<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 8-K/A
(Amendment #1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 10, 1996
Date of Report (Date of earliest event reported)
PENULTIMATE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-23152 33-0253408
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
500 Oakmead Parkway
Sunnyvale, California 94086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 524-4200
This report on Form 8-K/A, including all exhibits, contains 24 pages. The
exhibit index is located on page 2 of this report.
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The Registrant hereby amends this item of its Current Report on Form 8-K dated
June 10, 1996.
On June 10, 1996, PenWare Inc. ("PenWare" or the "Company") completed a reverse
acquisition with PenUltimate, Inc., ("PenUltimate"), a Delaware corporation.
Pursuant to the Agreement and Plan of Reorganization, common and preferred
shareholders of PenWare exchanged their holdings in PenWare for shares of
PenUltimate common and preferred stock, and PenWare became a wholly owned
subsidiary of PenUltimate. After giving effect to a reverse stock split and
exchange, wherein existing PenUltimate shareholders received 250,000 common
shares for their outstanding 16,740,934 common shares, PenUltimate issued to the
PenWare shareholders shares of common stock and 112,500 shares of Series C
Preferred Stock in consideration of the transaction. On an as-if converted
basis, the former shareholders of PenWare now hold approximately 90% of the
voting rights of PenUltimate. For accounting purposes the acquisition has been
treated as a reverse acquisition.
The terms of the reverse acquisition were the result of arms-length negotiations
between PenUltimate and PenWare. Prior to this transaction, no material
relationship existed between PenUltimate and PenWare or any of its directors or
officers.
As previously reported in the PenUltimate Form 10-QSB for the period ended March
31, 1996, the former business operations of PenUltimate were discontinued.
PenWare, which is primarily engaged in developing and marketing solutions for
signature transaction applications, now constitutes the operations of
PenUltimate in their entirety.
ITEM 5. OTHER EVENTS
On August 26, 1996, PenUltimate, Inc. effected a change in corporate name. The
new name of the Registrant is MobiNetix Systems, Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The Registrant hereby amends this item of its Current Report on Form 8-K dated
June 10, 1996.
a) Financial statements of businesses acquired.
The audited balance sheet of Penware, Inc. as of June 30, 1995 and the
related statements of operations, shareholders' deficit, and cash flows for each
of the two years ended June 30, 1995, together with the report thereon by Arthur
Andersen LLP, independent public accountants, are included herein.
The unaudited condensed balance sheet of PenWare, Inc. as of March 31, 1996
and the related unaudited condensed statements of operations and cash flows for
the nine month periods ending March 31, 1996 and 1995 are also included herein.
2
<PAGE> 3
b) Pro forma financial information.
Pro forma financial information for the transaction described in Item 2,
consisting of a pro forma condensed Balance Sheet as of March 31, 1996, and a
pro forma condensed Statement of Shareholder's Deficit as of March 31, 1996
together with notes thereto, are attached hereto and incorporated herein by
reference.
Because PenUltimate had ceased operations prior to the reverse acquisition,
pro forma operations for the combined entity are the same as PenWare's
operations. Therefore, a pro forma Statement of Operations has not been
presented.
c) Exhibits
27 Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PENULTIMATE, INC.
Date: August 23, 1996 By:/S/ David M. Licurse, Sr.
-------------------------------
David M. Licurse, Sr.
Chief Financial Officer and
Vice President of Operations
3
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To PenWare, Inc.
We have audited the accompanying balance sheet of PenWare, Inc.(a California
corporation) as of June 30, 1995, and the related statements of operations,
shareholders' deficit and cash flows for the two years ended June 30, 1995.
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 that 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 PenWare, Inc. as of June 30,
1995 and the results of its operations and its cash flows for the two years
ended June 30, 1995, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
San Jose, California
August 23, 1996
4
<PAGE> 5
PENWARE, INC.
BALANCE SHEET
as of June 30, 1995
<TABLE>
<CAPTION>
June 30,
1995
<S> <C>
ASSETS
Current assets:
Cash $ 76,814
Trade accounts receivable 2,044
Inventory - work in process 25,000
Prepaid expenses and other current assets 13,539
-----------
Total current assets 117,397
-----------
Property and equipment:
Computer equipment and software 127,401
Furniture and equipment 15,237
------------
Total property and equipment 142,638
Less: accumulated depreciation (128,268)
-----------
Property and equipment, net 14,370
Other non-current assets 5,382
-----------
Total assets $ 137,149
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 11,145
Accrued liabilities 38,283
Accrued interest 82,227
Deferred revenues 175,913
Notes payable to related party 930,000
-----------
Total current liabilities 1,237,568
-----------
Commitments (Note 9) --
Shareholders' deficit:
Redeemable preferred stock, no par
value, 175,000 shares authorized;
50,000 shares designated as Series A
and issued and outstanding;
liquidation preference of $1,000,000 989,269
Common stock, no par value, 2,500,000
shares authorized; 313,021 shares
issued and outstanding 12,904
Accumulated deficit (2,102,592)
-----------
Total shareholders' deficit (1,100,419)
-----------
Total liabilities and shareholders'
deficit $ 137,149
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
PENWARE, INC.
STATEMENTS OF OPERATIONS
For the fiscal years ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenues:
Software development $ 315,000 $ 191,588
Royalties and other 229,338 104,287
--------- ---------
Total revenues 544,338 295,875
Cost of revenues 298,296 220,108
--------- ---------
Gross margin 246,042 75,767
--------- ---------
Operating expenses:
Selling, general and administrative 367,344 499,013
Research and development 204,233 134,480
--------- ---------
Total operating expenses 571,577 633,493
--------- ---------
Loss before interest and income taxes (325,535) (557,726)
Interest expense (59,990) (22,254)
Interest income 1,021 1,075
--------- ---------
Income before income taxes (384,504) (578,905)
Income taxes (800) (800)
--------- ---------
Net loss $(385,304) $(579,705)
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
PENWARE, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
For the fiscal years ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
Series A Redeemable Total
preferred stock Common stock Accumulated shareholders'
Shares Amount Shares Amount deficit deficit
<S> <C> <C> <C> <C> <C> <C>
Balances as of June 30, 1993 50,000 $989,269 318,182 $12,727 $(1,137,583) $ (135,587)
Net loss -- -- -- -- (579,705) (579,705)
------ -------- ------- ------- ----------- -----------
Balances as of June 30, 1994 50,000 989,269 318,182 12,727 (1,717,288) (715,292)
Shares repurchased -- -- (7,557) (302) -- (302)
Options exercised -- -- 2,396 479 -- 479
Net loss -- -- -- -- (385,304) (385,304)
------ -------- ------- ------- ----------- -----------
Balances as of June 30, 1995 50,000 $989,269 313,021 $12,904 $(2,102,592) $(1,100,419)
====== ======== ======= ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
PENWARE, INC.
STATEMENTS OF CASH FLOWS
For the fiscal years ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $(385,304) $(579,705)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 25,550 23,147
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts
receivable 18,206 (17,511)
Decrease (increase) in inventories 101,000 (126,000)
Decrease (increase) in prepaid expenses
and other current assets 2,670 (183)
Increase in other assets (139) (243)
Decrease in accounts payable (877) (6,911)
Increase in accrued liabilities 67,511 20,601
(Decrease) increase in deferred revenues (177,745) 97,409
--------- ---------
Net cash used in operating activities (349,128) (589,396)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (12,890) (2,147)
--------- ---------
Net cash used in investing activities (12,890) (2,147)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 479 --
Repurchase of common stock (302) --
Proceeds from notes payable 387,763 520,000
--------- ---------
Net cash provided by financing activities 387,940 520,000
--------- ---------
Net increase (decrease) in cash 25,922 (71,543)
Cash at beginning of year 50,892 122,435
--------- ---------
Cash at end of year $ 76,814 $ 50,892
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 800 $ 800
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 9
PENWARE, INC.
NOTES TO FINANCIAL STATEMENTS (JUNE 30, 1995)
1. Description of business and summary of significant accounting policies
Organization and operations
PenWare, Inc. ("PenWare" or the "Company") is a California corporation engaged
in the development of software products for pen-based computers and personal
digital assistants, principally in the United States. The Company is subject to
a number of risks common to companies at a similar stage of development,
including concentrations of customers in the hand-held computer markets, a
history of operating losses, the need to obtain adequate financing, and
dependence on key personnel. As more fully discussed in Note 10, the Company
entered into an Agreement and Plan of Reorganization with PenUltimate, Inc.,
on June 10, 1996.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue recognition
The Company licenses its software to original equipment manufacturers ("OEMs")
under the terms of development and license agreements. Revenue for the
development of software is generally recognized using the
percentage-of-completion method, on a cost-to-cost basis. If no basis for
determining the percentage of completion exists, the completed contract method
is used. Royalty revenues derived from OEM sales of products to end users are
recognized when the OEM advises the Company that the products have shipped.
Other software product revenues are recognized when the related products are
shipped, provided there are no significant post-delivery obligations,
delivery is probable, and payment is due within one year. Payments received
from customers for which the related services have not been performed or for
which the royalties have not been earned, are recorded as deferred revenues.
Cost of revenues includes primarily salaries, benefits, and overhead costs
related to development personnel, as well as cost of media on which the product
is delivered.
9
<PAGE> 10
Research and development
Research and development costs are generally expensed as incurred. Statement of
Financial Accounting Standards (SFAS) 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed," required capitalization of
certain software development costs subsequent to the establishment of
technological feasibility. In the Company's case, capitalization would begin
upon completion of a working model as the Company does not prepare detail
program designs as part of the development process. As of June 30, 1995 and
1994, such capitalizable costs were insignificant. Accordingly, the Company has
charged all such costs to research and development expense in the accompanying
statements of operations.
Property and equipment.
Property and equipment are stated at cost and depreciated using the straight
line method over the estimated useful lives of the assets, generally three to
five years.
Recent accounting pronouncements
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," is effective for fiscal 1997. SFAS 121 will not have
a material effect on the Company's financial statements.
SFAS 123, "Accounting for Stock-Based Compensation," which is also effective in
fiscal 1997, establishes a fair value based method of accounting for stock-based
compensation plans, while also permitting an election to continue following the
requirements of APB Opinion No. 25, "Accounting for Stock Issued to Employees"
with disclosures of pro forma net income and earnings per share under the new
method. Upon adoption in fiscal 1997, the Company plans to elect to continue to
measure compensation cost for its employee stock compensation plans using the
method of accounting prescribed by APB Opinion No. 25 while providing the
additional disclosure requirements set forth in SFAS 123.
2. Income taxes
The Company accounts for income taxes in accordance with SFAS 109, "Accounting
for Income Taxes," whereby deferred tax assets and liabilities reflect the
future income tax effects of temporary differences between the financial
statement carrying amounts of assets and liabilities and their respective bases
for taxation. Deferred tax liabilities and assets are determined on the basis of
enacted tax rates in effect for the years in which the differences are expected
to reverse.
Significant components of the Company's deferred tax assets and liabilities are
as follows at June 30, 1995 and 1994:
10
<PAGE> 11
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Gross deferred tax assets:
Net operating loss carryforward $ 731,368 $ 568,554
Tax credit carryforwards 13,795 13,795
Deferred revenue 71,245 143,231
Accrued expenses 5,973 4,556
--------- ---------
Gross deferred tax asset 822,381 730,136
Deferred tax liability:
Work in process - inventory (10,125) (51,030)
Deferred tax valuation allowance (812,256) (679,106)
--------- ---------
Net deferred tax asset $ -- $ --
========= =========
</TABLE>
A valuation allowance has been established against the deferred tax asset
because such asset does not meet the criteria for recognition included in SFAS
109.
3. Redeemable preferred stock
The Company's Series A preferred stock is convertible to common stock at a rate
of 1 to 1, which is adjustable in the event of certain issuances of additional
common stock, including stock dividends, options, and securities convertible to
common stock. In June 1996, the conversion rate changed to 10 shares of common
for each preferred share in connection with the reverse acquisition discussed
in Note 10.
Preferred stockholders are entitled to a noncumulative annual dividend of $.04
or greater, when and if declared by the Board of Directors. No dividends were
declared during the two years ended June 30, 1995.
In connection with a borrowing arrangement with a shareholder (see note 5,
below), the Company issued a warrant to the shareholder to purchase 300,000
shares of the Company's Series A preferred stock at $0.50 per share. The warrant
was exercisable at any time at a rate of 1 to 1, subject to adjustment for
anti-dilution. In June 1996, the warrant was cancelled in connection with the
reverse acquisition and subsequent financing described in Note 10.
11
<PAGE> 12
4. Common Stock
On June 10, 1996, the Company effected a 1:4 reverse stock split. All common
share information in these financial statements has been presented to show the
effect of the reverse split.
5. Notes payable to related party
In fiscal 1994, the Company entered into an unsecured borrowing arrangement, as
amended, with a shareholder allowing the Company to borrow up to $1,000,000.
Principal and interest, which accrues at an 8% annual rate, are due upon 30 days
written notice from the shareholder. The amount borrowed is convertible to
preferred stock at the option of the shareholder. In June 1996, the balance of
the note and related accrued interest totalling $1,166,827 were converted into
shares of Series C Preferred Stock in connection with the reverse acquisition
discussed in Note 10.
6. Employee stock options
Under the Company's stock option plan, established in 1992, incentive common
stock options may be granted at prices not lower than fair market value and
nonqualified stock options may be granted at prices not lower than 85% of the
fair market value, as determined by the Board of Directors at the date of the
grant. The options generally vest 12.5% after six months with the remaining
options vesting pro rata over the following 48 months. Options generally expire
after 10 years. Activity relating to the stock option plan is as follows:
<TABLE>
<CAPTION>
Shares Outstanding options
available Number Exercise
for grant of shares price
<S> <C> <C> <C>
Balances, June 30, 1993 83,714 7,196 $.20
Options granted (1,725) 1,725 .20
------ ------
Balances, June 30, 1994 81,989 8,921 .20
Options granted (17,278) 17,278 .20
Options exercised -- (2,396) .20
Options cancelled 8,828 (8,828) .20
------ ------
Balances, June 30, 1995 73,539 14,975 .20
====== ======
</TABLE>
As of June 30, 1995, 1,587 options were exercisable, all at $0.20 per share. In
connection with the reverse acquisition discussed in Note 10, the options
converted into options to purchase shares of MobiNetix.
12
<PAGE> 13
7. Major customers.
The Company's customers representing 10% or more of revenues for the periods
covered by this report consisted primarily of makers of pen- based computers and
personal digital assistants. All of the major customers are located in the
United States or Japan, and are summarized below for fiscal 1995 and 1994:
<TABLE>
<CAPTION>
Percent of revenues
1995 1994
<S> <C> <C>
Company A (Japan) 25% 65%
Company B (Japan) 33% -
Company C (U.S.) 14% -
Company D (U.S.) - 25%
Company E (U.S.) 14% -
</TABLE>
8. Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and trade receivables. The Company places
its cash with high quality financial institutions. The Company operates in one
business segment and provides software development services to various companies
in the handheld computer industry. The Company generally does not require
collateral.
9. Commitments
The Company leased its Palo Alto, California facility under an operating lease
which expired in June 1996. Beginning July 1996, the Company entered into a
lease for new office and operating facilities in Sunnyvale, California under an
operating lease expiring in 1999. In addition, the Company entered into certain
leases for computers and equipment subsequent to June 30, 1995.
The annual minimum lease payments under these leases are as follows:
<TABLE>
<S> <C>
1996 $ 95,880
1997 142,080
1998 126,840
1999 131,520
</TABLE>
Rent expense was approximately $76,680 and $72,254 for the years ended June 30,
1995 and 1994, respectively.
13
<PAGE> 14
10. Subsequent events.
Reverse acquisition
On June 10, 1996, PenWare Inc. ("PenWare" or the "Company") completed a reverse
acquisition with PenUltimate, Inc., ("PenUltimate"), a Delaware corporation.
Pursuant to the Agreement and Plan of Reorganization, common and preferred
shareholders of PenWare exchanged their holdings in PenWare for shares of
PenUltimate common stock, and PenWare became a wholly owned subsidiary of
PenUltimate.
After giving effect to a reverse stock split and exchange, wherein existing
PenUltimate shareholders received 250,000 common shares for their outstanding
16,740,934 common shares, PenUltimate issued to the PenWare shareholders
1,125,000 shares of common stock and 112,500 shares of Series C preferred stock
in consideration of the transaction. On an as-if converted basis, the former
shareholders of PenWare hold approximately 90% of the voting power in
PenUltimate.
For accounting purposes the acquisition has been treated as a reverse
acquisition. The historical operations of PenWare for all periods prior to the
reverse acquisition will be presented as the results of operations for the
combined companies. No pro forma statement of operations is presented because
PenUltimate was a shell company prior to the acquisition and its former business
operations had ceased. Fixed assets increased by $128,500 and liabilities
increased by $43,500 on a pro forma basis as a result of the transaction.
As a result of the reverse acquisition, common stock of the combined companies
represents the capital of PenWare at the date of the reverse acquisition plus
the fair market value of PenUltimate's remaining assets and liabilities.
However, the number of shares outstanding will reflect only the shares of
PenUltimate. The shares issued to effect the reverse acquisition have been
assigned a value of $85,000. The fair market value of PenUltimate's assets at
the closing date was as follows:
<TABLE>
<S> <C>
Property and equipment $128,500
Capital lease liability (43,500)
-------
Total $ 85,000
=======
</TABLE>
Financing arrangements
PenUltimate entered into a series of private placements of stock and warrants in
June 1996, receiving proceeds of approximately $3,180,503 for 862,447 shares of
Series B Preferred Stock.
A total of $1,400,000 in bridge loans was received from private investors in
March and April 1996. The Company repaid $332,200 of the loans in June 1996, and
the remaining $1,067,800 was converted to 392,574 shares of PenUltimate Series B
Preferred Stock in June 1996, in connection with the private placements.
The preferred stock and promissory note previously held by a major shareholder
were exchanged for 112,500 shares of Series C Preferred Stock in June 1996, in
connection with the reverse acquisition as discussed above.
14
<PAGE> 15
Beginning in January 1996, the Company borrowed approximately $470,000 under an
unsecured short-term loan agreement with a bank. This loan was guaranteed by a
shareholder of the Company. The Company repaid the loan in full in June 1996.
Pro forma loss per share taking into consideration the reverse acquisition and
subsequent financing transactions discussed above as if the issuance of such
shares had occurred at the beginning of each period (such that pro forma common
shares outstanding amount to 1,334,275 shares) is $0.29 for fiscal 1995 and
$0.43 for fiscal 1994.
Technology acquisition
In a series of transactions, the Company acquired the rights to certain
technology and related inventory in December 1995 for a purchase price of
approximately $125,000. The Company expensed the purchased technology in fiscal
1996 as it was considered in-process research and development.
15
<PAGE> 16
PENWARE, INC.
CONDENSED BALANCE SHEET (unaudited)
(as of March 31, 1996)
<TABLE>
<CAPTION>
March 31,
1996
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 153,257
Trade accounts receivable 206,635
Inventory 73,856
Prepaid expenses and other current assets 13,539
-----------
Total current assets 447,287
-----------
Property and equipment, net 6,725
Other non-current assets 5,491
-----------
Total assets $ 459,503
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 149,801
Accrued liabilities 210,811
Deferred revenue 175,913
Notes payable 1,844,000
-----------
Total current liabilities 2,380,525
-----------
Shareholders' deficit:
Preferred stock 989,269
Common stock 12,904
Accumulated deficit (2,923,195)
-----------
Total shareholders' deficit (1,921,022)
-----------
Total liabilities and shareholders'
equity $ 459,503
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 17
PENWARE, INC.
CONDENSED STATEMENTS OF OPERATIONS (unaudited)
For the nine months ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net revenues $ 506,048 $ 397,676
Cost of revenues 299,279 243,847
--------- ---------
Gross margin 206,769 153,829
--------- ---------
Operating expenses:
Selling, general and administrative 550,626 276,668
Research and development 423,408 173,966
--------- ---------
Total operating expenses 974,034 450,634
Loss before interest and taxes (767,265) (296,805)
--------- ---------
Interest and other expense, net (52,536) (41,329)
Income taxes (800) (800)
--------- ---------
Net loss $(820,601) $(338,934)
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE> 18
PENWARE, INC.
CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
For the nine month periods ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net cash used in operating activities $(832,947) $(343,091)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (4,610) (7,570)
--------- ---------
Net cash used in investing activities (4,610) (7,570)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 479
Repurchase of common stock -- (302)
Proceeds from notes payable 914,000 322,111
--------- ---------
Net cash provided by financing activities 914,000 322,288
--------- ---------
Net increase (decrease) in cash 76,443 (28,373)
Cash at beginning of period 76,814 50,892
--------- ---------
Cash at end of period $ 153,257 $ 22,519
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 19
PENWARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1996
1. Basis of presentation
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles relating to the provision of interim
financial information. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ending March 31, 1996
are not necessarily indicative of the results that may be expected for the
period ending June 30, 1996.
2. Inventories.
The Company acquired title to certain inventory in fiscal 1996 in connection
with a third-party manufacturing agreement. This inventory is carried at the
lower of cost, on a first-in first-out basis, or market.
3. Concentrations of credit risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash equivalents and trade receivables. The
Company places its cash with high quality financial institutions. The Company
operates in one business segment and provides software development services to
various companies in the handheld computer industry. The Company generally does
not require collateral. The Company maintains reserves for credit losses.
4. Notes payable
Short term borrowings as of March 31, 1996 consist of bridge loan funding
received in March 1996 in the amount of $375,000; a $469,000 unsecured bank loan
guaranteed by a major shareholder bearing interest at 2% above the bank's prime
rate; and a $1,000,000 convertible loan (together with accrued interest in the
amount of $143,891) from a major shareholder.
5. Technology acquisition
In a series of transactions, the Company acquired the rights to certain
technology and related inventory in December 1995 for a purchase price of
approximately $125,000. The Company expensed the purchased technology in fiscal
1996 as it was considered in-process research and development.
6. Subsequent events.
Reverse acquisition
On June 10, 1996, PenWare Inc. ("PenWare" or the "Company") completed a reverse
acquisition with PenUltimate, Inc., ("PenUltimate"), a Delaware corporation.
Pursuant to the Agreement and Plan of Reorganization, common and preferred
shareholders of PenWare exchanged their holdings in PenWare for shares of
PenUltimate common stock, and PenWare became a wholly owned subsidiary of
PenUltimate. After giving effect to a reverse stock split and exchange, wherein
existing PenUltimate shareholders received 250,000 common shares for their
outstanding 16,740,934 common shares, PenUltimate issued to the PenWare
shareholders 1,125,000 shares of common and 112,500 shares of Series C preferred
stock in consideration of the transaction. On an as-if converted basis, the
former shareholders of PenWare now hold approximately 90% of the voting power in
PenUltimate.
Financing arrangements
Beginning in January 1996, the Company borrowed $469,000 under an unsecured
short-term loan agreement with a bank. This loan was guaranteed by a shareholder
of the Company. The Company repaid the loan in full in June 1996.
The Company completed a series of private placements of stock and warrants in
May, June and July 1996, receiving net proceeds of approximately $3,886,000 for
1,102,942 shares of Series B Preferred Stock.
A total of $1,400,000 in bridge loans was received from private investors in
March and April 1996. The Company repaid $332,200 of the loans in June 1996,
and the remaining $1,067,800 was converted to 392,574 shares of Series B
Preferred Stock in June 1996, in connection with the private placements.
The preferred stock and promissory note previously held by a major shareholder
were exchanged for 112,500 shares of Series C Preferred Stock in June 1996, in
connection with the reverse acquisition as discussed above.
19
<PAGE> 20
Lease obligations
In July 1996, PenUltimate entered into a lease for new office and operating
facilities in Sunnyvale, California. Annual payments for this three year lease
are $98,280 for 1997, $107,640 for 1998, and $112,320 for 1999.
In connection with the PenUltimate merger, the Company assumed capital leases
for certain office and telephone equipment. The leases expire in May 1998 and
the combined monthly obligation is approximately $1,600.
In July 1996, PenUltimate entered into a twelve-month operating lease for
software. Monthly payments on this lease are approximately $2,050 for the
duration of the lease.
20
<PAGE> 21
PENULTIMATE, INC.
CONDENSED PRO FORMA BALANCE SHEET (unaudited)
as of March 31, 1996
<TABLE>
<CAPTION>
Adjust-
ASSETS ments (1) Pro forma
<S> <C> <C> <C>
Current assets $ 447,287 -- $ 447,287
Property and equipment, net 6,725 $128,500 135,225
Other non-current assets 5,491 -- 5,491
----------- -------- -----------
Total assets $ 459,503 $128,500 $ 588,003
=========== ======== ===========
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current liabilities $ 2,380,525 -- $ 2,380,525
Long term liabilities -- 43,500 43,500
----------- -------- -----------
Shareholders' deficit:
Preferred stock 113 -- 113
Common stock 1,334 -- 1,334
Additional paid-in capital 1,000,726 85,000 1,085,726
Accumulated deficit (2,923,195) -- (2,923,195)
----------- -------- -----------
Total shareholders' deficit (1,921,022) -- (1,836,022)
----------- -------- -----------
Total liabilities and
shareholders' deficit $ 459,503 $128,500 $ 588,003
=========== ======== ===========
</TABLE>
Notes to Pro Forma Balance Sheet
1. Adjustments are to reflect fixed assets and capital lease obligations of
PenUltimate acquired in the reverse acquisition. Prior to the reverse
acquisition, all other assets and liabilities of PenUltimate were disposed of
or liquidated when PenUltimate ceased operations.
21
<PAGE> 22
PENULTIMATE, INC.
PRO FORMA STATEMENT OF SHAREHOLDERS' DEFICIT (unaudited)
For the nine months ended March 31, 1996
<TABLE>
<CAPTION>
Series B Series C
Preferred Stock Preferred Stock Common Stock Additional
Shares Amount Shares Amount Shares Amount Paid in
Capital
<S> <C> <C> <C> <C> <C> <C> <C>
Reverse acquisition
Shares outstanding
prior to acquisition
(Note 1) -- -- -- -- 250,000 --
Shares issued for
acquisition
(Note 2) -- -- 112,500 1,084,275 --
--------- ----- ------- ----- --------- ------ ----------
Balances as of
March 31, 1996 -- -- 112,500 $113 1,334,275 $1,334 $1,085,726
Pro forma adjustments for
issuance of stock
after March 31, 1996:
Shares issued for
conversion of
bridge loan (Note 3) 392,574 $393 -- -- -- -- 1,067,407
Shares issued for sale
of securities (Note 3) 862,447 862 -- -- -- -- 3,179,641
--------- ------ ------- ----- --------- ----- ----------
Pro forma shareholders'
equity 1,255,021 $1,255 112,500 $ 113 1,334,275 $1,334 $5,332,774
========== ====== ======= ====== ========= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
Accumulated Total
Deficit Shareholders'
Deficit
<S> <C> <C>
Reverse acquisition
Shares outstanding
prior to acquisition
(Note 1) -- --
Shares issued for
acquisition
(Note 2) -- --
----------- -----------
Balances as of
March 31, 1996 $(2,923,195) $(1,836,022)
Pro forma adjustments for
issuance of stock
after March 31, 1996:
Shares issued for
conversion of
bridge loan (Note 3) -- 1,067,800
Shares issued for sale
of securities (Note 3) -- 3,180,503
----------- -----------
Pro forma shareholders'
equity (2,923,195) $ 2,412,281
=========== ===========
</TABLE>
22
<PAGE> 23
PENULTIMATE, INC.
NOTES TO PRO FORMA STATEMENT OF SHAREHOLDERS' DEFICIT (unaudited)
1. Immediately prior to the reverse acquisition, PenUltimate shareholders owned
16,740,934 shares of common stock, which were converted to 250,000 shares of
common stock.
2. Pursuant to the Agreement and Plan of Reorganization, common and preferred
shareholders of PenWare exchanged their holdings in PenWare for shares of
PenUltimate common stock, and PenWare became a wholly owned subsidiary of
PenUltimate. After giving effect to a reverse stock split and exchange, wherein
existing PenUltimate shareholders received 250,000 common shares for their
outstanding 16,740,934 common shares, PenUltimate issued to the PenWare
shareholders 1,125,000 shares of common stock and 112,500 shares of Series C
preferred stock in consideration of the transaction. On an as-if converted
basis, the former shareholders of PenWare now hold approximately 90% of the
voting rights of PenUltimate. For accounting purposes the acquisition has been
treated as a reverse acquisition.
As a result of the reverse acquisition, outstanding stock of the combined
companies in the accompanying financial statements represents the capital of
PenWare at the date of the reverse acquisition plus the fair market value of
PenUltimate's remaining assets and liabilities. However, the number of shares
outstanding will reflect only the shares of PenUltimate. The shares issued to
effect the reverse acquisition have been assigned a value of $85,000 in the
accompanying financial statements. The fair market value of PenUltimate's assets
at the closing date was as follows:
<TABLE>
<S> <C>
Property and equipment $128,500
Capital lease liability (43,500)
--------
Total $ 85,000
========
</TABLE>
3. See Note 10 to the June 30, 1995, Financial Statements for a description of
the issuances of stock after March 30, 1996.
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 1995 AND 1994 AND THE
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIODS ENDED MARCH 31, 1996
AND 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1996
<PERIOD-START> JUL-01-1994 JUL-01-1995
<PERIOD-END> JUN-30-1995 MAR-31-1996
<EXCHANGE-RATE> 1 1
<CASH> 76814 153257
<SECURITIES> 0 0
<RECEIVABLES> 2044 206635
<ALLOWANCES> 0 0
<INVENTORY> 25000 73856
<CURRENT-ASSETS> 117397 447287
<PP&E> 142638 0
<DEPRECIATION> 128268 0
<TOTAL-ASSETS> 137149 459503
<CURRENT-LIABILITIES> 1237568 2380525
<BONDS> 0 0
0 0
989269 989269
<COMMON> 12904 12904
<OTHER-SE> (2102592) (2923195)
<TOTAL-LIABILITY-AND-EQUITY> 137149 459503
<SALES> 544338 506048
<TOTAL-REVENUES> 544338 506048
<CGS> 298296 299279
<TOTAL-COSTS> 298296 299279
<OTHER-EXPENSES> 204233 423408
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 59900 0
<INCOME-PRETAX> (325535) (819801)
<INCOME-TAX> 800 800
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (385304) (820601)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
