SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K/A
(Amendment No. 1)
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 9, 1998
MICROPOINT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-24368 33-0615178 87-0533607
(Commission file number) (IRS employer identification no.)
6906 South 300 West, Midvale, Utah 84047
(Address of principal executive offices) (Zip code)
(801) 568-5111
(Registrant's telephone number, including area code)
This document contains a total of 28 pages.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
a. Financial Statements of Businesses Acquired.
Listed on page F-1.
b. Pro Forma Financial Information.
Listed on page F-1.
c. Exhibits.
Number Description
------ -----------
2.1 Agreement and Plan of Reorganization (Incorporated by reference
to Exhibit 2.1 of the Company's current report on Form 8-K,
dated April 9, 1998).
3.1 Certificate of Amendment to Certificate of Incorporation
(Incorporated by reference to Exhibit 3.1 of the Company's
current report on Form 8-K, dated April 9, 1998).
10.1 Employment Agreement with Douglas Odom (Incorporated by
reference to Exhibit 10.1 of the Company's current report
on Form 8-K, dated April 9, 1998).
10.2 Lease Agreement (Incorporated by reference to Exhibit
10.2 of the Company's current report on Form 8-K, dated
April 9, 1998).
10.3 Ohio Art Agreement (Incorporated by reference to Exhibit
10.3 of the Company's current report on Form 8-K, dated
April 9, 1998).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: June 23, 1998 Micropoint, Inc. By /s/ Douglas M. Odom
Douglas M. Odom, President,
Chief Executive Officer
and Director
SENSITRON INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS F-2
Unaudited Condensed Pro Forma Consolidated
Balance Sheet - March 31, 1998 F-3
Unaudited Condensed pro Forma Consolidated
Statements of Operations for the Year Ended
December 31, 1997 and for the Three Months
Ended March 31, 1998 F-4
SENSITRON INC. AND SUBSIDIARIES
Report of Independent Certified Public
Accountants F-5
Consolidated Balance Sheet - December 31,
1997 F-6
Consolidated Statements of Operations for
the Years Ended December 31, 1997 and 1996
and for the Period from January 5, 1995
(Date of Inception) through December 31,
1997 F-7
Consolidated Statements of Stockholders'
Equity (Deficit) for the Period from
January 5, 1995, (Date of Inception) through
December 31,1995, and for the Years Ended
December 31, 1996 and 1997 F-8
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1997 and 1996
and for the Period from January 5, 1995
(Date of Inception) through December 31, 1997 F-10
Notes to Consolidated Financial Statements F-11
Condensed Consolidated Balance Sheet - March
31, 1998 (Unaudited) F-22
Condensed Consolidated Statements of
Operations for the Three Months Ended March
31, 1998 and 1997 and for the Period from
January 5, 1995 (Date of Inception) through
March 31, 1998 (Unaudited) F-23
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended March 31,
1998 and 1997 and for the Period from January
5, 1995 (Date of Inception) through March 31,
1998 (Unaudited) F-24
Notes to Condensed Financial Statements
(Unaudited) F-25
------------------
MICROPOINT, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated
balance sheet has been prepared to present the financial
position of Micropoint, Inc. ("Micropoint') and subsidiaries
as though the merger of Sensitron Inc. into a newly-formed
subsidiary of Micropoint was consummated on March 31, 1998.
The following unaudited pro forma condensed consolidated
statements of operations have been prepared to present the
operations of the consolidated companies assuming the merger
had occurred on January 1, 1997. The merger was accounted for
as the reorganization of Sensitron Inc. and the acquisition of
Micropoint by Sensitron. The acquisition has been accounted
for by the purchase method of accounting with Sensitron Inc.
being considered as the acquiring enterprise. On December 30,
1997 Micropoint and Sensitron Inc. entered into an agreement
to merge Sensitron Inc. with a newly formed subsidiary of
Micropoint. Micropoint was a shell corporation with no assets
and approximately $2,000 in accounts payable. A condition of
the agreement was that Micropoint raise $3,000,000 in a
private placement offering. The $3,000,000 was raised and the
merger was consummated April 9, 1998.
The following financial information was derived from, and
should be read in conjunction with the separate historical
consolidated financial statements of Sensitron Inc. and the
related notes to those financial statements, which are
included elsewhere herein. These unaudited pro forma
condensed consolidated balance sheet and statements of
operations have been included herein for comparative purposes
only and do not purport to be indicative of the results of
operations which actually would have been obtained had the
merger occurred March 31, 1998 or January 1, 1997, or the
results of operations which may be obtained in the future. In
addition, future results may vary significantly from the
results reflected in these pro forma balance sheet and
statements of operations.
<TABLE>
MICROPOINT, INC.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED
BALANCE SHEET
MARCH 31, 1998
<CAPTION>
Pro Pro
Forma Forma
Sensitron Micropoint Adjustments Results
----------- ----------- ------------ -----------
ASSETS
<S> <C> <C> <C> <C>
Current Assets
Cash $ 45,552 $ 479,864 $ 0 $ 525,416
Accounts receivable, net 51,141 0 0 51,141
Stock subscription receivable 0 75,078 (B) (75,078) 0
Investment in securities available
-for-sale 0 1,458,040 (B) (1,458,040) 0
Note receivable, current portion 3,387 0 0 3,387
Related party receivable 0 1,000,000 (A) (1,000,000) 0
----------- ----------- ------------- -----------
Total Current Assets 100,080 3,012,982 (2,533,118) 579,944
----------- ----------- ------------- -----------
Equipment 1,078,489 0 (B) 208,932 1,287,421
Less accumulated depreciation (230,875) 0 0 (230,875)
---------- ---------- ------------- -----------
Net equipment 847,614 0 208,932 1,056,546
---------- ---------- ------------- -----------
Goodwill, net of accumulated
amortization 59,901 0 0 59,901
Deposits 15,779 0 0 15,779
Patents, net of accumulated
amortization 85,249 0 0 85,249
---------- ----------- ------------- -----------
Total Assets $1,108,623 $ 3,012,982 $ (2,324,186) $ 1,797,419
========== =========== ============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 174,190 $ 2,297 $ 0 $ 176,487
Deferred revenue 200,000 0 0 200,000
Accrued expenses 134,261 0 0 134,261
Related party payable 1,000,000 0 (A) (1,000,000) 0
Notes payable 258,073 0 0 258,073
---------- ----------- ------------- -----------
Total Current Liabilities 1,766,524 2,297 (1,000,000) 768,821
---------- ----------- ------------- -----------
Stockholders' Equity
Preferred Stock 0 0 0 0
Common stock 3,126,453 6,000 (C) (3,108,593) 23,860
Additional paid-in capital 0 2,995,246 (C) 3,108,593 6,103,839
Deficit accumulated during
the development stage (3,784,354) 9,439 (B) (1,324,186) (5,099,101)
---------- ---------- ------------- -----------
Total Stockholders' Equity
(Deficit) (657,901) 3,010,685 (1,324,186) 1,028,598
---------- ---------- ------------- -----------
Total Liabilities and Stockholders'
Equity (Deficit) $1,108,623 $3,012,982 $ (2,324,186) $ 1,797,419
========== ========== ============= ===========
Notes to Pro Forma Balance Sheet
A Elimination of bridge loan from Micropoint to Sensitron Inc.
B To reflect the collection of receivables from stockholders and the
liquidation of investment in securities available-for-sale. The
proceeds therefrom are reflected as having been used to acquire
$208,932 of equipment and to pay $1,324,186 for research and development
and other expenses which has been charged to deficit accumulated
during the development stage.
C To adjust common stock based on 15,860,279 shares outstanding with
a par value of $0.001 per share.
</TABLE>
<TABLE>
MICROPOINT, INC.
UNAUDITED CONDENSED PRO FORMACONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Pro Pro
Forma Forma
Sensitron Micropoint Adjustments Results
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Sales $ 261,936 $ 0 $ 0 $ 261,936
Cost of sales 93,694 0 0 93,694
----------- ----------- ------------ ------------
Gross profit 168,242 0 0 168,242
General and administrative
expense 1,654,819 59 (B) 1,680,000 3,334,878
----------- ----------- ------------- ------------
Loss from operations (1,486,577) (59) (1,680,000) (3,166,636)
Interest expense (34,879) 0 0 (34,879)
Other expenses (19,602) 0 0 (19,602)
----------- ----------- ------------- ------------
Net loss $(1,541,058) $ (59) $ (1,680,000) $ (3,221,117)
============ =========== ============= ============
Basic and diluted loss
per common share $ (0.13) $ 0.00 $ (0.20)
=========== =========== ============
Weighted average number of
common shares used in per
share calculation 11,721,842 2,000,000 (A) 2,138,437 15,860,279
=========== =========== ============= ============
FOR THE THREE MONTHS ENDED MARCH 31, 1998
Sales $ 60,088 $ 0 $ 0 $ 60,088
Cost of sales 44,726 0 0 44,726
----------- ----------- ------------- ------------
Gross profit 15,362 0 0 15,362
General and administrative
expense 471,026 172 (C) (238,476) 232,723
----------- ---------- ------------- ------------
Loss from operations (455,664) (172) 238,476 (217,361)
Interest expense (40) 0 0 (40)
Investment income 0 13,140 0 13,140
Other expenses (40) 0 0 (40)
---------- ------------ ------------- ------------
Net loss $ (455,744) $ 12,967 $ 238,476 $ (204,301)
========== ============ ============= ============
Net loss per common share $ (0.05) $ 0.00 $ (0.01)
========== ============ ============
Weighted average number of
common shares used in per
share calculation 9,860,279 4,044,444 (A) 1,955,556 15,860,279
========== ============ ============= ============
Notes to Pro Forma Statements of Operations
A During the three months ended March 31, 1998, Micropoint issued
4,000,000 shares of common stock in a privateplacement offering for
$3,000,000. On April 9, 1998 Sensitron, Inc. merged into a newly-
formed subsidiary ofMicropoint. The number of shares outstanding
after the merger was 15,860,279. These shares are treated as having
been outstanding from January 1, 1997 for purposes of the pro forma
statements of operations.
B As a condition of the merger, Micropoint, Inc. was to raise $3,000,000.
This money was to be spent as follows: Research and Development,
Operations and Sales, $1,590,000; Equipment, $450,000; and Repayment
of indebtedness, $960,000. The effects on the pro forma statements of
operations are $1,590,000 of general and administrative expense and
$90,000 of depreciation expense reflected during the year ended December
31, 1997.
C During 1998, Sensitron Inc. spent $228,029 on research and development,
$241,000 on equipment with resultingdepreciation of $48,214. The pro
forma statement of operations for the three months ended March 31, 1998
reflect thereduction of the expenditures and a $37,767 increase in
depreciation as though the expenditures and purchases occurred January
1, 1997.
</TABLE>
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East 300 South,
Member of Summit International Associates Suite 200
Salt Lake City, Utah
84111-2693
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors
Sensitron Inc.
We have audited the accompanying consolidated balance sheet of
Sensitron Inc. and subsidiaries (a development stage enterprise) as of
December 31, 1997 and the related statements of operations,
stockholders' deficit, and cash flows for the years ended December 31,
1997 and 1996, and for the cumulative period from January 5, 1995 (date
of inception) through December 31, 1997. 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 consolidated financial position
of Sensitron Inc. and subsidiaries as of December 31, 1997 and the
results of their operations and their cash flows for the years ended
December 31, 1997 and 1996, and for the cumulative period from January
5, 1995 (date of inception) through December 31, 1997, in conformity
with generally accepted accounting principles.
HANSEN, BARNETT & MAXWELL
June 12, 1998
Salt Lake City, Utah
SENSITRON INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Current Assets
Cash $ 106,494
Trade accounts receivable,
net of allowance of $151,567 45,823
Stock subscription receivable 390,000
Note receivable, current portion 4,952
Related party receivable 47,989
----------
Total Current Assets 595,258
----------
Property and Equipment 924,696
Less accumulated depreciation (205,808)
----------
Net Property and Equipment 718,888
----------
Goodwill, net of accumulated
amortization of $53,911 65,891
Deposits 13,279
Patents, net of accumulated
amortization of $30,618 76,702
----------
Total Assets $ 1,470,018
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Trade accounts payable $ 505,732
Related party payable 14,562
Accrued liabilities 398,473
Deferred revenue 200,000
Notes payable 561,409
----------
Total Current Liabilities 1,680,176
----------
Stockholders' Deficit
Preferred stock - no par value;
5,000,000 shares authorized;
no shares issued or outstanding -
Common stock - no par value;
20,000,000 shares authorized;
9,860,279 shares issued and
outstanding 3,118,453
Deficit accumulated during
the development stage (3,328,611)
----------
Total Stockholders' Deficit (210,158)
----------
Total Liabilities and
Stockholders' Deficit $ 1,470,018
===========
The accompanying notes are an integral part of these consolidated
financial statements.
SENSITRON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period
January
5, 1995
(Date of
Iniception)
For the Years Ended Through
December 31, December 31,
1997 1996 1997
------------ ----------- -------------
Sales $ 261,936 $ 867,724 $ 1,375,097
Cost of Goods Sold 93,694 466,476 708,372
------------ ----------- -------------
Gross Profit 168,242 401,248 666,725
General and administrative
expenses 1,654,819 1,807,263 3,911,455
------------ ----------- -------------
Loss From Operations (1,486,577) (1,406,015) (3,244,730)
Interest expense (34,879) (16,392) (54,044)
Interest income - 10,780 13,434
Other expenses (19,602) (5,670) (43,271)
------------ ----------- -------------
Net Loss $ (1,541,058) $(1,417,297) $ (3,328,611)
============ =========== =============
Basic and Diluted
Loss Per Common Share $ (0.13) $ (0.12) $ (0.34)
============ =========== =============
Weighted Average Number
of Common Share Used
in Per Share Calculation 11,721,842 11,899,511 9,881,152
============ ============ =============
The accompanying notes are an integral part of these consolidated
financial statements.
SENSITRON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION> Total
Receivable Deferred Stockholders'
Common Stock Accumulated For Common Offering Equity
Shares Amount Deficit Stock Costs (Deficit)
--------- -------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance - January
5, 1995(date of
inception) - $ - $ - $ - $ - $ -
Issuance cash,
January 1995,
$0.00 per share
3,705,000 2,000 - - - 2,000
Issuance for cash,
January 1995,
$0.46 per share 650,000 300,000 - - - 300,000
Contribution of
patents by
stockholder,
January 1995 - 22,232 - - - 22,232
Issuance for cash,
September and
October 1995,
$0.77 per share 852,800 656,000 - (24,000) - 632,000
Issuance to acquire
Flexpoint, Inc.
September 26, 1995,
$(0.02) per
share 5,395,000 (94,184) - - - 60,000
Issuance to acquire
Tamco,
September 26,
1995, $0.46 per
share 130,000 60,000 - - - 60,000
Deferred offering
costs - - - - (213,382) (213,382)
Net loss for the
period from
January 5, 1995
through
December 31, 1995 - - (370,256) - - (370,256)
--------- -------- ---------- ----------- ----------- -----------
Balance -
December 31,
1995 10,732,787 $946,048 $ (370,256) $ (24,000) $ (213,382) $ 338,410
========== ======== ========== =========== =========== ===========
(Continued)
<FN>
The Accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
SENSITRON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT) (CONTINUED)
Total
Receivable Deferred Stockholders
Common Stock Cumulated For Common Offering Equity
Shares Amount Deficit Stock Costs (Deficit)
---------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance -
December 31,
1995 10,732,787 $ 946,048 $ (370,256) $ (24,000) $ (213,382) $ 338,410
Issuance for
services, January
1996,
$0.77 per share 260,000 200,000 - - - 200,000
Issuance for cash,
February 1996,
$0.77 per share 123,500 95,000 - - - 95,000
Issuance for cash,
March through
October 1996,
$0.66 per share
before $246,547
of offering
costs 1,957,111 1,053,453 - - 213,382 1,266,835
Forgiveness of
stock subscription
receivable - (24,000) - 24,000 - -
Net loss - - (1,417,297) - - (1,417,297)
---------- ---------- ---------- ----------- ----------- -----------
Balance -
December 31,
1996 13,073,398 2,270,501 (1,787,553) - - 482,948
Issuance for cash,
February through
July 1997, $0.97
per share 143,000 110,000 - - - 110,000
Redemption from
officers for
$50,000 of cash
and $150,000
of notes payable,
August 1997,
$0.03 per share (6,308,666) (200,000) - - - (200,000)
Issuance for
cash, September,
1997, $0.04
per share 1,820,000 80,000 - - - 80,000
Issuance upon
conversion of
debt, September
1997, $0.57
per share 110,672 53,952 - - - 53,952
Issuance for cash
and a $390,000
receivable, September
through
December 1997,
$0.78 per share 1,031,875 804,000 - - - 804,000
Net loss - - (1,541,058) - - (1,541,058)
---------- ----------- ---------- ----------- ----------- -----------
Balance -
December 31, 1997 9,860,279 $ 3,118,453 $(3,328,611) $ - $ - $ (210,158)
========== =========== =========== ============ ============= ===========
<FN>
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
SENSITRON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period
January
5, 1995
(Date
of Inception)
For the Years Ended Through
December 31, December 31,
1997 1996 1997
---------- ---------- ----------
Cash Flows From
Operating Activities
Net Loss $(1,541,058) $(1,417,297) $(3,328,611)
Adjustments to reconcile
net loss to net cash
used by operating
activities:
Depreciation and
amortization 166,040 105,480 295,850
Stock issued for services - 200,000 200,000
Allowance for doubtful
accounts - 151,567 151,567
Changes in operating assets
and liabilities:
Accounts receivable 249,641 (192,844) (61,349)
Accounts payable 52,327 213,800 326,918
Accrued liabilities 256,996 11,695 294,734
Deferred revenue 193,837 - 193,837
Other assets (3,761) 11,110 1,850
----------- ----------- -----------
Net Cash Used By
Operating Activities (625,978) (916,489) (1,925,204)
----------- ----------- -----------
Cash Flows From Investing
Activities
Payments to Flexpoint
prior to acquisition - - (268,413)
Cash paid to acquire Tamco - - (25,000)
Payments to purchase
equipment (92,008) (478,945) (621,534)
Proceeds from sale
of equipment 8,090 - 8,090
Issuance of note
receivable - (12,507) (12,507)
Payments received on
note receivable 6,252 1,303 7,555
Payments for patents (11,769) (42,403) (71,295)
----------- ----------- -----------
Net Cash Used By Investing
Activities (89,435) (532,552) (983,104)
----------- ----------- -----------
Cash Flows From Financing
Activities
Proceeds from issuance of
common stock 604,000 1,395,000 2,933,000
Cash payments to officers
to repurchase stock (50,000) - (50,000)
Cash paid for offering costs - (33,166) (123,020)
Proceeds from borrowings 303,960 - 303,960
Principal payments of debt (10,000) (35,415) (45,415)
Proceeds from related party
notes 39,562 646 60,208
Principal payments of related
party notes (66,376) - (63,931)
Net Cash Provided By
Financing Activities 821,146 1,327,065 3,014,802
----------- ----------- -----------
Net Change In Cash 105,733 (121,976) 106,494
Cash - Beginning of Period 761 122,737 -
----------- ----------- -----------
Cash - End of Period $ 106,494 $ 761 $ 106,494
=========== =========== ===========
Supplemental cash flow information and Noncash investing and financing
activities - Note 6
SENSITRON INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
UNAUDITED
ASSETS
Current Assets
Cash $ 45,552
Accounts receivable, net of allowance 51,141
Note receivable 3,387
-----------
Total Current Assets 100,080
Equipment 1,078,489
Less accumulated depreciation (230,875)
-----------
Net Equipment 847,614
-----------
Goodwill, net of accumulated amortization 59,901
Deposits 15,779
Patents, net of accumulated amortization 85,249
-----------
Total Assets $ 1,108,623
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Trade accounts payable $ 174,190
Deferred revenue 200,000
Accrued expenses 134,261
Payable to related party 1,000,000
Notes payable 258,073
-----------
Total Current Liabilities 1,766,524
-----------
Stockholders' Deficit
Preferred stock 3,126,453
Deficit accumulated during
the development stage (3,784,354)
-----------
Total Stockholders' Deficit (657,901)
-----------
Total Liabilities and
Stockholders' Deficit $ 1,108,623
===========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
SENSITRON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period
January
5, 1995
(Date
of Inception)
For the Three Months Through
Ended March 31, March 31,
1997 1996 1997
----------- ------------ ------------
Sales $ 60,088 $ 263,177 $ 1,435,185
Cost of sales 44,726 34,298 753,098
----------- ------------ ------------
Gross Profit 15,362 228,879 682,087
General and
administrative expenses 471,026 423,040 4,382,481
----------- ------------ ------------
Loss From Operations (455,664) (194,161) (3,700,394)
Interest expense (40) (960) (54,084)
Interest income - - 13,434
Other expenses (40) (6,821) (43,316)
----------- ------------ ------------
Net Loss $ (455,744) $ (201,942) $ (3,784,360)
=========== ============ ============
Basic and Diluted
Loss Per Common Share $ (0.05) $ (0.02) $ (0.39)
=========== ============= ============
Weighted Average Number of Common
Shares Used in Per Share
Calculation 9,806,279 13,158,633 9,806,279
=========== ============ ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
NOTE 1- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations and Principles of Consolidation - Sensitron Inc.
("Sensitron") was incorporated on January 5, 1995 under the laws of the
State of Utah. Sensitron and its wholly-owned subsidiaries Flexpoint,
Inc. ("Flexpoint") and Technology and Machine Company, Inc. ("Tamco"),
are collectively referred to herein as the Company. The Company is a
development stage enterprise engaged principally in designing,
engineering, and manufacturing sensor technology and equipment using
flexible potentiometer technology owned by the Company. Sales have
principally been to automobile component manufacturers and toy
manufacturers.
The accompanying consolidated financial statements include the accounts
of Sensitron and its wholly-owned subsidiaries from the date of their
acquisition. All significant intercompany transactions and account
balances have been eliminated in consolidation. The acquisition of
Flexpoint and Tamco occurred on September 26, 1995 (see Note 2).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in financial
statements and accompanying notes. Actual results could differ from
those estimates.
Business Condition - The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles,
which contemplates continuation of the Company as a going concern.
However, the Company has suffered losses from operations and has had
negative cash flows from operating activities during the years ended
December 31, 1997 and 1996 and cumulative from inception through
December 31, 1997, which conditions raise substantial doubt about the
Company's ability to continue as a going concern. Subsequent to year-
end, the Company completed a reorganization with Micropoint, Inc., as
discussed in Note 15, and thereby obtained approximately $3,000,000 of
additional equity financing. The Company's continued existence is
dependent upon its ability to achieve profitable operations. The
Company is continuing its efforts to negotiate a significant contract
to supply flexible sensors to an automobile component manufacturer,
which, if successful, would provide significant revenue to the Company.
Management believes this and other similar potential contracts will
provide sufficient cash flows for the Company to continue as a going
concern and to ultimately establish profitable operations.
Financial Instruments - The amounts reported as cash, accounts
receivable, accounts payable, and notes payable are considered to be
reasonable approximations of their fair values. The fair value
estimates were based on market information available to management at
the time of the preparation of the financial statements.
Concentration of Risk - The concentration of business in one industry
subjects the Company to a concentration of credit risk relating to
trade accounts receivable. The Company relies on large production
contracts for its business and generally does not require collateral
from its customers with respect to the Company's trade receivables.
During the year ended December 31, 1997, sales totaling $34,906 were to
one customer. During the year ended December 31, 1996, sales to two
customers totaled $418,109 and $152,506, respectively. An allowance for
doubtful accounts of $151,567 was provided at both December 31, 1997
and 1996.
Property and Equipment - Property and equipment is stated at cost.
Additions and major improvements are capitalized while maintenance and
repairs are charged to operations. Upon retirement, sale or
disposition, the cost and accumulated depreciation of the items sold
are eliminated from the accounts, and any resulting gain or loss is
recognized in operation. Depreciation is computed using the straight-
line and the double-declining-balance methods and is recognized over
the estimated useful lives of the property and equipment, which are
five to seven years.
Long-Lived Assets - Impairment losses are recorded when indicators of
impairment are present and undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount. No
impairment losses were required to be recognized in the accompanying
financial statements.
Revenue Recognition - Revenue from the sale of products is recorded at
the time of shipment to and acceptance by the customers. Revenue from
research and development contracts is recognized as the contracts are
completed. During the year ended December 31, 1996, approximately
$570,615 of the Company's revenue was related to research and
development contracts and to other research and development activities.
Revenue from contracts to license the Company's technology to others is
deferred until all conditions under the contracts are met by the
Company and then recognized as revenue over the remaining term of the
contracts.
Stock-Based Compensation - Stock-based compensation arising from
granting stock options to employees is measured by the intrinsic-value
method. This method recognizes compensation expensed based on the
difference between the fair value of the underlying common stock and
the exercise price on the date granted. The Company also presents pro
forma results of operations assuming compensation had been measured by
the fair-value method.
Basic and Diluted Loss Per Share - In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No.128, Earnings Per Share. Statement No. 128 specifies the
computation, presentation, and disclosure requirements for earnings per
share and was adopted as of December 31, 1997. Loss per share for the
year ended December 31, 1996 and cumulative from inception through
December 31, 1997 were restated; however, the effect of the change to
loss per share for those periods was not material.
Basic loss per common share is computed by dividing net loss by the
number of common shares outstanding during the period. Diluted loss per
share reflects potential dilution which could occur if all potentially
issuable common shares from stock purchase warrants and options or
convertible notes payable resulted in the issuance of common stock.
Inasmuch as the Company incurred losses during all periods presented in
the accompanying financial statements, diluted loss per share is the
same as basic loss per share because potentially issuable common shares
would decrease the loss per share and have been excluded from the
calculation.
NOTE 2 - ACQUISITIONS
In April 1995, Sensitron acquired 100 shares of Flexpoint's common
stock in exchange for the forgiveness of $50,000 of accounts
receivable. On September 26, 1995, Sensitron completed the acquisition
of Flexpoint by exchanging 5,395,000 shares of Sensitron's common stock
for the remaining outstanding common stock of Flexpoint in a purchase
business combination accounted for in a manner similar to a pooling of
interests. Flexpoint and Sensitron were principally owned by the same
individuals prior to the combination. Flexpoint became a wholly owned
subsidiary and is engaged in manufacturing and selling of various
electronic components and sensors.
On September 26, 1995, Sensitron acquired all of the outstanding stock
of Tamco, a company engaged in manufacturing and selling various molds
and dies. The purchase price was approximately $170,000, consisting of
$25,000 of cash, a long-term note payable of $85,000 and 130,000 shares
of the Company's common stock valued at $60,000. The purchase price
was allocated based on the estimated fair values of the net assets
acquired. This allocation resulted in the recording of goodwill of
$119,802. Goodwill is being amortized over five years using the
straight-line method.
Subsequent to December 31, 1997, the Company acquired Micropoint, Inc.
as further described in Note 15.
NOTE 3 - PROPERTY AND EQUIPMENT
At December 31, 1997, property and equipment consisted of the
following:
Furniture and fixtures $ 152,140
Machinery and equipment 381,672
Office equipment 104,062
Software 24,650
Leasehold improvements 252,172
----------
Total $ 914,616
==========
Depreciation expense for the years ended December 31, 1997 and 1996 was
$130,051 and $70,673, respectively.
NOTE 4 - PATENTS
Costs to obtain patents have been capitalized and are being amortized
over a 5 year period. The Company has the rights to several patents.
The value of these perfected patents is $62,583. The amortization
expense for the years ended December 31, 1997 and 1996 was $12,021
and $10,630, respectively. The Company is in the process of developing
new patents and protecting existing patents internationally.
Costs incurred for the development of these new patents are capitalized.
However, until the new patents are perfected, these costs are not
being amortized. The total cost of the patents and patent being applied
for at December 31, 1997 was $107,320.
NOTE 5 - LICENSE AGREEMENT
In May 1997, the Company granted an otherwise unrelated third party the
worldwide exclusive license to use and sell flexible potentiometers
covered under the Company's patents for use in toy, traditional games
and video game industries. The license does not include the right to
manufacture sensors which will be purchased from the Company. A
licensing fee of $500,000 was required under the agreement relating to
the exclusive use of the technology through December 1998, of which
$200,000 had been received by the Company as of December 31, 1997.
After 1998, the exclusive license is to be maintained under the
agreement by the licensee providing revenue from royalties and fees to
the Company of at least $500,000 per year. Royalties to be received
are 2% of sales of the licensee's products in the United States and 3%
of related products to the licensee's international partners.
Under the agreement, the Company guaranteed that it would deliver
flexible potentiometers in marketable quantities to the licensee by
June 1, 1998, and if this condition was not met, it would return any
amounts received under the licensing agreement. Accordingly,
recognition of the $200,000 licensing fee received by December 31, 1997
was deferred at that date. The funds will be recognized as revenue at
the point when the Company begins shipping sensors in marketable
quantities. Additional payments received prior to January 1, 1999 will
be recognized as revenue evenly over the period beginning at the point
the Company begins shipping sensors and ending December 31, 1998.
NOTE 6 - CASH FLOW INFORMATION
Supplemental Cash Flow Information
For the Period
Ended
For the Years Ended December 31,
1997 1996 1995
--------- --------- -----------
Interest Paid $ 34,879 $ 16,392 $ 965
Noncash Investing and Financing Activities - On September 26, 1995, the
Company acquired all of the common stock of Tamco. In connection with
this acquisition, liabilities were assumed as follows:
Fair value of assets acquired, including goodwill
of $119,802 $ 170,000
Cash paid in acquisition (25,000)
Fair value of stock issued in acquisition (60,000)
----------
Net liabilities assumed $ 5,000
==========
On September 26, 1995 the Company acquired all of the common stock of
Flexpoint in exchange for 5,395,000 shares of common stock of the
Company. The following assets and liabilities were acquired at their
historical cost basis:
Historical cost of assets acquired $ 174,229
Advances to Flexpoint prior to acquisition (258,413)
----------
Net liabilities assumed $ (94,184)
==========
During the period ended December 31, 1995, the Company assumed $13,792
of legal costs associated with the patents, in connection with the
assignment of patents to the Company by an officer. The Company
accepted notes receivable for $24,000 as consideration of 31,200 shares
of common stock.
During the year ended December 31, 1996, the Company issued 260,000
shares of common stock valued at $0.77 per share, or $200,000, for
services. The Company also offset the deferred offering costs against
the proceeds from the sale of common stock.
During the year ended December 31, 1997, $111,816 of notes payable was
issued to acquire leasehold improvements. The Company issued 110,672
shares of common stock upon conversion of $53,952 of accounts payable
and notes payable. Common stock was redeemed from officers in exchange
for $50,000 of cash and $150,000 of notes payable. The Company issued
common stock in exchange for stock subscription receivables totaling
$390,000.
NOTE 7 - EMPLOYMENT AND COMPENSATION AGREEMENTS
During the period ended December 31, 1995, the Company entered into
employment agreements with four officers. Two of the agreements
included annual base salaries of $50,000 and $75,000, respectively. Both
agreements were renewed for one year under the terms of the agreement.
Effective August 26, 1997, both officers resigned from the Board of
Directors and sold 6,308,666 shares of common stock to the Company for
approximately $0.03 per share (see Note 10). As part of the settlement
agreement, one of the officers was granted options to acquire 650,000
shares of common stock at $0.30 per share and 325,000 shares for $0.77
per share for a period of five years. One of the officers was retained
as a consultant for a period of one year. Under the terms of the
agreement the Company and the officers released each other from any
future obligation.
An agreement with a third officer included annual compensation payments
of $50,000. The agreement expired subsequent to December 31, 1997. The
fourth agreement included and annual base salary of $90,000 during the
first year of employment and $120,000 a year thereafter. This
agreement had an initial term of three years and included a $30,000
signing bonus. On December 31, 1997, this agreement was extended for
an additional two years, through December 31, 2000. Under the terms of
the agreement, the officer was granted options to purchase 650,000
shares of common stock at $0.77 per share.
Effective May 1, 1995, the Company entered into a compensation
agreement whereby an officer was to provide the Company technical
assistance and be paid a monthly fee of $8,333 for five years. During
1997, the Company temporarily suspended payments which resulted in
approximately $38,500 being accrued in accrued liabilities at December
31, 1997. An agreement was signed April 15, 1998 whereby the Company
agreed to pay the officer $160,000 in settlement of all past and future
obligation under the compensation agreement.
The following is a schedule of future payments due under the above
agreements as of December 31, 1997:
Years Ending December 31:
1998 $ 342,500
1999 120,000
2000 120,000
-----------
$ 582,500
===========
NOTE 8 - NOTES PAYABLE
Notes payable at December 31, 1997 consisted of the following:
8% note; payable in quarterly payments of
$7,083 through April 1,1998; unsecured $ 49,585
8.5% promissory notes; convertible into common stock
through February 28, 1998 at $0.93 to $1.23 per
share; due March 28 1998; secured by equipment 200,000
Non-interest bearing notes; unsecured;
issued for cash and leasehold improvements;
terms for repayment have not been established 105,791
Non-interest bearing notes payable to former
shareholders; issued in redemption of common
stock; paid February 1998 145,000
18% note payable; guaranteed by shareholders;
convertible into common stock at $0.93
per share; due April 17, 1998 50,000
Other notes 11,033
----------
Total Notes Payable $ 561,409
==========
Future maturities of notes payable as of December 31, 1997 are as
follows: 1998 - $521,409; 1999 - $40,000.
NOTE 9 - RELATED PARTY TRANSACTIONS
Transactions with related parties during 1996 consisted of advances to
employees and a payable to a member of the Board of Directors for cash
advances to the Company in the amount of $20,000. During 1997, the
Company made cash advances to employees for travel and personal
expenses and incurred liabilities payable to employees for Company
travel and to a shareholder for rent of office space. Terms for
collection of the advances to employees as of December 31, 1997 have
not been established. Amounts payable at December 31, 1997 are due
currently and were paid subsequent to year end.
NOTE 10 - STOCKHOLDERS' EQUITY
In January 1995, an officer and shareholder assigned certain patents to
the Company as an additional contribution to capital of $22,232. No
additional shares were issued to the shareholder for the contribution.
On March 18, 1996, the Company entered into a share purchase agreement
whereby the Company agreed to issue 1,957,111 shares of its common
stock for $1,300,000 in a private placement offering. The proceeds
were received and the shares were issued throughout the year as
required by the Company's cash flow needs. Offering costs incurred in
connection with the offering were $246,547. The deferred offering costs
consist primarily of legal and audit fees related to the preparation
of the private placement memorandum.
On August 26, 1997, the Company entered into a settlement agreement
with two officers of the Company whereby the relationship between the
officers and the Company was terminated. As part of the agreement, the
Company purchased 6,308,666 shares of common stock from the officers
for approximately $0.03 per share by paying $50,000 in cash and issuing
$150,000 of notes payable.
On December 24, 1997, the Company issued 422,500 shares of common stock
in exchange for stock subscriptions in the amount of $390,000
receivable from the investors. The subscriptions were collected in
January 1998.
NOTE 11 - STOCK OPTIONS
On April 1, 1995, the Company adopted the Omnibus Stock Option Plan
(the "Plan"). Under the terms of the Plan as amended in October 1997,
the Company may grant options to employees, directors and consultants
for up to 5,037,500 shares of common stock. Incentive or non-qualified
options may be granted under the Plan. Options may be granted for a
maximum of 10 years. Options generally vest from immediately to five
years and expire five years from the date of grant. The exercise price
of each option granted under the Plan has been equal to or in excess of
the market price of the Company's common stock on the date of grant.
Generally, the only condition for exercise of options granted under the
Plan is that the employees remain employed through the exercise date.
However, in October 1995, the Company granted an officer options for
325,000 shares whose vesting is contingent upon the Company obtaining
specified levels of sales and gross profit. Options for 65,000 shares
vested at the end of 1996 due to meeting non-sales performance
criteria. Vesting of options for 65,000 shares were contingent upon
the Company achieving $2,000,000 of sales with a minimum gross profit
margin of 50% during 1997. That target was not met and the 65,000
options were forfeited during 1997. The remaining 195,000 options vest
annually based upon the Company having sales of $4,000,000 in 1998 with
a minimum gross profit margin of 50%, and further increases in sales
during 1999 and 2000 by amounts not yet determined by the Board of
Directors.
The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its Plan.
Accordingly, no compensation cost has been recognized for its fixed or
performance stock options granted under the Plan. Had compensation cost
for the
Plan been determined based on the fair value at the grant dates for
awards under the Plan consistent with the alternative method of SFAS
No. 123, Accounting for Stock-Based Compensation, the Company's net
loss and loss per share would have increased to the pro forma amounts
indicated below. The weighted average assumptions used to estimate the
fair value of each option grant, using the Black-Scholes option-pricing
model, are also presented:
Years Ended December 31,
1997 1996
------------ -------------
Net Loss As reported $ (1,541,058) $ (1,417,297)
Pro forma (1,567,655) (1,444,149)
Primary and Diluted Loss per share
As reported $ (0.13) $(0.12)
Pro forma $ (0.13) $(0.12)
Weighted-Average Assumptions:
Divided yield 0.0% 0.0%
Expected volatility 0.0% 0.0%
Risk-free interest rate 5.0% 5.0%
Expected life of options,
in years 4.5 5.0
A summary of the status of stock options as of December 31, 1997, 1996
and 1995, and changes during the periods ended on those dates is
presented below:
Options Outstanding
1997 1996
----------------------- --------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
--------- ------- -------- -------
Outstanding at
beginning of period 1,455,350 $ 0.60 1,443,000 $ 0.60
Granted 3,651,700 0.35 12,350 0.77
Forfeited (60,000) 0.77 - -
--------- ---------
Outstanding at end of
period 5,047,050 0.42 1,455,350 0.60
========= =========
Options exercisable at end
of period 3,059,550 0.40 935,350 0.51
========= =========
Weighted-average fair value of
options granted during
period $ - $ 0.17
The following table summarizes information about stock options
outstanding at December 31, 1997:
Outstanding Exercisable
---------------------------------------- ---------------------
Range Weighted- Weighted-
of Remaining Average Average
Exercise Number Contracutal Exerecise Number Exercise
Prices Outstanding Life Price Exercisable Price
----- ----------- ----------- -------- ----------- --------
$0.15 871,000 4.7 years $ 0.15 871,000 $ 0.15
0.30 650,000 2.7 0.30 650,000 0.30
0.38 1,787,500 4.7 0.38 130,000 0.38
0.46 780,000 2.3 0.46 780,000 0.46
0.77 953,550 4.0 0.77 628,550 0.77
----------- -----------
$0.15
to
0.77 5,042,050 3.9 0.42 3,059,550 0.40
============ ===========
NOTE 12 - STOCK PURCHASE WARRANTS
In connection with the acquisition of Flexpoint and Tamco, the Company
issued warrants to purchase 22,750 shares of its common stock
exercisable at $0.77 per share ( which was the fair value of the common
stock on the date of the issuance as determined by the Board of
Directors) to its outside legal counsel. Additionally, the Company
issued warrants during 1995 to purchase 23,010 shares of its common
stock at a purchase price of $0.77 per share to equity investors in the
Company.
During 1996, warrants were issued to purchase 214,500 shares of common
stock at $0.77 per share to equity investors in the Company, and
warrants to purchase 6,500 shares at $0.77 per share were issued to
outside legal counsel.
During 1997, the Company issued warrants to purchase 260,000 shares of
common stock at $0.77 per share to equity investors in the Company.
Additionally, warrants to purchase 910,000 shares of common stock at
$1.15 per share were issued to a retiring member of the Board of
Directors.
All of these warrants were deemed to have no material fair value and
are therefore not recorded in the accompanying consolidated balance
sheet. The fair value of each warrant was estimated on the date issued
using the Black-Scholes option-pricing model.
The following table summarizes information about warrants outstanding
at December 31, 1997:
Weighted-
Average
Remaining
Range of Warrants Contractual
Exercise Prices Outstanding Life
--------------- ----------- ---------
$0.77 526,760 3.2 years
1.15 910,000 2.7
$0.77 to 1.15 1,436,760 2.9
===========
NOTE 13 - INCOME TAXES
There was no provision for or benefit from income tax for any period.
The components of the net deferred tax asset as of December 31, 1997
were as follows:
Operating Loss Carryforwards $ 1,105,749
Difference in amortization of intangibles 6,804
Total Deferred Tax Assets 1,112,553
Valuation Allowance (1,112,553)
------------
Net Deferred Tax Asset $ -
============
For tax reporting purposes, the Company has net operating loss carry
forwards in the amount of $3,252,203 that will expire beginning in the
year 2010. The following is a reconciliation of the amount of tax
(benefit) that would result from applying the federal statutory rate to
pretax loss with the provision for income taxes for the years ended
December 31:
1997 1996
----------- ----------
Tax at statutory rate (34%) $ (523,960) $ (481,881)
Non-deductible expenses 9,968 9,915
Change in valuation allowance 571,574 524,831
State tax benefit, net of federal
tax effect (57,481) (52,865)
----------- ----------
Net Income Tax Expense $ - $ -
=========== ==========
NOTE 14 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under operating lease agreements for office
space. Future minimum lease payments for the years ending December 31,
1998 and 1999 are $81,745 and $65,376, respectively. Lease expense for
the years ending December 31, 1997 and 1996 was $93,854 and $53,436.
A third party entity loaned $35,000 to a former officer of the Company
as a personal loan. This entity has made a claim against the former
officer for repayment of the advance and for other consideration. The
Company may be required to provide compensation to the former officer
sufficient to settle the claim on behalf of the former officer.
Management believes, after consulting with legal counsel, that
resolution of this claim may result in a cost of approximately $52,000
to the Company. This amount has been accrued in the accompanying
consolidated balance sheet at December 31, 1997.
In February of 1998, an otherwise unrelated third party filed suit
against the Company alleging it provided investment banking and
financial advisory services pursuant to an agreement with the Company.
The plaintiff claims to have sustained damages for breach of contract
and seeks damages in the amount of 6.5% of financing obtained from an
equity investor, plus the issuance of a warrant to purchase a 2% equity
ownership interest in the Company at a price of $5.00 per share. In
addition, the plaintiff is seeking punitive damages of $5,000,000. The
Company answered the complaint in March 1998 and the action is in the
discovery stage. The Company has been and continues to contest the case
vigorously. Given the early stage of the action, legal counsel for the
Company is unable to provide any evaluation of the likelihood of an
unfavorable outcome, if any, or the amount or range of potential loss.
Management believes, after consulting with legal counsel, that there is
only a remote possibility that the Company will be subject to a
punitive damage award under the suit. Management has tendered $75,000
to the plaintiff to completely settle the action and Management
maintains that the most the Company owes the Plaintiff is $75,000. The
Company has recorded $75,000 as an expense relating to this action in
the accompanying statement of operations during the year ended December
31, 1997.
NOTE 15 - SUBSEQUENT EVENTS
Reorganization - On December 30, 1997, Sensitron entered into an
agreement with Micropoint, Inc. (Micropoint) whereby Sensitron
Acquisition Corporation, a newly-formed wholly-owned subsidiary of
Micropoint, was to be merged into Sensitron. The agreement required
Micropoint to raise capital of approximately $3,000,000 in a private
placement before the merger was to occur. The $3,000,000 was raised and
the merger was consummated April 9, 1998. As a result, the Company's
shareholders became the majority shareholders of Micropoint in a
transaction intended to qualify as a tax-free reorganization. The
merger was accounted for by the purchase method of accounting with the
Company being considered the acquiring enterprise.
The terms of the agreement were established on December 30, 1997 and
the investments in Micropoint's common stock from that date through the
closing of the reorganization agreement were with the intent to
ultimately invest in the Company. As of December 30, 1997 Micropoint
was a "clean shell corporation" with 2,000,000 shares of common stock
outstanding. The business combination has therefore been considered the
acquisition of Micropoint at the historical cost of its net liabilities
in exchange for 2,000,000 shares of common stock with no goodwill being
recognized in connection with the transaction. From January 1, 1998
through April 9, 1998, investors contributed $3,000,000 of assets to
Micropoint in exchange for 4,000,000 shares of Micropoint's common
stock. This transaction has been accounted for as the issuance of
4,000,000 shares of common stock by the post-merger company.
The shareholders of Sensitron exchanged each of their shares of common
stock for 13 shares of Micropoint common stock in connection with the
merger agreement which resulted in Micropoint issuing 9,860,279 shares
of its common stock to the Sensitron shareholders. The merger has been
accounted for as the reorganization of Sensitron with a related 3-for-1
stock split. The accompanying financial statements have been restated
for the effects of the stock split for all periods presented.
Settlement of Compensation Agreement - On April 15, 1998, an agreement
was signed whereby the Company agreed to pay an officer $160,000 as a
settlement of all past and future obligations under a related
compensation agreement.
SENSITRON INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
UNAUDITED
ASSETS
Current Assets
Cash $ 45,552
Accounts receivable, net of allowance 51,141
Note receivable 3,387
----------
Total Current Assets 100,080
----------
Equipment 1,078,489
Less accumulated depreciation (230,875)
----------
Net Equipment 847,614
----------
Goodwill, net of accumulated amortization 59,901
Deposits 15,779
Patents, net of accumulated amortization 85,249
------------
Total Assets $ 1,108,623
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Trade accounts payable $ 174,190
Deferred revenue 200,000
Accrued expenses 134,261
Payable to related party 1,000,000
Notes payable 258,073
------------
Total Current Liabilities 1,766,524
------------
Stockholders' Deficit
Common stock--no par value; 20,000,000
shares authorized; 9,860,279 shares issued
and outstanding 3,126,453
Deficit accumulated during the
development stage (3,784,354)
------------
Total Stockholders' Deficit (657,901)
------------
Total Liabilities and Stockholders' Deficit $ 1,108,623
============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
SENSITRON INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For
the Period
January
5, 1995
(Date
of Inception)
For the Three Months Through
Ended March 31, March 31,
1997 1996 1997
---------- ----------- ------------
Sales $ 60,088 $ 263,177 $ 1,435,185
Cost of sales 44,726 34,298 753,098
---------- ----------- ------------
Gross Profit 15,362 228,879 682,087
General and administrative
expenses 471,026 618,888 4,382,481
---------- ----------- ------------
Loss From Operations (455,664) (390,009) (3,700,394)
Interest expense (40) (960) (54,084)
Interest income - - 13,434
Other expenses (40) (6,821) (43,316)
---------- ----------- ------------
Net Loss $ (455,744) $ (397,798) $ (3,784,360)
========== =========== ============
Basic and Diluted
Loss Per Common Share $ (0.05) $ (0.03) $ (0.38)
========== =========== ============
Weighted Average Number
of Common Shares Used
in Per Share Calculation 9,806,279 13,158,633 9,860,279
========== ========== ============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<TABLE>
SENSITRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
For the Period
January 5, 1995
(Date of
Inception)
For the Three Months Through
Ended March 31, March 31,
1998 1997 1998
----------- --------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (455,744) $(397,790) $(3,784,356)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 34,657 23,144 330,507
Stock issued for services 0 0 200,000
Allowance for doubtful accounts 0 0 151,567
Write-off of related party
receivable 47,989 0 47,989
(Gain)/Loss on disposition
of equipment 0 0 3,185
Changes in operating assets
and liabilities:
Accounts receivable (5,318) 89,341 (66,667)
Prepaid expenses 0 (19,160) (2,266)
Related party receivable 0 0 (18,931)
Accounts payable (332,775) 101,897 (5,857)
Accrued liabilities (264,211) 27,221 30,523
Deferred revenue 0 0 193,837
Related party payable 0 0 14,562
Other assets (2,500) (13,507) (1,568)
----------- --------- -----------
Net Cash Used By Operating
Activities (977,902) (188,854) (2,907,475)
Cash Flows From Investing Activities
Payments to Flexpoint prior
to acquisition 0 0 (268,413)
Cash paid to acquire Tamco 0 0 (25,000)
Payments for the purchase of
property and equipment (153,793) (86,262) (775,327)
Proceeds received from sale of
property and equipment 0 0 8,090
Investment in patents (12,147) (3,494) (83,442)
Proceeds received on note
receivable 1,565 1,563 9,120
Issuance of note receivable 0 0 (12,507)
Payments received from related
parties 0 0 646
----------- --------- -----------
Net Cash Used By Investing
Activities (164,375) (88,193) (1,146,833)
----------- --------- -----------
Cash Flows From Financing Activities
Proceeds from the issuance of
common stock 8,000 100,000 2,947,000
Cash payments to officers to
repurchase stock 0 0 (50,000)
Cash paid for offering costs 0 0 (123,020)
Proceeds from borrowings 0 0 297,960
Principal payments of long-
term debt (303,336) 0 (348,751)
Proceeds from stock subscription
receivable 390,000 0 390,000
Proceeds from related party notes 1,000,000 0 1,045,000
Principal payments of related
party notes 0 0 (45,000)
Payments of related party
payable (13,329) 0 (13,329)
---------- ---------- -----------
Net Cash Provided By Financing
Activities 1,081,335 100,000 4,099,860
---------- ---------- -----------
Net Change In Cash (60,942) (177,047) 45,552
Cash -- Beginning of Period 106,494 761 0
---------- ---------- -----------
Cash -- End of Period $ 45,552 $ (176,286) $ 45,552
========== ========== ===========
<FN>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</FN>
</TABLE>
SENSITRON INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
MARCH 31, 1998
NOTE 1 -- CONDENSED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements
have been prepared by the Company and are not audited. In the
opinion of management, all adjustments necessary for a fair
presentation have been included, and consist only of normal
recurring adjustments. These financial statements are
condensed and, therefore, do not include all disclosures
normally required by generally accepted accounting principles.
These statements should be read in conjunction with the
Company's annual financial statements included elsewhere
herein. The financial position and results of operations
presented in the accompanying financial statements are not
necessarily indicative of the results that may be expected for
the year ended December 31, 1998.
NOTE 2 -- NOTES PAYABLE
During the three months ended March 31, 1998, the Company
borrowed $1,000,000 from Micropoint, Inc, a related party with
whom the Company entered into a reorganization agreement which
was consummated on April 9, 1998. The Company also made
payments on other notes payable totaling $303,336 during the
three months ended March 31, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of March 31, 1998, and statements of operations for the three months
ended March 31, 1998, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JAN-01-1998
<CASH> 479,864
<SECURITIES> 1,458,040
<RECEIVABLES> 1,075,078
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,012,982
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,012,982
<CURRENT-LIABILITIES> 2,297
<BONDS> 0
0
0
<COMMON> 6,000
<OTHER-SE> 3,004,685
<TOTAL-LIABILITY-AND-EQUITY> 3,012,982
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 172
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,967
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,967
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
