<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
May 30, 1996
---------------------------------
Date of Report
(Date of Earliest Event Reported)
TOPRO, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Colorado 84-1042227
- --------------------------------- ----------------------------
(State or other jurisdiction of I.R.S. Employer I. D. Number
incorporation or organization)
2525 West Evans Avenue, Denver, Colorado 80219
- ----------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (303) 935-1221
--------------
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 30, 1996, Topro, Inc. ("Registrant"), through a merger
undertaken by a newly formed subsidiary, acquired all the outstanding capital
stock of Visioneering Holding Corporation ("VI") an independent control systems
integrator located in Cypress, California. VI's core business parallels that
of the Registrant's, with emphasis on some different/additional markets and a
generally more technically sophisticated product offering in the food and
pharmaceutical industries. VI is focused on the following vertical markets:
food processing, pharmaceutical, and discrete manufacturing. The Registrant
acquired all of the outstanding capital stock of VI in exchange for a maximum
of 1,600,000 restricted shares of the Registrant's Common Stock, all of which
have been escrowed, to be released to the shareholders of VI upon completion of
an audit of the December 31, 1995 financial statements and a subsequent review
of the April 30, 1996 financial statements and acceptance of proposed
adjustments, if any. In addition, to the acquisition the Registrant guaranteed
the bank debt of Vision Engineering Inc. to Garfield
<PAGE> 2
Bank of Montebello, CA in the amount of $1,165,161.
VI corporate headquarters operates from a modern 31,000 square foot
facility in Cypress, CA and has satellite engineering and sales offices in:
Sacramento, CA (6,700 sq ft), Phoenix, AZ(5,900 sq ft), Atlanta, GA (4,300 sq
ft), and Chicago, IL(3,900 sq ft), from which it serves certain accounts. VI
also has sales offices in Boston and San Juan, Puerto Rico. VI staff currently
numbers 95, with over 85 engineers and sales personnel and 10 corporate
personnel. The Registrant intends to continue the business of VI, having
effected the transaction in order to establish a market presence for its
Control Systems Integration operations in the regions served by VI. The
Atlanta office of VI will be merged into the Registrant's Atlanta offices of
MDCS, Inc. The Phoenix office of VI will transfer reporting functions to the
Registrant's Denver offices.
In connection with the Merger, the past President of VI, Mr. Michael
Taylor entered into an employment agreement with the Registrant for an initial
term of 6 months. In addition to the employment agreement, a 24 month
consulting agreement was entered into commencing six months after the date of
the employment agreement. Mr. Taylor will also become a director of the
Registrant. Kathleen Taylor, the past secretary and Vice President of
Technical Support, entered into an employment agreement for an initial term of
five months. In addition to the employment agreement, a 24 month consulting
agreement was entered into commencing five months after the date of the
employment agreement.
Prior to this transaction, there was no material relationship between
VI and the Registrant or any of its affiliates, any director or officer of the
registrant, or any associate of such director or officer.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited financial statements of VI for the 12 months ending
December 31, 1995 and 1994.
(b) This form is filed to fulfill the financial statement
requirements concerning the acquisition of VI, a wholly owned subsidiary,
accounted for as a purchase method. VI's previous fiscal year end was December
31. The pro forma balance sheet and income statements set forth the unaudited
interim results for the nine months ending March 31, 1996. The pro forma
financial statements have been restated to reflect the 9 months of operation of
VI for the periods ending March 31, 1996. The unaudited pro forma income
statement is for the period ending June 30, 1995 and has been restated to
reflect the 12 months of operations of VI. The combined pro forma income
statement was consolidated to show the cumulative effect of the acquisitions of
MDCS, Inc., ACT, Inc. and Visioneering Holding Corporation. The March 31, 1995
statement of operations of ACT, Inc. reflects 12 months of operations recast
for the acquisition expenses reported in previous 8K filings. The March 31,
1996 pro forma balance sheet reflects the consolidated position of the
Registrant, MDCS, Inc., ACT, Inc., and Visioneering Holding
2
<PAGE> 3
Corporation.
(C) Exhibits. The following exhibit was previously filed:
2.1 Agreement and Plan of Merger dated May 17, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Topro, Inc.
Date: August 13, 1996 By: /s/ John Jenkins
--------------- ---------------------------------
John P. Jenkins
President and CEO
3
<PAGE> 4
TOPRO, INC.
NOTES TO THE PRO FORMA FINANCIAL INFORMATION
On May 30, 1996, Topro, Inc. ("Registrant"), through a merger
undertaken by a newly formed subsidiary, acquired all the outstanding capital
stock of Visioneering Holding Corporation ("VI") an independent control systems
integrator located in Cypress, California. The Registrant acquired all of the
outstanding capital stock of VI, in exchange for a maximum of 1,600,000
restricted shares of the Registrant's Common Stock of which 1,600,000 shares
have been escrowed, to be released to the shareholders of VI upon review of the
April 30, 1996 balance sheet of VI and acceptance of proposed adjustments if
any. With the completion of the attached audited financial statements it is
anticipated less than the total maximum shares will be issued. The projections
utilize a gross issuance of 1,200,000 shares of the Registrant's common stock
for the acquisition of VI common stock.
The March 31, 1996 pro forma income statement of VI, has been restated
and adjusted to account for the write up of certain assets acquired in the
transaction relating to fixed assets increase of $150,000 and capitalization of
Software Development costs of $500,000. Interest expense of $67,500 was
adjusted to reflect the issuance of the subsequent $1,000,000 9% Convertible
Debenture in June 1996. Goodwill amortization of $129,899 for the period was
recorded. Additionally deferred note costs of $6,964 were amortized to reflect
the costs associated with the convertible debenture issued. Additional
depreciation expense and amortization of software costs were included in the
March 31, 1996 statement of operations for the period. The June 30, 1995 pro
forma income statement was adjusted to reflect the respective adjustments
described above for the period then ended.
The accompanying condensed combined pro forma balance sheet presents
the financial position of the Registrant as if the merger between the
Registrant and VI had occurred on March 31, 1996. The balance sheet was
prepared utilizing the April 30, 1996 balance sheet of VI. The pro forma
statement of operations combined the statements of operations of the Registrant
for the years ended June 30, 1995 and interim period ending March 31, 1996. The
VI financial statements were recast to reflect nine months of operations for
the period ending March 31, 1996. The combined consolidated income statement
for the period ending June 30, 1995 reflects the recast operating results of VI
for the twelve months ending June, 30, 1995. The March 31, 1996 Topro, Inc.
consolidated income statements reflects the 3 months of operation of Advanced
Control Technology, Inc. Additionally, 6 months of operations for Advanced
Control Technology, Inc. ending 12/31/96 was included to reflect 9 of
operations ended March 31, 1996 for the acquisition of ACT included in previous
8-K filings. The combined consolidated income statements for June 30, 1995
and March 31, 1996 reflect the combined acquisitions of MDCS, Inc (pooling of
interest), Advanced Control Technology, Inc. (purchase method), and
Visioneering Holding Corporation (purchase method) for the respective periods.
These statements are not necessarily indicative of future operations
or the actual results that would have occurred had the transactions been
consummated at the beginning
4
<PAGE> 5
of the periods indicated. The pro forma condensed combined financial
statements should be read in conjunction with the audited historical financial
statements of VI and notes thereto of the Registrant's financial statements
included in it annual report on Form 10-K and VI included elsewhere in this
8-K.
5
<PAGE> 6
TOPRO INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
PURCHASE OF VISIONEERING CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
TOPRO, INC. VISIONEERING TOPRO, INC.
CONSOLIDATED CORPORATION PRO FORMA CONSOLIDATED PRO
03/31/96 04/30/96 ADJUST FORMA
-------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 359,408 $ (7,245) $ 435,000 $ 787,163
Cash - Certificate of Deposit 350,000 350,000
Receivables:
Trade, net of allowance for doubtful accounts 3,245,875 1,772,187 5,018,062
Other 178,088 0 178,088
Fire damage claim 34,144 34,144
Cost and estimated earnings in excess of
billings on uncompleted contracts 1,853,357 411,292 2,264,649
Inventories 151,346 0 151,346
Prepaid expense 256,423 289,747 546,170
Assets of discontinued operations 740,380 740,380
Prepaid income taxes 0 110,529 110,529
-------------------------------------------------------------
Total current assets 7,169,021 2,576,510 435,000 10,180,531
INVESTMENT 0 0 0
PROPERTY AND EQUIPMENT, AT COST:
Building and land 850,000 0 850,000
Equipment, fixture & equipment 1,631,855 1,772,456 (939,146) 2,465,165
Vehicles 272,782 43,530 316,312
Leasehold improvements 408,344 435,389 843,733
Software development costs 0 0 500,000 500,000
-------------------------------------------------------------
3,162,981 2,251,375 (439,146) 4,975,210
Less accumulated depreciation (1,172,871) (1,089,146) 1,089,146 (1,172,871)
-------------------------------------------------------------
Net property and equipment 1,990,110 1,162,229 650,000 3,802,339
OTHER ASSETS
Goodwill - ACT & Visioneering 2,431,082 0 2,597,980 5,029,062
Other assets 336,732 74,831 65,000 476,563
-------------------------------------------------------------
TOTAL ASSETS $ 11,926,945 $ 3,813,570 $ 3,747,980 $ 19,488,494
=============================================================
</TABLE>
6
<PAGE> 7
TOPRO INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
PURCHASE OF VISIONEERING CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
TOPRO, INC. VISIONEERINGC TOPRO, INC.
CONSOLIDATED ORPORATION PRO FORMA CONSOLIDATED PRO
03/31/96 04/30/96 ADJUST FORMA
--------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Line-of-credit $ 867,795 $ 473,291 $ 1,341,086
Current portion of long-term debt:
Related parties 80,000 0 80,000
Financial institutions and other 406,140 236,285 642,425
Bridge loans 62,500 0 62,500
Accounts payable 3,311,835 1,648,440 (500,000) 4,460,275
Billings in excess of costs and estimated
earnings on uncompleted contracts 555,563 579,021 1,134,584
Accrued expenses 831,302 920,019 1,751,321
Deferred gain - bldg 24,342 0 24,342
--------------------------------------------------------------
Total current liabilities 6,139,477 3,857,056 (500,000) 9,496,532
LONG-TERM DEBT, NET OF CURRENT PORTION:
Renaissance 2,500,000 0 1,000,000 3,500,000
Financial institutions and other 642,025 804,494 1,446,519
--------------------------------------------------------------
Total long-term debt 3,142,025 804,494 1,000,000 4,946,519
DEFERRED GAIN
Sale of bldg 50,714 50,714
Sale of DMC investment 297,983 297,983
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00 per share;
authorized 10,000,000 shares, no shares - - -
issued
Common stock, par value $.0001 per share;
authorized 200,000,000 shares;8,013,654
shares issued and outstanding 6/30/96 604 13,683 (13,563) 724
Additional paid-in capital 6,886,786 164,398 2,235,482 9,286,666
Accumulated deficit (4,590,644) (1,026,060) 1,026,060 (4,590,644)
--------------------------------------------------------------
Total stockholders' equity 2,296,746 (847,979) 3,247,979 4,696,746
--------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 11,926,945 $ 3,813,571 $ 3,747,979 $19,488,494
==============================================================
</TABLE>
7
<PAGE> 8
TOPRO INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
PURCHASE OF VISIONEERING CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995
-------------------------------------------------------------------------
TOPRO, INC. VISIONEERING TOPRO, INC.
CONSOLIDATED ACT, INC. CORPORATION PRO FORMA CONSOLIDATED
06/30/95 03/31/95 06/30/95 ADJUST PRO FORMA
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Control systems integration $10,911,258 $10,473,483 $11,064,511 $ 32,449,252
Distributorship 2,103,455 2,103,455
-------------------------------------------------------------------------
13,014,713 10,473,483 11,064,511 34,552,707
COST OF SALES:
Control systems integration 7,778,519 7,806,241 6,952,019 22,536,779
Distributorship 1,858,155 1,858,155
-------------------------------------------------------------------------
9,636,674 7,806,241 6,952,019 24,394,934
-------------------------------------------------------------------------
GROSS PROFIT 3,378,039 2,667,242 4,112,492 10,157,773
COMMISSION INCOME 461,872 0 461,872
-------------------------------------------------------------------------
NET REVENUE 3,839,911 2,667,242 4,112,492 10,619,645
EXPENSES:
Sales expense 1,012,638 1,034,909 2,047,547
General and administrative expense 2,598,961 1,230,509 4,262,646 150,000 8,242,116
-------------------------------------------------------------------------
3,611,599 2,265,418 4,262,646 150,000 10,289,663
-------------------------------------------------------------------------
OTHER INCOME (EXPENSES)
Gain (loss) on sales of assets 157,839 0 (76,079) 81,760
Other (expenses) income 2,384 3,467 7,009 12,860
Interest expense (182,586) (353,707) (71,372) (99,286) (706,951)
Claims expense 0 0 0 0 0
Goodwill amortization 0 (148,330) 0 (173,199) (321,529)
-------------------------------------------------------------------------
(22,363) (498,570) (140,442) (272,484) (933,859)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 205,949 (96,746) (290,596) (422,484) (603,877)
INCOME TAX BENEFIT (PROVISION):
Current 0 (28,167) 97,435 0 69,268
-------------------------------------------------------------------------
Total income tax benefit (provision) 0 (28,167) 97,435 0 69,268
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY
ITEM $ 205,949 $ (124,913) $ (193,161 $ (422,484) $ (534,609)
=========================================================================
NET INCOME (LOSS) PER SHARE:
Continuing operations $0.04 ($0.07)
----------- -----------
SHARES OUTSTANDING 6/30/96 4,691,354 1,722,000 1,600,000 8,013,654
=========================================================================
</TABLE>
NOT REPORTED AS A WEIGHTED AVERAGE PER GAAP
8
<PAGE> 9
TOPRO INC., AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
PURCHASE OF VISIONEERING CORPORATION
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, 1996
----------------------------------------------------------------------------------
TOPRO, INC. ACT, INC. VISIONEERING TOPRO, INC.
CONSOLIDATED 6 MONTHS CORPORATION PRO FORMA CONSOLIDATED
3/31/96 12/31/95 03/31/96 ADJUST PRO FORMA
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Control systems integration $ 11,235,777 $ 2,605,129 $ 7,167,891 $ 21,008,797
----------------------------------------------------------------------------------
11,235,777 2,605,129 7,167,891 21,008,797
COST OF SALES:
Control systems integration 8,552,439 2,228,112 3,770,272 14,550,823
----------------------------------------------------------------------------------
8,552,439 2,228,112 3,770,272 14,550,823
----------------------------------------------------------------------------------
GROSS PROFIT 2,683,338 377,017 3,397,619 6,457,974
EXPENSES:
Sales expense 680,477 498,541 0 1,179,018
General and administrative expense 2,135,293 582,220 4,592,927 112,500 7,422,940
----------------------------------------------------------------------------------
2,815,770 1,080,761 4,592,927 112,500 8,601,958
INCOME (LOSS) FROM SYSTEMS INTEGRATION (132,432) (703,744) (1,195,308) (1,327,740)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS -
TECH SALES (483,449) 0 0 (483,449)
OTHER INCOME (EXPENSE)
Gain on sale of assets 85,345 10,436 0 95,781
Other (expense) income 52,547 73 (6,583) 46,037
Interest expense (147,646) (172,057) (104,573) (74,464) (498,740)
Claims expense 0 0 0 0
Goodwill amortization 0 (74,165) 0 (129,899) (204,064)
----------------------------------------------------------------------------------
(9,754) (235,713) (111,156) (204,363) (560,986)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (625,635) (939,457) (1,306,464) (316,863) (3,188,419)
INCOME TAX BENEFIT (PROVISION):
Current 0 (7,831) 69,315 61,484
----------------------------------------------------------------------------------
Total income tax benefit (provision) 0 (7,831) 69,315 61,484
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY ITEM (625,635) (947,288) (1,237,149) (316,863) (3,126,935)
==================================================================================
NET INCOME (LOSS) PER SHARE:
Continuing operations ($0.10) ($0.39)
SHARES OUTSTANDING 6/30/96 6,413,354 1,600,000 8,013,354
==================================================================================
</TABLE>
NOT REPORTED AS A WEIGHTED AVERAGE PER GAAP
9
<PAGE> 10
TOPRO INC., AND SUBSIDIARIES
ASSUMPTIONS
PURCHASE OF VISIONEERING CORPORATION
(UNAUDITED)
<TABLE>
<S> <C> <C> <C>
NOTES PAYABLE
9% Convertible Debentures - Renaissance 1,000,000
--------------
1,000,000
==============
DEFERRED NOTE COSTS
9% Convertible Debentures - closing costs 65,000
ASSET WRITE-UP - YEARLY EXPENSE
Depr expense 6 years 25,000
Amortization of Software over 4 years 125,000
--------------
150,000
INCOME STATEMENT ADJUSTMENTS - 3/31/96
Goodwill amortization 209,899
Interest expense
9% Convertible Debentures - Renaissance 67,500
Deferred note costs 6,964
INCOME STATEMENT ADJUSTMENTS - 06/30/95
Goodwill amortization - yearly 15 Years 279,865
Interest Expense
9% ConvertiblesDebentures - Renaissance Capital 90,000
Deferred note costs 9,286
STOCK EXCHANGED & GOODWILL
Assets 3,813,570
Liability (4,661,549)
--------------
Net assets purchased (847,980)
Total Shares 1,200,000 2.00 2,400,000
Net asset write up (650,000)
--------------
Total goodwill 03/31/96 2,597,980
==============
ASSET WRITE-UP
Building and land 0
Equipment, fixture & vehicles 150,000
Leasehold improvements 0
Software development costs 500,000
--------------
650,000
==============
EQUITY
Common stock, par value $.0001 per share;
Visioneering Corporation common stock (13,683)
Visioneering Corporation shares issued 1,200,000 0.0001 120
--------------
(13,523)
==============
Additional paid-in capital
Visioneering Corporation additional paid
in capital (164,398)
Visioneering Corporation shares issued 1,200,000 2,399,880
--------------
2,235,482
==============
Accumulated deficit
Visioneering Corporation accum deficit 1,026,060
==============
USE OF PROCEEDS
Working capital (435,000)
Fees Bathgate/McColley - Renaissance 3.5% (35,000)
Fees Renaissance 3.0% (30,000)
--------------
(500,000)
==============
</TABLE>
10
<PAGE> 11
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT - HEIN + ASSOCIATES LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
INDEPENDENT AUDITOR'S REPORT - MCGLADREY & PULLEN, LLP . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
COMBINED BALANCE SHEET - December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
COMBINED STATEMENTS OF OPERATIONS - For the Years Ended December 31, 1995 and 1994 . . . . . . . . . . . . F-5
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - For the Years Ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
COMBINED STATEMENTS OF CASH FLOWS - For the Years Ended December 31, 1995 and 1994 . . . . . . . . . . . . F-7
NOTES TO COMBINED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
</TABLE>
F-1
<PAGE> 12
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Boards of Directors
Vision Engineering Corp. and Vision Fabrication, Inc.
Cypress, California
We have audited the accompanying combined balance sheet of Vision Engineering
Corp. and Vision Fabrication, Inc. (collectively the "Company") as of December
31, 1995, and the related combined statements of operations, stockholders'
equity (deficit), and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Vision
Engineering Corp. and Vision Fabrication, Inc. as of December 31, 1995, and the
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company's loss from operations, and their working capital and
net capital deficiencies raise substantial doubt about the entity's ability to
continue as a going concern. Management's plans in regard to these matters are
described in Note 3. The combined financial statements do not include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amounts and classification of liabilities that might result from
the outcome of this uncertainty.
HEIN + ASSOCIATES LLP
Certified Public Accountants
Orange, California
July 30, 1996
F-2
<PAGE> 13
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Board of Directors
Vision Engineering Corp.
Cypress, California
We have audited the accompanying statements of operations, stockholders' equity
(deficit), and cash flows of Vision Engineering Corp. for the year ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined 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 aspects, the results of operations and cash flows of Vision
Engineering Corp. for the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
MCGLADREY & PULLEN, LLP
Certified Public Accountants
Anaheim, California
September 22, 1995
F-3
<PAGE> 14
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995
------------------
<S> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 937
Accounts receivable, net of allowance for doubtful accounts
of $80,000 1,277,377
Advance to employee/shareholder 40,092
Income tax receivable 152,529
Costs and estimated earnings in excess of billings
on uncompleted contracts 289,729
Prepaid expenses 36,647
----------------
Total current assets 1,797,311
PROPERTY AND EQUIPMENT, net 1,259,254
OTHER ASSETS 60,995
----------------
TOTAL ASSETS $ 3,117,560
================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Line-of-credit $ 550,000
Current portion of long-term debt:
Related parties 70,000
Financial institutions and other 464,985
Current portion of capital lease obligation 44,733
Accounts payable 1,108,789
Billings in excess of costs and estimated earnings on
uncompleted contracts 743,011
Accrued liabilities 797,142
----------------
Total current liabilities 3,778,660
----------------
LONG-TERM DEBT, net of current portion:
Related parties -
Financial institutions and other 111,417
----------------
Total long-term debt 111,417
----------------
CAPITAL LEASE OBLIGATION, less current portion 141,385
----------------
Total liabilities 4,031,462
----------------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 13,683
Additional paid-in capital 164,398
Retained earnings (1,091,983)
----------------
Total stockholders' equity (deficit) (913,902)
----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 3,117,560
================
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-4
<PAGE> 15
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------------
1995 1994
------------------ ------------------
(Note 1)
<S> <C> <C>
REVENUES $ 9,515,377 $ 10,768,845
COST OF SALES 5,776,424 6,243,328
---------------- ---------------
GROSS PROFIT 3,738,953 4,525,517
GENERAL AND ADMINISTRATIVE EXPENSE 5,243,976 3,895,447
---------------- ---------------
OPERATING INCOME (LOSS) (1,505,023) 630,070
---------------- ---------------
OTHER INCOME (EXPENSE):
Gain (loss) on sale of assets (12,159) (76,079)
Interest expense (135,782) (71,372)
Other (12,599) 2,052
---------------- ---------------
Total other expenses (160,540) (145,399)
---------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES (1,665,563) 484,671
INCOME TAX (BENEFIT) PROVISION:
Current (105,000) 124,116
Deferred (60,000) 63,000
---------------- ---------------
NET INCOME (LOSS) $ (1,500,563) $ 297,555
================ ===============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-5
<PAGE> 16
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON COMMON ADDITIONAL RETAINED TOTAL
STOCK STOCK TO PAID-IN EARNINGS STOCKHOLDERS
AMOUNT BE ISSUED CAPITAL (DEFIC(DEFICIT) EQUITY
---------- ---------- ---------- --------------- ------
<S> <C> <C> <C> <C> <C>
BALANCES, January 1, 1994, $ 10,896 $134,000 $ - $111,025 $ 255,921
Net Income - - - 297,555 297,555
--------- -------- ------- --------- --------
BALANCES, December 31, 1994 10,896 134,000 - 408,580 553,476
Shares issued for incorporation of Vision Fabrication 1,000 - 1,000 - 2,000
Shares issued to employees for compensation 2,031 - 82,530 - 84,561
Shares repurchased upon settlement of stockholder
lawsuit (244) (134,000) - - (134,244)
Contribution of capital - - 80,868 - 80,868
Net loss - - - (1,500,563) (1,500,563)
-------- ---------- ------- ----------- ------------
BALANCES, December 31, 1995 $ 13,683 $ - $164,398 $(1,091,983) $ 13,902)
======== ========== ======== ========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
<PAGE> 17
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------
1995 1994
------------------ -----------------
(Note 1)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from operations $ (1,500,563) $ 297,555
Adjustments to reconcile net income (loss
provided by (used in) operating activities:
Depreciation 305,701 225,448
Allowance for doubtful accounts (85,000) 122,452
Loss on disposal of leasehold improvements 12,159 73,573
Deferred income taxes (60,000) 63,000
Common stock issued to employees for services 84,561 -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 716,535 (867,942)
Advance to employee/shareholder (16,852) -
Income tax receivable (152,529) -
Costs and estimated earnings in
excess of billings 667,473 (453,860)
Prepaid expenses (33,463) 46,360
Other assets (22,732) -
Increase (decreas) in:
Accounts payable (118,435) 659,605
Billings in excess of costs and
estimated earnings (233,019) (109,032)
Accrued liabilities 253,750 455,392
--------------- ----------------
Net cash provided by (used in) operating activities (182,414) 512,551
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (164,897) (972,529)
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings:
Related parties 50,000 -
Financial institutions and other 527,556 1,668,260
Principal payments on borrowings (134,304) (1,221,820)
Principal payments on capital leases (45,076) -
Proceeds from issuance of Vision Fabrication stock 2,000 -
Contribution of capital 80,868 -
Payment for redemption of common stock (134,244) -
--------------- ----------------
Net cash provided by financing activities 346,800 446,440
--------------- ----------------
INCREASE (DECREASE) IN CASH (511) (13,538)
CASH, at beginning of year 1,448 14,986
--------------- ----------------
CASH, at end of year $ 937 $ 1,448
=============== ================
</TABLE>
(continued)
F-7
<PAGE> 18
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
COMBINED STATEMENT OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------
1995 1994
------------------ -----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for:
Interest $ 133,463 $ 71,732
=============== ==============
Income taxes $ 136,114 $ 59,016
=============== ==============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued to employees for services $ 84,561 $ -
Capital lease obligations assumed in connection with the
acquisition of equipment $ 231,194 $ -
Note payable assumed by former director $ 20,164 $ -
Common stock retired in settlement of shareholder lawsuit
$ 244 $ -
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
F-8
<PAGE> 19
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS:
Organizational Structure and Basis of Presentation - Vision
Engineering Corp. ("Visioneering"), the founding company, was
incorporated in September 1985 to provide process control and factory
automation services to the food and pharmaceutical industry. The
financial statements for 1994 include only the accounts and
operations of Visioneering. In April 1995, the Fabrication Division
of Vision Engineering Corp. was incorporated as a new company,
(Vision Fabrication, Inc.). Certain fabricating assets from Vision
Engineering Corp. were transferred to Vision Fabrication, Inc. Both
Companies have common ownership and management, and therefore
combined financial statements for 1995 have been presented.
Collectively, Visioneering and Vision Fabrication, Inc. are hereafter
referred to as "the Company". All significant related company
transactions and accounts have been eliminated.
The Company is organized with central headquarters in Cypress,
California. In addition to its fabrication facilities in Cypress,
the Company operates four branch offices in Sacramento, CA; Phoenix,
AZ; Chicago, IL and Atlanta Georgia. Visioneering also has two sales
offices in Boston, MA and San Juan, Puerto Rico.
Nature of business - The Company operates as a single source systems
integrator with focused specialties in process control and factory
automation. The Company primarily sells its products to its
customers throughout the United States with a minor amount of sales
internationally. Credit is extended to customers on an unsecured
basis based on credit analysis performed by the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents - The Company considers all highly liquid
monetary instruments purchased with an original maturity of three
months or less to be cash equivalents. The Company maintains cash in
bank deposit accounts which, at times, may exceed Federally insured
limits. The Company has not experienced any losses in such accounts.
The Company believes it is not exposed to any significant credit risk
on cash and equivalents.
Property, Equipment and Leasehold Improvements - Depreciation of
property, equipment and leasehold improvements is provided utilizing
the straight-line method over the following estimated useful lives:
F-9
<PAGE> 20
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Furniture & Equipment 5-10
Vehicles 3-5
Leasehold Improvements 3-7
</TABLE>
Major renewals and betterments are capitalized while expenditures for
maintenance and repairs are charged to expense as incurred.
Income Recognition - The Company follows the percentage of completion
method of accounting for all significant long-term contracts. The
percentage of completion method of reporting income from contracts
takes into account the cost, estimated earnings, and revenue to date
on contracts not yet completed.
The amount of revenue recognized is the portion of the total contract
price that the cost expended to date bears to the anticipated final
total cost, based on current estimates of cost to complete. Contract
costs included all labor and benefits, material unique to or
installed in the project, subcontract costs, and allocations of
indirect construction cost. Selling, general and administrative
costs are charged to expenses as incurred.
As long-term contracts extend over one or more years, revisions in
estimates of costs and earnings during the course of the work are
reflected in the accounting period in which the facts which require
the revision become known. At the time a loss on a contract becomes
known, the entire amount of the estimated ultimate loss is recognized
in the financial statements. Contracts which are substantially
complete are considered closed for financial statement purposes.
Revenue earned on contracts in progress in excess of billings is
classified as a current assets. Amounts billed in excess of revenue
earned are classified as a current liability.
Income Taxes - The Company accounts for income taxes under the
liability method, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events
that have been recognized in the financial statements or tax returns.
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
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 other
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Impairment of Long-Lived Assets - In the event that facts and
circumstances indicate that the cost of assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is
required, the estimated future undiscounted cash flows associated
with the asset would be compared to the asset's carrying amount to
determine if a write-down to market value or discounted cash flow
F-10
<PAGE> 21
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
is required.
Common Stock Issued For Services - The common stock issued for
services is valued at their fair value. __________
Impact of Recently Issued Standards - In October 1995, the Financial
Accounting Standards Board issued a new statement titled "Accounting
for Stock-Based Compensation" (FAS 123). The new statement is
effective for fiscal years beginning after December 15, 1995. FAS
123 encourages, but does not require, companies to recognize
compensation expense for grants of stock, stock options, and other
equity instruments to employees based on fair value. Companies that
do not adopt the fair value accounting rules must disclose the impact
of adopting the new method in the notes to the financial statements.
The Company currently does not intend to adopt the fair value
accounting prescribed by FAS 123, and will be subject only to the
disclosure requirements prescribed by FAS 123. However, the Company
intends to continue its analysis of FAS 123 and may elect to adopt
its provisions in the future.
Accrued Warranty Costs - Estimated warranty costs are provided for at
the time of sale of the warranted product. The Company generally
extends warranty coverage for one year from the time of sale.
Concentrations of Credit Risk - Credit Risk represents the accounting
loss that would be recognized at the reporting date if counterparties
failed completely to perform as contracted. Concentrations of credit
risk (whether on or off balance sheet) that arise from financial
instruments exist for groups of customers or groups of counterparties
when they have similar economic characteristics that would cause
their ability to meet contractual obligations to be similarly
effected by changes in economic or other conditions described below.
Fair Value of Financial Instruments - The estimated fair values for
financial instruments under SFAS No. 107, Disclosures about Fair
Value of Financial Instruments, are determined at discrete points in
time based on relevant market information. These estimates involve
uncertainties and cannot be determined with precision. The estimated
fair values of the Company's financial instruments, which includes
all cash, accounts receivables, accounts payable, long-term debt, and
other debt, approximates the carrying value in the consolidated
financial statements at December 31, 1995.
Reclassifications - Certain reclassifications have been made to the
prior years' financial statements to conform to the current year's
presentation. Such reclassifications had no effect on net income
(loss).
3. BASIS OF PRESENTATION:
As shown in the accompanying financial statements, the Company
incurred a net loss for 1995 of $1,500,563, and at December 31, 1995
had a $1,981,349 deficit in working capital and a $913,902 deficit in
stockholders equity.
F-11
<PAGE> 22
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
These conditions raise substantial doubt about the Company's ability
to continue as a going concern.
Management believes that 1995 was a building year and that they have
put into place an infrastructure, including personnel, to achieve
future profitable operations. Additionally, subsequent to December
31, 1995 the Company was acquired by Topro, Inc. another systems
integrator. No assurance, however, can be given, that these actions
will return the Company to profitability. The financial statements
do not include any adjustments relating to the recoverability and
classification of reported asset amounts or the amounts and
classification of liabilities that might result from the outcome of
this uncertainty.
4. ACCOUNTS RECEIVABLES:
The following information summarizes accounts receivables:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995
---------------------
<S> <C>
Contract receivables:
Completed contracts $ 178,938
Uncompleted contracts 1,178,439
-----------------
1,357,377
Less allowance for doubtful accounts (80,000)
-----------------
$ 1,277,377
=================
</TABLE>
The Company's contracts generally require certain benchmarks to be
achieved before amounts under the contract can be billed. On
fabrication work within the contract, the Company generally can
invoice the customer at order reception, prior to commencing work
and, finally upon shipment.
5. CONTRACTS IN PROGRESS:
The following information is applicable to uncompleted contracts:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995
------------------
<S> <C>
Costs incurred on uncompleted contracts $ 3,504,347
Estimated earnings 2,851,837
----------------
6,356,184
</TABLE>
F-12
<PAGE> 23
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Less billings to date 6,809,466
----------------
$ (453,282)
================
</TABLE>
These amounts are included in accompanying balance sheet under the
following captions:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995
-----------------
<S> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 289,729
Billings in excess of costs and estimated
earnings on uncompleted contracts 743,011
---------------
$ (453,282)
===============
</TABLE>
F-13
<PAGE> 24
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
6. EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Equipment and leasehold improvements consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995
------------------
<S> <C>
Furniture and fixtures $ 903,400
Equipment 865,012
Leasehold improvements 435,389
Vehicles 43,529
---------------
2,247,330
Less accumulated depreciation and amortization 988,076
---------------
$ 1,259,254
===============
</TABLE>
7. LINE-OF-CREDIT AND LONG-TERM DEBT:
Line-of-Credit - The Company has a $650,000 line-of-credit pursuant to
a loan agreement with a financial institution, secured by a UCC-1
filing on substantially all assets of the Company. The terms include
variable interest at the bank's prime rate (9.5% at December 31, 1995)
plus 2%. The outstanding principal balance under the line-of-credit
amounted to $550,000 as of December 31, 1995. The line originally
expired April 4, 1996 and require monthly payment of interest only.
The line-of-credit subsequently was extended to December 3, 1996 and
requires principal reductions of $50,000 upon extension, $50,000 on
July 15, 1996, and monthly principal reductions of $16,667 commencing
June 30, 1996.
F-14
<PAGE> 25
Long-Term Debt - Long-term debt payable to related parties consists of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995
-----------------
<S> <C>
Note payable to the majority stockholders of the Company payable
upon demand with interest at 8%.
$ 50,000
Note payable to the parents of the majority stockholders of the
Company, interest only at 10% payable quarterly.
20,000
--------------
$ 70,000
==============
</TABLE>
Long-term debt payable to financial institutions and other consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995
-----------------
<S> <C>
Term loan payable to a bank, with a variable
interest rate at prime (9.5% December 31, 1995) plus 2%,
collateralized by equipment and leasehold improvements, due on
demand or if no demand, payable in monthly installments of $7,000
plus interest through April 1998. $ 195,417
Term loan payable to a bank, with a variable
interest adjusted quarterly based on prime (9.5% at December 31,
1996) plus 2.75%, collateralized by a second security interest on
substantially all assets of the Company, 85% guaranteed by SBA and
personally guaranteed by the two majority shareholders of the
Company, which personal guarantee is collateralized by a third
trust deed on the shareholders' residence, payable in monthly
principal and interest payments of $6,696, adjusted quarterly
through September 2002. The agreement prohibits the payment of
dividends, acquisition of the Company's stock , bonus compensation
to any officer of the Company, and purchase of fixed assets over
$25,000 annually, without prior written approval of the bank. The
Company was not in compliance with the covenants at December 31,
1995 and through the date of the independent auditor's report.
Therefore, the entire outstanding loan balance has been classified
as a current liability at December 31, 1995. 344,930
Other notes payable, with interest of 9.5% with aggregate monthly
payments of approximately $6,300, and with maturities from June 1,
1996 to December 1, 1996. 36,055
--------------
</TABLE>
F-15
<PAGE> 26
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995
-----------------
<S> <C>
576,402
Less current maturities 464,985
--------------
$ 111,417
==============
</TABLE>
F-16
<PAGE> 27
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
The principal payments on all notes payable and long-term debt as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
RELATED
YEAR PARTIES OTHER TOTAL
---- ------------------- ------------------- -------------------
<S> <C> <C> <C>
1996 $ 70,000 $ 464,985 $ 534,985
1997 - 84,000 84,000
1998 - 27,417 27,417
---------------- ------------------ ------------------
$ 70,000 $ 576,402 $ 646,402
================ =================== ===================
</TABLE>
8. INCOME TAXES:
The actual income tax expense (benefit) differs from the "expected"
tax expense (benefit) computed by applying the U.S. federal
corporate income tax rate of 34% for each period as follows:
<TABLE>
<CAPTION>
FOR YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994
----------------------------- ------------------------------
AMOUNT PERCENT AMOUNT PERCENT
-------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Computed "expected" tax expense
(benefit) $ (566,291) (34.0)% $ 164,788 34.0%
Refundable credits (136,000) (8.1) - -
Nondeductible expense 21,875 1.3 22,328 4 .6
Effect of valuation allowance 453,474 27.2 - -
Other 34,942 2.1 - -
Effect of Internal Revenue Service
examination 27,000 1.6 - -
------------ ------ ------------- ---------
$ (165,000) (9.9)% $ 187,116 38.6%
============ ====== ============ ==========
</TABLE>
F-17
<PAGE> 28
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
Deferred tax assets (liabilities) as of December 31, 1995 and 1994 are
comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
--------- ----------
<S> <C> <C>
Deferred tax assets (liabilities):
Trade receivables $(384,000) $ (783,000)
Costs and earnings in excess of billings
on uncompleted contracts (76,000) (392,000)
Other - (1,000)
--------- -----------
Total deferred liabilities (460,000) (1,176,000)
--------- -----------
Deferred tax assets:
Accounts payable 328,000 503,000
Billings in excess of costs and estimated
earnings 163,000 400,000
Accrued expenses 326,000 213,000
Net operating loss carryforward 97,000 -
--------- -----------
Total deferred assets 914,000 -
Valuation allowance for deferred tax assets (454,000) -
--------- -----------
460,000 1,116,000
--------- -----------
Net deferred tax asset (liability) $ - $ (60,000)
========= ===========
</TABLE>
As of December 31, 1995, the Company has available net operating loss
carryforwards for income tax purposes of approximately $534,000, which
expire in various years through 2010. These net operating losses may
be subject to annual limitations imposes by Internal Revenue Code due
to a change in control of the Company as discussed in Note 13.
9. STOCKHOLDERS' EQUITY (DEFICIT):
Vision Engineering Corp. is a California Corporation which has only one
class of stock authorized, that being common stock. Vision Engineering
has 75,000 shares of no par value common stock authorized, and at
December 31, 1995 had 12,683 shares issued and outstanding.
Vision Fabrication, Inc. is a California Corporation which has only one
class of stock authorized, that being common stock. Vision
Fabrication, Inc. has 100,000 shares of no par value common stock
authorized, and at December 31, 1995 had 1,000 shares issued and
outstanding.
F-18
<PAGE> 29
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
During the year ended December 31, 1995, the Company issued 2,031
shares of stock of Vision Engineering Corp. to five employees for
services rendered. The stock was valued at the net book value of
Vision Engineering Corp. on July 31, 1995.
As a settlement of a lawsuit with a former employee, the Company
repurchased 244 shares of Vision Engineering Corp. stock back in
exchange for $134,244.
10. BENEFIT PLANS:
The Company has a profit-sharing plan that covers all full-time
employees with 3 months of service who elect to enter the plan. At the
option of the Board of Directors, an amount, not to exceed the
allowable under the Internal Revenue Code of 1984, as amended, may be
contributed to the plan. The Board did not approve a contribution for
the year ended December 31, 1994. During 1995 the Company accrued a
contribution of approximately $113,000.
11. COMMITMENTS AND CONTINGENCIES:
The Company leases equipment under leases which are classified as
capital leases. The following is an analysis of leased equipment under
capital leases at:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995
-----------------
<S> <C>
Equipment $ 231,194
Accumulated amortization (17,677)
---------------
$ 213,517
===============
</TABLE>
Amortization on equipment under capital leases charged to expense in
1995 and 1994 was $17,677 and $0, respectively.
F-19
<PAGE> 30
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
The following is a schedule of future minimum lease payments
for all leases:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDED DECEMBER 31, LEASES LEASES
--------------------------------------------------- ------------------ ---------------------
<S> <C> <C>
1996 $ 75,566 $ 312,239
1997 66,164 297,634
1998 56,638 258,199
1999 38,840 228,990
2000 26,499 237,516
Thereafter - 138,551
----------------- -----------------
Total minimum lease payments 263,707 $ 1,473,129
=================
Less amount representing interest (77,589)
-----------------
Present value of minimum lease payments 186,118
Less current portion (44,733)
-----------------
$ 141,385
=================
</TABLE>
Rent expense for the years ended December 31, 1995 and 1994 was
approximately $548,267 and $312,673 respectively.
The Company is contingently liability for a loan on which a
majority shareholder and former director is making payments. At
December 31, 1995 the balance on the loan is approximately $21,000.
12. CONCENTRATION OF CREDIT RISK:
The Company operates in one industry segment and a geographic
concentration exists because the Company's customers are generally
located in the United States. During the year ended December 31,
1995, two individual customers each accounted for more than 10% of
total revenue. One customer accounted for 18.5% of total revenue
and the other for 13.1% of total revenue. Financial instruments
that subject the Company to credit risk consist principally of
accounts receivable, other receivables and costs and estimated
earnings in excess of billings on uncompleted contracts.
At December 31, 1995, such accounts totaled $1,687,198 and the
Company has provided an allowance for doubtful accounts against
accounts receivable only of $80,000. The Company performs periodic
credit evaluations on its customers' financial condition and
believes that the allowance for doubtful accounts is adequate.
F-20
<PAGE> 31
VISION ENGINEERING CORP. AND VISION FABRICATION, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
13. SUBSEQUENT EVENTS:
During March 1996, Visioneering Holding Corporation, a California
corporation, was formed. Visioneering Holding Corp. subsequently
acquired 100% of Vision Engineering Corp., and Vision Fabrication
Inc. On May 17, 1996 Visioneering Holding Corp. was acquired by
Topro Inc. by them agreeing to issue up to a maximum of 1,600,000
restricted shares of its common stock.
F-21
