EX-99 3 exhibit99-1.txt EXHIBIT 99.1 POLLUTION RESEARCH AND CONTROL CORP. PRO FORMA EXPLANATORY HEADNOTE The following unaudited pro forma consolidated financial statements give effect to the sale of 100% of the common stock of Pollution Research and Control Corp.'s (the Company) formerly wholly owned subsidiary, Dasibi Environmental Corp. (Dasibi) to a private party and is based on the estimates and assumptions set forth herein and in the notes to such statements. This pro forma information has been prepared utilizing the historical financial statements of the Company and notes thereto, which are incorporated by reference herein and the separate historical financial information of Dasibi. The pro forma financial data does not purport to be indicative of the results which actually would have been obtained had the sale been effected on the dates indicated or the results which may be obtained in the future. The pro forma consolidated statement of operations for the year ended December 31, 2001, assumed that the sale had occurred at the beginning the period. The December 31, 2001 consolidated balance sheet assumes that the sale occurred on December 31, 2001. In 2002, the Company entered into an agreement to sell Dasibi to one of its note holders in exchange for the forgiveness of $1,500,000 of debt, including $1,220,000 which was outstanding at December 31, 2001. The purchaser assumed all liabilities of Dasibi as of the date of the closing of the sale and all liabilities of the Company incurred on behalf of Dasibi. As part of the transaction, Dasibi assigned all of its inventory to the Company. The agreement also amended and restated option grants to purchase common stock of the Company to the purchaser as follows: 50,000 at $0.25 per share, 100,000 at $0.50 per share, 528,571 at $0.875 per share, 100,000 at $1.00 per share and 21,875 at $3.10 per share. The options are vested immediately and expire in March 2005. The options are valued at the fair market value of $160,993 on the date of grant utilizing the Modified Black-Scholes European pricing model. The average risk-free interest rate used was 4.73%, volatility was estimated at 99.86%, and the expected life was three years. The Company was granted a perpetual non-exclusive license for all products, software, technologies and other intellectual property (including the use of the name Dasibi and Dasibi Environmental Corp.) of Dasibi throughout the world with the exception of the Peoples Republic of China. Page F-1
POLLUTION RESEARCH AND CONTROL CORP. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DECEMBER 31, 2001 POLLUTION POLLUTION RESEARCH AND RESEARCH AND CONTROL CONTROL CORP. CORP. PROFORMA PROFORMA CONSOLIDATED ADJUSTMENTS CONSOLIDATED ------------ ------------ ------------- ASSETS CURRENT ASSETS: Cash $ 142,754 $ (134,600) $ 8,154 Accounts receivable, trade, net 259,151 (259,151) - Inventories 2,032,384 2,032,384 Inventory held by joint venture 500,000 (500,000) - Other current assets 21,791 (21,791) - ------------ ------------ ------------ Total Current Assets: 2,956,080 (915,542) 2,040,538 ------------ ------------ ------------ PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 53,664 (53,664) - INVESTMENTS IN JOINT VENTURE 473,761 (473,761) - OTHER ASSETS 23,509 (23,509) - ------------ ------------ ------------ $ 3,507,014 $(1,466,476) $ 2,040,538 ============ ============ ============
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS Page F-2
POLLUTION RESEARCH AND CONTROL CORP. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED) DECEMBER 31, 2001 POLLUTION POLLUTION RESEARCH AND RESEARCH AND CONTROL CONTROL CORP. CORP. PROFORMA PROFORMA CONSOLIDATED ADJUSTMENTS CONSOLIDATED -------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable, trade $ 229,967 $ (154,967) $ 75,000 Customer Advances 59,557 (59,557) - Accrued liabilities 318,220 (318,220) - Deferred revenue 550,000 (550,000) - Estimated liability for disposal of discontinued subsidiary 487,344 (487,344) - Notes payable and convertible debt 3,355,000 (1,540,000) 1,815,000 Accrued interest expense 377,589 (169,786) 207,803 ------------- ------------ ------------- Total Current Liabilities 5,377,677 (3,279,874) 2,097,803 DEFERRED RENT, NET OF CURRENT PORTION 24,236 (24,236) - ------------- ------------ ------------- Total Liabilities 5,401,913 (3,304,110) 2,097,803 ------------- ------------ ------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock - - - Common stock 9,789,742 - 9,789,742 Additional paid-in capital 2,485,062 160,993 2,646,055 Accumulated (deficit) (14,169,703) 1,676,641 (12,493,062) ------------- ------------ ------------- Total Stockholders' Equity (1,894,899) 1,837,634 (57,265) ------------- ------------ ------------- $ 3,507,014 $(1,466,476) $ 2,040,538 ============= ============ =============
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS Page F-3
POLLUTION RESEARCH AND CONTROL CORP. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 POLLUTION POLLUTION RESEARCH AND RESEARCH AND CONTROL CORP. CONTROL CORP. PROFORMA PROFORMA CONSOLIDATED ADJUSTMENTS CONSOLIDATED --------------- ------------- -------------- NET REVENUES $ 2,393,681 $ (2,393,681) $ - COST OF GOODS SOLD 1,897,795 (1,897,795) - -------------- ------------- -------------- GROSS PROFIT 495,886 (495,886) - -------------- ------------- -------------- OPERATING EXPENSES: Selling, general and administrative 2,930,238 (1,363,977) 1,566,261 Research and development 92,173 (92,173) - -------------- ------------- -------------- Total Operating Expenses 3,022,411 (1,456,150) 1,566,261 -------------- ------------- -------------- (LOSS FROM OPERATIONS) (2,526,525) 960,264 (1,566,261) -------------- ------------- -------------- OTHER INCOME (EXPENSE) Amortization of loan fees (423,544) 144,060 (279,484) Interest Expense (476,383) 241,812 (160,993) (395,564) -------------- ------------- -------------- Net Other Income (Expense) (899,927) 224,879 (675,048) -------------- ------------- -------------- (LOSS) ON UNCONSOLIDATED JOINT VENTURE (126,239) 126,239 - -------------- ------------- -------------- (LOSS) FROM OPERATIONS, BEFORE INCOME TAXES AND LOSS ON DISPOSAL OF SUBSIDIARY (3,552,691) 1,311,382 (2,241,309) -------------- ------------- -------------- LOSS ON DISPOSAL OF SUBSIDIARY (487,344) 487,344 -------------- ------------- -------------- INCOME TAXES 3,387,000 (1,188,000) 2,199,000 -------------- ------------- -------------- NET (LOSS) $ (7,427,035) $ 2,986,726 $ (4,440,309) ============== ============= ==============
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS Page F-4 POLLUTION RESEARCH AND CONTROL CORP. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - PRO FORMA ADJUSTMENTS The adjustments relating to the unaudited pro forma consolidated statements of operations are computed assuming the sale of Dasibi was consummated at the beginning of the period. The adjustments relating to the unaudited pro forma consolidated balance sheet are computed assuming the sale of Dasibi was consummated at December 31, 2001. NOTE 2 - ADJUSTMENT OF ASSETS AND LIABILITIES In connection with the sale, Dasibi assigned all of its inventory to the Company. All other assets of Dasibi were transferred in the sale. The Company was relieved of $1,220,000 of notes payable and accrued interest of $169,786, and all other debt of Dasibi was transferred in the sale and assumed by Dasibi. The Company maintains its investments in Nutek and Logan, both of which are eliminated with inter-company transactions. NOTE 3 - REVENUES AND EXPENSES All revenues and costs of goods sold were generated by Dasibi. Operating expenses were primarily generated by Dasibi, with the exception of certain salaries, professional fees and other corporate expenses during the year ended December 31, 2001. Interest expense and amortization of loan fees relate to the debt not transferred by the Company in the sale. The Company has amended and restated option grants to purchase common stock of the Company to the purchaser of Dasibi as follows: 50,000 at $0.25 per share, 100,000 at $0.50 per share, 528,571 at $0.875 per share, 100,000 at $1.00 per share and 21,875 at $3.10 per share. The options are vested immediately and expire in March 2005. The options are valued at the fair market value of $160,993 on the date of grant utilizing the Modified Black-Scholes European pricing model. The average risk-free interest rate used was 4.73%, volatility was estimated at 99.86%, the expected life was three years. The Company was granted a perpetual non-exclusive license for all products, software, technologies and other intellectual property (including the use of the name Dasibi and Dasibi Environmental Corp.) of Dasibi throughout the world with the exception of the Peoples Republic of China. Page F-5