SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 10, 2000
(Date of report)
PROTOSOURCE CORPORATION
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 33-86242 77-0190772
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
2800 28th Street, Suite 170
Santa Monica, California 90405
(Address of Principal Executive Offices)
(310) 314-9801
(Registrant's telephone number, including area code)
----------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
On October 28, 1999, Protosource Corporation ("Protosource" or the
"Company") consummated their acquisition of substantially all of the assets of
MicroNet Services, Inc., a Connecticut corporation ("MicroNet"), in exchange for
the issuance of 78,810 shares of Protosource Common Stock and $132,500 in cash
consideration. The transaction was completed in accordance with the terms of the
asset purchase agreement, dated as of October 28, 1999, and effective as of
November 1, 1999, between the Company, MicroNet and the shareholders of
MicroNet.
The assets purchased by Protosource include all of MicroNet's subscriber
base, consisting of approximately 2900 accounts, as well as its commercial based
web hosting business, consisting of approximately 28 accounts, and any
intellectual property rights held by MicroNet. The total value of these assets
was based upon a pre-determined purchase price per account mutually agreed upon
by the Company and MicroNet. As an additional part of the completed transaction,
Protosource has hired James Sette, MicroNet's former Chief Executive Officer, as
Vice President of Business Development, John Prather, MicroNet's former
President, as Director of Operations, and intends to appoint Stuart Rosenkrantz,
a shareholder of MicroNet, as a Director of the Company.
ITEM 5. Other Events.
On November 3, 1999, and effective as of November 1, 1999, Raymond Meyers
resigned from his positions as Chief Executive Officer, President, Chief
Financial Officer and Secretary of the Company. In connection with his
resignation, the Company has entered into a severance agreement with Mr. Meyers,
by which the Company will pay Mr. Meyers $35,000, over a period of no more than
six months, and grant him 20,000 options in the Company's common stock. In
addition, the Company has entered into a six month consulting agreement with Mr.
Meyers, by which the Company will pay Mr. Meyers an hourly rate of $100. Both of
these agreements are attached as exhibits hereto.
Upon Mr. Meyer's resignation, Protosource's shareholders elected William
Conis as the Company's new Chief Executive Officer, President, Chief Financial
Officer and Secretary, effective November 1, 1999. In connection with his
election to these positions, the Company has entered into an employment
agreement with William Conis for a term of two years, at a base annual salary of
$175,000. Mr. Conis' employment agreement is also attached as an exhibit hereto.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
All financial information required by this Item 7(a) is attached hereto
beginning on page F-1.
<PAGE>
(b) Pro Forma Financial Information
All financial information required by this Item 7(b) is attached hereto
beginning on page F-12.
(c) Exhibits
<TABLE>
<CAPTION>
Number Description
<S> <C>
10.1 Asset Purchase Agreement, dated as of October 28, 1999, and effective as of November 1, 1999, by and among
MicroNet Services, Inc., Kanfer Associates, Denise Rosenkrantz, James M. Sette and Protosource Corporation.*
10.2 Form of Severance Agreement, dated as of November 3, between Protosource Corporation and Raymond Meyers.*
10.3 Form of Consulting Agreement, dated as of November 3, between Protosource Corporation and Raymond Meyers.*
10.4 Form of Employment Agreement, dated as of November 3, between Protosource Corporation and William Conis.*
-------------------
*Previously filed.
</TABLE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the Undersigned, thereunto duly authorized.
PROTOSOURCE CORPORATION
(Registrant)
Date: January 10, 2000 /s/William Conis
William Conis
Chief Executive Officer
<PAGE>
Financial Statements
<TABLE>
<CAPTION>
Table of Contents
Page
MicroNet Online Services, L.L.C.
(a limited liability company)
Financial Statements for fiscal year ended December 31, 1998 (audited)
<S> <C>
Independent Auditor's Report 1
Balance sheet 2
Statement of loss and members' deficit 3
Statement of cash flows 4
Notes to financial statements 5 - 6
Interim Financial Statements for the nine-month period
ended September 30, 1999 and September 30, 1998 (unaudited)
Accountant's compilation report 7
Balance sheets 8
Statements of income(loss) and members' deficit 9
Statements of cash flows 10
Notes to unaudited financial statement 11
Protosource Corporation
Proforma Combined Condensed Statement Of Operations
For The Nine Months Ended September 30, 1999 (unaudited)
Proforma combined condensed balance sheet 12-13
Proforma combined condensed statement of operations 14
Proforma combined condensed statement of operations
For the year ended December 31, 1998 15
Notes to unaudited proforma combined condensed
Financial statements 16
</TABLE>
<PAGE>
Independent Auditor's Report
MicroNet Online Services, L.L.C.
1580 Chapel Street
New Haven, CT 06511
We have audited the accompanying balance sheet of MicroNet Online Services,
L.L.C. as of December 31, 1998 and the related statements of loss, members'
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MicroNet Online Services,
L.L.C. at December 31, 1998 and the results of its operations and cash flows for
the year then ended.
Francis X. Conlon & Co., P.C.
Certified Public Accountants
North Haven, CT
October 22, 1999
F-1
<PAGE>
MicroNet Online Services, L.L.C.
(a limited liability company)
Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
Assets
Current assets
<S> <C>
Cash & cash equivalents $ 67,100
Trade accounts receivable
Property & equipment, net of accumulated
depreciation of $1,676. 6,706
Goodwill, net of accumulated amortization
of $13,919. 116,071
$189,877
============
Liabilities and members' deficit
Current liabilities
Cash - overdraft $ 6,396
Demand notes payable 111,000
Trade accounts payable 296,095
Loans and advances 71,430
Accrued expenses and withholding 23,296
508,217
Members' deficit (318,340)
$ 189,877
============
</TABLE>
See accompanying notes.
F-2
<PAGE>
MicroNet Online Services, L.L.C.
(a limited liability company)
Statement of Loss and Members' Deficit
for the year ended December 31, 1998
<TABLE>
<CAPTION>
Revenue
<S> <C>
Sales ................................................. $ 903,606
Other ................................................. 9,531
913,137
Cost of sales .............................................. 685,872
Gross profit ............................................... 227,265
Expenses
Compensation ........................................... 207,206
Interest ............................................... 7,770
Selling and administration ............................. 206,224
421,200
Net loss ................................................... (193,935)
Members' deficit - January 1, 1998 ......................... (131,905)
Capital contributions ...................................... 7,500
Members' deficit - December 31, 1998 ....................... $(318,340)
=========
</TABLE>
See accompanying notes.
F-3
<PAGE>
MicroNet Online Services, L.L.C.
(a limited liability company)
Statement of Cash Flows
for the year ended December 31, 1998
<TABLE>
<CAPTION>
Cash flows from operating activities
<S> <C>
Net income (loss) ........................................ $(193,935)
Adjustments to reconcile net loss to net cash
used by operating activities
Depreciation and amortization .......................... 10,962
(Increase) in:
Trade accounts receivables ............................. (41,100)
Increase(decrease) in:
Trade accounts payables ................................ 156,808
Loans and advances ..................................... 48,780
Accrued expenses and withholding ....................... 15,402
(3,083)
Cash flows used by investing activities
Acquisition of equipment ................................. (8,382)
Cash flows from financing activities
Capital contribution by member ........................... 7,500
Net decrease in cash .......................................... (3,965)
Cash overdraft January 1, 1998 ................................ (2,431)
Cash overdraft December 31, 1998 .............................. $ (6,396)
=========
</TABLE>
See accompanying notes.
F-4
<PAGE>
MicroNet Online Services, L.L.C.
Notes to Financial Statements
December 31, 1998
Note A - Summary of significant accounting policies
Nature of operations
The Company principally provides internet access service to retail
customers for a monthly access fee. The service is provided to customers
primarily in Connecticut and the New England area. Customers generally pay for
such service by major credit card and management believes all amounts due from
customers is collectable.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Depreciation
The Company's equipment consists of computer equipment and is depreciated
using the straight line method for financial reporting purposes. Depreciation
amounted to $1,676. during 1998. The estimated useful lives of depreciable
assets is five years.
Amortization of goodwill
Costs of investments in purchased companies in excess of the underlying
fair value of net assets at date of acquisition are recorded as goodwill and
amortized over a 14 year period. Amortization amounted to $9,286. during 1998.
Advertising
The Company expenses advertising costs as they are incurred. Advertising
expenses amounted to $2,911. during 1998
Note B - Related party transactions
The following transactions occurred between the Company and related
parties:
The Company rents space from and is supplied administrative services by a
company controlled by a member. The cost of rent and administrative services is
at market rates. No formal lease agreement is in effect. The amount payable for
such rent and services amounted to $90,152. at December 31, 1998.
Demand notes payable are due to a member of the Company. The balance of
demand notes payable was $111,000. at December 31, 1998. Interest expense
related to the notes amounted to $7,770. during 1998.
Loans and advances are due to a member of the company. The balance of loans
and advances was $71,430. at December 31, 1998. No formal notes covers such
advances and interest is not due on them.
F-5
<PAGE>
MicroNet Online Services, L.L.C.
Notes to Financial Statements
December 31, 1998
Note C - Property and equipment Property and equipment consists of the
following:
<TABLE>
<CAPTION>
<S> <C>
Computer equipment ........................................................... $8,383.
Accumulated depreciation ..................................................... (1,676.)
$6,706.
</TABLE>
<TABLE>
<CAPTION>
Note D -Demand notes payable consists of the following:
<S> <C> <C>
Note payable to Stuart Rosenkrantz,
with interest at 7%, due on demand $ 50,000.
Note payable to Stuart Rosenkrantz,
with interest at 7%, due on demand 20,000.
Note payable to Stuart Rosenkrantz ,
with interest at 7% , due on demand 35,000.
Note payable to Stuart Rosenkrantz,
with interest at 7%, due on demand 6,000.
----------
$ 111,000.
</TABLE>
All of the above notes are secured by the personal property and accounts
receivable currently held by the Company and all other property that now or
hereafter is held by the Company.
Note E - Leasing arrangements
The Company leases computer equipment under non cancelable operating leases. The
following is a schedule of future lease payments required under the leases:
$ 42,632.
19,672.
8,192.
2,731.
-------
$ 73,227.
Note F - Income taxes
The Company is not a taxpaying entity for federal income tax purposes, and
thus no income tax expense has been recorded in these statements. Income or loss
of the Company is reported and included by the members in their respective
returns.
F-6
<PAGE>
Accountant's Compilation Report
MicroNet Online Services, L.L.C.
1580 Chapel Street
New Haven, CT 06511
We have compiled the accompanying balance sheets of MicroNet Online
Services, L.L.C. as of September 30, 1999 and 1998 and the related statements of
income (loss) and members deficit and cash flows for the nine months then ended,
in accordance with Statements on Standards for Accounting and Review Services as
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other forms of assurance on them.
Management has elected to omit substantially all of the disclosures
required by generally accepted accounting principles. If the omitted disclosures
were included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
Francis X. Conlon & Co., P.C.
Certified Public Accountants
North Haven, CT
December 30, 1999
F-7
<PAGE>
MicroNet Online Services, L.L.C.
(a limited liability company)
Balance Sheet
September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
Assets
Current assets
<S> <C> <C>
Cash & cash equivalents .......... $ 9,972 $ --
Trade accounts receivable ........ 70,384 78,321
Property & equipment, net of accumulated
depreciation of $2,933. and $1,257 5,449 7,125
Goodwill, net of accumulated amortization
of $20,895. and $ 11,607 .......... 109,105 118,393
$ 194,910 $ 203,839
========= =========
Liabilities and members' deficit
Current liabilities
Cash - overdraft .................. $ -- $ 13,427
Demand notes payable .............. 111,000 111,000
Trade accounts payable ............ 292,334 309,552
Loans and advances ................ 42,230 27,750
Accrued expenses and withholding .. 22,637 9,828
468,201 471,557
Members' deficit .............................. (273,291) (267,718)
--------- ---------
$ 194,910 $ 203,839
========= =========
</TABLE>
See accountant's compilation report and the accompanying notes.
F-8
<PAGE>
MicroNet Online Services, L.L.C.
(a limited liability company)
Statements of Income(Loss) and Members' Deficit
For the nine months ended September 30, 1999 & 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
Revenue
<S> <C> <C>
Sales ................................. $ 841,338 $ 648,790
Other ................................. -- 6,637
841,338 655,427
Cost of sales .............................. 388,162 455,738
---------
Gross profit ............................... 453,176 199,689
Expenses
Compensation ........................... 164,755 146,521
Interest ............................... 5,843 5,828
Selling and administration ............. 237,529 200,795
408,127 353,144
Net income(loss) ........................... 45,049 (153,455)
Members' deficit - January 1, 1999 & 1998 .. (318,340) (121,763)
Capital contributions ...................... -- 7,500
Members' deficit - September 30, 1999 & 1998 $(273,291) $(267,718)
========= =========
</TABLE>
See accountant's compilation report and the accompanying notes.
F-9
<PAGE>
MicroNet Online Services, L.L.C.
(a limited liability company)
Statements of Cash Flows
for the nine months ended September 30, 1999 & 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
Cash flows from operating activities
<S> <C> <C>
Net income (loss) ........................................ $ 45,049 $(153,455)
Adjustments to reconcile net loss to net cash
used by operating activities
Depreciation and amortization .......................... 8,222 8,221
(Increase) in:
Trade accounts receivables ............................. (3,284) (52,321)
Increase(decrease) in:
Trade accounts payables ................................ (3,760) 175,726
Loans and advances ..................................... (29,200) 5,100
Accrued expenses and withholding ....................... (659) 6,616
16,368 (10,113)
Cash flows used by investing activities
Acquisition of equipment ................................. -- (8,382)
Cash flows from financing activities
Capital contribution by member ........................... -- 7,500
Net increase (decrease) in cash ............................... 16,368 (10,995)
Cash and cash equivalents (overdraft) January 1, 1999 & 1998 .. (6,396) (2,432)
Cash and cash equivalents (overdraft) September 30, 1999 & 1998 $ 9,972 $ (13,427)
========= =========
</TABLE>
See accountant's compilation report and the accompanying notes.
F-10
<PAGE>
MicroNet Online Services, L.L.C.
Notes to Unaudited Financial Statements
for the nine months ended September 30, 1999 & 1998
BASIS OF PRESENTATION
The accompanying financial information of the Company is prepared in
accordance with the rules prescribed for filing condensed interim financial
statements and, accordingly, does not include all disclosures that may be
necessary for complete financial statements prepared in accordance with
generally accepted accounting principles. The disclosures presented are
sufficient, in management's opinion, to make the interim information presented
not misleading. All adjustments, consisting of normal recurring adjustments,
which are necessary so as to make the interim information not misleading, have
been made. Results of operations for the nine months ended September 30, 1999
are not necessarily indicative of results of operations that may be expected for
the year ending December 31, 1999. It is recommended that this financial
information be read with the complete financial statements for the year ended
December 31, 1998.
F-11
<PAGE>
PROTOSOURCE CORPORATION
UNAUDITED PROFORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
The following unaudited proforma combined balance sheet gives effect to the
acquisition of MicroNet Online Services, L.L.C. ("MicroNet") by ProtoSource
Corporation ("Proto") in a transaction accounted for as a purchase. The proforma
information is presented for illustrative purposes only and is not necessarily
indicative of the operating results or financial position that would have
occurred if the acquisition had been consummated nor is it necessarily
indicative of future operating results or financial position. The unaudited
proforma balance sheet gives effect to the acquisition as if it had occurred on
September 30, 1999. This proforma balance sheet should be read in conjunction
with the accompanying notes and related historical financial statements and
notes thereto of Proto and MicroNet.
<TABLE>
<CAPTION>
Proforma Proforma
ASSETS Proto MicroNet Adjustments Combined
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents .... $ 1,259,356 $ 9,972 $ 1(175,597) $ 1,093,731
Accounts receivable .......... 96,507 70,384 1(70,384) 96,507
Prepaid expenses and other ... 83,130 -- -- 83,130
----------- ----------- ----------- -----------
Total Current Assets ....... 1,438,993 80,356 (245,981) 1,273,368
----------- ----------- ----------- -----------
Property and Equipment, at cost:
Equipment .................... 944,776 8,382 1(8,382) 944,776
Furniture .................... 147,533 -- -- 147,533
Leasehold improvements ....... 6,463 -- -- 6,463
----------- ----------- ----------- -----------
1,098,772 8,382 (8,382) 1,098,772
Less accumulated depreciation .. (794,007) (2,933) 12,933 (794,007)
----------- ----------- ----------- -----------
Net Property and Equipment . 304,765 5,449 (5,449) 304,765
----------- ----------- ----------- -----------
Other Assets:
Goodwill, net of amortization 16,089 109,105 1586,520 711,714
Investment in Corporation .... 1,800,000 -- -- 1,800,000
Deposits ..................... 15,420 -- -- 15,420
----------- ----------- ----------- -----------
Total Other Assets ......... 1,831,509 109,105 586,520 2,527,134
----------- ----------- ----------- -----------
Total Assets ............... $ 3,575,267 $ 194,910 $ 335,090 $ 4,105,267
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
unaudited proforma combined condensed financial
statements.
F-12
<PAGE>
PROTOSOURCE CORPORATION
UNAUDITED PROFORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Proforma Proforma
LIABILITIES AND STOCKHOLDERS' EQUITY Proto MicroNet Adjustments Combined
Current Liabilities:
<S> <C> <C> <C>
Accounts payable - trade .................... $ 103,131 $ 292,334 $1(292,334) $ 103,131
Accrued expenses ............................ 65,883 64,867 1 (64,867) 65,883
Deferred revenue ............................ 9,302 -- -- 9,302
Notes payable ............................... -- 111,000 1(111,000) --
Current portion of long-term debt ........... 70,448 -- -- 70,448
------------ ------------ ----------- ------------
Total Current Liabilities ................ 248,764 468,201 (468,201) 248,764
------------ ------------ ----------- ------------
Long-Term Debt, net of current portion above .. 39,741 -- -- 39,741
------------ ------------ ----------- ------------
Commitments and Contingencies ................. -- -- -- --
Stockholders' Equity:
Preferred stock ............................. -- -- -- --
Common stock ................................ 10,792,672 -- 1 530,000 1 1,322,672
Additional paid in capital .................. 10,658 26,500 1 (26,500) 10,658
Accumulated deficit ......................... (7,516,568) (299,791) 1 299,791 (7,516,568)
------------ ------------ ----------- ------------
Total Stockholders' Equity ............... 3,286,762 (273,291) 803,291 3,816,762
------------ ------------ ----------- ------------
Total Liabilities and Stockholders' Equity $ 3,575,267 $ 194,910 $ 335,090 $4,105,267
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part
of these unaudited proforma combined condensed
financial statements.
F-13
<PAGE>
PROTOSOURCE CORPORATION
UNAUDITED PROFORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
The following unaudited proforma combined statement of operations and per
share data gives effect to the acquisition of MicroNet by Proto in a transaction
accounted for as a purchase. The proforma information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the acquisition had
been consummated nor is it necessarily indicative of future operating results or
financial position. The unaudited proforma statement of operations gives effect
to the acquisition as if it had occurred on January 1, 1999. This proforma
statement of operations should be read in conjunction with the accompanying
notes and related historical financial statements and notes thereto of Proto and
MicroNet.
<TABLE>
<CAPTION>
Proforma Proforma
Proto MicroNet Adjustments Combined
<S> <C> <C> <C> <C>
Revenue $ 759,708 $841,338 $ -- $1,601,046
Operating expenses 1,675,395 790,446 2 96,122 2,561,963
---------- -------- -------- ----------
Income (Loss) From Operations (915,687) 50,892 (96,122) (960,917)
---------- -------- --------- ---------
Other Income (Expense):
Interest expense (20,324) (5,843) 25,843 (20,324)
Interest income and other 182,577 -- -- 182,577
---------- ---------- ------------ ---------
Total Other Income (Expense) 162,253 (5,843) 5,843 162,253
---------- -------- ---------- --------
Net Income (Loss) $ (753,434) $ 45,049 $(90,279) $ (798,664)
========== ======== ======== ==========
Net Income (Loss) Per Basic and
Diluted Share of Common Stock $ (.42) $ (.43)
Weighted Average Number of Basic and
Diluted Common Shares Outstanding 1,775,177 1,853,987
</TABLE>
The accompanying notes are an integral part
of these unaudited proforma combined condensed
financial statements.
F-14
<PAGE>
PROTOSOURCE CORPORATION
UNAUDITED PROFORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
The following unaudited proforma combined statement of operations and per
share data gives effect to the acquisition of MicroNet by Proto in a transaction
accounted for as a purchase. The proforma information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the acquisition had
been consummated nor is it necessarily indicative of future operating results or
financial position. The unaudited proforma statement of operations gives effect
to the acquisition as if it had occurred on January 1, 1998. This proforma
statement of operations should be read in conjunction with the accompanying
notes and related historical financial statements and notes thereto of Proto and
MicroNet.
<TABLE>
<CAPTION>
Proforma Proforma
Proto MicroNet Adjustments Combined
<S> <C> <C> <C> <C>
Revenue $ 882,651 $ 913,137 $ -- $ 1,795,788
Operating expenses 2,068,145 1,099,302 2128,163 3,295,610
----------- ---------- --------- -----------
Income (Loss) From Operations (1,185,494) (186,165) (128,163) (1,499,822)
----------- ---------- --------- -----------
Other Income (Expense):
Interest expense (705,021) (7,770) 27,770 (705,021)
Interest income and other 194,286 -- -- 194,286
----------- ------------- ------------ -----------
Total Other Income (Expense) (510,735) (7,770) 7,770 (510,735)
----------- ----------- ---------- -----------
Net Income (Loss) $(1,696,229) $ (193,935) $(120,393) $(2,010,557)
=========== ========== ========= ===========
Net Income (Loss) Per Basic and
Diluted Share of Common Stock $ (1.24) $ (1.39)
Weighted Average Number of Basic and
Diluted Common Shares Outstanding 1,365,484 1,444,294
</TABLE>
The accompanying notes are an integral part
of these unaudited proforma combined condensed
financial statements.
F-15
<PAGE>
PROTOSOURCE CORPORATION
NOTES TO UNAUDITED PROFORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
1. Basis of Presentation
On October 28, 1999, Proto executed an Asset Purchase Agreement (the
"Agreement") to purchase certain assets of MicroNet. The acquisition was
effective November 1, 1999. The assets acquired consist of Internet subscriber
base, Web hosting subscriber base, intellectual property rights and various
other assets. The purchase price was $662,500 of which $132,500 was paid in cash
and 78,810 shares of the Company's common stock ($530,000). The acquisition will
be accounted for as a purchase.
The proforma combined condensed balance sheet gives effect to the
acquisition of MicroNet in a transaction accounted for as a purchase. The
transaction is reflected in the proforma balance sheet as if it occurred on
September 30, 1999.
The proforma combined condensed statement of operations gives effect to the
acquisition of MicroNet in a transaction accounted for as a purchase. The
transaction is reflected in the proforma statement of operations as if it
occurred at the beginning of the period presented.
2. Proforma Net Income (Loss) Per Share of Common Stock
The proforma net income (loss) per share of common stock is based on the
weighted average number of common shares outstanding after giving effect to the
shares issued for the acquisition.
3. Proforma Adjustments
Adjustments to present the proforma combined condensed financial statements
are as follows:
1. Record the acquisition of MicroNet for $662,500; $132,500
in cash and $530,000 in common stock of the Company. The Company
also paid a finders fee of $33,125 in connection with the
acquisition which is added to the cost of the assets acquired.
2. Record amortization expense of goodwill recorded in the
acquisition. The goodwill is amortized over a five year life.
Also includes reversal of depreciation, amortization and interest
expense of MicroNet for the periods presented.
F-16
