EX-99.3 3 v68472a1ex99-3.txt EXHIBIT 99.3 1 EXHIBIT 99.3 DENSE-PAC MICROSYSTEMS, INC. AND PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL INFORMATION -------------------------------------------------------------------------------- Effective October 26, 2000, the Company purchased all outstanding common stock of Productivity Enhancement Products, Inc. and subsidiaries (PEP), in exchange for 884,167 shares of Dense-Pac Microsystems, Inc. (Dense-Pac) common stock valued at $3,719,019, and the assumption of net liabilities estimated to be $1,068,304 at July 2, 2000. Transaction costs are estimated at $250,000. The following table sets out certain consolidated financial information for Dense-Pac and PEP, as well as certain pro forma combined consolidated financial information for Dense-Pac after giving effect to the acquisition. The unaudited pro forma adjustments are based upon currently available information and upon certain assumptions that management of Dense-Pac believes are reasonable under the circumstances. The following unaudited pro forma combined consolidated balance sheet as of August 31, 2000 includes the unaudited consolidated balance sheet of Dense-Pac as of August 31, 2000 and the unaudited consolidated balance sheet of PEP as of July 2, 2000 and assumes that the acquisition had occurred on August 31, 2000. The unaudited pro forma combined consolidated statement of operations for the six months ended August 31, 2000 includes the unaudited consolidated statement of operations of Dense-Pac for the six months ended August 31, 2000 and the unaudited consolidated statement of operations of PEP for the six months ended July 2, 2000. The unaudited pro forma combined consolidated statement of operations for the year ended February 29, 2000 includes the consolidated statement of operations of Dense-Pac for the fiscal year ended February 29, 2000 and the consolidated statement of operations of PEP for the year ended January 2, 2000. The unaudited pro forma combined consolidated statements of operations assume that the acquisition occurred on March 1, 1999. The pro forma financial information is intended for information purposes only and is not necessarily indicative of the future financial position or future results of operations of the Company after the acquisition, or of the financial position or results of operations of the Company that would have actually occurred had the acquisition been effected for the periods presented. Furthermore, the pro forma financial information excludes discontinued operations and other comprehensive income of PEP as the related financial information does not relate to assets or operations of PEP purchased by Dense-Pac. The acquisition will be accounted for using the purchase method of accounting. Accordingly, the cost to acquire PEP will be allocated to the assets acquired and liabilities assumed according to their estimated fair values as of the date of acquisition after giving effect to the purchase price adjustments required by the acquisition. The allocation presented herein is based on unaudited financial statements of PEP. Accordingly, the purchase allocation adjustments made in connection with the preparation of the unaudited pro forma consolidated financial information are preliminary, and have been made solely for the purpose of preparing such unaudited pro forma consolidated financial information. 28 2 DENSE-PAC MICROSYSTEMS, INC. AND PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 29, 2000 --------------------------------------------------------------------------------
TOTAL DENSE-PAC PEP PRO FORMA FEBRUARY 29, JANUARY 2, PRO FORMA FEBRUARY 29, 2000 2000 ADJUSTMENTS 2000 ------------ ------------ ------------ ------------ Net sales $ 27,459,614 $ 5,946,793 $ -- $ 33,406,407 Cost of sales 18,181,463 3,048,450 21,229,913 ------------ ------------ ------------ ------------ Gross profit 9,278,151 2,898,343 12,176,494 Costs and expenses: Research and development 1,277,701 1,277,701 Selling, general, and administrative 5,263,039 2,311,513 724,475(2) 8,299,027 Write-off of note receivable 366,519 366,519 ------------ ------------ ------------ ------------ Total costs and expenses 6,540,740 2,678,032 724,475 9,943,247 ------------ ------------ ------------ ------------ Income from operations 2,737,411 220,311 (724,475) 2,233,247 Other expense, net 150,038 7,109 157,147 ------------ ------------ ------------ ------------ Income before income tax provision 2,587,373 213,202 (724,475) 2,076,100 Income tax provision (benefit) 22,800 72,239 (70,360)(5) 24,679 ------------ ------------ ------------ ------------ Net income from continuing operations $ 2,564,573 $ 140,963 $ (654,115) $ 2,051,421 ============ ============ ============ ============ Earnings per share: Basic $ 0.14 $ 0.10 Diluted $ 0.13 $ 0.10 Weighted-average shares: Basic 18,773,138 884,167(3) 19,657,305 Diluted 19,974,857 884,167(3) 20,859,024
See notes to unaudited pro forma financial information 29 3 DENSE-PAC MICROSYSTEMS, INC. AND PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2000 --------------------------------------------------------------------------------
COMBINED DENSE-PAC PEP TOTAL PRO FORMA AUGUST 31, JULY 2, AUGUST 31, PRO FORMA AUGUST 31, 2000 2000 2000 ADJUSTMENTS 2000 ------------ ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 4,959,746 $ 283,333 $ 5,243,079 $ -- $ 5,243,079 Investments 11,198,240 11,198,240 (11,198,240)(4) Accounts receivable, net 2,760,945 1,025,271 3,786,216 3,786,216 Inventories, net 2,128,578 697,691 2,826,269 2,826,269 Prepaid expenses and other current assets 234,655 153,807 388,462 388,462 ------------ ------------ ------------ ------------ ------------ Total current assets 10,083,924 13,358,342 23,442,266 (11,198,240) 12,244,026 Property, net 5,446,139 213,073 5,659,212 5,659,212 Goodwill, net 5,068,323(1) 5,068,323 Other assets 29,171 94,872 124,043 124,043 ------------ ------------ ------------ ------------ ------------ $ 15,559,234 $ 13,666,287 $ 29,225,521 $ (6,129,917) $ 23,095,604 ============ ============ ============ ============ ============
See notes to unaudited pro forma financial information 30 4 DENSE-PAC MICROSYSTEMS, INC. AND PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2000 (CONTINUED) --------------------------------------------------------------------------------
COMBINED DENSE-PAC TOTAL PRO-FORMA AUGUST 31, JULY 2, AUGUST 31, PRO FORMA AUGUST 31, 2000 2000 2000 ADJUSTMENTS 2000 ------------ ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,258,876 $ 678,434 $ 1,937,310 $ -- $ 1,937,310 Accrued compensation 443,773 116,318 560,091 560,091 Other accrued expenses 91,333 241,524 332,857 250,000(1) 582,857 Deferred income taxes 1,435,055 1,435,055 1,435,055 Current portion of long-term debt 560,586 773,888 1,334,474 1,334,474 Deferred revenue 300,000 297,432 597,432 597,432 ------------ ------------ ------------ ------------ ------------ Total current liabilities 2,654,568 3,542,651 6,197,219 250,000 6,447,219 Long-term debt, less current portion 1,009,153 24,700 1,033,853 1,033,853 Stockholders' equity: Common stock 20,766,929 46,000 20,812,929 3,673,019(1) 24,485,948 (Accumulated deficit) retained earnings (8,833,755) 3,377,001 (5,456,754) (3,377,001)(1) (8,833,755) Accumulated other comprehensive income 6,706,935 6,706,935 (6,706,935)(4) Notes receivable from sale of common stock (31,000) (31,000) 31,000(1) Unearned compensation (37,661) (37,661) (37,661) ------------ ------------ ------------ ------------ ------------ Total stockholders' equity 11,895,513 10,098,936 21,994,449 (6,379,917) 15,614,532 ------------ ------------ ------------ ------------ ------------ $ 15,559,234 $ 13,666,287 $ 29,225,521 $ (6,129,917) $ 23,095,604 ============ ============ ============ ============ ============
See notes to unaudited pro forma financial information 31 5 DENSE-PAC MICROSYSTEMS, INC. AND PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED AUGUST 31, 2000 --------------------------------------------------------------------------------
COMBINED DENSE-PAC TOTAL PRO FORMA AUGUST 31, PEP AUGUST 31, PRO FORMA AUGUST 31, 2000 JULY 2, 2000 2000 ADJUSTMENTS 2000 ------------ ------------ ------------ ------------ ------------ Net sales $ 18,185,152 $ 3,454,052 $ 21,639,204 $ -- $ 21,639,204 Cost of sales 12,697,849 2,250,087 14,947,936 14,947,936 ------------ ------------ ------------ ------------ ------------ Gross profit 5,487,303 1,203,965 6,691,268 6,691,268 Costs and expenses: Research and development 858,944 858,944 858,944 Selling, general, and administrative 2,975,212 1,590,026 4,565,238 362,237(2) 4,927,475 ------------ ------------ ------------ ------------ ------------ Total costs and expenses 3,834,156 1,590,026 5,424,182 362,237 5,786,419 Income (loss) from operations 1,653,147 (386,061) 1,267,086 (362,237) 904,849 Other income, net 38,542 16,570 55,112 55,112 ------------ ------------ ------------ ------------ ------------ Income (loss) before income tax provision 1,691,689 (369,491) 1,322,198 (362,237) 959,961 Income tax provision (benefit) 53,000 349,858 402,858 (361,434)(5) 41,424 ------------ ------------ ------------ ------------ ------------ Net income (loss) from continuing operations $ 1,638,689 $ (719,349) $ 919,340 $ (803) $ 918,537 ============ ============ ============ ============ ============ Earnings per share: Basic $ 0.08 $ 0.03 Diluted $ 0.08 $ 0.02 Weighted-average shares: Basic 19,612,042 884,167(3) 20,496,209 Diluted 20,633,423 884,167(3) 21,517,590
See notes to unaudited pro forma financial information 32 6 DENSE-PAC MICROSYSTEMS, INC. AND PRODUCTIVITY ENHANCEMENT PRODUCTS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION FOR THE YEAR ENDED FEBRUARY 29, 2000 AND AS OF AND FOR THE SIX MONTHS ENDED AUGUST 31, 2000 -------------------------------------------------------------------------------- 1. To reflect the elimination of PEP's equity accounts and the allocation of the purchase price of $5,068,323 to goodwill. The purchase price consists of the common stock issued by Dense-Pac ($3,719,019), estimated transaction costs ($250,000), and assumed net liabilities of PEP as follows: Net assets of PEP as of July 2, 2000 $ 10,098,936 Less available-for-sale investments (Note 4) (11,198,240) Note receivable from sale of common stock 31,000 ------------ Net liabilities of PEP being assumed by Dense-Pac $ (1,068,304) ============
The allocation may change once the audit of PEP's closing balance sheet is completed and other valuation information is received. 2. To reflect the amortization of goodwill over seven years on a straight-line basis. 3. To adjust for the 884,167 shares of Dense-Pac common stock issued in the acquisition in the basic and diluted net income per share calculation. 4. To eliminate available-for-sale investments and related accumulated other comprehensive income associated with PEP's discontinued line of business. The securities are not being purchased by Dense-Pac. 5. To adjust the income tax provision to reflect estimated income tax expense on a combined basis. 33