occurred on January 1 of each respective period. The proforma information is
based on historical financial statements of California ASIC Technical Services,
Inc. and JMAR Industries, Inc. after giving effect to the transaction using the
purchase method of accounting and the assumptions and adjustments in the
accompanying notes to the proforma financial statements. The proforma financial
statements have been prepared on the basis of preliminary estimates. The
Registrant will continue its review to determine the fair value of the acquired
assets and liabilities.
The proforma statements have been prepared by the Registrant based upon
the financial statements of California ASIC Technical Services, Inc. (filed with
this report under Item a) which have been provided by California ASIC Technical
Services, Inc. These proforma statements may not be indicative of the results
that actually would have occurred if the combination had been in effect on the
dates indicated or which may be obtained in the future. The proforma financial
statements should be read in conjunction with the audited financial statements
and notes of California ASIC Technical Services, Inc.
3
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
California ASIC Technical Services, Inc.:
We have audited the accompanying balance sheets of CALIFORNIA ASIC TECHNICAL
SERVICES, INC. (a Nevada corporation) as of December 31, 1995 and 1994, and the
related statements of operations, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
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 our audits provide 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 California ASIC Technical
Services, Inc. as of December 31, 1995 and 1994 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
San Diego, California
May 23, 1996
4
<PAGE> 5
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
BALANCE SHEETS - DECEMBER 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 16,651 $ 33,741
Other current assets 963 -
---------- ----------
Total current assets 17,614 33,741
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Machinery and equipment 607,969 615,419
Furniture and fixtures 4,132 3,632
Automobiles 3,000 -
---------- ----------
615,101 619,051
Less--Accumulated depreciation and amortization (162,797) (70,695)
---------- ----------
452,304 548,356
---------- ----------
OTHER ASSETS:
Deposits 7,725 7,725
---------- ----------
$ 477,643 $ 589,822
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
BALANCE SHEETS - DECEMBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 132,041 $ 184,377
Notes payable to stockholders 42,869 8,269
Accrued interest 71,249 31,620
Accrued salaries and related taxes 373,411 217,593
Accrued expenses 310,687 242,537
Income taxes payable 1,600 1,600
---------- ----------
Total current liabilities 931,857 685,996
---------- ----------
LONG-TERM LIABILITIES:
Notes payable to stockholders,
net of current portion 238,235 239,457
Notes payable to unrelated entities 130,000 100,000
---------- ----------
Total long-term liabilities 368,235 339,457
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value, 25,000,000 shares authorized, 4,080,365 and
3,967,000 shares issued and outstanding at December 31,
1995 and 1994, respectively 4,080 3,967
Additional paid in capital 474,874 419,783
Accumulated deficit (1,301,403) (859,381)
---------- ----------
(822,449) (435,631)
---------- ----------
$ 477,643 $ 589,822
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
REVENUES:
Product sales $ 13,666 $ 30,680
Design and engineering services 176,642 158,252
----------- -----------
Total revenues 190,308 188,932
OPERATING COSTS AND EXPENSES:
Salaries and related costs 244,794 243,007
Occupancy 79,090 142,705
Depreciation 92,868 54,034
Other 205,818 347,574
----------- -----------
LOSS FROM OPERATIONS (432,262) (598,388)
----------- -----------
OTHER:
Interest expense (net) (57,453) (30,270)
Gain (loss) on sale of assets 47,693 (83)
----------- -----------
Total other expense (9,760) (30,353)
----------- -----------
NET LOSS $ (442,022) $ (628,741)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock
---------------------
Number Additional
of Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- ------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31,
1993 3,883,667 $3,884 $354,866 $ (230,640) $ 128,110
Issuance of common
stock 83,333 83 64,917 - 65,000
Net loss - - - (628,741) (628,741)
--------- ----- -------- ----------- ---------
BALANCE, December 31,
1994 3,967,000 3,967 419,783 (859,381) (435,631)
Issuance of common
stock 113,365 113 55,091 - 55,204
Net loss - - - (442,022) (442,022)
--------- ------ -------- ----------- ---------
BALANCE, December 31,
1995 4,080,365 $4,080 $474,874 $(1,301,403) $(822,449)
========= ====== ======== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 9
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (442,022) $ (628,741)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 92,868 54,034
Gain on disposition of property, plant
and equipment (47,693) 83
Write-down of property, plant and equipment - 29,379
Changes in operating assets and liabilities:
Accounts receivable, net - 38,641
Other current assets (963) -
Prepaid expenses - 4,187
Other noncurrent assets - (4,311)
Accounts payable (52,336) 31,194
Accrued interest 39,629 22,189
Accrued salaries and related taxes 155,818 151,359
Accrued expenses 68,150 203,443
---------- ---------
Net cash used in operating activities (186,549) (98,543)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (3,850) (108,878)
Proceeds from sale of property, plant and equipment 54,727 18,350
---------- ---------
Net cash provided by (used in)
investing activities 50,877 (90,528)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock 55,204 40,000
Proceeds from issuance of notes payable 30,000 100,000
Proceeds from issuance of notes payable
to stockholders 58,500 -
Principal repayments of notes payable
to stockholders (25,122) (37,345)
---------- ---------
Net cash provided by financing activities 118,582 102,655
---------- ---------
Net decrease in cash and cash equivalents (17,090) (86,416)
CASH AND CASH EQUIVALENTS, beginning of year 33,741 120,157
---------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 16,651 $ 33,741
========== =========
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ - $ 8,365
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
During 1995, the Company issued 16,667 shares to a stockholder as collateral
for amounts owed to that party.
During 1994, the Company incurred $75,000 of accounts payable, incurred
$250,000 of long-term debt and issued $25,000 of common stock in conjunction
with the acquisition of property, plant and equipment.
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 11
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. Summary of Significant Accounting Policies
a. Nature of Operations
California ASIC Technical Services, Inc. (the Company) is engaged in
the design, fabrication, assembly and testing of custom integrated
circuits for the electronics industry.
b. Basis of Presentation
These financial statements have been prepared on a going concern basis
which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company's ability to
continue to generate positive cash flows depends on its ability to
maintain a level of revenues sufficient to meet its obligations and
sustain its operations. The Company has had limited sales to a small
number of customers to date, has sustained operating losses since
inception and will have to acquire capital equipment and hire
additional personnel to maintain a sufficient level of revenues.
The above conditions raised substantial doubt about the Company's
ability to continue as a going concern. The accompanying financial
statements do not include any adjustments that might result from the
outcome of this uncertainty. However, as described in Note 6, the
Company was acquired by JMAR Industries, Inc. (JMAR) on May 23, 1996
and, concurrently, the Company has entered into agreements to
significantly reduce certain of its liabilities. Furthermore, JMAR has
provided working capital loans and has committed to providing
additional financing to enable the Company to continue operations, at
least through December 31, 1996.
c. 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.
d. Revenue Recognition
Revenue from product sales is recognized upon shipment. Revenue from
design and engineering services is recognized ratably over the period
in which services are performed.
e. Significant Customers
The Company's revenues in 1995 and 1994 were derived from a small
number of customers. One customer accounted for 61 percent and another
accounted for 32 percent of the Company's revenues during 1995. One
customer accounted for 33 percent and another accounted for 29 percent
of the Company's revenues during 1994.
11
<PAGE> 12
f. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are computed on the straight-line basis over the estimated
useful lives of the related assets, as follows:
Machinery and equipment 5 to 7 years
Furniture and fixtures 5 years
Automobiles 5 years
Repairs and maintenance are charged directly to expense as incurred.
g. Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 (SFAS No. 121) on
accounting for impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to assets to be held and used. SFAS
No. 121 also establishes accounting standards for long-lived assets and
certain identifiable intangibles to be disposed of. The Company is
required to adopt SFAS No. 121 no later than January 1, 1996, although
earlier implementation is permitted. SFAS No. 121 is required to be
applied prospectively for assets to be held and used. The initial
application of SFAS No. 121 to assets held for disposal is required to
be reported as the cumulative effect of a change in accounting
principle. Management believes that the adoption of SFAS No. 121 will
not have a material impact on the financial statements.
h. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109(SFAS No. 109). SFAS No. 109
requires an asset and liability approach in accounting for income taxes
payable or refundable at the date of the financial statements as a
result of all events that have been recognized in the financial
statements and as measured by the provisions of enacted tax laws.
Additionally, SFAS No. 109 requires that deferred tax assets be
evaluated and a valuation allowance be established if it is "more
likely than not" that all or a portion of the deferred tax asset will
not be realized.
As of December 31, 1995, the Company had net operating loss
carryforwards for federal tax purposes of approximately $1,300,000
approximating its accumulated deficit. The deferred tax asset related
to the estimated net operating loss carryforwards as of December 31,
1995 and 1994 has been reduced by an equivalent valuation allowance due
to the uncertainty of realization.
2. Stockholders' Equity
On March 16, 1995, the Board of Directors declared a one-for-three
reverse stock split which became effective on March 23, 1995. All
references to the number of shares have been restated to reflect the
effect of the reverse split.
3. Related-Party Transactions
As of December 31, 1995 and 1994, the Company had accrued salaries due
to the majority stockholder in the amounts of $222,000 and $142,000,
respectively.
As of December 31, 1995 and 1994, the Company had accrued salaries due
to the President in the amounts of $120,000 and $60,000, respectively.
As of December 31, 1995 and 1994, the Company had accrued expenses due
to stockholders in the amounts of $140,000 and $80,000, respectively
for consulting services rendered.
12
<PAGE> 13
During 1995, the Company issued 16,667 common stock shares as
collateral for a $21,500 liability to a stockholder.
4. Long-Term Debt
At December 31, 1995 and 1994, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Notes payable to officers, interest primarily
at 10 percent. $ 21,647 $ 8,269
Note payable to stockholder, due in monthly
principal and interest installments of $6,306 through May 2000,
interest at 12 percent, secured by certain machinery and
equipment. 239,457 239,457
Note payable to stockholder, due 1998,
interest at 10 percent, convertible
into common stock of the Company at a
conversion price per share ranging from
$1.50 to $6.00. 20,000 -
Notes payable to unrelated entities, due 1997
and 1998, interest at 10 percent, convertible into common stock of
the Company at a conversion price per share ranging from $1.50 to
$6.00. 130,000 100,000
---------- ----------
411,104 347,726
Less--Current portion 42,869 8,269
---------- ----------
$ 368,235 $ 339,457
========== ==========
</TABLE>
Included in accrued interest at December 31, 1995 and 1994 is $13,578 and
$9,248, respectively, related to the notes payable to officers; $36,102 and
$17,704, respectively, related to the note payable to stockholder; and $2,000 at
December 31, 1995, related to the convertible note payable to stockholder.
Subsequent to year-end, in connection with the acquisition of the Company by
JMAR, the past-due interest accrued through May 1996, related to the note
payable to stockholder, was secured by a interest-free promissory note
stipulating repayment over 12 months.
At December 31, 1995, future principal payments are as follows:
<TABLE>
<S> <C>
1996 $ 42,869
1997 147,284
1998 104,561
1999 62,957
2000 53,433
----------
$ 411,104
==========
</TABLE>
5. Commitments and Contingencies
The Company leases its facility and office equipment under operating leases with
initial terms of three years. At December 31, 1995, future minimum payments
required under noncancelable operating leases, are as follows:
<TABLE>
<S> <C>
1996 $ 48,750
1997 16,000
--------
$ 64,750
========
</TABLE>
13
<PAGE> 14
Rental expense for the years ended December 31, 1995 and 1994, was approximately
$63,000 and $115,000, respectively.
The Company is, from time to time, involved in various legal proceedings, most
of which are routine litigation in the normal course of business. In the opinion
of management, after consultation with legal counsel, the resolution of these
matters will not have a material adverse impact on the Company's financial
position or results of operations.
6. Subsequent Event
On May 23, 1996, approximately 94 percent of the outstanding common stock of the
Company was acquired by JMAR through a private tender offer to the stockholders
of the Company (the "Sellers"). As consideration for the acquisition, JMAR
issued to the Sellers an aggregate of 1,357,869 shares of its Common Stock,
1,050,210 of which went to the two majority stockholders and officers of the
Company. The stock issued to the majority stockholders is subject to the terms
of an escrow agreement until December 31, 1998. All of the shares issued by JMAR
are unregistered, however, such shares may be registered in the future pursuant
to piggyback registration rights granted to the Sellers.
In addition, concurrent with the closing, JMAR loaned $400,000 of its funds to
the Company (in addition to $100,000 previously advanced) and agreed to advance
an additional $1,000,000 over an eighteen month period to be used by the Company
for equipment purchases and working capital purposes.
In connection with the acquisition, the Company entered into agreements with
several of its creditors which reduced the related liabilities due as of
December 31, 1995 by approximately $850,000. The financial statements do not
reflect these reductions.
Unaudited proforma financial information reflecting the acquisition by JMAR,
including push down accounting and the aforementioned debt settlements is as
follows, as of December 31, 1995:
<TABLE>
<CAPTION>
Unaudited
Proforma
----------
<S> <C>
Cash $ 516,651
Other current assets 963
----------
Total current assets 517,614
Property, Plant & Equipment, net 1,713,098
Goodwill and other assets 408,851
----------
Total assets $2,639,563
==========
Current liabilities $ 319,213
Long-term liabilities 99,800
Payable to JMAR 500,000
Stockholders' equity 1,720,550
----------
Total liabilities & stockholders' equity $2,639,563
==========
</TABLE>
14
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
Board of Directors
California ASIC Technical Services, Inc.
We have audited the accompanying balance sheet of California ASIC Technical
Services, Inc. as of December 31, 1993 and the related statements of operations,
stockholders' equity 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
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 California ASIC Technical
Services, Inc. as of December 31, 1993, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
California ASIC Technical Services, Inc. will continue as a going concern. As
discussed in Note 2 to the financial statements, the Company's limited sales,
losses from operations and liquidity problems raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
CORBIN & WERTZ
Irvine, California
February 25, 1994, except
as to Note 11, which is as
of March 5, 1994
15
<PAGE> 16
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
BALANCE SHEET
December 31, 1993
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash (Note 8) $ 120,157
Accounts receivable, less allowance for
doubtful accounts of $3,900 (Note 8) 38,641
Prepaid expenses and other 4,187
---------
Total current assets 162,985
---------
Property and equipment, net (Notes 2 and 3) 191,325
Deposits 3,414
---------
$ 357,724
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 78,183
Accrued interest (Notes 4 and 5) 9,431
Accrued salaries and related taxes (Note 9) 66,234
Note payable (Note 5) 24,000
Income taxes payable (Note 6) 1,600
---------
Total current liabilities 179,448
---------
Note payable to stockholder (Note 4) 20,071
---------
Advances payable to stockholder (Note 9) 15,000
---------
Deferred rent (Note 10) 15,094
---------
Commitments (Note 10)
Stockholders' equity (Note 7):
Common stock - $.001 par value, 25,000,000
shares authorized, 11,650,000 shares issued
and outstanding 11,650
Additional paid-in capital 347,100
Accumulated deficit (230,639)
---------
Total stockholders' equity 128,111
---------
$ 357,724
=========
</TABLE>
See accompanying notes to financial statements
16
<PAGE> 17
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
STATEMENT OF OPERATIONS
For The Year Ended December 31, 1993
<TABLE>
<S> <C>
Revenues (Notes 2 and 8):
Product sales $ 152,651
Design and engineering services 88,515
---------
241,166
---------
Costs and expenses:
Cost of product sales 78,844
Salary and related expenses (Note 9) 66,234
Rent (Note 10) 40,278
Consulting services (Note 9) 150,430
Depreciation (Note 2) 11,945
Other general and administrative 102,289
---------
Total expenses 450,020
---------
Other income (expense):
Interest income 1,789
Interest expense (5,936)
---------
Net loss before provision for income taxes (213,001)
Provision for income taxes (Note 6) 1,600
---------
Net loss $(214,601)
=========
</TABLE>
See accompanying notes to financial statements
17
<PAGE> 18
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For The Year Ended December 31, 1993
<TABLE>
<CAPTION>
Common Stock Total
------------------------------ Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993
(Note 1) 4,424,170 $ 4,424 $ 215,594 $ (16,038) $ 203,980
Issuance of shares to
effect acquisition
(Note 1) 1,054,000 1,054 (1,054)
Shares issued for
services (Note 7) 121,830 122 48,610 48,732
Shares issued for
cash (Note 7) 112,500 113 44,887 45,000
Two-for-one stock
split (Note 7) 5,712,500 5,712 (5,712)
Shares issued for
cash (Note 7) 225,000 225 44,775 45,000
Net loss (214,601) (214,601)
----------- ----------- ----------- ----------- -----------
Balance at
December 31, 1993 11,650,000 $ 11,650 $ 347,100 $ (230,639) $ 128,111
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
18
<PAGE> 19
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
STATEMENT OF CASH FLOWS
For The Year Ended December 31, 1993
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $(214,601)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 11,945
Provision for doubtful accounts 3,900
Loss on disposal of assets 20,000
Write-off of acquisition costs 98,188
Compensation expense recorded related to
stock issued for services 48,732
Change in operating assets and liabilities:
Accounts receivable (36,094)
Prepaid expenses (4,187)
Accounts payable 78,183
Accrued interest 5,936
Accrued salaries and related 66,234
Deferred rent 15,094
Income taxes payable 1,600
---------
Net cash provided by operating activities 94,930
---------
Cash flows from investing activities:
Cash paid for property additions (174,149)
Increase in other assets (3,414)
---------
Net cash used in investing activities (177,563)
---------
Cash flows from financing activities:
Principal payments on note payable to stockholder (22,489)
Principal payment on note payable (1,000)
Advances payable to stockholder 15,000
Collection of stock subscription receivable 100,000
Sale of stock 90,000
---------
Net cash provided by financing activities 181,511
---------
Net increase in cash 98,878
Cash beginning of year 21,279
---------
Cash end of year $ 120,157
=========
</TABLE>
Continued
See accompanying notes to financial statements
19
<PAGE> 20
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
STATEMENT OF CASH FLOWS - CONTINUED
For The Year Ended December 31, 1993
Supplemental disclosures of cash flow information:
There was no cash paid during the year for interest or income taxes.
See accompanying notes to financial statements
20
<PAGE> 21
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For The Year Ended December 31, 1993
NOTE 1 - ORGANIZATION
Organization
Intrepid, Inc. was incorporated on August 17, 1987 under the laws of the State
of Nevada. Intrepid, Inc. was originally organized to acquire and develop real
estate. Intrepid, Inc. never commenced formal operations.
California ASIC Technical Services, Inc. (OLD-CATS) was incorporated on April 7,
1992, under the laws of the State of Nevada.
On February 26, 1993, OLD-CATS effected a reverse acquisition of Intrepid, Inc.
In connection with the transaction, Intrepid, Inc. issued 4,424,170 shares of
its common stock to the stockholders of OLD-CATS. For financial reporting
purposes, the shares issued by Intrepid, Inc. are considered outstanding since
the beginning of the year and the 1,054,000 shares retained by the stockholders
of Intrepid, Inc. are reflected as consideration issued to consummate the
reverse acquisition.
The reverse acquisition has been accounted for by the purchase method of
accounting, however, there were no assets acquired or liabilities assumed. No
value has been ascribed to the consideration given to consummate the reverse
acquisition. There were no operations of Intrepid, Inc. from the date of
acquisition.
Pro-forma summary financial information presenting the results of operations as
if the acquisition had occurred at the beginning of the period is not shown
since Intrepid, Inc. has been inactive since 1992 and its operating expenses
were insignificant.
Subsequent to the reverse acquisition, Intrepid, Inc. changed its name to
California ASIC Technical Services, Inc. (CATS) and merged OLD-CATS into CATS.
CATS is engaged in the design, fabrication, assembly and testing of custom
integrated circuits for the electronics industry.
Continued
21
<PAGE> 22
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1993
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation
The financial statements have been prepared on a going concern basis which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The Company's ability to continue to generate
positive cash flows depends on its ability to maintain a level of revenues
sufficient to meet its obligations and sustain its operations. The Company has
had limited sales to a small number of customers to date, has sustained
operating losses since inception and will have to acquire capital equipment and
hire additional personnel to maintain a sufficient level of revenues. The
Company is currently trying to raise capital through a private placement
offering and through other means. If the Company is unsuccessful in its attempt
to raise capital, there would be substantial doubt about its ability to continue
as a going concern for a reasonable period of time. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation, and
are being depreciated on a straight-line basis over estimated useful lives of
five to seven years. Routine repairs and maintenance are charged to expense as
incurred.
Revenue Recognition
Revenue from product sales is recognized upon shipment. Revenue from design and
engineering services is recognized ratably over the period services are
performed.
Continued
22
<PAGE> 23
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1993
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF
PRESENTATION, continued
Income Taxes
CATS accounts for income taxes under Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires the asset
and liability method of accounting for income taxes. Under SFAS 109, deferred
income taxes are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes the enactment
date.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of December 31, 1993:
<TABLE>
<S> <C>
Computer hardware and software $173,090
Machinery and equipment 31,437
Furniture and fixtures 3,525
--------
208,052
Less accumulated depreciation (16,727)
--------
Property and equipment, net $191,325
========
</TABLE>
NOTE 4 - NOTE PAYABLE TO STOCKHOLDER
CATS has a note payable to its majority stockholder as of December 31, 1993 in
the amount of $20,071. The note bears interest at 10% per annum and is due on
demand. The majority stockholder does not intend to require payment before
January 1, 1995. Accordingly, the note payable has been classified as long-term
in the accompanying balance sheet.
Continued
23
<PAGE> 24
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1993
NOTE 5 - NOTE PAYABLE
CATS has an unsecured note payable to an unrelated party as of December 31, 1993
in the amount of $24,000 that bears interest at 10% per annum and is past due.
NOTE 6 - INCOME TAXES
No provision for income taxes, other than state minimum taxes, for the year
ended December 31, 1993 has been recorded because of the losses incurred by
CATS.
As of December 31, 1993, CATS has net operating loss carryforwards for federal
tax purposes approximating its accumulated deficit. The deferred tax asset
related to the net operating loss carryforwards has been reduced in its entirety
by a valuation allowance due to the uncertainty of realization. The valuation
allowance changed in the current year only to the extent that new net operating
loss carryforwards were generated. The Tax Reform Act of 1986 includes
provisions which may limit the net operating loss carryforwards available for
use in any given year if certain events, including a change in stock ownership,
should occur.
NOTE 7 - STOCKHOLDERS' EQUITY
CATS issued 4,424,170 shares of stock to the stockholders of OLD- CATS in
exchange for 100% of OLD-CATS stock in connection with the reverse acquisition
(see Note 1). For purposes of the accompanying statement of stockholders'
equity, these shares have been reflected as outstanding since the beginning of
the period. The 1,054,000 shares retained by the stockholders' of CATS have been
reflected as issued to effect the reverse acquisition.
During March through September 1993, the Company issued 121,830 shares of common
stock for services performed by employees and directors of CATS. Compensation
expense at $.40 per share, the estimated fair value of the shares at the date of
issuance, was recorded in the accompanying statement of operations.
Continued
24
<PAGE> 25
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1993
NOTE 7 - STOCKHOLDERS' EQUITY, continued
CATS sold 87,500 shares of common stock in March and 25,000 shares of common
stock in September at $.40 a share for cash.
On October 8, 1993, CATS effected a 2 for 1 stock split.
During November 1993, CATS sold 225,000 shares of common stock at $.20 a share
for cash.
NOTE 8 - CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
The Company, at times, has cash with a bank in excess of FDIC insured amounts.
The Company's revenues in 1993 were derived from a small number of customers.
One customer accounted for 53% and another accounted for 27% of the Company's
1993 revenues.
The Company had receivables due from three separate customers that represent
17%, 26% and 52%, respectively, of total outstanding accounts receivable as of
December 31, 1993. All of these receivables were collected subsequent to year
end.
NOTE 9 - RELATED PARTY TRANSACTIONS
The accrued salaries and related taxes of $66,234 represents amounts accrued for
services rendered by the majority stockholder.
The Company's President has provided services to the Company pro bono since
inception of the Company. No amounts have been expensed in the accompanying
statement of operations for his services.
The Company paid approximately $8,000 during 1993 to a stockholder for
consulting services rendered and $11,000 to a director for consulting services
rendered.
Continued
25
<PAGE> 26
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1993
NOTE 9 - RELATED PARTY TRANSACTIONS, continued
In connection with the note payable to stockholder (Note 4), $22,489 was repaid
to the majority stockholder during 1993.
The Company has also accrued as of December 31, 1993, $15,000 in amounts owed to
the majority stockholder for expense reimbursements, which is included in
advances payable to stockholder in the accompanying balance sheet.
NOTE 10 - COMMITMENTS
The Company leases its facility under an operating lease that expires in 1998.
The Company's facility lease included free rent during part of 1993 and
escalating rents through the lease term. The Company is expensing its rent
obligation on a straight-line basis over the life of the lease.
Future minimum rental payments required under the noncancelable operating lease
are as follows:
<TABLE>
<S> <C>
1994 $ 36,000
1995 38,000
1996 40,000
1997 42,000
1998 7,000
--------
$163,000
========
</TABLE>
NOTE 11 - SUBSEQUENT EVENT
The Company obtained a line of credit on March 5, 1994 in the amount of $250,000
from a stockholder. This line of credit is to be used for the acquisition of
certain processing equipment. The line of credit bears interest at 10% per annum
on outstanding amounts and will be repaid in equal monthly principal and
interest installments over five years. The line of credit agreement calls for
the release of funds to the Company in the amount of $150,000 on March 5, 1994,
$50,000 on April 9, 1994 and $50,000 on May 14, 1994. The Company received
$150,000 on March 5, 1994.
Continued
26
<PAGE> 27
CALIFORNIA ASIC TECHNICAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
For The Year Ended December 31, 1993
NOTE 11 - SUBSEQUENT EVENT, continued
The Company issued a stock option to the aforementioned stockholder for the
right to acquire 500,000 shares of common stock at a price of $.50 per share.
The stock option expires after five years.
27
<PAGE> 28
JMAR INDUSTRIES, INC. AND CALIFORNIA ASIC TECHNICAL SERVICES, INC.
CONSOLIDATED PROFORMA BALANCE SHEET
March 31, 1996
(Unaudited)
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents $ 1,869,662
Accounts receivable, net 1,875,018
Notes receivable 539,183
Inventories 2,992,861
Prepaid expenses and other 247,771
------------
Total current assets 7,524,495
Notes receivable 126,069
Receivable from officer 70,360
Property and equipment, net 2,220,745
Equity securities, at cost 621,000
Other assets, net 314,143
Goodwill, net 914,988
------------
TOTAL ASSETS $ 11,791,800
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 882,139
Accrued liabilities 611,603
Accrued payroll and related costs 403,002
Customer deposits 310,085
Notes payable 1,252,071
------------
Total current liabilities 3,458,900
------------
Convertible notes payable 1,545,377
------------
Notes payable, net of current portion 189,800
------------
Stockholders' equity:
Common stock 158,553
Additional - paid in capital 33,648,511
Accumulated deficit (27,209,341)
------------
Total stockholders' equity 6,597,723
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,791,800
============
</TABLE>
28
<PAGE> 29
JMAR INDUSTRIES, INC. AND CALIFORNIA ASIC TECHNICAL SERVICES, INC.
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
California
ASIC
JMAR Technical
Industries, Services, Proforma Proforma
Inc. Inc. Adjustments Combined
-------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sales............................................ $ 12,210,490 $ 190,308 $ - $ 12,400,798
Cost of sales.................................... 7,331,070 183,165 (1) 125,000 7,639,235
-------------- ---------------- ---------------- ----------------
Gross profit................................... 4,879,420 7,143 (125,000) 4,761,563
-------------- ---------------- ---------------- ----------------
Operating expenses:
Selling, general and administrative............ 3,812,433 439,405 (2) 160,000 4,411,838
Research, development and
engineering.................................. 881,800 - - 881,800
-------------- ---------------- ---------------- ----------------
Total operating expenses................ 4,694,233 439,405 160,000 5,293,638
-------------- ---------------- ---------------- ----------------
Income (loss) from operations.................... 185,187 (432,262) (285,000) (532,075)
Interest and other income (expense), net......... 212,240 47,693 - 259,933
Interest expense................................. (321,162) (57,453) - (378,615)
-------------- ---------------- ---------------- ----------------
Net income (loss)................................ $ 76,265 $ (442,022) $ (285,000) $ (650,757)
============== ================ ================ ================
Weighted average common shares
outstanding.................................... 15,559,988
===============
Net loss per common share........................ $ (0.04)
===============
</TABLE>
Notes to Proforma Financial Statement:
(1) Additional depreciation resulting from the acquisition.
(2) Amortization of goodwill resulting from the acquisition.
29
<PAGE> 30
JMAR INDUSTRIES, INC. AND CALIFORNIA ASIC TECHNICAL SERVICES, INC.
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
California
ASIC
JMAR Technical
Industries, Services, Proforma Proforma
Inc. Inc. Adjustments Combined
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sales............................................ $ 2,457,395 $ - $ - $ 2,457,395
Cost of sales.................................... 1,419,028 - - 1,419,028
-------------- --------------- --------------- ---------------
Gross profit................................... 1,038,367 - - 1,038,367
-------------- --------------- --------------- ---------------
Operating expenses:
Selling, general and administrative............ 983,731 130,195 (1) 71,250 1,185,176
Research, development and
engineering.................................. 273,860 - - 273,860
-------------- --------------- --------------- ---------------
Total operating expenses................ 1,257,591 130,195 71,250 1,459,036
-------------- --------------- --------------- ---------------
Loss from operations............................. (219,224) (130,195) (71,250) (420,669)
Interest and other income (expense), net......... (62,688) - - (62,688)
Interest expense................................. (74,201) (9,953) - (84,154)
-------------- --------------- --------------- ---------------
Net loss......................................... $ (356,113) $ (140,148) $ (71,250) $ (567,511)
============== =============== =============== ===============
Weighted average common shares
outstanding.................................... 15,697,632
===============
Net loss per common share........................ $ (0.04)
===============
</TABLE>
Note to Proforma Financial Statement:
(1) Amortization of goodwill and additional depreciation resulting from the
acquisition.
30
